On 4 October 2018, Syrah Resources Ltd (ASX: SYR) provided an update regarding the Balama Graphite Operation in which a fire occurred in the Primary Classifier section of the process plant. Following this news, the share price of the company decreased by 7.296% as on 4 October 2018.
As per the company’s update, the fire was brought under control and extinguished swiftly because of the strong operational health, safety and emergency response capability that exists on site and more importantly no injuries were sustained.
The fire occurred on 1 October in the Primary Classifier section of the Balama process plant. The Primary Classifier distributes and classifies all milled material from the scrubber prior to flotation. The fire was quickly extinguished by the onsite emergency services team, a root cause investigation was initiated, and rectification works started immediately. Initial investigation indicates that the fire originated during hot work activities below the unit during planned maintenance on piping. No structural damage was incurred beyond the unit, and all other sections of the plant were paused in a planned manner.
To return to the production, the company has brought in a new and immediately available replacement Primary Classifier from the Original Equipment Manufacturer in South Africa, as repair of the unit would be less efficient and higher risk than replacement. The total repair cost including the replacement unit is estimated at US$0.5 million.
After this incident the Syrah’s Chief Operating Officer and the Balama Leadership Team have come up with a comprehensive production improvement plan which will continue to be implemented and further reinforced after this incident. The focus areas include enabling works for recovery improvement, many of which will now be implemented concurrently with the repair works, rigorous process control optimization and governance of operating practices and comprehensive equipment maintenance, spares and consumables program.
The company is estimating a production loss of 30kt in quarter four which includes allowance for ramp up as the plant comes back online. The revised production forecast for Quarter 4 is approximately 30-35kt. Following nine months’ year to date production of 71kt, the company is engaging with customers regarding the outage, with only minor impacts expected to the near-term sales profile. Company’s Cash on hand as at 30 September 2018 was $100.3 million which is providing enough liquidity to manage the incident, and to continue the Company’s Balama and Battery Anode Material strategy. More updates will be provided in the quarterly report which is expected to be released on 11 October 2018.
The group has also revised its share purchase plan dates in view of the above incident.
SYR’s shares traded at $2.160 with a market capitalization of $791.24 million as on 4 October 2018 (AEST 4 PM).
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