Syrah Resources hits 90m at 22.1% graphite at Balama West
Syrah Resources (ASX: SYR) should open higher today after delivering outstanding first drill assays from the Ativa Zone infill drilling program at Balama West in Mozambique.
Drilling is designed to upgrade the resource to Indicated status from Inferred. Syrah is very confident that this aim will be achieved based on the latest results and visual inspection of the remaining core to be assayed.
Best intercepts include:
– 50m at 20.9% TGC and 0.46% V2O5 from 43.5m to 93.5m;
– 67m at 18.8% TGC and 0.36% V2O5 from 62.7m to 130.0m;
– 68m at 20.8% TGC and 0.36% V2O5 from 4m to 72.1m;
– 58m at 18.4% TGC and 0.53% V2O5 from 23m to 81m;
– 74m at 18.7% TGC and 0.39% V2O5 from 82m to 156m;
– 90m at 22.1% TGC and 0.52% V2O5 from 83m to 173m; and
– 78m at 21.7% TGC and 0.44% V2O5 from 4m to 82m.
The results clearly show that the Ativa Zone (Inferred Resource of 21 million tonnes at 20.8% TGC & 0.38% V2O5) was intercepted where expected.
The Ativa Zone outcrops at surface over a distance of at least 1.3 kilometres, and is still open along strike and at depth.
Syrah’s field team has observed that the Ativa Zone becomes coarser flake to the east. Also it appears that the graphite grade in this area may be the highest yet encountered.
Further step out drilling was conducted to better define this very coarse flake zone, with results from this drilling are expected over the coming weeks.
All holes ended in mineralisation
Where the high grade mineralisation was intersected close to surface, the initial few metres intercepted graphite rich soils, which cannot be recovered in drill core. As such the results above give the appearance that the graphite was intercepted below cover.
These graphite rich soils can be mined very cheaply as the material is unconsolidated, and they may contain high grade material. All holes ended in mineralisation.
Syrah has enough graphite to meet world demand for over 100 years
Highlighting the sheer size of Balama, Syrah recently described the worldwide demand for graphite, and noted, Industrial Minerals (industry consulting and publishing group) project a base case demand for natural graphite of 1.235 million tonnes in 2016 and a bullish case demand of 1.528 million tonnes in 2016.
Syrah has enough graphite to meet the entire world demand for graphite for well over 100 years.
Graphite currently sells for an average of around US$1300 – US$1,500 per tonne.
Syrah has identified a number of other markets where graphite (as a carbon) can substitute other carbon forms, such as graphite electrodes with a current market size over 1.5 million tonnes and US$3.5 billion per year.
Other markets include: Calcined petroleum coke – market size of 7 million tonnes and US$4 billion per year; and Anode grade petroleum coke for the aluminium industry – market size over 15 million tonnes and estimated over $8 billion tonnes per year.
Size and quality
Balama is unique in that is has an extremely large amount of graphite, outcropping at surface with zones that are amongst the highest in the world.
The quality of Balama graphite is also extremely good based on testwork by Mintek, and from feedback received from buyers.
Syrah will pursue market share so that it can dominate both the traditional graphite markets and also replace carbon forms in higher volume markets, and the company believes that it will be able to do so by supplying a superior product at more competitive cheaper prices than any other producer in the market.
With China graphite mines’ supply constrained due to declining mineral resources, relatively low grades and high cost operations, this provides further opportunity for Syrah.
The Balama Graphite Project is therefore perfectly positioned to capitalise on this situation with projected sales of 220,000 tonnes of graphite to be sold in year 1 at US$1,500 a tonne.
Analysis
The next catalyst for Syrah will be offtake agreements, which the company recently said are expected to be significantly advanced over coming months.
Given Balama’s expected low mining and production costs, Syrah is in a position to investigate additional substantial carbon markets going forward.
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