Mozambique Mining: Administrative Tribunal approves Syrah Resources graphite agreement

Mozambique’s Administrative Tribunal has approved the mining agreement which governs the operations of the Australian company Syrah Resources, exploiting a large deposit of graphite in Balama district, in the northern province of Cabo Delgado.

According to a Thursday release from the company, “the certificate will be formally issued following the payment of the relevant court fees by the company today. This completes all required steps for the Mining Agreement to be binding and enforceable”.

In fact, the Balama mine is already up and running. The first production of natural flake graphite was in November 2017, and sales and shipments to what Syrah calls “a global customer base, including battery anode producers” began at the start of 2018.

The Mining Agreement is between the wholly-owned Syrah subsidiary, Twigg Exploration and Mining, and the Mozambican government and it covers the mining of graphite and vanadium up to 2038. The main tax provisions are a three per cent royalty, paid quarterly based on the value of the product sold, and 32 per cent corporation tax, “assessed annually, with three advance payments on account (based on 80 per cent of the prior year corporate income tax liability) due in May, July and September of the respective tax year”.

There is also an obligation to offer at market value up to 10 per cent of the equity of Twigg to investors on the Mozambique stock exchange, within five years of the start of commercial production.

The agreement also commits Twigg to to spend 15 million dollars on community development initiatives over the term of the mining concession. Twigg must also gradually increase the percentage of Mozambicans employed at Balama. Currently 94 per cent of the work force is Mozambican, which is more than the required minimum.

Twigg must also “give preference to Mozambican enterprises for all construction, service or supply contracts, and also give preference to the purchase of goods and materials available in Mozambique”. However, this provision is subject to the goods and services in question meeting international quality standards and competitive prices.

Twigg must pay the Mozambican government an environmental bond currently set at 2.5 million dollars a year, rising to 6.2 million by 2020.

Syrah Resources has provided the government with a “parent guarantee” for up to 22.5 million dollars, to cover any loss or damage arising out of breaches of the Mining Concession rules by Twigg.

Syrah managing director Shaun Vermer said: “The finalisation of the Mining Agreement represents another significant milestone for the company and reaffirms the Government of Mozambique’s commitment to the long term success of the Balama Operation”.

“Balama has been operating since commencement in accordance with the agreed terms”, he added, “and our stakeholders can be even more confident that the Company will be able to conduct its operations under a stable legal, fiscal and operating regime, which underpins Syrah’s position as the world’s premier producer of high quality graphite”.

Balama production, Syrah says, is aimed at “traditional industrial graphite markets and emerging technology markets”. But, in addition, Syrah is developing a Battery Anode Material plant in Louisiana, in the US, and has “successfully completed extensive product certification test work with several major battery producers for the use of Balama spherical graphite in the anode of lithium ion batteries”. Source:AIM