Syrah Resources Ltd

ASX:SYR

Earnings Call Transcript

[Operator]

Thank you for standing by, and welcome to the Syrah Resources Q1 Quarterly Report Update. [Operator Instructions]

I would now like to hand the conference over to Mr. Shaun Verner, Managing Director and CEO. Please go ahead.

[Shaun Verner, executive]

Good morning, and thanks for joining the Syrah Resources quarterly activities call for the first quarter of 2024. With me on the call are Stephen Wells, our Chief Financial Officer; and Viren Hira, our General Manager of Business Development and Investor Relations.

Today, we'll focus on 3 key topics: firstly, the market and operational updates for the quarter; secondly, medium-term market expectations, government policy initiatives, and Syrah's position to maximize strategic advantage; and finally, how we'll generate shareholder value through differentiation and delivery of strategic objectives.

Before we move to those topics, I wanted to highlight that as the supply chain develops into different market segments based on geopolitical events, Syrah has delivered critical elements in our strategic plan in the first quarter and is well placed to continue delivery in 2024. Immediate market conditions remain very challenging, but the progress being made across the company is delivering baseline assets and market outcomes that position the company for a long period of differentiated value creation.

In Q1, key evidence of the development of an ex-China anode material supply chain crystallized, demonstrating Syrah's importance in satisfying new demand for ex-China source natural graphite and anode material products. Syrah's key milestones and actions taken through the quarter were: the completion of project construction and commencement of operations at the Vidalia anode material facility with on specification production from the first ex-China integrated natural graphite anode material facility at commercial scale; signing a 6-year offtake agreement for Balama natural graphite with Posco Future M, delivering a cornerstone contract with the largest ex-China anode material producer; achieving our first large volume shipment and sale of Balama fines to an ex-China anode material facility through the sale to PT Indonesia BTR New Energy, an 80,000 tonne per annum Indonesian anode material facility expected to start production shortly, which has been developed by BTR, the largest anode material producer globally.

Actions taken to improve the balance sheet and liquidity position to secure our ability to deliver 2024 targets and execute the medium-term strategy, whatever market conditions present in the short term and subsequent to quarter end, dispatch of initial commercial scale production samples to Tesla and other customers. The importance of these milestones cannot be emphasized strongly in us.

In commercial and project areas, we are delivering on commitments as the ex-China market develops. We have 2 unique operating assets in a bifurcating market, supported by deep competitive tension ahead from high quality OEMs and lithium-ion battery manufacturing counterparties, counterparties who are seeking large-scale supply positions for the long term to compete with and diversify away from Chinese domination of the global anode and graphite markets.

There remains significant short-term challenge, but our achievements in forthcoming catalysts are widening the gap between us and other market participants, also providing an incredible base from which to accelerate and further markets for crystallizers, which is not only reliant on China.

Firstly, to short-term market and operating conditions for the natural graphite market and Balama, shown on Slide 9 of the presentation we released today, global EV sales in Q1 2024 were up 21% compared to Q1 2023 to 3.1 million units. Volatile anode -- China anode production was evident in Q1, with significant variability between months and over Chinese New Year, which showed a 17% year-on-year increase overall, roughly equivalent to EV sales growth.

Significant artificial graphite anode material production capacity growth has continued to come to market and dominate Chinese domestic anode material sales, driving unsustainably low pricing and substitution in the domestic China market. The implementation of Chinese export licensing controls, severely limited demand for imported natural graphite into China from Balama, given uncertainty amongst Chinese producers over their ability to export material until later in the first quarter.

Slide 11 shows that towards quarter end, exports of value-added graphite products began to return to normal levels. More licenses were granted and higher volume of exports of spherical graphite and finished anode material are expected in the second quarter of 2024, which should lead to an increase in natural graphite consumption and import demand for Balama natural graphite. There are uncertainty exists in how consistently licenses will be granted in the future. The continuing immediate market challenge is in stark contrast to the evolution of the medium-term market dynamics, which are positive for Syrah's position as I'll expand on shortly.

At Balama, production was held back given the weak demand conditions. Importantly, despite the interrupted nature of production campaigns, the safety and sustainability performance at Balama is outstanding with the current TRIFR at 0, contribute to a deep focus on this for the leadership team in Mozambique. 11,000 tonnes of natural graphite was produced in the first quarter because we made the decision to limit production pending further demand visibility, with the low volume resulting in a higher C1 cost during the operating period of $635 a tonne FOB, clearly not a competitive position based on volume and an average additional freight cost for the quarter of $85 a tonne CIF.

Syrah's realized sales price increased quarter-on-quarter to $607 a tonne CIF, over 20,000 tonnes of external sales for the quarter. As mentioned, sales volumes were similar quarter-on-quarter, but not enough to drive a signal to increase production.

Balama recovery was good to start the short campaign at 78% during operating periods, and maintenance completed during the quarter positioned us well for improved dryer and power efficiency through coming campaigns, fully utilizing the new solar battery operation. Standby C1 fixed costs of USD 4 million per month for Balama was in line with cost guidance.

As noted, low but stable quarter-on-quarter natural graphite sales were achieved, but we saw a significantly different composition with a 10,000-tonne natural graphite great bulk shipment sold to BTR's new joint venture anode material facility in Indonesia, and a very strong coarse flake market demand impacted by for poor global supply. We took advantage where possible, but our coarse flake inventory was drawn down through the quarter. Low fines demand in China limited our production and, therefore, our ability to restock coarse flake.

Many of our Chinese customers are awaiting anode export demand to improve, which will be the driver of further production signals for us for fines. Thousand tonnes was shipped to Vidalia during the quarter, where we currently have an inventory of around 8,000 tonnes, which is more than adequate for the planned production ramp-up.

Moving on to the Vidalia operation. We safely commenced production at the 11.25 thousand tonne Vidalia anode material facility. Production commenced in February and bringing the plant online involves a period of stabilization and product optimization. This saw our milling, wet plant and furnace carbonization areas begin to run concurrently and more consistently through towards the end of the quarter. The start-up process is at relatively low levels of plant utilization as optimization is undertaken and incremental concurrent operating periods are achieved across the plant.

On-specification product was key to our declaration of product commencement, and we've continued to produce high purity, stable and on-specification anode material. Internal quality assessment after multiple batches of initial production made us comfortable to dispatch mass production samples to customers, demonstrating the confidence we have in the early product quality.

As with any new plant commencement, there have been some commissioning issues, and the team have responded very well with troubleshooting and increasing production stability. Milling yields and furnace capacity will be the key determinants of production levels over the coming months of ramp-up, and we're on target to reach 50% capacity utilization by the end of July, around 6 months after production commencement.

In subsequent to quarter end, we undertook the substantial completion testing process with the Department of Energy to close out project construction and commissioning, which was a huge milestone for the team over a very detailed assessment process from both the DOE and the independent engineer, giving confidence in the potential of the plant ahead.

Through Q2, we will continue to focus on assessing the operating cost base against plan as operations ramp up and plant capacity utilization is increased.

We understand that investors are eager to see operating statistics for Vidalia, but production volumes at this early stage of ramp-up are not the primary driver, so reporting outcomes are not yet meaningful. We expect to report commercial production levels from Q3 and expected initial reporting metrics will be on-specification anode material production volumes, on-specification anode material production yield and process of milling yields and cost per tonne. We're currently focused on availability, yield assessments, wet plant consistency and furnace capacity and automation for product quality and stability through the process. We've so far run some areas that are planted up to 50% capacity utilization for short periods and are increasingly confident of the operating capability of the plant against expectations.

The majority of the increased workforce is also new to operating plants that have been highly unique outside China. So strong leadership in safe, repeatable implementation of process and the utilization of lean management principles is the focus for the operational leadership team.

From a customer and revenue perspective, the short-term focus has been the delivery of on-specification product samples to customers for the commencement of the commercial production line qualification and testing processes. The marketing team continue to work with Tesla and other customers on the earliest conversion of production to revenue, noting that the contractual obligation Tesla commences upon their certification and qualification of the product and the facility reaching an 8,000 tonne per annum run rate production level.

Given the testing time frames and ramp-up profile, we're looking at all opportunities to accelerate revenue into the group from Vidalia, noting the restricted DOE loan cash reserves are accessible to fund working capital at Vidalia through the ramp-up period under conservative assumptions for revenue timing.

I'll now hand over to Steve to talk about the current financial position, strategic government funding interaction and progress in developing Syrah's financial position aligned with long-term downstream customer policy support. Steve?

[Stephen Wells, executive]

Thank you, Shaun. Syrah's quarter end cash balance was USD 99 million, and included USD 38 million of restricted cash. It also included institutional proceeds from the capital raise, a further USD 13 million from the retail component was received after quarter end. Excluding the proceeds from the equity raise, the net cash outflow from unrestricted cash for the quarter was $36 million of which $19 million was investment into the completion of Vidalia Phase 2 and early expenses for Vidalia Phase 3, with the remainder representing cash outflow from corporate and Balama. Also noting, however, the cash proceeds from a significant take bulk sale through the first quarter was received just after quarter end.

In the quarter, an AUD 98 million equity raising was completed, had a challenging time for the company. It was critical to providing near-term certainty through this period of changing supply chain dynamics, but benefit Syrah in the medium term. This raising provided financial support to the company, and along with DOE and DFC funding through volatile market conditions and ensures that we can bridge to the development of ex-China, [ activity over to our capacity ] that strongly requires Balama's supply.

We also announced Australian Super will be converting in Series 1 and 3 convertible notes at a revised conversion price, subject to Syrah's shareholder approval, simplify Syrah's capital structure and remove the material potential redemption required later on this year. We believe that Syrah's shareholders understand the strategic rationale for continuing to support the company through the existing challenging market to position the company for participation in the ex-China market well ahead of all other players and providing the potential for significant period of pricing differentiation and margin capture.

We are grateful for the support of shareholders in this process and believe that strong value creation is ahead given the forthcoming expected catalysts this year, even if short-term market conditions remain challenging. Syrah's strategic position will be clearly evident.

With regard to our future strategic funding activities, we continue to make strong progress on the near-term catalysts. We are targeting completion and first disbursement of the USD 150 million loan this quarter for Balama from the U.S. International Development Finance Corporation, and are working with government, DFC and other stakeholders on the final processes required for this funding to be available to support Balama.

We will progress Syrah's $350 million loan application with the DOE to fund a significant portion of the Vidalia further expansion project, noting that progress with additional customer offtake is key to further progression and the major focus of current effort. We are targeting readiness for FID as soon as possible. The timing will be dictated by the company's financial position in the current business environment, customer support for acceleration of additional capacity and DOE loan processes.

We continue to assess opportunities to access tax credits in the U.S. under both 45X and 48C programs, noting that companies are only able to access one of these 2 programs. Rules under the 45X program are yet to be finalized. There are multiple rounds of the 48C program and an active market is beginning to develop to monetize these types of tax credits in the U.S.

Significant activity is also evident in other policy areas with direct implications for Syrah, including the application of 301 tariffs on the import of graphite from China into the U.S. and the foreign entity of concern guidance on sourcing of graphite to enable customers to benefit from 30D credits on EV purchases in the United States.

We are also seeing greater appreciation for Syrah's unique strategic position more broadly and investigating increased potential for supply chain financing opportunities with collaboration in support of accelerated development and derisking. We will have more to say on this front in the coming months.

I'll now hand you back to Shawn.

[Shaun Verner, executive]

Thanks, Steve. We'll move on to the medium-term market in particular. Syrah's strategic position and value is integrally linked to the global EV market evolution, OEM and lithium-ion battery customer manufacturing capacity expansion and government policy across the energy transition. To understand Syrah's position and why, despite the near-term cash flow, we see great shareholder value potential accruing. We need to go back to the market development.

Currently, the global anode material market is dominated by Chinese production, and 4 key factors are causing U.S. and European OEMs and lithium-ion battery manufacturers significant strategic concern and forcing them to act.

First, Chinese domination of artificial and natural graphite anode material production capacity and the unsustainable nature of current domestic market competition, pricing and capacity utilization means that little ex-China natural graphite or anode material capacity is being induced to market.

Second, Chinese government policy actions implementing controls on the export of graphite and anode materials potentially impact future supply continuity, more absolute availability whether globally ex-China or of specific materials to specific countries or companies.

Third, there is a need for diversification of sorting risk and co-location of ex-China supply to meet U.S. and European government policy objectives such as the foreign entity of concern definition and IRA compliance to ensure eligibility for consumer and producer tax credits and funding programs in the U.S.

And fourth, the concern of ex-China customers regarding product provenance, traceability and in particular, life cycle emissions impacts.

Importantly, customers in ex-China anode markets continue to demand a broadly unchanged blend of high-quality natural and synthetic anode material products, providing a strong natural graphite demand profile outside China and Syrah expects that underutilization of expanded artificial graphite anode material capacity and sustained loss-making prices caused by intense competition will ultimately lead to rationalization of marginal anode material supply capacity in China, which will support higher pricing for both artificial graphite and natural graphite anode material.

Natural graphite anode material demand for ex-China battery cell customers is expected to be around 240,000 tonnes in 2025 and over 600,000 tonnes by 2030. We're focused on ensuring that both Balama and Vidalia are best positioned to capture benefit from exposure to ex-China customers. Syrah's strategic position is enhanced through readiness of production capacity of both natural graphite and anode material into the ex-China supply chain, developing to serve the U.S. and European markets.

We have a unique set of attributes. We have long-term large-scale vertically integrated supply with Syrah being the only fully integrated ex-China natural graphite anode material supplier from a mine source. We have advanced standing versus project peers with a multiyear head start on other integrated ex-China new entrants on production, know-how, qualification and sales and product quality.

We retain geopolitical independence with supply from Balama into both the China and ex-China markets, and U.S. processing capacity capability able to be replicated in other locations. And this includes government recognition and potential funding support for Syrah's position.

We are U.S. Inflation Reduction Act compliant. We are a non-foreign entity of concern, qualified and auditable natural graphite and anode material supply source and that enables Syrah and its customers' potential access to IRA funding and tax benefits. And we have a differentiated ESG position with lower environmental impact and trusted accreditations on both quality and ESG, and a position demonstrated in operations, something that's becoming increasingly important to customers.

The key strategic actions we have underway are focused on strengthening Syrah's position relative to both ex-China and China customers, capitalizing on our stage of development and the current geopolitical situation.

Firstly, we're diversifying and balancing the Balama sales book through long-term, large-scale natural graphite offtake contracts with anode material producers ex-China and seeking a key position in the emergence of potential directed purchase contracts from OEMs and lithium-ion battery manufacturers for natural graphite into anode makers.

Secondly, we're settling long-term, high-volume anode material contracts, supporting both margin generation at the existing Vidalia operation and underpinning development of the potential 45,000 tonne expansion projects. Importantly, also seeking optionality to calibrating contract performance variations.

Thirdly, we're ensuring that contract terms and pricing mechanisms in those contracts facilitate the development of more transparent pricing and exposure to market supply-demand fundamentals.

Fourth, we're focused on securing nondilutive funding options that best derisk and accelerate capacity development opportunity and provide security through the near-term volatile market conditions.

And lastly, we're continuing to build IP and operating workforce capability ourselves and through interaction with our customer base, embedding Syrah in the supply chain and providing opportunity for continuing product development. Through progress of these actions, we'll continue to build differentiation of the Syrah value proposition.

And lastly, moving to the milestones ahead. We'll continue to navigate the short-term market conditions with a laser focus on cash preservation, and we expect greater visibility of the potential for sales volume improvements through this quarter. We're strongly driving toward other key milestones with greater momentum following the completion of the Vidalia project, giving us a visible presence as an integrated participant in the global anode supply chain.

Key milestones ahead for the company include U.S. DFC loan funding for Balama with targeted completion this quarter, progression and qualification processes toward commercial sales from the Vidalia anode material facility, further Balama natural graphite offtakes, capitalizing on strong interest in large-scale, long-term supply to ex-China market participants, for IRA eligible and foreign entity of concern compliant feedstock, including the potential for directed purchase offtake agreements from OEMs or lithium-ion battery manufacturers, finalization of further anode material offtake sales for both the remaining tonnage from the current Vidalia capacity in conjunction with agreements to underpin the development of the Vidalia further expansion project to 45,000 tonnes.

And as customer and project milestones are achieved, pursuit of U.S. Department of Energy conditional loan commitments for the Vidalia further expansion project funding targeting $350 million and finally, development of commercial options to accelerate Syrah's exposure to the ex-China downstream market and derisk investment through nondilutive funding sources towards the subsequent potential FID on the Vidalia further expansion project.

We understand that outwardly progress has been overshadowed by the very challenging near-term market overlay. The catalysts ahead are very strong. The momentum is shifting in recognition of the need for offtakers to move to contract completion quickly, to ensure access to Balama and Vidalia potential tonnage in the coming years. It's also important to note that every one of these progressive steps in the operating project development, the operation of our assets and our marketing engagement puts the company ahead of others who remain in predevelopment or in the early stages of funding and project planning, opening a window in which Syrah will develop -- will deliver significant value.

We look forward to keeping everyone updated and we'll now move to questions and answers.

[Operator]

[Operator Instructions] The first question comes from Dim Ariyasinghe from UBS.

[Dim Ariyasinghe, analyst]

Just a couple of questions for me. Just on the sales price, great that it's moving in the right direction. Can you maybe quantify how much of that is due to the BTR sale? I presume some of that agreement went into the weighted average realized price. I'll come back in a second.

[Shaun Verner, executive]

Yes, it did, Dim. We won't talk specifically about the price. It's obviously confidential, but it did have an impact on the overall basket price as did improvement in the coarse flake market prices as well. So we've been very clear that we will seek to differentiate pricing for sales of fines outside of China as that market develops. And I think that is an important factor as we look at the price that we achieved during the quarter.

[Dim Ariyasinghe, analyst]

Yes. Yes. Okay. That's fair. And then just in terms of production, so obviously lower in response to demand as we see it. But looking forward, do you expect that, that'll pick up again for the next quarter? Could I maybe even ask, do you expect maybe a couple of campaigns for the June half -- June quarter potentially? Anything -- any clarity on that would be great.

[Shaun Verner, executive]

Yes. I think we're obviously pleased to see that exports of spherical graphite and anode material picked up late in the quarter, which is a good leading signal that there should be demand starting to improve for natural graphite imports into China. I think it's important to reflect on what's happened over the last 6 months. It's just been a fundamental interruption and disruption to the market profile and the impact of the license restrictions has been really -- a really significant issue around confidence of the Chinese spherical graphite and anode material producers on the potential consistency and application of these licenses in the future.

So whilst we are starting to see some improvement in that, I think it's fair to say that there's still some concern and hesitation around how that will be applied in future. And customers are taking a very cautious approach to restocking. But it is positive to see that there's some renewed market activity at this point. So assuming we obviously ended up -- ended the quarter with a very low inventory level of natural graphite across the company, so assuming we see that, you can expect to see that there will be production in the quarter. We won't comment yet on whether there'll be 1 or 2 campaigns this month.

[Dim Ariyasinghe, analyst]

Yes. Okay. Cool. And maybe last one, if I could sneak it in. Just on the DFC loan, can you give any more granularity in terms of what's left to do? I know you -- I guess, the targeting for June quarter hasn't changed, but -- yes, any insight to whether that could potentially even slip or be confident that, that actually gets executed in the next couple of months, please?

[Stephen Wells, executive]

Yes. I mean, we've kept the -- sorry, this is Steve. We've kept the time line at the end of June. All parties are aligned to working towards that. There are documentation and approval process to go through, but we've significantly progressed the loan documentation. So we're still targeting a June 30 time line.

[Operator]

Your next question comes from Mark Fichera from Foster Stockbroking.

[Mark Fichera, analyst]

Shaun, just a couple of questions around BTR again. Firstly, just given the size of their facility and, obviously, your value to them as an ex-China supplier, are you working towards sort of nutting down a binding offtake agreement sort of long term, I guess, similar with what you've done with Posco?

And just a second question around BTR, given obviously, the ramp-up in the production, you mentioned expectation of sort of shipments later this year, do you expect those to be greater than the 10,000 tonnes of shipped already?

[Shaun Verner, executive]

Thanks, Mark. Look, I think it's fair to say it's early stages. And participants in the China natural graphite and anode material supply chain have a fairly different historical approach to supply and contracting. I think across other commodities, Posco has a long history of large volume support in the long term under offtake. Typically, China market participants are much more focused on stock market conditions and the evolution of shorter-term supply-demand fundamentals.

What we're focused on is that we are the only large-scale supply of ex-China foreign entity of concern compliant product. And we believe that, that is important not just to BTR, but to others who are developing anode facilities outside of China and that will put us in a good position for future shipments. But I wouldn't want to speculate at the moment on how contractual development will evolve over time, nor on sort of timing or size of additional shipments through the course of the year.

[Operator]

[Operator Instructions] Your next question comes from Ben Lyons from Jarden.

[Ben Lyons, analyst]

Just another one on the potential future relationship with BTR to follow that previous question. Is it your understanding or your current interpretation of the IRA that this style of active anode material will be combined with both the sourcing requirements, but probably more importantly, that foreign entity of concern stipulation? Just wondering at Mozambique, natural graphite being processed into active anode material ultimately sold into the United States. Will it be compliant for those potential tax credits, subsidies, et cetera?

[Shaun Verner, executive]

Thanks, Ben. I think there's a lot still to be determined on that front. Certainly, the supply of our feedstock is compliant on that basis. There's still some questions of interpretation around ownership structure for entities, which have Chinese participation. And I think that, that will be important in the determination of the categorization of the Indonesia facility over time.

What I can say, I guess, is that there's a strong drive to see this type of ex-China facility developed for the purposes of trying to meet not just IRA but also European regulation development and to offer some perception of diversification of supply risk. So it's not just about that IRA or tax credit compliance.

So I think there's still a little bit of uncertainty at this point. But what is clear to us is that in our interaction with each of these players that Balama has seen is a critical and large-scale option for supply into the development -- to underpin the development of these facilities.

[Ben Lyons, analyst]

Okay. Yes. No, that's helpful. Second one, just switching focus to Vidalia and the potential offtake structure for the 45,000 tonne capacity facility. My understanding, and I may be incorrect, so please correct me, but my current understanding is that Tesla has exercised their option to participate up to that 25,000 tonnes level. Just wondering if you could possibly clarify if that would still be on the fixed price terms? Or is that additional capacity if the company was to proceed to FID, the ultimate price of that material might be open to renegotiation?

[Shaun Verner, executive]

Yes. So there's a 2-step process for that option to crystallize. So yes, Tesla have declared that option, but it is subject to finalization of binding offtake for that second 17,000 tonnes, which is being worked through in conjunction with the other opportunities that we're looking at for offtake for that potential expansion.

The pricing mechanism for that 17,000 tonnes is for 4 years of fixed price sale, but specific to that 17,000 tonne portion of the potential offtake. What we have been extremely clear about is that beyond that initial contract and option, everything that we are seeking to do for Vidalia will be underpinned by pricing mechanisms, which include floating elements to them.

The customer base have varying degrees of excitement about that idea, but it's certainly critical for us given where we see the market balance both for the upstream natural graphite fines and the flow-through of that pricing dynamic into anode material, but also for IRA and foreign entity of concern and compliant anode material in the U.S., and we see different supply-demand dynamics for each of those compared to the China market. So certainly, all future contractual arrangements we're seeking to make sure have exposure to that dynamic.

[Ben Lyons, analyst]

Okay. Understood. And just a final one, coming back to the potential funding stack for the 45,000 tonne Vidalia facility. There were a couple of references in your introductory remarks and Stephen's about potential nondilutive funding sources. And I think you used the terminology sort of potential for supply chain financing as well in your remarks. Can you provide any further detail about what you might be referring to in those potential funding solutions?

[Shaun Verner, executive]

Yes. I think -- I mean, we won't go into specifics at this point apart from saying that the dynamics around compliance supply and the understanding of the supply-demand balance has fundamentally changed in recent months. And I think that change in understanding, I mean, it's obviously something we've always thought was ahead, but that very clear visibility of what that availability of compliant material looks like opens additional options to us around funding.

We have talked in the past about the lack of participation that's been evident of customers in funding the development of either natural graphite or anode material facilities, but we certainly see that there is a greater recognition not just from customers but other participants in the supply chain that, that type of funding is important to help see the development of capacity. So it's just to say that there are broader options and we're engaged around those. Certainly, at the time that we did the original facility, FID really was government funding and equity were the only options. We think it's a very different situation today.

[Operator]

The next question comes from Peter Kormendy from Shaw and Partners.

[Peter Kormendy, analyst]

I'm just interested in those 2 offtakes that you announced last year in the U.S. with Graphex and Westwater. Shaun, where are those facilities up to at the moment?

[Shaun Verner, executive]

The Westwater project is developing slowly. It still has a requirement for further funding, that is under construction and progressing. Graphex is still pre investment decision. So the Westwater facility is certainly further advanced. But at this stage, the likely or the expected entry of these additional facilities is BTR Indonesia first, Posco second, and the potential of Westwater and others to follow behind those two.

[Operator]

Your next question comes from Andrew Harrington from Petra Capital.

[Andrew Harrington, analyst]

On cost of Balama, has the new supply of power and your expected run rate, how is that benefiting? Or is it benefiting already? Or what do you think long term if you're running at $10,000 a month or $20,000 a month? Are you still happy with sort of sub-$500 costs?

[Shaun Verner, executive]

Yes, certainly, in the longer term, the cost guidance we've provided previously, we're very comfortable with. We just haven't had the opportunity yet to get a good long run given the demand position to crystallize the benefits of the solar and battery system. And we're hoping that through upcoming campaigns and hopefully seeing some improvement in those demand conditions that we can better demonstrate that benefit. So it's still early stages. The system is absolutely working as designed and providing power, both when we are online and off, but the full extent of seeing that benefit, yes, we'll need to see a decent production campaign period to be able to comment further.

[Andrew Harrington, analyst]

Okay. That leads, I guess, to the second question. Are you able to save power back into the grid if you're not in a production mode or what's happening to all that solar capacity?

[Shaun Verner, executive]

The grid as it exists is extremely underdeveloped in the north of Mozambique. So there's no opportunity at this stage to do that, Andrew.

[Operator]

There are no further questions at this time. I'll now hand back to Mr. Verner for closing remarks.

[Shaun Verner, executive]

Thank you very much. We appreciate the attention and the attendance today, and we look forward to continuing to keep everyone updated on catalysts in the coming quarters. Thank you.

[Operator]

That does conclude our conference for today. Thank you for participating. You may now disconnect.