The suspension of operations by the Australian company Syrah Resources at the Balama mine in Cabo Delgado province, due to post-election tensions, is having adverse effects on both the United States and Australia. This halt occurs as surrounding communities fail to benefit from the economic gains of the company’s operations, continuing to live in extreme poverty.
Recently, the Australian Financial Review reported that Syrah Resources is in emergency talks with the U.S. government regarding loans amounting to approximately $250 million that the company is unable to repay due to the suspension of its activities at the Balama mine, where it extracts graphite—a critical material used in manufacturing electric vehicle batteries and other products.
“Syrah Resources, the Australian graphite producer, is engaged in crisis talks with U.S. government agencies after civil unrest near its mine in Mozambique disrupted production, triggering default clauses in crucial U.S. government loans,” the Australian Financial Review writes.
The publication highlights that Syrah has struggled to profit from graphite mining at its Balama facility in Mozambique since 2017. As a result, it has relied on financial backing from Australian Super and U.S. government agencies, either through equity subscriptions or loans, to stay in business.
The suspension of Syrah’s operations jeopardizes U.S. ambitions to reduce dependence on China for graphite-based products. According to GlobalData, Mozambique is among the top five global producers of graphite, with China leading the market. Mozambique ranked as the world’s second-largest graphite producer in 2022, achieving a 126% production increase compared to 2021. From 2020 to 2021, Mozambique’s production surged by 294%, and forecasts predict a further 13% increase by 2026.
To diminish reliance on Chinese products, the U.S. approved the aforementioned $220 million loan to Syrah Resources to establish an anode factory in Louisiana, one of the poorest states in the U.S., creating 221 jobs using graphite sourced from Mozambique. The plant produces active anode material (AAM) for lithium-ion batteries. With this facility, Syrah would become the only large-scale, vertically integrated natural graphite AAM producer outside China, significantly reducing U.S. dependence on the Chinese supply chain.
As Carta has previously reported regarding the loan, this factory could have been built in Cabo Delgado, where the graphite could be processed locally, especially for achieving the correct particle size and purity. The necessary infrastructure alone would suffice. With such a facility, the mentioned 221 jobs could have been created for Mozambicans.
However, in today’s global economy, the U.S. has the prerogative to allocate $220 million to the private sector to create jobs, develop local suppliers, and compete with China. Conversely, a developing country like Mozambique is not permitted to engage in a similar state-supported initiative within a key industry.
“Contrary to all the above statistics, areas where graphite is mined still face major challenges that neither the company nor the government has adequately addressed. The vast wage disparities between local and other workers led to a strike that paralyzed operations for a month (from September to October), resulting in the dismissal of 23 workers in November 2023,” criticized the Center for Democracy and Human Rights (CDD) in a June 2023 bulletin.
The bulletin further notes that companies have contributed to the rapid deterioration of the road connecting the graphite mines in Balama and Ancuabe to the Port of Pemba, through which the product is exported. Meanwhile, local communities remain in extreme poverty, with no access to the economic benefits of the company’s operations. Citing data from the Provincial Executive Council of Cabo Delgado, the CDD bulletin highlights that during the third Provincial Development Observatory meeting on April 24, 2023, the graphite industry, despite its significant revenues, contributed only 7.9% to Cabo Delgado’s public revenue.
