Syrah Resources Ltd (ASX: SYR) has revealed its June 2019 quarter report to ASX investors, is its share price a buy?
Syrah is a resources business that owns and developed the Balama Graphite Project in Mozambique. In 2018 Syrah produced over 100,000 tonnes of natural graphite in 2018 and is the largest and first major new operation outside of China. Syrah is also progressing its ‘downstream’ Battery Anode Material strategy with first production of spherical graphite achieved in December 2018 from its plant in Louisiana, USA.
Syrah Resources June 2019 Quarter Update
In the quarter Syrah Resources signed a binding sales agreement with Gredmann for sales into China. The Balama Graphite Operation will supply 9,000 tonnes per month of fines natural graphite across a range of fixed carbon grades. The agreement commenced in June 2019 and is until December 2021 for a total of 279,000 tonnes, which is a rate of 108,000 tonnes per year.
In terms of production, Syrah reported that it produced 44kt of natural flake graphite, which was 8% lower than the first quarter largely due to minor equipment issues.
Syrah said that the first half operating cash cost of production was US$567/t, which was sadly higher because of lower production volume.
Syrah also reported that it sold 53kt in the June quarter compared to 48kt in the March quarter with continued improvement in contract volume and logistics.
The company achieved a weighted average graphite price of US$457/t in the June quarter, compared to US$469/t in the first quarter of 2019. The decline in the price was due to Chinese fines pricing and lower than planned coarse flake production.
Syrah’s Battery Anode Material (BAM) Project
Syrah said that unpurified spherical graphite customer qualification continues and the commissioning of purification circuit is underway, the first dispatch is planned in the third quarter of 2019.
A preliminary feasibility study of commercial scale plant provides attractive economics according to Syrah.
Is Syrah A Buy?
The net cash outflow was US$14.8 million versus a planned US$20 million. Syrah also executed a convertible note deed and an underwritten entitlement offer to raise US$76.3 million and US$38.8 million from a capital raising.
Syrah has a production target of 205kt to 245kt for 2019 with cash operating costs trending towards US$400 by the end of the year.
As you may know, I’m generally not a fan of commodity businesses because they have to take the price they can get.
That’s why I prefer to invest in businesses that have more pricing power, like the growth shares in the free report below.
[ls_content_block id=”18457″ para=”paragraphs”]
[ls_content_block id=”18380″ para=”paragraphs”]
