The Syrah Resources Ltd (ASX: SYR) share price has fallen more than 30% so far this year and is currently trading at $1.06 per share – just shy of its 52-week low of $1.03.
So, is Syrah another failed mining stock destined for decline or is now the time to buy the dip and ride the lithium-ion battery boom throughout 2019 and beyond?
Why has the share price been on the slide in 2019?
The current share price represents a multi-year low for the Aussie graphite miner as it continues to battle lower prices and higher-than-expected operating costs at its cornerstone Balama mine in Mozambique. In its latest Q1 2019 update, Syrah announced expected production of 45 kilotonnes (kt) at the low end of its 45kt – 50kt guidance range with sales volumes expected to exceed production.
The expected Q1 2019 weighted-average graphite price was cited as US$460 – US$470 per tonne which was down sharply on its US$500 – US$600 per tonne guidance. Management put down the significant difference to product mix and faster than anticipated progress towards close out of lower-priced contract volumes in 2018.
This Q1 result follows a weak Q4 2018 result which saw the company's share price fall as much as 8%. In that update, quarterly graphite production came in at 33kt which translated to 104kt of full-year (FY18) production with an 80% fines and 20% coarse flake graphite mix.
The anticipated increase in graphite and lithium prices has materialised thus far for the company which has hurt overall profitability and raised concerns about the company's short-term share price performance.
Where's the upside for Syrah?
The company's Balama mine is the largest graphite mine in the world which puts Syrah in the box-seat to capitalise on higher demand for lithium-ion batteries from an electric car or in-home battery storage boom – should it eventuate.
Delays in the Tesla Model 3 production and ongoing uncertainty in global trade certainly haven't aided the company's profitability woes so far in 2019.
With battery technology always evolving, and the company relying heavily on China for continued demand, there is a risk that Syrah gets left with a whole lot of graphite with no buyer on the other side.
I'm a big believer in Syrah and think they have the ability to control global graphite and graphene supply but the risk of technological obsolescence does remain for the group. At $1.06 per share, I'm of the view that it's worth rolling the dice on what could be a major global player in the global renewables push in the next 5-10 years.
For those who aren't as bullish on Syrah's near-term prospects, then maybe these buy-rated growth shares could be better options for your portfolio in the meantime.
