Syrah Resources seeks $250 million for US expansion after Tesla deal

Syrah Resources will seek to raise $250 million as it looks to fund the expansion of its US processing facility to meet growing global demand for a key mineral needed to manufacture electric vehicles and batteries.

Syrah said it would proceed with the active anode material facility in Louisiana that would have a capacity of 11,250 tonnes a year, a 12 per cent increase on its 2020 feasibility study.

The decision to proceed with the US expansion comes just weeks after Syrah struck a deal with Tesla under which it will supply the electric vehicle company with most of the active anode material processed from the yet-to-be built plant in Vidalia for four years at a fixed price.

This agreement comes as companies and countries aligned with the US including Australia, Japan and South Korea seek to diversify so-called “critical mineral” supply chains away from China, which supplies 85 per cent of the world’s active anode material.

Graphite has traditionally been sold to refractories, steel mills and the manufacturers of lubricants, but future demand is expected to come from battery manufacturers who use graphite in the anodes of their batteries.

Construction of the Vidalia facility is scheduled to be completed in the June 2023 quarter and, following commissioning, start of production is expected in the September 2023 quarter, the company said. The project will require an 18-month ramp-up period to reach the full 11.25ktpa active anode materialproduction rate.

The US plant will be supplied by Syrah’s Balama Graphite mine in Mozambique.

The Australian Super backed company brought the Balama mine back onstream in 2021 after a two-year bear market for battery minerals and the coronavirus pandemic forced the mine to close in March 2020.

Syrah’s funding is expected to be completed quickly, with Bank of America’s equities calling for bids by 5pm on Monday.

The deal was split into a $125 million institutional placement and $125 million one-for-5.9 non-renounceable entitlement offer, both at $1.48 a share.

The fresh equity raising is the latest time Syrah has sought to tap the market for funds for the Vidalia project.

Syrah raised $18 million from investors in January in a process in which investors applied for more than $60 million of new shares.

Syrah in December 2020 sought $124 million as the company struggled to progress the Vidalia facility and Balama graphite project. Analysts said Syrah was likely to be burning around $US10 million of cash each quarter on the Mozambique mine during its closure.

Before the shutdown, Syrah in 2019 had already announced production cuts at Balama due to weakening market conditions, and that was followed by a company restructure in 2019’s September quarter when the head count at Balama was cut by 30 per cent.

But the global energy transition towards electric vehicles and concerns about Chinese control have aided Syrah and its Balama mine, which has the capability to supply 350 kilotonnes a year of graphite.

In recent weeks, graphite prices have also rallied on weak supply caused by shipping delays, while China’s electricity rationing left many companies that made synthetic graphite unable to continue operations.