In morning trade the Syrah Resources Ltd (ASX: SYR) share price has continued its poor run despite the release of a positive announcement.
At the time of writing the graphite producer's shares are down almost 1% to $1.55.
What did Syrah Resources announce today?
This morning Syrah Resources announced that it has signed a binding term sales agreement with Qingdao Langruite Graphite Co. Ltd (Langruite).
Langruite is based in Shandong, China and is a related entity of Qingdao Guangxing Electronic Materials, with whom Syrah Resources has developed spot business over 2018.
According to the release, the agreement is for a minimum of 48kt of natural graphite from the company's Balama project in 2019. An additional 12kt can be added at Syrah Resources' option.
As a comparison, this year the company is on track to achieve its full year 2018 production target of 101kt – 106kt of graphite concentrate.
In addition to this, the agreement includes the sale of both fine and coarse flake products, across a range of fixed carbon grades. All other terms of the agreement are confidential.
The company's managing director and CEO, Shaun Verner, appeared to be pleased with the agreement and the diversification it provided.
He said: "Syrah continues to establish itself as a significant supplier of natural graphite into China. Our relationship with Langruite will enable further diversification of Balama graphite sales across a range of end uses and provides flexibility in product delivery. We look forward to a successful relationship with Langruite."
Should you invest?
While I think that Syrah Resources is a good company and its Balama project has the potential to be a world class operation, I'm holding off an investment until I see the price that the company is commanding for its graphite.
As the financial terms of its agreements are predominantly confidential, it is difficult to make an investment decision on announcements like these.
So for now I would suggest investors looking for exposure to the resources sector stick with mining giants like BHP Group Ltd (ASX: BHP) or Rio Tinto Limited (ASX: RIO).
