Dinis Napido, Mozambique Manager, Syrah Resources

MACIG Connect Series

“The Balama Project hosts the world’s largest graphite ore reserve, but there is significant opportunity for resource expansion, as the deposit is open along strike and at depth.”

Syrah Resources has interests in countries all over Southern Africa and Australia. Please provide a brief introduction to Syrah Resource’s operations in Mozambique.

Dinis Napido (DN): Syrah commenced exploration activities in Mozambique during 2011 at Balama, which is the flagship project for the company. The company holds a 25-year concession with deposits of graphite and vanadium. Our objective is to develop the mine and put graphite into production by the beginning of 2017. Development of the vanadium project will follow after graphite production has commenced. Our graphite deposit is high-grade and of significant size. Currently, the Balama project has JORC-compliant ore reserves of 81.4 million metric tons (mt) at 16.2% total graphitic carbon for 13.2 million mt of contained flake graphite, which is the largest ore reserve in the world.

In addition, a key advantage of our Mozambique operation is its low-production cash costs of $286 per mt free on board. The graphite is located in soft, weathered rock, so we should be able to extract ore for ten years without blasting. This makes a big difference in mining costs, as the stripping ratio is minimal. The company successfully completed a $148-million round of raising capital during August 2015 and is now well underway with project development activities that are currently on schedule and within budget.

Syrah Resources has several off-take agreements for entering into international markets with companies in China and the United States. What is Syrah’s strategy for entering into these markets once the mine starts operations?

DN: The global graphite market is characterized by many diverse end users who predominately purchase graphite for ‘traditional’ purposes, including refractories, foundries, crucibles, lubricants, recarburisers, and other industrial applications. These end users are generally supplied by either existing major graphite producers (predominately in China) or key regional commodity traders.

Syrah’s strategy is to partner with major end users or key regional commodity traders to leverage off their existing relationships and distribution channels. In addition to traditional uses of graphite, a major opportunity exists in supplying spherical graphite, which is a high-value, processed graphite product that is used to manufacture anodes for lithium ion batteries. As a result of increasing demand from electric vehicle and grid storage applications, the lithium ion battery market is expected to see significant growth over the medium term.

Strong progress has been made in relation to the company’s spherical graphite development in recent months including the finalization of offtake and marketing agreements. We have also secured exclusive access to a proprietary spherical coating technology that will enable us to operate an integrated supply chain from mine to anode material.

What is the potential for the development of Syrah’s vanadium deposit?

DN: The Balama project also contains an exceptional JORC-compliant vanadium resource of 1.15 billion mt at 0.23% V2O5. This makes the Balama’s contained vanadium resource almost four times larger than Rhovan in South Africa, which is currently the world’s largest operating vanadium deposit.

Due to the technical and processing requirements of vanadium, which is more complex than graphite, Syrah will only develop Balama’s vanadium resource after graphite production has commenced. In July 2014, a scoping study that was completed by Chalieco, the international engineering arm of the Chinalco Group, demonstrated the viability of the project. Currently, pilot plant work is ongoing and samples are ready to send to customers for product qualification.

The overall logistics environment has not been favorable for a number of mines. What is Syrah Resources logistics position at the Balama mine?

DN: Syrah is fortunate to have a main bitumen road that connects the Balama project to Nacala port and provides ready access for shipments. Nacala port currently has ample capacity with a 600-meter (m) berth and a 395-m container berth, and is serviced by major shipping lines with regular passages.

Resettlement of local communities has been an issue in the past for some mining companies in Mozambique. How has that issue evolved?

DN: Broadly speaking, the resettlement issue is moving in a positive direction. There have been some problems, but the government is on its way to providing effective solutions. In Mozambique, the government encourages companies to open a dialogue with officials so as not to duplicate programs and effectively focus each company’s efforts.

In our case, Syrah has never encountered issues with local communities at Balama and our relocation program has been recognized in Mozambique as a leading example of how such programs should be implemented.

We are also actively assisting local communities through initiatives such as the creation of an adult learning center, assisting a Women’s Farming Association, installing solar power systems, and establishing a soccer team for younger Mozambicans. The company is currently in discussions with the government to further refine and develop our corporate social responsibility program.

What is Syrah Resources’ message to investors interested in Mozambique for the future?

DN: Mozambique is a country with great potential and many companies are intensifying exploration efforts. This will likely result in new discoveries that will provide further investment opportunities.

The Balama Project hosts the world’s largest graphite ore reserve, but there is significant opportunity for resource expansion, as the deposit is open along strike and at depth. Just as Mozambique will expand and grow, Syrah intends to expand with it and be a part of its growth story.

This interview was part of research being conducted by GBR for its Mining in Africa Country Investment Guide (MACIG) 2017. The 2016 edition of MACIG will be published next week, but the 2015 edition can be accessed here and the 2015 Sub-Saharan Africa Oil and Gas Handbook can be accessed here. The GBR team is currently in Mozambique conducting the necessary research and interviews for the mining and oil & gas sectors. To participate in this report, please contact Molly Concannon at mconcannon@gbreports.com or +258 82 559 4115