Earlier today I replied to a few posts today regarding SYR and it got me thinking. Initially I said I wouldn't add to my Syrah holdings but after doing a little research I've topped up. Here's my reasons I think Syrah may have reached a tipping point.
1. Syrah are almost at a point where they are making a profit. Their latest report says that the "should" be in the black during their third quarter.
2. There's upside from Syrahs decision to change their product mix.
3. There's upside from the current low graphite prices.
4. Graphite demand in increasing. LION Batteries use more graphite than any other mineral. China and many other countries are changing their steels mills to a newer technology which requires graphite electrodes.
5. China are making it quite difficult for Synthetic granite producers due to the environmental concerns of producing synthetic graphite. Synthetic graphite also requires oil byproducts and these are said to becoming more expensive.
6. There aren't many producers of natural graphite. Syrah's position in the market as the first AND their size means that new producers will have a hard time competing with Syrah on price. Larger operations are usually able to produce a cheaper product due to their economies of scale.
7. Syrah "shouldn't" have to go to the market for a capital raising again. The recent raising "should" provide sufficient funds to get the BAM up and running which "should" also improve their bottom line. Cash on hand should also allow them to be more conservative when negotiating new contracts and also to ensure the mine is running as efficiently as possible by completing what ever efficiency changes are required.
8. Legacy contracts are expiring. As the new kid on the block, I think it's likely Syrah discounted their products for some of their intial sales. It's also likely Syrah's primary focus was to get the product to market in the early days, regardless of how much cream was left. With demand increasing and a history (short) of successful sales, I believe Syrah will be better positioned to negotiate higher prices.
9. The shorts are fleeing. I did some calculations earlier and was pleased to find that for the month of July, on average, shorts accounted for just 0.6%.
Assuming management don't light any more fires (pun intended), Syrah "should" be able to turn their button line around this quarter. While I don't expect all of these factors to swing in their favour at once, I believe only a few will are required to bring the company into profit. Once this occurs I think investors will quickly return.
(20min delay)