A little Bit of HistoryI know everyone is mainly interested in...

A little Bit of History

I know everyone is mainly interested in the future and the past is gone, not to be repeated, but I am a bit of a history buff, I find it tends to put things in perspective.

So here, for your entertainment, is the potted history of Syrah as told by themselves, all the information is derived from the ASX announcements and Annual Reports on their website.

It is a testament to the originator, director and CEO Tolga Kumova’s foresight and persistence that this company got to where it is today. Single handedly he got investors enthusiastic and involved in something that had never been attempted before outside of China and rather than starting off small (as all the companies that followed plan to do) he went in boots and all, large scale, to stick it to the Chinese. The story he told got institutions and “sophisticated investors” excited and wanting to be involved to the extent of enthusiastically investing in 2016 at $6.05 a share. He got out, job done, at the peak before reality had time to take over.

It is interesting to compare the story told in the 2015 DFS and prospectus with what subsequently transpired. The forecast production cost was 100% underestimated, the sales price was 100% overestimated, the achievable production volumes 100% overestimated and while you would need a forensic accountant to discover from the published accounts what the mine and plant cost, I believe it could be more than 100% over original estimates.

All this is understandable, for an idea that new, and with the opaque Chinese market everything was an educated guess and even now, 8 years later graphite companies with the benefit of history suffer from the same enthusiasm / reality divide. However, you have to wonder if the lessons of 2018/2019 had been known in 2016 whether this project would even have been attempted.

Reality kicked in early, the first year of operation (2018) was a nightmare. Commissioning problems, refractory brick failure, shortage of consumables and a plant fire all contributed to an extended commissioning phase and not being able to fully supply contracted orders. The decision was made to not activate a binding offtake agreement because it was thought they would be able to find more profitable deals easily. All the production costs for 2018 less income received was capitalised, how they convinced the auditors that was acceptable would need a royal commission to discover. The following year it was accepted that action was untenable and a US$96.9 million impairment charge darkened the profit and loss account.

From then proceedings were entirely less than optimal, market downturn, covid, unavailability of shipping, industrial action, political instability, operational instability, volatile market conditions and finally this year again a complete mine shutdown.

So here we are, six years down the track with ~US$400 million in accumulated losses, seemingly few orders to fill and a plant in campaign mode, maybe producing, maybe not. Is it any wonder investors have lost confidence.

Disclaimer : I have been known to misread figures, misinterpret basic facts and misunderstand accounting standards so no credence should be placed on anything I say here, today, in the past or in the future.