It goes from bad to worse for Syrah Resources Ltd (ASX: SYR) shares.
Prior to today, the ASX mining stock was down 60% since the start of the year.
In early trade, the graphite producer's shares have sunk a further 32% to a multi-year low of 18 cents.
Why are Syrah shares being sold off again?
Investors have been rushing to the exits today after the company released an update on its Balama project in Mozambique.
As some readers may be aware, there has been major civil unrest in the East African country this year.
So much so, South32 Ltd (ASX: S32) was forced to withdraw its guidance for its Mozal Aluminium operation earlier this week.
The civil unrest has been driven by the results of Mozambique's general election, with the ruling Frelimo party extending its majority across both Provincial and National levels of government.
These results are being contested by opposition parties, citing allegations of electoral fraud and irregularities. Nationwide protests associated with the electoral process is causing widespread disruptions throughout Mozambique, including at several mining operations.
What's happening at Syrah?
Unfortunately for this ASX mining stock, it has also been caught up in the civil unrest, with protests around historical farmland resettlement grievances getting larger.
This has led to its subsidiary Twigg Exploration and Mining declaring a force majeure event for the Balama Graphite Operation under the terms of its Mining Agreement with the Mozambique Government.
Commenting on the situation the company said:
With conditions continuing to deteriorate across Mozambique and further National Government opposition protest actions recently announced, Syrah is unable to undertake a production campaign at Balama in the December 2024 quarter that is required to replenish finished product inventory, and for customer sales. Consequently, force majeure is declared under the Mining Agreement.
Syrah advised that it remains committed to achieving a positive resolution of the protest and addressing all legitimate resettlement concerns.
However, it acknowledges that "resolution of the Balama protest will take time due to broader unrest and disruptions across Mozambique and the new Mozambique Government not being formed until January 2025."
Big consequences
While the failure to replenish inventory for customer sales is bad, it gets much worse for Syrah.
It notes that these events have triggered events of default in its loans with the US government. It said:
The impacts and duration of the protest actions have triggered events of default in the Company's loans with United States International Development Finance Corporation (DFC) and United States Department of Energy (DOE). Syrah is engaging with DFC and DOE regarding these events of default.
These certainly are difficult times for Syrah and its shares. Once again, this highlights the dangers of mining (and investing) outside tier-1 jurisdictions.
