The Syrah Resources Ltd (ASX: SYR) share price has been a very strong performer on Thursday morning.
At the time of writing, the graphite producer's shares are up 32% to a multi-year high of $1.75.
This latest gain means the Syrah share price is now up an impressive 78% in 2021.
Image source: Getty Images
Why is the Syrah share price shooting higher?
Investors have been bidding the Syrah share price higher this morning after it announced a major agreement relating to its vertically integrated Active Anode Material (AAM) production facility in Vidalia, USA.
Through this facility, Syrah is aiming to be the first major integrated ex-China producer of natural graphite AAM that is battery ready for electric vehicles.
Well, it made a major step forward to achieving this goal this morning. According to its announcement, the company has executed an offtake agreement with electric vehicle giant Tesla to supply natural graphite AAM from the production facility.
The release explains that Tesla will offtake the majority of the proposed initial expansion of AAM production capacity at Vidalia at a fixed price for an initial term of four years. This will commence from the achievement of a commercial production rate, subject to final qualification.
In addition, Tesla has an option to offtake additional volume from Vidalia subject to Syrah expanding its capacity beyond 10kt per annum of AAM.
Management believes that the agreement provides a compelling foundation to proceed with the initial expansion of Vidalia's production capacity. Though, a final investment decision for construction of this expanded facility is planned in January 2022, subject to financing commitments.
But it doesn't stop there. The company revealed that it is advancing commercial and technical engagement with other target customers to develop Vidalia AAM for mass production and secure additional long-term purchase commitments for Vidalia.
