Syrah Resources : December Quarterly Activities and Cashflow Report

ASX/Media Release 30 January 2017

QUARTERLY ACTIVITIES REPORT - PERIOD ENDING 31 DECEMBER 2016

Headlines Balama Project

• Remains on schedule for commissioning in Q2 2017 with production and ramp up commencing in Q3 2017

• Project capital cost has increased from US$185 million to US$193 million plus a project contingency of US$7 million

• Ore Reserve upgrade finalised for the Mualia Zone, Balama West, which resulted in a 40% increase in the Proven and Probable Reserves to 114.5 Mt at 16.6% total graphitic carbon (TGC)

• Structural, Mechanical and Piping (SMP) Contractor has commenced erection of structural steel and installation of equipment for key areas of the processing plant is progressing well

• Electrical and Instrumentation Contractor has mobilised and installation work has commenced

• All major equipment has been delivered to site

• Further attrition cell test work completed in China has demonstrated that a concentrate grade of >98% TGC can be achieved across all flake sizes for Balama graphite product

• Bureau Veritas has been awarded the contract for supply of on-site laboratory services.

  Marketing

• Progress made in integrated sales and operations planning, product placement, and value-in-use for Syrah products. Commercial negotiations progressing well, with an update planned for March 2017.

  Downstream Project

• The Company updated the market on its downstream strategy in November 2016. Subsequent discussions with potential customers, supply chain and industry participants have identified a number of new and value enhancing options which are currently under review.

  Corporate

• Discussions have now commenced on arranging a debt facility of US$50 million for the Balama Project and general corporate activities, as a conservative contingency measure for the commissioning and production ramp-up phase.

  ASX/Media Release 30 January 2017

  BALAMA GRAPHITE PROJECT (100%) - REMAINS ON SCHEDULE FOR COMMISSIONING IN Q2 CY2017

  During Q4 CY2016, US$32.6 million was spent on the Balama Graphite Project, resulting in total project development expenditures of US$113.0 million as at 31 December 2016. An additional US$37.6 million in development expenditures have been committed as at the end of the quarter, which brings total actual and committed capital expenditures to US$150.6 million.

  Balama Project capital costs has been increased from US$185 million to US$193 million to incorporate growth in quantities of US$8.0 million arising from final detailed design. This includes concrete, structural steel and plate work, and associated engineering, freight and SMP installation costs.

  An additional amount of US$7.0 million is set aside as contingency, bringing the total project capital budget to US$200 million. The increase in the project budget will be funded from the Company's existing cash reserves.

  Health, safety and community development

• 1.1 million work hours completed for the quarter and 2.8 million hours for 2016, with a Total Recordable Injury Rate (TRIFR) of 2.5. The total workforce on site at the end of December 2016 was 1900, an increase of 500 from last quarter. Workforce numbers are expected to peak at end of January 2017.

• A recordable injury occurred during this quarter, involving a contractor team member falling off a truck trailer during unloading activities. The individual is recovering well

• A Health and Safety Committee has been established involving all key contractors and convenes monthly to ensure alignment with the Company's Health and Safety Management Plan and associated requirements

• A site based Volunteer Emergency Response Team has been formed consisting of Mozambican employees and trained to internationally accredited certification

• Representatives from the Mozambique Ministry of Land, Environment and Rural Development (MITADER) have visited Balama and commended the progress of the Environmental Monitoring Program

  ASX/Media Release 30 January 2017

  Geology

• A Mineral Resource and Ore Reserve upgrade for the Mualia Zone, Balama West, has been finalised in accordance with the guidelines of the JORC Code (2012).

• The Probable Ore Reserve estimated by The MSA Group Pty Ltd (MSA Group) is based on the optimised open pit mine plan for the Mualia Zone, whilst taking into consideration the same mine planning parameters used for the Balama East and West open pits in the Feasibility Study completed by Snowden Mining Industry Consultants in May 2015.

• The updated Proved and Probable Ore Reserve for the overall Balama Project now totals 114.5 Mt at 16.6% TGC for 18.6 Mt of contained flake graphite. This comprises a 40% increase in the Proven and Probable Reserves of 81.4Mt @ 16.2% TGC previously reported (ASX release dated 29 May 2015). The resource remains open in all directions, however due to the present long life ore reserve, no further graphite resource drilling is planned.

  Wet season

  There has been no impact to date on construction from inclement weather since the commencement of the wet season (December 2016 to February 2017), primarily due to drainage that has been completed around the plant site.

  Mine development (license to mine in place)

  As at 31 December 2016, mine development has made substantial progress with the following activities now completed or near completion:

• Mining facility administration building and training centre are now operational

• Mining facility warehouse and wash pad are nearing completion

• Pre-stripping for Balama West:

  • Soil, waste and low grade dumps have been completed

  • Service and haul roads have commenced

  • Mining pit has commenced

• Construction of the run-of-mine (ROM) pad with a capacity of 360,000 tonnes substantially progressed with completion scheduled for February 2017

• As advised in the September 2016 quarterly, the mining fleet required for full operations has been mobilised including 9 × Bell B40 articulated dump trucks, 2 × Liebherr excavators, 2 × Caterpillar dozers, 2 × Caterpillar graders and 2 × Fuel tankers.

ASX/Media Release 30 January 2017

Figure 1 - ROM Pad Construction in Progress Figure 2 - Balama West haul roads, pre-stripping of Balama West pit, dumps and low grade stockpile