Making mine_locations an optional parameter makes zero sense. If there're no mines, pass the empty list as the argument to the function yourself like any sane person would do (although having zero mines in Minesweeper doesn't make any sense either). As of now, it's not even documented what should be the default case.

A validation must be performed to check whether all of the mine locations are valid. If they are not, the function should fail.

What does "valid" mean? Fail how?

Why does this requirements exist in the first place? Assuming we're supposed to check whether the given mine locations are actually on the board, it might make sense to perform such validation IRL, but it doesn't add any value to the task here.

A function needs to be made which will take in the size of the board (x and y)...

It's not stated which of these represents the rows and which represents the columns.

No sample tests.