Syrah Resources Limited

Thank you for standing by and welcome to the CIRA Resources Q3 quarterly report update. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Sean Verner, Managing Director and CEO. Please go ahead.

Thanks for joining the call. With me this morning, Stephen Wells, our Chief Financial Officer, and Viren Heera, our General Manager of Business Development and Investor Relations. We'll reference some of the slides released along with the report on today's call. The third quarter of 2024 saw both continuing EV industry growth and significant uncertainties evident in the global lithium-ion battery, active anode material and graphite market. with Chinese dominance of sales growth and EV penetration, but varied growth rates in other markets. China's dominant position in lithium-ion battery and anode production continues to extend. The global markets for these finished goods and input materials are in the midst of a series of high-impact policy decisions across China, the US, and Europe in particular, as well as other growing jurisdictions. and many of these policy decisions potentially have binary outcomes. In light of this volatility, and despite our challenging operating and cash flow position, Syrah's strategy is to ensure production readiness and development progress beyond others in the ex-China integrated natural graphite anode material and input feedstock production. But this strategy must be supported by cost minimisation and cash preservation, protecting the asset base and ensuring we're set to take advantage of market and policy conditions as they evolve. Turning to slide five, during the third quarter, we were focused on sales from inventory for Balama with no production campaign being run. Progression of the DFC funding through a delayed and significant set of approvals that has now reached binding conclusions. increasing production expertise and progressing qualification towards sales of Vidalia anode material to Tesla and other customers, and significant government engagement regarding policy settings, particularly for the US, but also with regard to Mozambique and China. Whilst the natural graphite finds market is showing the first signs in many months of slightly more activity, the challenges have remained. and cash outflow has continued with both Valama and Bedelia impacted by the timing of demand, albeit for very different reasons. We'll outline these asset positions today, but we maintain that despite the very real challenges faced by the company, Syra demonstrates industry criticality through relationships with the US government and major OEM and battery customers, and only Syra is currently poised to benefit from any near-term catalyst. starting with the DFC loan, which Steve will comment on further later. The unexpectedly long process for approvals under the DFC loan took the major outstanding step towards finalisation last week, with approval required from the Mozambique Council of Ministers being granted after many months of communication, and the loan is now binding with disbursement processes to follow. The execution of this loan shores up SARA's runway significantly providing an important Belama working capital backstop, even if the most challenging market conditions from China continue, as it provides a bridge to ex-China natural graphite demand growth. Progress of the loan has been a significant effort over more than three years from Steve and the broader SARA finance team, the DFC team, and various service providers. It's an important indicator that both the DFC and the US Department of Energy have strategically embedded into CSIRA's funding, highlighting the importance of both Bulama and Vidalia to the graphite critical minerals position of the US and other ex-China markets. With $150 million US available under the 13-year loan and an initial disbursement imminent for Bulama and for upstreaming to provide parent company liquidity, this loan is critical for CSIRA's immediate funding position. The binding commitment is a great milestone and our focus turns to efficient disbursement processes that are important to our unrestricted liquidity position. We continue to work through these processes with all stakeholders, noting that some challenges have been seen through the post-election interruptions to normal availability in Mozambique. We're working hard with our US funding partners at both the DOE and DFC. as current geopolitical, market and policy circumstances are not simple to navigate, and in some cases impacts are driven by competing aspects of US policy. Getting to this point with funding has required strong communication, a degree of flexibility, and the policy and market conditions have evolved. We're very focused on reaching a more stable period ahead where these loans are operating procedurally. I wanted to touch now on the broader industry context. Both equity performance and commodity price performance of the majority of battery materials has been volatile for most of calendar year 2024. In nearly all cases, that volatility has been driven by the actions of or reactions to China, with siren and graphite no exceptions. Whether an EV and battery producer or an input materials producer, what remains critical to long-term equity value is the market position that your organisation holds relative to Chinese players at the same point in the supply chain. Case of and position in market development, competitive leverage and industry consolidation dynamics are all being driven by Chinese policy and market activity. and the responses of the US and the EU to those dynamics. China continues to dominate this EV and energy storage supply chain, and as we show on slide 8 of the presentation, in the immediate term, North American EV sales growth has slowed through 2024, and some of the forecast EV demand has been moderated, with planned auto and battery capacity expansion timelines in some cases also being adjusted, which has ultimately flowed through to our node materials. What remains critical strategically and in preparation for the future of input material production is asset quality, expertise and development readiness. You can't participate in the market developments or consolidation opportunities without operating progress and funding certainty. An attractive cost position and demonstrated product quality through qualification are also key differentiators. Palarma remains the premier asset in natural graphite globally, and a very strong operating team manages to drive campaign production volumes of high-quality material within the extremely challenging market conditions. Equally, at Vidalia, whilst progress has been slower than we hoped towards sales qualification, the learnings in production and qualification processes ex-China are enormous, and we're banking important development and operating experience in advance of other projects. We recognise that the investment and patience required from shareholders has been very significant and that the value we describe here is not yet reflected in the share price, but our focus on preservation of asset optionality and readiness is paramount to realisation of that future value. Turning to slide nine and linking back to the comment I made earlier about just how many potentially binary market and policy factors exist in the graphite and anode space today, SARA's position of readiness remains unique. With so many factors having turned against ex-China capacity development over the past two years, any swing back to a requirement for ex-China natural graphite feedstock or US domestic natural graphite anode material positions the company strongly. Upside risk is evident in a number of potential changes, such as China's supply risk, given the potential use of government export licence controls, Chinese domestic policy development, including potential economically driven consolidation or policy driven rationalization of overcapacity. Potential environmental controls focused on emissions or power consumption in China. More requirements for import approvals or costs on such. In the US, the evolution of import controls on tax credits and supply chain resilience. Ongoing changes to global tariff policies and overall trade policy positioning in the US dependent on electoral outcomes. With all this in mind, despite it requiring a significant cash investment and focus on further reducing costs, we're convinced of the importance of maintaining operating capability. Evidence of the expected growth in ex-China funds demand from 2025 onward will support Balama and the need for domestic production of natural graphite anode material in the U.S. sustains the importance of the Vidalia position. I'll come back to more detail on the assets in our markets later, but first I'll hand over to Steve to talk through the finance and funding position and an update on some of the relevant government policy positions. Steve?

Thank you, Sean, and good morning, everyone. Turning first to our cash position, as of 30 September, Syrah had total cash of US$61 million including US$41 million of restricted cash, which is SARA cash held for use by the Vidalia asset for operating costs, minor capital improvements, as well as standard lender protection reserves, and it's restricted under the DOE loan. The remaining US$20 million in unrestricted cash accounts that are used for the LAMA, corporate expenses and any additional group requirements. Clearly, as the DFC loan is finalised, that loan will reduce any cash draw from Balaama for an extended period as it relates to unrestricted cash. The reduction of $20 million from unrestricted cash through the quarter included $7 million to Vidalia for additional capital works to support qualification processes and debt service. We don't expect further capital requirements of this type for Vidalia going forward. Corporate and related experiences were $4.5 million with $1.3 million of legal expenses relating to the finalization of the DFC loan. The remaining $8.5 million related to BALAMA net cash outflows with reduced operations to minimize cash outflow offset by sales receipts. In conjunction with this quarterly release, we are also very pleased to announce today the signing of binding loan documents with the DFC. This is a very significant milestone as the loan will support the net cash outflow from BALAMA for a challenging market period in the near term, as well as provide liquidity support for the parent company through a contribution to the parent company. As Sean outlined, it has been a challenging process requiring a series of approvals, which have all taken longer than expected. However, signing of the finance agreement and related documents has been achieved and we are now targeting funding of the loan as soon as possible. Turning to slide 10 on US government policy in particular, The geopolitical backdrop to the evolution of ex-China AAM market conditions continues to be mixed and variable, with changing dynamics across both China and US government policy in particular. Although the implementation of the two-year transition rule in May 2024 allowed US auto OEMs a longer period to access tax credits while still utilising Chinese-sourced graphite nano, it did incorporate a mechanism for OEMs to be required to demonstrate support for the development of anode production facilities in the US. Final determinations on whether OEMs have been successful in demonstrating the required support and supply from non-FEOC AIM producers to be ready for 2020. In our view, OEMs and the regulators continue to walk a thin line with vehicles remaining eligible for the very significant consumer tax credits under the 30D program and the steps they need to take to have alternative supply in place. Given the abundance of cheaper Chinese anode material in the US and with a historically ineffective terrorist regime in place, it is clear that absent OEMs being required to support the domestic anode supply chain as a result of the implementation of the transition rule or other policy changes, development of the US anode supply chain will stagnate rather than progress. While policy progress under the current administration is occurring and the policy intent is clear, i.e. the development of a US anode capability, The absence of any further uptakes being announced and no meaningful purchase volumes in place for domestically available material compared to cheaper Chinese material mean that support for the build-out of the domestic supply chain is not certain by any stretch. On that basis, future tax credits for OEMs should be at risk if there is a substantial build-out of anode production capacity in the US. There is especially challenging from a relativity perspective in a world where almost $3 billion of consumer tax credits on EVs are expected to be claimed in 2024 by US OEMs significantly above initial US Treasury estimates. The more recent developments have trended towards advantage for Syrah and positively the reapplication of existing tariffs of 25% on imported Chinese natural graphite and artificial graphite AEM being in effect from June 24 was very welcome news for the competitiveness of domestically produced material against the subsidised Chinese imports. But statistics currently demonstrate lower coverage against imported goods that would be expected given the volumes being consumed. We expect that this will be an area of strong interest for customs and commerce authorities in the coming year. Final guidance on the 45X production tax credits have been released and including the cost of the import raw materials, even if those are mined outside North America. They are claimable if non-FEOC, which estimate will provide around $0.70 per kilo benefit to the Vidalia AAM cost base. And the next round of 48C capital tax credits are also underway, with Auto OEM seeking to demonstrate support for future capacity in that process. Zara is cognizant that much uncertainty is riding on the outcome of the upcoming US elections. Whatever the outcome, we expect that the greater activity will be evident in the sector after the completion of the election, irrespective of administration. There remains great opportunity for the US to further refine policy to accelerate domestic AIM production and sales, especially where capacity has already been built or there are options for expansion. If the government is truly dedicated to seeing the build-out of the domestic production capacity for battery materials, policy must drive support from OEMs to reduce their reliance on and benefit from aggressively dominant and subsidized Chinese production. As Sean noted earlier, across many markets, including but not limited to graphite, this capacity domination is driving unsustainably low pricing, in many cases below the cost of production, with the aim of China driving out ex-China competition and monopolizing the markets. For investors in and observers of Syrah, there are many catalyst developments to watch for in this space. And I'll now pass you back to Sean.