SYR:ASX

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 in Q1 2015. 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:

Michael Slifirski, Credit Suisse (2/12/15)
"Syrah Resources Ltd. has advised that test work conducted by Japanese graphite anode and lithium ion battery producers indicates that uncoated Balama spherical graphite is of a superior quality than existing alternatives. . .the company's preliminary economic study for two spherical graphite plants is underway, which considers 25 Kt/year plants located in both Mozambique and the United States for a combined production of 50 Kt/year."

Michael Slifirski, Credit Suisse (2/10/15)
"Syrah Resources Ltd. has announced a 3-year binding offtake agreement with Chalieco, (Chinalco subsidiary) for an initial 80 Kt/year graphite at pricing-linked market. . .this formalizes a memo of understanding announced on March 7, 2014 and is strategically very significant in our view as it prices graphite at market (no discount)."

Luke Smith, Canaccord Genuity (2/10/15)
"Syrah Resources Ltd. has announced a three-year binding offtake agreement with Chinese SOE Chalieco. . .the deal completes the memorandum of understanding signed in March 2014 between the two parties which now incorporates terms of quantity, duration, exclusivity, pricing and specifications. . .we anticipate additional offtake agreements are likely to contribute specifically to enhancing debt financing options for the company."

"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 >

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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