Syrah Resources share price falls 6.5% on Q1 2019 interim update

The Syrah Resources Ltd (ASX: SYR) share price has fallen 6.5% this afternoon after the company provided its Q1 2019 operational update on Thursday.

What was in the announcement?

Syrah said that it continues to ramp up its Balama Graphite Operation in Mozambique and production is on track for approximately 45 kilotonne (kt) in line with the lower end of its 45kt – 50kt guidance range. Management also said production optimisation and cost management actions are continuing as investors hope to see a turning point for the group’s Balama operations following years of cost blowouts and delays.

Sales volumes for the company are expected to exceed production volumes, between 45kt – 50kt depending on shipping completions in March with an expected Q1 2019 weighted-average graphite price of US$460 – US$470 per tonne (versus US$500 – US$600 per tonne guidance).

The major difference cited by management was product mix and final vessel scheduling weighted towards sales of fine graphite and faster than anticipated progress towards close out of lower-priced contract volumes in 2018.

The company’s cash position remains robust with US$55 – US$57 million in cash (versus US$57 million guidance) while management re-emphasised Q2 2019 group net cash draw is forecast to be lower quarter-on-quarter given the majority of the Battery Anode Material Project capex spend in Louisiana, USA, is to be completed in the first quarter.

Is the Syrah share price a Buy?

The Syrah share price has been hammered in 2019 and is down 30% year-to-date following soft earnings and continued lack of ability to deliver on the potential at the world’s largest spherical graphite mine in Mozambique.

The stock is near its 52-week low of $1.035 per share and remains a real punt on the long-term ability of Syrah and its management to convert the strong supply-side factors into a profitable venture within the electric car and battery storage sectors.

For those who aren’t so bullish on Syrah or its fellow alternative miners including Galaxy Resources Limited  (ASX: GXY) or Orecobre Limite d  (ASX:ORE), I’d suggest checking out these top growth shares that have been tipped as market beaters.

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Motley Fool contributor Lachlan Hall owns shares of Syrah 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.

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