CORPORATE DIRECTORY CONTENTS

Transcription

1 Annual Report 2014

2 CORPORATE DIRECTORY CONTENTS Directors Paul Kehoe (Managing Director) Tom Eadie (Non-Executive Chairman) Tolga Kumova (Executive Director) Rhett Brans (Non-Executive Director) Company secretary Melanie Leydin Registered office Level Collins Street Melbourne Victoria 3000 Telephone: +61 (03) Principal place of business Level Collins Street Melbourne Victoria 3000 Telephone: +61 (03) Chairman s Letter 2 Review of Operations 4 Directors Report 25 Auditor s Independence Declaration 38 Corporate Governance Statement 39 Statement of Profit or Loss and Other Comprehensive Income 46 Statement of Financial Position 47 Statement of Changes in Equity 48 Statement of Cash Flows 49 Notes to the Financial Statements 50 Directors Declaration 79 Independent Auditor s Report to the members of Syrah Resources Limited 80 Shareholder Information 82 Share register Security Transfer Registrars Pty Ltd 770 Canning Highway Applecross WA 6153 Auditor Grant Thornton Audit Pty Ltd The Rialto, Level 30 Level 30, 525 Collins Street Melbourne VIC 3000 Solicitors Baker & McKenzie Level William Street Melbourne VIC 3000 Stock exchange listing Syrah Resources Limited shares are listed on the Australian Securities Exchange (ASX code: SYR) Website address

3 Annual Report 2014 I 1

4 CHAIRMAN S LETTER The Review of Operations, which follows this letter, highlights Syrah s achievements and milestones over the past year. We are very proud of these accomplishments, especially the progress that we have made in moving the Balama Graphite and Vanadium Project towards development and marketing our products. However I believe that the future is even brighter because of: the large size and incomparable quality of the Balama deposit the orebody s location in a very favourable country - Mozambique the excellent infrastructure and supportive people in our local district the brilliant future outlook for both graphite and vanadium the high calibre Board and management team that has been chosen specifically to develop a large African industrial mineral project. Most of the points above are selfexplanatory or are discussed in more detail in the following pages. I would like to take this opportunity to expand on the last mentioned point. Our top team of Paul Kehoe as Managing Director; Tolga Kumova as Executive Director, Dinis Napido as Country Manager - Mozambique and myself as Chairman, have done a good job over the last three years of bringing the Balama deposit from an exploration prospect to the prospect of becoming the biggest and lowest cost graphite and vanadium project in the world. Our skills have complemented themselves well up to this point. Going forward, Syrah needs different skills to ensure that this project, which is critically important to Syrah, Mozambique and perhaps (in the future) the whole world, proceeds in the best manner possible. To this end we have been recruiting the right people continuously over the past two years. Most recently, in changes to the Board of Directors, Jim Askew has agreed to come on as Chairman starting October 2014, a tremendous coup for the Company. Joining him on the Board will be Sam Riggall, a vastly experienced law, marketing and industrial minerals professional. At the same time, Tolga Kumova will take over the reigns of Managing Director. Tolga s knowledge of graphite and vanadium markets, his clear enthusiastic leadership, and his expansive vision for the Company, will be instrumental in ensuring that the Company makes the most of the extraordinary opportunity that the Balama deposit presents Syrah with. Other recent director appointments to strengthen the Board include Rhett Brans, a very well-credentialed project manager and corporate director, and Jose Caldeira, one of Mozambique s pre-eminent lawyers. In addition Ian Stewart has been appointed to the position of General Manager of Development at Balama. Helping him, at least during the definitive feasibility stage, is Jeff Sterling from Intech Engineers. Michael Chan, Syrah s project metallurgist, is also an important part of the team. Syrah has had another very good year in advancing Balama and other projects towards a commercial outcome. This is a credit to our staff, consultants and contractors in Australia and particularly in Africa who have performed with great diligence and professionalism. The Board would like to thank the team for all of the good work. Tom Eadie Chairman Syrah Resources Limited 2 I Syrah Resources Limited Annual Report 2014

5 We are very proud of these accomplishments, especially the progress that we have made in moving the Balama Graphite and Vanadium Project towards development and marketing our products. Syrah Resources Limited Annual Report 2014 I 3

6 REVIEW OF OPERATIONS Financial year 2014 and the subsequent months has proven to be the most significant period for the Company to date with numerous milestones being achieved for the Balama Graphite and Vanadium Project including: upgrading of the Inferred Resources for the high grade Ativa (Balama West) and Mepiche (Balama East) zones to Measured and Indicated Resources using a 13% total graphitic carbon (TGC) cutoff to a depth of 300 m granting of a Mining Licence for an initial 25 year life by the Mozambican government with a further 25 year life extension available signing of a Memorandum of Understanding (MOU) for offtake agreement with China Aluminum International Engineering Corporation Limited (Chalieco), an affiliate company of Aluminum Corporation of China (Chinalco), for 80,000 tonnes of graphite per annum for industrial uses signing of a MOU for offtake agreement with Asmet (UK) Limited (Asmet) for 100,000 to 150,000 tonnes of graphite per annum for the recarburiser market ongoing positive metallurgical results for graphite with testing by commercial laboratories and potential customers demonstrating that >96% TGC concentrate can be consistently achieved with high recoveries through simple flotation with abundant recovery of coarse to very coarse material (+80 US Mesh) successful production of battery grade spherical graphite from fine grained graphite (-140 US Mesh) with a pilot plant purchased to further optimise the results positive metallurgical test results for vanadium which demonstrates that a combined concentrate grade of greater than 3.0% vanadium pentoxide (V 2 O 5 ) can be produced using a combination of Wet High Intensity Magnetic Separator (WHIMS) and flotation. Further test work has shown that this V 2 O 5 concentrate can then be successfully upgraded to 98% V 2 O 5 powder or flake and 99.9% V 2 O 5 powder completion of the Vanadium Scoping Study encompassing an approximate 5,000 tonne per annum scenario by Chalieco with robust financial metrics projected commencement of a Definitive Feasibility Study (DFS) in order to secure financing for the project and associated technical appointments in relation to this and the upcoming construction phase management and Board changes to further strengthen the technical expertise and experience of the Company as it transitions from a successful exploration to a production phase. In addition, the Company has proposed to demerge its Tanzanian assets through a distribution to shareholders which will be followed by a listing of Jacana Minerals on the ASX through an initial public offering. 4 I Syrah Resources Limited Annual Report 2014

7 Numerous milestones are being achieved for the Balama Graphite and Vanadium Project. Syrah Resources Limited Annual Report 2014 I 5

8 REVIEW OF OPERATIONS CONTINUED BALAMA GRAPHITE AND VANADIUM PROJECT LOCATION The Balama Graphite and Vanadium Project is hosted on a 106 km 2 granted prospecting licence located within the Cabo Delgado province in the district of Namuno in northern Mozambique. On the 6th of December 2013, Syrah Resources was granted a Mining Licence by the Mozambique Ministry of Mineral Resources for the Balama Licence. The concession was granted to Twigg Exploration and Mining Limitada (100% owned by Syrah Resources) and has an initial 25 year life. Under Mozambique law an extension of the Mining Licence for a further 25 years is available. INFRASTRUCTURE The project is located approximately 265 km by road west of the port town of Pemba. The Balama Project site is accessible by a major sealed road which runs from Pemba to approximately 40 km from the project site. The last 40 km is unsealed but in the process of being upgraded. This main road is located 1 km from the project site. To date, approximately 6.5 km of road has been completed and a further 10 km sealed and ready for bitumen. Civil works for two of the three culverts have been completed and back filling is now in progress. The third culvert platform is expected to be completed shortly. Figure 2: Balama location map Figure 3: Completed bitumen road (left) and road sealed and ready for bitumen (right) 6 I Syrah Resources Limited Annual Report 2014

9 Figure 4: Pouring platform (top left), completed platform (top right) and preparation for back filling (bottom) Grid power currently terminates at Montepuez approximately 60 km from the Balama Project site but is in the process of being installed. To date, installation of a 33 kv overhead power line over 7.6 km is almost complete. All overhead cables, earth spikes and lightning protection have been installed. Two (250 kva and 50 kva) out of three transformers have also been installed. The compound for the 500 kva is in progress and the entire project is expected to be completed shortly. Swedish firm Poyry SwedPower has been engaged to complete a load survey of the 33kV line which will be followed by a full load study. In addition, as part of the DFS currently underway, a backup diesel power station is being planned to meet any shortfalls in the grid capacity. The estimated capital costs for this are not expected to be significant. A large regional dam, Chipembe, is located only 12 km away from the Balama Project site and is currently underutilised. Two million litres of water has been contracted and allocated to Syrah which will be ample for the requirements of the project. Figure 5: 250 kva transformer (top left), 50 kva transformer (top right) and 33 kv overhead power line (bottom) Figure 6: Chipembe dam Syrah Resources Limited Annual Report 2014 I 7

10 REVIEW OF OPERATIONS CONTINUED BALAMA GRAPHITE AND VANADIUM PROJECT An investigation into the capabilities of the Port of Pemba has revealed that the port does not have the capability of handling the anticipated volumes proposed by Syrah in all the critical areas related to a container port. There is inadequate port access, a very small container terminal, inadequate berth infrastructure and a lack of international container liner services. The Company has entered into discussions with the Port Authority and third parties on how best to implement any proposed improvements to the port. Concurrently, investigations into the Port of Nacala as a viable alternative have also commenced. The Port of Nacala is substantially larger than the Port of Pemba and currently boasts a 600 m bulk berth and a 395 m container berth, compared to a single 183m general purpose berth at Pemba. Nacala is already refurbishing its berths and installing new container handling equipment. Four major shipping lines currently call on this port with regular liner services to all the major developed countries. Consequently, Syrah considers that the existing capacity and capabilities of the Port of Nacala would be sufficient to handle the volumes proposed by the Company. Syrah will continue its investigations into the economics and capabilities of both ports as part of the DFS. At this stage, although trucking costs to the Port of Nacala will be higher, Syrah expects that this will likely be offset by much lower container shipping costs compared to the Port of Pemba. Figure 7: Aerial view of the Port of Nacala GEOLOGY Balama comprises a series of hills consisting of graphitic schist which rise up to 250 m from the surrounding plains. The outcropping strike extent of the graphite is in excess of 7 km (refer Figure 8). The outcropping width of the graphite mineralisation is up to 2 km. The plains are situated in an alluvial river valley and hence the cover is deep further away from the outcropping graphitic schists. To the east of the main Balama hills is a granite intrusion that is younger in age than the graphitic schists. Syrah believes that heat from this intrusion likely recrystallised and upgraded much of the deposit. This is one aspect that is considered to be unique about the Balama deposit. RESOURCES The Balama Graphite and Vanadium Project has an exceptional JORC Code Inferred Resource containing 1.15 billion tonnes at 10.2% total graphitic carbon (TGC) and 0.23% V 2 O 5. Balama Drilling commenced in early 2012 following a series of trench sampling programs. Although over 120 diamond drilling holes have been completed in total, with the deepest being 350 metres (which ended in mineralisation), this drilling only represents a limited portion of the outcropping Balama deposit. In addition, Syrah has also defined several high grade zones within this global resource using a 13% TGC cut-off. These high grade zones are shown in Table 1. 8 I Syrah Resources Limited Annual Report 2014

11 Figure 8 (above): Overview of the Balama Project showing the the 250 m high hill that is composed of graphitic units at surface and the location of the high grade areas within the large strike extent of the outcropping mineralisation. There is continuous graphite exposure across the central area of the deposit which is only lightly explored. The deposit also remains open to in all directions. Depth Resource Category Balama West - High Grade Ativa Zone Mt TGC% V 2 O 5 % Graphite (Mt) Contained V 2 O 5 (t) Measured , Measured ,783 TOTAL , Indicated , Indicated ,296 TOTAL , Inferred , Inferred ,518 TOTAL ,578 Balama West - High Grade Mualia Zone Inferred , Inferred ,570 TOTAL ,084 Balama East - High Grade Mepiche Zone Measured , Measured ,690 TOTAL , Indicated , Indicated ,624 TOTAL ,848 Table 1 (right): JORC resources calculated for the high grade zone at Balama West and East using a 13% TGC cut-off Inferred , Inferred ,720 TOTAL ,872 Syrah Resources Limited Annual Report 2014 I 9

12 REVIEW OF OPERATIONS CONTINUED BALAMA GRAPHITE AND VANADIUM PROJECT METALLURGY - GRAPHITE Extensive metallurgical testing by both commercial laboratories and potential customers were conducted during the financial year. During January 2014, a bulk sample of 500 kg was taken from Balama East and processed via simple fine crushing only (no grinding) and subsequently followed by three stages of flotation to produce a high-grade graphite concentrate. The results are shown in Table 2. The weighted average of the concentrate grade is 96.6% TGC. Balama graphite is rare as the fine flakes are also averaging greater than 94% TGC without any need for chemical treatment. Approximately 25% of the processed material is coarse to very coarse (+80 US mesh). The results show an excellent concentrate grade across all size fractions. The recoveries were 92%. In separate tests, a potential customer achieved a 99.3% grade using simple flotation processes. Size Yield % TGC % Ash % Volatiles % (US mesh) Table 2: Yield, TGC, ash and volatile content of Balama East graphite concentrate Size (US mesh) Size (microns) Yield % TGC % +50 > > > < Table 3: Further test results of Balama East graphite concentrate showing yield and TGC During March 2014, further test work was performed on Balama East graphite by a potential European customer using simple flotation. The grade of the ore was 19.2% TGC. The results are shown in Table 3. Approximately 56.8% of the processed material is coarse to very coarse (+80 US mesh). The results show an excellent concentrate grade across all size fractions. Metallurgical test work completed by Syrah also shows that the vanadium reports to the tailings during the graphite flotation process. A pilot test plant has been established in China to commence trial production runs in relation to graphite and the first stage of vanadium processing. The following figure shows the simplified flow sheet to produce a graphite and initial vanadium concentrate. 10 I Syrah Resources Limited Annual Report 2014

13 Figure 9: Simplified flow sheet showing steps to produce a graphite and initial vanadium concentrate Ore Crushing Primary Milling Graphite Concentrate Flotation Rod Mill Graphite Concentrate Flotation WHIMS Vanadium Concentrate (4-5% V ) Ball Mill Graphite Concentrate Flotation Vanadium Concentrate (2-2.5% V ) Syrah Resources Limited Annual Report 2014 I 11

14 REVIEW OF OPERATIONS CONTINUED BALAMA GRAPHITE AND VANADIUM PROJECT METALLURGY SPHERICAL GRAPHITE In March 2014, Syrah announced that it has successfully produced spherical graphite from Balama fine grained graphite (-140 US Mesh). Initial results are shown in Table 4. The spherical graphite industry utilises a standard deviation system for classifying particle distribution. The spherical graphite produced by Syrah consisted of a 90% distribution at <6.63 microns, a 50% distribution at <4.69 microns and a 10% distribution at <2.73 microns. The spherical graphite was produced by patented milling equipment. The natural graphite concentrate feed sizing was 100 microns, which is considered fine flake. A smaller spherical graphite size produces a larger surface area which has a higher density and increases storage capacity which is preferred by the cathode producers. The current automotive battery producers utilise mainly spherical graphite with a 90% distribution at <15 microns. Consumer battery producers utilise spherical graphite with 90% distribution at <10 microns. The following figure shows Balama spherical graphite produced from initial test work. During the year, representatives of Syrah Resources attended the rechargeable battery conference in Tokyo, Japan and met several Japanese, Chinese and Korean traders and major end users of spherical graphite for use in rechargeable batteries in consumer electronics and electrical / hybrid vehicles. All parties Feed size: 100 µm 90% distribution: <6.63 µm 50% distribution: <4.69 µm 10% distribution: <2.73 µm Specific surface area: 1.47 sq m/cc Spherical graphite yield: 50% Table 4: Initial spherical graphite test results Figure 10: Electron microscopy image of Balama spherical graphite from initial test work 12 I Syrah Resources Limited Annual Report 2014

15 indicated that the specifications of Balama spherical graphite appeared ideal for rechargeable battery applications. Samples of Balama spherical graphite will be prepared to be sent to these potential customers. The flake graphite concentrate used in this initial test was processed from the Sushi Zone at Balama East. These were first pass results and Syrah expects to optimise these results further. Syrah has purchased a pilot plant sized spherical graphite plant so that it may further optimise the results. MOU FOR OFFTAKE AGREEMENT CHALIECO In March 2014, Syrah signed a MOU for an offtake agreement with Chalieco, a multi-award winning engineering design and consultancy company. Chalieco is an affiliate company of Chinalco, the world s second largest alumina producer, the third largest primary aluminium provider and the fifth largest fabricated aluminium producer. Under the MOU, Chalieco will buy 80,000 tonnes of flake graphite and an amount of >98% V 2 O 5 chemical powder or flake products to be determined. The final offtake agreement will firm up V 2 O 5 volume requirements and also both graphite and V 2 O 5 pricing. This MOU has since progressed to a signed Statement of Sales Intent to incorporate additional terms including pricing and flake size specifications. Figure 11: Mr He Zhihui (Executive Director and President of Chalieco) and Tom Eadie (Chairman of Syrah Resources) shaking hands on signing of MOU with Tolga Kumova, Managing Director of Syrah (far left) MOU FOR OFFTAKE AGREEMENT ASMET In April 2014, Syrah signed a MOU for an offtake agreement with Asmet, a global supplier of metallurgical consumables and specialist products to the iron, steel and aluminium industries. Asmet was established over 25 years ago and has more than 500 customers in over 30 countries. Asmet sells a range of carbon products, including foundry coke, petroleum coke and graphite. Under the MOU, Asmet will buy 100,000 to 150,000 tonnes of graphite per annum subject to a bulk sample testing of graphite products. Subject to successful completion of this test work, Syrah and Asmet will be required to negotiate in good faith a formal offtake agreement for the sale of graphite. Asmet intends to use Balama graphite as a recarburiser in mainly foundry applications and high quality steel production. Most steel applications only require low amounts of carbon (<1%) and the typical recarburiser used is anthracite coal, metallurgical coal, calcined petroleum coke or amorphous graphite which sell for low values. Syrah will not be seeking to substitute flake graphite into these markets. One of the major categories of cast iron (which require up to 4% carbon) is gray iron which can use flake graphite as a carbon alloy. Gray iron is used to make engine blocks, pump housings, valve bodies, electrical boxes, decorative castings, cast iron cookware and disc brake rotors. Worldwide gray iron production is about 46 million tonnes per annum. Assuming a 3-4% carbon content, this results in a carbon market of 1.38 to 1.84 million tonnes per annum. Ductile iron is another important category of cast iron which likewise can use graphite as its carbon alloy. The major use for ductile iron is the ductile iron pipe which is used for water and sewer lines. Worldwide ductile iron production is about 25 million tonnes per annum. Assuming a 3-4% carbon content, this results in a carbon market of 750,000 tonnes to 1 million tonnes per annum. Syrah Resources Limited Annual Report 2014 I 13

16 REVIEW OF OPERATIONS CONTINUED BALAMA GRAPHITE AND VANADIUM PROJECT The following figures show an engine block made from grey iron and ductile iron pipes. Although a low quality recarburiser such as anthracite coal, metallurgical coal, calcined petroleum coke and amorphous graphite can be used to make cast iron, it produces a poor quality product. This is due to the high degree of impurities in these carbons such as sulphur, nitrogen, hydrogen, ash, moisture and volatiles. These impurities are particularly harmful to ductile iron and only high quality recarburisers are used in this instance. Although fine flake graphite can also be used as a recarburiser it is not common to do so because most fine flake graphite produced from China has high impurities (particularly sulphur content). Also, as most quality fine flake graphite can be sold in refractory applications at a higher price than recarburiser, few graphite miners are prepared to take a price sacrifice to sell in to the recarburiser market. Balama Graphite is considered ideal for use as a recarburiser as it contains low harmful impurities. Balama Graphite can be readily upgraded to 96%+ concentrate through simple flotation. The majority of the gangue in the concentrate is quartz (silica) which is not an impurity in cast iron processing. Also, Balama Graphite has a very low sulphur content (<.01% sulphur). High quality recarburiser typically sells for US$1,200 to US$1,500 a tonne. Syrah believes it can rapidly capture market share in this industry because it will produce a superior product at very competitive market prices. Recarburiser samples are currently being prepared by various commercial laboratories and will be sent to Asmet for product testing upon completion. Figure 12: Engine block made from grey iron (left) (Source: Shelmet Castings) and ductile iron pipes (right) (Source: Steellot) VANADIUM SCOPING STUDY During April 2014, Syrah engaged Chalieco to complete the Vanadium Scoping Study. Chalieco was selected by Syrah based on its experience in undertaking the engineering work on eight vanadium projects in China with a similar ore assemblage to that of Balama (vanadium hosted in graphitic schists). Metallurgical test work to date has shown that the vanadium reports to the tailings during the graphite flotation process. Magnetic rich mineralisation (mainly magnetite and limonite) can be upgraded by 8-11 times to achieve a V 2 O 5 grade of 4-5% by a WHIMS. Non-magnetic mineralisation (mainly roscoelite) can be upgraded by 4-5 times to achieve a V 2 O 5 grade of 2-2.5% by flotation. These two processes have been demonstrated to produce a combined concentrate grade of >3% V 2 O 5. The Vanadium Scoping Study has conservatively assumed a combined concentrate grade of 2.5% V 2 O 5. Chemical processing of this initial vanadium concentrate had shown that a 98.5% purity vanadium pentoxide can be produced. In July 2014, Syrah announced that additional metallurgical test work has successfully produced a 99.9% high Figure 13: Balama >99% vanadium pentoxide from stage 2 processing purity vanadium pentoxide by solvent extraction as shown in the Figure 13. The ability to produce a 99.9% concentrate is a significant differentiating factor for Balama when compared to the majority of vanadium projects outside of China, which are generally ferro-magnetite style deposits for which it may not be economic to upgrade to these levels. As a potential major supplier of high purity vanadium outside of China, Syrah is well positioned to take advantage of forecast future growth in vanadium battery manufacture (specifically vanadium redox flow batteries). Figure 4 shows the simplified flow sheet for the production of vanadium at Balama. 14 I Syrah Resources Limited Annual Report 2014

17 Figure 14: Simplified vanadium flow sheet V Concentrate Aggiomeration Soda Bake Tail Gas Treatment HCI Acid Alkaline Leach Vanadium- Enriched Liquid Leach Residue Impurity Removal Waste Pond Solvent Extraction Stripping Solvent Recycle Pure Vanadium Solution First Precipitation Second Precipitation Calcining Calcining 99.9% V % V Syrah Resources Limited Annual Report 2014 I 15

18 REVIEW OF OPERATIONS CONTINUED BALAMA GRAPHITE AND VANADIUM PROJECT Operational metrics Unit Financial metrics Unit Life of mine 1 years 20 Capex US$ m 80 Concentrate throughput (2.5% V 2 O 5 ) 2 tpa 255,000 Price assumptions Min. 98% V 2 O 5 US$/t (FOB) 12,000 Recovery 99.9% V 2 O 5 US$/t (FOB) 50,000 Min. 98% V 2 O 5 % 58.5 HCl acid (33% concentration) 3 US$/t (FOB) % V 2 O 5 % 19.5 Unit operating costs (Min. 98% & 99.9% V 2 O 5 ) US$/t product 7,200 Product Total costs (Min. 98% & 99.9% V 2 O 5 ) US$/t product 8,250 Min. 98% V 2 O 5 tpa 3, % V 2 O 5 tpa 1,245 Post-tax NPV (10% discount rate) US$ m 330 Total tpa 5,049 Internal rate of return (IRR) % 59 By-product HCl acid (33% concentration) tpa 105,300 Payback period years 3.4 The key results of the finalised Vanadium Scoping Study under an approximate 5,000 tonne per annum scenario are summarized in Table 5. Currently, it is envisaged that the development of the Vanadium Project will occur as a second stage incremental development following completion of ramp up and established graphite production, and leveraging proposed graphite plant, site infrastructure and transport logistics. Table 5: Key operational and financial metrics of the Vanadium Scoping Study Note 1: Although there are sufficient resources to support a mine life exceeding 20 years, for the purposes of the scoping study a mine life of 20 years was used as the NPV impact will be immaterial beyond this period Note 2: Based on a 300-day production schedule and a head grade of >0.40% V 2 O 5 over life of mine. Note 3: The scoping study assumes that HCl acid can be sold. Syrah has conducted preliminary market research and is satisfied that there is likely to be sufficient local and/or regional demand for this product 16 I Syrah Resources Limited Annual Report 2014

19 DFS AND TECHNICAL APPOINTMENTS Syrah has been an exceptional exploration success story to date and the next step in the Company s evolution is to become a successful graphite producer. Accordingly, Syrah has authorised the commencement of a DFS in order to secure financing for the construction of the Balama Graphite Project. Snowden Group was appointed as responsible author for the DFS and other key technical professionals and directors were also appointed to strengthen Syrah s management team and Board. Board appointments included Jim Askew as Non-Executive Chairman (replacing Tom Eadie) and José Caldeira and Sam Riggall as Non- Executive Directors. Tolga Kumova, previously an Executive Director, also replaced Paul Kehoe as Managing Director. Technical appointments include Jeff Stirling as Oversight Manager, Ian Stewart as Project Manager, Ricardo Rodrigues as Construction Manager and Andrew Hickey as Logistics Manager. Full details of these appointments can be found in ASX announcements dated 22 July 2014, 4 August 2014 and 25 September Syrah notes that it is one of the few graphite explorers taking such steps to assemble a team of this calibre who are capable of bringing a project into production. Syrah Resources Limited Annual Report 2014 I 17

20 REVIEW OF OPERATIONS CONTINUED TANZANIAN EXPLORATION ASSETS SUMMARY Given the world-class nature of the Balama deposit, Syrah has primarily been focused on the development of the Balama Graphite and Vanadium Project during the past two years. Accordingly, Syrah considers that the value of its highly prospective Tanzanian assets are not being fully recognized by the market. Consequently, the Company had been investigating ways to add shareholder value through a joint venture, sale or spin-off its Tanzanian exploration properties. This includes the mineral sand assets (North Tanga, South Tanga, Bagamoyo and Fungoni), the Mbinga nickel project, the Nachingwea graphite prospect and the coal prospect at Shikula. Syrah will hold an Extraordinary General Meeting on 1 October 2014 to request shareholder approval to demerge Jacana Minerals Limited (Jacana), the holder of Syrah s Tanzanian exploration assets. Shares in Jacana will be distributed to Syrah shareholders at a ratio of 3 shares for 10 shares held in Syrah. This will be quickly followed by application for an ASX listing through an Initial Public Offering. Syrah shareholders will have a two week priority period to apply for additional shares in Jacana. The locations of all of the Tanzanian projects are shown in Figure 15. Figure 15: Map of Tanzania showing the location of Syrah s project areas 18 I Syrah Resources Limited Annual Report 2014

21 MINERAL SANDS PROJECTS Syrah controls 10 licences in the northern coastal area of Tanzania and these are shown in Figure 16. Mineralisation has been identified in each of the licences with an Indicated Resource at Fungoni and advanced prospects at Tongani and Tajiri (Tanga South). As shown in Figure 16, Tanzania is unique along the southeastern coast of Africa for not having a world class mineral sands deposit. Syrah believes that this is at least partially due to the limited amount and lack of follow through of previous exploration for mineral sands in Tanzania. Although mineralised systems are still being formed on the present day beaches, Syrah is targeting paleo-beaches and dune systems away from the current coastline. Figure 16: Map of northern Tanzanian coast showing Jacana mineral sand properties (left) mineral sand deposits in southern Africa (right). World class mineral sand deposits have been developed along the entire southeastern coast of Africa except in Tanzania Syrah Resources Limited Annual Report 2014 I 19

22 REVIEW OF OPERATIONS CONTINUED TANZANIAN EXPLORATION ASSETS FUNGONI The Fungoni project is located approximately 25 km south-east of Dar es Salaam on the northern coast of Tanzania. Syrah holds a 100 % interest in Prospecting Licences (PL) 7754/2012, 7499/2011 and 9951/2014. The Fungoni project area is approximately 15km inland on the Sakura. Resource HM Slimes Oversize Zircon Rutile Ilmenite category Mt (%) (%) (%) (%) (%) (%) Indicated Inferred TOTAL Table 5: Fungoni Mineral Resource estimate at 1.0 % HM cut-off To date, some 294 holes had been drilled using air-core with an outside diameter of 78 mm. Only 67 have analyses for HM %, slimes % and oversize %. Samples were sent to two external laboratories and were collected on 2 m intervals. These holes were used to estimate the Mineral Resource shown in Table 6 classified according to the JORC Code using a 1.0 % heavy mineral (HM) cut-off. No bulk density samples are available and bulk density test work is proposed. A bulk density of 1.8 t/m3 has been used based on the bulk density of similar deposits. The drill hole spacing of 100 m by 100 m allows geological and grade continuity to be reasonably understood. Syrah believes that the exploration potential for similar, zircon-rich deposits is excellent outside of the small licence containing the Fungoni resource. A large zone of 1-3% HM, and even one zone of >3% HM, have been outlined by past explorers using test pits on a nominal 5 km by 0.5 km spacing. There has been no drill follow up of these anomalous zones. Another positive finding from previous water bores and from Syrah s resource drilling, which went as deep as 75 m, is that the targeted Neocene sand thickness is very large, indicating huge volumes of sand in the Fungoni region. Figure 17: Phase-patched mineral map of the non-magnetic concentrate from the Fungoni deposit from CSIRO 20 I Syrah Resources Limited Annual Report 2014

23 In addition sophisticated microscope test work carried out by the Commonwealth Scientific and Industrial Research Organisation (CSIRO) has provided positive results for the zircon. Phase-patched mineral mapping of the non-magnetic concentrate from the Fungoni deposit shows that the zircon grains, (shown as pale green in Figure 17 and making up about 50% of the sample), are clean with very little coatings or included thorium or uranium minerals which would decrease their value. Separate monazite grains account for the moderate levels of thorium that has been detected in the sample. Grain size is also good with most zircon grains between 100 and 200 microns. BAGAMOYO Bagamoyo, like Fungoni, has a very large zone of underexplored mineralisation. One difference is that the mineral assemblage, although still valuable, is not as zircon-rich as Fungoni. At Bagamoyo, the assemblage averages 59% ilmenite, 5.4% rutile and 5.5% zircon. This has been confirmed by Syrah sampling and mineral identification. To date, exploration work has been limited to prospecting for outcropping high grade areas and some mineral identification work. Two zones of high grade have been discovered in the southeastern portion of Bagamoyo. One of these areas, which was greater than 2 m thick, was exposed in a sand cliff in a road cut and is estimated to run 10-15% HM. Both of the high grade areas await follow up drilling to penetrate the thin layer of soil and vegetation which covers almost all of the prospective area. TANGA SOUTH The Tanga South Project has several different prospects, the best of which are Tongani and Tajiri. These projects tend to have a high value mineral assemblage with about 75% ilmenite, 7 10% rutile and 4 6% zircon. At Tajiri North, the mineralisation appears to be about 5 km long and at least 1 km across. Hand auger drilling have indicated that large zones of high grade mineralisation (up to 13% HM) exist and is open to the west and at depth beneath the very short hand auger drill holes. TANGA NORTH Tanga North is located just south of the Kenyan border and about 50km from the Kwale mineral sands mine. The project area has been very difficult to explore with hand auger drilling because of extensive soil cover with a thin layer of hard laterite beneath the soil. None of Syrah s auger drilling has succeeded in penetrating this cover. Accordingly, the auger results shown should be considered a geochemical survey rather than a true test of the target horizon. Nonetheless the prospect area has two attributes that indicates that it is one of Syrah s better prospects in Tanzania. Firstly, the mineral assemblage of the heavy mineral concentrates is excellent with an average of 38.0% ilmenite, 18.7% rutile and 5.9% zircon. Secondly, the prospect appears to be a very large sand dune with huge volumes of sand. The anomalous area is >14 km long, 2-3 km across and very thick with the dune rising almost 100 m above sea level. This makes for a very significant exploration target. Syrah Resources Limited Annual Report 2014 I 21

24 REVIEW OF OPERATIONS CONTINUED TANZANIAN EXPLORATION ASSETS GRAPHITE PROJECTS CHILIOGALI (FORMERLY NACHINGWEA) The Chiliogali Project is located in southeast Tanzania near the town of Nachingwea as shown in Figure 18. Also shown in the figure is the location of the main prospect area, which forms two hills in the central part of the licence. The whole licence area is currently being covered by ground electromagnetics to identify other graphite targets under cover. To date, trenching and mapping have been the focus of the work at Chiliogali. This has concentrated on the hilly areas (refer Figure 19 (left)) where there is some outcrop. Some highly significant results obtained from the trenching are as follows: NTR001: 33m at 11.3% Total Graphitic Carbon (TGC) and 11m at 15.8% TGC NTR002: 31m at 15.5% TGC NTR003: 33m at 13.9% TGC and 6m at 11.6% TGC NTR004: 7m at 28.8% TGC and 13m at 5.6% TGC NTR005: 12m at 11.9% TGC and 29m at 9.7% TGC (including 12m at 14.9% TGC) NTR006: 6m at 11.4% TGC NTR007: 2.2m at 9.5% TGC and 1.3m at 10.1% TGC NTR008: 14m at 10.4% TGC and 3.2m at 25.4% TGC. Figure 18: Chiliogali Project in southeastern Tanzania. Area of current prospects with high grade results from trenching is shown. Both of Syrah s licences are currently being covered by a ground electromagnetic survey to locate more graphite targets under cover While all mineralisation observed to date appears to include medium to coarse grained graphitic flake, the graphite in Chiliogali South appears to be particularly coarse flaked (see Figure 19 (right)), which increases the potential value of the ultimate product. Historical metallurgical testwork on the graphite at Chiliogali indicates that simple flotation (Van Eck & Laurie Batepro Labs), produces an exceptionally high concentrate grade of 98.3% carbon, which again is encouraging for the value of the final product. The location of the trenches mentioned above can be seen in Figure 20. All of the trenches except for NTR002 are located in the Chiliogali North prospect. NTR002 is located at Chiliogali South. Mineralisation is wide open at Chiliogali North and South. 22 I Syrah Resources Limited Annual Report 2014

25 Figure 19: Chiliogali Prospect map showing outcropping graphitic horizons and the trenches that have been completed by Syrah (left) and coarse flake graphite in a sample from NTR002 (right) Figure 20: Prospect maps showing results (using a 3.0% TGC cut-off) of sampling from the trenches at Chiliogali North (left) and Chiliogali South (right) Syrah Resources Limited Annual Report 2014 I 23

26 REVIEW OF OPERATIONS CONTINUED TANZANIAN EXPLORATION ASSETS OTHER PROJECTS MBINGA (NICKEL) No work has been completed at Mbinga other than the interpretation of a previous explorer s airborne electromagnetic data. Promising high conductivity targets exist which are scheduled for drilling in the 2015 field season. SHIKULA (COAL) No work has been completed at Shikula. The information in this report as it relates to geology, geochemical, geophysical and exploration results was compiled by Mr Tom Eadie, FAusIMM, who is a Competent Person and Chairman of Syrah Resources Ltd. Mr Eadie has more than 20 years of experience in the activities being reported on and has sufficient expertise which is relevant to the style of mineralisation and type of deposit under consideration and to the activity undertaken to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Eadie consents to the inclusion of this information in the form and context in which it appears in this report. The information in this report as it relates to mineral processing and metallurgical testing was compiled by Mr Michael T.N. Chan, MAusIMM, who is a Competent Person and General Manager of Project Development at Syrah Resources Ltd. Mr Chan has more than 20 years of experience in the activities being reported on and has sufficient expertise which is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Chan consents to the inclusion of this information in the form and context in which it appears in this report. The information in this release that relates to the Mineral Resources of the Fungoni Mineral Sands Deposit is based on information compiled by Mr R L Webster, a Competent Person who is a Member of The Australasian Institute of Mining and Metallurgy. Mr R L Webster is a full time employee of AMC Consultants Pty Ltd and is independent of Syrah Resources the owner of Mineral Resource. Mr R L Webster has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Webster consents to the inclusion of this information in the form and context in which it appears in this report. 24 I Syrah Resources Limited Annual Report 2014

27 Directors' report The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'consolidated entity') consisting of Syrah Resources Limited (referred to hereafter as the 'company' or 'parent entity') and the entities it controlled at the end of, or during, the year ended. Directors The following persons were directors of Syrah Resources Limited during the whole of the financial year and up to the date of this report, unless otherwise stated: Paul Kehoe Tom Eadie Tolga Kumova Rhett Brans Jose Manuel Caldeira (appointed 22 July 2014) Michael Chester (resigned 2 September 2013) Principal activities During the financial year the principal continuing activities of the consolidated entity consisted of: Pursuing exploration activities in Africa and Australia. Dividends There were no dividends paid, recommended or declared during the current or previous financial year. Review of operations The loss for the consolidated entity after providing for income tax amounted to $6,751,232 (30 June 2013: $4,759,115). Refer to separate detailed review of operations preceding this Director's Report. Financial Position The net assets of the consolidated entity have increased to $64,542,161 as at (30 June 2013: $37,107,288). The major movements were due to expenditure on exploration and evaluation of mineral projects capitalised. During the current year the consolidated entity completed one share placement raising a total of $35,000,002 before costs, issuing a total of 13,725,491 fully paid ordinary shares in relation to this placement. The consolidated entity's working capital at, being current assets less current liabilities was $29,484,271 compared with working capital of $10,754,375 in The Directors believe the consolidated entity is in a strong position to progress its substantial exploration portfolio, particularly the Balama Graphite and Vanadium Project. Significant changes in the state of affairs On 1 July 2013, the consolidated entity issued 100,000 fully paid ordinary shares upon conversion of unlisted options exercisable at $0.26 (26 cents) expiring on or before 15 December On 19 September 2013, the consolidated entity issued 375,000 fully paid ordinary shares upon conversion of unlisted options exercisable at $0.26 (26 cents) expiring on or before 15 December On 1 October 2013, the consolidated entity issued 87,500 fully paid ordinary shares upon conversion of unlisted options exercisable at $0.26 (26 cents) expiring on or before 15 December On 18 October 2013, the consolidated entity issued 50,000 fully paid ordinary shares upon conversion of unlisted options exercisable at $0.26 (26 cents) expiring on or before 15 December On 23 October 2013, the consolidated entity issued 30,000 fully paid ordinary shares upon conversion of unlisted options exercisable at $2.21 (2 dollars and 21 cents) expiring on or before 16 July On 16 December 2013, the consolidated entity issued 200,000 fully paid ordinary shares upon conversion of unlisted options exercisable at $2.21 (2 dollars and 21 cents) expiring on or before 16 July

28 Directors' report On 13 December 2013, the consolidated entity announced the successful completion of an institutional equity placement of 13,725,491 fully paid ordinary shares at $2.55 per share, raising $35 million before costs. The placement was completed on 19 December On 24 January 2014, the consolidated entity issued 50,000 fully paid ordinary shares upon conversion of unlisted options exercisable at $2.21 (2 dollars and 21 cents) expiring on or before 16 July On 1 April 2014, the consolidated entity issued 90,000 fully paid ordinary shares upon conversion of unlisted options exercisable at $2.21 (2 dollars and 21 cents) expiring on or before 16 July On 16 May 2014, the consolidated entity issued 10,000 fully paid ordinary shares upon conversion of unlisted options exercisable at $2.21 (2 dollars and 21 cents) expiring on or before 16 July On 19 May 2014, the consolidated entity granted 500,000 unlisted options to a consultant of the consolidated entity which are exercisable at $5.50 (5 dollars and 50 cents) expiring on or before 19 May On 2 June 2014, the consolidated entity issued 15,000 fully paid ordinary shares upon conversion of unlisted options exercisable at $2.21 (2 dollars and 21 cents) expiring on or before 16 July There were no other significant changes in the state of affairs of the consolidated entity during the financial year. Matters subsequent to the end of the financial year On 15 July 2014 the consolidated entity issued 75,000 and 5,000 fully paid ordinary shares upon conversion of unlisted options exercisable at $0.26 (26 cents) and $2.21 (2 dollars and 21 cents) expiring on or before 15 December 2015 and 16 July 2016 respectively. On 17 July 2014 the Company announced its intention to demerge the Tanzanian Minerals Sands assets, with a general meeting to be held on 1 October 2014 to request shareholder approval to demerge the assets through a distribution to shareholders. On 18 July 2014 the consolidated entity issued 425,000 fully paid ordinary shares upon conversion of unlisted options exercisable at $0.26 (26 cents) expiring on or before 15 December On 29 July 2014 the consolidated entity issued 10,000 fully paid ordinary shares upon conversion of unlisted options exercisable at $0.26 (26 cents) expiring on or before 15 December On 8 August 2014 the consolidated entity issued 454,462 fully paid ordinary shares upon conversion of unlisted options exercisable at $0.26 (26 cents) expiring on or before 15 December On 1 September 2014 the consolidated entity issued 15,000 fully paid ordinary shares upon conversion of unlisted options exercisable at $2.21 (2 dollars and 21 cents) expiring on or before 16 July No other matter or circumstance has arisen since that has significantly affected, or may significantly affect the consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial years. Likely developments and expected results of operations The consolidated entity will continue to pursue its objective of maximising the value of its investments held in exploration assets located in Africa, and Australia. The consolidated entity's focus for the coming periods will initially be on advancing the Balama Graphite and Vanadium Project towards development and production, where a program has been budgeted for. Whilst the Balama Graphite and Vanadium Project will continue to be the focus of the consolidated entity's operations over the coming periods, the consolidated entity will maintain its interests in other exploration areas located in other areas of Africa, and advance these assets where the Directors see potential. 26

29 Directors' report Environmental regulation The consolidated entity holds participating interests in a number of mining and exploration tenements. The various authorities granting such tenements require the tenement holder to comply with the terms of the grant of the tenement and all directions given to it under those terms of the tenement. There have been no known breaches of the tenement conditions, and no such breaches have been notified by any Government agencies during the year ended. Information on directors Name: Mr Tom Eadie Title: Non-Executive Chairman Qualifications: B.Sc. (Hons), M.Sc., F.AusIMM, SA Fin Experience and expertise: Tom Eadie is a Non-Executive Chairman of Copper Strike, an ASX listed exploration company. Prior to this role, Tom had twenty years experience within the junior resources sector, including one year running Austminex NL, and at technical to senior Executive levels with major mining companies including Pasminco, Aberfoyle Resources and Cominco. At Pasminco he was Executive General Manager - Exploration & Technology for 11 years. At Aberfoyle, he began as Chief Geophysicist before being put in charge of all mineral sands and base metal exploration. He is a past board member of the Australasian Institute of Mining and Metallurgy and the Australian Mineral Industry Research Association. Tom has a B.Sc. (Hons) from the University of British Columbia, a M.Sc. in Physics (Geophysics) from the University of Toronto and a Graduate Diploma in Applied Finance and Investment from the Securities Institute of Australia (now the Financial Services Institute of Australasia). Other current directorships: Copper Strike Limited Former directorships (last 3 years): None Special responsibilities: Member of the Nomination and Remuneration Committee Member of the Audit Committee Interests in shares: 12,500,005 fully paid ordinary shares Interests in options: None Name: Mr Paul Kehoe Title: Managing Director Experience and expertise: Paul is both an accountant and a geologist. As a Chartered Accountant with a Bachelor of Business (Accounting Degree) he worked in senior management roles in firms such as PricewaterhouseCoopers and Grant Thornton. His area of expertise was corporate finance and restructuring. He subsequently returned to university to study geosciences and completed his first class honours in geology. Paul worked for a group of ASX listed resource companies and performed company secretarial functions, business development and geology roles. Other current directorships: None Former directorships (last 3 years): None Special responsibilities: None Interests in shares: 20,145,000 fully paid ordinary shares. Interests in options: None Name: Tolga Kumova Title: Executive Director Experience and expertise: Mr Kumova is one of the founding shareholders of Jacana Resources Pty Ltd, which held the Balama Graphite and other projects subsequently vended into Syrah in late Mr Kumova has 15 years of experience in financial markets, corporate advisory and stockbroking. He has been successful in supporting unlisted mining focused entities and listed entities by providing capital and corporate advisory services. Mr Kumova assists with the corporate strategy of the Company and overseeing investor relations, product marketing and other day to day activities. Other current directorships: None Former directorships (last 3 years): None Special responsibilities: None Interests in shares: 14,522,215 fully paid ordinary shares Interests in options: None 27