Syrah Resources sheds $100m market cap on production pause

afr.com:

Shares in Syrah Resources collapsed 16 per cent after the graphite producer admitted it has not restarted mining at its flagship Mozambique operation because prices are still too low.

ASX-listed Syrah revealed at its June quarter results on Tuesday that it would resume production once customers place orders for its battery-grade graphite above cost price.

Syrah Resources chief executive Shaun Verner. Luis Enrique Ascui

“Sales orders and price bids for Balama natural graphite products have not yet reached this level,” Syrah said, adding graphite prices were “unsustainably” low.

Syrah paused production in May and June after the graphite market was oversupplied.

The strong electric vehicle sales that drove miners to ramp up supply did not recur in early 2023, as a change in the Chinese subsidy regime and COVID-19 rules dented car sales. The result was large stockpiles of battery minerals building up at factories and ports, particularly in China where Syrah sells most of its natural graphite.

For the three months to June, Syrah reported a weighted average sales price of $US688 ($1000) a tonne. In the month of April, production cost $US565 a tonne.

The two-month production pause means total production was just 15 kilo tonnes for the quarter, compared to 41kt in the prior quarter. Syrah reiterated medium-term guidance of $US430-$US480 per tonne at a 20kt-a-month production rate.

Syrah will this year become the biggest producer of a battery-grade critical mineral outside China, but its shares don’t reflect that optimism.

The miner is one of the top 10 most shorted companies on the ASX, with short-sellers holding 7 per cent of the stock, which dropped 16 per cent to 74¢ on Tuesday. Its market capitalisation shrunk from $600