Amid the electric vehicle boom and growing desire from US automakers to reduce reliance on China, battery minerals company Syrah Resources (ASX: SYR) has confirmed significantly lower operating costs to supply graphite from their US facility.
The Bankable Feasibility Study (BFS) confirmed the business case for Syrah’s natural graphite Active Anode Material (AAM) production at their Vidalia facility in Louisiana to be scaled up, increasing production capacity to 40,000 tonnes per annum. Specifically, the BFS identified an opportunity for Syrah to produce AAM around US $2,704 per tonne once expanded beyond the current 10ktpa which can produce AAM at $3,149 with an observable Natural Graphite Spot AAM Price of $5,471.
Strong BFS metrics are possible for Syrah courtesy of their Balama Project (pictured) in Mozambique which Syrah has been producing and exporting natural flake graphite since 2018 which would make Syrah the world’s first vertically integrated produce of natural graphite AAM outside of China once Vidalia comes online.
“The BFS confirms strong positive economics for commercial scale natural graphite AAM production at Vidalia, with robust operating margins implied compared to current observed spot natural graphite AAM prices, which are arguably at the low point of the cycle,” said Syrah Managing Director, Shaun Verner.
“Vidalia vertically integrated with Balama presents a unique value proposition: scale; independence and localisation with USA battery production; critical mineral security; and ESG auditability back to the graphite source.”
Syrah’s proposed facility would be located within 25 acres of land already owned by the Company situated near the Mississippi River and would form a central location for efficient delivery to battery production megafactories being run by the likes of Tesla and LG in neighbouring States.
To date, Syrah has invested more than US $56m to enter the US market with plans on track for the installation of a furnace in Q1 CY21. Once it is installed, Syrah will have the capacity to produce 0.2ktpa of natural graphite AAM. This would represent the most progressed vertically integrated production of natural graphite AAM outside of China but be well short of full scale 40ktpa plans.
According to market research leader Benchmark Minerals Intelligence, it is estimated that the world will need 425GWh of battery production capacity by 2029 to meet EV and clean energy needs which Syrah estimates will require 250kt of natural graphite AAM annual production.
Alfred Chan is an Analyst at Emerald Financial, specialising in ASX-listed small cap companies.
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