The Syrah Resources Ltd (ASX: SYR) share price has continued its strong run on Thursday and is up almost 4.5% to $2.02 at the time of writing.
At one stage the graphite miner’s shares were 7.5% higher at $2.08. This brought its two-week return to an impressive 48%.
Why are Syrah’s shares surging higher today?
This morning Syrah announced that the replacement Primary Classifier Unit at its Balama project in Mozambique has been successfully installed and commissioned ahead of schedule.
Just over a month ago a fire occurred in the Primary Classifier section of the Balama process plant. This is the part of the plant that distributes and classifies all milled material from the scrubber prior to flotation.
The fire, which originated during hot work activities below the unit during planned maintenance on piping, rendered the Primary Classifier inoperable.
This meant the company had to suspend production and source a replacement unit from South Africa. Downtime of approximately five weeks was expected while the unit was sourced and installed.
Pleasingly, with the unit now installed, production has resumed and a stable ramp up was achieved.
In addition to this, Syrah took advantage of the downtime to bring forward planned maintenance and production optimisation works. This is expected to reduce subsequent planned downtime and continue the production improvement plan.
With those works completed as planned, management believes it provides confidence for its future production performance. Which is certainly a big positive given its poor track record and numerous production guidance downgrades this year.
Should you invest?
While I think that Syrah’s Balama project is a world class asset and has significant potential, a lot will ultimately depend on the prices that it is able to command for its graphite.
I intend to wait and see how its free cash flow is looking once its production ramps up and is maintained at a consistent level.
Until then, investors looking for exposure to battery materials shares might want to consider Galaxy Resources Limited (ASX: GXY) or Orocobre Limited (ASX: ORE). However, both are high risk investments and prone to wild share price swings.
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Motley Fool contributor James Mickleboro owns shares of Galaxy Resources Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.