The Syrah Resources Ltd (ASX: SYR) share price is on course to end the week in a positive fashion.
In morning trade, the graphite producer's shares are up 1.5% to $2.31.
Why is the Syrah share price rising?
Investors have been bidding the Syrah share price higher today despite the market weakness thanks to the release of an update on the company's deal with electric vehicle giant Tesla.
One year ago today, the company executed an offtake agreement with Tesla to supply natural graphite Active Anode Material (AAM) from its vertically integrated AAM production facility in Vidalia, USA.
At the time, the company advised that the offtake obligation was conditional on the parties agreeing the final specifications of AAM by no later than 31 December 2022.
The good news is that today's announcement reveals that the agreement of final specifications of AAM has been fulfilled. Management notes that the final specifications are aligned with Syrah's planned AAM product from Vidalia that informed the final investment decision on the expansion of Vidalia's production capacity to 11.25ktpa AAM.
Though, the deal isn't quite final just yet. The offtake obligation remains conditional on Syrah achieving final qualification of AAM by no later than 31 May 2025. The company also warned that the agreement may be terminated if production has not started by 31 May 2024.
However, the latter seems highly unlikely. Management notes that the start of production of the 11.25ktpa AAM Vidalia facility is targeted in the September 2023 quarter.
Tesla increases its offtake
Another positive that could be supporting the Syrah share price today is news that Telsa has exercised its option to offtake an additional 17ktpa AAM from Vidalia at a fixed price and for an initial term of no less than four years.
This is subject to the expansion of Vidalia's production capacity to 45ktpa AAM.
Syrah will work towards finalising the detailed terms of this additional offtake obligation in an offtake agreement.
It is also working on a Definitive Feasibility Study (DFS) on the expansion of Vidalia's production capacity to at least 45ktpa AAM, inclusive of 11.25ktpa AAM. Detailed engineering, procurement, and construction phases for the subsequent expansion of Vidalia will follow the DFS sequentially, subject to Syrah board approval and customer and financing commitments.
