We All Need to make a Simple Coices, page-8

Hi,

The vanadium we are sitting on is great. Here is the article from the AFR referring to SYR's vanadium interest. We are primed for a great 12-18 months if all continues as expected. Add to that our TIVAN tech and we not only are sitting on a huge deposit but can license TIVAN to many company's for processing of these 'materials of the future'.  

Japanese firms would like a taste of Syrah Resources

PRINT EDITION: 28 Jul 2014
Amanda Saunders

Japan’s major trading houses are in a fight to lock up Syrah Resource’s battery grade graphite from its greenfields Balama project, which houses the biggest graphite and vanadium resource in the world.

Reports that commodities trading giant Glencore has been eyeing the ASX-listed Syrah are understood to have sparked Japan’s major battery and automotive manufacturers – and the trading houses that supply them – into action.

Japanese trading groups Marubeni, Mitsui and Sumitomo are understood to have entered talks in the past few weeks with Syrah over graphite offtake from its Balama resource in Mozambique, set to start production in 2016. Whichever Japanese trading house is successful will then distribute the graphite among the country’s key battery and automotive players, as well as South Korean manufacturers.

Security of supply play

It is in part a security of supply play, given many Japanese manufacturers no longer want to be handcuffed to the Chinese for graphite supply, particularly given the Chinese government’s crackdown on polluting miners.

Japanese and Korean battery makers have enjoyed a huge head start in the advanced battery market, which has proved difficult for new entrants, and are keen to maintain their dominance. The Japanese want Syrah’s high-grade spherical graphite, which is key to the production of lithium-ion batteries.

Lithium-ion batteries can help power electric cars, and are also used for smartphones, tablets and laptops.

It would also be expected that the house that signs on for Syrah’s spherical graphite would be given first rights to the company’s chemical grade vanadium. Vanadium plays a critical role in rapidly growing battery markets, and is fundamental to the nascent technology for the storage of grid-scale renewable energy, known as vanadium redox flow batteries, could transform the economics of renewable energy.

Glencore, which controls the world’s vanadium market, would not comment on reports in The Australian Financial Review earlier this month that it had made an informal approach to Syrah that valued the junior at between $1 billion and $2 billion.

But it is understood investment bankers have been quick to tell Syrah’s management they would be naïve to accept an offer in that range.

Credit Suisse has secured the unofficial defence mandate for Syrah, despite there being no formal bid for the junior on the table.

Japanese trading houses were quick to approach Syrah after the Glencore report emerged, largely out of concern that the commodities giant could be about to secure control of the graphite market, and cement its existing control of the vanadium market.

China’s dominance of the graphite market appears to be coming to a natural end: they are running out of core ore and the government is closing mines in an attempt to counter huge pollution problems closing mines.

Syrah says Balama contains 117 million tonnes of graphite, larger than the rest of the world’s reserves combined. It is tipped to be the lowest-cost graphite producer in the world, with its asset set to come online in 2016 if all goes to plan.

Longevity a necessity

Any financier considering bankrolling the billions needed for new battery factories in Japan or South Korea would need to comfortable that the source of supply – namely the graphite mine – had longevity.

Syrah’s resource is estimated to have a life of at least 1000 years.

Shares in Syrah have enjoyed a stratospheric rise to $5.50 from about 15¢ in late 2011. Its market capitalisation has grown in that time from $15 million to sit at $895 million.

It is likely a contract struck with the Japanese for Syrah’s spherical graphite would be exclusive and would start at about 30,000 tonnes in the first year of production, which would then grow exponentially once the Balama production ramped up. Syrah has an existing MOU for offtake with Chinalco to supply 80,000 to 100,000 tonnes a year of lesser-quality graphite from Balama, known as flake graphite.

Uncoated, spherical graphite fetches between $3500 and $5000 a tonne. Coated product coated for between $7000 and $10,000 a tonne. It would make sense for Syrah to build technology in house to coat the graphite so it could eventually sell it at the highest premium.

While graphite is the initial prize that Syrah investors are focused on, vanadium could be the junior’s true money maker.

Syrah is reviewing a scoping study on its vanadium resource, and has said its preference is for it to be used for batteries.

Aside from use in the lucrative battery market, slightly lesser quality vanadium is used as a steel-hardening ingredient in the production of lightweight, energy-efficient aluminium cars.

Syrah said Balama has an inferred vanadium resource of 1.15 billion tonnes, at a high concentrate level.

Mafew DYOR IMO

The Australian Financial Review