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Mozambique Mining: Balama graphite set to supply Chinese electric cars and American steel

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Graphite samples

Australian graphite miner Syrah Resources has signed a series of agreements over recent weeks to supply graphite from its mine in Cabo Delgado, northern Mozambique, to the Chinese electric vehicle market and to US steel producers – in addition to agreements it made in 2014 to supply aluminium and other metal producers around the world.

Syrah intends to start producing graphite later this year at its Balama mine, the most advanced of a number of Australian-owned graphite-producing projects in Cabo Delgado. Although all of its sales agreements so far are non-binding, one of them is slated to bring in revenues of at least US$100 million per year for the first five years of the project’s operation.

In November 2015, Syrah agreed a deal with Chinese firm Morgan Hairong to supply graphite to the growing Chinese electric vehicle market. According to research by UK-based consultancy Benchmark Minerals, China looks certain to have overtaken the US as the world’s largest producer of electric vehicles in 2015.

Syrah’s most recent sales agreement is a ‘statement of sales intent’, or SSI, signed in January 2016 with Hillier Carbon, a supplier of raw materials to North American steel producers”. According to the SSI, Hillier Carbon intends to sell up to 35,000 tonnes per year of Syrah’s graphite recarburiser, an important ingredient in the steel-making process, to steel producers in the US, Canada, and Mexico for a period of five years. In November 2015, Syrah signed a 10-year deal to sell up to 15,000 tonnes of graphite to an unnamed ‘major refractory producer’.

The recent agreements are on top of two offtake agreements made almost two years ago, when Syrah signed memoranda of understanding with China’s Chinalco, the world’s second largest producer of Alumina and the third largest aluminium producer; and with Asmet, a metals trading company.

The deal with Asmet is the only one whose approximate value has been made public. Asmet intends to buy 100,000 to 150,000 tonnes of graphite per annum at a price of approximately US$1,000 per tonne over an initial period of 5 years. At the lower end of that estimate, the deal would bring in $100 million per year for Syrah Resources.

According to an update published on 29 January 2016, the Balama Project is on track to start commissioning its processing plant in late 2016, and to ramp up production in the first quarter of 2017.

Managing director Tolga Kumova is being handsomely rewarded by the company for the progress the project is making. His new contract, which started in January 2016, sees his annual salary rise from A$181,818 to A$450,000 (US$321,000), and hands him shares worth over A$500,000 (US$357,000).(source: Zitamar news)

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