Balama Protests Trigger Force Majeure, Casting Shadow Over Syrah’s Growth Prospects

Balama Operations Disrupted by Protests

Syrah Resources has reported a complete halt in production at its flagship Balama graphite mine in Mozambique for the December 2024 quarter. The stoppage stems from prolonged protest actions linked initially to local farmers' land grievances and later compounded by nationwide unrest following Mozambique's general election. These disruptions have blocked site access and forced Syrah to declare force majeure on 12 December 2024 under its mining agreement with the government.

Despite no damage to plant infrastructure and the safety of personnel being maintained, the operational standstill has depleted Balama's inventory, constraining further sales. Fixed costs at Balama remain below US$4 million per month, but remobilisation and maintenance will be necessary before production can resume. Syrah continues to engage with government and community leaders to resolve the situation, emphasizing its commitment to sustainable and responsible mining practices.

Vidalia Facility Advances Amid Market and Policy Dynamics

In the United States, Syrah's Vidalia Active Anode Material (AAM) facility is progressing through technical qualification processes with customers, including Tesla and other major battery and automotive companies. The company expects commercial sales to commence in 2025, although timing remains dependent on customer qualification, US government policy clarifications, and competitive pressures from tariffed Chinese AAM imports.

Syrah's Vidalia expansion plans have received a significant boost with the award of a US$165 million Section 48C tax credit under the US Inflation Reduction Act (IRA). This incentive supports the proposed increase of Vidalia's AAM production capacity to 45ktpa, contingent on securing customer commitments and financing. However, uncertainties around US government policy, including recent executive orders and ongoing antidumping investigations into Chinese graphite imports, continue to influence market dynamics.

Market Conditions and Financial Position

Global electric vehicle sales surged by 35% in the December 2024 quarter compared to the prior year, driven largely by strong growth in China. This robust demand underpins the long-term outlook for graphite and anode materials. However, Syrah faces headwinds from oversupply and aggressive pricing in the Chinese synthetic graphite market, which has suppressed natural graphite fines demand and pressured prices.

Financially, Syrah ended the quarter with a cash balance of US$87 million, including restricted funds earmarked for Balama and Vidalia operations. The company completed a US$53 million loan disbursement from the US International Development Finance Corporation to support Balama's working capital. Despite the operational disruptions, Syrah has not defaulted on any loan obligations and is actively managing its capital structure amid challenging conditions.

ESG and Responsible Mining Credentials

Syrah achieved a significant milestone by attaining the Initiative for Responsible Mining Assurance (IRMA) 50 level of performance for Balama, the first graphite operation globally to do so. This certification underscores Syrah's commitment to rigorous environmental, social, and governance standards, differentiating its product in a market increasingly focused on responsible sourcing.

Looking ahead, Syrah's ability to resolve the Balama protests, secure further customer commitments for Vidalia, and navigate evolving US policy will be critical to unlocking growth and meeting the rising demand for battery materials in the electric vehicle era.