Tesla has partnered with a nickel mine after Elon Musk said the metal was the group's 'biggest concern' amid shortage fears


kduffy@insider.com (Kate Duffy)

© Kevork Djansezian/Getty Images Elon Musk, the CEO of Tesla. 

Tesla may become an adviser of a nickel mine in New Caledonia, a deal seen by Reuters showed.

The agreement may allow Tesla to buy nickel for its battery production amid concerns of shortages.

Elon Musk tweeted previously, "Nickel is our biggest concern for scaling lithium-ion cell production."

Tesla on Thursday agreed to partner with a nickel mine in New Caledonia in an effort to secure more of the resource, which is key in the production of lithium-ion batteries in electric cars, Reuters reported.

Tesla is expected to become an industrial adviser at the Pacific island's Goro mine, which is owned by Brazilian mining giant Vale and is a French overseas territory.

Reuters reported that the electric-car maker is set to help with product and sustainability standards and buying nickel for its battery production, an agreement with the New Caledonian government showed.

The move comes amid growing concerns about the demand for nickel, as the acceleration of electric-vehicle production could lead to low supplies.

"Nickel is our biggest concern for scaling lithium-ion cell production," Elon Musk, the CEO of Tesla, tweeted February 25.

This echoed his tweet from July: "Nickel is the biggest challenge for high-volume, long-range batteries." Musk added that nickel production in Australia, Canada, and Indonesia is going well, but in the US it's "objectively very lame."

There has been large unrest in the region since Vale and the French state decided to sell the nickel mine to Swiss commodity trader Trafigura in early December. This triggered strikes and protests from pro-independence groups, which forced Vale to shut down the site in the same month.

The agreement cited by Reuters showed that the new deal means a 51% stake in the Vale operations may be held by New Caledonia's provincial authorities and other local interests. Trafigura is expected to hold a 19% stake - less than the 25% planned in the original sale agreement with Vale, the outlet reported.

Tesla won't have a stake, just a partnership that will secure its electric-battery supply chain as it ramps up production. "Our task now is to complete any and all outstanding items to allow the transaction to formally conclude," Vale said in an emailed statement to Reuters.

New Caledonia is the world's fourth-largest nickel producer. The material is also mined mostly in Russia, Canada, and Indonesia.