Joe Biden backs Australian graphite miner Syrah Resources with Tesla and AustralianSuper with $107m loan

Graphite is one of 50 minerals listed by the US government as essential to national security and economic growth.

The expansion to produce 11,250 tons per year at the Louisiana plant was already fully funded after raising $178 million in February. However, Mr Verner said the US government loan would allow his company to allocate cash to further expansion studies which could quadruple production again to 45,000 tonnes a year.

“To the extent that this funding is complete, we will apply excess balance sheet and capital raise funds to development, reviewing Vidalia’s expansion and in this process, we will continue to engage with the DOE and review options for other potential funding down the track,” he said.

The Louisiana plant is a loss leader

Syrah mines graphite in Balama in Mozambique and sells almost half of its production to China, where other companies process and purify the product into a form suitable for insertion into the anodes of lithium-ion batteries.

Syrah built the Louisiana plant as part of a strategy to vertically integrate and sell higher-margin products directly to car and battery manufacturers.

The Louisiana plant is, indeed, a “loss leader” for the company at present. It produces small volumes of high-purity coated spherical graphite for potential customers who undertake several years of testing to ensure Syrah’s product is suitable before signing long-term supply contracts.

This “qualification” work received a broad vote of support in December, when Tesla pledged to purchase 8,000 tons per year of battery-grade graphite, or about 71% of the factory’s initial commercial output.

If Syrah executes the plan to produce 11,250 tons of high-purity coated spherical graphite in Louisiana by September next year, the company should start generating strong profits at the mill and become the only vertically integrated producer. of this battery-grade graphite outside of China. .

But it would still supply only about 5% of North American demand.

If Syrah can expand the Louisiana plant to produce 45,000 tons of battery-grade graphite per year by 2026, it will still only supply between 12 and 15 percent of projected North American demand.

Syrah said in a statement that the loan was conditional on further due diligence by the DOE, but if all goes according to plan, the funds should be transferred in September.

The loan would have a 10-year term with interest rates tied to long-term US Treasury rates.

“It’s clearly better than what could be achieved commercially [lending] market, and that’s what we’ve been focusing on for some time,” said Verner, who was formerly an executive at BHP.

The unwavering support of AustralianSuper

The DOE loan would be Syrah’s first debt apart from two convertible notes issued to AustralianSuper. These were the first convertible notes issued to a listed company by Australia’s largest superannuation fund.

These convertible notes symbolized AustralianSuper’s unwavering support for Syrah through a severe bear market in 2018 and 2019, which was compounded by intense shorting of the stock.

AustralianSuper has subscribed to shares of Syrah on numerous occasions over the past six years and is the company’s largest shareholder with 18%.

The Syrah loan marks the relaunch of a $25 billion US government fund established in 2007 to support the growth of a low-emissions transportation industry on US soil, the Advanced Vehicles Technology Manufacturing (AVTM) program.

The AVTM fund has not given a loan since 2011, when taxpayers’ money was lost in a high-profile corporate bankruptcy. But it was revived as part of US President Joe Biden’s clean energy manifesto and still has $17 billion to lend.

DOE Director of Loans, Jigar Shah, said in a statement released by Syrah: “The conditional commitment offered to Syrah would be AVTM’s first-ever loan to support a supply chain manufacturing project and further demonstrates the DOE’s commitment to building a strong national zero-emissions supply chain. transportation solution.

“This reiterates President Biden’s commitment to strengthening America’s critical mineral supply chains.”

The DOE fund is just one of the ways the US government finances Australian producers of critical minerals. Lynas Corporation is in talks with the US Department of Defense about possible financial support for a possible rare earth separation plant on US soil, most likely in Texas.