Name of the Project
Balama graphite project.

Location
Mozambique.

Project Owner/s
Syrah Resources.

Project Description
A feasibility study has confirmed Balama as a project with low capital intensity and technical risk, but attractive returns. The project is one of the highest-grade, large-flake deposits globally after the recent upgrade to 51.1-million tonnes at 9.3% total graphitic carbon (TGC), including 38.7-million tonnes in the indicated category at 9.3% TGC and 12.4-milion tonnes in the inferred category at 9.1% TGC.

Balama will be a high-grade, openpit operation using conventional mining methods with an extremely low stripping ratio. Operations will start with free-dig mining within the high-grade pits of Balama West using conventional truck-and-shovel mining. Operations will shift to the pits in Balama East thereafter.

The processing plant will have a feed rate of two-million tonnes a year using conventional processes, including crushing and screening, grinding, flotation, filtration and drying, as well as classification, screening and bagging.

Graphite concentrate will be transported using a sealed highway south-east of the project and shipped at the Port of Nacala, about 490 km away.

The mine is expected to produce an average of 365 000 t/y of graphite concentrate during its first ten years of production. The mine’s production will be sold to traditional industrial graphite markets and emerging technology markets.

Syrah also intends to pursue its downstream strategy, which involves further processing of flake graphite from Balama into spherical graphite at a plant in Louisiana, in the US. Spherical graphite is a high-margin, value-added product that is currently in significant demand, owing to its use in lithium-ion batteries for electric vehicle and energy-storage applications.

Potential Job Creation
Not stated.

Net Present Value/Internal Rate of Return
Based on the assumptions used in the feasibility study dated May 2015, the Balama project has a post-tax net present value, at a 10% discount rate, of $1.1-billion and an internal rate of return of 71%, with a payback period of less than two years from the start of commercial production.

Capital Expenditure
By the end of June 30 this year, Syrah had spent an estimated $162.3-million on the project, with a further $23.7-million committed at the end of the quarter, bringing total current capital expenditure to $186-million.

Planned Start/End Date
Not stated.

Latest Developments
Minor equipment issues at the Balama graphite operation have resulted in Syrah Resources’ production decreasing by 8% in the second quarter ended June.

About 44 000 t of natural flake graphite was produced at Balama during the three months to June, down from the 48 000 t in the previous quarter.

Despite the lower production in the second quarter, Syrah has said that substantial progress has been made at Balama, including the strengthening of the equipment management and preventative maintenance programme, and increased frequency of recovery of 80%.

About 53 000 t of graphite was shipped during the quarter under review, generating sales revenues of $24.2-million for Syrah.

For the full year, Syrah is targeting a production of between 205 000 t and 245 000 t, dependent on an ongoing assessment of sales volumes against price, production performance and quality performance.

Meanwhile, Syrah Resources has completed its fully underwritten one-for-five pro rata accelerated nonrenounceable entitlement offer, raising A$55.8-million.

The institutional component of the entitlement offer closed on June 20 and raised about A$25.1-million, with the retail component closing on July 8 and raising a further A$30.7-million.

The entitlement offer forms part of a larger A$111.6-million capital raise announced in June, which also included a A$55.8-million convertible note placement with shareholder AustralianSuper.

The funds raised will be used towards the ramp-up of production at the Balama project.

On Budget and on Time?
Syrah Resources has warned of more cost increases at the Balama project, along with delays in the commissioning timeline.

Key Contracts and Suppliers
CPC Engineering (detailed engineering and design).

Contact Details for Project Information
Syrah Resources GM – investor relations John Knowles, tel +61 419 893 491 or email ljknowles@optusnet.com.au.