Shaun Verner - MD and CEO David Corr - CFO Rob Schaefer - Chief Commercial Officer Nova Young - GM, IR

Rahul Anand - Morgan Stanley Nick Herbert - Credit Suisse Reg Spencer - Canaccord Jade Little - UBS

Hi. Good morning, everyone.

And welcome to Syrah Resources first quarter 2018 update. On the call with me today I have David Corr, our Chief Financial Officer; Rob Schaefer, Chief Commercial Officer; and Nova Young, GM of Investor Relations.

I will take you through the slide deck we’ve presented with today’s update. So going to slide two, the highlights of the quarter, the quarter ending 31 March was Syrah’s first quarter of operations at Balama.

Pleasingly, our safety record remains strong with the TRIFR of 0.8 per million ounce, worked at the end of the quarter. Jose Caldeira and I had the honor to represent the Board of Directors at the recent Balama inauguration where the operation was officially opened by the Mozambique President, His Excellency, Mr.

Filipe Nyusi and an event on site. At Balama, we continue to focus on plant optimization and production ramp-up.

Q1 production of 11,200 tons was below plan due to slower ramp-up in recoveries and the fines dryer outage in March which carried through into April where we lost a major element of capacity just as we were starting to lift throughput and recoveries. As we announced last week, the fines dryer was repaired and operationally ahead of schedule.

And improving flotation recoveries, strong plant throughput rates post the repair and increased stability through all sections of the plant now delivering a significant uplift in daily production. The plant’s consistently producing high quality, low impurity graphite products with a carbon grade in excess of 95% and particle size distribution within specification.

Our 2018 target production remains at 160,000 to 180,000 tons. However, we’re guarding towards the lower end of the range.

Now, target production ramp up split for the year is 25% in the first half and 75% in the second half of the year. Operating costs are in line with expectations and Balama is well-positioned for C1 cash costs of below US$400 a tonne by the end of 2018.

So, if we look at sales and marketing, sales and qualification shipments commenced in January to all major customer markets, noting that there was a longer time lag from production to arrival at customer in the ramp up period during Q1 when we expect to see in steady state operations, but received very positive qualification feedback from over 20 customers across the industrial and battery markets. Additional spot and term sales contracts settled in Q1 and we have further contractual negotiations well advanced at this point.

As we’ve previously advised, the basket price being achieved for initial shipments is lower than the basket price inferred by external consultants and reporters. Basket price realization has been impacted in Q1 by the focus on qualification shipments, the product mix of sales being skewed to higher fines production for contractual agreements and Chinese pricing dynamics.

And we expect a higher basket price in the second half with full sales and production profile coming into play, continued demonstration of product consistency over multiple shipments, and the pricing of our grade differential. On the battery anode material project, during the quarter, we made significant progress with site selection for the BAM facility Louisiana and post the end of the quarter we entered into a letter of intent to purchase the site in Vidalia, Louisiana.

Air and water environmental discharge requirements have already been met with this site. So, there is no permitting lead time and an existing suitable building is in place for the first phase.

Stakeholder and local community engagement in Vidalia is been strong support for the project. We are also undertaking an extensive and detailed testing and benchmarking process.

The Syrah’s BAM product, which is now largely complete with the results related in conjunction with the international battery seminar in late March where we interacted with battery manufacturers and automotive OEMs. The positive results of the testing reconfirmed that Syrah’s BAM products have the essential core properties required by the global battery industry and that allows for market entry.

And for the first time, we have also shown performance against leading products that are already in the market. Our target is to produce the first unpurified spherical graphite as soon as possible after installation and purified material by the end of 2018, which will enable market entry this year.

Now that we’ve completed this work and settled on a preferred site, a full feasibility study to determine the size and economics of a potential commercial expansion will be completed by the end of Q3, this year. On finance, cash at the 31st of March was US$80.5 million; our forecast net outflow for Q2 is US$25 million, implying a cash balance of approximately $55 million at 30 June.

We remain disciplined in our cash spend, and our BAM CapEx profile is being determined in conjunction with the Balama cash flow profile. If we move on to slide three, from an H&S[ph] perspective, the transition to operations is being completed successfully.

And I’m really pleased to see the continuation of the focus on safety management system is being implemented and the results being achieved. The TRIFR of 0.8 is attributed to the leadership team on site who continue to work very hard on improving with every day.

In addition to the strong safety record, the Balama operation, we’re well-positioned to receive ISO Certification for health, safety and environment this year, reinforcing our commitment to global best practice. Our environmental monitoring program continued through the quarter, in line with over 200 license conditions with no significant issues reported during the quarter.

Moving on to slide four around the Balama inauguration. As I mentioned, I had the honor with Jose to represent the Board at the inauguration in April.

Balama was officially opened by the President and other guests at the inauguration included the Governor of Governor of Cabo Delgado province, the Minister of Mineral Resources and Energy, and a number of dignitaries and guests, as well as representatives from key suppliers. The inauguration was also a major event for the community.

It was attended by around 5,000 people from the province from the Balama district local communities. And the presidential and ministerial support that was provided was wonderful context for the communities and national media around the importance of the success of the project for the country and the government and community role in ensuring operational success and stability.

In emphasizing the importance of the project, the President speech included references to government stability, to ongoing international investments to Syrah’s safety and community record, and to representing Mozambican projects to the global market in a positive. He also encouraged all of those in attendance, to contribute to making Balama as successful as it can possibly be.

Most were on -- in direction with the government during the first quarter and Mining Agreement was signed and it since then presented to the Administrative Court. And this final step is for the Administrative Court to sanction the Mining Agreement to officially make it binding and enforceable.

In the meantime, all the elements of the agreement are operating as we expected but from an operations perspective and from the perspective of exports out of Mozambique. Moving onto slide five looking at operational performance.

In Q1, we produced 11,200 tonnes of graphite. Production was below our plan.

And as I said, that was due to slower ramp-up in floatation recoveries and the fines dryer outage. However, improved current performance and underlying recoveries, throughput and plant stability position us really well for a sustained increase in daily production from here onwards.

Mining activities continue to perform well with consistent high-grade stocks [ph] throughout the wet season. And as mentioned, last quarter, a small amount of drill and blast is required to remove a section of cap rock in the Balama west pit and this commenced in April.

The fines dryer outage impacted plant throughput -- March throughput 33% lower than planned. The fines dryer is now fully operational as we announced last week.

And during the outage, we focused on fines graphite production by rerouting through the flake dryer to satisfy our customer commitments. And as a result, the Q1 product mix was 80% fines and 20% flakes versus our planned production ratio of 70% fines and 30% flakes.

We plan to revert to the planned mix from May onwards. The flexibility that we had there is something that we can only achieve when the plant is running at lower levels of capacity utilization, the complex ability that we believe we’ll have once we’re running at full capacity.

Month-on-month floatation recovery performance continues to improve. Floatation circuit optimization work is underway.

The slower ramp-up in recoveries was due to three main factors; the first was optimization of the float level management. Now, float level centers have not been operating well, source an alternative mechanism, which is now at site and awaiting installation.

And we that’ll be a step change further in recoveries once those are in. There are low CapEx elements; that’s something that’s very important for the management of recoveries.

Second issue is reagent dosing. The original design for reagent dosing, every second floats.

[Ph] And we’ve since moved to complete that in [indiscernible] and uplift in production from that change. And lastly, we had limited utilization with the secondary grinding [ph] circuit, and that was primarily due to the lower throughput.

That circuit runs effectively when throughput is higher. And we were looking at some minor design enhancements to screw classifier, which is part of the secondary circuit.

The filtration, drying, screening and bagging elements are performing well with the plant consistently producing high quality, low impurity graphite products and those products are on grade and within particle size specifications. The installation of the attrition cells is well under way and we’re targeting operations from the second half of 2019.

And just as a reminder, the attrition cells allow for production at higher graphite grades of 96% to 98% carbon. We’ll also undertake a Balama expansion and optimization review in the second half of the year as we reach a more stable level of operations.

Moving on to slide six. Post the end of the quarter, there has been a solid improvement in the fundamentals supporting daily production rates.

Throughputs increased in April due to further plant optimization and the availability in the last five days of the month of both the flake and fines circuit after the fines dryer repair. And for the April 28th month-to-date, daily throughput rates are up 45% and increasing.

Month-on-month, increases in filtration recoveries have been achieved. And as I said, a step change is expected with new float level centers.

Ongoing minor design enhancements also resulted in some secondary circuit downtime during the quarter, impacting our Q1 recoveries. The month-to-date 28th of April, recoveries continued to improve and good progress is being made.

And we continue to focus on those control enhancements, in particular around level controls and the reagent dosing to achieve our initial recovery target of 88%. And we’re already seeing some days in the high 60s and low 70% range for flotation recoveries, which is very encouraging.

With strong plant throughput performance post the fines dryer repair combined with the progressive improvement in recoveries and improved stability being exhibited in all sections of the plant, in recent days, we’ve seen daily production reach upto 470 tonnes per day and the solid increasing trend with April months to date average daily production up 70% against March. We have reconfirmed our 2018 production guidance of 160,000 to 180,000 tonnes.

However we are now guiding to the lower end of that range and targeting in 25-75, half one and half two split. Whilst production was lower than expected in the first quarter, it’s important to note that it was always planned to be a relatively low tonnage ramp-up quarter, focused on qualification tonnes and getting the supply chain up and running.

But, it’s not to say that we are happy with the performance but to keep things in context, for us to target the lower end of our 160 to 180 guidance, the remaining eight months of the year, broadly the same production profile is what we’ve previously planned with around 30,000 tonnes for Q2 and 120,000 tonnes for the second half of the year. Essentially the tonnes lost in Q1 lead us guiding to the lower end of the range, but if we can make up that tonnage through the course of the year, we will do so.

David will make some comments later on with the Balama operating cost base is progressing well and we think positioned well for C1 production costs of less than $400 a tonne by the end of the year. I’ll now hand over to Rob to give an update on sales and marketing.

Thanks, Shaun. Looking at sales and marketing on slide seven.

The shipping of sales and qualification of products, global customer commenced in January and we’ve now made shipments to Brazil, China, Germany, Japan, India, Indonesia, Italy, Poland, Russia, Taiwan, Turkey and the U.S. We’ve received qualification feedback from over 20 customers from around 50 samples.

Feedback has been very positive with the carbon grade, impurities, and particle size distribution meeting customer specifications. We have had some minor logistics and process issues including shipment frequency and some customs interactions ex Mozambique and these have been addressed.

As we noted earlier, the lead time between production and arrival at the customer has been longer than we expect in steady state, in our first quarter. And we initially, as a result, booked less frequent vessels to consolidate shipments.

In the first quarter, we shipped approximately 50% of production from Balama as we built stocks in the supply chain and shipments have been increased significantly in the month of April. During Q1, more than 10 additional spot and term sales contracts were settled.

And we continued to engage with the spot customers for conversion to term volume contracts. As previously advised, average prices for initial shipments are lower in the basket price inferred by external consultants and reporters.

The current variation is not uniform across all products. We are deliberately limiting our communication of the contract settlement volumes, negotiation details and pricing as we are deep into negotiation of further significant contracts, some of which are well advanced.

We expect to be able to provide further data on the reminding composition of the sales over next quarter. We understand that there is strong interest in the status of the build out of the sales book and pricing.

But we will do what is commercially right first. We can say however that our basket price for Q1 has been impacted by three main factors.

Firstly, as this was the first quarter of production, we have volumes of qualification shipments for which full pricing may not be received. Secondly, our product mix was heavily skewed to the production and sales of fines in order to make contractual commitments with the fines process generally lower than larger flake sizes due to current global supply.

And thirdly, pricing will take time to settle in China. Syrah is the first ever significant exporter of natural graphite into the Chinese market, which has traditionally been supplied domestically.

China is the largest and most competitive graphite market and Syrah is establishing as a reliable and consistent supplier of high quality natural graphite. We expect the basket price to be higher in the second half as forecast production and sales will be more reflective of our annualized profile.

Quarterly re-pricing will provide further price discovery; and Syrah, we will have continued to demonstrate Balama’s quality, consistency and grade differential. The attrition cells expected to be operation in the second half will enable higher graphite grades of 96% to 98% fixed carbon.

Higher carbon grade attracts a premium price and is expected to contribute to Syrah’s higher basket price in the second half. And we will provide further price guidance next quarter.

Okay. Thanks, Rob.

If we move on to slide eight, it’s also worth reviewing the very positive market evolution over the past 12 months and providing an updated view of where we see things going. On slide eight, you can see the performance of steel and electric vehicle markets in 2017 and in Q1 2018.

We expect the global flake graphite market to grow by around 10% in 2018 after the 7% growth in 2017. This year, we expect the total market demand to range around 780,000 tonnes with the incremental growth of around 80,000 tonnes from battery related demand.

We expect the overall flake graphite market to remain in the state of smaller oversupply this year and Syrah ramps up and higher cost Chinese supply and that’s being impacted by environmental restrictions moves up the fourth quarter. We expect the overall flake graphite market to move into the deficits probably in late ‘19 to early ‘20 with the demand for battery materials continue to build and the global electric vehicle penetration rate approaches 4 to 5%.

The battery-driven breakout of the flight market in 2017 is presented on slide nine. Noting that in addition to cars, [ph] the development of electric buses and trucks are important elements of demand.

26% of the demand for flake graphite is expected to be from the battery sector in 2018, up from 17% in 2017. That equates to around 200,000 tonnes of demand out of 780,000 total demand for natural graphite, up from around 120 last year for battery applications.

Moving to slide 10. We expect the conditions in the lithium ion battery market to remain very positive out to 2021.

The tripling of installed capacity year-on-year from Chinese battery makers is evident of the supply chain build out occurring in anticipation of the demand from automakers to meet their electric vehicle plan. Between now and 2025, more than 200 electric vehicle models are on the release agendas of the major OEMs, with announced related battery capacities surpassing 300 gigawatt hours by 2020 and 500 gigawatt hours by 2025.

For context, total energy produced by battery makers in 2017 was approximately 120 gigawatt hours for all applications. Given this growth, we expect an additional 400,000 tonnes of flake demand to a total of around 500,000 tonnes from 2017 out to 2021.

Industry interaction continues to highlight lithium ion as the best battery technology for electric vehicles and graphite to retain its dominance in the anode. New technologies do not evolve and commercialize quickly and the vast majority of OEMs, steel material manufacturers and battery producers are increasing their capacities focused on lithium ion technology almost exclusively.

Moving on to BAM and on to slide 12, we’ve made great progress during the quarter in the battery anode material side of the business, some of which has not been as high profile with the focus on Balama. Most importantly, post the end of the quarter, we’ve settled on a preferred BAM manufacturing site of Vidalia with key purchase terms agreed under an LOI and final documents taking place at the moment.

As I said earlier, the air and water discharge approval process has been completed during the site selection process and does not require further time for permitting. The site selection decision has been supported by attractive development and tax incentives, strong community support, good expansion options for commercial plant development and skilled labor pool.

The three to four months lead time is required once the site is finalized to complete installation for first production. We’re seeking to produce unpurified spherical as soon as possible after installation inflation and purified spherical by the end of Q4 this year.

The second major development is the significant amount of testing and benchmarking work has been completed in conjunction with Cadenza innovation that’s provided an enormous amount of detailed information regarding performance and classification of our BAM materials and that’s unpurified, purified and coated spherical graphite. The benchmarking is compared against materials from the major Chinese producers of precursor material which is unpurified and purified products, and the major Chinese, Japanese and Korean producers of coated BAM materials.

And these tests illustrate that Syrah’s material in an un-optimized form demonstrates comparable electrochemical performance, physical properties and processing properties. That’s enormously helpful in reconfirming that our products will be able to enter the market without making charge required to customer purchasing patterns.

We’re in the midst of customer discussion on the results at the month. And the Florida International Battery Conference in March provided a great set of interactions for us with automotive OEMs and battery manufacturers, which we have continued to follow up on since.

It’s very important to understand that the industry from a technical perspective now sees that Balama provides a high-quality, long life, low-cost, consistent natural graphite production base on which they can base their development. In addition, the work has informed our product development roadmap options.

And whilst these are commercially sensitive at this point, they provide some attractive opportunities for us. So, the combination of the site selection and the performance benchmarking work finally allows us to lock down the requirements for a feasibility study for potential commercial expansion, which has been in a state of continued development given the changing nature of end markets and the investigation of technology options.

And it’s expected that we will have this by the end of Q3. Most of these elements have taken a little longer than was originally expected.

I make no apology to spending the time on interacting with the industry and being prudent with this development because these are decisions which will have a long-term impact on shareholder value. I will now pass you over to David Corr, our Chief Financial Officer for an update on finance.

Thanks, Shaun. Moving on to the next slide and as mentioned earlier, the Group held cash reserves of $80.5 million as at 31 March 2018, a net decrease of $31.4 million during the March quarter versus our forecast of $35 million.

In terms of project development activities, $4 million was spent during the quarter, bringing total project development expenditures to $209 million against an unchanged project capital cost of $215 million. Key items of project expenditure during the quarter included plant and infrastructure equipment costs of $0.9 million, including the release of retention amounts on achievement of commissioning milestones and the progressive payments for the installation of attrition cells and in line analyzers; final payments for the structural, mechanical and piping construction activities and ongoing payments of the final stages of electrical and installation instrumentation activities, which totaled $1.7 million; and commissioning activities and ongoing process automation where we spent $1.1 million.

The key item of expenditure during the quarter was however related to production ramp-up and sustaining capital projects at Balama where we spent $20.3 million. As outlined in the quarterly report, our operating cost structures are developing in line with expectations, with both the sales books building out and the underlying cost base well-positioned to achieve positive cash flows from operations in mid-H2 and first quartile quarter C1 cash operating cost of less than $400 per tonne of production by the end of 2018.

Management has assessed that the criteria for the direct declaration of commercial production, as disclosed in the last quarterly report and the Group’s annual report with 27A which was released during the quarter, has not yet been satisfied. Accordingly, production ramp-up costs for Balama offset by the revenues received continue to be capitalized to the balance sheet and this will continue until such time as commercial production is declared.

In terms of sustaining capital projects, the key item of expenditure during the quarter was the construction of Cell 1B of the tailings storage facility which is planned for completion during the second quarter. Forecasted sustaining capital expenditures for 2018 remain unchanged at between $7 million and $10 million.

Project development, production ramp-up, and sustaining capital expenditures for the quarter also included $1.3 million of VAT [ph] payment in Mozambique, bringing total the total VAT receivable to approximately $17 million. The Mozambique government is acknowledging the challenges that businesses in Mozambique are experiencing in relation to the recovery of VAT amounts and has put forth a range of initiatives that the company might benefit from going forward if implemented.

Positively, the Company has received its first VAT refund during 2018. And whilst the amount was only small, it is a very positive signal in relation to the recovery of this amount.

In relation to BAM activities, $5.2 million was spent during the quarter with the key items of expenditure including the identification and due diligence of alternative site, further payments for long lead equipment items for milling and shaping activities, which started to arrive in Louisiana during the quarter and ongoing product research and development testing and benchmarking activities with Cadenza Innovation. Net cash outflows for the group for the forthcoming quarter are forecasted to be $25 million and our forecasted cash balance of $55 million is expected as at 30 June, 2018.

With expected significant improvements in production rates, during Q2 and Q3 and continued global interest in both industrial and battery end user markets driving increased sales and revenues, we also expect to see a significant reduction in the net cash draw of the business beyond Q2, including achieving positive operating cash flows from Balama during mid H2 2018. We remain comfortable with the strength of our balance sheet and continue to manage our cash reserves in a disciplined manner, which has included a focus on the timing of further major capital expenditures on the BAM project and also being subject to consideration to the cash flow profile of operations at Balama.

We also continue our discussions with financiers on the debt facility for Balama, in line with the increasing levels of production and the formation of our sales book, revenue profile and operating cost structures, which have as previously advised, being important parameters to putting in place a strategically aligned debt facility for the project.

Okay, thanks David. So, just before we move to Q&A, a couple of final comments.

On the people front, we are very pleased to announce the appointment of Julio Costa as Chief Operating Officer for Syrah. Julio will join the Company in June from Alcoa where he is currently the General Manager of the Pinjarra Alumina Refinery in Western Australia.

Julio has got a long and distinguished operations career in both mining and processing and has lived and worked in Brazil, Australia, Mozambique and the U.S. through his time with Alcoa, Rio Tinto and Vale.

His initial focus will obviously be Balama, but he will immediately also be involved in the operational and project plans for the battery anode materials side of the business. And we are really looking forward to having the benefit of Julio’s experience as he joins the organization.

Moving to slide 13, the last slide. In summary, we see now that we have the right team in place to continue to develop our performance across the business.

Our health and safety, and environment process continues to be our first priority at Balama. We approached the period following Q1 in the fines dryer outage with confidence on production rates improving quickly.

The team on site has done excellent job at increasing recoveries and optimizing the circuit, but they recognize and we recognize that there is still work to do. But the fundamentals are in place for us to meet production guidance.

Sales and marketing efforts are delivering major developments in relationships, qualification feedback has been very positive, and further contracts have been delivered along with strong progress on additional contract negotiations being made. Market conditions continue to develop very positively, in line with our demand expectations.

And we are enormously positive about the place that Balama has in the market as China moves to become a net importer and electric vehicle driven battery demand growth. Our battery anode material work has taken significant steps forward in this quarter with our preferred site selected in Louisiana, and testing and benchmarking work largely complete, we’re really well-positioned now, continue to build engagement with customers to get the first phase plant up and running, and to complete a comprehensive feasibility study for potential commercial scale expansion with that study being completed by the end of Q3.

The most -- lower first quarter production and a focus on fines volumes impacted our Q1 revenue and price realization. We retained a very healthy cash position and we are conservatively managing our spend profile in line with Balama’s production and sales development.

We look forward to capitalizing on the great momentum that’s now underway as we continue operations ramp-up at Balama and as we progress our battery anode material strategy. And with that, I’m happy to move to Q&A.

Couple of quick ones, firstly, might start with the cash outflow projections to circa $56.5 million by this year. Just wanted to understand in that $56.5 million number, how much of that is attributable to Balama being built and how much of that constitutes part of your working capital budget, please?

We haven’t given specific guidance on that Rahul. I think, you’ll note in the numbers that we have spent $209 million against the original or the project capital cost of $215 million.

The remaining spend on capital expenditures will continue to occur for the coming months and probably flow into the third quarter also. In terms of the split between sustaining and operating costs, we’d expect to see an ongoing spend profile on a consistent basis over the course of this year.

I mean, in terms of the 209 spent, can I confirm, is that cash outflow already or is that commitments only at this point in time and the cash outflow is yet to occur?

No. That’s cash outflow of 209, Rahul.

Okay. So there is $6 million left for Balama and we add about, let’s say $10 million for the sustaining cap that gets us to $16 million.

And then the capital budget is about 70. Basically what I’m trying to understand it is, whether the working capital budget still holds and is potentially enough for the rest of the year, given the cash outflow that we’ve got?

Rahul, certainly, we see that as being the case. We understand exactly what we have to do in terms of production and sales through Q2 and Q3.

But, we see that in line with that the working capital budget still holds. The other thing that’s worth noting is that projected cash outflow for Q2 does include already the acquisition costs for the Vidalia site and some BAM expenditure.

So, there is a combination obviously of those elements in that projected cash outflow.

And moving onto offtake. Just any uptake can be provided in terms of the tonnages?

I understand no pricing information can be talked about this time. But, my understanding was that end of last year, we were tracking at about 100,000 tonnes of commitments for this year and the rest of the product still trying to find an offtake partner or was going to replaced on spot, has that number moved since that time?

Yes, absolutely, it has obviously. There were more than 10 contracts settled during Q1.

And we have a number of ongoing significant contractual negotiations. So, if you recall through the last year, we had made clear that there were a number of significant potential customers, who whilst they had sample tested material prior to production, were not interesting in undertaking negotiations of contract until we were in production.

Those contracts in many cases are now under negotiation. And the contracts that we have settled through the course of Q1 have been a mix of those and also some spot contracts, which we expect to result in further term contracts after initial consumption.

So, the reason we’ve not provided a specific breakout of that tonnage, it’s very clear, what is remaining for, in total, in the end of last year to the end of this year because we’ve guided 160 to 180, and we’ve always said that that was driven by demand. We don’t see that it’s commercially useful at the moment for us to provide a clear view of exactly how much tonnage is left to place, and equally what pricing is being achieved whilst those contracts are negotiation.

What we would say, however, is that we remain very comfortable that the production guidance that is driven by our demand views will be met and that demand view remains firmly on foot. We see continuing orders from the customers who have taken material and who have gone through the qualification process.

And that very positive feedback is permeating through the market and influencing the negotiations that are currently underway. So, we feel very positive about how that will pan out.

Sure. That’s a fair answer.

And just finally, if I can, you can always take this offline, I’m not sure time would permit. But slide nine, your forecast for battery related tonnages of graphite in terms of national flakes, there is about a 120,000 tonnes in there.

And then, I mean I can pick any one of the categories but I’ll pick buses because it’s easier. 20,000 tonnes of bus related flake graphite demand.

Could I possibly get the sales being assumed on the battery pack size?

Yes, because it’s easier to go into the stuff offline for sure. What I would say on tracking bus is around 300 kilowatt hours on average for bus for the battery pack size and about a 100,000 units from memory.

On the bus side of things, sales were lower in the last 12 months because of a change in subsidy, but the truck sales increased significantly. So, we continue to monitor that extremely closely because at the moment, that’s very much Chinese phenomenon.

But as that expands out of the Chinese market, we see enormous potential for growth there as well because those pack sizes are so much larger. It obviously has a significant impact on the market.

And just finally, we’ll talk about the pack sizes offline, I guess. My numbers are slightly -- significantly different.

But in terms of anode composition, have you assumed 50% synthetic and 50% natural in these numbers or is it assuming a100% natural consumption?

No, no, certainly not assuming a 100% natural consumption. It’s based on 50% in this split here for 2017, noting however that if the forecast moves into the future, there is an increase in our assumptions around proportion of natural graphite in the overall…

Just couple of questions for me please. I might start on the downstream.

I’m just wondering what are sort of the key risks in posing that preferred sites. And I had that community consultation and that all sounds pretty positive, but just wondering if there is a formal community town hall like last time and if so, when is that planned?

All of the community consultations of which there has been the school board, the sheriff’s department, the mayor and the older men, I think there has been at least four now have all been public meetings. The support for the project has been overwhelming.

There is no additional general meeting around it. The support from the Concordia Parish Business Development Group and the Louisiana Economic Development Board has been outstanding for this particular site.

So, the main element here for completion of the site is really just document DD around closure of title and process. So, it’s not something that we expect to take a significant amount of time, nor is there any major interaction left for the process.

The one thing that is still to be done here is finalization of some elements of the utility cost in the long term. And we are working through some potential subsidies, rebates that are available or potentially available around those which make the base position even more attractive for this particular site.

Got it. Okay.

Thank you. And the other one, just sort of scoping out potential Phase 2 and obviously that will hinge on feasibility study but just trying to get an idea of assuming that feasibility study is supportive of an expansion, when can we think about potential first production from a Phase 2 plant?

Look, I think we would have to wait for the outcome of the study on that Nick. Suffice it to say that this is a market which is developing rapidly.

And through the course of this quarter, the level of both indication and formal announcement about battery, supply chain, capacity expansion in both the Americas and Europe and the supply chain support for that capacity expansion means that we see this is something which should be done as quickly as possible.

And just I guess and scoping out then your potential -- well the forthcoming Phase 1 and that 5,000 tonne facility. And I guess just thinking about from modeling perspective.

And is that -- and tonnage that’s the output from that, is that mostly just going to be qualification in terms of -- and is that a period for say six months that will be sort of no cash sales from that, all qualification total commercial and Phase 2 is up and running, or how should I guess we think about that Phase 1?

Yes. Certainly, the initial production be primarily focused on qualification, but we have identified sales opportunities for precursor material.

As to the timing of those out of the Phase 1 plant, I don’t have a strong indication around that at this point. But certainly, the whole intent of taking the 5,000 to 10,000 tonne development for this Phase 1 was to take advantage of commercial opportunities for precursor material, which present themselves before the development of Phase 2.

And then, just a couple on Balama. Do you mind just giving a bit more insight and into the qualification sort of things?

I’m just trying to get I guess bit a feel of expected tonnages and how material they are and in the context of say your second half 120,000 tonnes? And I guess just trying to sort of really understand of that 120,000 tonnes in second half and what sort of proportion of that is expected to be sort of cash generative rather than into qualification.

I would say, 99.9% of the 120,000 tonnes, they come in. The qualification tonnage, they will still base on as additional customers come in to the book but it’s very, very low.

So, we tend to see customer qualification tonnages being at a maximum, 100 tonnes and most of them are well below that. So, even if you took a significant customer base of say 50 customers in all of the worst case scenario the 100 tonnes each, the qualification tonnage is not enormous, but there will be some that goes into the second half.

And lastly just a couple of sort of accounting modeling ones, and just sort of wanting to understand timing of cash receipts. I think you mentioned that and there was first cash receipts in February but there’s nothing shown in your cash flow for cash receipts.

So, just sort of wondering how that works?

So, Nick, just answering the first part there, we routinely expected to see cash inflows from sales 30 days, FOB Port of Nacala. In terms of the way we’ve presented, the revenue that we’ve received to-date in the quarterly, we’re continuing to obviously capitalize those against development costs.

And that presentation approach will continue until such time as we declare commercial production.

And then, just finally, that commercial production obviously mentioned when do you think that’s going to occur. But I guess for our purposes, and is it fair to assume that that’s going to be related to when you move to being cash positive at the Balama, so sort of mid second half?

And so for us I guess, for now, until you declare reasonable to assume that’s from the December quarter?

I think that’s a reasonable conclusion Nick. I will note that the parameters around commercial production were announced last quarterly, further data was given in the annual report and -- but look, in terms of the ramp-up of production and the stability that we will -- that we have achieved and will continue to achieve, I think that’s a reasonable conclusion to form.

A couple of questions for me. If we can -- if I can just refer you to your figure 2 in your quarterly report, which shows your maximum daily production every month in Q1.

Just looking at the April number where you said that’s a maximum daily production rate of 470 tonnes was achieved. But that wasn’t the average daily rate for that month, correct?

No, no, not at all. Always same areas in the five or so days, post having the dryer back.

We’ve seen a significant ramp up in production -- daily production achieved. And that maximum is the record of what we’ve done so far.

And we’ve seen I think three record days of production since the return of the dryer. So, the message to take away from that is that during the period of the dryer outage, we were constrained on throughput.

That did not inhibit the guys from continuing to work on recoveries. Now, we’re not happy with where recoveries are at the moment.

We still have work to do on that front. But, we made a lot of progress through that period.

So, as soon as the dryer came back on, there was a few days of work, which had to be done to reverse the bypasses that we’ve done to allow us to use the flake dryer for fines during that outage period, once that was done, and throughput was able to ramp up, we’ve seen immediate impact in daily production uplift from that -- the combination of the better recovery from what we saw prior to the outage and the availability of the full circuit.

And just on that sale recovery number, kind of guesstimate that that would have been the around mid-30s. A quick question on some terminologies to make sure if I understand this correctly.

Your 11,200 tonnes of production was graphite concentrate.

Yes. That’s right.

And that would have a graphite grade of whatever that number might happen to be, you haven’t provided that. I just wanted to clarify that.

Second question…

Reg, 11,200 is finished graphite production in the bag. 95% or greater in the vast majority of cases in grade, and that’s material after the customer.

Understood. Secondly, just on the pricing, I think, if I recall, you guys mentioned that you expect to provide some further details around pricing next quarter.

Did I catch that correctly?

Yes. I think, I mean by next quarter, we will be half way through the year and quarterly pricing for the third quarter would be 9, plus with everything going to plan, we’ll be well progressed against some of the elements that need to be satisfied for commercial production as well.

So, I think it’s only fair at that point to assume that guidance around pricing can be a bit more transparent. The other key thing is that as I mentioned, there is a whole bunch of significant negotiations underway.

And we expect to conclude quite a number of those through the course of this quarter. So, the combination of those elements means that we will provide further price guidance.

And I am keenly aware from every discussion I have with analysts, investors and everybody else how important this is. So, it’s not an issue here of us trying to keep this or take for any reason other than finishing the negotiation process and getting the best possible feel we can for this first year of market conditions and using the market to drive those pricing outcomes, rather than self fulfilling discussion around what prices have done so far.

That’s great. I suppose where I was going with that question was, you mentioned the potential for some spot sales.

And what -- are you in a position to service just what percentage of your overall sales volume might be in the spot? Obviously, you got your contract, which I’ll presume would comprise a large percentage of that.

On those spot size whatever volume that might be, is there any difference on price versus what you might be achieving on the contract?

Yes, of course, because they are all done at different times. So, it’s a market balance issue on timing as much as it is whether it’s spot or term.

And I think it’s fair to say that every one of those spot sales provides another reference point for further pricing. So, it is an illustrative process.

The other thing that I guess is important to note is that if you are sitting in a bulk commodity market or a traded metals commodity market, you might be comfortable carrying 20% of the book spot. In this type of a more industrial material market, you are probably going to carry less than that.

So, I wouldn’t envisage that we would carry more than 10% of spot in steady state operations until we see that potential for the minus 100 mesh high-grade material to commoditize over the coming years because that is where the market will really develop.

Just one other quick question on the BAM for me. I presume that you’ll be providing some kind of guidance with your feasibility study in terms of the move to take it -- the BAM from 5,000 to 10,000 and then beyond.

Yes, absolutely. So, the intent is still very much in Phase 1 to get to that 10,000 tonne.

What we have outlined today is that the first step in that process and the most important thing we can do is get that first line, 5,000 tonnes milling and shaping equipment up and running and have product coming through. So, we’ll focus on that as quickly as possible, post the site selection process.

All right. Thanks Shaun and guys.

Look, I’ve got a couple of other questions. We might take that offline if that’s good.

Yes. No problem at all.

Thanks, Reg. I guess, we’ve got time one more before the conclusion of the call.

My two questions quick will be quick. Just first one is on BAM.

I just wanted to understand, you got your letter of intent out and you have a 30-day exclusive right to purchase. So, does that mean within a month you have that site?

That’s the plan purchase it, lock down and you will develop?

Certainly acquisition of the site, yes. In terms of starting development, there are number of steps around mobilization of construction teams.

Obviously, the materials and equipment, which has arrived in the U.S. is not at that site.

So, there is also some work that needs to be done there in terms of mobilization. But, those won’t be immediate, but obviously we intend to move relatively quickly on the front.

And just the last question I had just with your net cash outflow performance for the quarter. You noted that it was about 10% less than what you forecasted.

Was that just simply a function of potentially less dollars being spent on progressing BAM, because you obviously didn’t have a site or is that due to other factors?

Yes. Look, the combination of factors.

Yes, one of the factors was reduced spend on BAM as we went through the exercise of identifying a new site there. But, look, there was obviously some factors there, there was a lower level of production during the quarter and also the level of spend on our sustaining capital.

So, there is not one absolute reason. It was a combination across all parts of our business.

And that contributed to that lower cash spend during the quarter.

Thank you very much. We appreciate the attention and interest today.

And we’re really looking forward to building on the momentum that’s now underway. So, thank you very much for your participation in the call.