The Syrah Resources Limited (ASX: SYR) share price is one of the top performers on the S&P/ASX 200 Index on Tuesday, up 10.6% to $1.98.
It seems the Australian graphite miner has put a horror 2018 behind it, with the Syrah share price now up more than 30% since the beginning of the year only 2 weeks ago.
Australian equities as a whole endured a torrid 2018 as global trade tensions, domestic political uncertainty and softer economic data combined to create a particularly nerve-jangling environment for investors. As we enter the early stages of 2019, the ASX is looking more like “same same but different” rather than sporting a “new year, new me” mantra.
Amidst ongoing market turbulence, keen-eyed investors may be able to find tactical pockets of fool’s gold in the Australian market. I believe that Syrah Resources could be one such stock.
The company, with a market capitalisation of around $615 million, was hit particularly hard by global trade tensions and operational issues at its Mozambique-based Balama Graphite Operation in 2018, as it saw its share price plummet 68%, falling from $4.71 in January to just $1.51 to end the year.
However, 2019 may just be the struggling miner’s year to thrive.
Today’s share price surge comes amid greater optimism in the metals and mining sector. Syrah recently announced a binding sales agreement with China-based Qingdao Langruite Graphite Co. Ltd. for the sale of 48 kilotonnes (kt) of natural graphite from its Balama mine in 2019.
Additionally, the company announced on 31 December that it had achieved its first production of unpurified spherical graphite at its Louisiana, USA facility using Balama natural graphite with strong production numbers released on Monday also aiding the stock’s rebound.
Following years of delays and setbacks, Syrah Resources now appears well-placed to capitalise on this robust technical environment of sustained economic growth and ever-increasing demand for electric car and renewable energy storage batteries.
The company recently completed an institutional placement, raising A$94 million and guided Q4 2018 net cash outflow at US$23.6 million. Whilst earnings remain negative at A$0.06 per share, I think you’d have to be a fool not to consider this stock as it matures from its capital-intensive growth phase into a mature market player in global graphite.
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Returns as of 6th October 2020
Motley Fool contributor Lachlan Hall has no position in any of the stocks mentioned. 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.
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