Benzinga | Aug 17, 2021 04:02AM EDT

Tesla Supplier LG Strikes 6-Year Deal With Australian Mining Company For Cobalt, Nickel

Tesla Inc. (NASDAQ:TSLA) battery supplier LG Energy Solution said it has entered into a six-year deal with an Australian mining company for the stable supply of key battery materials - cobalt and nickel.

What Happened: LG Energy, a subsidiary of South Korea-based LG Chem, said it will purchase 71,000 tons of nickel and 7,000 tons of cobalt from Australian Mines Limited for six years, starting from the end of 2024.

The EV battery materials will be sourced from Australian Mines' $1.5 billion flagship Sconi Project based in Queensland, which is currently under development.

The six-year supply deal would translate to producing batteries that can power 1.3 million high-performance electric vehicles.

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Why It Matters In addition to Tesla, LG Chem supplies EV batteries to automakers such as General Motors Co. (NYSE:GM) and Volkswagen AG (OTC:VWAGY).

The battery is the key component of an EV as it accounts for roughly 30% of the cost. The race to procure raw materials for EV batteries is intensifying amid growing global demand for EVs.

It was reported in July that Tesla signed a deal to secure nickel supplies from mining giant BHP Group Ltd. (NYSE:BHP), as the Elon Musk-led company rushes to secure raw materials for its batteries.

The Palo Alto-based automaker already sources three-quarters of lithium and over a third of its nickel feedstock from mineral-rich Australia.

Price Action: Tesla shares closed 4.3% lower in Monday's trading at $686.17.

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