In yet another long term deal to secure a sustained supply of critical battery materials, leading electric vehicle maker Tesla has signed a five-year offtake agreement with Australian mining company Liontown Resources for Lithium spodumene concentrate.

Liontown Resources said that Tesla will receive an annual amount of 150,000 metric tonnes of lithium spodumene that will be produced at its under-construction Kathleen Valley Lithium Project in Western Australia.

Kathleen Valley lithium development project is located 680km northeast of Perth in Western Australia’s premier mining district.

A recently conducted Definitive Feasibility Study (DFS) by the company confirmed the potential to develop a state-of-the-art, second-generation lithium-tantalum mining at the project location. The lithium deposits at the mining site are estimated at 156Mt at 1.4% Lithium oxide and 130ppm Tantalum pentoxide. Liontown says that the current deposit base will support an initial 23-year life of mine, with scope for further expansion.

Construction of the A$473 million ($338 million) Kathleen Valley mine will commence in the second quarter of this year, with the first production expected in 2024. The company has already raised $450 million to fund the lithium mining project.

The agreement with Tesla comes close on the heels of another long-term offtake agreement that Liontown signed with South Korean battery maker LG Energy Solutions.

The company said that more than half of its planned production is now covered by long-term agreements with leading battery makers and EV companies like Tesla and LG.

Lithium is a critical component in battery making. Electric Vehicle(EV) batteries rely on a host of rare materials – from Lithium and Nickel to Cobalt to Graphite. With the growth in EV industry, the use of these rare elements are expected to increase, and therefore could lead to supply chain issues in future as the availability of these rare elements is concentrated in a few countries only. Approximately 25 per cent of the total cost of an electric vehicle is the raw materials for the lithium-ion battery.

Experts said the world’s shortage of lithium had been forecast to last for another three years at least, but the scrapping of Rio Tinto's Jadar project in Serbia could exacerbate the shortfall of the key battery mineral.

Tesla also has a lithium supply deal with China-based Ganfeng Lithium (, which grants the automaker a three-year supply of battery-grade lithium, beginning 2022.

In a bid to reduce dependence on China for critical raw materials for its lithium-ion batteries (LiB), Tesla also signed an agreement in January 2022 with Australia’s Syrah Resources to supply natural graphite.

Syrah will supply Active Anode Material (AAM) from its vertically integrated AAM production facility in Vidalia, Louisiana. Syrah will source material from Balama in Mozambique where the firm operates one of the world’s largest graphite mines.

Also read: Tesla Signs Deal With Australian Mining Firm Syrah To Secure Supplies Of Graphite For Lithium-ion Batteries, Move Seen As Bid To Reduce Chinese Dependence

Liontown Resources

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