Tesla Secures 5-year Lithium Supply Deal Starting Next Year With Australia's Liontown

Tesla Inc TSLA has secured a five-year agreement with Australia’s Liontown Resources to supply lithium spodumene concentrate to the Elon Musk-led electric vehicle maker.

What Happened: Tesla will buy 100,000 dry metric tonnes (DMT) of the lithium concentrate in the first year and up to 150,000 DMTs annually thereafter, Liontown Resources said.

Spodumene is considered a key material that goes into making batteries for electric vehicles.

Large quantities of lithium spodumene concentrate have been found in Africa, Australia, and North America.

The supply deal is subject to Liontown commencing commercial production at the Kathleen Valley Lithium Project by 2025.

The Kathleen Valley project is a high-grade lithium-tantalum project being developed near Perth, Western Australia.

Liontown Resources said the supply deal follows the recent foundational offtake arrangement with LG Energy Solutions, a supplier for Tesla.

See Also: Tesla Strikes Deal To Secure Nickel Supplies From Tamarack In Minnesota

Why It Matters: Tesla and its legacy rivals such as General Motors Co GM and Ford Motor Co F are rushing to develop supply chains and secure raw materials such as lithium and nickel for their electric vehicle battery needs.

The global demand for lithium is expected to jump to one million tonnes by 2025 and three million tonnes by the end of the decade as more and more legacy automakers switch to electric vehicles. 

Earlier this year, Tesla agreed to buy nickel supplies from Talon Metals Corp’s TLOFF Tamarack mines in central Minnesota, a first such U.S.-based nickel supply deal for the Austin, Texas-based EV company.

Price Action: Tesla shares closed 5.3% higher at $922.43 a share on Tuesday.