Ann: Balama force majeure, page-103

Syrah is one of those companies that would appear to have plenty of potential should any of the major major catalyst they spruik come to fruition. But somehow those major catalysts just never eventuate, they remain perpetually just over the horizon.

• It has major backing of AusSuper and the US Government.
• It has the largest known Graphite resource on earth.
• It is the only western company with any downstream capability.

If only the oft quoted western bifurcated graphite price (caused by S30D IRA credits, S301 tariffs or Chinese ban etc), parabolic demand from high EV/BESS adoption, or bans of synthetic graphite would eventuate, then SYR would be to the moon... but these supposed catalysts never come.

Blame who you want, but the reality is that without any of these catalysts SYR was unlikely to be profitable any time soon. This latest incident has just compounded the issue and it makes an already highly speculative stock basically uninvestable in my mind.

I feel absolutely horrible for holders, SYR has to be one of the most unlucky companies on the ASX - it constantly feels like 1 step forwards, two steps backwards.

Now I have no doubt I'll get labelled a downramper, but I'm not. I have been keeping an eye on SYR because I agree that if any of the above catalysts ever actually occurred it would have been in the best position of any of it's peers.

But now should any of the catalysts occur, there is no guarantee SYR will even be able to mine the graphite from Balama necessary to capitalise on the event. It may be a short lived event, but as others have pointed out - this is Africa - there is every chance it may not be so simple.

With that in mind, the companies inability to generate any income for the foreseeable future has only further compounded it's already precarious financial position.

SYR has a market cap of $186m AUD at 18c.

SYR has approximately $576.4m AUD in debt:

• $98m USD DOE Loan (3.98%) - fully drawn
• $150m AUD convertible notes with AusSuper (11%)
• $150m USD DFC loan (4.61%) - unclear degree drawn

From this SYR accumulates up to approx $37m AUD/year in interest related payments.

SYR had approximately $96m AUD cash at 30/09/24, however $64m AUD of this was restricted.
Meaning they had approximately $31m AUD cash at 30/09/24 they can access without hurdles or approvals.

SYR had a quarterly cash burn of approximately $48m AUD:

• Approx $25m AUD for Balama ($4m USD/month)
• Approx $7m AUD for VIvaldi
• Approx $12m AUD for Staff
• Approx $4m AUD for Admin

So if SYR had approximately $31m AUD of liquid cash at 30/09/24 with a burn rate of approximately $48m (plus interest payments) and no income - I find it hard to see them not needing to raise capital in the near future, even if they were able to access the restricted cash.

Maybe SYR will receive an insurance payout at some point, I cant see that being in the immediate future and we would be absolutely guessing if it may occur, when it may occur, what amount may be payable and if any of the other parties, owing to the default, may make any claims.

Now lets assume you are private equity, a superfund or lender - how much of a discount would it take for you to invest in a loss making company with no clear timeline to resuming production in a country of high sovereign risk, in a bear market, with a end product that hasn't yet been successfully validated, laden with debts which they have already defaulted on and where those lenders have first priority ranking security over the companies assets. Would any discount be enough?

At this point I see most investors suffering the sunk cost fallacy.
I wish all investors luck and I hope for the sake of the west SYR pulls some rabbits out of it's hat, but that would not be my base case.

As always DYOR. I may have stuffed up the math or assumptions and It is possible that time will prove me totally wrong.