Syrah Resources Limited

Thank you for standing by and welcome to the SIRA Resources Q2 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'll 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.

Thank you, good morning, and thanks to everyone for joining us on the call today. With me is our CSO, Steve Wells. We'll use the presentation release along with the quarterly report through today's call. We'll start on slide three. The second quarter of 2026 for the global grad science in those material markets still digesting the US International Trade Commission's negative determination. in the anti-dumping and countervailing duties case, amid ongoing demand-side policy uncertainty. Consequently, Syrah's natural graphite production and sales performance was softer than we had initially expected. This policy inertia led to subdued market conditions and price sensitivity with natural graphite feedstock customers during the second quarter, which together with increased ex-China activity from Chinese-operated graphite suppliers negatively impacted sales demand for Palama. Our operations decisions at Palama are informed by confirmed demand signals from the market and with slower than planned inventory drawdown, Syrah's natural graphite production was moderated with the planned production campaign being deferred into the third quarter and now underway. The expansion of Chinese-controlled East Africa finance supply into the ex-China trade is a relatively new dynamic playing out in the seaborne markets. The Chinese privately-held natural graphite operation, which links to and is a strategic direction of Crohn's, Chinese state-owned entities commenced finance exports from Mozambique into the ex-China anode market during the quarter. Under current policy settings, is competing with such supply for ex-China fine supply into Indonesia. The long-term strategic importance of graphite and Syrah's position are positive given that policy support remains critical and expected factor in ex-China markets moving to reduce reliance on Chinese dominated supply. Graphite and anode demand is still expected to grow significantly in the medium term and these materials are essential to downstream industries that generate hundreds of billions of dollars in value per year globally. Although the immediate drive slowed somewhat in Q2, customers are still seeking secure and sustainable supply of Cyrus products over the medium and longer term to ensure these highly valuable industries are less vulnerable to disruption. Meaningful and stable government policy support, both on the supply and demand side, is crucial to developing ex-China supply chains, incentivising greater critical mineral sourcing diversification and growing SARA sales volumes. SARA is very active in highlighting existing supply concentrations and in advocating for policy development. Seeing that development in other critical minerals, rare earths being the most prominent example, the government support is having a clear positive impact on the expansion of capacity and demand outside China. The cost to governments and customers of not proceeding in this manner would be high, demonstrated by IEA analysis in its 2026 Critical Minerals Outlook. estimating that over $300 billion per year of downstream production outside China would be at risk if battery grade graphite trades with China were meaningfully disrupted. Syrah's capacity is key in partnering with customers and governments to build resilient graphite anode materials supply chains. On slide four, turning to an overview of Syrah's performance in the second quarter, At Fidalia, the operations team made very strong progress in Q2, moving through several key qualification milestones and demonstrating very strong product quality performance and production consistency. We continue to build valuable operating experience through more extended production runs and intensive interactions with multiple customers in the final stages of material testing and qualification approvals. Vidalia now has a great foundation for the transition from qualification campaigns to continuous production and ramp-up to commercial operations, subject to the final go-ahead from major customers. We have been working through multiple customers' highly detailed and extensive qualification requirements, and we are making faster and more positive progress. We are also responding to continuing refinements that have been requested by customers as their own processes and requirements mature in sometimes newly developed battery manufacturing operations and product mixes in the US. Our product quality and performance are excellent as the updated technical performance outlined on slide 11 in the appendix of today's presentation illustrates. We are absolutely confident that our anode product meets or surpasses the requirements the use in customers' batteries, and that's been further demonstrated by the resolution of alleged customers' assault as we advised during the quarter. On the natural graphite side, things were more challenging during Q2. As I mentioned earlier, the llama did not produce for most of the quarter, with 2,000 tonnes being produced in completing a Q1 campaign. Natural graphite sales were 7,000 tonnes during the quarter. and our weighted average sales price for the quarter of US$736 per tonne was up 17% on the first quarter of 2026, weighted to a higher proportion of course sales in the sale mix. At the macro level, electric vehicle sales were weaker through the start of 2026, however are recovering now in key markets. Global EV sales grew 4% in the second quarter year-on-year. and this bodes well for improved upstream materials demand in the months ahead. We used this period of ALAMA to deliver ongoing reliability upgrades across critical processing equipment to reduce unplanned downtime risks and to improve future plant availability. ALAMA's C16 costs during the non-operating periods of the quarter were around $4 million per month, largely consistent with the prior quarter. with some incremental variable costs for mining activities in preparation for future campaigns and product logistics for ongoing sales. Ultimately, it is confirmed demand and product inventory position that informs BALAMA's operating requirements. We continue to carefully monitor the ex-China anode material demand position as customers adjust to a post-antidumping case world. and believe that we will see recovery in ex-China feedstock demand this year, even if it's slower than initially expected. We continue to deal constructively with a highly complex mix of policy, commercial and technical factors across natural graphite feedstock and anode material markets. We remain singularly focused on accelerating and increasing sales. The strong progress in anode material qualification activity this quarter demonstrates both that there is domestic demand in the US for new-term sales and that customers still expect the policy environment to develop towards domestic sourcing requirements, facilitating China's commercial progress. Ongoing impacts arising from China's export license controls and the potential for US tariffs and investment policies to favor products produced in the US and allied countries mean that ex-China demand growth remains positive, with timing the unknown factor. We emphasise the extensive work of our operating and commercial teams in this space, with our investment and development experience demonstrating the considerable time and capital required for others to follow, creating a sustainable lead time advantage for CSIRO. Before I hand over to Steve to talk about the financials, I wanted to move to slide five on safety and sustainability performance across the company. As we continue to develop as a leading ex-China critical minerals producer, we are guided by three core objectives. Being positive for the communities in which we operate, being sustainable for the environment and providing secure, high-quality supply for our customers. In the second quarter, performance against our key safety and sustainability metrics was very pleasing. The health, safety and security of employees and contractors will always remain SARA's highest priority and in Q2 we saw our total reportable injury frequency rate reach a record low of zero incidents per million hours worked. This is a real credit to our site leaders and every employee and contractor remains focused on safety through the intermittent nature of BALANA's campaign operations and for daily use ramp-ups. Our safety focus is underpinned by our work on critical risk hazard management and infield data shift interactions, which are a daily priority. Congratulations to our teams for this very strong outcome and we are highly motivated to maintain this performance and continue to refine our operational risk profile. SARA's operations are also clearly aligned to leading global sustainability and governance standards. Our Initiative for Responsible Mining Assurance or ERMA 50 level of performance for sustainability and our commitment to external audit and accreditation processes including ISO standards are critical differentiators. We continue to highlight our commitments to operational, environmental and tailings governance compared with other sources of supply, which we are convinced over time will lead to stronger preference for Bulama and Vidalia products. SARA has invested decades towards strengthening this differentiated sustainability performance and in reducing the global warming potential of integrated production to a level significantly below Chinese alternatives. We continue to prioritise health and safety and environmental management systems confirming our commitment to operating sustainably and driving continuous improvement. This makes CSIRA the most sustainable source of integrated natural graphite anode material available at scale today. You can read more about CSIRA's sustainability objectives and performance and progress in the quarterly sustainability report which is released on our website today. And with that, I'll hand over to Steve to talk about our current financial position.

Thanks, Sean, and good morning, everybody. I'll turn your attention to slide six, the kind of cash flow approach for the quarter. We started the quarter with $52 million in total cash across restricted and unrestricted cash balances, which excludes the proceeds from the opening raise announced in March, but which had not yet settled. Net cash outflow from operations during the quarter was negative $19 million, inclusive of $12 million of customer receipts. This was a lower cash outflow than the March 26 quarter of negative $27 million due to lower operating costs in the low-alarm reproduction quarter, increasing working capital and payments for a large break-volt shipment sale in Q1 that was received in Q2. At the end of the second quarter, the company had a closing tax balance of $98 million following the settlement of equity raising earlier in the quarter. Of this closing balance, there was $31 million of unrestricted cash and $67 million of restricted cash under both U.S. government loans. Of the restricted cash, $23 million is available to fund Bulama operating and capital costs, and restricted cash of $18 million is available to fund Bedalia costs. Further, new liquidity is planned to be committed to Syra in the non-binding strategic proposals. After the end of the quarter, our U.S. subsidiary, Syra Technologies, received an $8 million Advanced Manufacturing Production Tax Credit which is a direct cash refund under section 45X of the US Inflation Reduction Act related to a 2025 tax year. The market and policy conditions I experienced in the second quarter were challenging but demonstrated exactly why the multi-element strategic funding proposals were pursued. The development of ex-China demand and capacity in a China-dominated market requires funding, customer and policy support and SARA's deep focus on these elements has been critical in navigating conditions to date and will be into the future. With that I'll hand it back to Sean.

Thanks Steve. Moving to slide 7 which outlines the US government policy initiatives that are developing to support SARA's position. Noting that irrespective of the International Trade Commission outcome, the extensive Department of Commerce investigation through 2025 found widespread Chinese product dumping and subsidisation harming the development of sustainable US domestic anode demand and capacity development. SARA continues to advocate for policies that address non-market practices and those of supply from China. During the quarter, U.S. trade policy developments continued to focus on reducing dependence on Chinese critical mineral supply chain, with graphite identified as a strategic material. Existing U.S. Section 301 tariffs on Chinese graphite remain in place and are considered relatively durable, while additional policy measures targeting Chinese graphite, anode material and precursor products continue to be evaluated. The evolving policy environment reflects bipartisan support for strengthening domestic critical mineral supply chains and improving supply security for battery materials. A key development area is the ongoing US Section 232 investigation into processed critical minerals and derivative products. The US administration is progressing negotiations with trading partners and has indicated that graphite remains a priority critical mineral in this space. Potential outcomes under consideration include targeted trade measures such as minimum import price mechanisms, tariffs or other measures designed to support both targeted domestic demand and investment in domestic and allied supply capacity. Updates on the Section 232 process are expected during this third quarter of 2026. Recent U.S. trade proposals have included exemptions for natural graphite imports under certain tariff actions, reflecting the current absence of domestic natural graphite mining capacity in the U.S. CSIRO continues to engage with U.S. policymakers and regulators on the immediately available supply of natural graphite from Balama and anode material from Bedalia, as well as our expansion potential. The U.S. government is highly incentivized to develop and support local anode manufacturing capabilities for unfettered access to critical industrial inputs and to protect the US markets from China trade practices. And there are many potential policy levers that are supportive of CSIRO. Some of these include the remaining tariffs on Chinese anode imports, Section 45x production tax credits, as mentioned by Steve at Bedavia, and the huge importance of ExChina's supply of NOs material to enable battery manufacturers and auto OEMs in the US to continue to qualify for 45x tax credits of their own, which currently deliver more than a billion dollars each annually to the major players, underpinning their profitability. There's also the US government's Defence Logistics Agency Centre for Natural Graphite and the Project Vault stockpile initiative for critical minerals. Also, the US Department of War supplier financing and non-PFE critical mineral sourcing requirements were recently announced for military applications, where SARA has been advancing customer discussions, along with customer discussions that we are having into the critical nuclear industry, supporting power supply requirements into developing demand in the US. And lastly, Starra also retains a US $165 million Section 48C tax credit awarded to Bedalia for further potential expansion. Such policy positions improve the economics of producing anode material in the US, directly benefiting Bedalia and strengthening demand for Belama feedstock globally. Looking at the right-hand side of this slide, expected ex-China demand growth for lithium-ion batteries remains attractive, and US existing demand and future growth will require a greater proportion of ex-China supply of anode material to ensure supply chain security and to maintain cell and auto manufacturer eligibility for the tax incentives that we mentioned earlier. Some additional details about the outlook for our operations and business overall. We are ready to increase production subject to market demand as the ex-China market stabilises and grows. Over the medium term, ramp-up of BALANA's targeted levels is dependent on both meaningful policy developments, which are expected to enhance support for ex-China producers, and overall market growth in both the industrial and battery segments. These will obviously be the key factors in the timing of positive cash flow from Belloma. At Fidelia, we are ready to ramp up immediately and we expect the commencement of commercial anode material sales in this second half of 2026. Our expectation remains for positive operating cash flow from the Fidelia operation from mid-2027 onwards, if that occurs. Finally, as outlined earlier, our pro forma liquidity lasts the equity raising and work towards finalising the strategic funding proposals, provides flexibility to ramp up our operations towards targeted levels and to continue to develop business. And finally, let me close with an overview of some of the elements of our investment proposition on slide 9. We have a clear advantage in Natural graphite and active anode material markets is the integrated first mover for commercial scale supply outside China. No other company today has both an operating graphite mine and integration with a fully operational commercial scale anode material facility positioned to supply into the US domestic battery manufacturing market. We strongly believe this will deliver advantage, particularly considering that other new projects have long lead times and very significant capital requirements. Secondly, Bulana is the largest and highest grade natural graphite resource and operation outside China. Its scale and oil quality give us meaningful optionality as demand grows and where ex-China customers prioritise diversification, both for natural graphite feedstock in industrial and battery markets, and for integrated anode material production. Importantly, we're advancing the implementation of the strategic funding proposals we announced in March that reset our balance sheet and provide incremental support to the business. And lastly, we continue to develop our alignment with the US government through both the DFC and DOE, with both an immediate and future pathway to direct US government equity holding in Syrah, highlighting the importance of CSIRO's assets in securing critical mineral supply for US energy and battery supply chain interests. Thank you for joining the call today and I'm now happy to move to any questions.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your questions. Your first question comes from Regan Burrows with Macquarie. Please go ahead.

Hi, it's Sean and Tim. Thanks for taking my question this morning. Can you just remind us the pricing dynamics for both the Tesla and the Lucid contracts? Were they both fixed at the time of signing or did that period commence on achieving a qualification?

Sorry, can you just repeat the first part of the question, Regan? I missed it.

Sorry, can you just confirm the pricing dynamics for both of those off-tag contracts that you have with Tesla and Rosid? Were they fixed at the time of signing those contracts or were they fixed from financial and qualifications material?

They were fixed from the time of signing those contracts.

Okay, great. And just sort of staying on that, I mean, it looks like the Tesla qualification is largely met. Can you sort of give us a bit of a comment on how far you are down that pathway for the Lucid contracts?

I think it's difficult to provide specific information given the confidentiality elements of each of those processes. But, you know, as we said during the call, progress through the quarter was very positive on qualification processes for a number of customers and that's what leads us, I guess, to a stronger view that commencement sales in the second half of this year is likely.

And if we're taking the commencement sales in the second half of this year across both contracts as occurring, Looking out to calendar year 21, how does that sales mix look across the portfolio? Do we sort of assume, I guess, a similar dynamic versus the contracted volumes, or are there going to be sort of rank periods between those two contracts? How should we sort of think about that?

Yeah, I think for the daily facility overall, we've spoken previously about an overall ramp-up requirement. We expect it to take six months or so to reach 80% capacity utilisation. We haven't provided any insight into the mix of customers split through that ramp up, but our focus is clearly on commencing that commercial production process and ramping up as quickly as we can to that 80% level. the expectation of having the daily operation at an operating cash flow positive level in the second half of 27 is very much based on that commencement of a commercial sale sometime in half two of 26.

Great. Thanks. I'll leave it there. Thank you. Thanks, Regan.

Thank you. Once again, if you wish to ask a question, please press star 1 on your telephone. Your next question comes from Andrew Harrington with Petra Capital. Please go ahead.

Morning, Sean and Steve. Thank you for your time. I have a few questions. I hope you'll hand over to the other people on the line. I see there's a couple. Referencing the timelines of milestones and qualifications, it's very hard to gauge. How do we think about you when you cross those milestones? Are you three months into a 12-month process or 24 months into a 30-month process? When you say you've made a lot of progress, How can you understand those processing milestones?

Yeah, it's a really challenging question to answer, Andrew, given the confidential nature of those qualification processes owned by customers and controlled by customers. In general, mass production... qualification processes with major customers take at least 12 months and in some cases up to two years and beyond. So we are very much at the back end of that with our expectations of commencement of sales being much closer than it has been in the past. So I know that doesn't provide you an accurate view of The timeline are exactly where we are at on those processes but what really matters here is our expectation around the commencement of sales and we will continue to work through with other customers in addition to the ones that we are well progressed with on qualification of material out of the data to provide us greater optionality in terms of what the sales mix might look like for the existing operation and for future expansion of operations at Bedelia.

And where is the first sale expected? You're saying second half of 2021 or 2027? That's your first delivery that, you know, your first invoice you will be sending out?

No, I said our expectation is that commercial sales will commence in the second half of 2026. and that based on that you have an expectation that for day year if it achieves the ramp up profile that we're seeking it can achieve operationally cash flow positive operations in the second half of 2017.

Alright, thank you. And then the Vidalia V funds that has arrived after the quarter, you were saying that Russia is paying them out every quarter, is that how, is that correct?

It's every year, annual.

Every year. Oh, so it's just, sorry. And then a sort of a broader question on the 45X credits. How many battery makers or vehicle makers are receiving that? How many are able to comply at the moment? Or put another way, how much is the government sending out under 45X?

There's an enormous amount of money flowing out under that program. If you think of the three or four largest EV manufacturers or EV battery manufacturers, at least the top three, are receiving in excess of a billion dollars a year direct cash each out of that program. At the moment, it is our understanding that all of them or near all of them comply because the levels of required non-PFE inputs is only at 60% this year. That ratchets up roughly 5% a year to 85% required by 2030. So it becomes increasingly challenging for the combination of all of those players to achieve that, given the limited amount of non-PFE sorting of anode material in particular. but it's extraordinarily important to the profitability of those battery makers and OEMs.

Are they achieving that without buying anything domestically in terms of graphite?

At the moment, yes, because the way that the current guidance of that requirement is structured means that it is the aggregate of all input materials that is judged, and obviously in other areas, whether it be cathode materials, separators, electrolytes, etc., there are non-PFE alternatives that are allowing customers to achieve that. As I said, as that requirement ratchets up each year, that becomes increasingly difficult and then our material will become more relevant to that calculation.

Okay, thank you. And then in terms of the cash balance, how does it look once the new arrangements get finalized? What happens with the restricted cash on the restricted cash over the next, let's say, month by December?

The various balances there on slide 6 on the right hand side highlight the amounts that are available for both Bulama and also for Vidalia. The Vidalia cash burn per month is about $2 million. Obviously as we start to ramp up that will increase because we'll be producing and incurring variable costs. and there's certainly plenty there for that, particularly with the addition of the 45x tax credit we received. On the Balama side, you can see there's $23 million for that, and as part of the program under the Magnolia arrangements, there's another $15 million of investment due from the BNC to help fund that. Obviously, we're not drawing down on that. if we don't need to, because you incur the interest costs on it, but there's sort of liquidity through that part of it as well, as well as additional liquidity from the other elements of those non-binding proposals.

Sorry, go on.

No, it's fine.

Go ahead, Andrew. I was going to say, you've got a rearrangement of the funding with Old Super, correct?

Yeah, so the non-binding proposals had two core elements to them, one of which was sort of balance sheet reset. So that was visiting convertibles and new convertibles, as well as conversion of the DSC debt into equity and convertible notes and conversion of the DOE, apportionment of the DOE debt into convertible notes. So that was one kind of key stream. And then the other key stream is additional liquidity payments. that was also outlined in that. So that was a further drawing under the BFC loan and then additional liquidity under additional convertible notes to both Australian Super and the BFC as well. So it had those two elements to it, both balance sheet and liquidity.

And so notwithstanding sales and new funds from the US government, what is the I guess the question is about what does it look like, what do those columns look like that on the last column on page six look like in six months' time? How should we think about that?

Andrew, I think the best way to think about it at the moment is that obviously we're talking about the balance of the sales position and the continuing work through those strategic proposals and draw down based on the combination of requirements that play out over the next six months. So it's really difficult to give a specific answer to that question. The important piece to take away here is that the strategic proposals and the equity raising provide significant runway and that was the reason that they were structured in this way. that had multiple assets to them that gave us liquidity options. So we might leave it at that. Okay.

If I may, if I'm not hogging along.

Yeah, one more question and then we'll start.

Yeah, sure. In terms of Mozambique and competition from private Chinese groups, can you expand on that, please, and who and how much, perhaps, is coming out of Mozambique?

Yeah, it's still very early days to comment too much on that. I mean, there are a number of Chinese-controlled graphite mining operations in Africa. Some of those have been in production for some time and sending material directly to China. The one in Mozambique is relatively new and it's yet to be apparent just how much production of what quality is going to come out of that operation. demonstrating that there is China-controlled production going into Indonesia, which was not happening during the period that the tariffs were in place during the anti-dumping and counter-bailing duties investigation period. But I think it's too soon to draw much conclusion about what that's going to look like in the future.

Thank you very much. Appreciate your responses for all those questions. Thank you.

All right. Thanks, Andrew.

Thank you. There are no further questions at this time. That does conclude our conference for today. Thank you for participating. You may now disconnect.