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Syrah Resources Ltd.


Syrah Resources Ltd. is an Australian resource company that is rapidly progressing its flagship Balama graphite and vanadium project in northern Mozambique, which hosts one of the world's largest resources in both commodities. A mining license was granted in December 2013, and completion of a definitive feasibility study is expected by the end of 2014. The project is ~260km by road west of Pemba, and is accessible by a sealed main road running directly from Pemba Airport. The Port of Nacala is ~460km by road southeast of the project, and is the deepest port in southern Africa.

The information provided below is from analysts, newsletters and other contributors. Please contact the company and visit its website before making an investment decision.

Expert Comments:

Luke Smith, Canaccord Genuity (12/3/14) "Syrah Resources Ltd. has commenced preconstruction work ahead of the wet season at its 100%-owned Balama graphite project in Mozambique. This is in anticipation of the imminent completion of the Balama feasibility study (expected early 2015) and highlights the confidence the new board has in the economic viability of the project. . . we remain firmly of the view that Balama is world class and that these milestones will be achieved in the next three to six months. We maintain our Buy rating."

The Mining Report with Michael Slifirski (11/18/14) "The one graphite company that stands out is Syrah Resources Ltd., a small emerging Australian company that sits on one of the best graphite deposits in the world. The deposit is in Mozambique and it is very, very large. It's unconstrained as it's only been partially drilled, but the resource size we know so far could provide 100% of the world's current requirement for natural graphite for about 1,000 years. The deposit could certainly get bigger if the company chose to spend more money drilling it. It's a deposit that has virtually no strip ratio in its early years. It's about three or four times the grade of a typical Chinese mine. It's a very high-quality deposit with very low impurities that should have a very low production cost. It's absolutely the standout.

The company has two MOUs (and just announced a third MOU), which with time I'm sure will develop into more binding arrangements as commitments are met, such as delivering a feasibility study and getting into production. Once there is production certainty I think those agreements can be tightened up and further agreements should be forthcoming. What's interesting about the agreements that Syrah has signed to date is that they are for non-traditional uses of graphite outside the current natural graphite market. One is an aluminum anode application, which is displacing an alternative material with higher quality graphite. This is a new market with a 3 Mtpa potential in the context of a natural graphite market of 1.1 Mt. The other is for use as a recarburizer or a carbon raiser for the steel industry. That also is potentially a 3 Mtpa market. To date there's been little use of graphite as a recarburizer, again, because of the volumes that would be required for that market and the price impact that volume would have. Syrah's planned stage one production is around 300 Ktpa. That much supply in a relatively constrained market in normal circumstances could have a price depressing impact, but given that all the sales committed to date are outside the normal market, it's a very positive sign. The battery market is the same principle." More >

Vincent Pisani, Shaw Stockbroking (11/5/14) "Syrah Resources Ltd. has been focused on advancing the development of a high quality recarburiser made with graphite from its Balama project. The results of this test work currently underway will feed into the definitive feasibility study, enable it to work towards finalizing its memorandum of understanding with Asmet Ltd. and provide a strong platform to secure additional offtake agreements. . .the company is at the forefront of developing new markets for graphitic carbon. The firm has a resource of over 1.1 Bt at 10.5% total graphitic carbon. We rate the company a Buy with an AU$6.30/share price target."

Luke Smith, Canaccord Genuity (9/26/14) "Syrah Resources Ltd. has announced an overhaul of its board of directors in preparation for development of the Balama Graphite project, the world's largest graphite deposit. The appointment of Jim Askew (non-executive chairman) to replace Tom Eadie is a huge coup for the company and aligns the quality of the project with high-caliber technical expertise. . .Sam Riggall has been appointed as a non-executive director, following his 15 years with Rio Tinto. . .executive director Tolga Kumova will become managing director. We view the enhanced skill sets of the board as complementary and. . .the right mix of market, technical, development and management experience."

The Mining Report Interview with Luke Smith (8/26/14) "Syrah Resources Ltd. (SYR:ASX) is the frontrunner [for favorite near-term graphite producer]. Its market cap is about $900M. It owns 100% of the Balama project in Mozambique, which contains close to 1.2 billion tons with about 10% total contained graphite. I've visited Balama, and it is effectively a 6km-long topographic high rising out of the countryside. Syrah has signed a number of MOUs for offtake, one with Chalieco. That created a lot of credibility. The company could produce somewhere north of 300 Ktpa graphite, roughly 30% of the known traditional graphite market. That could possibly push down graphite prices, but the X factor in demand is the growth of the electric vehicle market and, as mentioned earlier, the substitution of graphite for green petroleum coke in aluminum production.

A BFS for the world's largest graphite operation requires a great deal of work. Now, Balama won't need a large plant because the in-situ deposit grade is exceptionally high. We're looking at front-end throughput around 2 Mtpa. I expect publication sometime between October and December. Balama could sell a small amount of graphite and still be profitable. Syrah is focusing first on customer demand and will then work backwards from there. Demand from the two MOUs already announced totals 240 Ktpa graphite concentrate annually. The company is likely talking to more customers and could potentially sign further offtake agreements in 2014. Syrah understands the market. . .Syrah's senior management team is based here in Melbourne, and we meet with them regularly. I think Q1/16 is a reasonable timeframe [to begin production] and still very much achievable. Locking in the offtakes and then securing financing on the back of this are the key hurdles the company must clear to meet that date.

Vanadium is a byproduct and thus not crucial to commercial success. It could be put out into the tailings or the gangue material and then be forgotten forever, and Balama, in my view, would still be extremely profitable. It's the icing on the cake. The just released first scoping study for the vanadium demonstrates additional net present value and value accretion to Syrah. We should have a Balama vanadium feasibility study soon after the release of the graphite BFS. The company has a number of options. It could create a semi-vanadium concentrate that would then be upgraded in the secondary and tertiary processes. Capexes for producing vanadium pentoxide, which Syrah is looking to produce, do not need to be funded upfront. The vanadium processing stream might be added two or three years after the graphite stream is up and running. . .I have a Buy rating and a target price of $8.76 for Syrah. When I initiated coverage a year ago, shares were $2.55. They're around $4.82 now." More >

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Luke Smith, Canaccord Genuity (8/4/14) "Syrah Resources Ltd. recently released a detailed vanadium scoping study highlighting robust financial metrics. . .it provides a significant uplift in analysis and detail. . .vanadium metallurgical test work completed highlighted that high purity (99.9%) V2O5 product can be produced from Balama ore. . .the high-purity vanadium powder differentiates the deposit, as very few significantly sized vanadium deposits globally can produce this superior quality of V2O5."

Michael Slifirski, Credit Suisse (7/11/14) "Syrah Resources Ltd.'s memorandums of understanding for offtake have been announced at $1K/t. Assuming $1K/t as an average price delivers a valuation of $7.86/share, the emerging opportunity to dominate in the spherical graphite market could readily increase the average price to $1.3K/t (10% of tons sold at $4K/t and 90% at $1K/t) and valuation to $11.24/share."

Vincent Pisani, Shaw Stockbroking (7/3/14) "The recently announced memorandums of understanding signed by Syrah Resources Ltd. amount to a quantity of graphite larger than the capacity outlined in the 2013 scoping study of ~225 Ktpa end product. We believe it is now likely that when a bankable feasibility study is completed (Q3/14), the company will announce an increased plant size, capable of producing close to 350 Ktpa graphite."

The Gold Report Interview with Simon Moores (6/23/14) "Australia's Syrah Resources Ltd. is developing its Balama project in Mozambique where a lot of the oil and gas investment is happening. The company has been active in 2014 announcing two memorandums of understanding for an offtake with China, 80120,000 tpa, and Europe, 100150,000 tpa, as well as test results of its battery-grade spherical graphite." More >

Luke Smith, Canaccord Genuity (6/11/14) "Syrah Resources Ltd. has announced a delay in completing the binding offtake agreement with CHALIECO, a subsidiary of CHINALCO. . .we are not surprised by the delay in completing such a major offtake agreement and, arguably, the original three month timeframe set in March was ambitious. We anticipate that a binding offtake agreement should transpire within the next three months. We do not view the delay as materially negative for the company."

Chris Terry, Deutsche Bank (5/27/14) "Syrah Resources Ltd. is developing the Balama deposit in Mozambique with unrivalled average graphite grades of 17%. Balama is the world's largest graphite resource and will grow in importance as environmental controls reduce Chinese production and new applications increase global demand. We forecast annual production of 290 Ktpa graphite and 5 Ktpa vanadium from mid-2016, a conservative 30 year mine life and US$950/t graphite pricing."

Luke Smith, Canaccord Genuity (5/1/14) "Syrah Resources Ltd. has announced its second major memorandum of understanding for offtake of 100150 Ktpa graphite concentrate with European trader Asmet Ltd. . .importantly, Asmet intends to use the graphite fines from Balama as a recarburiser in foundry applications and high-quality steel production; this is not a traditional market for graphite. We maintain our Buy rating and increase our target price to AU$8.40."

Luke Smith, Canaccord Genuity (3/26/14) "Syrah Resources Inc. has released a major resource upgrade for the Mepiche zone at Balama East, part of its 100%-owned Balama graphite project in Mozambique. Significantly, a substantial portion of the resource has moved into Measured and Indicated (M&I) status. . .we now consider Syrah to have sufficient M&I resources to sustain a mine life of more than 20 years, initially producing 240 Ktpa graphite from 2016 before climbing to 350+ Ktpa in 2020."

The Mining Report Interview with Kiril Mugerman (3/4/14) "Syrah Resources Ltd. has a very interesting graphite-vanadium project, Balama in Mozambique. The company has the largest resource and the largest market capitalization in the graphite sector. Those advantages have resulted in very ambitious plans, in my opinion. The company intends to produce 220 Kt annually, which is essentially half of current global flake production. We are following the Balama story closely." More >

The Gold Report Interview with Simon Moores (1/14/14) "One financing that stood out in 2013 was Syrah Resources Ltd.'s raising AU$35M for its project in Mozambique. I know how difficult it was for all the other projects in the industry, so that was an achievement. It was a big step toward actually building a mine." More >

Michael Slifirski, Credit Suisse (12/23/13) "Syrah Resources Ltd. has confirmed that the 25-year mining lease at the Balama graphite and vanadium project has been granted, a significant derisking event for the project and the company. Syrah now has 100% ownership of the project and development can commence as soon as practical."

Michael Slifirski, Credit Suisse (10/23/13) "Syrah Resources Ltd. has released additional favorable results for metallurgical test work conducted by external consultants and potential customers on a bulk sample. Test work indicated that the tested areas of the Balama graphite that are likely to be the basis of the mine plan consistently achieved >96% concentrate and generally 9697% concentrate through simple flotation from a bulk sample grade of 11.2%."

Michael Slifirski, Credit Suisse (10/10/13) "We initiate coverage on Syrah Resources Ltd. with a $4.90 target price and Outperform rating. . .Balama is already the world's largest graphite and vanadium endowment but could potentially still increase in size by a factor of 20. . .the ore body is already exceptional in grade, continuity, flake size, scale, strip ratio, accessibility, topography and metallurgy."

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