The Vulcan Energy Resources Ltd (ASX: VUL) share price has been a strong performer on Thursday morning.
At the time of writing, the lithium developer's shares are up a sizeable 12% to $10.89.
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Why is the Vulcan Energy share price surging higher?
Investors have been bidding the Vulcan Energy share price higher today following the release of a positive announcement after the market close on Wednesday.
According to the release, the company has signed a binding lithium hydroxide offtake agreement with the world's largest automaker, Volkswagen Group.
The release reveals that from 2026, Volkswagen will purchase a minimum of 34,000 tonnes and a maximum of 42,000 tonnes of battery grade lithium hydroxide over a five-year term. Pricing will be based on market prices on a take-or-pay basis.
In addition, Volkswagen has agreed to a first right of refusal to invest in additional capacity in the Zero Carbon Lithium Project. Conditions precedent include the successful start of commercial operations and full product qualification.
Vulcan's Managing Director, Dr Francis Wedin, commented: "Through this agreement, Vulcan Energy's Zero Carbon Lithium business will become a key enabler of Volkswagen's world-leading target to produce carbon neutral EVs, including all the raw materials in the battery supply chain. We look forward to working closely together with Volkswagen, the world's largest automaker by revenue and the largest company in Germany, to build sustainable, local lithium supply for the German and European automotive sector."
This sentiment was echoed at Volkswagen, with the CEO of Volkswagen Group Components, Thomas Schmall, commenting: "Volkswagen is implementing its battery strategy very consistently and at a high pace. The Volkswagen unified cell must be at the forefront of performance, costs and sustainability right from the start. With our new partners, we are taking the next step closer to this goal. Together, we will approach key parts of the battery value chain and develop cutting-edge technologies."
