The Syrah Resources Ltd (ASX: SYR) share price is having a tough session on Thursday.
In afternoon trade, the graphite producer's shares are down 11% to $1.26.
Why is the Syrah Resources share price sinking?
The Syrah Resources share price is sinking on Thursday after the company released its quarterly update and announced a major funding package.
In respect to the former, Syrah reported flat quarter on quarter natural graphite sales due to a volatile sales order performance from Chinese anode customers.
Also disappointing investors was the operating performance of its Balama operation. Its production and C1 costs were impacted by maximum inventory positions and minor operational issues.
This ultimately led to Syrah reporting 30kt natural graphite sold and shipped, 41kt produced at Balama, and C1 cash costs of US$668 per tonne. The latter was above its weighted average sales price of US$636 per tonne.
In light of the above, the company has decided to moderate its production until trading conditions improve.
This appears to have overshadowed the release of a definitive feasibility study (DFS) confirming that the expansion of Vidalia to a 45ktpa active anode material (AAM) production capacity is technically viable, financially robust, and expected to generate significant value for Syrah.
Convertible notes
In other news, this morning Syrah announced a $150 million capital raising through the issue of new convertible notes to AustralianSuper.
Management explained its decision to raise funds:
The Chinese anode market conditions are expected to be volatile over the near-term and forward sales orders for Balama products have weakened in this market from the higher levels in 2022. This, and the availability of significant finished product inventory, has led Syrah to announce today that it will moderate production from Balama until demand conditions and sales orders at economic prices warrant higher capacity utilisation.
The New Convertible Notes will provide the Company with additional liquidity to manage near-term demand volatility for Balama natural graphite and optimise its sales and operations strategy to achieve improved commercial outcomes for Syrah, and support the continuous progression of its downstream strategy.
The Syrah Resources share price is now down almost 50% over the last six months.
