Short covering Started?, page-36

Hi DoctorFouad, you make some interesting points, but many do appear to be mainly based on a misunderstanding of the true position. Let's look at them.

The suggestion that flake size distribution will not be achieved on an industrial scale, sounds good to non-technical people, but is quite improbable. The laboratory analysis processes use international standard methods, and management depends on them to design the plant. Are they really going to run risks there? Balama ore is relatively soft (remember, mining involves digging only, no drilling and blasting), so purification involves simple crushing, grinding, flotation and filtration - all bog-standard stuff.

The largest flake-size fraction reported by Syrah is 50 mesh, representing 8% of the product. That is 28000 tonnes per year, which possibly exceeds current world consumption of that flake size. With Balama's low costs, the price asked may well be below current market levels, which could impact small-volume, high-cost, current producers. If it cannot all be sold, then it must be milled down to a marketable, smaller-flake product.

Transportation costs are very well-understood, and product will be moved to port under contract with Grindrod, one of Southern Africa's largest and most experienced transport companies. They know their stuff! Trucks will run in daylight hours only, and the trip time for graphite transportation from mine to port is 11 hours, including driver rest-breaks, not 48 hours.

Ramping up production of a mine using simple, well-understood processes is something which is well within the scope of good professional engineers. I have more confidence in their calculations, critically reviewed at several levels, than I have in anybody's "gut feelings".

As for selling the product, we already know that the first year's production, of 160-180K tonnes, is committed to buyers. That's more than any graphite company has ever produced in a year, so I think we have to say that it's a pretty good start! It certainly proves they can, in fact, sell graphite in the "hundreds of thousands of tonnes" range. Beyond that time, we have to wait for announcements, but Syrah, starting from a position of strength due to their low costs, have made it clear that they are prepared to market aggressively. In that mood, why wouldn't they get market share?

From a shareholder's perspective, it's hard to see why a "start slow and grow" strategy can be preferred to one of "start big and grow bigger - quickly". Just as an aside, based on this morning's action, maybe the market thinks so, too.

Cheers