SYR 0.71% 70.0¢ syrah resources limited

I asked a little while ago why is SYR so unloved? JamesRS just...

  1. 442 Posts.
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    I asked a little while ago why is SYR so unloved?
    JamesRS just asked why is SYR the most shorted stock on the ASX

    The responses I got to my question were
    The mine is in Mozambique and the inherent sovereign risk
    The mines capacity is too large

    The doubters will say Mozambique is a risky place to invest. I say Mozambique need the miners and this EV revolution to get them out of debt and increase employment and moves are underway to clean up the corruption issues in Mozambique. If it is any consolation Mozambique is nothing like Tanzania, I would not invest there.

    SYR is now the world’s largest graphite miner and in front position to benefit from the boom in battery storage. The doubters will say it is a bad thing to be the largest graphite miner in the world and the capacity of the mine is too large for the market.

    In 10 years time the demand for battery storage is going to be about 1 TWh per year
    (reference: Roskill, page 20 of an LPD market report 22/2/2018)

    1 GWh = about 1050t of BAM which in turn needs about 1800t of flake feedstock
    (reference: SYR ann April 2017 page 20)

    the median annual demand is estimated to be about 1,800,000t in about 10 years time
    the present demand is 100 GWh of battery storage per year i.e. 180,000 t and growing exponentially

    SYR have presold their 2018 production of 160-180kt (this will go to a broad range of markets not only battery storage)

    SYR have also presold their 2019 production of 250-300 kt

    SYR have quoted about $680 $/t sale price with costs less than 400 $/t

    By the way, Balama will be cash flow positive in early H2 2018
    (reference SYR 30/1/18)

    BAM sells for about 2000 $/t that is the golden goose

    IF SYR process half their production into spherical i.e. 175 kt and costs of 400 + 100? Then they benefit from 1500 $/t x 175 kt = $262,500,000 pa
    plus for the flake sales 280 $/t x 175 kt = 49,000,000 pa

    lets just say $300m pa profit

    Current SP is $3.48 and market cap $1b

    add your own PE (say 10) to the $300m profit and we get a future SP in the near term of maybe 3x the current one

    I expect demand will grow quicker than the above figures and most people are hugely underestimating grid storage and the demand there.

    With regards to why is SYR the most shorted stock?
    There have been some big cap raisings the last 2 years and IMO the big institutions who invested are not going to be getting a dividend for a couple of years hence they are making money by lending shares out (with a fee) to others manipulating the SP down and buying them back cheaper. It’s how they make money. The cap raisings have been big so the insto’s have a lot of ammunition.

    The capital cost of Balama is $215m and SYR have a further $111.9m in the bank for the BAM facility. Those funds were raised by issuing capital.

    SYR has no debt.

    With approx. 60m shares shorted and a daily volume of about 2m shares on the market. It is going to be difficult for the institutional shorters (and all shorters) to buy them back without a huge spike in SP. That is what I am looking forward to.

    Macquarie have a target price of $4.70 and UBS $4.60 and Credit Suisse $6.40
    SYR is a strong Buy at present value

    IMO and DYOR

    Have a Great day to all
 
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