The deal, which is conditional to Magnis opening a new plant in the US, is for a three-year contract to supply 17,500 tonnes a year of anode active materials (AAM) beginning in February 2025.

Tesla has an option to double the contract to 35,000 tonnes a year.

Magnis is now locked in to secure a location in the US for the AAM plant by June 30 this year; have a pilot operation in place with trial production by March 31 next year; and start production from February 1, 2025.

The AAM uses graphite from Magnis’s Nachu graphite mine in Tanzania. The graphite has for the past seven years been shipped to Magnis’ facility in New York state. From 2025, the plan is to ship from Nachu to the new US plant.

Magnis and its US-based technology partner, C4V LLC, produces high-performance AAM for lithium-ion batteries.

Most lithium-ion batteries use graphite powder as an anode material which is either synthetically-produced (artificial graphite) or mined from the ground (natural graphite). It is then heavily processed before being baked onto a copper foil to serve as anodes. 

Magnis chairman Frank Poullas said in a statement that it can produce a battery-grade AAM that avoids traditional chemical purification and energy intensive high thermal purification. This leads to reduced costs and lower emissions.

It said that its AAM product is produced at a 99.97 per cent purity rate using existing commercial scale technology.

From the upcoming US plant, Magnis aims to send the AAM product to Tesla’s gigafactory in Nevada to be used to make batteries.

Tesla has recently announced a $US3.6 billion ($A5.2b) expansion to the gigafactory to allow it to produce 100 gWh of batteries per year, equivalent to supply 1.5 million EVs a year.

In a report to the Australian Securities Exchange (ASX), Magnis said that: “North America currently has no domestic supply of AAM. In 2022, global annual demand for AAM was 779,000 tonnes. By 2030, that global demand is expected to soar to 2.523 million tonnes.”

The agreement comes as Tesla prepares a major announcement set for launch at the company’s Investor Day on March 1.

Tesla’s Investor Day is expected to reveal the car-maker’s third-generation platform which is believed to enable it to dramatically reduce production costs and lead to CEO Elon Musk’s long-speculated sub $US25,000 ($A36,300) Tesla model.

Mr Musk has said the Investor Day will also announce its “Master Plan 3”, launched 17 years after his first “Master Plan” in which he detailed Tesla’s production move from high-cost/low-volume to low-cost/high-volume.

Australian EV publication “The Driven” reported this week that the US government’s Inflation Reduction Act (IRA) has been a catalyst to the growth of the EV industry in the US.

It includes incentives including a $US35 ($A51) per kilowatt-hour (kWh) battery cell manufacturing credit to entice companies to set up factories in the US.

Magnis says the US IRA will boost demand for its AAM products as EV makers aim to qualify their vehicles for a new-car rebate of up to $US7500 ($A10,900).

In its statement to the ASX, Magnis said: “These are extremely significant incentives. The need to source IRA-compliant material will be critical, positioning Magnis perfectly as an onshore supplier of AAM for use in electric vehicles.”

By Neil Dowling