It was no surprise to discover recently that Paul Kehoe, managing director of graphite-vanadium-heavy mineral sands East African-focused explorer Syrah Resources (ASX: SYR) (“Syrah”), had increased his direct interest in the company and bought up 10,000 more shares.
Fuelled by plans to fast-track its potentially large tonnage, high grade and coarse flake size Balama graphite-vanadium project in Mozambique—as well as new acquisitions in the form of the early-stage Balama lookalike Nachingwea graphite project in Tanzania and a masses of mineral sands prospective Tanzanian coastal tenements—Syrah shares spiked 400 per cent in under two months to January 11.
“Our graphite deposits appear to be bigger, higher grade and with better metallurgy than those being promoted in Canada and Australia,” Kehoe says.
“Nonetheless, we’re in a contract market and the sooner you pick up contracts, the sooner you can get into production. There’s only so much room available for new participants so it’s important to move as quickly as possible.”
Syrah plans to move particularly quickly. The company will commence mid-2012 scoping study work and announce a maiden JORC resource for Balama within the coming 12 months. At Nachingwea, where the explorer has already identified similarities to Balama which may prove highly beneficial to figuring out all-important metallurgy, testing throughout 2012 will further evaluate the project’s true potential as a significant second graphite play. And furthermore, with eight exploration licences totalling 1350 square kilometres, Syrah has acquired the lion’s share of the Tanzanian north and central coast known to be prospective for heavy mineral sands.
Situated about 280 kilometres inland from the port of Pemba, the Balama project originating from Jacana Resources—the private explorer since bought up by Syrah—stands out from the onset. Firstly, there are the in situ high grades of up to 60 per cent graphite and Syrah’s February announcement of initial metallurgical results showing saleable grades for the coarse flake premium product. Furthermore, there’s the potential shown in mapping to significantly expand on its current four kilometre-long strike length and two kilometre width—and, of course, the small matter of the extensive vanadium anomalism within the license area.
“In terms of the graphite grade, we did some initial trenching and sent samples to Mintek’s large South African lab. The organic carbon grade of those was 11.2 per cent and we now know from our further work that those samples come from quite a low grade area,” Kehoe recaps.
“We believe we’ll get grades of about 20 per cent graphite. If that’s the case we’ll have a globally significant project—but that said we like to keep conservative.”
News that the desirable flake graphite was capable of saleable grades marked another step forward for Balama. Surpassing the common industry minimum 94 per cent purity, initial metallurgical testing returned 95 per cent and above with 87 per cent recoveries and plenty of potential to further upgrade the product higher; a favourable result matched by straightforward crush, grind, flotation and kerosene wash processing plans without any need for the use of acids.
“The vanadium is really interesting, particularly considering its pricing. Although they are early stage, we do have anomalous samples, most of which are vanadium mica,” Kehoe adds.
“When we’re drilling we’ll certainly be considering the vanadium and all of the core will be assayed for that. If the results warrant it, we’ll announce a graphite and a vanadium JORC resource simultaneously.”
In addition to further hydrometallurgical testworks aimed at evaluating the vanadium identified thus far, Syrah plans to commence scoping works and an extensive drilling campaign to formulate graphite tonnages from April. This will encompass both RC scout drilling and the diamond drilling necessary to turn up drill core for further metallurgical testing in support of the JORC resource. Importantly, each activity unveiling Balama’s lofty potential will also spell good news for the geologically analogous Nachingwea project.
An expanding footprint
The February 28 acquisition of Nachingwea, seven kilometres northeast of the Nachingwea township in southern Tanzania, is one of the main share price boosters which Syrah has enjoyed of late, and the project’s Balama-similarities complete with finer flake graphite came into the miner’s portfolio at a particularly opportune time. Kehoe says that, having realised to what extent the graphite market might grow, the acquisition was a strategic move given that different types of graphite service different albeit equally healthy markets.
“By picking up Nachingwea we aren’t cannibalising our Balama market, so to speak,” he says.
“It isn’t as big as that project but it is sizable at over three kilometres strike distance. We think that will increase, although not to the same scale as Balama. It is also well-located to the major port.”
Syrah’s acquisition terms are just as favourable. Essentially, they comprise of a $100,000 cash payment made up front, another $400,000 and a couple of other milestone payments of $500,000—each stage of which importantly affords the explorer the opportunity to pull out and forfeit the payments made, should Nachingwea not match up to the company’s expectations.
“Again, we remain conservative but we will be surprised if we don’t continue it to the next stage based on what we’ve seen. That’s why our first programme is geared towards ensuring that it is the real deal, and the key to graphite is always going to be the metallurgy,” Kehoe says.
“Our first works will be similar to those of Balama in getting samples into the lab for metallurgical testing. That will involve mapping, trenching, sampling and testing to take us up to a six-month period. Based on the results, we’ll decide whether to continue with Nachingwea or not.”
Nachingwea represents more than the ideal strategically staged next-step as Syrah begins expanding its East African exploration footprint; it is also tantamount to the in-country team’s substantial expertise in graphite and the locale, and acute sense for picking up overlooked opportunities. The same applies to the company’s ability to pick up such a large and intriguing landholding prospective for heavy mineral sands, another February acquisition to make a positive impact on its share price. While Syrah remains largely graphite focused, Kehoe says, projects this interesting prove too good to pass up.
Fast-tracking & company value
Back in 2000, global graphite consumption ranked at 600,000 tonnes annualised. In 2011 it rose to 1.2 million tonnes per annum, and according to market watchers, it is tipped to hit demand levels of around 2.6 million tonnes per year by 2020. It’s no wonder that the U.S. Geological Survey believes its usages from fuel cells to high end new technology will propel pricing for the foreseeable. And with vanadium rising—demand is expected to more than double to 123,000 metric tons per year in 2025—and mineral sands still strong—a star performer for some time, particularly with respect to zircon—Syrah’s its highly knowledgeable has amassed its large exploration footprint in strategic minerals in precisely the right place at the right time.
Today, the potential tonnage, high grade and coarse flake size differentiating Balama from many of the graphite deposits making the most noise globally would be enough to warrant many a miner to unleash a deluge of sweeping and grandiose statements; but not this one. Erring on the conservative, compiling cleverly staged work programmes to fast-track the flagship project and picking up other key assets under highly favourable terms has resulted in Syrah shares soaring, an undercurrent of excitement, and a highly anticipated growth story.