AustralianSuper quadruples down on short-sold Syrah

AustralianSuper has raised its long-term bet on battery minerals company Syrah Resources, after agreeing to subscribe for more shares in the graphite miner, loan the company money and potentially underwrite part of its fifth capital raising in less than four years.

The emphatic show of support from the nation's biggest pension fund for the ASX's most shorted stock reflects AustralianSuper's strategy to ''partner'' with companies rather than just invest, and comes despite the fund's existing 15 per cent stake in Syrah being underwater at the miner's current share price.

AustralianSuper will provide more than half of the $111.6 million that Syrah will seek to raise from shareholders in coming days, and Syrah chief executive Shaun Verner said the support would allow him to run the business for ''the best medium and long-term outcomes'' rather than prioritising short-term cashflow and liquidity.

That long-term philosophy is best illustrated by Syrah's approach to graphite sales. Rather than increase exports to bolster short-term revenue, Mr Verner said the financing would allow him to sell less graphite than previously expected this year, in a move that should support prices for the commodity and give Syrah extra leverage in contract negotiations.

"The support of our largest shareholder AustralianSuper is designed to give Syrah the balance sheet strength to ensure we have the flexibility to optimise our production output, capital expenditure and pricing negotiations," he said.

"We are a single asset company in a new and developing market, and we see depth of liquidity as critical ... to ensure that fundamental drivers are forming the [graphite] price, not the need for us to clear material because of cashflow."

The reduced export volumes also highlight Syrah's significance to the graphite market; the company's Balama mine in Mozambique is considered by analysts to be the world's largest and most prospective graphite deposit, and the mine's entry to an opaque, niche market has had a significant impact on supply and prices.

AustralianSuper subscribed to a $55.8 million, five-year debt instrument which can be converted into Syrah shares at $1 each no sooner than 30 months after being issued.

AustralianSuper will also subscribe for more than $8 million new Syrah shares at 81¢ each under an entitlement offer to all shareholders in the miner.

Syrah shares were fetching 98¢ on Tuesday, well below the $6.54 AustralianSuper paid for one tranche of Syrah shares on June 10, 2016.

AustralianSuper's average buying price has been $3.25 according to Bloomberg.

A series of equity raisings, production delays and weaker than expected graphite prices have driven an 85 per cent slump in Syrah shares over the past three years.

Credit Suisse will manage and underwrite the raising, but AustralianSuper has agreed to sub-underwrite a portion of the raising if required.

"The support for Syrah through ramp up and entry into the market has been very strong from AustralianSuper,'' said Mr Verner on Wednesday.

Mr Verner said the long-term support would also afford Syrah the luxury of time to better evaluate the fast-changing geopolitical situation around battery minerals.

China's domination of global rare earths production has sparked concerns in the US consumers that recent trade tensions between the world's two biggest economies could see it starved of rare earths supply, and China's domination of global graphite supply has created similar concerns.

Alaskan senator Lisa Murkowski recently highlighted the fact the US imports 100 per cent of its graphite needs while preparing legislation to reduce the US' reliance on foreign minerals.

Syrah has built a pilot graphite processing plant in the US which if developed to commercial scale would allow it to supply battery grade graphite to electric vehicle manufacturers and battery producers in the US.

''It certainly provides the ability to think strategically about Balama's supply position from a geopolitical standpoint because at the moment the vast majority of natural graphite into the battery supply chain is coming from China at a time when battery manufacturing capacity is growing in both Europe and the US,'' said Mr Verner.

''It means that optionality for us about who we look to supply, who we potentially look to work with is still before us. We are not forced to make decisions on that more quickly than we otherwise would need to.''

Syrah will continue looking for lenders, and Mr Verner said the company had the right to reduce the size of AustralianSuper's convertible note if it was able to secure debt elsewhere on more attractive terms.

"Today's announcement provides additional negotiating support for that process," he said.