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Syrah Resources cuts production as graphite prices fall

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Syrah Resources paused production in May and June 2023 from its Balama mine in Mozambique due to low natural graphite concentrate sales and high inventories at China anode consumers. In Q2, the company sold 15kt to third-party customers and shipped 2kt to its Vidalia integrated active anode material (AAM) facility in Louisiana, in the USA.

The Balama mine began production in 2018 and propelled Mozambique to be the world’s second-largest natural graphite producer after China. It has a nameplate production capacity of 350ktpy graphite concentrate with the majority of material exported to China for downstream processing.

In early 2022, Syrah secured a US$44M advance out of its loan from the USA Department of Energy (DOE) for its Vidalia Initial Expansion project and signed an offtake agreement with Tesla for AAM. Mining operations resumed in October 2022 after a company labour dispute with employees, but up until April 2023, the mine’s beneficiation plant has been operating at around 50% capacity.

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Currently, Syrah is focused on establishing its AAM operation within the USA. The company is in discussions for a second binding offtake agreement with Tesla, seeking a second advance from its US$102M loan from the (DOE) and considering a financial investment decision in H2 to expand its Vidalia Facility to 45ktpy AAM. Production from Vidalia’s initial expansion (11.25ktpy AAM) is scheduled for December 2023.

However, during H1 2023, global natural graphite flake and spherical graphite prices have declined, due to oversupply and competition from synthetic graphite AAM in China. The restart of Syrah’s mine will likely depend on a recovery in prices and new orders, as the high inventories held by Chinese anode manufacturers get depleted. But, according to Project Blue data, there is uncertainty about the extent and speed of any Chinese graphite price recovery as natural and synthetic capacity in China is ramping up significantly. Therefore, there may be a further delay in restarting mine production at Balama in H2 until sales volumes pick up and prices reach a suitable tipping point.

 

Source: Project Blue

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