Syrah Resources’ dispute with Tesla might have more to do with the pricing of the material it supplies rather than the company’s alleged failure to provide the product conforming to the electric-vehicle maker’s specifications.

Elon Musk-led Tesla has an incentive to renegotiate the fixed price of active anode materials (AAM) – used in lithium-ion batteries – under an offtake agreement because AAM prices have fallen by about one-third in September 2025 from December 2021.

However, the ASX-listed graphite miner Syrah needs to get the Tesla agreement on track because it is key to curing loan defaults, obtaining future US government funding for its 11.25ktpa Vidalia AAM plant in Louisiana, and improving the economics of its flagship Balama natural graphite mine in Mozambique which produces the primary feedstock for its AAM plant.

Syrah does not have sufficient cash to cover more than two quarters of cash burn if it doesn’t obtain additional funding. The miner had USD 17.6m unrestricted cash as of 31 December 2025 against USD 33.8m net cash outflows (receipts from customers less payments to suppliers and employees) in 2H25 when production totalled 60.1kt, or 10kt per month, the same run-rate as management guided for 1Q26. Syrah stated in its 4Q25 activities report that it is being advised by Macquarie Capital on partnering and investment options to strengthen its balance sheet.

The Balama mine is at best a third-quartile C1 cash cost mine with costs exceeding average selling prices (ASP) because of sub-scale utilisation. Natural graphite prices are depressed because of ample production capacity from lower-cost Chinese producers and competition from synthetic graphite supplies. Also, Balama mining operations ceased for about a year between July 2024 and June 2025 because of local protests, resulting in the declaration of a force majeure on 11 December 2024. The protests and force majeure triggered events of defaults on the miner’s loans with the US International Development Finance Corp (DFC) and the US Department of Energy (DOE).

Syrah in 2021 signed an offtake agreement to deliver to Tesla 8ktpa of AAM from the Vidalia AAM plant over an initial four-year period at an undisclosed fixed price, per the miner’s 23 December 2021 and 28 December 2021 stock-exchange announcements. Syrah disclosed in its 1H25 interim report that it received a notice from Tesla in June 2025 that it had defaulted on the offtake agreement because it failed to provide conforming AAM samples from Vidalia.

Syrah is required to cure the alleged default by 16 March 2026, a deadline extended date from 16 January 2026, per a 19 January 2026 stock-exchange announcement. The extended cure date is subject to the approval from the DOE, the provider of a defaulted USD 98m due-April 2032 loan which is under a two-year forbearance from 30 July 2025. The DOE has the right to terminate the forbearance deal if the offtake agreement with Tesla is terminated.

It might just be all about price

A renegotiation of AAM’s fixed price in the offtake agreement will benefit Tesla because AAM prices have fallen by about one-third to ~USD 4.6/kg (~CNY 32/kg) (FOB China) in September 2025 from CNY 48 (~USD 6.9/kg) in December 2021, when the offtake agreements were signed. (see chart 1) Vidalia’s AAM production – validated by third-party laboratory as well as customer test results – meets contractual and targeted specifications, Syrah’s December 2025 quarterly activities report presentation dated 28 January 2026 states.

Syrah also signed an offtake agreement with EV manufacturer Lucid Group Inc to deliver 7ktpa AAM from Vidalia with a floating-price mechanism, per a 24 February 2025 stock exchange announcement. Lucid has not as of 12 February indicated that Syrah had failed to provide conforming AAM samples although it has until 1 January 2027 to complete the qualification period.

Vidalia’s AAM production would not be cost competitive compared with Chinese supplies if not for the proposed at least 160% anti-dumping and countervailing duty to be imposed on Chinese AAM imports (including AAM contained in imported batteries) to the US. However, major Chinese suppliers are diversifying supply chains offshore into countries with less onerous tariff regimes and lower production costs.

Take Beijing-listed, Shenzhen government-backed (via major shareholder China Baoan Group) BTR New Material Group. Its 60%-owned Indonesian joint venture PT Indonesia BTR New Energy Material commenced production in August 2024 from its 80ktpa-capacity AAM facility, described as the largest AAM producer globally by Syrah. (see Syrah’s 2Q24 quarterly activities report)

BTR’s Indonesian AAM plant is likely to be significantly more cost effective than Vidalia because of its lower capex cost. The Indonesia JV is 40% owned by Stellar Investment Pte Ltd, a subsidiary of privately held nickel and stainless-steel giant Tsingshan Holdings Group.

BTR’s AAM plant construction cost per ton of capacity is expected to be just ~30% of Vidalia’s.

The BTR JV spent USD 478m, or ~USD 6,000 per ton of capacity, for an initial 80ktpa capacity and a second 80ktpa phase started construction in 2024 for an additional USD 299m. Including the second phase, the 160ktpa AAM facility’s construction costs would be USD 777m, or ~USD 4,850 per ton of AAM capacity.

In comparison, Syrah’s Vidalia facility costs USD 209m for its 11.25ktpa initial expansion plan excluding the land and pre-initial expansion development costs, implying ~USD 18,600 construction cost per ton of AAM capacity. Syrah in its Definitive Feasibility Study published on 27 April 2023 estimates that it would cost USD 539m to expand Vidalia by 33.75ktpa (Vidalia Further Expansion), or ~USD 15,900 construction cost per ton of AAM capacity. Construction costs for the 45ktpa total capacity including the expansion plan would be USD 748m, or ~USD 16,600 per ton.

BTR’s Indonesia JV could theoretically export Indonesian-produced AAM to US with a 19% tariff rate (per a 22 July 2025 US government announcement), lower than the ~160% in duties to be imposed on Chinese-made products. BTR Indonesia was Syrah’s largest customer in 2025, purchasing 30kt, or 55%, of the Balama mine’s 54.6kt natural graphite sales volume that year. With feedstocks from Balama, the indirectly Chinese-state-backed Indonesian JV could sell into the US markets free from Chinese feedstock inputs and onerous tariffs.

Vidalia operating expenses not compelling

The city of Vidalia in Louisiana isn’t likely to be conducive for an AAM plant with lower cost compared with BTR’s Indonesian AAM plant.

BTR’s plant should have a comparative advantage over AAM from Vidalia because of an agglomeration of lithium-battery-related industries in the Morowali Industrial Park in Sulawesi, lower initial capex, lower labour costs and better economies of scale. BTR did not disclose its Indonesia AAM unit production costs in its 2024 and 1H25 financial reports.

The Indonesian plant would undercut Vidalia even with the 19% Indonesia tariff if it can land AAM into the US at USD 3.7/kg, similar to Chinese producers (see chart 2). Syrah guided in its 4Q25 activities report that Vidalia’s steady state operating cost (opex) at 11.25ktpa capacity would be USD 4.30-USD 4.80/kg of AAM assuming that it obtains natural graphite from Balama at USD 425/t (FOB Nacala). The cost at Balama’s current production rate would be higher at USD 4.48-USD 4.98/kg of AAM using Balama’s USD 535/t C1 cash cost in 4Q25, per Debtwire calculations. The actual cost could be even higher because C1 costs do not include sustaining capex and the 8.95% p.a. interest on the DFC loans secured on the mine. BTR’s debt-funding cost is significantly lower at 2.24%-4.80% as of 30 June 2025, per its financial statements.

Vidalia AAM steady-state 11.25ktpa capacity guided opex has increased by 54% from USD 3.11/kg AAM as disclosed in February 2022 (see Final Investment Decision and Equity Capital Raising presentation for the 11.25 initial expansion) to up to USD 4.80/kg AAM per its 4Q25 activities report.

Even with the same AAM plant economics as Vidalia, BTR’s Indonesian plant is likely to do better because it purchases natural graphite from Balama at spot prices very likely below Balama’s C1 costs. Syrah’s reported natural graphite ASP (FOB Nacala) was USD 506/t, compared with C1 cash cost of USD 535/t in 4Q25.

Tesla or another US-based EV manufacturer holds the keys for Vidalia

Despite Vidalia’s less-favourable economics, Syrah needs to get the Tesla offtake agreement back on track. The miner’s liquidity on hand is dwindling again after completing in August 2025 an equity placement which raised USD 44.3m in net proceeds.

A successful negotiation with Tesla to commence AAM deliveries from Vidalia would potentially lead to progress on restructuring its in-default up-to USD 150m DFC loan secured on Balama and potential further DOE funding for the 45ktpa Vidalia expansion project. A termination of the Tesla offtake agreement would potentially end a forbearance agreement it has on its in-default, USD 98m DOE loan secured on the Vidalia AAM facility.

From Tesla’s (or another US-based EV manufacturer’s) perspective, having Vidalia as a reliable second – albeit more costly – AAM source domestically might be a good hedge against volatility in US foreign trade policies.

Syrah is progressing on financing and partnering alternatives including with the US government for Vidalia’s expansion to 45ktpa, according to its 3Q25 activities report. However, the expansion would require sales to commence from the existing 11.25ktpa Vidalia AAM facility and additional offtake agreements, implying that Syrah needs to obtain further offtake agreements beyond the existing 8ktpa and 7ktpa agreements with Tesla and Lucid, respectively.

The miner would also benefit from a USD 165m tax credit under the Inflation Reduction Act of 2022 Section 48C Qualifying Advanced Energy Project Tax Credit if it completes the expansion. The tax credit can be sold and “considered under future debt funding scenarios” according to the 3Q25 activities report. To qualify, Syrah must satisfy certain undisclosed requirements by January 2027 and put into service 45ktpa AAM Vidalia facility within two years thereafter (latest by January 2029).

According to Debtwire, a hypothetical funding scenario for the expansion could be one in which an offtake partner such as Tesla provides a loan that is repaid via offtake and the tax credit. Syrah applied for a USD 350m Advanced Technology Vehicles Manufacturing loan from the DOE to partially fund Vidalia’s expansion to 45ktpa, according to its 1Q24 activities report. A JV partner could potentially avail a USD 150m-USD 200m 10-year loan to fund the balance, repayable in AAM offtake and the USD tax credit when the facility is commissioned. The JV partner loan together with a new USD 350m DOE loan would be sufficient to fund the USD 539m cost for the expansion as disclosed in Syrah’s April 2023 Definitive Feasibility Study. The expansion is expected to be operational 35 months after the final investment decision (FID) including a 26-month construction period.

Balama is the lower-cost option of an ex-China natural graphite supply

The Balama mine is among the lowest-cost natural graphite producer excluding Chinese producers that dominate the first two quartiles of the cost curve (see chart 3).

Balama is the only major in-production natural graphite mine in Africa and is most likely the light orange segment in the third quartile representing ~120ktpa production and incremental ~725-845kt production in chart 3. Balama reported 34.4kt production in 4Q25 and is targeting “no less than” 30kt (120kt annualised) production in 1Q26. The chart shows the mine at ~USD 350/t C1 cash cost which is the low end of management’s cost guidance if the mine were to operate at its full 360ktpa capacity. Balama’s cash cost would be USD 580-620/t at 10kt per month or 120ktpa production rate per Syrah’s 4Q25 activities report.

Chart 4 shows that there was ~785kt of -100 mesh natural graphite (Balama’s main graphite product) demand in 2025.

Despite Balama’s relatively strong position among ex-China natural graphite producers, the mine would still be free cash flow (FCF) negative after sustaining capex and interest costs assuming current ASP (FOB Nacala) of ~USD 500/t and a medium-term production target of 20kt per month (240kt annualised) compared with the current production rate of 10kt per month (see table 1 and table 2). The mine would be FCF positive at current prices if it produces at 30kt per month full capacity (360kt annualised).

Natural graphite pricing won’t increase beyond USD 600/t before 2028, according to a forecast provided by Benchmark Mineral Intelligence for -100 mesh 94%-95% concentrate as seen in ASX-listed Kingsland Minerals’ 22 September 2025 announcement. Balama would be FCF breakeven after interest and sustaining capex at ~USD 529/t ASP (FOB Nacala) and 20kt per month medium-term production target, per Debtwire estimates, while Syrah’s FCF breakeven point would be at ~USD 600/t including interest paid on Vidalia’s DOE loan and cash interest on AUD 150m PIK or cash-pay convertible notes. Syrah’s FCF breakeven estimate implicitly assumes that Vidalia AAM production would be breakeven as Tesla and Lucid would purchase Vidalia AAM at the facility’s marginal cost because EV manufacturers might be able to obtain cheaper, 19%-tariffed AAM from BTR or other ex-China suppliers.

Syrah in its recent quarterly activities reports attributed the depressed natural graphite prices to an oversupply of synthetic graphite and intense competition in China. Synthetic graphite is produced by baking and graphitisation of carbon-rich byproducts – mainly petroleum coke – from oil-refining process. Chart 1 shows that synthetic graphite AAM was more competitive compared to natural graphite AAM.

Syrah has yet to report full 2025 financial results. It reported 2024 financial results in March 2025. The takeaways below are based on its 4Q25 activities report and presentation which provided certain cash flow, debt and cash numbers.

Takeaways from 4Q25 activities report published on 28 January 2026, recent events and disclosures:

• Syrah’s FCF was negative USD 18.3m in 4Q25, compared with negative USD 15.5m in 3Q25 and negative USD 19.1m in 4Q24, per Debtwire calculations from cash flow statements attached to its quarterly activities reports. FCF in 3Q25 would have been negative USD 27.2m if it was not for a USD 11.7m payment from the US Internal Revenue Service for a Section 45X Production Credit claimed in its 2024 tax filing related to its Vidalia AAM facility.
• Syrah’s wholly owned US subsidiary Syrah Technologies is eligible for Section 45X Production Credit equivalent to 10% of production costs of Vidalia, inclusive of material costs and tax depreciation. Section 45X Production Credits for the 11.25ktpa AAM Vidalia facility operating at capacity are estimated to be ~USD 7-9m per annum (~USD 0.62-0.80/kg AAM) prior to phase down. Section 45X Production Credits phase down to 75% in 2030, 50% in 2031, 25% in 2032 and 0% from 2033.
• The Balama mine produced 34.4kt natural graphite in 4Q25, up 34% QoQ. Balama mining operations ceased between July 2024 and June 2025 due to local protests. The miner sold 28.8kt natural graphite in 4Q25, up 21% QoQ / 231% YoY. Finished inventory was 13kt as of 31 December 2025, up from 8kt as of 30 September 2025.
• Natural graphite ASP (FOB Nacala) was USD 506/t in 4Q25, down 5% QoQ but up 11% YoY. Balama mine’s C1 cash cost was USD 535/t in 4Q25, down from USD 585/t in 3Q25. There was no production in 4Q24.
• Syrah reported USD 291m total debt as of 31 December 2025 which includes in-default USD 68m outstanding Tranche 1 DFC loan, in-default USD 98m outstanding DOE loan and USD 132.8m in 11% PIK /10.5% cash-pay unsecured convertible notes due May 2028 issued to Australian superannuation fund AustralianSuper. Total debt as reported also included accrued interest and loan discount arising from warrant consideration.
• Syrah managed to tap DFC for an additional USD 8.5m disbursement on 20 November 2025 on its in-default, up-to USD 150m due-May 2037 loan. Syrah had USD 82m available under the DFC loan as of 31 December 2025. However, further disbursements up to USD 75m will be tied to tailings storage facility capex at Balama and amounts exceeding USD 75m would be subject to yet-to-be agreed new conditions, according to the miner’s 17 November 2025 stock-exchange announcement. Syrah issued to the DFC as part of the USD 8.5m disbursement agreement equity warrants – with negligible exercise price – equivalent to a 1.3% stake in the company.
• The company had USD 77.1m cash as of 31 December 2025, comprising USD 17.6m unrestricted cash and USD 59.5m restricted cash. Total cash was USD 87.4m as of 30 September 2025.
• Auditor PWC cited material uncertainty related to going concern in the company’s audited 2024 financial statement. Syrah reported a USD 59.8m net loss in 1H25 and a USD 125.3m net loss in 2024.

Company Description

Syrah Resources is an ASX-listed, vertically integrated, natural graphite miner and battery anode material producer, operating the Balama graphite mine in Mozambique and the Vidalia AAM (active anode material) plant in Louisiana, US.

The company is led by Managing Director and CEO Shaun Verner who joined Syrah in October 2016. He was a former executive in mining conglomerate BHP Group for 20 years prior to joining the company. Syrah appointed Samantha Hogg as its incoming chairman to succeed long-time non-executive Chair James Askew upon his retirement on 31 December 2025, per a 5 December 2025 stock-exchange announcement.

AustralianSuper Pty Ltd is the company’s largest shareholder with a 32.5% stake as of 25 July 2025. The Australian superannuation fund is the sole holder of the miner’s AUD 150m convertible bonds.

Useful links:

• Syrah Resources 4Q25 activities report
• Syrah Resources 4Q25 activities report presentation
• Syrah Resources 1H25 interim report
• Syrah Resources 2024 annual report

[Excel spreadsheet of Syrah Resources financial results]