Balama Shutdown and US Tariffs Cloud Syrah’s Growth Prospects Despite Tax Credit

Balama Operations Disrupted by Protests

Syrah Resources reported no production at its flagship Balama Graphite Operation in Mozambique for the third consecutive quarter, as ongoing protest actions continue to impede site access. Despite sustained dialogue efforts with local communities and government authorities, a small group of protestors remains, blocking operations and forcing Syrah to declare force majeure under its mining agreement. This disruption has depleted finished product inventory and resulted in fixed monthly costs of approximately US$3 million, partially offset by temporary cost savings.

Vidalia Facility Advances Amid US Policy Dynamics

In contrast, Syrah’s Vidalia Active Anode Material (AAM) facility in the United States is progressing steadily. The company has executed a binding multi-year offtake agreement with Lucid for approximately 7,000 tonnes of AAM supply over three years, with production meeting stringent lithium-ion battery specifications, including carbon purity above 99.95%. Sales from Vidalia are anticipated to commence in 2025, contingent on customer qualification processes, US government policy clarity, and competitive dynamics influenced by tariffs on Chinese imports.

Strategic Financial and Market Developments

Syrah secured a substantial US$165 million tax credit under Section 48C of the US Inflation Reduction Act to support the Vidalia Further Expansion project, which aims to scale production capacity to 45,000 tonnes per annum. This financial incentive is pivotal as the company seeks to finalize financing and customer commitments necessary for a final investment decision. Meanwhile, the US government’s imposition of reciprocal tariffs and ongoing antidumping investigations into Chinese graphite imports add layers of complexity and opportunity, potentially reshaping supply chains and market access.

Market Context and Customer Engagement

Global electric vehicle sales surged 36% year-on-year in the March 2025 quarter, driven predominantly by China, underscoring robust demand for battery materials. Syrah’s strategy balances integrated consumption through Vidalia with increasing sales to ex-China markets, responding to evolving US trade policies and customer procurement strategies. The company is actively engaging with major battery manufacturers and automakers, including Tesla and LG Energy Solution, to secure long-term supply agreements and expand its commercial footprint.

Financial Position and Outlook

At quarter-end, Syrah held a cash balance of US$66 million, including restricted funds earmarked for Balama and Vidalia operations. The company continues to manage financing arrangements with the US Department of Energy and the US International Finance Corporation, navigating events of default triggered by operational delays. Syrah’s ability to sustain operations and advance its growth projects hinges on resolving community unrest at Balama and accelerating customer qualification and sales ramp-up at Vidalia.