Syrah Resources Limited

Good day and thank you for standing by. Welcome to the Serial Resources Q4 quarterly update conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 1 on your telephone. Please be advised that today's conference is being recorded. For any assistance, it is star 0. I'd now like to hand the conference over to you for a speaker today, to Mr. Sean Bruner. Thank you. Please go ahead.

Thanks very much. Good morning to everyone and thank you for dialling in today. With me on the call is Stephen Wells, our Chief Financial Officer and Viren Heera, our GM of Business Development and Investor Relations. Today SARA released its December 2021 quarterly results covering operations, market conditions, the Vidalia project and the outlook for natural graphite, active anode material and its end use markets. The fourth quarter and 2021 as a whole was an extraordinarily important period for Syrah, repositioning the company at a transformative point for the industry. Market conditions in the upstream market are the strongest they have been since the LLAMA's commencement in 2017, with very strong momentum in demand growth the existence of supply interruptions and rising prices for natural graphite. The electric vehicle market has shown remarkable growth through 2021, with sales doubling year on year to more than 6 million units, monthly global EV sales exceeding 800,000 units for the first time in December and global EV penetration reaching approximately 8%. Growth is expected to be sustained and this is driving significant EV and battery manufacturing expansion announcements and capital programs in our downstream target markets and the concurrent gap is evident in localised supply of input materials in the US and in Europe. CSIRO's timing during the quarter of a fixed volume and price offtake agreement with Tesla for active anode material from the Vidalia facility in the US marked the importance of SARA's integrated business in potentially starting to fill a part of that gap. All around the world governments and markets recognise the key role of critical minerals such as graphite in automotive electrification and energy storage development towards the objective of reducing carbon emissions. Positive ESG differentiation also continues to rise in importance as greater understanding sees challenges in parts of the existing battery materials supply chain. Each quarter we reiterate our belief in the importance of the BALAMA asset and our vertically integrated active anode material facility at Vidalia. to the future of this transition and as 2021 closed we saw that this is becoming more apparent to customers, investors and governments. Whilst it's disappointing that disruption in the global container shipping industry constrained Balaama production and sales in recent months, we have developed a major logistics option to reduce the future impacts and head into 2022 with strong optimism around Balaama's future. and the potential for near-term FID approval at Vidalia. Slide four reiterates our fundamental ESG commitments and performance focus and every quarter that passes highlights the criticality of this effort. Since the company's commencement, ESG excellence has been a key focus and we're beginning to see the very real impact of downstream customer requirements and supply chain auditing bring differentiation between incumbent production and ourselves into sharp relief. During Q4, Minviro completed a detailed independent life cycle assessment of Syrah's integrated operations from Bulama origin to Vidalia active anode material customer gate in accordance with ISO standards. LCA is a globally recognised and scientifically validated methodology to quantify direct and embodied environmental impacts along the life cycle of a product or process and Minviro is an independent third party consultant with an established track record of life cycle assessments in the battery materials space. The approach incorporates all material and energy inputs and direct emissions to air, land and water associated with the production of a product or process and identifies environmental hotspots in the production process via an assessment of an overall global warming potential outcome. Minviro's LCA estimated that SARA's operations exhibit materially lower global warming potential compared with representative natural graphite and synthetic graphite anode material suppliers benchmarked in China. The company is also advancing specific projects including a solar and battery system at Galama and longer term power options for Vidalia to further reduce the environmental impact of its operations. It's worth noting here that a lot of partial chain information is being communicated to the market around LCA. SARA is committed to making the full chain from mine to final product visible and encourages care to be taken in making comparisons to ensure that definitions are not being cherry-picked to derive a particular desired result by others. Specifically moving on to ESG outcomes for the quarter, our health, safety and environment performance remains outstanding. Our TRIFA at Balaama was 0.5 in the December quarter. and the Balaama trigger has remained below one since late 2018. Our trigger at Vidalia was again zero in the December quarter. We recorded a number of further positive COVID-19 cases at Balaama late in the quarter after around two months with no new cases. All cases were minor or no symptoms and there's been no impact on operations. CSIRA has robust COVID-19 protocols in place and these allow us to effectively manage at the LLAMA without interruption. CSIRA has also made available and promoted vaccination and now 97% of employees and contractors are vaccinated at the LLAMA. The company is also supporting vaccination efforts in its host communities. We'll skip over the quarterly summary slide and go straight to the detail, and I'll hand over to Steve here to make some comments on the market and our corporate position. Steve?

Thank you, Sean, and good morning, everyone. As Sean noted, 2021 was a watershed year for EV production and sales, with a huge number of legacy automaker programs and model announcements demonstrating mainstream integrations. Slide 6 shows our primary leading indicator, global electric vehicle sales. Very positive momentum continued in EV sales and penetration in the fourth quarter. Global EV sales grew 115% in 2021 versus 2020 to approximately 6.2 million units with strong demand growth in China, Europe and the US. Global EV sales were more than 850,000 units in December 2021 alone, a staggering outcome when compared to full year results of just over 2 million units only two years ago. Most analysts project further strong increases across all major geographies in 2022 and beyond, supported by growing consumer adoption and government policy. EV sales and battery demand growth are obviously causing strong momentum to flow through the demand for anode material, as demonstrated by total Chinese active anode material production increasing to a record 71,000 tonnes in December 2021, and Q4 representing an almost 50% increase on the fourth quarter of the prior year. The trend on this front has been very strong over the past 18 months, and our interaction with spherical graphite processes in China demonstrates very robust demand. This demand growth has hit some supply headwinds, with both artificial graphite and natural graphite AAM supply in China being impacted by production challenges, which has reduced inventory. In the case of synthetic graphite activano material, the impact of power disruptions, rising power prices and an increased focus on emissions in Q4 reduced availability and increased price on the synthetic product. And as highlighted on slide 7, the upstream natural graphite finds market has seen strong demand conditions coincide with supply disruption amongst Chinese domestic producers. Major Chinese production sources have been impacted by environmental restrictions, including tailings challenges, air and effluent emissions, as well as seeing the same power costs and disruption challenges that have impacted the synthetic graphite active anode material producers. These domestic Chinese market dynamics have coincided with the annual winter domestic production outage period, resulting in very low natural graphite inventories. exacerbated by import challenges caused by disruptions in the global shipping market and China logistics disruptions from COVID lockdowns. As a result, third-party price reporting agencies are recording significant increase in Chinese domestic natural graphite science prices, as demonstrated by the 2021 spot price chart on slide 7. It is important to note that SARA's weighted average price achieved may not reflect this spot price, as it includes prices for sales under a mix of spot and term contracts and different pricing mechanisms. We are, however, seeing contracted prices increasingly strong for new deals and spot shipments. Slide 8 and 9 provide the latest picture of the global and relevant regional battery manufacturing capacity pipeline forecast and announcements, as well as the resultant graphite battery anode material forecast requirements. The growth ahead for the industry continues to strengthen, in particular for Syrah's Chinese natural graphite target customers and the USA acumenode material market, providing a very strong backdrop for the company to increase production capacity utilization of Volama and a great setting for Vidalia's potential initial expansion. Moving now to the corporate front, Syrah finished the quarter and the year with a cash balance of $53 million compared to $74 million at the end of Q3. Given the confidence in progressing with Vidalia construction in the near term and to maintain the expected project schedule, we continue to invest in detail engineering activities and procurement of long lead items at Vidalia. SARA also completed the purchase of an adjacent parcel of land that will facilitate construction activities for Vidalia's initial expansion, as well as provide the required space to potentially expand the facility further as the market grows. The total amount of Vidalia investment through the quarter was $6 million. With shipping constraints causing lower production and sales than anticipated at Balama, we were not able to achieve our minimum 15,000 tonnes per month production target, and there were also several one-off items through the quarter, including a 13th paycheck for local Mozambican staff. We have also extended our procurement working capital cycle to ensure we are not impacted by any challenges to production inputs, while shipping transit times have extended our receivables collection timeframes. Funds continue to be received just later. Similarly, there is a lag between higher shipping costs being incurred at present and increased pricing on tons being shipped, compared to what we're experiencing on new orders. However, this will balance out, and there is strong upward pricing pressure through the order book, which will more than compensate for the shipping price increases we have seen. Over the short to medium term, we would see shipping costs stabilising and beginning to moderate, should the shipping market normalise. while current price support for natural graphite based on market factors is very strong. In the current market, we are also likely to achieve prepayment of natural graphite sales through break-bulk shipments, which will also improve working capital. Concurrent with the Vidalia FID processes, SARA continues to review funding requirements for the initial expansion and has engaged with government agencies relevant to critical minerals developments. As a result of these initiatives and the Vidalia production, Offtake work, corporate costs were also higher than normal during the quarter. I'll now hand you back to Sean.