Syrah’s Q1 graphite output down but remains on track for 2018 target

By Davide Ghilotti
Published: Thursday, 17 May 2018

Syrah's first quarter output hit by operational problems, with prices increases expected and graphite output to ramp up in the second quarter 2018.

Syrah Resources maintains its target output for graphite for this year and intends to increase prices, even though production at its recently opened Balama operation in Mozambique was lower than expected in the first quarter of 2018 due to operational problems.

Syrah brought online the flake graphite mine in October last year, and produced 11,200 tonnes of material in January-March this year, the company said in its quarterly update on Monday April 30.

This level of output was "below plan," the company conceded, because problems in the drying circuit for fine flakes had affected output until they were eventually resolved earlier this month.

Daily production has been on a general uptrend since the start of this year and reached 470 tonnes per day in April, once the fines dryer was repaired.

This, as well as improving flotation recoveries and throughput rates at plants, will help to deliver a "significant" increase in output, Syrah said. It plans to ramp up production to achieve a 25% increase in the first half of the year, and 75% in the second half.

The company claims that it is still on target to reach its production guidance of 160,000-180,000 tonnes in 2018, but conceded that it is now aiming for the lower end of that range.

Operating costs are in line with expectations. The company hopes to reduce costs to less than $400 per tonne of product by the end of the year.

Initial shipments of graphite material from Balama to customers started in January. In the first quarter, Syrah added "more than 10" additional spot and sales contracts, it said, and is going ahead with negotiations with other potential customers.

On product pricing, Syrah said that average prices for the first shipments were lower than "basket prices inferred by external consultants and reporters." This was due to reasons including a focus on sample shipments, which led to lower pricing; the product mix of sales being affected by the outage of the fines dryer; and competition from China.

Syrah expects to increase its basket price in the second half of 2018.

The Balama operation came online at a time when market prices for graphite were increasing, following a sharp decline in availability from China, the single largest supplier, and a parallel rebound in demand from end-markets such as refractories and batteries.

Flake graphite prices rose 20-30% in the second half of last year, to reach record-high levels.

The company has been separately carrying out testing of battery anode materials, using graphite mined at Balama, as part of a battery anode materials (BAM) project which it wants to set up in the United States to supply battery makers.

The project is being developed in conjunction with Cadenza, a technology startup company based in the state of Connecticut, which is focused on energy storage.

As part of this process, it has signed a letter of intent (LOI) to purchase an industrial site in Vidalia, Louisiana, where it wants to set up the operation.

The BAM project will first deliver unpurified spherical graphite material, and will achieve purified spherical graphite volumes by the end of this year.

A feasibility study now in the works is expected to be completed in the third quarter to establish the potential size and commercial expansion of the BAM facility.

Syrah expects the global demand for natural flake graphite to reach 780,000 tonnes in 2018, up by 10% year on year, the company said. This, it added, may lead the market into a deficit in 2019-20 because of growing demand for graphite-based anode material for batteries to be used in electric vehicles (EVs).