Tesla (NASDAQ:TSLA) on Monday backed away from terminating its supply deal with Australia’s Syrah Resources after the graphite producer demonstrated progress in meeting product qualification requirements.

The EV maker accepted that the Syrah had produced conforming natural graphite active anode material samples and made sufficient progress to tackle an alleged default under their offtake agreement, the graphite producer said in a statement.

Qualification Work Continues

Tesla’s decision does not eliminate all uncertainty, as the automaker still retains the right to terminate the agreement if Syrah fails to secure final qualification approval.

Syrah said it is currently in the advanced stages of qualification testing and approvals for material produced at its Vidalia facility in Louisiana.

Why The Deal Matters

Under a supply agreement signed in 2021, Syrah is expected to provide Tesla with 8,000 metric tons of natural graphite active anode material from the facility over four years.

Maintaining the Tesla relationship removes a near-term uncertainty for Syrah as it works toward commercial-scale production and customer qualification.

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A Long-Running Dispute

The companies had been working through the issue for months, with Tesla and Syrah in March extending the deadline to resolve the alleged default for a fourth time, giving the graphite producer until June 1 to address qualification concerns.

The deal gives Tesla access to a U.S.-based source of graphite anode material, a key battery component, helping reduce its reliance on China-dominated supply chains.

Risks remain if Syrah is unable to secure final qualification approval, Reuters reported, citing Craig Sidney, a senior investment adviser at Shaw and Partners.

Syrah stock popped over 23% to AUD 0.12 ($0.09) at the time of writing in Sydney, while Tesla’s shares closed 1.4% lower on Friday.

Benzinga Edge Rankings indicate that Tesla stock has a Momentum score in the 58th percentile and a Growth score in the 88th percentile.

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