TNG the next SYR??

Great read this guys.  No reason why TNG cant have the same uplift as SYR has.  Take note of the first few paragraphs!!



Syrah trio toast remarkable transformation

• by: BARRY FITZGERALD
• From: The Australian
• June 14, 2014 12:00AM

Barry Fitzgerald

Resources Editor
Sydney


Syrah’s executive director Tolga Kumova, left, chairman Tom Eadie and managing director Paul Kehoe outside their Melbourne offices. Picture: Luis Ascui Source: News Corp Australia


••
YORKSHIRE lawyer, expeditionist and part-time geologist (William) Basil Worsfold is credited with the first known reference to the Balama graphite deposit that sits as a craggy hill on the otherwise flat plain country in northern Mozambique’s Cabo Delgado province.

Writing in 1899, Worsfold said that to the north of the township of Mualia, he had discovered “the greatest deposits of graphite, of a most excellent quality, which I think have ever been found’’.

Worsfold was on the money, but it was not until 2011 that Balama’s world-class potential began to take shape. And that has all been to the benefit of Melbourne’s Syrah Resources — a company that only joined the Australian Securities Exchange lists in September 2007.

The fast-unfolding potential of Balama — now known to also be a big vanadium resource — has propelled the value of Syrah from $15 million in late 2011 to $570m, with its share price rocketing from 15c to $3.50 yesterday.
Confidence that Syrah’s run is not expected to be just another example of hype in a sector known for its excesses has come in recent months from some big-end-of-town mining analysts.

Deutsche last month slapped a $6.20-a-share price target on Syrah, saying it was a “graphite giant in the making”, and more recently Credit Suisse maintained an outperform’ recommendation with a $5.60 price target.
Both share price targets suggest Syrah could be the next $1 billion company on the ASX, much to the delight of the three men behind the unassuming firm: Tom Eadie (chairman), Paul Kehoe (managing director) and Tolga Kumova (executive director).

All up, Syrah directors own 22 per cent of the company, worth some $125m at current prices for the stock. The lion’s share is held by Kehoe (12 per cent) and Kumova (9 per cent), with the pair having backdoor-listed the Balama project in to Syrah in December 2011 in return for a big lick of shares.
While Kehoe in particular has benefited big time from Syrah’s runaway success, he has kept his feet on the ground, as have Kumova and Eadie. His only indulgence since the stock took off is to have upgraded his car from a buzz-box Toyota Yaris to a Prius.
Kehoe tells The Weekend Australian that other than the Prius, Syrah’s run has not changed his life at all. “In terms of spending money, I have always been as cheap as cheap can be.’’
Like all big mineral discoveries, the Balama story, and its impact on Syrah, is a mix of geological nous, self-belief, and perseverance, as much as it is about happenstance, blind luck and personal relationships.
Syrah was spun off from ASX-listed Copper Strike (which continues to own 11 million shares) where Eadie is also chairman, and was originally involved in copper/gold exploration. Come 2011 and Eadie was looking for a new focus for the company. The veteran Canadian geologist knew that Kehoe, with the support and participation of money man Kumova, had tried to float his private company, Jacana Resources, as an African-focused uranium float.
Included in the uranium tenement package was Balama, priced at all of $300,000 in Jacana’s earlier deal with the London-listed vendor, African Eagle Resources. As a uranium prospect, Balama was second rate. But its graphite potential was to be another thing.
At the time, Kehoe was working as a bookkeeper in the Collins Street office that Copper Strike, Syrah, and other junior mining companies were sharing to keep costs down.
A former accountant with the likes of PricewaterhouseCoopers and Grant Thornton, Kehoe had taken the bookkeeping job while he completed a geology degree at Monash University. “I hated accounting and became bored with it,’’ Kehoe said of his career change. “And I had made a bit of money out of the uranium stocks and had always wanted to do a uranium float.’’
The younger and flashier Kumova was working at Shaw Stockbroking and had met up with Kehoe through mutual acquaintances at Syrah’s shared office.
Kumova had recently cemented his reputation as the ever-enthusiastic guy with the killer smile who could raise money when others said it couldn’t be done, thanks to the successful float in February 2010 of ASX-listed gold producer Doray Minerals.
The float of Jacana was next on Kumova’s list, initially as Kehoe’s wished for uranium play.
But the door slammed shut on uranium floats when Japan was hit by a tsunami in March 2011, crippling the Fukushima nuclear power plant in the process.
As luck would have it, both Kehoe and Kumova had attended the Indaba Mining conference in South Africa the month before.
At the conference the pair met up with an industrial mineral specialist who told them while the package of tenements acquired from African Eagle were interesting for their uranium potential, Jacana should focus on Balama’s graphite and vanadium potential.
When Japan was hit the following month, Jacana quickly became a graphite play, not only because of Fukushima, and the chance meeting in Indaba, but because graphite prices had taken off.
Graphite is an opaque market, leaving graphite watchers to turn to the London-based research house Industrial Minerals (IndMin) to divine prices and trends.
IndMin data manager Simon Moores told The Weekend Australian that prices for (flake) graphite rose to all-time highs in 2011 of more than $US2200 a tonne for the high grade material used in batteries and refractories.
Graphite miners and processors, who had taken supply offline during the global financial crisis, were not ready for a return in demand, particularly from refractories used in steel.
“The situation was compounded by the emergence of battery demand at the same time as car manufacturers like Nissan ramped up production of electric vehicles. As graphite is the biggest input raw material into a lithium-ion battery, demand was significant,’’ Moores said.
Instead of pursuing the float route for Jacana, Kehoe and Kumova — who eventually left Shaw to make Syrah his focus — went for a backdoor listing for Syrah.
That was why Eadie found himself in Mozambique in September 2011 doing due diligence on the Jacana package of tenements. He was not impressed with the main uranium property so moved on to Balama.
He recalls the sky was black and blue from storm activity, and Balama itself had been blackened from a fire that had swept through the property as part of the locals’ agricultural practices.
Eadie was excited by what he saw; making an educated guess that Balama was at least 100 million tonnes of 10 per cent graphite.
The deal for Syrah to acquire Jacana was subsequently sealed in mid-December 2011. After first ensuring that Balama metallurgy had the right sort of characteristics, drilling followed in 2012, and Balama has since been shown to contain at least 382m tonnes of graphite grading a world-beating 17 per cent.
In keeping with the bullish calls made by Deutsche and Credit Suisse on Syrah, the company has held on to its value despite a fall in graphite prices from the 2011 peak to $US1200 a tonne recently.
(Moores expects prices could rebound by $US300-$US600 a tonne over the next four years depending what happens in China and the demand side.)
Syrah has held value because the expectation is that Balama will redefine the industry’s cost-base, with its easy digging and super high-grade to make it a very low cost producer. More certainty around what Balama is capable of will come with the release later this year of the bankable feasibility study.
While a staged approach is expected (graphite production to be followed at a later stage by graphite and vanadium), Deutsche for one has had a stab at what Balama’s earnings capability will be on a joint production basis. It assumed total cash costs of $US390 a tonne after vanadium credits, and a long-term graphite price of $US950 a tonne.
That would result in an earnings margin of 55 per cent and free cash flow for Syrah of $150 million a year.