The Motley Fool

Why the Syrah Resources share price is down 18% in the last week

The Syrah Resources Ltd (ASX: SYR) share price fell 1.16% on the ASX yesterday, and is currently down 18% since Tuesday 23 July – so why is the ASX graphite miner’s sinking lower?

Graphite prices have slumped in 2019

The recent Syrah share price slump has occurred despite no significant ASX releases from the Aussie miner, and much of it has to do with global graphite markets.

In general, an oversupply of flake graphite in the market has created a supply-demand imbalance in global markets and sent the lucrative commodity’s prices lower.

Slowing demand out of China, in particular, hasn’t helped spot or futures prices for graphite, and given Syrah currently runs the largest graphite mine in the world at its Balama operations in Mozambique, this current pricing environment has hurt the company’s profitability.

Operational issues haven’t helped Syrah Resources

As recently as January 2018, the Syrah Resources share price was trading at $4.69 per share, while it reached a record high of $6.15 per share back in June 2016 when the graphite markets were booming.

However, the Syrah share price is now trading at just $0.85 per share with investors wary of the company’s history of cost overruns and operational delays with its Balama mining site.

While the company is making big strides towards having a reliable and fully-operational mine, the question now is how not to flood the market with its own supply and where the next source of demand will come from.

Also… Syrah remains cash flow negative

This last point is a big one for ASX growth stocks, with many investors preferring to invest in stocks that are cash flow positive and able to rely on their operations to fund further working capital requirements.

The Syrah share price surged higher on 4 April 2019 after reporting a strong quarterly result, eventually climbing 17% higher in just 2 days, but its soft half-year result in February left investors disappointed.

While I’m a holder of Syrah Resources shares and believe that the company has significant long-term potential, I’d be waiting to see a material uplift in the company’s profitability, after it reported a half-year loss of US$12.3 million (A$18 million) in its latest results.

While waiting on the sidelines for Syrah, this buy-rated ASX cannabis stock could be a bargain with huge growth potential in 2019.

One ASX Stock For An Estimated $US22 Billion Marijuana Market

A little-known ASX company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.

And make no mistake – it is coming. To the tune of an estimated $US22 billion.

Cannabis legalisation is sweeping over North America, and full legalisation arrived in Canada in October 2018.

Here's the best part: we think there's one ASX stock that's uniquely positioned to profit immensely from this explosive new industry... taking savvy investors along for what could be one heck of a ride.

AND, this is the first time The Motley Fool Australia has EVER put a BUY recommendation on a marijuana stock.

Simply click below to learn more on how you can profit from the coming cannabis boom.

Click here to find out more

Motley Fool contributor Kenneth 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.

NEW. Five Cheap and Good Stocks to Buy in 2019…

Our Motley Fool experts have just released a brand new FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.8% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.