Contract terms including price and quantity were not immediately known.

Under the deal First Cobalt will have the option to sell up to 100% of its annual cobalt sulfate to Stratton once its refinery in Ontario province is in production, the source said.

Stratton did not immediately respond to an email seeking comment. First Cobalt declined to comment.

Demand for cobalt, a key ingredient for the rechargeable lithium-ion batteries used to power electric vehicles, is expected to surge as governments and consumers clamp down on fossil fuels such as diesel and gasoline to cut greenhouse gas emissions.

The contract provides flexibility for First Cobalt to enter offtake agreements with automakers and their suppliers, reducing amounts available to Stratton, the source said.

First Cobalt in January said it would buy cobalt hydroxide from Glencore's Kamoto Copper Company operation in Democratic Republic of the Congo for five years starting in 2022.

The Canadian company last week said it would repay a loan to Glencore by issuing stock equivalent to 4.8% of the outstanding shares.

Construction at the C$77 million plant, about 600 kilometers (373 miles) from the U.S. border, is slated to start in mid-2021 with production commencing in October 2022.

Production will be 5,000 tonnes of refined cobalt sulphate annually.

(Reporting by Jeff Lewis; Editing by Lisa Shumaker)