HLT My advice is simple. Be extremely careful. The graphite...

HLT

My advice is simple. Be extremely careful. The graphite industry is not as simple as investors have been lead to believe. Companies like Syrah and other have promoted a great story and thus have created market values that are extremely difficult to support once a mining company starts to have revenues.

Mining and processing of graphite is the simple part. The real difficult part is selling all the graphite mines capacity at profitable prices. Offtake agreement are not guaranteed take or pay agreements. they are exclusive agreements to supply a specified volume if and when the offtake buyer requires all that volume. Offtake agreements do not guaranteed the seller any min price. Thus as market priced decrease the producer/sell is the big loser.

New graphite mines will experience difficulties in selling all their capacity and thus will struggle to becoming profitable.

The worldwide demand is just not growing fast enough to support all this new added capacity. Syrah and others reports they are going to develop new markets but they fail to share with shareholders the selling prices they will generate from these new markets and what time frame is need to develop regular sales volume to these new markets. Thus the longer it takes to develop profitable markets the more capital they burn thru.

Yes Syrah has lots of capital today. The question is at the rate they are spending their capital which also must cover all their ongoing overhead costs how long will this excess capital last? Once it runs dry will investors want to continue to fund their losses is the question?

Will Syrah find a big mining company that will purchase them and then this issue will go away and existing shareholders do not get burned.

Lots of risks to consider if you want to become a graphite investor.