what can possibly go wrong? , page-29

Hi Prime,
Both this thread and a number of other recent threads for SYR and other ASX listed graphite explorers have mentioned time and again that the pricing structure for the Chinalco market is low cost. I have also seen mentioned that the graphite going to Chinalco will be the 'low spec' or 'waste' material.
It seems to me that all of this is speculation. SYR has not mentioned what type of product is going to Chinalco. The announcement talks about high quality flake graphite so I am not so sure that it is lower grade material going into the anodes. I note that the Credit Suisse update note of 13 March on the Spherical Graphite announcement makes mention of the anode destined graphite selling for $800-$1,000/tonne. This doesn't sound like low grade material to me.
I agree wholeheartedly that SYR has the upper hand with pricing however. Not only because it's FOB costs are sub US$200/t (from what I can gather this cost is between one-half and one-quarter of the costs of all other current and proposed producers) but also, perhaps more importantly, that it has the capacity to deliver a large amount of high quality product to the end user for many many years. No point in Chinalco dealing with a producer that can only supply say 20kt.
Another article being quoted talks about the need for 6 new graphite mines to satisfy Tesla's new battery production. Yes, that's 6 new mines at 20.000tpa, OR it's about 55% of SYR's proposed starting output (btw, CS also suggests the 220kt will ramp very quickly to 300kt). Frankly I can't see more than a couple of new mines opening up.
One other point made by Robin Bromby will be true in that SYR won't be able to have the entire market to itself. Buyers will definitely want to diversify their supply lines- it's a risk management thing. Having said that, Balama is a godsend to current users in that they can now diversify away from China into a long term asset of high grade and quality.
So my take on this is that SYR will earn profit of $48 -$60 million a year from Chinalco. Now if we supply the spherical graphite market at $3,500/t for say 50kt and sell the balance of our initial 220kt production at an average of say $1,200/t then that's a big chunk of money. I won't speculate on costs for spherical graphite or our potential vanadium profits but I would think that we would have to be headed towards $200m profit before tax for initial production. The BFS will no doubt reveal more.
Cheers