On 30 January 2019, Syrah Resources Limited (ASX: SYR) has announced December quarter results. The company not only acquired Battery Anode Material Project (BAM) site in Louisiana but also installed 5000 tonnes per annum milling capacity with purification installation underway. Its phase 1 commercial scale feasibility has been completed.
Balama’s mining agreement was finalized with the Mozambique government as its safety record has been improved to TRIFR of 0.3 along with the achievement of daily design recovery and throughput.
Syrah has commenced its marketing operation by establishing marketing & sales offices at UAE and China. The company turned out to be first key flake graphite exporter to China.
It shipped 37000 tonnes of graphite in Q4, FY18 with awaiting shipment of 20000 tonnes at Nacala. There has been a new agreement with China for export of minimum 74000 tonnes in 2019. With this, Syrah aspires to grab vast market potential outside the continent.
At the end of December 2018, net cash stood at US$ 77 million.
Syrah has been maintaining high standard toward environmental concerns. It paid US$ 1.3 million for the current end of life mine closure and rehabilitation plan into the Balama environmental bond in 2018.
There has been a strong inclination towards hiring locals from Mozambique which now comprises about 96% of Balama’s direct employee. Their donations were further used to provide food for local communities during the festive season. Malaria elimination program had been helpful in averting more than 130 cases.
As per graphite production data, 33.2K tonnes of graphite were produced in Q4 as compared to 38.7 K tonnes in Q3. The major reason being primary classifier unit fire damage which has been resolved and the production is expected to ramp-up. The product mix for FY18 stood at 80% for fine graphite and 20% for coarse flake.
There are plans to improve operational efficiency by maximizing recovery and optimizing throughput so to achieve next phase target of 1000 tonnes per day. A regular key performance indicator would help fill the performance gap along with conditioning monitoring and critical spares management. It has been decided to leverage the new implemented structure by improving system integration, planning and optimize trucking control. To produce high grade, coarse flake product mix would be increased by blend strategy and mine plan, and dry screening.
In the case of pricing, the overall price for coarse flake graphite improved but for fine graphite, Q4 product weighted realized price was lower than Q3. In logistics, there has been a significant increase in dispatch via road transport and container port.
China’s maximum supply capacity of graphite is expected to be around 750000 tonnes per annum and currently 450000 tonnes per annum is being served. Though environmental concerns and mining limits have been a hindrance toward meeting such growing demands. High use in Lithium-Ion battery also drove its market along with its application for industrial steel. This can be clearly understood from the announcement made by Daimler and SK Innovation to open new plants in the USA to manufacture Lithium-Ion batteries on a large scale to be served in automobile sector to meet Electric vehicle aspirations.
It is further expected that the global demand for natural graphite will grow at a rate of 9% to 12% for the next three to four years. Other than steel and transport, there will be a massive surge in the energy storage market especially home and grid scale.
The shift in dynamics of import and export for China would favour Syrah to grab huge market potential and drove its top and bottom line in this fiscal year.
Stock performance: SYR closed the day’s trading session at A$1.740, down by 13.43%. The stock has generated a return of 32.67% over the last three months with a YTD return of 30.94% this year.
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