Talk Of Rising Graphite Prices Provides Fresh Hope For Smashed-Up Syrah

By Barry Fitzgerald | More Articles by Barry Fitzgerald

A recovery could also see the next generation of graphite producers such as Battery Minerals and Kibaran spring to life.

Leading graphite stock Syrah Resources (SYR) has been beaten up something shocking ever since it turned on its Balama operation in Mozambique.

The fall from grace – it’s down from $2.80 a year ago to $1.07 this week – has a lot to do with teething problems at the concentrate processing plant.

But the real issue is that the $US1,000/t average price for Balama concentrates forecast in the May 2015 feasibility study has proved to be complete nonsense.

In its most recent production downgrade – yes, there’s been more than a few – Syrah let slip that its weighted average price for the current June quarter was expected to be all of $US466/t, down a little from $US469/t in the preceding March quarter.

Given average cash operating costs in the 2015 feasibility study were put at $US286/t, Balama is lucky to be washing its face.

It’s why the cash burn is being closely watched. It was taken as a positive that in the recent production downgrade, Syrah was at least able to say its expected cash position at June 30 would be $US43m as guided.

Despite the gloom around the stock, things are not as bad as a realised selling price of less than half that indicated in the feasibility study might suggest.

Otherwise there would be no explaining why Credit Suisse in a June 10 note was happy to have a $3.30 a share price target on the stock. UBS was not quite as bold with its June 7 share price target of $2.40 a share, but at least it is a multiple of the current share price.

Plus, pending BFS could re-rate Orion shares. Read more +

Barry Fitzgerald

About Barry Fitzgerald

Barry Fitzgerald has covered the resources industry for 30 years. His column highlights the issues, opportunities and challenges for small and mid-cap resources stocks - most recently penned his column for The Australian newspaper and before that, The Age.

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