The word "unique" is much overworked. Yet Balama really is unique. It contains much more graphite than all the rest of the world's known deposits combined, and more vanadium than the largest vanadium mine operating in the world.
This gives SYR the chance to look at the combined present and potential graphite market, in a way that nobody has been able to even dream about in the past. Two things have recently happened which, together, show a value for the company much larger than anything previously suggested on HC (or any other forum, for that matter).
First, tucked away on Page 7 of their June 4 announcement, SYR mentioned that the market for petroleum coke is about 20 million tonnes per year - and that's about 20 times as big as the market for flake and amorphous graphite. The main use of the stuff is in anodes for aluminium refining. Now, petroleum coke is only about 90% carbon (low grade by Balama standards!) and sells for about $US550 per tonne. Producing an equivalent from the high-grade Balama ore would be a snap.
Second is the generosity of Cdchi1, on this forum, making freely available an Excel model to evaluate alternatives for Balama development, and comparing them by producing an NPV for each.
Every graphite prospecting hopeful, in Australia and Canada, has previously focused solely on flake graphite. Nonetheless, there really are wider horizons. Based on the announced initial plan to produce 220K tonnes of graphite per year, we have seen several evaluations of Balama, leading to NPVs in the $1.2B - $1.5B range, which is very impressive.
But that is not the end of the story. What happens to the economics if we look to supplying other markets, currently untapped by graphite miners? What if the amount of graphite produced at Balama went to, say, 1.2 million tonnes per year? (With much of it sold at a lower grade and lower price). There are several feasible development models, and I have no doubt that SYR management are indulging in the luxury of exploring them.
Petroleum coke is just one of these. Cdchi1's model shows that achieving just 5% of that market, and selling it at $500/tonne (slightly below the current price), would have an extraordinary impact on the NPV of Balama.
Why?
Principally because the vanadium in the ore then becomes accessible. Experience in China is that vanadium in roscoelite ores(like those at Balama) can be extracted economically at the 0.1% level. The rich zones at Balama (316 million tonnes, so far) average about 0.43%, which makes for a nice little earner!
To cut a long story short, after making what I believe to be conservative assumptions about CAPX and OPEX for such an operation, the model arrives at an NPV of about $4.0B, for a 25 year life. And that relates only to the currently defined rich areas of Balama. A large area remains to be explored. And, yes, I did say four billion.
True, there are quite a few assumptions here. So I suggest that you download Cdchi1's model, and try some alternatives. You might like to add in the possibilities of other major current and potential graphite applications. Some are listed in the June 4 announcement, in the section: "Other Carbon Markets". Be prepared for the numbers to get bigger.
By the way, I'd like to emphasise that none of this is glamorous, new-age stuff. These are applications in the here-and-now. Lithium batteries, graphene and fuel cells are all additional(and, as a techo from way back, I find it hard not to include them). But that's up to each of us to consider, as we do our own sums.
Yes, Balama is unique - it's simply the biggest. and when it comes to ore deposits, size really does matter. I'm enjoying cranking out these numbers. I hope you will, too!
Cheers, Prime1
SYR Price at posting:
$1.94 Sentiment: LT Buy Disclosure: Held
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