Tesla drops threat to scrap graphite supply deal with Australia's Syrah

By Rajasik Mukherjee

June 1 (Reuters) - ‌Australia's Syrah Resources ​said ​on Monday Tesla has withdrawn a notice of intent to end their graphite supply deal over an alleged quality default, ‌accepting the miner is now producing conforming samples.

Under its 2021 ⁠contract with Elon Musk-led Tesla, Syrah aimed to supply 8,000 metric tons of graphite anode ‌materials over a four-year period ‌from its Vidalia plant in Louisiana.

Shares of Syrah rose as much as 41.4% to A$0.140, hitting their highest since March 24 and on ​track for their best session since October 23, 2023. The broader ASX200 benchmark stock index was down 0.4% in early trading.

Risks remain, ⁠especially if Syrah fails to achieve the final qualification, said Craig Sidney, a senior investment adviser at ​Shaw and Partners.

"Today's move is positive off a very low base and volumes are very high as expected," said ​Sidney, while referring to Syrah shares.

Volatility is ‌expected to continue in the short term as some traders exit the stock and there may be some tax ⁠loss selling into the end of the financial year, he said.

Electric vehicle maker Tesla issued a default notice in July 2025, citing conformity issues with the ⁠active anode material (AAM) samples delivered from the Vidalia facility, the only vertically integrated, large-scale ​producer of anode materials outside China.

In a statement to the ASX on Monday, Syrah said Tesla now accepts that the miner has demonstrated it is producing conforming AAM ‌samples and has made sufficient progress.

Syrah said Tesla has reserved its existing right to terminate the supply agreement if ‌Vidalia AAM does not meet final qualification.

In March, Tesla and Syrah agreed ⁠to extend for the fourth ‌time the deadline to ​resolve the alleged default under their graphite supply agreement to June 1.

(Reporting by Rajasik Mukherjee; Editing by Jacqueline Wong and ‌Subhranshu Sahu)

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