Mozambique Graphite Project Could Point Syrah Resources to Massive, Immediate Profit

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--A scoping study at the Balama West graphite project, which is in the northern Mozambican province of Cabo Delgado, indicates such an enormous potential profit margin that Syrah Resources (OTC:SYAAF) (Melbourne, Australia) could recoup its costs in less than six months.

The scoping study puts the average minegate price of producing graphite at Balama at $101.58 per ton. The free-on-board (FOB) freight costs at the port of Pemba, the province's capital, were put at $198.01 per ton.

With an assumed selling price of $1,500 per ton, Syrah anticipates huge potential profits. Graphite prices vary wildly, depending on type and quality. Amorphous granite has a current selling price of about $55 per ton, while the price of large flake graphite can top $2,500 per ton.

The report puts the peak development funding requirement at $69 million, and predicts a payback period of within six months of commissioning. Snowden Mining Industry Consultants (Perth, Australia), which performed the study, says there is a potential to further reduce project costs, since the study is based on conservative parameters.

After discussions in the market with graphite buyers and traders, Syrah believes that it can sell 220,000 tons in the first year of production. Production could increase in following years, depending on the state of the market. The study reports 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 vanadium, which is the second mineral found at Balama West. Other studies have indicated the possibility of readily producing a saleable vanadium concentrate, which would add significantly to the project's cash flow.

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