Name of the Project
Balama graphite project.

Location
Mozambique.

Client
Syrah Resources.

Project Description
A feasibility study has confirmed Balama as a project with low capital intensity and technical risk, but attractive returns. As part of the study, a maiden proved and probable graphite ore reserve has also been declared. This ore reserve has since been increased to comprise 114.5-million tonnes at 16.6% total graphitic carbon (TGC) for 19-million tonnes of graphite.

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 – to and shipped at the Port of Nacala, about 490 km away.

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 commercial production.

Value
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. 

Duration
First production has been delayed to October 2017.

Latest Developments
Syrah Resources is hoping to raise A$110-million through a share placement and pro-rata accelerated nonrenounceable entitlement offer to fund the development of its Balama project and  provide working capital.

About 7.4-million new shares will be offered to eligible institutional investors at A$3.38 each to raise an initial A$25-million.

The shares issued under the placement will represent about 3% of Syrah’s undiluted share capital following the entitlement offer.

The entitlement offer will be conducted on the basis of one new share for every 10.5 shares held, and will also be priced at A$3.38 a share to raise a further A$85-million.

The offer price represents a 10.2% discount to the theoretical ex-rights price and an 11.1% discount to Syrah’s last closing price on September 18.

Syrah has extensively reviewed potential financing options to see it through to the ramp-up of the Balama project and accelerate the battery anode material strategy.

“During this review, it has become clear that debt funding is an expensive option at this time. In addition, given restrictions on the use of funds and other encumbrances proposed by debt financiers, debt funding would limit Syrah’s flexibility to accelerate its value-adding strategic options,” the company has said, adding that an equity raising is in the best interest of the company and its shareholders.

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