Syrah Resources Limited (SYR) Earnings Call Transcript & Summary

Good morning. This is Jim Askew. I'm the Chairman of the Board of Syrah Resources, and I'd like to welcome you to today's meeting. You'll all be aware that we're holding this meeting in a new format, specifically related to the COVID pandemic. So this is a way that we can hold a meeting with shareholders and representatives can participate safely via the webcast. Although you're not physically present at the meeting venue, legally this is regarded as an Annual General Meeting. The company's Secretary has advised that a quorum is present. And as the time is now 10 a.m. Eastern Australian Time, I declare the meeting open. Today, I'm joined in the webcast by my fellow Directors, Shaun Verner, your Managing Director and CEO; Sam Riggall, a Nonexecutive Director, both of those guys are in Melbourne today; José Caldeira, who's dialed in from Maputo in Mozambique; Lisa Bahash, who's dialed in from -- where are you, Lisa, in the U.S.?

Michigan, Detroit area.

Michigan. Thanks. And Sara Watts from Sydney. Also present are the company's Secretary, Melanie Leydin; the company's auditors, PricewaterhouseCoopers, represented by John O'Donoghue, who is here to answer any questions that shareholders may have in relation to the audit. Our executive team is also in attendance via the webcast. And I'd like to introduce Steve Wells, our Chief Financial Officer; and Julio Costa, our Chief Operating Officer. You would have seen this morning an announcement that there is a change being made with your Board. Sam Riggall is retiring from the Board at the end of the AGM today, and John Beevers will join the company as a Director following the conclusion of this AGM. I'm going to hand over to John to introduce himself in a moment, but before I do that, I would like to speak a little bit about Sam's service. Sam and I joined the Board in October of 2014. At that point, Syrah had -- it was -- we were just in time for the third Annual General Meeting. Syrah was -- had been -- was 2.5 years into its life span. It had discovered the Balama ore body in Mozambique. And if you look at the first Annual General Meeting in 2012, you will see that there was a great deal of enthusiasm at that point. There were a small number of holes into the ore body. And there was already a [ gangue chart ] showing that Balama would be in production by the end of 2014. When Sam and I arrived, the -- there was a commencement of a feasibility study which needed further work and restart. And since then, I've had the pleasure of working with Sam through until today. And I speak on behalf of all of the Directors in our appreciation of his great contribution to the Board meetings and his personal values, and we wish him very best for the future. John is on the call, John Beevers. And I would like to pass across to John. You can see his credentials in the announcement of the AGM today, but I'd like to John to perhaps introduce himself and give a little color to why he was agreeable to joining your Board. Over to you, John.

Thanks, Jim. My Wi-Fi is a bit unstable. Hopefully, it'll hold out okay. Yes, thank you, Jim, and good morning, everybody. Very pleased actually to have the opportunity to join the Syrah Board, and I note, at a particularly interesting and challenging time. As a tiny bit about me, I have over 30 years international experience in the mining resources and services industries. I spent a good deal of that time with Orica Mining Services, which is the leading and global blasting services company. [ And again], what we believe will be quite relevant in experience across business and marketing as well as a whole range of operations to Syrah. My time at OMS culminated in the role of CEO, which was in a business of over $4 billion turnover and 10,000 people. I then moved on to a cool little company called GroundProbe as MD and CEO. It's a Brisbane-based company, [ NEPs ] company, in need of a turnaround. In my time there, we grew the company fivefold and expanded into 25 countries. In 2018, GroundProbe was awarded and heralded as the most innovative company across Australia and New Zealand by the Australian Financial Review. And shortly after that, we sold it. I really enjoy a challenge and I really enjoy working in high-performing teams, both of which I can see at Syrah's. So I'm really looking forward to the opportunity. I currently serve on the Board of Orica and am engaged in a number of other private endeavors. On the assumption that I gain your ongoing support, I'll be looking forward to contributing to building your company through working on the Syrah Board for a number of years. Back to you, Jim.

Thanks, John, and welcome. Moving on in the agenda. I'm going to foreshadow that this is -- given the medium we're working with here, the meeting is going to take a while. So I suggest you get a good cup of tea or depending on where you are on the planet, something similar and settle back. The notice of meeting has been given in accordance with the company's constitution and copies are available for you on the webcast facility. I will take the notice of meeting and explanatory memorandum as read. The format of the meeting today, as previously advised, is a virtual meeting and shareholders will be able to participate and view a live webcast of the meeting, ask questions and cast direct votes at the appropriate times whilst the meeting is in progress. The format of today's meeting will be to consider and vote on the proposed resolutions as set out in the notice of meeting. I will propose the resolution and then ask if there are any questions. Once questions have concluded, I will then ask shareholders and their representatives to vote on the resolution by way of a poll, and we'll explain further how that poll will be conducted. There are 9 items of business today, 8 of these require a formal resolution. In order to ascertain the true intention of shareholders and to reflect our focus on transparent governance, as Chair, I have determined to call a poll on each resolution. I'll now outline the procedures for the meeting. With regard to voting on today's resolutions, all shareholders, proxy holders and authorized corporate representatives and attorneys of shareholders who are entitled to vote will be able to do so via the webcast facility. Voting shareholders will be able to comment and ask questions via the webcast facility. So there won't be any verbal questions. You have to do it via the webcast facility. It is important to note that if you have lodged a proxy form and voted prior to the meeting, you do not need to vote again at this meeting. Nonvoting shareholders, that is a shareholder who has already voted via proxy to the meeting, may still comment and ask questions via the webcast facility. Visitors and media are reminded that whilst we welcome you at this meeting, it is a shareholders' meeting and you may not make comments or ask questions. For shareholders, proxy holders and corporate representatives who intend to vote online via the webcast, please observe the following poll voting instructions. With regard to the poll procedure, we will be open voting short -- we will open voting shortly so that your votes can be cast during the formal business section of the meeting. Again, as mentioned earlier, if you have lodged a proxy form and voted prior to the meeting as a shareholder, you do not need to vote again at the meeting. For those proxy holders, shareholders and corporate representatives who have not yet voted, to vote via the Lumi webcast facility, when I declare the poll open, tap one of the voting options indicating how you wish to cast your votes. Your response will be highlighted. For proxy holders, you will have a summary of proxy votes which detail the voting instructions, if any, for the items of business. By completing the voting via the Lumi webcast, when instructed to vote in a particular manner, you are deemed to have voted in accordance with those instructions. With respect to any open votes a proxy holder may be entitled to cast, you need to mark a box beside the motion to indicate how you wish to cast your open vote. For shareholders that have not already voted prior to the meeting via submitting a proxy form, you also need to mark a box beside the motion to indicate how you wish to cast your votes. The number of items you have voted or are yet to vote on are displayed on the top of the screen. Voting on all resolutions is allowed up until the time I close the poll. Once the poll results have been tallied, we will be announcing the results with the ASX today. In relation to the questions, I would ask that only questions relevant to the specific resolution be asked when each resolution is being considered. There will be ample time at the end of the meeting for shareholders to ask general questions regarding the business. For the shareholders participating via the webcast, please note the following process to ask questions. [Operator Instructions] When Computershare have tallied the poll results, we will immediately release those results to the ASX via the electronic announcements platform. After the close of the meeting and whilst the poll results are being tallied, our Managing Director and CEO, Shaun Verner, will provide a presentation as is our normal practice. Before we commence the formal business of the meeting, I would like to make a brief address. Thanks for joining us today in what are extraordinary circumstances around the COVID virus. Its effects are far-reaching, and despite improvements here in Australia, are still disrupting operations and markets around the world. Shaun will expand on some of these challenges in his address. Syrah's commitments to health, safety, environment and community has seen us prioritize response to the COVID outbreak in a manner which protects the health and well-being of our employees, maintains asset integrity and ensures that our relationship with the communities and governments where we operate are preserved. During 2018, Syrah's primary focus has been on establishing products from Balama in key markets and geographies. Just to remind you, Balama is the mine in Mozambique. The most important of those being the active anode materials market and China. Balama product quality has strong market acceptance through 2019 with more than 160,000 tonnes of products sold, of which greater than 75% went into China. During 2019, China transitioned from a net export to a net import position for natural graphite, primarily driven by lithium-ion demand -- battery demand. The other major focus for the company during 2019 was on continuous operational improvement at Balama, both on operating metrics and cost. This entailed embedding on operational management systems and processes that improve plant reliability, process control and product quality, and optimized outbound logistics. Balama matured its governance processes in line with the company's risk management framework and crisis and emergency management procedures. Although Balama was positioned operationally for continued production ramp-up, the natural graphite demand was lower than expected during the second half of last year, primarily due to a lower year-on-year electric vehicle sales growth in China during the second half of the year following the reduction in supportive market subsidies. The weaker-than-expected demand caused a market imbalance in the third quarter of last year, resulting in a downward pressure on natural graphite prices and led to the decision to moderate production at Balama and undertake a company-wide cost restructure in the last quarter of last year. Subsequently, the impacts of COVID on global supply chains and end-user demand this year has compounded the marketing challenges initially observed in the third quarter of last year. Despite the short-term headwinds in EV end market demand, significant growth in this market over the long term is increasingly certain. The market is going through a major supply and pricing evolution, a process that has overlapped with significant supply and demand impacts of COVID. The Syrah leadership operational team has developed hard-won and deep operating and market knowledge over recent years' experience, which, while it's difficult to gain, was not available outside China prior to the commencement of operations at Balama. The team is highly aware of the challenges that investors have faced, and they are vigilantly working to navigate these difficult intermediate-term market conditions in a way that best preserves and develops long-term shareholder value. The company is well placed to work through and adapt during this period, and more importantly, emerge as a stronger business with a lower cost base and a deep and sustainable market position. Approval by shareholders for a convertible note and the completion of an associated equity issue during 2019, which were both undertaken with the strong support of Syrah's major shareholder, AustralianSuper, has positioned Syrah's balance sheet well to navigate near-term market challenges. We continue a very positive experience in Mozambique. The company has not wavered in its commitment to be a constructive corporate citizen to the benefit of the host communities and the national government in Mozambique. Even with the challenges faced in the market, Syrah ensured that the cost restructuring initiated in the last quarter of last year was executed in line with the company's core values and preserved existing ESG best practices. We are proud of our safety record, which, combined with our environmental and community initiatives, underpin our license to operate in Mozambique. Syrah's development of Balama envisage a multigenerational asset, and there is no doubt that assessing management performance through the last year has been a great challenge, given the market circumstances and structural factors around the asset size and initial cost base. Despite the significant progress in operating and marketing experience as Syrah became the largest high-quality integrated natural graphite producer globally, the Board took a clear view that the corporate key performance indicators, or KPIs, that had been set at the beginning of 2019 were not met with respect to production at Balama and cost at Balama, plus the sales and volume and price achieved. Accordingly, the KPIs for these factors received no award at all. At the same time, strong performance was seen from the team -- from our team in the critical long-term areas of sustainability, compliance and governance; in the BAM development in Louisiana; and particularly in cost and capital management. Performance against these KPIs has been recognized, along with strong performance against personal KPIs by the executive. We also substantially restructured the executives in the last quarter of last year, and with departing team members through an extremely challenging period saw a higher average short-term incentive outcome than might have otherwise been expected. We also note that the long-term incentive plan is designed to align with shareholder value creation and 0 of the long-term incentive vested at the end of 2019. However, the Board believes that retention of the executive and operational leadership team post restructuring is critical for financial success, which is reflected in the proposed ongoing long-term incentive 5-year performance and retention incentive and performance rights plans proposed beyond 2019. Moving across to the Board. We had one additional appointment last year with the appointment of Sara Watts. Sara now Chairs the Audit and Risk Committee at Syrah and brings significant Audit and Risk Committee experience in over 30 years of financial, operational and international experience. Sara is -- I wanted to point out that she has little mining experience, but she is a very fast read, and congratulations, Sara, on being -- integrating yourself across all the parts of the business. Whilst the primary focus for 2020 was set to be growing Balama's position in a rebalanced market with an asset cost structure and operational methodology more adapted to market conditions, the COVID situation has presented further challenge in the first half of this year. Positioning Balama to meet these challenges and the ongoing development of our downstream business remains a near-term focus for the company. It's critical for growing shareholder value. We appreciate this has been a challenging period for shareholders. The executive and leadership team are incredibly committed to Syrah's success, and the Board thanks you for your continuing support. As we work towards improved demand conditions in end-user markets, rest assured that Balama is well positioned to translate demand growth to improvement in the equity value of your stockholding. We're confident that we have the management team to deliver improved results. And we continue with the vision to make Syrah the leading high-quality natural graphite producer and downstream anode company globally. That concludes my words. I would now like to turn to the business of the meeting. I now declare the poll open. I'd also like to remind you that shareholders can now submit questions in relation to any of the resolutions. [Operator Instructions] A few reminders on voting. If you have lodged a proxy form and voted prior to the meeting as a shareholder, you do not need to vote again. If you intend to vote, tap one of the voting options indicating how you wish to cast your votes and your response will be highlighted. The number of items you have voted or yet to vote on are displayed on the top of the screen. I'll now move to the first item of the general business, being to receive and consider the financial report of the company and the related reports of the directors and the auditor of the company for the year-ended December 31, 2019. These items are contained in the annual report, so I will ask that they be taken as read. The annual report can be accessed via the webcast facility. The Corporations Act and the company's constitution require the accounts and reports to be laid out before shareholders at the AGM meeting. However, except as set out in Resolution 1 to be considered later, there is no requirement for a vote of members to be taken on them. No written questions to the auditor under Section 250PA of the Corporation Act were received by the cutoff date, 5 business days before this meeting. I now move -- does anybody have any questions in relation to the accounts or for the auditors, please? Melanie, do you have any questions available?

Jim, you should have those on your question sheet there.

I've got a poll open, that's all. Resolution 1, poll open.

Okay. Well, there is a question that's come through from the ASA. I'll pass this on to the auditors. This is for John O'Donoghue. John, could you just confirm that you have that question?

Yes, Melanie. Perhaps if you can read it and I'll...

I have the question up now, Mel. It's come up on the screen.

Okay.

Okay. Thank you. This question is from the ASA. Has the company audit examined the cost of operations at the individual mines and exploration sites? In particular, has the audit examined nonspecific mine expenditures for Balama such as the working capital expenses for the mine and operation? Secondly, for specific expenses of the capital nature, has the audit verified the existence of the asset? For example, if a mine has purchased 2 trucks, has the audit verified the existence of the 2 trucks? Over to you, John.

Thanks, Jim, and thank you for the question. So just to give some context first, our audit opinion covers the financial statements as a whole rather than individual line items. In designing our overall audit approach, we scope our audit with due regard to financial statement risks and materiality as outlined in our audit opinion on Page 102 of the annual report. We consider the risk of this statement of all material financial statement line items, including operating expenses and property plant equipment and designed audit procedures to address those risks. We perform testing on a sample basis, which would generally mean that items with material balances at individual operations will be selected for testing. We do not test every transaction clearly on a sample basis.

A further part of the question, John, is as -- if the audit has not gone down to individual mining operations to answer these questions, please explain the extent to which the audit of the company, the operations and exploration. I think it's what you were just answering there.

Sure. But yes, just to confirm, we do perform our testing on a sample basis. So any material balances at those individual operations would be selected for testing. So the answer is yes, we would test individual mining operations.

Thank you. And then finally, in the course of the audit, has the auditor identified any expenditure which could cause the company to be in breach of its commitment to good governance and compromise itself with regard to U.S., U.K. and Australian anti-bribery laws?

Thanks, Jim. We also -- we are also required to perform procedures on compliance with laws and regulations, and in doing so, consider the extent to which noncompliance may have a material effect on the financial statements. The laws and regulations we consider include those anti-bribery laws which you referred to. And our procedures did not identify any matter that required communication to those charged with governance or that had a material impact on the financial statements.

Okay. Thanks, John. Do we have any further questions, please? On that basis, I'll now turn to the resolutions in today's notice of meeting.

Firstly, the resolution regarding the adoption of the remuneration report. It's a nonbinding resolution. I'm sure most of you are familiar with how this works. I now propose that the shareholders consider and, if thought fit, pass the following resolution as an ordinary resolution: That the resolution -- that the remuneration report for the financial year-ended December 31, 2019, be adopted. This report is set out in the company's annual report. The remuneration report explains the Board's policies in respect of the nature and level of remuneration paid to directors and senior management of the company. It discusses the link between the Board's policies and the company's performance, explains why the performance conditions were chosen and how performance is measured against them, sets out the remuneration details for each director and each member of the company's senior management team and makes clear that the basis for remunerating Nonexecutive Directors is to speak from the basis for remunerating executives and Executive Directors. Although the vote to adopt the remuneration report is advisory only, it must be put to the members at this Annual General Meeting. Voting exclusions apply to this resolution as set out in the notice of meeting. Do I have any questions, please?

There are no questions for this resolution, Jim.

In respect of this -- thank you, Mel. In respect of this item of business, the following proxies have been received as outlined in the presentation. Do we have those on the screen?

Yes, we do, Jim.

I'm afraid I can't see them.

It's okay. I can read those up. So we have 88% in favor, 10.5% against and 1.37% open votes.

The open votes, with the express authorization of voters, the Chairman decides, which I intend to vote in favor of the resolution. As indicated earlier, this resolution is to be considered by a way of a poll being conducted during the meeting. The results will be announced at -- to the market in due course. Moving to Resolution 2. This is the election of Sara Watts as director -- as a Nonexecutive Director of the company. I propose that the shareholders consider and, if thought fit, pass the following resolution as an ordinary resolution: Sara Watts, having been appointed to the Board since the last AGM of the company, retiring as a director of the company in accordance with the company's constitution, be elected as a director of the company. I alluded to Sara's experience earlier in the presentation. She has ample experience and we really value her contribution at the Board. Do we have any questions, please?

Jim, there's no questions received on this resolution.

Thank you, Mel. Could you please indicate the voting and proxies, please?

Sure. In favor, 94.33%; against, 3.96%; and open, 1.71%.

Once again, I intend to vote in favor of the resolution as Chair. As indicated earlier, all resolutions will be considered by way of a poll during the meeting. Moving to Resolution 3, the reelection of José Caldeira as a director of the company. I propose that the shareholders consider and, if thought fit, pass the following resolution as an ordinary resolution: That José Caldeira, being a director of the company who retires by rotation in accordance with the company's constitution, to be reelected as a director of the company. José has been a director of the company since 2014, I believe, and he's a highly experienced legal and regulatory professional with over 30 years' experience in the legal industry. He's one of the prominent lawyers in Mozambique. He is currently a Senior Partner at Sal & Caldeira Advogados Lda in Mozambique, one of the leading law firms in Mozambique. As I mentioned, he's a Senior Partner, which provides legal services to the company and its subsidiary, and accordingly, is not considered by the Board to be an Independent Director. However, his business acumen and strong connection to the mining sector, business community and government in Mozambique enable a strong contribution to the Board of the company. Do we have any questions, please?

There are no questions for this resolution, Jim.

Thank you, Mel. Could you let know -- let us know the proxies, please?

Sure. In favor, 90.26%; against, 8.07%; and open, 1.67%.

I will be voting in favor of those as the Chair, those open votes. Thank you. I now move to Resolution 4. It's to approve the grant of 865,892 performance rights to Shaun Verner or his nominee as part of Mr. Verner's 2020 long-term incentive. I propose that the shareholders consider and, if thought fit, pass the following resolution as an ordinary resolution: That for the purposes of Listing Rule 10.14, Sections 200B and 200E of the Corporations Act and for all other purposes, approval be given to grant 865,892 performance rights to Shaun Verner, a director of the company, or his nominee, as Mr. Verner's 2020 long-term incentive under the equity incentive plan on the terms described in the explanatory memorandum. The company is seeking shareholder approval for the grant of these performance rights as a 2020 long-term incentive on the terms described in the notice of meeting and in accordance with the company's equity incentive plan. Performance rights are proposed to be granted to Mr. Verner or his nominee to further enhance the alignment of his interests with the interests of shareholders. The performance period will run from 3 years from the 1st of January this year through to 31st of December 2022. The Remuneration, Nomination and Governance Committee will test performance against the performance hurdles to determine whether the performance rights are eligible to vest shortly after the end of the performance period at the end of 2022. Further details in this resolution are set out in the explanatory memorandum. Voting exclusions apply to this resolution as set out in the notice of meeting. Do we have any questions, please, Mel?

There are no questions for this resolution.

Thank you. The proxies, please?

Sure. In favor, 66.54%; against, 32.39%; and open, 1.07%.

Thank you. Once again, I intend to vote -- as the Chair, I intend to vote in favor of this resolution. Moving on to Resolution 5. Approval to issue 286,473 fully paid ordinary shares to Shaun Verner or his nominee as part of his 2019 short-term incentive. I now propose that shareholders consider and, if thought fit, pass the following resolution as an ordinary resolution: That for the purposes of Listing Rule 10.14 and for all other purposes, approval be given to the issue of 286,473 fully paid ordinary shares to Shaun Verner, a director of the company, or his nominee, as Mr. Verner's 2019 short-term incentive under the equity incentive plan and on terms described in the explanatory memorandum. The company's Managing Director and Chief Executive, Mr. Verner, is entitled to receive a short-term incentive award of up to 75% of his total fixed remuneration for his 2019 short-term incentive grant. The Board awarded Mr. Verner 67% of the short-term incentive for the year ending December 2019, being $247,607, which is to be satisfied by the issue of shares to the value of $123,804 and the payment of cash of $123,803. And you can see here that this is a 50-50 split. The issue of shares will be assisted -- will assist to conserve the company's cash position and facilitate a greater level of executive shareholding in the company, which the Board considers will further align his interest with the shareholders. I just want to make a side here, a comment. As with any companies that are startups, when you mature the management team and executives who are appropriate to the evolution of the company's requirements come to the employee of the company later in its gestation, it's quite challenging at times to find appropriate ways to make sure that -- to use the vernacular, that these key executives have skin in the game, and Shaun's election to an acceptance to take half of his STI stipend in shares is part of that process. Thank you, Shaun. Further details on this resolution are set out in the explanatory memorandum. Voting exclusions apply to this resolution as set out in the notice of meeting. Are there any questions?

There are no questions received for this resolution, Jim.

Thank you. And the proxies?

In favor, 65.77%; against, 33.16%; open, 1.07%.

Thank you. I intend to vote as Chair in favor of the resolution for the open shares -- open votes. Moving on to Resolution 6. It's to approve the grant of 4 million performance rights to Mr. Shaun Verner or his nominee as a 5-year performance and retention incentive. I now propose that the shareholders consider and, if thought fit, pass the following resolution as an ordinary resolution: That for the purposes of Listing Rule 10.14, Sections 200B and 200E of the Corporations Act and for all other purposes, approval be given to grant 4 million performance rights to Shaun Verner, a director of the company or his nominee, as part of a 5-year performance and retention incentive under the equity incentive plan and on the terms described in the explanatory memorandum. The Board has implemented a 5-year performance and retention incentive by the way of a proposed one-off issue of performance rights to selected senior personnel. So Shaun is participating in that, but other senior executives are also participating in this retention just to underscore the point. This incentive takes into account the operational review and restructuring undertaken by the company in late 2019, which included a restructuring of the senior executive team. The 5-year incentive designed to ensure that the participants are remunerated in a manner which encourages high performance, resulting in benefit to the company and to ensure that their individual interests are further aligned with the company's success. Further details of this resolution are set out in the explanatory memorandum. Voting exclusions apply to this resolution as set out in the notice of meeting. Questions, please?

There are no questions for this resolution.

Thank you, Mel. Proxies?

In favor, 65.18%; against, 33.74%; and open, 1.08%.

Thank you. I intend to vote as Chair in favor -- the open votes in favor of this resolution. Now moving on to Resolution 7, which is to approve the grant of 100,000 performance rights to Sara Watts or her nominee as a long-term incentive. I propose that the shareholders consider and, if thought fit, pass the following resolution as an ordinary resolution: That for the purposes of Listing Rule 10.14, Sections 200B and 200E of the Corporations Act and for all other purposes, approval be given to grant 100,000 performance rights to Sara Watts, a director of the company or her nominee, as Ms. Watts' long-term incentive under the equity incentive plan and on the terms described in the explanatory memorandum. The vesting of the performance rights is contingent on Ms. Watts remaining as a director of the company for a period of 3 years from her appointment date as a director of the company. Consistent with the desire to minimize cash expenditures, the Board believes that having regard to the company's current cash position and in order to compensate Ms. Watts in line with current market practices, performance rights provide an appropriate and meaningful remuneration component that is aligned with shareholders' interests. Further details on this resolution is set out in the explanatory memorandum. Voting exclusion apply to this resolution as set out in the notice of meeting. Questions, please?

Jim, there's a question on your screen from the Australian Shareholders' Association.

Thank you. I will read out the -- this relates to both Resolutions 7 and 8. So we'll also address this when the question is open for Resolution 8. The Australian Shareholders' Association is particularly concerned with Nonexecutive Director share schemes which have a performance element to them, in this case, staying with the company for 3 years. We believe this can compromise the independence of directors. Can you please confirm this hurdle in these resolutions? Thank you for the question. Lisa Bahash, would you be happy to make a comment to this, please, as Chair of the Remuneration Committee? Thanks.

Sure, Jim. As many of you may know, in the past, new directors were provided a similar quantity or value in options. So in this case moving forward, it was decided to move to performance rights shares which are truly based on time in the seat as opposed to performance in the company per se. So same impact but also, obviously, tied to the company's continuance and Sara's continuance as a director in the company.

Thank you. No further questions?

No further questions, Jim.

Could we have the proxies, please?

Yes. In favor, 67.18%; against, 31.77%; and open, 1.05%.

Thank you. As Chair, I intend to vote these open votes in favor of the resolution. Now moving on to Resolution 8 which is the adoption of Nonexecutive Director share plan. I now propose that shareholders consider and, if thought fit, pass the following resolution as an ordinary resolution: that approval is given for the company to adopt the nonexecutive directors' share rights plan to grant share rights and allocate shares in the company on vesting of those shares to nonexecutive directors on the terms described in the explanatory memorandum. Shareholders are being asked to approve the grant of share rights to NEDs under the company's nonexecutive share rights plan in financial year 2020, financial year '21 and financial year 2022 and for the allocation of shares on exercise of those share rights. Following a review of the company's existing remuneration arrangements for its nonexecutive directors, the Board has determined that annual remuneration paid to the directors may be delivered in cash and/or equity, subject to shareholder approval. The proposed scheme is intended to support nonexecutive directors to develop a meaningful shareholding in the company and as a means of aligning the interests of nonexecutive directors and shareholders generally through the diversion of current and future cash remuneration to equity. In addition, this will assist the company in implementing its cost reduction strategies and maintaining its cash reserves. Further details on this resolution are set out in the explanatory memorandum, and voting exclusions applied to this resolution are set out in the notice of meeting.

We already had a question [ upfront ] from the Australian Shareholders' Association. Once again, Lisa, I'll pass across to you, if you would as Chair of the Remuneration and Nomination committee, to provide an answer.

Sure, Jim. Thank you. Again, the Board undertook the concept of ensuring alignment with the performance of the company in addition to allowing a level of cash to be reserved or improved for the company. So the idea behind it is to aid in the company's future in cash preservation not necessarily be in conflict with ownership of shares in the company. That's the intent behind it. So in general, the directors have chosen on average of about 50-50 between cash and shares.

Okay. Thanks, Lisa. Melanie, further questions on that?

No further questions received.

Thank you. Could we have the proxies, please?

Yes. In favor, 67.06%; against, 31.78%; and open, 1.16%.

I -- just a question. Mel, am I able to vote those as the Chair, given that it's relating to the NEDs?

Yes, you are.

Okay. Thank you. Just I think it's -- might be a question in some shareholders' minds as well. So on that basis, the open votes, as chair, I intend to vote in favor of the resolution. Moving on to Resolution 9. The last resolution, which was to approve a 10% placement capacity. This resolution is withdrawn. And we -- on the 5th of May, we announced to the ASX, Resolution 9 will be -- was withdrawn, will not be put to shareholders. The reason for that is that the additional 10% placement facility is only available for listed companies with a market capitalization of $300 million or less and who are not included in the S&P/ASX 300 Index. As of the March 2020 quarter, ASX 300 rebalancing had been postponed. And Syrah is currently included in the S&P/ASX 300 Index, and hence, this resolution was withdrawn prior to the meeting. Do we have any questions?

No questions on this one, Jim. And we have answered all questions received on the formal resolutions.

Thank you very much. We'll now provide shareholders with an additional minute for poll voting to be completed. I now -- and so we'll have a minute's pause. And if I could get -- I'll recommence the meeting in a minute's time. [Voting]

How is your stopwatch, Melanie?

Yes. About 10 seconds, we will wrap.

Thank you. I now declare the poll is closed. Moving on to other business. The final item on the agenda. I note that because the company has not received notice of any other business, I will now move to formally close the meeting. That concludes the formal part of the meeting. As is our usual practice, we will now move to a presentation by Shaun. I declare the meeting closed. And thank you very much for your attendance and your patience. Over to you, Shaun.

Thanks, Jim. Good morning to everyone, and thanks for the participation today. As Jim alluded to in his opening remarks, we remain here in an unprecedented period of global markets in the battery supply chain in particular, subject as we are to the unknowns around the COVID-19 virus and its impact on both operations and end-user demand. Whilst in the short term, this impact makes forward visibility very difficult for Syrah, in addition to the highly challenging period that you, as shareholders, have been exposed to over the last 2 years, we are ever clearer about the future value of this asset as a complementary source of natural graphite, both for direct placement in China and for the development of Syrah's U.S. anode material production facility as an integrated ex China supplier to the electric vehicle industry. In some ways, the challenges we have faced and which continue through this COVID-19 period seem unrelenting. Having made excellent production volume, quality progress at Balama, we saw growth in the EV market decline through the removal of China subsidies in the second half of 2019. And just as our reduced production volumes were assisting in the market rebalance through the end of '19 and into early 2020, the impacts of COVID-19 became apparent. I can assure you that any frustration you have regarding these impacts is magnified and felt tenfold within the Syrah team, and be in no doubt that every member of the Board, the leadership team and all of those working across this company are intensely focused on improving the value of the shareholding. We fully acknowledge Syrah's current reality and our accountability for delivery compared to estimates at the time of the investment decision 2 years of commencement at strong margins, and secondly, the positive cash flow from Balama would be available to fund rapid development at BAM. Instead, the pace of EV market development has meant that financial support has been required for Balama to enter the market, and BAM development has been carried out more slowly on a limited budget. We do not outline these issues to make excuses but to describe the constraints under which Balama and BAM have developed, particularly over the past 2 years. And though that's difficult from an equity value perspective today, these unexpected market circumstances will lead to strong value benefit as market growth does eventuate. Because we've had time to make major progress in production understanding, including increased efficiency and flexibility, we've fundamentally restructured the Balama cost base. We have developed a very strong operating and marketing team with knowledge that is not easily replicable, and we've seen competing potential projects that have been canceled, delayed or deferred. And most importantly, through dealing with all of these challenges, we've developed a disciplined culture of cost control learning and improvement. The challenge of this time, however, is to redouble our resolve. And whilst we do everything we can to preserve cash right now, we must hold our nerve and not lose our position or lose sight of the extraordinary opportunity for the future that Balama, the BAM project and, importantly, that this team represents. Moving to Slide 3 of the presentation. We all know why investment in this company holds great potential. And today, the context is even more stark and as China's dominance of the current global battery supply chain is more visible to market participants and to governments, especially in light of slower-than-expected market growth and the COVID-19 disruption. Regardless of what is happening in the near term, the long-term value of this company is intrinsically linked to the quality of the Balama resource and the global adoption of electric vehicles. Through all the near-term challenges, Balama remains the best global natural graphite resource on many parameters: reserve grade of 16%, a 50-year plus mine life, large plant production capacity of 350,000 tonnes per annum and the ability to be a low-cost producer when running closer to capacity, all with production of a differentiated quality product. The increasing global importance of the asset is underlined by the designation of graphite as a strategic raw material or critical mineral by governments in the EU, the U.S., Japan and China. And it's important to note that vanadium hosted at Balama is also a U.S. critical mineral. The unique nature of the Balama resource provides the opportunity to take a very long-term view on establishing a vertically integrated position in the anode supply chain. And what may be challenging today will provide a major advantage in the future as the BAM plant at Vidalia delivers an alternate and complementary source of anode material to the fast-developing U.S. and EU electric vehicle markets. Within the context of very strong electric vehicle penetration growth over the next 5, 10 and 20 years, automotive, battery and anode manufacturer plans are considering both design and manufacturing platforms to gain momentum. And it's really interesting to see partnerships and alliances continuing to develop, and production from Vidalia will position Syrah very well to be a credible player in these discussions. Moving to Slide 4. In addition to Balama and Vidalia, Syrah coordinates sales and marketing from Dubai, supported in our key natural graphite end market of China by an in-country sales liaison team and with our corporate office here in Melbourne. Our sales and marketing strategy has been focused on long-term diversification across customers, market segments and geographies with a focus on development in the lithium-ion battery sector. In a short space of time, we've established Balama as a globally significant supplier of high-quality graphite into batteries, selling more than 160,000 tonnes in 2019. Though it's not in China's interest to advertise the consumption of Syrah product, we know for certain that natural graphite from Balama is present in a number of core lithium-ion battery products through to electric vehicles. On Slide 5, we support Syrah's development with an unwavering commitment to the highest safety, environmental, community and governance standards and the standards that fundamentally differentiate our products and process from the rest of the supply chain. Best practice ESG credentials complement the high-quality Balama resource and have been in place from the commencement of the project to not just withstand the trend of increasing ESG scrutiny of battery supply chains but rather to set the example of ESG best practice for the industry. These practices are at the core of what we do, and this has been recognized through multiple awards and reviews over the past 12 months. We've also made a major economic impact in Mozambique in direct employment of over 96% Mozambican nationals and through training and development as well as significant contributions to local health and community development programs. Such ESG credentials are rapidly increasing in importance in the U.S. and Europe as end users assess and seek diversification away from a supply chain that's currently 100% reliant on China. And the likes of the World Economic Forum, developing the Global Battery Alliance and Battery Passport, demonstrate that ethical sourcing of battery raw materials will only increase in profile. Our health, safety and environment performance continues to be outstanding, not just for a developing location, but on par with operations in developed jurisdictions. Our total recordable injury frequency rate has remained below 1 since late 2018, and we're in compliance with over 200 environmental license conditions on the site at Balama. We're focusing strongly on best practice tailings management and continue efforts in malaria control and eradication. Our local development committee composition is central to these community efforts. The committee comprises company, government and community representatives who determine the best deployment of project resources for benefit in the 8 local host communities. On Slide 8, Syrah's commitment under the mining agreement to development of the Balama township professional training center saw more than 100 community members trained in detailed mechanical and electrical discipline courses in 2019. Our commitment to more than 500 trainings by 2023 and a minimum of 30% female participation is making a difference to employment opportunity and readiness across the regional community. Syrah remains committed to these programs through the period of temporary suspension, demonstrating our long-term commitment to the community. Our local programs include agricultural development for greater efficiency, livelihood programs to provide newer alternative options for employment in the community, support to local education and ensuring awareness of Balama's operations and the value that Balama will provide to Mozambique and to the future of global energy storage. If I move on to Slide 10 and our operational and market performance in 2019. Prior to the significant and ongoing impacts of China's reduction of EV subsidies and COVID-19 on end-user demand, 2019 marked a transition point for Balama. Despite market conditions, the company demonstrated the power of the asset through high volume, high-quality production, resolved key production challenges and deeply restructured costs. From the sales and marketing side, when demand was supported, we saw the transport and logistics operation demonstrate capacity for high-volume and fast throughput, and our sales program fundamentally changed international trade flows of natural graphite, demonstrating the impact that the Balama asset will have on the global market balance even when operating at 50% capacity. We learned an enormous amount through the year, and we're extremely well placed from an operational perspective for market development. Importantly, the Balama operating leadership team demonstrated that improvement in required recoveries have been achieved. Although monthly recoveries were in the 70% range, it's worth noting that our highest consistent run of recoveries of over 80% was achieved within periods of short campaign running. Full year production guidance for 2020 was suspended from the 19th of March this year due to market and operational uncertainty associated with the impacts of COVID-19. But the team at Balama is eagerly awaiting the opportunity to run at pace and consistency to really demonstrate what the plant can do. Moving to Slide 11. For the past 2 years, Syrah's key focus has been on the ramp-up of the Balama graphite operation and establishing Balama's natural graphite position in key markets and geographies. The most important of these, as I said earlier, being the battery anode market and China. The first chart here on this slide demonstrates just how important the reference I made earlier to the change in market development pace compared to what was expected at the time of the investment decision for the asset being made. Even in late 2016, combination of external analyst forecasts on EV market growth by 2020 and on the proportion of natural graphite in anode consumption saw expectations of global EV penetration between 5% and 10% and a natural graphite market deficit of over 100,000 tonnes by this year with Balama operating at full capacity. To be clear, these were not Syrah estimates but those of industry analysts. This difference in what was expected with what we see today has led Balama seeking to operate at low capacity utilization of less than 50%, which has led to higher unit costs and a significantly lower price environment, compressing expected margins from both ends. This drove the market balance outcome we saw in Q4 when we made the decision to moderate our production. The future comes down quite simply to the outlook for EV penetration and competing supply as Balama's operational cost profile has been deeply worked. So the immediate challenge and focus for the company is to ensure we've resumed production in line with end-user demand growth in the EV market and continue to manage our cost base accordingly. Ultimately, global EV demand will come, driven first by Chinese government targets for EV adoption and later through cost parity with internal combustion engine vehicles. Though positive long-term global growth rates are expected, the marketing and positioning strategy for Balama in the short term needs adjustment to ensure that this strategic asset remains in our control. Moving on to Slide 12. Despite the production suspension, the pre-existing target of 20% to 25% cost reduction at an equivalent production rate of 15,000 tonnes per month is close to completion. We continue to work hard to define additional cost reduction opportunities for the long term. This benefit should not be underestimated as the restructure changes the volume at which we believe we can operate on a cash flow positive basis with any sensible market balance and pricing scenario. Work is focused additionally on deferral of cash outflow beyond cost reductions through this temporary suspension period. At 15,000 tonnes production or 50% capacity utilization, it is, however, important to remember that 50% of the cost base is fixed. And the ongoing work underway now is on how to materially reduce cash outflow and this fixed cost through the period of the COVID-19 market impact. Turning specifically to COVID-19. Early in Q1, we assembled our crisis and emergency management team in a preventative manner to assess, manage and, where possible, minimize the impact of COVID-19 on employees, on the business and on key stakeholders as the impact in China became visible. And this work has to date ensured that we have had no cases of infection across the 5 countries in which we operate. Subsequent to suspension of production guidance, measures were imposed by government authorities in Mozambique to contain the spread of COVID-19. These measures restricted the international and domestic movement of the Balama workforce, requiring production at Balama to be temporarily suspended from the 28th of March, with primary focus switching into managing the delicate trade-off between preserving cash and retention of our capability to resume operations. We continue to work really hard to assess the market impact and to reduce cash outflow and work within the restrictions in place in both Mozambique and the U.S. In essence, there will be a 2-step process to coming out of the temporary suspension: being able to work within the travel and quarantine requirements of host countries and seeing improving global market conditions out of the COVID-19 impact. We are already underway in the U.S. and progressing protocols for operation in Mozambique, but the market indicators remain very weak at this point. Accordingly, the highest priorities at the moment are maintaining momentum in getting battery anode material product to market out of the U.S. and absolute minimization of the cash outflow from Balama. Turning to Vidalia, the BAM site in Louisiana. Despite the COVID-19 interruption, we have made important progress with our anode material processing facility and expect purified spherical graphite at market specification to be produced imminently, which will be an exciting catalyst for increased pace [ of ] market and strategic interaction. Strong preparatory work has continued with external engineering support for commercial scale feasibility, and that is progressing well. Product development and sample testing is also continuing for advanced anode materials in conjunction with Cadenza Innovation, and a significantly amount -- increased amount of interaction with the anode battery cell and auto manufacturers is underway. Coming out of the Louisiana COVID-19 lockdown, work has shifted to a new gear, and real momentum is expected over the next 6 months as dispatch of purified spherical products to potential customers for evaluation leads into our first toll-processed coated product, release of the final feasibility study for the commercial scale plant towards the end of the year and installation of coating capacity of our own on-site at Vidalia. This work will be transforming for the BAM project, and we expect further commercial and government interaction to be supported in the second half of 2020. Moving to Slide 15. You should be confident of the importance of the developments we're making at Vidalia will become apparent in the second half of this year. We are now the only integrated natural graphite producer outside China to be materially progressed on purified spherical production at commercial scale and targeting integration to coated anode production on-site at Vidalia from early 2021. This is a fundamental differentiator, and getting product to market will significantly increase this profile. Over the next few slides, from 16 onwards, I just want to reiterate why it's important -- why Vidalia is important in the global battery supply chain. Disruptions caused by the shutdowns in China during COVID-19 have shown life on Europe and the U.S. being enormously reliant on China for raw material and processing to build out their battery supply chains. We don't say this to deny China's very important role in the global supply chain in future but to highlight that without short-term action, Europe and the U.S. will lose competitive tension and independence in their supply of strategic raw materials. Looking specifically at the anode supply chain, we see that anode supply is currently 100% concentrated through Chinese origination. Battery producers are totally reliant on China to process natural graphite anode precursor material, which is purified spherical graphite, even if that raw material supply currently comes from Syrah. Once China produces natural spherical graphite anode precursor, a large portion of it remains in China for production of active anode material, and the balance is exported primarily to Korea and Japan. So every battery cell manufacturer and every electric vehicle producer is 100% reliant on China for precursor material and 100% reliant on Asia for supply of active anode material. This is clearly not a sustainable long-term solution for ex China markets like Korea, Japan, the U.S. and Europe. And accordingly, our interactions with auto and battery manufacturers about future supply chain security are increasing significantly. We aim to provide an alternative proposition for the ex Asian markets with value-added processing of Balama's natural graphite at Vidalia through to active anode material. The strategic importance of such production is recognized by U.S. and EU governments who are demonstrating growing support and funding for critical raw materials projects. In addition, massive commercial investment plans from auto and cell manufacturers have continued to be announced through recent months outside Asia despite the COVID-19 disruption. Colocation of an ESG-differentiated anode supply source within the U.S. provides strong advantages to potential customers: strategic sourcing diversification, supply chain resilience and inventory management, potential cost optimization and lead time improvement and, perhaps most importantly of all, an opportunity for co-development. We see that Vidalia's distribution of products shortly commences a new phase of engagement on this front. On Slide 20, we take a look at the evolution of anode material development. And our interaction with leading OEMs in Europe and the U.S. provides clear direction on anode composition. After a period where synthetic graphite gained some share, a move towards higher natural graphite consumption is occurring and is seen as a critical issue for battery manufacturing capacity outside China. Even inside China, where 2 of the top 3 players have been more recently focused on artificial graphite, incorporation of natural graphite products is increasing rapidly, evidenced by a greater focus, for example, by CATL within the past year. There are multiple reasons that this is occurring. Natural graphite is viewed as having ESG and health, safety, environment -- and environment advantages as, philosophically, it makes no sense for OEMs to move away from fossil fuels and then to use a coal or petroleum-based anode material with high production emissions intensity through coal-fired power consumption, and that's exactly what artificial graphite is. Secondly, natural graphite energy density is higher and cost remains significantly lower. This lower cost has seen focus on cycle life development prioritized in R&D efforts around natural graphite. In addition to this, there's some speculation that some anode producers have been able to integrate more natural graphite into branded synthetic or artificial products and capture margin. Ultimately, as [ EVs ] move to the mass market, natural graphite is a major focus of vehicle production and marketing strategies to facilitate cost parity and advantage over ICE vehicles. Tesla is a great example of this with a far higher set of volume plans around the lower cost models, 3 and Y, versus where they started, with the higher cost models, S and X. And natural graphite is a logical choice to be part of that development. Supply chain resilience and sourcing security challenges have never been more strongly understood than through the recent periods of trade tension and COVID-19 disruption. Government and commercial recognition of the strategic importance of battery raw materials supply, whether that be graphite, lithium, nickel or cobalt precursors, has never been stronger. However, ex China capacity is grossly lagging in independent development as China continues to grow and consolidate in the battery supply chain. There's, therefore, an urgent need for development of complementary supply as an alternative to Chinese production, and this period of deeply depressed prices provides further incentive for the supply chain to move quickly. On Slide 22, all of this results in a growth profile ahead for this industry, which is outstanding, with expectations of tenfold increase in natural graphite demand expected from energy storage over the next decade. Syrah's importance in the supply of this material is clear. In 2019, operating under 50% capacity, Syrah provided over 1/3 of the natural graphite volume consumed in natural graphite anode material production around the world. Maintaining market presence and operational capability through this immediately challenging period is therefore critical to build on this position as market growth returns. So what does all this mean for the coming period? Production at Balama will be suspended at least for the duration of Q2 2020, given the ongoing COVID-19 disruptions to operational movements and demand and logistics impacts through the global auto and battery supply chains. At Vidalia, production of purified spherical graphite is back in action with dispatch to potential end customers expected very soon. The temporary suspension of operations at Balama has been undertaken with a focus on health and safety, cash preservation and also on maintaining the optionality to restart operations or to further respond to uncertain market conditions. And we are deep in the process of assessing scenarios of longer operational or demand disruption and options to further preserve cash, if that's the case. We're in a period of unprecedented international market supply -- market and supply chain turmoil, and the effects on supply/demand and the rate of near-term EV adoption are as yet unknown, with geopolitical and international trade relationships further complicating the picture. We've taken immediate steps to control as best we can the health and safety of employees whilst preserving cash and the ability to restart operations. Further fundamental cost and operating change is possible, and this management team is absolutely focused on preserving the value of the Balama asset and our BAM development. We also remain acutely aware that the longer-term EV picture is still extremely attractive, and Syrah's asset quality and development progress is even more apparent as other production and projects potentially fall away. So retaining control is critical to generating value. The battery supply chain's reliance on China and the potential for further consolidation must be addressed if the U.S. and Europe are to achieve supply and production independence. Alternative raw material and integrated anode material production is now more critical than ever. And Syrah's continuing BAM development and the ratcheting up of strategic commercial and government engagements will ultimately strengthen the corporate position, mitigate risk and grow shareholder value, but we don't underestimate how hard the work ahead will be. You can rest assured, however, that I and the Syrah team will be doing everything that we can to realize that value as soon as possible. And I'd like to conclude by expressing my deep thanks to the team, for their ongoing commitment, and to you, as shareholders, for your commitment to the vision for Syrah. With that, Melanie, I'm happy to take any questions.

Sure. [ Mr. Olev ] has one question on your screen.

Okay. Thank you. This is a general question. Besides a cost-saving program, the cost-saving program implemented, what strategies are being considered to bolster the company's cash position to ensure Syrah gets through this current downturn of depressed prices in the challenged market? Thank you for the question. Let me start, I guess, by reemphasizing the work that's been done on the cost-out program. As I mentioned during the address we are very close to achieving the 25% cost-out target, and we expect that to be concluded within this quarter. In addition to that, obviously, we have taken significant additional measures around the temporary suspension of operations at Balama. Those include working closely with our contract partners and with our labor force to put arrangements in place during this period of outage to minimize cost -- cash outflow as far as we possibly can. All this is in addition, of course, to the corporate restructure which was completed late last year. So as I mentioned, we have work ongoing around our key contractors from a mining, camp, transport, processing and supply perspective, really looking at how we can defer cash outflow, particularly around the fixed cost base through this period. Steve Wells, I'm not sure whether you'd like to add anything to that.

Shaun, I think that's accurate. It's been very much a detailed process across all aspects, including internal expenses, external supplies, the way we go around our processing and basically taking a look at every aspect of the company's expense base.

Thanks, Steve. And I think the important piece is to reemphasize that, obviously, in Q4 last year, we had a cash outflow of around $16 million as we moved into -- sorry, in Q1. In Q2, we expect around $12 million cash outflow, and we are working extremely hard to reduce that cost -- cash outflow further should these difficult conditions related around the suspension continue into next quarter.

Shaun, there's no other questions that have been received.

Shaun, normally -- this is Jim, Shaun, can you hear me?

Yes.

Normally, at this time, we would invite shareholders and others at our meeting, AGM meeting, to join us in a cup of tea and a chat. Unfortunately, this is not going to happen today, but we thank you for being on the call. And for those of you who are still on the call, be safe, and we look forward to coming out the other side of COVID and resuming normal interactions with you. Thank you very much.