ASX-listed Syrah Resources has signed a five-year spherical graphite offtake agreement with Japanese trading and investment conglomerate Marubeni Corporation, representing the largest agreement of its kind signed to date, notes Syrah MD Tolga Kumova.

Syrah’s flagship Balama project is situated in the Cabo Delgado province of northern Mozambique. According to the definitive feasibility study completed in May 2015, Balama will be a simple openpit operation that will produce about 350 000 t/y of graphite over a mine life of 42 years. It has the largest graphite resource in the world, with 1.05-billion tonnes, grading at 10% graphitic carbon. Production is expected to start in the first quarter of 2017.

The company has prioritised downstream processing of graphite concentrate to accrue additional value for shareholders, as coated spherical graphite is a high-value product used to manufacture anodes for lithium-ion batteries.

Through the offtake agreement, Marubeni will have the exclusive right to import and sell Balama coated and uncoated spherical graphite in Japan and Korea. Marubeni will also have the exclusive right to sell to a subsidiary of a Japanese- or Korean-headquartered corporation (excluding certain specifically agreed customers) that is located outside the Japanese and Korean territories.

Marubeni will buy 50 000 t/y and will market the graphite to its customers, which consist of the largest battery and anode producers in Japan and Korea.

The company’s obligation to buy graphite starts after Syrah issues a notice stating that it has reached adequate commercial production rates, provided that such notice is given before December 31, 2019. Product prices will be negotiated on a quarterly basis between the parties, with reference to the market prices prevailing in the territories.

Syrah has also completed an internal economic assessment on a proposed spherical graphite facility in the US.

Marubeni’s inorganic mineral resources GM, Ryoichi Mano, comments that the conglomerate has worked closely with Syrah to conduct premarketing activities in Japan and Korea for the past 18 months. “Extensive testwork has been performed on numerous samples provided by Syrah and the results have shown that Balama’s spherical graphite is superior to current material supplied from China, exceeding customers’ expectations.”

Mano says, while the initial yearly volumes of 50 000 t are satisfactory at this time, Marubeni expects the Japanese and Korean markets to expand significantly in the near term and Syrah may become the major supplier as the market grows.

“Given that this volume is only for the Japanese and Korean markets, further . . . opportunities remain available in the Chinese, North American and European markets,” says Kumova.

He adds that Syrah has significantly progressed product qualification with potential customers in the aforementioned regions. “The Marubeni agreement has validated our strategy and steadfast belief that the lithium-ion battery market will be the major source of growth for the graphite sector in the upcoming years.

Syrah is ideally positioned to be a consistent, high-quality and long-term major producer to satisfy the expected significant global demand for spherical graphite,” Kumova concludes.