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Post Market Wrap | Syrah Resources secures US$107 million loan facility from US Department of Energy



Syrah Resources secures US$107 million loan facility from US Department of Energy

  • Loan proceeds applied to expansion of Vidalia Active Anode Material processing facility
  • Vidalia facility now fully funded, following completion of a $250 million capital raising in March 2022  
  • Active Anode material is an essential component of the supply chain for zero emission transportation solutions  
  • Syrah has first mover advantage in developing a large scale vertically integrated natural graphite AAM supply option in the USA market    
  • Offtake agreement to supply Active Anode Material to Tesla at a fixed price for 4 years points to strong global demand for graphite.  

Syrah Resources Limited (Syrah or the Company) is an industrial minerals and technology business that seeks to become the world’s leading supplier of superior quality graphite anode material products. These products are essential components of the supply chain that adds value in battery and related industrial markets. 

The Company’s flagship asset is the Balama Graphite Operation in Mozambique. This project covers an area of 106 square kilometres and has a mineral resource estimate of 1,422 million tonnes at 3 percent Total Graphitic Carbon cut-off grade. This estimate provides for a 50-year mine life.  The Company also operates a large scale downstream Active Anode material facility at Vidalia, Louisiana in the US. 

US$107 million US Department of Energy (DOE) loan

Syrah has finalised the terms of a Term Sheet for a US$107 million loan from the US DOE to accelerate the expansion of its Vidalia Active Anode Material (AAM) facility in Louisiana, USA. The loan terms are expected to settle by June 2022 and the first drawdown is scheduled for the September 2022 quarter.  The loan term is for approximately 10 years and is based on long-dated US Treasury rates, implying an interest cost of slightly above 3 percent pa. The US government attaches significant strategic importance to the project under President Biden’s critical minerals strategy. The US DOE is committed to building a reliable domestic supply chain for zero emission transportation solutions. The strategy is specifically aimed at supporting the manufacture of advanced technology vehicles, including electric vehicles (EVs). The US government sees long-term economic value in growing the US workforce to support domestic battery manufacturing for EVs. Other recipients of funding under this loan program include Ford, Nissan and Tesla.  

The Vidalia project us fully funded, following the completion of a $250 million capital raising by Syrah in March 2022. The construction contract for the Vidalia project has been awarded to the global engineering and construction services company Worley Group. 

The downstream AAM facility positions Syrah as a first mover in developing a large scale vertically integrated natural graphite AAM supply option in the USA that is essential to accelerating the deployment of batteries to power EVs.    

Image: file

Looking Ahead

The significance of the US$107 million funding facility from the US Department of Energy is that it positions Syrah as a key supplier to the rapidly expanding EV and battery supply chain in the USA. The economic value of this manufacturing capability is leveraged by the offtake agreement with Tesla to supply natural graphite Active Anode Material from the vertically integrated production facility in Vidalia. Tesla will offtake most of the expanded AAM production capacity at a fixed price for an initial term of 4 years from the date of a commercial production rate. Tesla also has an option to offtake additional volume from the Vidalia plant, subject to Syrah expanding its capacity beyond 10,000 tonnes per annum of AAM.   

Strong global demand for critical battery supply chain materials is likely to support the growth outlook for Syrah well into the future.

This Post Market Wrap is presented by Kodari Securities, written by Michael Kodari, CEO at KOSEC.

"Michael Kodari is one of the world's most consistent, top performing investor. A philanthropist and one of the prominent experts of the financial markets, he has been referred to as ‘the brightest 21st century entrepreneur in wealth management' by CNBC Asia and featured on Forbes. Featured on TV as the "Money Expert", on the weekly Sunday program "Elevator Pitch", he is recognised internationally by governments as he was the guest of honour for the event "Inside China's Future", chosen by the Chinese government from the funds management industry, attended by industry leaders, when they arrived in Sydney Australia, on April 2014. Michael and George Soros were the only two financiers in the world invited and chosen by the Chinese government to provide advice, and their expertise on Chinese government asset allocation offshore. With a strong background in funds management and stockbroking, Michael has worked with some of the most successful investors and consulted to leading financial institutions. He was the youngest person ever to appear on the expert panel for Fox, Sky News Business Channel at the age of 25 where he demonstrated his skillset across a 3 year period forming the most consistent track record and getting all his predictions right over that period. Michael writes for key financial publications, is regularly interviewed by various media and conducts conferences around the world."

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