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Syrah Resources' Highlights "Standout" Financials For Balama Graphite Project

Syrah Resources (ASX: SYR) has proven without a doubt the attractiveness of its Balama West graphite project in Mozambique with the Scoping Study highlighting a relatively low development cost and payback period of less than six months.

The study also estimates average mine gate cost of production at US$101.58 per tonne and FOB Port of Pemba cost at US$198.01 per tonne.

Which. based on assumed selling price of US$1,500 per tonne would provide a hefty profit margin for Syrah.

The study is based on the updated Resource of 51 million tonnes at 19.9% total graphitic carbon and 0.38% V2O5 including an Indicated Resource of 13.5Mt at 19.8%TGC and 0.4% V2O5 for just the Ativa Zone.

The study only includes graphite production results with outcomes for vanadium production to be reported at a later date.

Other key takeaways include:

- Peak development cost funding requirement of US$69 million;
- Payback period within 6 months of commission; and
- Strip ratio of 0.09:1 waste to ore.

While the results are attractive, there is potential to reduce project costs further given that independent consultants Snowden Mining Industry Consultants has advised that the Scoping Study is based on conservative parameters throughout.

Syrah is currently undertaking a update of the Scoping Study and a valuation of the project.


An Open Pit mining study for Balama West was undertaken by Snowden on the Ativa and Mualia Mineral Resource zones with the results reported based on the base case mining and processing operation of 1.2 million tonnes of ore per annum.

In the initial seven years of production, Syrah will be mining graphite at 19% from Ativa.

The Snowden model assumes a negligible strip ratio (0.09) for these seven years. After this, the Snowden model assumes that waste will occur as the model was based only on ore being mined from Balama West.

The Ativa Zone has significantly increased since the Scoping Study was received from Snowden.

Syrah also expects the Mualia Zone resource to also grow once a new resource is calculated.

Furthermore, there is a significant resource at Balama East that will be better defined for mining in the near future due to the abundance of exceptionally large flake size identified in the Sushi ore.

Production and Vanadium upside

The company believes it can sell 220,000 tonnes of graphite in the first year of production based on discussions and meetings with graphite buyers and traders regarding the quantity of graphite they are likely to purchase from Balama once a mine is brought into production.

Further support is lent by industry consulting and publishing group Industrial Minerals, which expects increased graphite demand of an additional 235,000tpa in the base case, or 528,000tpa in a bullish scenario.

The Scoping Study assumes that there are no production increases after the first year. This is considered to be a conservative assumption given the projected demand for graphite going forward, particularly with new emerging uses such as lithium ion batteries for electric and hybrid cars and fuel cells.

Balama's low operating cost will also allow its graphite to be substituted into other carbon markets. No allowance has been made in the Scoping Study for additional such demand.

Separately, the Scoping Study does not include any potential for vanadium credits.

Studies have recently confirmed that the vanadium content can be readily upgraded to a saleable concentrate, offering the potential to cash flow at minimal additional cost.

Potential also exists for Syrah to receive prices higher than the constant selling price of US$1,500 per tonne over 25 years used in the study.

Industrial Minerals project that large flake graphite prices will rise to between US$2,500 per tonne to US$3,100 per tonne by 2016.


The outlook for Syrah Resources' Balama West graphite and vanadium project is rosy with the current, already attractive, initial capital cost of US$91.6 million and FOB Port of Pemba cost of US$198.01 per tonne being based on conservative assumptions.

With the conservative selling price assumed in the Study, the already high projected profit margins provide a strong base for development and financing options.

A payback period of less than 6 months demonstrates just how good a project Balama West is.

There is considerable potential to increase resources across the project area while the strong demand for graphite could fuel an increase in production capacity.

Adding further to that is the potential for vanadium credits to increase cash flow an minimal cost, a result that will just serve to make the project that much more attractive.

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