Thank you for standing by, and welcome to the Syrah Resources Q3 quarterly conference call. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Shaun Verner, Managing Director and CEO. Please go ahead.
Good morning, and thank you all for dialing in today. With me on the call is Stephen Wells, our Chief Financial Officer, and Viren Hira, our General Manager of Business Development and Investor Relations. Today, Syrah released its September 2022 quarterly results covering operations, market conditions, the Vidalia initial expansion project, and the outlook for natural graphite, active anode material, and their end-use markets. We'll use the slide deck we released today to guide through this discussion. It's clearly been an eventful period for the company, and in some ways that's indicative of the EV and battery markets overall. In short, there is a clear gap between the shorter lead times for battery manufacturing capacity development versus the raw materials, the downstream processing capacity and localization that's required to facilitate them.
Customers, investors, and other public stakeholders, I think are increasingly aware of what that means for supply and for prices in future. The broader macroeconomic and geopolitical trends are making development and expansion more complex and in some cases more expensive. Syrah has a significant incumbency advantage and is advancing towards becoming a large scale, vertically integrated natural graphite anode material supplier. A favorable upstream market setting for natural graphite is translating well to high demand for Balama products. Summarizing the company's position, we're a key participant in the global graphite market already, and that market's expected to grow by four times over the next 10 years. The lithium-ion battery anode material market, which is expected to grow by eight times.
Syrah is the only vertically integrated natural graphite anode material supplier outside of China that's producing anode material into qualification and producing upstream material that's sold into the Chinese market. Our Balama natural graphite operation in Mozambique is unique in its place in the graphite industry with 350,000 tons per annum production capacity in a global natural graphite market of approximately 1.3 million tons per year currently. We've spent a lot of time talking about Balama, and for many years, it's fair to say that the operation was too big and had potentially been constructed too early. The market growth to support it is well and truly here. Potential ex-China competitors with significant volume are still some way from production, especially where downstream integration is part of their plans.
Balama, at 350,000 tons per annum, is based on reserves with a 50-year mine life and there's significant growth potential through the resource base. Vidalia is the site of our downstream active anode material facility in Louisiana, and we've been operating there since 2018. We've had material in qualification and testing with auto OEMs and battery manufacturers for the last year and a half. The first phase of commercial expansion is underway, which will deliver us 11.25 thousand tons capacity for active anode material production. We're concurrently completing a definitive feasibility study, DFS, for expansion to 45,000 tons per annum, underpinned by market demand, by regulatory tailwinds and, as we're announcing today, increased customer interest and further government support. Syrah really has a unique position.
The fact that we are the first vertically integrated natural graphite anode material operation in the United States has been tremendously important for our development because it's resulted in extensive engagement with potential customers. Our cost position from an OpEx perspective at Vidalia for anode material is roughly competitive with China. CapEx is more expensive, but there's no surprise in that CapEx challenge, and that's something that we've planned for from the outset. With Balama in the upstream, the size of the asset is such that at full capacity , it will be a first quarter cost producer with significant expansion potential. Governments, industry participants, and markets recognize the key role of critical minerals such as graphite in facilitating transport electrification and energy storage development toward the objective of reducing global carbon emissions.
In August this year, the U.S. government passed the historic Inflation Reduction Act of 2022, the largest climate-focused legislation ever, in the U.S. The Inflation Reduction Act offers significant tax credits and financial support to end users of EVs and material producers to mobilize the development of a domestic battery and battery raw material supply chain and to accelerate the adoption of EVs in the U.S. We expect that Vidalia'sthe active anode material will qualify as a critical mineral processed in the U.S. for the EV tax credit under this act. Underpinning demand for the Vidalia products and that our U.S. operating subsidiary will also qualify for direct tax credits. Moving to slide five. Our environmental, social and governance activities are fundamental to our company, and every quarter that passes highlights just how critical this focus is and how critical our commitments are.
Given the recent industrial action at Balama, I wanted to take some time here to talk about our approach and commitments in Mozambique and ensure that the value to local, provincial, and national communities in the country are really clearly communicated. Our commitment to local employee development is enormous. Of over 1,400 direct and contractor employees, 98% are Mozambican and 49% are from the eight local host communities around Balama. We have a localization focus and a demonstrated history of skills and career development. Our two general managers in country and many of our senior leaders are Mozambican, and we have invested heavily in training and development right from the outset of the project. We have an active union covering the majority of the Balama workforce and a company-level collective agreement ratified by the labor authorities in Mozambique covering our employment conditions.
Since Balama's inception, our total economic contribution to Mozambique has been over $280 million. We're deeply committed to improving education, health, and sustainable income generation in the district through our local development committee, which has a number of capital and skills development projects. Success at Balama has to come hand in hand with our employee, community, and government relationships. Given the very long-term nature of the asset, we are taking the time to ensure that we continue to get them right. Moving over to emissions intensity. A critical panel review of our Minviro independent lifecycle assessment for our integrated operations was completed in the third quarter.
Minviro has evaluated that Vidalia anode material and Balama natural graphite products have a 50%-60% lower global warming potential in production processes compared with benchmarked Chinese supply routes, which currently account for most of global production. This clearly demonstrates the differentiated sustainability credentials of Syrah's natural graphite and our anode material products. To further strengthen ESG performance, we intend to undertake an independent third-party audit of Balama against the Initiative for Responsible Mining Assurance and the Standard for Responsible Mining under IRMA. That's one of the most comprehensive and rigorous mining standards in the world. Syrah believes that in partnership with our key stakeholders, we've built a really strong foundation, and we will be able to achieve an IRMA certification level, and we're highly focused on moving through that in the coming months.
Our health, safety, and environmental performance at Balama remains outstanding. Our total recordable injury frequency rate was 1 at quarter end, and the Balama TRIFR has remained no greater than one since late 2018. Our TRIFR at Vidalia, where there's obviously far fewer employees and contractors, was 8.8 at the quarter's end, and there were no lost- time injuries sustained at the site through the quarter, with significant hours spent on the expansion project. We'll now move to the highlights for the quarter, and I'll hand over here to Steve to make some comments on the corporate position and the market context. Over to you, Steph.
Thank you, Shaun, and good morning, everyone. Significantly for the quarter, we are pleased to report a positive net operating margin at Balama after C1 and C2 costs. This is a result of record sales of 55,000 tons for the quarter at a high weighted average price of $688 per ton and lower C1 total costs due to lower Balama production of 38,000 tons for the quarter. In terms of Balama, we were able to produce at our minimum production rate target of 15,000 tons per month through July and August and prior to interruption in September, for a total of 38,000 tons for the quarter. With the three additional break-bulk vessels during the quarter, we achieved record sales of 55,000 tons, which were again materially higher than the previous quarter.
However, we want to continue to grow sales volumes and production, which was still somewhat constrained by container shipping and unexpected interruption in that area. Approximately 5,000 tons in shipments slipped into the first week of the fourth quarter, which otherwise would have taken total sales to 60,000 tons. We will continue to execute further break bulk shipments and increase container shipments to expand sales volumes as shipping and market allows. While C1 unit costs were higher than expected, due in part to these lower production volumes as well as fuel price inflation, basket pricing and sales volumes were higher. Shipping costs remain three to four times our long-term historical average levels. However, container market conditions through the quarter end have begun to improve, with freight rates declining and availability increasing.
Over the short to medium term, we expect shipping costs to moderate with the normalization in the shipping market, while current price support for natural graphite based on market factors is strong. Syrah finished the third quarter with a cash balance of $136 million, compared to $168 million at the end of the second quarter. Third quarter cash outflows for Syrah were $33 million versus $37 million last quarter, with approximately $28 million being related to investing activities. Pleasingly from a project perspective, the daily cash outflows increased from $14 million in the second quarter to $25 million in the third quarter, with remaining cash outflow relating to Balama working capital and investment and corporate costs. Syrah is progressing debt funding processes with the U.S. Department of Energy and DFC on funding requirements for the Vidalia and Balama respectively.
We see significant benefit to the company from these funding processes. In July, Syrah entered into binding documentation for a loan facility of up to $102 million from the U.S. DOE to support financing of Vidalia's initial expansion project. The proposed loan is to be made under DOE's Advanced Technology Vehicles Manufacturing Loan Program, and the loan has highly attractive terms with capitalized interest and deferred debt servicing until October 2024, interest costs at long-dated U.S. Treasury rates, and a 10-year term. The company and DOE are targeting the first advance from the loan within the December 2022 quarter, aligned with the capital spending program for the Vidalia initial expansion project. This is the first loan from the ATVM program for 11 years, and the first loan out of that program ever to a materials processing company.
Today, we are also very pleased to announce that Syrah has been selected for a DOE grant of up to $220 million to support funding for the potential further expansion of Vidalia to a 45,000 tons per annum AAM capacity. The DOE grant program that Syrah has been selected for is aimed at developing a viable battery materials processing and battery manufacturing position in the U.S. with funding appropriated via the Bipartisan Infrastructure Law. If successfully concluded, a DOE grant will be highly attractive to the company and is expected to fund a significant proportion of capital costs for Vidalia's potential further expansion to that 45,000 tons per annum AAM production capacity. We will work with the DOE to finalize a binding funding agreement for this DOE grant. Moving to slide 7 and current market conditions.
The end market setting in 2022 year to date continues to be outstanding, with strong momentum in EV production and sales globally, and with broad-based electrification of model ranges planned by major automakers this decade, the trend is likely to continue. To underpin this and the substantial energy transition, further large commitments are being made to develop battery manufacturing capacity across the globe, including in North America, and regionalization of supply chain remains a major trend in the EV and battery supply chain. Positive momentum continued in our key leading indicator, EV sales, in the third quarter, despite the global economic headwinds. Global EV sales grew 68% in the quarter against Q3 2021 to approximately 2.8 million units, with record sales of above 1 million units globally in September.
EV sales and battery demand growth are driving demand for anode material, as shown by total Chinese AAM production increasing to above 130,000 tons per month and achieving new monthly production records once again during the quarter. The trend in this area continues to be very strong, and our broad interactions with spherical graphite processes in China and increasing flake imports demonstrates robust forward demand. A strong market setting for natural graphite is evident with stable pricing, even with natural graphite production in China returning to normalized output levels during the peak seasonal production period, but still well below typical annual production volumes due to events earlier in the year, and therefore likely lower inventory than would normally be the case heading into the fourth quarter.
As we move into the fourth quarter, Chinese domestic production typically seasonally shuts down, and with strong demand and absent higher inventory levels, higher Chinese natural graphite imports, principally from Mozambique and Madagascar, are likely to be required to satisfy demand ahead of the winter period of lower Chinese production. Syrah's forward sales orders are substantial at 70,000 tons alongside the record sales of 55,000 tons this quarter. Syrah's forward sales orders indicate growing customer concern regarding Chinese natural graphite production availability and market balance. Moving to slide 8. This slide provides an updated perspective on regional battery manufacturing capacity pipeline forecasts and announcements.
The growth ahead for the industry continues to strengthen, providing a very strong backdrop for the company to increase production capacity utilization at Balama and a great setting for Vidalia's various stages of expansion, which are increasingly supported by governments, the regulatory environment and of course, customers. I'll now hand you back to Shaun.
Great. Thanks, Stephen. Moving on to slide nine, which outlines our long-term vision and pathway to growing Syrah's downstream business to become a leading supplier of anode products globally, capitalizing on the benefits of vertical integration with the Balama Graphite resource and operation. To succeed in this strategy, provision of production capacity in key markets is needed to underpin resilient and localized supply chains for customers. During the quarter, we made very strong progress on a potential expansion of Vidalia to 45,000 tons of anode material production capacity in the areas of feasibility, customer development, and in funding.
We announced a memorandum of understanding with Ford and SK On earlier in the quarter, and today announced an MoU with LG Energy Solution to evaluate significant anode material supply from Vidalia for both the initial expansion to 11,000 tons per annum and from a subsequent expansion to 45,000 tons per annum. Stephen also mentioned the potential two hundred and twenty million US dollar grant from the DOE earlier, which would, of course, be a significant funding contribution to such an expansion. The DFS for the larger expansion of Vidalia is advancing well with Worley Group being awarded the services contract to complete this study with our team. As part of the company's vision and given market fundamentals, Syrah is also progressing the evaluation of a large-scale anode material production facility in Europe and the assessment of strategic merits of such a development through a partnership.
By 2026, European lithium-ion battery manufacturing capacity is forecast to be almost 500 gigawatt-hours per annum, which is estimated to require something like 450,000 tons per annum of anode material. Syrah's broad engagement with the customer base already has highlighted concerns with input material production capacity being in deficit and a dependency on incumbent producers of anode material. Moving to slides 10 through 14 and an update on Balama, a little bit more detail around sales and logistics performance during the quarter. Key takeaways from the operational performance during the quarter were obviously the record sales of 55,000 tons, including the three break bulk shipments, and those sales being made at a higher weighted average basket price of $688 a ton, even during the higher production period in China.
Production was 38,000 tons, as Steve mentioned, for the quarter, and around our minimum target rate of 15,000 tons a month, for the first couple of months of the quarter, but obviously with September interrupted. That interruption in September was through illegal industrial action, and impacted total production and C1 costs over the quarter. Operational performance prior to that was excellent with really consistent product quality, stable grade, and higher recovery of 80% during the quarter and with 85% recovery achieved in the August production month.
Our C1 costs, FOB Nacala, were $615 a ton with a $120 a ton aggregate impact from the combination of fixed costs during September's operational interruption, higher logistics costs from transporting a larger volume of Balama finished product volumes to port, and increases in diesel costs since the end of Q1. Balama's net operating profit after C1 and C2 costs was positive, as Steve mentioned, for the quarter for the first time. Prior to the operational interruption, maximum finished product inventory positions due to the ongoing shipping constraints constrained Balama operating at higher than 15,000 tons per month production rate. As we have emphasized over and again, it is that shipping constraint rather than market conditions which is holding back production.
The execution of the 3 10,000-ton Pemba break bulk shipments to supplement Nacala's container exports enabled that 15,000-ton per month production rate through the operation in the first two months of the quarter. However, quarterly production overall remained constrained by maximum inventory positions at Balama, Nacala and Pemba and the ongoing disruption in the global container shipping market. In short, we could have produced and sold significantly more product without these constraints. Of the record 55,000 tons of sales shipped during the quarter, we had 6,000 tons finished product inventory shipping subsequent to the quarter end as well. A very, very strong period for sales. All remaining finished product inventory at the end of the quarter was contracted to customers and the forward sales order book remains very strong.
Our product quality was consistent with previous quarters, with a stable grade above 95%. The plant recovery through the quarter of 80% was an improvement on Q2. As I mentioned, we achieved 85% recoveries in August. With the new cyclone system in the secondary milling circuit fully commissioned from the start of Q3, there's been a steady improvement towards our 90% medium-term recovery target. Coming back to costs. Our C1 costs trended higher during the quarter due to a number of unexpected and uncontrollable impacts. As I mentioned, there's been cost pressures across the sector, given the persisting inflationary environment, including the state-based pricing of diesel, costs for our power generation and product drying and shipping costs for inputs, that come from outside of Mozambique.
We're currently evaluating potential operational cost savings to offset these inflationary pressures and note that C1 costs should trend lower or else being equal with recovery uplift and other improvement initiatives, including the solar project. Most importantly, with increased production levels as shipping constraints reduce and we benefit from our fixed cost base. We're still reviewing the Balama C1 cash cost guidance at a 15,000 ton per month production rate, given the very dynamic backdrop, particularly around diesel prices, and we'll provide further information in due course. Digging a little deeper into the disruption. During the end of September, Balama operations were interrupted by illegal industrial action driven by a small contingent of local employees and contractors.
With work stoppages, disrupted access to site, and out of caution for the safety of Syrah's employees and contractors, Balama operations were halted, and at one stage, the company's workforce temporarily moved from site. After the end of the quarter, we prepared operations for restart, with employees and contractors returning to site and camp, preparing for production and logistics movements recommencing. Syrah's extensive engagement with employee representatives and the relevant Mozambican government authorities endorsed that the company level agreement, and the renewal process around that with the internal union committee is the correct process for matters regarding Balama employment conditions. The disruption impacting full operational restart and logistics movements has continued into the start of this quarter. Currently, the plant is fully ready for operational restart, and we're working through the remaining impediments.
The company continues to engage with employee and contractor labor representatives and the district and provincial government authorities to drive a resolution of the immediate challenges and toward the renewal of the company level agreement. Ensuring as well that any grievances are managed through the correct internal and/or regulatory channels. Our focus, as I mentioned earlier, is on emphasizing local employee development, long-term career development, and a mutually beneficial labor environment. Despite the frustrating interruption intermittently impacting almost one month's production, we will take the time to get this right for the long term. We remain deeply committed to ensuring value for all our stakeholders through this process. Moving to slide 13, which contains some further detail on the graphite sales and marketing side. We reported a significant improvement in and record sales volumes in Q3, incorporated 3 spot break bulk shipments from Pemba.
Sales would have been higher if it wasn't for those container market, container shipping market disruptions and the interruption to Balama operations, because there is a very strong underlying demand picture. The break bulk shipments from Pemba will continue to supplement container shipments, and that'll enable overall natural graphite shipments of up to 20,000 tonnes a month or more. We're seeing very strong demand and stable forward contracting with customers. Our forward sales book remains very healthy at 70,000 tonnes, even with increased sales in Q2 and peak Chinese natural graphite production seasonally. That demonstrates the clear market growth and customer concern with supply ahead of winter, and the period of lower Chinese production, with low inventory levels and considering demand growth.
Given the market backdrop, the demand for Syrah material and changing market dynamics in China, we also implemented a new commercial relationship to deepen our supply chain servicing options in China and enable us to reach a greater spread of potential customers. This commercial relationship is expected to provide further year-round volume benefits in future. The weighted average sales price increased to $688 a ton CIF in the quarter, reflecting the stable and strong market conditions, with fines accounting for 83% of product sales. Fines spot pricing was stable in July and August compared to last quarter, and increased in September 2022 with record downstream anode market demand. Coarse flake prices outside of China have remained strong, and that's primarily due to ongoing supply disruptions, including from Ukraine and Russia.
Sea freight rate volatility and surcharges continued with Syrah's average shipping unit costs during the quarter at almost four times the long-term average, despite the recent indications of improvement. We have seen that the global container freight index has retraced more than 50%, from its peak, in the short space of time over recent months. We're strongly of the view that while sea freight rates will normalize, the structural demand increase for natural graphite will see pricing generate strong margins for our business. Moving on now to Vidalia, on slides 15 and 16. We're making strong progress with the Vidalia project and in our strategy to become a vertically integrated natural graphite anode material supply alternative for the ex-Asia markets.
We are a first mover in this integrated downstream anode market outside of China, and we've created a differentiated position at Vidalia that's not easily replicated. Following the announcement of a final investment decision on the initial expansion of Vidalia in February this year, detailed engineering is nearing completion, equipment fabrication and deliveries and on-site construction activities are well underway. The project's being overseen by our high caliber team alongside Worley Group. At the end of the third quarter, detailed engineering was 89% complete and will be finished in the current quarter, enabling required equipment fabrication and construction to progress in line with the schedule. Procurement for all key construction activities and equipment is substantially complete with contracts for more than $130 million awarded, including for the major mechanical and equipment work packages.
The project is on budget after the completion of the majority of procurement activities, with a significant portion of the project contingency remaining unallocated. The key construction activities undertaken during the quarter were piling and fencing, buried water services, power connections, concrete foundations and slab pouring, mechanical, structural steel and substation deliveries, piping manufacturing, and preparing for delivery and installation of major equipment, including overseas orders. All the overseas fabrication is tracking as expected, and delivery of this equipment's on schedule. That delivery has been further facilitated by improving shipping market conditions. Construction activities in the December quarter will focus on the completion of foundations, mechanical and structural steel delivery, steel erections for buildings, piping, and manufacturing and delivery and installation of major equipment.
Construction completion, commissioning and the start of production for the 11,250-ton anode material facility is targeted for the September 2023 quarter, with an 18-month ramp-up period to the full anode material production rate. Our offtake agreement to supply anode material to Tesla from the Vidalia facility is core to this initial expansion. During the quarter, we further announced a non-binding MoU with Ford and SK On to evaluate supply from Vidalia to their BlueOval SK joint venture. Today, we announced the non-binding MoU with LG Energy Solution to evaluate supply of 2,000 tons of anode material from Vidalia, commencing from 2025, and increasing that to at least 10,000 tons of anode material with Vidalia's potential expansion to 45,000 tons. Under both MoUs, we're targeting finalizing a binding agreement by the end of calendar year 2022.
We are strongly advancing further commercial and technical engagements with other target customers on the potential to supply anode material from Vidalia and qualification processes and iterative testing programs are progressing well. Importantly, we also finalized a binding offtake with Asbury Carbons to supply all the by-product micronized spherical graphite fines from the 11,250-ton facility for an initial five-year term, and with extension options under that contract. Asbury Carbons is a leading supplier of specialty carbon products and other minerals and a long-term partner of Syrah already in the U.S. We have a significant future opportunity with the combined position at Vidalia and the globally significant graphite resource and operation at Balama.
Tesla's option to offtake additional anode material volume, the MoUs with Ford SK and with LG, broader customer interest and market evolution continue to highlight the requirement for significant localized supply of anode material in the U.S. and other ex-Asia markets. Our assessment and test work for the DFS on further expansion of Vidalia to 45,000 tons continues with the contract that we've awarded to Worley Group for this work. The DFS is planned to be substantially completed by the end of 2022, enabling Syrah board assessment in conjunction with the development of customer and financing commitments. Scaling Syrah's downstream business is underpinned by Balama and the resource and reinforcing why we're so intent on continuing to develop labor and community relations for long-term success.
The opportunity to consume a significant proportion of Balama's production at Vidalia over time and to potentially expand Balama to supply third-party customers further are both important factors in the overall upstream supply-demand balance. Even at an expanded 45,000 tons at Vidalia, only approximately 25% of Balama's current production capacity would be utilized internally. To finish up on slide 21, EV sales growth, a constructive demand environment for anode and Chinese supply chain disruptions are driving strong demand and strong pricing for Balama products.
With increased shipping optionality and expected freight cost reductions, the release of inventory constraints, and strong demand, we should facilitate increasing Balama production to towards a target of 20,000 tons per month and enable higher sales volumes. We're intently focused on continuing to develop Balama's labor relations environment and to ensure long-term opportunity for local employees and communities and overall value growth in Mozambique. Construction of Vidalia's initial expansion is progressing within schedule and budget, with a pathway to 45,000 tons per annum at Vidalia being de-risked concurrently. The DOE and DFC loan processes are progressing well, and these processes, along with the DOE grant award announced today, clearly highlight the strategic importance of Syrah's integrated operations to the EV and battery supply chains.
The current market and Syrah's progress demonstrate the unique position we occupy, the largest global integrated natural graphite operation of Balama and the most advanced option for vertically integrated supply of natural graphite anode material outside Asia. We look forward to keeping everyone up to date with the company's progress. With that, we will move to Q&A.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speaker phone, please pick up the handset to ask your question. Your first question comes from Alex Ren from Credit Suisse. Please go ahead.
Morning, Shaun, Stephen, and team. Congrats on getting showered with money from the U.S. government. Great news. A couple from me, please. On that potential $220 million grant. What are the conditions that Syrah needs to satisfy? Could you give us a bit more color on that? If successfully granted, when will you start receiving it? Is that contingent on the first shipment from stage one? On that $120 million loan for Vidalia stage one, first advancement in December quarter. How many installments are there? Is that just flowing through each quarter? I've got more questions, but I'll circle back. Thanks.
That's all right. Thanks for the question. I'll take the grant first. Literally, we've announced that this morning. We're really pleased to be, you know, part of the list and be awarded such a significant amount. That's for Phase III, which is obviously the further expansion to 45,000 tons a year and beyond the existing construction project. It will take a reasonable process of negotiation of the terms and conditions around the grant. We've obviously applied for it. We obviously know the amount that's been awarded, but the rest of it is very much still to come. In terms of the DOE loan itself, that is for Phase II, our 11,250-ton facility.
Effectively, you know, like most project financing loans, as we need the funds, we will draw down on them, you know, effectively a monthly process, if you will. That's the first time that is expected to happen through the December quarter. Does that answer your questions?
Yes, absolutely. Thank you. Operational status on Balama. When do you expect production to recommence? You know, given the inventory is now down to what's 14,000 tons by end of September. Basically, that's just one break bulk shipment, right? Does that mean the entire Balama is currently in full halt? You know, both you know in terms of both site production and logistics. If so, do you know you know what the monthly cash burn rate is? I got one more. Sorry, I'll circle back. Thanks.
Yeah. The interruption to production and logistics continues at the moment. As I said, though, from the period that we advised, staff were coming back to Balama, and we did a lot of work on site to ready the plant again for full production after a relatively quick stop. We have not recommenced production at this stage. All effort and intense focus is on reaching resolution to allow that to happen as quickly as possible. As I said, we are constructively engaging with labor representatives, both employee and contractor, and the relevant government authorities from a district, provincial and national level around this. We do not have a timeline to provide today.
It's a dynamic situation, but you can be assured that the soonest possible resolution is the highest focus for the company. At this stage, we're not making any further comment around cash burn or potential impacts at this point in time.
Understood. Last one from me. So, Tesla qualification progress, and also could you give us a bit more color on that offtake discussions? It sounds like the market is, you know, craving for ex-China supply, right? But how come there's still, you know, around 1/3 of uncontracted volume for Vidalia stage one? I would have thought, you know, customers would be jumping on board to sign MOUs, at least with you guys.
Yeah, thanks. We have clearly a set of commercial processes underway, which includes a balance of material from the first phase expansion, and a further potential expansion to 45,000 tons. The level of interest is indicative. The MOUs are indicative of the level of interest and the level of engagement. As I mentioned, there are other commercial processes as well underway. We are assessing the best combination of potential options, not just for the balance of phase II, but also how that might link to an expansion to the phase 3 volume of 45,000 tons. It is definitely a period of very strong interest.
As I've mentioned previously, the level of understanding about market dynamics for the balance in natural graphite from an upstream perspective, but particularly for localized supply of anode material was already improving significantly. I think the overlay of potential benefits coming from the Inflation Reduction Act has only exacerbated that level of interest and intensity of interaction. We're very comfortable with the pace at which we are finalizing and moving through commercial arrangements for the phase 21 1,250-ton facility and the phase III 45,000-ton facility potential.
Right. Understood. Thanks, team. Congrats again. Just that's it from me.
Thanks.
Thank you.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Mark Fichera from Foster Stockbroking. Please go ahead.
Yes. Hi, guys. Congratulations on the grant and the DOE announcement. Yeah, just a couple of questions from me. Firstly, with the Vidalia phase III expansion, should the grant be binding? Can you also still apply for a DOE loan similar to what you've done with phase II? Or does the fact that, you know, you'll be getting the grant, preclude you from applying for that loan? Yeah, if you could just clarify that. Thanks.
Mark, I think under the Inflation Reduction Act and with the level of policy support, that's moving ahead in this space, there's not just loans and grants, there's also tax incentives and various other items that are potentially available. The way in which those interact and the degree to which multiple items can be pursued is not yet fully clear. We obviously prioritized the grant program and the potential for a grant allocation as something that was very attractive to potentially get onto the balance sheet. That was a focus. Obviously the DOE ATVM loan for phase two is not impacted by the grant allocation to phase three.
I think, you know, there's lots of water to go under the bridge to determine what other interactions around loans, grants, and other incentives might still be there to work through.
Sure. Okay, thanks. In terms of the grant going binding, what timeframe are you sort of looking for sort of that closure?
I think as Stephen said earlier, it's very early in this process. The allocation and the announcement process has only just happened. The timing and process for next steps is something that we'll learn more about in the coming weeks and months.
Okay. One more from me. Just on the Pemba break bulk shipments. Obviously you did well. You did three shipments during the quarter. Can you do, subject to Balama getting back to restart, how many could you possibly do more than three break bulk shipments through Pemba, or can that be four or five? I was just wondering to get a feel for how that can be optimized.
Yeah. I mean, there's no logistical or timing constraint that means you can only do one a month. It comes down to what is the balance of customer allocations, 'cause there's a far smaller number of customers who take break bulk compared to container. The fixed cost base that we have in place through our transport and cross-dock facility for the container shipments through Nacala. It really is an ongoing assessment of the best allocation, both for maximum volume but also the balance of cost.
Okay. Thanks.
Thanks, Mark.
Thank you. There are no further questions at this time. I will now hand back to Mr. Verner for closing remarks.
Thank you. Obviously, we will keep everyone updated very closely around progress at Balama. As I said, that is absolutely the primary area of focus for us to ensure that we're back to operations and logistics movements as quickly as possible. Thank you for listening in today, and we look forward to keeping everyone updated. Thank you.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.