Australia-based Syrah Resources is restaffing in order to
resume production at its Balama mine in Mozambique within the
next two to three months.
"Once we have restarted, we are targeting a ramp-up to
production of around 15,000 tonnes per month, subject to market
conditions," Verner said. "We see a positive cash flow
operational position at that level."
The company suspended output in March 2020 due to
restrictions on activity stemming from the Covid-19
"We kept our plant ready to run – it was in
temporary suspension rather than care and maintenance. The key
focus is restaffing to restart production, with no significant
capital requirement to do so," Verner said. "We are not
planning to get there straight away as we manage our
Syrah had already slowed its production rate in September
2019, prior to the suspension, in response to oversupply in the
market, which had weighed heavily on prices. The company began
commercial production at Balama, which predominantly makes fine
flake, in early 2019.
The addition of material from Balama into the market at a
time of slower than expected consumption from the anode battery
sector weighed heavily on prices. Fastmarkets’
assessment for graphite flake 94% C, -100 mesh, cif Europe
(-194), was at $600 per tonne on February 25. That price was at
$475 per tonne in September 2019, when Syrah slowed its output,
down by 26.92% ($175 per tonne) from $650 per tonne on February
"If the market falls into surplus, then we will adjust our
production accordingly. We have shown we are not afraid to take
tough decisions on this and are aware of the size of the
production we can bring to the market," Verner said.
Since Syrah's 2019 suspension of operations, the company has
identified greater strength in the market from the battery
sector. "Back then, 2 million electric vehicles were being
built per year, but year-on-year growth was actually declining
due to lower demand in China following subsidy reductions,"
Verner said. "EV production is at 3 million plus [units] now
and growth is up by more than 100% year on year. So both the
base-line demand and momentum is now much stronger," he
Syrah has also changed the way it operates to lower its
costs and to be more reflective of market conditions. In 2019,
it sought to quickly ramp up production to maximize sales and
lower unit costs.
"We have also been through an in-depth restructure of the
way we operate in order to lower costs. We will be able to
really respond to the evolving market conditions between the
mix of supply and demand through day-to-day market
interaction," Verner said. "This means we have the flexibility
to increase or moderate production," he explained.
The company will maintain a balance between spot versus
contract agreements with its customers, but this is largely
dependent on the market segment to which they belong.
"The industrial sector – for coarse flake material
– is more geared towards long-term contracts, while
the fines market, especially in China, relies much more on spot
pricing indications," Verner said.
"So we have a combination of spot and contract pricing, as
well as spot and fixed-term deals, and we are set up to have a
process of constant price discovery," he added.
Increasing sources of material
Syrah’s return to the market comes at a time
that several producers are either ramping up output or emerging
in the market. From Mozambique's east coast, for example, there
are three graphite flake producers developing on the Indian
Ocean island of Madagascar. However, Syrah does not feel it is
in a race with other producers despite the competition felt
among some market participants to ramp up and come to
"Demand is expected to increase strongly for the material
which makes up 80% of our production [-194 graphite flake]. By
the time most of the emerging projects actually get to the
market, that demand will have been realized and our
350,000-tonne-per-year capacity will be fully utilized and we
will be at the bottom end of our cost curve," Verner said. "We
focus on our own position and our customers – can we
sell at the price the market balance dictates," he said.
There has been a rise in religious insurgent activity in
Cabo Delgado, which is the same Mozambiquan province that
includes Balama. But Syrah said the violence has had no impact
on the safety of its operations or its ability to restart.
"There has been some increase in insurgent activity in the
north of the province, but it has had no impact on our ability
to move material or people, or our operations. We would not be
restarting if we weren’t confident we could manage
within the situation," Verner said.
The move to vehicle electrification can be expected to drive
demand for fine graphite flake as a feedstock for lithium-ion
batteries. And graphite is considered a critical mineral in
Europe and the US, where there is concern about Chinese
dominance over supply. "The development of the battery anode
space in Europe and the US is going to be really important.
However, we don’t see it as a China versus
non-China situation, but as a diversification of risk," Verner
China remains the world’s biggest consumer, and
producer, of flake graphite in the world. As a result, it is
the most important market for Syrah. "We are driven by the
consumption of natural graphite, and that is primarily in
China. Battery anode pre-cursor production levels are almost
zero outside of China, so China drives the upstream demand for
fines," Verner said.
Syrah achieved initial production of natural graphite active
anode material (AAM) at its downstream plant in the US city of
Vidalia, Louisiana, in the fourth quarter of 2020, using flake
feedstock from Balama.
"We will decide in the second half of this year whether the
commercial underpinning is there to go ahead with this," Verner
said. "However, we think the market needs to be more
diversified and we are excited about the evolution of
opportunities for providing a fully integrated alternative
source of supply," he added.
Syrah is one of a cluster of companies, including other
flake producers, developing AAM capabilities.
"The key differentiator for us is that we can be the first
fully integrated natural graphite AAM producer to the market
outside China," Verner said.