Australian mining company Syrah Resources ‒ which has a diversified exploration portfolio in southeast Africa ‒ has announced that a scoping study on its Balama West graphite project, in the northern Mozambican province of Cabo Delgado, shows such an enormous profit margin that it could recoup its costs in less than six months.
allAfrica.com reports that the study puts the average mine-gate cost of producing graphite at Balama at US$101.58/t. As for freight costs, the FOB at the port of Pemba, capital of Cabo Delgado, is calculated at US$198.01/t.
Since the assumed selling price is US$1,500/t, Syrah is looking at enormous potential profits. In fact, graphite prices vary wildly depending on type and quality. What is known as “amorphous graphite” has a current selling price of around US$550/t, while the price of “large flake graphite” can go to over US$2,500/t.
The report also puts “peak development cost funding requirement” at US$69 million, and predicts a payback period of within six months of commission.
The company that carried out the study, Snowden Mining Industry Consultants, says there is a potential to reduce project costs further, since the study is based on conservative parameters.
After discussions with graphite buyers and traders, Syrah believes it can sell 220,000t of graphite in the first year of production. In following years, production could increase, depending on the state of the market. The study believes that demand for graphite will increase “particularly with new emerging uses such as lithium ion batteries for electric and hybrid cars and fuel cells”.
The study does not take into account the second mineral found at Balama West, which is vanadium. Other studies have pointed to the possibility of readily producing a saleable vanadium concentrate, which would add significantly to the project's cash flow.
Source: allAfrica.com. For more information, click here.
Picture: The Mozambican port of Pemba, from where Syrah Resources will export its graphite.