“The development of Balama positions Syrah to become a leading supplier of graphite to industrial and high growth, emerging technology markets. We are positioned to deliver on our advantage as one of the early movers in the sector,” said the company.
Not that investors have doubted the ability of industry stalwarts Tolga Kumova (MD) and James Askew (chairman) to pull it off. They have advanced the Balama project in Mozambique at not inconsiderable speed and with well-rehearsed Aussie aplomb. No surprise, perhaps, the share price in Sydney is up 60% in 12 months.
Last week, Kumova and Askew were grandstanding a record graphite offtake deal with Japan’s Marubeni. This week, they unveiled a fully underwritten US$146 million capital raising to complete funding of Balama, as well as to provide additional balance sheet flexibility “and further accelerate the company’s spherical graphite strategy”, according to an ASX statement.
More than that, the cash raising exercise means the company looks to be as good as its word with Askew adamant commercial production will start in early 2017, and that Syrah will become the world’s largest global producer of high-purity graphite, “hosting the world’s largest reserve”. A feasibility study in 2015 estimated Balama would produce about 380,000 tonnes per annum.
The 50,000tpa offtake agreement with Marubeni was part of a multi-pronged sales and marketing offensive. Kumova said at the time “given this volume is only for the Japanese and Korean markets, further large opportunities remain available in China, North America and Europe”.
Optimism was based on the company’s belief “the lithium-ion battery market will be the major source of growth for [the] graphite sector in the upcoming years”.
The capital raising is by way of an institutional placement to professional and sophisticated investors. Under the terms of the offer, institutional investors will subscribe for 32 million new shares in the company at A$6.05 per share, to raise about A$194 million before costs. The shares issued under the offer will represent around 12.2% of the group’s undiluted share capital immediately following completion of the placement.
The offer price of A$6.05 represents a discount of 5.5% to Syrah’s closing price of A$6.40 on the ASX as at June 15, 2016.
The proceeds will be used to complete the development of the Balama Project (including working capital requirements) and to fund Syrah’s general and administrative cost requirements, said the company.
It also said there were plans for a pilot plant that would mirror the components of an industrial scale facility, to enable further product qualification and process optimisation.
Balama was said to host a JORC-compliant reserve of 81.4Mt at 16.2% total graphitic carbon. Balama is a 110 km2 granted concession located within the Cabo Delgado province in the district of Namuno in northern Mozambique.(source: miningjournal)