I’ve been out all day. I managed to read the Activities and Cash...

I’ve been out all day. I managed to read the Activities and Cash Flow report before I left and listened to the teleconference when I got home. For a better understanding of the quarterly, always read the Activities and Cash Flow report first. It has all the details about the pretty pictures and charts in the quarterly itself. In fact, during the teleconference when Shaun tells you to go to slide 7 or whatever, Shaun or Steve mainly read or paraphrase from the Activities and Cash Flow report pertaining to the page in the quarterly. Go back and listen but have the activities report open. Make sure you read it first.

There was a lot to unpack from this quarterly and activities report. This may take hours to write

1/ First the most important news which everyone seems to have missed. September was the first time they have ever had a production run where the average C1 costs were lower than the average sales price.

2/ The production run in the quarter produced 18kt of concentrate which is just over half capacity. They achieved an average daily rate of 20kt in the last 2 weeks so the previous average of the run was less than half capacity with lower recovery rates which would have increased C1 costs per kt. They sold 23kt and shipped 4kt to Vidalia. To replace all of the 27kt, they have to produce another 9kt in October. (I don’t know why I earlier thought the production run was only 10 days)

3/ BMI are reporting natural graphite prices bounced in late September due to demand increases so keep an eye out for any confirmation from Fastmarkets (usually in an article about graphite) and Asian Metal. If demand goes up, so do prices while SYR’s C1 costs go down increasing margins, now we have a margin to increase.

4/ It’s a worry that up to 10m EV’s manufactured this year will be running around with sub standard synthetic graphite in them. I was hoping someone would ask the question if Shaun had any insight if any of those EV’s were exported to western markets.

5/ With the completion of Vidalia pushed back a quarter I’m not surprised the FID was too. I’m still hoping the DOE announcement is linked to a cutting of a ribbon. Don’t forget SYR was invited by the DOE to make another loan application for the 45ktpa expansion.

Shaun will be in LA for the BMI event on the 14-17 of November so he’ll be in the neighbourhood. Just before the event would be better for Shaun. Actually a big announcement of several loans by the DOE would be the talk of the event when most of the major players will be present not to mention reporters.

They may also want to wait a quarter to see if the natural fine flake concentrate demand bounce has legs which will strengthen their financial position in terms of cash, commercial loan negotiations and SP if they have to go the CR route. As I keep saying about AAM, if they can produce it, they can sell it.

6/ Tesla won’t take delivery until Vidalia is at a pro rata rate of 8ktpa and they have carefully managed their finances for the qualification period. Steve said the last credit note they’re converting will go towards working capital primarily for the start up of Vidalia.

Tesla has to do the cycle testing which takes some time. My thoughts are SYR have their own testing facilities so once they believe the graphite is the same as phase 1, SYR can still ramp and stockpile while waiting for the all clear from Tesla and then sell it to them as part of the pro rata.

They have started calibrating the machines to make SPG.

7/ There is a chance SYR can sell all their spare fines concentrate from Balama to ex-China customers in a short number of years. They’re targeting to sell 100kt to ex-China AAM producers from 2026.

8/ The TSF 2a has been completed and they don’t expect to spend any more money on it in the remaining 2023 year and possibly 2024. Due to the time it takes to process the loan and not wanting to delay progress, it’s not unusual for the DFC to grant a loan or part of, for a finished project.

In Summary:

There are still a lot of balls in the air but we’ll find out in the next 6 months how serious the US and Europe are in de-risking their supply chain and how many of our own balls start falling in the right holes.

SYR is by far the most advanced graphite company ex-China with the biggest resource with the right flake size globally to take advantage of the EV revolution. If SYR can’t make a go of it, nobody can. It would only take a small percentage of the blend to switch back to natural to really turn things around quickly. The amount of graphite required is massive.

I can't see the US or Europe allowing sub standard synthetic graphite to be used in batteries built onshore. This will make the price of natural graphite cheaper than synthetic.

The potential of SYR is enormous especially at the current market cap.

All IMO. I’m bound to get something wrong.