I would now like to hand the conference over to Mr. Shaun Verner, Managing Director and CEO. Please go ahead.
Thank you. Good morning, and thanks for joining us on the call today. With me is our CFO, Steve Wells, and our EGM of Strategy and Business Development, Kieran Hira. I'm pleased to report our Balama operations delivered a solid, solid quarter of campaign production and closed the year out with real momentum. Our commercial team had a busy Q4, meeting good ex-China demand for break bulk shipments of our Balama fines and solid sales of coarse products into the global industrial markets. At the same time, the policy and market backdrop is moving into a pivotal period for support of the growth and potential development of our Vidalia anode material business, a period in which there is potential for acceleration of qualification and further commercial activity.
Today, we'll work through the presentation provided with the quarterly report and update you on the key developments in the quarter, then be happy to answer any questions at the conclusion of the call. Returning to Slide three, and I wanted to remind everyone of our clear and differentiated investment proposition. Syrah is the leading integrated natural graphite and active anode material producer outside China, having deployed significant investment into infrastructure and operating capability with readiness to immediately increase upstream and downstream supply, providing significant lead time over following projects. Vertical integration from mine through anode delivery to end customer, offers a secure source of high quality, critical graphite material supply outside China. Our unique asset base can be OPEX competitive with China and leading ex-China, and we are well-placed to generate strong margins over the long term as operating capacity utilization increases.
Our leading sustainability and governance position, including broad-ranging external assessment and low emissions intensity compared with Chinese products, provides full auditability and traceability from raw material to finished anode. Finally, in response to expected continued growth and regionally specific requirements in our end markets, we have clear expansion opportunities that we can execute in line with the needs of our customers and government stakeholders, with support from capital providers. Moving on to Slide four now. Our critical underpinning values at Syrah are safety and sustainability. As we continue to develop as a leading ex-China critical minerals producer, we're guided by three core objectives: being positive for the communities in which we operate, being sustainable for the environment, and providing secure, high-quality supply for our customers. In the Q4, performance against our key safety and sustainability metrics was very strong.
We continue to demonstrate how our people and our local communities are critical to our success. The health and safety, and security of employees and contractors will always remain Syrah's highest, highest priority. As we strive for zero harm in our operations, we saw our Total Recordable Injury Frequency Rate remain very low at 0.9 incidents per million hours worked, a result which any operations globally would be proud of. Our safety focus is underpinned by our work on critical risk hazard management and in-field leadership interactions, which are a daily priority for the leadership teams. For the full year, we saw continuing improvement trends in our injury frequency rates across both operations and further refinement of our asset risk profile. I'm also happy to report that in December 2025, we finalized a new community development agreement with Balama host community and district government representatives.
The new agreement extends our community development framework that's been in place since 2017 and commits a further $5 million from Syrah to important social and economic initiatives focused on infrastructure, essential services, and sustainable income generation programs. Importantly, the priorities for these projects are determined in conjunction with our local host communities in Cabo Delgado. Syrah's operations are clearly aligned with leading global sustainability and governance standards. Last year, Balama became the first graphite operation globally and the first mining operation in Mozambique to achieve the Initiative for Responsible Mining Assurance or IRMA 50 level of performance for sustainability. This achievement highlights nearly a decade of strengthening our differentiated performance, including strong safety record, investment in training, and developing a highly skilled workforce, ongoing community interaction and development, and human rights due diligence.
Along with our ISO certifications and external auditing required under our U.S. government funding arrangements, we continue to prioritize health and safety and environmental management systems, confirming our commitment to operating sustainably and driving continuous improvement. Final point I wanted to reiterate here is the independent lifecycle assessment, or LCA, of Syrah's integrated operations conducted by Minviro on global warming potential. From Balama origin to Vidalia customer gate, our global warming potential is estimated at 7.3 kgs of CO2 equivalent per 1 kg of anode material produced, which is around 50% lower than equivalent natural graphite from a benchmark supply route in Heilongjiang Province in China, and 70% below the synthetic graphite benchmark in China.
This whole sustainability focus along with the lower global warming potential of our integrated natural graphite anode product relative to other suppliers, should provide Syrah a competitive advantage on these parameters as the most sustainable source of integrated natural graphite anode material available at scale today. On Slide five, turning to a more detailed look at our performance in the Q4. Total production at Balama was up 34% from the prior quarter to 34,000 tons. This result was in part driven by a clear improvement in recovery rates to 76% and good plant availability. It's worth making a specific mention of the operational performance in the most recent production campaign through December, where we produced 16,000 tons at 83% recovery, while maintaining high product quality.
This is in line with our best prior operational performance, and the team is confident that further improvement at higher throughput for greater cost efficiency is achievable. Since recommencing production after the non-operating period through most of the H1 of 2025, it's been great to see the Balama operational team delivering high performance and closing out the year on a strong note. As you'll recall, we restarted operations in mid-June 2025, and in July, we recommenced shipments from Balama, and subsequently lifted the force majeure declaration that had been in place since December 2024. As a result of campaigns from restart, comparisons with the prior two quarterly periods are less meaningful here, given that we're still ramping up operations after an extended outage. But we are demonstrating clear and continuous improvement, and operating comparisons will be more relevant over future quarters.
Natural graphite sales of 29,000 tons were up 21% on the prior quarter. We continue to have demand drive our operating campaigns and product inventory requirements, and we essentially sold everything we produced in the quarter, noting the lead time required to port and shipment. This included 2 further break bulk shipments to Indonesia in the quarter, with solid demand evident for ex-China feedstock into the anode market. Our weighted average sales price for the quarter of $577 per tonne CIF was up 2% on the same quarter last year, but down quarter-on-quarter on the customer and product mix. Our C1 cost was $535 FOB per ton during the operating period, and freight averaged $74 per ton.
Importantly, this all provides a good basis for lower C1 costs as we can lift capacity utilization and increase volumes. Along with indications of better than historical pricing, as ex-China differentials are embedded, positive future cash flow opportunity is clear, subject to demand continuing to increase. Balama has always had potential to generate good margins of greater than 50% capacity utilization, and a price premium is being achieved for ex-China sales compared to domestic and FOB China prices. At Vidalia, the operations team continues to build significant operating experience through small batch production periods and qualification interactions. We continue to work through the highly detailed and extensive qualification requirements, and we are making positive progress, albeit obviously slower for conversion to sale than we would like.
We're also responding to continuing refinements that have been requested by customers as their own processes and requirements mature in newly developing battery operations and product mixes in the U.S. Our product's quality and performance is excellent, as per the key technical performance outlined on Slide 13 in the appendix of today's slides. There is no issue with our product specification or performance, and we continue to deal constructively with a highly complex mix of policy, commercial, and technical factors. We remain singularly focused on achieving sales as early as possible, but it's clear that greater certainty in the policy and resultant pricing and supply environment, which is expected in the Q1 of 2026, will be critical for the next steps in commercial progress.
The removal of the Section 30D consumer tax credits in September 2025, saw a marked reduction in U.S. EV demand in Q4, given sales had been brought forward prior to the change. The growth profile is expected to normalize from there as the broader policy and AD/CVD, or anti-dumping and countervailing duties, case position crystallizes throughout this year. This will be important not just for Vidalia, but also for Balama's continuing sales growth. So we emphasize that the extensive work of our operating commercial teams will pay off with our investment and development experience, demonstrating the considerable time and capital required for others to follow, creating a sustainable lead time advantage for Balama and Vidalia. I'll hand over to Steve now to talk about the current financial position and interaction with our U.S. government lenders. Steve?
Thanks, Shaun, and I'll turn your attention to Slide six to cover the cash flow for the group. We started the quarter with $87 million in total cash across restricted and unrestricted cash balances. Our cash flow from operations during the quarter of -$18 million included receipts from sales of natural graphite product shipments of $13 million. Cash outflow was higher than the September 2025 quarter, mainly due to a $4 million partial payment for a break bulk shipment being delayed into January for a December shipment, and higher advisor costs associated with DOE and DFC loans. In addition, the prior quarter's operating cash flow was also positively affected by the receipt of a $12 million Section 45X US tax credit for Vidalia.
We experienced some working capital buildup at Balama, ongoing working capital draw from Vidalia through this low production qualification period, and increased advisor costs associated with the loans. Also noting that we continue to draw on the DFC loan in the quarter. Our clear focus remains on increasing sales from Balama to facilitate further improvement in the quarters ahead, and to bring Balama to operational cash flow breakeven as soon as possible, as well as completing the qualification process at Vidalia to expedite ramp-up and sales. Through this period, we are highly focused on managing the cost position of both assets.
Other movements to call out in this quarter were the $8.5 million disbursement from the DFC loan to fund working and sustaining capital at Balama, which net of $1.1 million of financing, repayments, and transaction costs, led to the $7 million net proceeds from financing amount. At the end of December, the group had a closing cash balance of $77 million. Of this closing balance, there is $18 million of unrestricted cash and $59 million of restricted cash under both loans. Of that restricted cash, $10 million is available to fund Balama operating and capital costs, and restricted cash of $17 million is available to fund Vidalia costs.
In addition to sales, of course, further liquidity of $7 million is available under the current DFC facility for TSF funding purposes and subject to meeting loan terms and conditions. Interest payments on the DFC loan are currently deferred to May 2026, while debt service obligations on the DOE loan are deferred to 2027 under the forbearance agreement Syrah has with the Department of Energy. We continue to work with both lenders, given the market dynamics as a result of the geopolitical and policy landscape, which Shaun has referred to, and to the clear strategic nature of the assets and Syrah's market conditions, as well as the specific loan requirements, which include various events of default and a requirement for further funding by March 1. This also forms part of the overall strategic advisory process we have previously announced with Macquarie.
With that, I'll hand you back to Shaun.
Thanks, Steve, and I'll spend some time now providing an update and our perspectives on various market developments and the evolution of government policy through the last quarter of 2025, and implications for our business in 2026. On slide seven, you can see on the left-hand chart that global EV demand remains strong, though volatile month-to-month. In 2025, global EV sales were up approximately 24% from 2024, with strongest growth in China, positive developments in Europe, and a spike in demand in the U.S. in Q3, prior to the expiring of the Section 30D consumer tax credit. As noted earlier, we expect the U.S. demand growth profile to normalize over the coming months, and while still positive, we expect the growth rate to moderate from prior forecasts.
Anode production in China continues to grow, approaching almost 3 million tons in 2025, reflecting not only the EV market, but also the rapid rise of battery energy storage systems or BESS requirements for data centers and other stationary storage applications. Synthetic graphite anode material production overcapacity in China has resulted in intense competition for market share and destructive pricing behavior in the domestic market. Although the addition of BESS demand is starting to see some improvement in utilization, in conjunction with some early evidence of capacity rationalization. Prices for synthetic graphite anode material, especially lower grade products, remain below estimated production costs in many cases. Synthetic graphite anode margins have also been impacted by higher coke feedstock costs, maintaining pressure on Chinese producers, as only two or three major producers have significant export market share.
These elements are now indicating that prices may be coming off historical sustained lows. In the natural graphite space and anode material production, low overall anode material prices have kept precursor margins and upstream feedstock margins very low over successive periods. Below, a few of the larger Chinese anode material producers remain profitable. An increasing number of Chinese natural graphite feedstock and precursor suppliers are not operating due to poor margins and low demand, driven by domestic market price substitution, seeing Chinese anode material supply at around 85% synthetic graphite. In the ex-China market, which is more balanced between products, natural graphite anode material demand was lower in Q4, largely due to the US consumer tax credit removal. But through further development in 2026, we expect to see continuing structural shifts driven by policy.
U.S. government tariff policies and the preliminary ADCVD investigation outcomes have already seen transition to lower Chinese exports, evident in the charts on the right-hand side of this page... replaced by a supplier from Indonesia into the U.S. of Chinese-owned facilities. This has been positive for Balama, supplying Indonesia, and there is potential future demand in other ex-China production capacity. As the anti-dumping and countervailing duty investigation is expected to finalize in this Q1 of 2026, the potential for implementation of minimum five-year anti-dumping tariffs and countervailing duties may support Vidalia further through increasing demand for ex-China supply and potentially underpin capacity expansion. There are continuing deep market challenges and financial pressures across the global battery and input material sectors, arising from the dominance of incumbent Chinese producers in both cell production and feedstock and precursor supply.
Policy decisions will be key to the evolution of both demand and pricing for ex-China supply, and we do expect to see support for diversification decisions and positive developments from a more level playing field for ex-China production. Slide eight sets out the current position on a number of these government policy settings, which deliver potential support to Syrah's strategy to be the leading ex-China integrated natural graphite and anode material producer. Over the course of 2025, we saw key U.S. government policy changes. In particular, the anti-dumping and countervailing duties investigation and combined preliminary tariff imposition of at least 105%, and various other import tariffs and policy instruments, including the definition of prohibited foreign entities, impacting future availability of the 45X tax credit to battery and auto manufacturers, credit which is very important to their profitability.
The ever-present specter of trade tensions also keeps concerns arising from China's export license controls alive for graphite, anode, and processing equipment, similar to those restrictions imposed on rare earth exports. This remains a key driver of ex-China purchasing diversification considerations for potential customers. The combination of these factors should level the playing field for ex-China supply through this year, and Syrah's major investment and capability build will allow us to capitalize on both the competitiveness and value of the line of feedstock and our anode material from Vidalia for OEM and lithium-ion battery manufacturers in the U.S. Turning now to slide nine, and a summary of our key strategic priorities and milestones over the coming six to 12 months.
In the H1 of 2026, we'll target campaign production to support increasing natural graphite shipments to ex-China anode material customers, with a particular target on break bulk shipments for efficiency. This will continue to generate important revenue for the company as we progress our technical and process qualification steps with Vidalia customers to progress sales from there, concurrent with the near-term evolution of commercial and policy positions. At an industry level, we're awaiting the final determinations for the anti-dumping and countervailing duties investigation in the U.S., which are due by the end of the Q1. If the preliminary duties are finalized, they will be in place for a minimum of 5 years, providing important stability and a marked leveling of the competitive position for Syrah relative to Chinese exports to the U.S.
Geopolitical developments, including government focus on addressing the vulnerabilities caused by the concentrated structure of graphite supply and anticipated demand growth, particularly outside of China, underpin our loan restructuring efforts and pursuit of further strategic transaction opportunities. We're advancing a process advised by Macquarie to review strategic partnering and funding options to enable strengthened position in which to pursue developing market opportunities. At Vidalia, we expect to further progress technical and process qualification with a high quality product, with customers' immediate purchasing decisions informed by policy developments. Concurrent with driving our Vidalia operations into commercial sales, we're targeting additional customer and financing commitments to facilitate potential expansion steps through 2026. We're optimistic about improving market and policy positions soon, and we see a number of clear positive catalysts ahead that have the potential to create significant value.
We strive to deliver against these objectives safely and rapidly, and we look forward to communicating further progress as we move through. We're now happy to move across to questions. Thank you.
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. Your first question comes from Austin Yun with Macquarie. Please go ahead.
Morning, Shaun and Steve. Good to see continued production ramp up at Balama. The first one is more on the market color. I know you touched on that briefly. I'm keen to understand the current market dynamic from the pricing, front. So like, you know, we see that lithium market is flying with a strong ESS demand where, you know, half of the ESS battery requires, graphite. I just try to understand, are you, observing any, customer behavior changes for the ones you're engaging with, or new markets emerging, and also the, pricing, changes, into the March quarter? Thank you. But I come back with a second one.
Thanks, Austin. I think we are seeing an ex-China pricing differential for natural graphite. I think differently to the lithium market, the graphite market is still dominated globally by synthetic graphite anode material, and that is seeing a weight on the overall pricing for graphite. But the growth of ex-China manufacturing capacity, particularly in the natural graphite space, is starting to create a bifurcation in that pricing between China domestic and ex-China pricing for the natural graphite feedstock. I think more broadly on anode material, you know, the regionally specific policy matters that I mentioned during the course of the call will be the greatest determinant on pricing.
But assuming that the policy conditions continue to evolve in a positive and supportive manner, there's strong underpinning potential for improvement in prices for both anode material and demand for Balama feedstock.
Thank you, Shaun. Second question is on your you know balance sheet and the cash flow. Just to understand your liquidity requirement, given that Balama is up and running again, which I assume requires a bit more working capital. Also assuming you would need to tap into the term meeting restrict cash for Balama in the March quarter. Is that a right understanding?
Yeah, I'll hand over to Steve to make some comments there, Austin.
Yeah, thanks, Sean. So, within our sort of cash balances, you'll see we have restricted cash, as well as unrestricted cash. So within the restricted cash, we have funds at Balama of $10 million that can be used for working capital, plus obviously receipts from sales, and Sean's talked about, some of the positive direction there. And we also have, $7 million available under the DFC loan that can be used to fund the TSF, which is probably not a Q1 expense, but more spread out over the year. So we have that available. Obviously, the key swing factor is, does relate to sales. And then at the end of the year, we also had that $80 million of unrestricted cash also.
So very much dependent on, on the production side of things, as well as the receipts that we get from sales during the quarter. I'll just kind of highlight as well, as I talked about in my comments, that a $4 million partial payment for the break bulk that we did in December was also received in early January as well. So that's part of our cash consideration for the quarter.
Thank you, Steve. Thank you, Shaun, on top down.
Thanks, Austin.
Thank you once again. If you wish to ask a question, please press star one on your telephone. Your next question comes from Mark Fichera with Foster Stockbroking. Please go ahead.
Yeah, hi, Shaun. Yeah, just a couple of questions. Firstly, you've guided regarding production of no less than 30,000 tons of graphite in the March quarter. I just assume that in terms of sales, which you're looking at at least 30,000 tons as well, just given you've built up your inventory now at Balama?
Yeah. Thanks, Mark. Yeah, we've been very clear that, you know, we're using our, our sales forecast to drive our production decisions. And, you know, we are seeing a more consistent and stable demand outlook. So that is supporting that view. You know, should that change, we have capability to produce further through the quarter, but that's the view at this stage. The coarse flake market's relatively stable. And, you know, we watch very carefully what the supply-demand balance looks like in those markets as well. But it will really be that ex-China anode material demand profile that drives our production and sales position for the quarter.
Right. Okay. And a second one: Regarding the battery energy storage systems market, you mentioned that's a future market for the company. I was just wondering, yeah, can you elaborate a bit on that in terms of how you would approach entering that market, in terms of what potential impacts on Balama and Vidalia in terms of, you know, the operations to enter that market? Thanks.
Thanks, Mark. I think it's still very early stage to talk through that. The vast majority of battery energy storage system, cell supply, and battery supply is coming from China at this stage, and therefore, the majority of anode material supply is obviously, you know, domestically procured in China and synthetic graphite. One of the key requirements of that segment is long warranty periods. And cycle life performance is key. And you might recall from other discussions that we've had, that natural graphite anode material has a higher energy density than synthetic graphite, but synthetic graphite tends to have longer cycle life performance than natural graphite. So that's certainly something that, you know, we need to take into account.
But what we'll be driven by is the development decisions of the battery manufacturers, primarily in the U.S., and the requirements or specifications that they need. And it's pretty early stage in terms of their thoughts on that, on that front, because most of the capacity in the U.S. is currently geared towards EV.
Right. Okay, thanks.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone. We'll now pause a moment to allow for any final questions to register. There are no further questions at this time. That does conclude our conference for today. Thank you for participating. You may now disconnect.