Ground Breakers: Watered down graphite miner Syrah gets a helping hand from the US
Graphite miner Syrah (ASX:SYR) still has a market cap of around $420 million but its trajectory year to date has been concerning, losing almost 70% of its value as the graphite market continues to false start despite a looming wall of demand from the growth of the electric vehicle sector.
Half year financials today show the company lost $38.6 million after tax for the first half of 2023, booking a $12.44m loss on its operations in Mozambique at the Balama mine.
Compare that to a $9.081m profit on its operations last year.
“During operating campaigns undertaken in the interim financial period, Balama
production was constrained by finished product inventory positions and lower Chinese demand,” Syrah noted in its half-year report.
“Continuing volatile Chinese anode market conditions and excess availability of finished product inventory led to lower demand for natural graphite from Balama and a decision to pause Balama plant operations, resulting in no production in May and June 2023.
“This decision was made to allow for downstream inventory consumption to occur and natural graphite demand conditions to improve.”
Balama’s production fell from 89,800t in the 2022 half-year to 56,300t in 2023, with shipments to third parties dropping from 79,300t to 44,700t. Around 2200t were sent to the Vidalia plant in Louisiana.
But it has received a shot in the arm today as well, sending its shares around 8% higher. That has come in the form of a US$150m loan commitment from the US International Development Finance Corporation the company says can be used to fund capital requirements at the Balama mine.
The main game for Syrah is to move downstream and become one of America’s only producers of active anode materials for batteries at the aforementioned 11,250tpa Vidalia factory. A DFS is currently being conducted on plans to expand the facility to 45,000tpa.
Believed to be the first DFC loan for a graphite mine, it demonstrates the central position of upstream resources to the downstream picture as the US under President Joe Biden looks to solidify an ex-China supply chain for battery materials.
“The DFC Board’s approval of the DFC loan to Twigg (a Syrah subsidiary) demonstrates the importance of Balama, which is the largest integrated graphite mining and processing operation globally, to the critical minerals strategy of the US,” MD Shaun Verner said.
“Together with the US Department of Energy loan for the expansion of Syrah’s downstream business, DFC loan funding will position Syrah as a strategic partner in bolstering supply chain security for critical minerals required for the electric vehicle and energy transition in the US.”
The DoE issued a binding loan facility of US$102m ($146m at the time) back in mid-2022 to support the expansion of Vidalia to its commercial scale 11.25ktpa capacity.
$65 million had been advanced as of June 30.
Due to robust supply in China and temperate EV sales growth in the Middle Kingdom, graphite prices have staggered in 2023 so far. According to Benchmark Mineral Intelligence, high purity -100 mesh 94-95% flake graphite for batteries was down 6.9% on the month in August and 28.9% YTD to US$578/t.
Over at the ASX materials sector the resources companies are up 0.18% in what has been a dull day of trade for the ASX large caps in general.
The iron ore players are all in the green despite a cooling in a sentiment driven iron ore run on Friday.
Gold producers are down, except for Genesis Minerals (ASX:GMD) which is up more than 5% on some high grade drill hits from its newly acquired Gwalia gold mine.
Meanwhile the bulk of the battery metals sector has been hit hard into the red, led by 8% loser Leo Lithium (ASX:LLL) which responded to an ASX aware query as it continues to feel the fallout from the Mali Government’s decision to halt DSO exports from its Goulamina lithium mine in the West African nation.