Syrah Resources has a world class, very low cost (forecast) graphite mine in Mozambique.
- FS results included a IRR of 71%, post-tax NPV10 of US$1.1 billion.
- Valuation is now attractive, with graphite production set to begin in Q2 2017.
- Syrah Resources (ASX:SYR) (OTCPK:SYAAF) – Price = AU$2.73, US$2.15
Syrah Resources is an Australian mineral exploration company with a focus on the graphite sector. They also have exposure to vanadium, mineral sands, copper, coal, and uranium.
I previously briefly covered Syrah Resources back in May 2016, when I wrote, “The Graphite Miners Could Be Next To Boom.” At that time I liked the company, but not its valuation. Since that time the stock has halved in price and valuation, and now looks attractive. My reason for looking at the graphite sector is that I believe electric vehicles (EVs) are likely to achieve rapid adoption, and the demand for lithium, cobalt, and graphite will skyrocket.
Graphite is used for the battery anode. It takes 30 to 40 times more graphite than lithium to make a lithium ion battery. Whilst the graphite used in the lithium ion battery can be synthetic, generally that is a lot more expensive than natural graphite. There are almost no substitutes and little recycling of graphite.
Benchmark minerals has stated that the 35 GWh Tesla (NASDAQ:TSLA) gigafactory (producing 500,000 EVs), would require 112,500 tonnes per year of flake graphite, 45,000 tonnes per year of spherical graphite. The proposed Tesla “gigafactory” alone will require several new graphite mines to feed it.
Graphite spot prices
You can see from the graph below that graphite prices (unlike lithium) are yet to take off, as the EV boom is still in its infancy. Also the larger the flake size the higher the price. Investors should be aware graphite is very plentiful, however cheap large flake graphite mines, with very low production costs are quite rare.
Article by Matt Bohlsen, SeekingAlpha