Hi ASXIOU,I made some notes of the AGM for a few mates. These...

Hi ASXIOU,

I made some notes of the AGM for a few mates. These may be of interest.

redgum


First impression – pretty good team running this outfit – no prima donnas - all there for good reason relaxed and quite communicative as well they might be with the story they have.

But fist the two questions on my mind.

The insurgency actions. Moz is a long thin country – SYR are in the north - the action for what it is worth - is in the south equivalent to they being in Cairns and the action down near Albury. But the activities would appear to be related to the local elections that are going on in the country at the moment. Come the end of this week the elections will be over and so do they suspect will be these activities. To date they have been no more than skirmishes. The company made comments like there will be no uprising or civil war in Moz. There are two groups in this – the Frelimos(?) and the Remanos(?) The Govt is Frelimos and the Remanos are actually a sponsored group out of South Africa by an anti apartheid group back when these activities were prevalent in South Africa. The Remanos are in the south SYR is in the north some 1500 kms north of the capital and in the words of the chairman the people there love us. They pray for us the do dances for us and they erect safety symbols for us. We keep in touch with the local police whenever we are in the area. Whilst it was admitted that a terrorist attack can have a significant impact the company saw no impediments to their activities there. And to add to their confidence all of the north is Frelimos.

The Mining Licence. Has passed all stages of assessment within their various ministries eg Resource, environment, Finance, etc etc it now awaits approval of the Governing Council. They opined that the delay was probably due to the local elections being carried out and as these conclude this week then hopefully something very soon after. A consequence of the delay in issuing the licence is that they now do not see production occurring until 1st or 2nd qrt of 2015 instead of 4th qrt 2014.

The Balama resource is massive – 6km long and 2km wide. It has within it virtually every grade and type of graphite that might be required. Thus they are able to offer a complete suite of graphite products to any user. You will have seen talk about large flakes – the Sushi zone is full of large flakes 10mm and more across but interestingly the industry need for large flake is no more than about 1mm across. Incidentally this large flake graphite goes out for between $3000 and $5000 a ton. And they have any amount of it. At a cut off purity level of 15% that have some 50 m tonnes of accessible ore (all types of graphite) if they raise the cut off to 20% purity they have some 30m tonnes of accessible ore. By contrast the Talga deposit in Sweden (I think about 6m tonnes) is but a few metres wide (essentially down a deep crevice) quite extensive in length under considerable overburden and will have high recover costs. (from my notes – large flake market about 50ktons a year at say $4000 / tonne ie this market alone is $200m per year – they expect to get much of it. And this is just a small segment of the entire graphite market.)

Plant costs estimated at $100m. Rhett Brans a director has spent his business life building resource processing plants is quite confident end cost will be well below this. For example almost all of it is off the shelf somewhere. Equally the freight cost to port quoted at about $100/t will come in much less than this. Rhett Brans has been a director of a few companies that have operated out of the Congo. He resigned them all because of the corruption there and at the same time finds the business environment in Moz absolutely straight. He advised that the minister for resources who will eventually sign off on behalf of the Governing council is a female and is likely to become the Prime Minister after another set of elections mid next year. He considers this a great plus with her non corruptible attitude. And while on costs electricity is about 4c/kwh in Moz they expect to be able to negotiate a lower price.

SYR will pay about $100m in tax to the Moz govt in its early years. Given the total yearly Federal budget of Moz is about $800m the SYR project will contribute about 13% of govt revenues. They are anxious to see the project working.

The Vanadium is in two forms one form separable at the flotation/ tailings stage and the other form via magnetic process. Moz’s good fortune also extends to a recent gas discovery off the Port Kemba. They expect within year 2 or 3 to be processing the Va at Port Kemba to a much higher concentrate level than the 5% concentrate they get from a flotation process. The current best Va mine can only get Va concentrate to about 3% so here again they expect to be a world leader in this mineral.

Tolga Kumova is company salesman and he talks off-take. They are continually being asked about supply and almost all of the potential customers have been to the site and they want the stuff. The company expects to put initially 220k of product into the market each year. Will this not over supply the market and force down prices? It may do so but even if a lower price has to occur their margin will be still be considerable. Second China is shutting down many of their producers on environmental grounds and as they shut these mines down SYR envisages it might pick up the balance. Chinese ore is very impure and requires a very toxic acid (didn’t get its name) for purification. After the acid has been used in the process it is usually then run out the pipe into the river as there is no other way to dispose of it as I was lead to believe.

Funding: In contrast to a HC poster this afternoon (of the AGM) about some major insto putting up cash for a major securities allocation the impression taken from the meeting was that it would be all about debt funding. In fact reference was made that one party has been to the site a few times as part of its due diligence.

The company is doing all it can to be a good corporate citizen such that they are promoting schools, built some extensions to a hospital, sinking water bores and employing as many locals as they can. They advertised for a bulldozer driver – none seemed suitable until one of their cleaners made application – they gave her the training and she is doing a top job – better than a previous male.

The Port Kemba has a current capacity of about 10k containers a year – SYR expect to do another 10k so the government is now expanding capacity to 30k containers per year.

The mineral sands project although on the back burner has been visited by a world major in mineral sands – SYR does not expect to make any announcements on this until Mar April next year.

That is about all I can think of other than I met Neptune - and a very nice fellow he is too. He mentioned he was partial to a good red.