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To offtake all anode material from Syrah's Louisiana plant Metal Tech News – December 29, 2021
At full capacity, Tesla's Gigafactory Nevada requires roughly 33,000 metric tons of graphite anode material per year.
Syrah's Balama mine and processing facility in Mozambique is one of the world's largest suppliers of natural graphite.
Tesla Inc. has cut a deal with Syrah Resources Ltd. to supply the single largest ingredient in most lithium-ion batteries powering electric vehicles – graphite.
More specifically, the renowned electric automaker has entered into an offtake agreement for natural graphite active anode material, also known as coated spherical graphite, from Syrah's Vidalia processing facility in Louisiana.
The anodes in lithium-ion batteries that power most EVs are packed full of graphite that has been rolled into potato-shaped spheres and coated in a hard carbon shell that is thermally treated. The spherical shape allows the graphite to be more efficiently packed into battery cells, while the coating extends the graphite's lifetime capacity.
Going into 2021, China supplied 65% of the world's mined graphite and produced 100% of the coated spherical graphite being used by global auto and battery makers.
Syrah's Vidalia plant in the United States, however, is positioned to provide an alternative source for this active anode material.
Vidalia currently has the capacity to produce 5,000 metric tons of unpurified spherical graphite. With a furnace installed by Syrah earlier this year, this facility now has the ability to bake on the coating needed to upgrade 200 metric tons of this spherical graphite to active anode material per year.
"In our view, this milestone further positions Syrah as the most progressed ex-China option for vertically integrated supply of natural graphite AAM for USA and European battery makers and OEMs (original equipment manufacturers)," Syrah Resources CEO Shaun Verner said upon the March installation of the furnace at Vidalia.
While the 200 metric tons per year of active anode material only represents a minuscule fraction of the current and forecasted needs in the U.S., this pilot-scale plant is providing auto and battery manufacturers with a sample of the product to be commercially produced.
Apparently satisfied with this product, Tesla has entered into an agreement to buy most of the active anode material produced at Vidalia over the first four years of commercial production.
According to a 2020 feasibility study, this Louisiana plant will produce 10,000 metric tons of active anode material per year during the first phase of expansion.
Tesla's commitment to buy almost all the anode graphite produced during this first phase of commercial production provides Syrah with the impetus to invest in the expansion.
According to the feasibility study, it will cost $138 million to expand Vidalia. However, considering the supply chain issues and rising energy costs since the feasibility study was completed, it would not be a surprise if these costs increase slightly.
Syrah expects to finish the initial expansion to commercial capacity toward the end of 2023 and is already planning another expansion to around 40,000 metric tons per year by 2025.
Tesla's agreement with Syrah includes an option to acquire additional active anode material from the expanded facility.
Syrah said it is in talks with other target customers in the U.S. and Europe to develop long-term purchase commitments for additional active anode material produced at Vidalia.
As owner and operator of the Balama mine in Mozambique, the largest natural graphite mining and processing facility on Earth, Syrah has no shortage of supply of natural graphite to upgrade to active anode material.
Going into 2020, the last time reserves were calculated, this African project hosted 107.5 million metric tons of proven and probable reserves averaging 15.7% (16.9 million metric tons) of graphitic carbon. This is plenty of reserves for Balama to be a major graphite supplier for at least 50 years.
Though currently only operating at a fraction of its capacity, the mine and processing facility at Balama is designed to produce 350,000 metric tons of graphite per year, which is equivalent to more than 30% of total global production during 2020.
Even at full capacity, Balama would only produce a small portion of the graphite that will be needed to meet the demands being driven by EV production.
A battery megafactory capable of producing 30 gigawatt-hours of annual capacity, approximately the size of Tesla's gigafactory in Nevada, requires roughly 33,000 metric tons of graphite anode material per year.
Extrapolated out over the more than 200 battery megafactories that are being built or are in the pipeline, this equates to up to 5.4 million metric tons of battery-grade graphite anode material per year.
While changing battery chemistries, including the use of silicon in the anode, will likely temper some of this demand, Vidalia is expected to be the first of many new coated spherical graphite facilities needed to meet the skyrocketing demand being driven by the electric vehicle revolution.
ARTICLE UPDATE – Following up on its original news releases, Syrah Resources Dec. 29 provided further details on the offtake agreement. Tesla’s offtake obligation is conditional on the parties agreeing on the final specifications of active anode material before the end of 2022 and achieving those qualifications by no later than May 2025. The offtake agreement may also be terminated if production has not started by the end of May 2024. If these conditions are met, Tesla will offtake 8,000 metric tons of active anode material per year from Vidalia, which represents about 80% of commercial capacity. Syrah plans to make a final investment decision for construction of this expanded facility in January 2022, subject to financing commitments.
With more than 16 years of covering mining, Shane is renowned for his insights and and in-depth analysis of mining, mineral exploration and technology metals.
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