Syrah Resources Ltd.

Syrah Resources Ltd. is an Australian resource company that is rapidly progressing its flagship Balama graphite and vanadium project in northern Mozambique, which hosts one of the world's largest resources in both commodities. A mining license was granted in December 2013, and completion of a definitive feasibility study is expected by the end of 2014. The project is ~260km by road west of Pemba, and is accessible by a sealed main road running directly from Pemba Airport. The Port of Nacala is ~460km by road southeast of the project, and is the deepest port in southern Africa.

Expert Comments:

"One graphite company with big resources is Syrah Resources Ltd., which has over 1 billion tons. [It recently announced that it had a memorandum of understanding with Asmet Ltd. for 100150 tons per year of graphite at US$1,000/ton.] That's a situation where company management asked: "I have a lot of cash flow sitting in this deposit. How can I maximize the sales volume?" Syrah approached Asmet, a big producer of recarburized parts for engines, and said we can provide you with a very good product that you're paying US$1,2001,500/ton for now. We can give it to you for US$1,000/ton. Syrah's operating cost per ton on large-volume production is going to be around US$200/ton." read more >

Luke Smith, Canaccord Genuity (12/3/14)
"Syrah Resources Ltd. has commenced preconstruction work ahead of the wet season at its 100%-owned Balama graphite project in Mozambique. This is in anticipation of the imminent completion of the Balama feasibility study (expected early 2015) and highlights the confidence the new board has in the economic viability of the project. . . we remain firmly of the view that Balama is world class and that these milestones will be achieved in the next three to six months. We maintain our Buy rating."

"The one graphite company that stands out is Syrah Resources Ltd., a small emerging Australian company that sits on one of the best graphite deposits in the world. The deposit is in Mozambique and it is very, very large. It's unconstrained as it's only been partially drilled, but the resource size we know so far could provide 100% of the world's current requirement for natural graphite for about 1,000 years. The deposit could certainly get bigger if the company chose to spend more money drilling it. It's a deposit that has virtually no strip ratio in its early years. It's about three or four times the grade of a typical Chinese mine. It's a very high-quality deposit with very low impurities that should have a very low production cost. It's absolutely the standout.

The company has two MOUs (and just announced a third MOU), which with time I'm sure will develop into more binding arrangements as commitments are met, such as delivering a feasibility study and getting into production. Once there is production certainty I think those agreements can be tightened up and further agreements should be forthcoming. What's interesting about the agreements that Syrah has signed to date is that they are for non-traditional uses of graphite outside the current natural graphite market. One is an aluminum anode application, which is displacing an alternative material with higher quality graphite. This is a new market with a 3 Mtpa potential in the context of a natural graphite market of 1.1 Mt. The other is for use as a recarburizer or a carbon raiser for the steel industry. That also is potentially a 3 Mtpa market. To date there's been little use of graphite as a recarburizer, again, because of the volumes that would be required for that market and the price impact that volume would have. Syrah's planned stage one production is around 300 Ktpa. That much supply in a relatively constrained market in normal circumstances could have a price depressing impact, but given that all the sales committed to date are outside the normal market, it's a very positive sign. The battery market is the same principle." read more >

Vincent Pisani, Shaw Stockbroking (11/5/14)
"Syrah Resources Ltd. has been focused on advancing the development of a high quality recarburiser made with graphite from its Balama project. The results of this test work currently underway will feed into the definitive feasibility study, enable it to work towards finalizing its memorandum of understanding with Asmet Ltd. and provide a strong platform to secure additional offtake agreements. . .the company is at the forefront of developing new markets for graphitic carbon. The firm has a resource of over 1.1 Bt at 10.5% total graphitic carbon. We rate the company a Buy with an AU$6.30/share price target."

Luke Smith, Canaccord Genuity (9/26/14)
"Syrah Resources Ltd. has announced an overhaul of its board of directors in preparation for development of the Balama Graphite project, the world's largest graphite deposit. The appointment of Jim Askew (non-executive chairman) to replace Tom Eadie is a huge coup for the company and aligns the quality of the project with high-caliber technical expertise. . .Sam Riggall has been appointed as a non-executive director, following his 15 years with Rio Tinto. . .executive director Tolga Kumova will become managing director. We view the enhanced skill sets of the board as complementary and. . .the right mix of market, technical, development and management experience."

"Syrah Resources Ltd. (SYR:ASX) is the frontrunner [for favorite near-term graphite producer]. Its market cap is about $900M. It owns 100% of the Balama project in Mozambique, which contains close to 1.2 billion tons with about 10% total contained graphite. I've visited Balama, and it is effectively a 6km-long topographic high rising out of the countryside. Syrah has signed a number of MOUs for offtake, one with Chalieco. That created a lot of credibility. The company could produce somewhere north of 300 Ktpa graphite, roughly 30% of the known traditional graphite market. That could possibly push down graphite prices, but the X factor in demand is the growth of the electric vehicle market and, as mentioned earlier, the substitution of graphite for green petroleum coke in aluminum production.

A BFS for the world's largest graphite operation requires a great deal of work. Now, Balama won't need a large plant because the in-situ deposit grade is exceptionally high. We're looking at front-end throughput around 2 Mtpa. I expect publication sometime between October and December. Balama could sell a small amount of graphite and still be profitable. Syrah is focusing first on customer demand and will then work backwards from there. Demand from the two MOUs already announced totals 240 Ktpa graphite concentrate annually. The company is likely talking to more customers and could potentially sign further offtake agreements in 2014. Syrah understands the market. . .Syrah's senior management team is based here in Melbourne, and we meet with them regularly. I think Q1/16 is a reasonable timeframe [to begin production] and still very much achievable. Locking in the offtakes and then securing financing on the back of this are the key hurdles the company must clear to meet that date.

Vanadium is a byproduct and thus not crucial to commercial success. It could be put out into the tailings or the gangue material and then be forgotten forever, and Balama, in my view, would still be extremely profitable. It's the icing on the cake. The just released first scoping study for the vanadium demonstrates additional net present value and value accretion to Syrah. We should have a Balama vanadium feasibility study soon after the release of the graphite BFS. The company has a number of options. It could create a semi-vanadium concentrate that would then be upgraded in the secondary and tertiary processes. Capexes for producing vanadium pentoxide, which Syrah is looking to produce, do not need to be funded upfront. The vanadium processing stream might be added two or three years after the graphite stream is up and running. . .I have a Buy rating and a target price of $8.76 for Syrah. When I initiated coverage a year ago, shares were $2.55. They're around $4.82 now." read more >

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Investing Highlights
 
World class deposit consisting of two commodities - graphite and vanadium
 
High grade, expected low capex and opex
 
Leveraged to the carbon, energy storage and electric vehicle markets
catalyst Calendar
Q1
2015
Definitive Feasibility Study
Q1
2015
Q1
2015
Binding Offtake Agreements
Q1
2015
Spherical Graphite Feasibility Studies
Q2
2015
Project Financing
Q2
2015
Construction Commencement
Syrah Resources Ltd. Content