Graphite to surge, Syrah and Talga the best bet for investors: UBS

afr.com:

Syrah Resources, the ASX-listed graphite producer, is set for a moment in the sun with demand for the key battery material expected to send spot prices up by more than 50 per cent, according to brokers at UBS.

Stock in Syrah surged nearly 15 per cent following the publication of the investment bank’s analysis on Friday, which estimates electric vehicle automakers will adopt cheaper lithium iron phosphate batteries.

Shaun Verner is the chief executive of Syrah Resources. Luis Enrique Ascui

LFP batteries, which requires large amounts of graphite, are a form of lithium-ion battery. This type of battery is not as robust – it requires more frequent charging – but UBS expects automakers will look past this to embrace its cheaper cost and lower carbon profile.

Syrah is the largest vertically integrated graphite producer outside China.

Lachlan Shaw, the lead author of the research, forecasts natural graphite prices will fetch $US850 per tonne by the end of the decade, due to a six-fold increase in demand to 6.3 million tonnes by 2030. That’s a 50 per cent recovery from the $US570 per tonne spot price on Friday.

“We think that the market is more focused on spot graphite prices which are down 30 per cent from 2022 highs versus the potential upside ahead from continued EV momentum and potentially increasing natural graphite share,” he wrote in a note to his clients.

UBS anticipates Syrah, which owns the Balama mine in Mozambique, is well-placed, alongside Talga Resources, a pre-revenue explorer hoping to build a graphite mine and battery processing facility in Sweden. “In natural graphite we marginally prefer ASX-listed Talga over Syrah. In a quickly growing market this isn’t a zero-sum game,” Mr Shaw said.

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