Syrah Resources has revealed plans for its latest capital raising to advance the Balama graphite project in Mozambique.
The company has entered into a convertible note deed and an underwritten entitlement offer to raise approximately $111.6 million for the project.
It will use the funds to ramp-up operations at the site, with the operation nearing production volumes that are expected to generate positive operating cash flows.
Syrah stated that production at Balama was reaching a point where the trade-off between unit cash operation cost benefits was almost balanced with the pricing impact of supply into the market.
The company concluded that increasing production too rapidly in the short term in order to target market penetration wasn’t optimal for pricing outcomes.
Syrah has revised its 2019 calendar year production to between 205,000-245,000 tonnes as a result, down from 250,000 tonnes previously.
This figure is dependent, however, on production volume and quality performance coinciding with the ongoing assessment of optimal sales volume against demand and price.
The raising of additional capital “will provide Syrah with additional liquidity and greater flexibility to tailor Balama production ramp-up in accordance with global natural graphite demand.”
Syrah’s raising plans include a proposed $55.8 million convertible note to be issued to an AustralianSuper trustee, subject to conditions which include Syrah shareholder approval.
AustralianSuper, Syrah’s largest shareholder, has agreed to issue the five-year unsecured convertible note, with the shareholder meeting for approval to be held on August 1 this year.
It also includes an approximate $55.8 million underwritten pro rata accelerated entitlement offer, which is non-renounceable.
A portion of the proceeds of the capital raising will also be used to progress the qualification of Syrah’s battery anode material and inform Syrah’s market entry and “commercialisation approach”.