I note that you
completely evaded the request to provide evidence.
I on the other hand will provide empirical evidence rather than unsubstantiated opinion.
When the Chinese were dumping graphite into the market in the early noughties the price for +80 mesh 94-97% C graphite was a little over $500:
View attachment 445496
This is substantially lower than the current forecast prices:
View attachment 445502
But provides a good benchmark for the sake of argument for a middle of the range weighted average graphite basket price. Commodity prices are linked to supply/demand and the cost of production; if supply overwhelms demand as it did in the early noughties the price will fall so that uneconomic players leave the industry and the supply/demand balance corrects; this is microeconomics 101. Since the price never fell below $500
we can infer that Chinese prices for supplying graphite (i.e. their opex costs) have never been below $500 for flake and this figure is not inflation adjusted to today so its possibly higher now. And, I've never seen any evidence that Brazilian graphite of any significant quantity has an opex cost lower than the Chinese. Furthermore, it's likely that a lot of Chinese production is currently unsustainably being produced below the cost of production as its the only way for them to pay fixed costs; this is
not sustainable and high cost players will exit the industry in the medium to long term.
I suspect that your erroneous opinions are linked to something you've seen regarding amorphous prices as opposed to flake which is Syrah's market:
View attachment 445535
On to opex costs:
View attachment 445586
General administration costs are not significant on a cost per ton basis (
assuming that Shaun and Rob are successful in maximising sales) and with the recent depreciation of the Metical, it's possible that Syrah's opex will be lower than forecast as wages for mining workers and transportation workers should be less in US dollars:
View attachment 445595
Assumptions that Syrah won't sell its output therefore its admin costs will be too high miss the point for me. Syrah can drop its prices down to where the Chinese did in the early noughties if they need cash flow; it worked for the Chinese and it would work for Syrah. This would have the byproduct of gaining market share and causing competitors to exit the industry. And rather than flooding the market with 94-97% C graphite they can use ~
98%C graphite; the equal best product at the lowest cost. As an addendum, when end users realize that Syrah can put its competitors out of business, how appealing will their value proposition as a sustainable miner and hence a sustainable supplier be? (even if they have offtakes today)
Now, one point that the market does not realize yet.
It makes sense for Syrah to mine graphite for the vanadium:
View attachment 445598
In the spreadsheet above, if Syrah mined 1,000,000 tons of graphite with a weighted average basket price of $295 (well below the $500 of the noughties and opening up new markets due to the lower cost in
recarburisers as an example), the share price should be at least $9.66 (not including spherical) with $6.88 of that coming from vanadium. The vanadium supply would be quite small relative to the market and the pricing is conservative.
This is what the graphite market doesn't understand! Syrah will eliminate its graphite competition because it makes sense for the vanadium. Other graphite hopefuls could not survive in a world with a $295 basket price. Syrah wouldn't do this to be spiteful but because it makes economic sense.
This is too complicated for the market to realise at this point in time and it's largely caught up with the Country Risk Premium in Mozambique where positive developments are occurring; Nyusi restructuring his power base to have people more amenable to peace, the Kroll audit progressing and the IMF hinting at a new package. From everything that I've read including recent bearish arguments it's clear to me that few people really understand Syrah or economics.
My opinion is that Syrah is undervalued based on my modelling of multiple scenarios including stress tests and reduced initial output. Other than Michael Slifirski at Credit Suisse and Regal Funds Management, I don't think that many investors have done their due diligence here despite many claiming to have done so.
I'm not going to respond to your future posts unless there's empirical evidence of substance as opposed to mere opinion.
And finally, the spreadsheet above assumes a $19.68 price for Syrah in 5-7 years if it produces 60,000 tons of spherical. If Syrah produced 120,000 tons an adequate valuation would be around $29.70. All in my opinion.
(20min delay)