The Syrah Resources Ltd (ASX: SYR) share price has soared 23% after announcing a deal with Tesla Inc (NASDAQ: TSLA).
Syrah Resources is a listed minerals and tech company with the main operation at the Balama Graphite project in Mozambique and a downstream active anode material (AAM) facility in the US. The company wants to be the world’s leading supplier of superior quality graphite and anode material products.
Syrah’s Tesla deal
The ASX resource share has executed an offtake agreement with Tesla to supply natural graphite active anode material from its AAM facility in the US.
Tesla will take the majority of the proposed initial expansion of AAM production capacity at Vidalia at a fixed price for an initial term of four years commencing from the achievement of a commercial production rate, subject to ‘final qualification’.
The electric vehicle manufacturer also has an option to offtake additional volume from Vidalia subject to Syrah expanding its capacity beyond 10kt per year.
Syrah said that the agreement provides a compelling foundation to proceed with the initial expansion of Vidalia’s production capacity and Syrah plans to make a final investment decision for construction of this expanded facility in January 2022, subject to financing commitments.
The mining company said it’s advancing commercial and technical engagement with other target customers to develop Vidalia AAM for mass production and secure long-term purchase commitments for Vidalia.
My thoughts
I am not expert on Syrah, the share price or graphite. But this seems like a very promising development considering how large Tesla is.
Syrah could have a very promising decade and beyond. The company says that graphite is a key component of lithium-ion batteries used in electric vehicles and energy storage, both of which are rapidly growing markets.
Rapidly rising prices of lithium and other future-facing commodities could have a dampener effect on the uptake of vehicles if that’s reflected in the sticker price of the vehicle. So there is a balancing act here.
For Syrah, this announcement is good news and it will be interesting to see what other customers it can sign, if it does.
