Syrah cautions investors on lofty graphite prices

2018-02-02

Feb. 2, 2018 - Heavily shorted miner Syrah Resources has warned investors that its initial graphite sales have not achieved the sort of prices that index providers have been quoting of late, in a disclosure that has watered-down expectations for the company's maiden revenues.

Syrah Resources says its early sales have not achieved the high graphite prices being quoted by index providers.

The Mozambique-focused miner's first exports sailed to China, Europe, India, the US and Brazil earlier this month, and first revenues from those sales are expected in February.

Graphite is a small, opaque industry in which prices differ by region, product quality, particle size and the level of beneficiation, with the highest prices typically paid for the sort of coated, spherical graphite that can be used in lithium-ion batteries.


While Syrah's Balama mine will produce several different specifications of graphite, the bulk of its output will be a fines product with particle size below "100 mesh".

Prices for multiple graphite specifications rose strongly in the latter part of 2017 on the back of environmental regulations in China, with Benchmark Mineral Intelligence and UBS reporting that prices for flake graphite with 95 per cent carbon and particle size below "100 mesh" rose from about $US550 per tonne to almost $US800 per tonne in recent months.

But Syrah told investors on Tuesday they should not assume the company was receiving such externally quoted prices.

"As the company has only recently started producing, shipping and pricing, prices for initial shipments are lower than those reported by third party price reporting agencies. As interaction with Syrah's global customer base evolves and product qualification and sales progress, price discovery will develop further," the company said in a statement.

Syrah's disclosure serves as a reminder to investors in the fashionable battery commodities space, where product specifications, the location of sale and the level of beneficiation can dramatically influence pricing. 

Syrah said its first cashflows from sales should be received in February. Plans to be cashflow positive at Balama before June 30 have been pushed back into the second half of 2018.

Despite a growing number of offtake customers, Syrah has vowed to produce between 160,000 and 180,000 tonnes in 2018. The company says its 2019 production will be between 250,000 and 300,000 tonnes.