I am not confident regarding Balama, I wrote about this issue before, but I will restate my view/analysis here. Balama is a case study where "grade is king" is not sufficient for mining success and other factors such as "location", "logistics" and "infrastructure" are determinant factors. Balama has one of the highest graphite grades of graphite deposits in the world (16%) while being the biggest graphite deposit ever discovered (easily a 30+ years mine life at 250.000 tonnes per year). Besides the issue of the deposit being mostly of low-value graphite (80% of the deposit is comprised of small flakes), the bigger issue is : transportation costs.
If not for the transportation costs, the mine would have already been profitable, however they were selling the graphite at 400 US$ per tonne, while paying a cost of 120 us$ per tonne of transported graphite from the mine to the sea-port (480 km journey by diesel trucks). Transportation costs are eating 25% of their revenue ! that is crawy and unheard of in the mining business, they are not transporting Gold, but rather bulk cheap graphite, that is unsustainable business, just to breakeven they need to reduce the mining processing costs to sub 280 us$ per tonne which is brutal and may need to produce 350.000 tonnes of graphite per year to achieve the necessary economies of scale to bring costs to sub 300 us$ per tonne. This is a dilemma, demand is simply not there, they would be flooding the market and their revenue would slip further, so its a loosing vicious cycle game.
The secret is in reducing the transportation costs per tonne. IMO they should bite the bullet and seriously think about building a rail train system (100 Million us$ ?) to the sea port to reduce costs of transportation per tonne to just 10$ or 20$. Another solution is spend the apex expanding the capacity of another nearby sea port (from memory there is another port at 250km distance but most probably too small which was mentioned in the first pre-feasibility study back then in 2014 or something....wow time goes b fast...).
The final solution is to play the waiting game : wait until demand catches up (2021 ? 2022 ?) and prices of small flakes graphite improve to 600$+ per tonne and in this case even at the currently whopping (and crazy if you ask me) 120 us$ per tonne of transportation costs they would be able to make some tiny profits.
In anycase at current transportation costs and graphite prices, I cant see them reopening the mine and making a profit anytime soon....
But would the market be patient with them ? that is why I dont understand why they were too slow with BAM, it may be the saving point....
SYR Price at posting:
32.5¢ Sentiment: None Disclosure: Not Held
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