Why did the Syrah (ASX:SYR) share price jump 12% to a multi-year high today?

Syrah shares are on fire again!

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The Syrah Resources Ltd (ASX: SYR) share price has been a very strong performer on Tuesday.

At one stage today, the graphite producer’s shares were up 12% to a multi-year high of $2.10.

The Syrah share price has since given back some of these gains but remains up 8% at $2.01.

Why is the Syrah share price surging higher?

Today’s rise in the Syrah share price comes despite there being no news out of the company today.

However, it is worth noting that the company’s shares have been on fire over the last few weeks thanks to the release of a very positive announcement before Christmas that revealed that Syrah has signed a deal with electric vehicle giant Tesla.

According to the release, the company has signed an offtake agreement with Tesla for the supply natural graphite Active Anode Material (AAM) from its vertically integrated AAM production facility in Vidalia, USA.

The release explains that Tesla will offtake the majority of the proposed initial expansion of AAM production capacity (8kt pa of 10kt pa) 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.

The offtake obligation is conditional on the parties agreeing the final specifications of AAM by no later than 31 December 2022 and achieving final qualification of AAM to Tesla’s satisfaction by no later than 31 May 2025. The agreement may also be terminated if production has not started by 31 May 2024.

Why is this a big deal?

Management commented on the deal, explaining why it has big consequences for the company’s future.

It said: “The importance and materiality to Syrah of the agreement with Tesla is that it provides a foundation to proceed with the initial expansion of Vidalia’s production capacity, as stated in the announcement of 23 December 2021.”

“The terms of the Agreement including volume, pricing and term will assist Syrah in finalising its investment decision in relation to Vidalia. Syrah plans to make a final investment decision for construction of this expanded facility in January 2022, subject to financing commitments,” it added.

Following today’s gain, the Syrah share price is now up almost 80% over the last 12 months.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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