I would now like to hand the conference over to Mr. Shaun Verner, Managing Director and CEO. Please go ahead.
Good morning, and thanks for dialing in today, and apologies for the delay in the start of the call. 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 we'll update you on market and geopolitical developments, Syrah's significant progress and forward milestones, and a combination of funding processes and requirements which have led to the announcement of this capital raising. It is a pivotal time in market and geopolitical positioning of natural graphite and anode globally. Syrah is the leading player in terms of assets, developmental stage, and downstream integration outside of China.
Through this capital raising and the conditional agreement with AustralianSuper to convert its Series 1 and 3 notes into Syrah shares, as well as the DFC funding process that is significantly advanced towards signing, we have the opportunity to capitalize on our preeminent market position through this year, ensuring balance sheet strength, flexibility, and time for the best possible commercial positioning in executing our strategy. The purpose of today's announced transactions is multifaceted. Firstly, it preserves Balama operating mode optionality, responding to China's implementation of export license controls across the graphite and anode industry that have fundamentally challenged current and future supply certainty.
It strengthens Syrah's balance sheet with $148 million on the balance sheet as of 31 December 2023, with further significant funding support targeted with a $150 million DFC loan for Balama at an advanced stage, and potential further DOE loan funding being progressed for Vidalia's further expansion. It allows for optimal commercial positioning, providing time for Syrah to transition to a higher quality sales and revenue composition as ex-China anode processing capacity develops and U.S. anode material demand and pricing evolves. It provides stability for Vidalia's ramp-up and progress in product qualification to enable commercial sales, also supporting DOE loan reserve requirements. It provides for continued anode material capacity development funding remaining pre-final investment decision workstreams on the Vidalia further expansion.
Importantly, it removes refinancing risk associated with the Series 1 and 3 convertible notes of AustralianSuper, which otherwise mature in October 2024, and reduces pro forma net debt, leaving balance sheet headroom for the company to take on DFC funding. The headlines of the funding initiatives we're announcing today are a fully underwritten institutional placement and 1 for 10.2 pro rata accelerated non-renounceable entitlement offer to raise a total of approximately AUD 98 million, and agreement with AustralianSuper for the conversion of the Series 1 and 3 convertible notes, otherwise maturing in October 2024, subject to shareholder approval, resulting in AustralianSuper's shareholding in Syrah increasing to approximately 32%.
These actions will provide stability and strength for Syrah from which to continue the development of sales transition for Balama and acceleration of integrated anode material production capacity and sales from Vidalia, with the support of key customers and government funding agencies. There have indeed been times at which the questions have been of whether Syrah would reach its promise, Balama would be fully utilized, and Vidalia integration achieved, but recent market developments mean we firmly believe it now is really a question of when this occurs. The market and geopolitical challenges already navigated by Syrah have been enormous, and at all times we have been focused on ensuring investors retain full exposure to Balama upside and the Vidalia position. The capital raising we announced today in conjunction with DFC funding will allow us to reach our objectives more quickly and more independently than would otherwise be possible.
Firstly I'll move into a market update. The overall increase in EV sales during 2023 of 37% year-on-year was again extremely strong, and this saw a continuing ramp-up in anode material demand but disorderly supply in China from expanded artificial graphite anode material capacity, with total Chinese anode material production growing 28% year-on-year, which was lower than the EV and energy storage battery demand growth rates, implying some drawdown in anode material inventory through the year.
Market conditions for Balama have been very challenging, resulting in lower total sales and revenue in 2023, driven by sub-economic pricing of artificial graphite anode material in the China domestic market, reducing short-term demand for natural graphite anode material in China, and most significantly, the major impacts of China's announcement and implementation of export restrictions in Q4, stifling the burgeoning improvement in market conditions that were being seen in September and early October. China swung from a net importer of natural graphite halfway through last year as domestic natural graphite demand fell, spherical producers reduced production due to low precursor prices, and import demand was further impacted by export license uncertainty. Moving on to more on the short-term China impacts. The significance of China's actions on the near-term graphite and anode product markets can't be stated strongly enough.
They have fundamentally altered the geopolitical and trade landscape for the battery and electric vehicle value chain. The imposition of export licensing at a national level was announced on October 20 last year, and then the immediate impact was Chinese exporters seeking to export all available inventory ahead of the imposition of controls. Given Chinese producer concerns over the granting of export permits, they also reduced feedstock imports, creating a perfect storm of short-term oversupply ex-China and reduced demand for imports into China. This lack of visibility in export permitting carried over into 2024 prior to Chinese New Year with minimal import demand. Overall, anode material demand is still strong, and the supply chain ex-China, where natural graphite and artificial graphite blend ratios have not changed, will start to be stretched.
And OEMs and battery producers are deeply concerned about China exports, meaning the new processing developments ex-China and new trade flow options are under consideration and investment, but they're not immediate fixes. In the near-medium term, this is very positive for Syrah. Simply put, neither the world gives in and says Chinese supply of artificial graphite is the only solution, or Balama and Vidalia will be critical to any other outcomes, as evidenced by our recent offtake announcement with POSCO for strategic future volumes from Balama. In the short term, the China export licensing process will influence Balama's operating rate with further production campaign runs determined by demand, price, and inventory drawdown. Ex-China industrial consumers of natural graphite are also concerned about supply as the short-term inventory has been drawn down, and their minds are turning to securing longer-term supply.
At Balama, in the very near term, things continue to be impacted by China's dominance and government policy intervention in the synthetic graphite, natural graphite, and anode material markets, impacting our overall demand. Uncertainty arising from the export graphite controls has led to constrained demand from Chinese anode customers so far this year and has limited Syrah's overall natural graphite sales. A lack of market liquidity driven by uncertainty in the export licensing implementation has maintained pressure on Chinese natural graphite fines demand and spot prices, but positively, domestic production in China and inventory positions have also decreased significantly, setting up conditions for improvement. Coarse flake demand and pricing is strong given limited apparent availability from Chinese exports and other suppliers, and we are maximizing our exposure to that.
We've continued our campaign operating mode in the March 2024 quarter, targeting high capacity utilization production campaigns, followed by curtailment periods determined by inventory levels and new sales demand. Balama sales volume for the March 2024 quarter are expected to be similar to the December 2023 quarter, with production moderately lower. The weighted average sales price for the March 2024 quarter is expected to be materially higher than the December 2023 quarter. Chinese export licensing progress will be the primary factor influencing the near-term Balama sales and production profile, and little information has been officially released in China so far this year. We are today preserving optionality to return to high capacity utilization quickly if warranted by demand conditions, and we'll continually review this position against overall demand and Vidalia supply requirements to ensure the optimal impact on cash.
Matching Balama sales and production for a cash flow breakeven position remains the urgent minimum target but has been significantly impacted by the Chinese commercial and government actions. Balama near-term and medium-term C1 cost guidance is unchanged, demonstrating that its capacity utilization increases a significantly better unit cost position results. Moving on to Vidalia and our 11,000-ton per annum anode material facility, we commenced integrated anode material production in early February this year, a landmark achievement and a critical step for the build-out of U.S. capacity. The Vidalia operations team is fully staffed with 101 employees engaged in the commissioning process and ramping up operations and production.
Our immediate focus at Vidalia is progressively increasing throughput whilst increasing process consistency, ensuring product quality, and maintaining safety, producing and dispatching product samples to Tesla and other customers for physical and electrochemical performance testing programs to complete qualification of the new facility, completing full commissioning of all processing capacity and ancillary infrastructure to support full ramp-up, and increasing production rates to the 11,250 tons per annum design capacity, targeting 80% capacity within 6 months and full capacity within 18 months from commencement.
On the anode material sales side, Syrah is engaging with customers on conditional product sales and revenue prior to completion of qualification, encouraged by the increasingly strategic nature of Vidalia products, with Syrah not being designated a Foreign Entity of Concern, and Vidalia anode material using Balama natural graphite expected to be qualified as a critical mineral, both contributing towards the tax credit requirements under Section 30D of the IRA. We continue to see very strong engagement on contracting for our potential future expansion to 45,000 tons, leveraging the time and full supply chain capability, climbing the full supply chain capability of Balama and Vidalia. Our operating cost estimate of $3.64/kg compared to an observable spot China natural graphite anode material price of $5.35/kg at the moment remains compelling from a margin perspective.
Looking at the further expansion of Vidalia, while focusing on cost management, we are progressing transition engineering, permitting, and other long lead procurement activities in advance of an FID proposal to be considered by the Syrah board at the appropriate time. Progressing in these processes and progressing offtake agreements are important for DOE loan financing and preparing the project for FID readiness. It is critical to note that our final customer and financing considerations will determine FID timing, and we're working hard to progress additional funding beyond the DOE application to minimize dilution. We will take the FID to the board at the right time for the company. In addition to the commencement of Vidalia production and the recent POSCO offtake announcement, Syrah is targeting a number of significant milestones over 2024, which both accelerate our development and de-risk the business.
Key expected catalysts ahead include commercial offtake sales for additional tons from the anode material facility at Vidalia, further offtake agreements for Vidalia to support the further expansion projects, commercial arrangements to accelerate Syrah's exposure to the ex-China downstream market, Balama natural graphite strategic offtakes with new customers developing spherical and anode capacity outside China, progression of U.S. DFC loan funding for Balama, progress on U.S. DOE loan funding for the Vidalia further expansion project, and importantly in the near-term decisions regarding balancing China demand and Balama production. And lastly, we'll continue to progress toward FID on the expansion project dependent on the customer and funding readiness I referred to earlier. Moving on to the equity raising summary.
The equity capital raising launched today comprises a fully underwritten placement of approximately AUD 61 million and a fully underwritten 1 for 10.2 pro rata accelerated non-renounceable entitlement offer to raise an additional AUD 37 million. The fixed offer price of the equity raising is at AUD 0.55 per share, which represents a 21.4% discount to Syrah's last closing price and a 17.8% discount to Syrah's theoretical ex-rights price as of close of trading yesterday. AustralianSuper, Syrah's largest shareholder, has committed to supporting the equity raising, and Stephen will provide some more detail on the use of proceeds shortly. Syrah and AustralianSuper have agreed to revise the conversion price and for AustralianSuper to convert the Series 1 and 3 notes, which mature in October of this year, subject to Syrah's shareholder approval.
The conversion price for the Series 1 and 3 notes will be revised to AUD 0.6688 per share, representing a premium of 21.6% to the offer price. AustralianSuper will convert the Series 1 and 3 notes into new shares 5 business days after Syrah's shareholder approval of resolutions for the Series 1 and 3 notes conversion. Syrah intends to propose the Series 1 and 3 notes conversion resolutions at its 2024 annual general meeting to be held in late May of this year. Interest will accrue on the principal outstanding and will be capitalized quarterly in arrears and added to the face value of the Series 1 and 3 notes up to the conversion date.
With the completion of the equity raising and the Series 1 and 3 notes conversion, AustralianSuper's shareholding in Syrah is expected to increase to no more than 32%. The terms and conditions of AustralianSuper's Series 4, 5, and 6 notes, which mature in May 2028, have not been amended. The Series 1 and 3 notes conversion will simplify Syrah's capital structure and remove a material potential redemption requirement for the company in October 2024 of up to AUD 122 million, which would otherwise require the company to obtain significant alternative cash funding for such a redemption. AustralianSuper is a long-term investor, has been, and continues to be a significant and supportive investor in Syrah by its ordinary shareholding since 2015 and the Series 4, 5, and 6 notes.
And I'll now pass you across to Stephen to talk about the DFC and DOE funding position updates and the use of proceeds from this transaction. Stephen.
Thank you, Shaun. One of the most impactful strategic developments arising from the geopolitical realization of Chinese supply dominance in the supply chain, including the recent imposition of export controls onto supply, has been extensive government support for ex-China development. Government support ex-China is taking multiple forms across jurisdictions, including significant financial commitments towards capacity development and critical minerals through the supply chain, something strongly championed by OEM and battery customers and other stakeholders. Syrah is receiving stronger support from various U.S. government agencies, which demonstrate the resolve of U.S. and aligned governments to open and champion alternative sources of critical mineral supply.
Syrah signed a $150 million conditional loan commitment with the U.S. International Development Finance Corporation in September 2023, which continues to progress well, targeting funding in the second quarter of this year. The DFC loan will be available in two tranches with $100 million in aggregate disbursements to fund working and sustaining capital of Balama operations, current tailings storage facility expansion, and Vidalia development capital, and a $50 million tranche in aggregate disbursements to fund a future-dated tailings storage facility expansion project later this decade. Syrah is targeting signing of a binding DFC loan agreement and related documents and first disbursement of the DFC loan by the end of June 2024, subject to completion of all financing documents and receipt of DFC, Syrah, and Twigg board approvals and formal approvals from relevant Mozambique government entities.
The company expects to seek an initial disbursement, which is currently estimated to be approximately $60 million following execution of the loan agreement and satisfaction of conditions precedent. The term of the DFC loan is up to 13 years, and interest on the loan is fixed at applicable long-dated U.S. Treasury rates plus a margin. From a DOE or U.S. Department of Energy perspective, we have also received strong financing support for the construction of the Vidalia initial expansion project. Through 2023, $98 million of DOE loan proceeds were fully advanced with a weighted average interest rate of 3.98%, and loan advances have been fully invested in the project. A $4 million capitalized interest component brings the total loan amount to $102 million.
Payment is due on the 20th of July 2024, and then quarterly loan interest and principal payments commence from 20th of October 2024. The loan has a maturity date of 20th of April 2032. At the end of December 2023, there was $38 million in restricted cash associated with the loan, with $28 million of that restricted cash held in Syrah accounts to meet DOE loan reserve requirements. Syrah is working with the DOE considering delays and cost escalation to complete the Vidalia initial expansion project and timing of funding of new loan reserve requirements with commencement of commercial operations at Vidalia.
Syrah is also progressing a further DOE loan of up to $350 million to fund a significant portion of the Vidalia further expansion project, which is also subject to customer commitments and a final investment decision. In terms of transaction sources and uses, all dollar amounts that we refer to from this point forward are in U.S. dollars unless stated. The net proceeds of the equity raising, which is fully underwritten, is in addition to our cash balance, including restricted cash, of $85 million as of December 31, 2023 and provides Syrah with $148 million pro forma cash as of December 31, 2023.
From this pro forma cash position, $16 million has funded project capital costs from the start of this calendar year to complete, commission, and commence active anode material production at the 11.25 thousand ton per annum AAM Vidalia facility. $46 million has and will fund operating costs of the Vidalia facility and operating reserves associated with the DOE loan, providing working capital for the ramp-up of Vidalia to commercial production and sales. $15 million has funded and will fund other DOE loan-related reserve accounts associated with Vidalia, including a debt service reserve account typical of project finance facilities of this nature. $4 million will fund transition activities for the Vidalia further expansion project to achieve FID readiness, and $16 million has funded and will continue to fund Balama working and sustaining capital costs.
Transaction costs of the equity raising are estimated to be approximately AUD 2 million. The AUD 50 million balance has funded and will fund general corporate purposes, including providing incremental liquidity for the company. The equity raising ensures that the company is fully funded in the ramp-up of Vidalia to commercial operations to meet DOE loan obligations and for commercial positioning in Balama sales pending resolution of China or until DFC funding is unconditionally available for drawdown. I'll now pass you back to Shaun.
Thanks, Steve. The degree of uncertainty regarding the China export license controls and Balama market conditions, the timing of the DFC loan, particularly managing for any potential challenges in relevant government approvals, and the need to ensure commercial positions are not compromised in key negotiations have led to the timing of the elements of the funding strategy we're talking about today.
We're well engaged in the supply chain regarding offtake from both Balama and an expanded Vidalia facility, and our major focus is getting those commercial agreements in place to demonstrate the rapidly evolving market conditions and the unique position of Balama and Vidalia, as well as our stage of operation and development compared with any integrated ex-China alternatives. We remain open to and engaged with various funding options outside the DOE for further expansion and see recent actions from POSCO, General Motors, and Panasonic in early-stage developments as encouraging. We believe that the required acceleration of ex-China supply chain capacity build-out requires significant commitment from offtakers that will both indirectly and potentially directly facilitate or include funding support.
Today's equity funding step, coordinated with the AustralianSuper note conversion as well as the preparation for targeted DFC funding, will provide balance sheet stability and flexibility to navigate the foreseeable market scenarios for Balama sales and production and allow us to demonstrate the value and criticality of large-scale, IRA-compliant natural graphite and anode material supply. This has been an extraordinarily challenging period, and the company seeks now to be ready to deal with any challenges that may arise in order to avoid decisions which might compromise later development or force less palatable alternatives to be considered at inopportune times. We've dealt with the circumstances before us and sought to retain the strategic position for shareholders, providing the best possible base for future value creation.
We've clearly outlined that we believe the market position to be fundamentally shifting towards Syrah's asset position, and we will seek to extract value and execute options to minimize further dilution in pursuit of expansion of the business. I'll finish with five key takeaways of what we've been through today. Firstly, this equity raising is part of a series of balance sheet steps that allow optimal transition to a higher quality ex-China sales base from Balama and Vidalia and provides significant runway to that achievement. Though ideally, timing would have aligned with Vidalia's further expansion, natural graphite market uncertainty driven by China's geopolitical actions and the later commencement of Vidalia's operations meant that strengthening the company's funding position now is important to provide the best base from which to launch further development steps.
This funding creates certainty of balance sheet position and allows us to control timing on commercial decisions and contracts in both natural graphite and anode to optimize long-term pricing and volume outcomes. The conversion of the Series 1 and 3 notes removes a significant maturity overhang on the company. And finally, the transaction provides capacity on the balance sheet to take on attractive, non-dilutive government funding from the DFC and allows us to focus on supply chain funding options to accelerate progress of the Vidalia further expansion project. Despite the headwinds we've faced, Syrah sees a clear path to generating increased shareholder value through this year. Our focus has always been the preservation of control of assets, generation of funding options to minimize dilution wherever we can, and continuing to progress development. We believe that the catalyst before us will capitalize on the certainty provided by this transaction.
With the support of the U.S. DOE and DFC, Mozambique and stakeholders, our shareholders, and increasingly ex-China customers, we're pursuing multiple years of high margin, market-driven benefit as ex-China anode material capacity and the need for Balama volume growth and Vidalia's continuing development provides opportunity into very strong U.S. demand for IRA compliant non-Foreign Entity of Concern products. Our operating, marketing, and corporate teams remain singularly focused on generating this value for shareholders. And with that, we thank you for your ongoing interest in and commitment to Syrah, and we'll now move across to questions and answers.
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 speakerphone, please pick up the handset to ask your question.
We'll now pause a moment to allow for questioners to register. Once again, if you wish to ask a question, please press star one on your telephone. Your first question comes from Mark Fichera with Foster Stockbroking. Please go ahead.
Yeah. Hi, Sean. Just a couple of questions. Firstly, on Balama, you mentioned the first quarter average weighted price is materially higher than December. Is that due to a greater mix of coarse material being sold, or is it due to a customer mix or contracts changing? Maybe if you could elaborate on that. Thanks.
Yeah. As I mentioned during the call, clearly the coarse flake market pricing has improved, and the availability of material in both fines and coarse inside and outside China has become more challenging because of low inventory and low production. So it's a combination of product mix and the current market conditions.
Right.
And just another one from me. On Vidalia, obviously, it's wrapping up as you expected. Just in terms of first sales, I understand obviously with Tesla that there's a qualification period. But in the interim, how is the interest in terms of other customers potentially purchasing material during the current calendar year?
Yeah. I think the level of customer interest is very strong. I mean, the value of a ton of IRA compliant product in the U.S. this year, but particularly next year, has increased markedly from what it was 12 months ago. So we see a theme of achieving acceleration in terms of sales or revenue due to that increased value because there's clearly a benefit in having material available for next year that is IRA compliant. So a very good level of interest.
It's both important for the existing 11,250-ton capacity, but also as part of our strategy on contracting for the expansion to 45,000 tons.
Okay. Thanks.
Of course, Mark.
Thank you.