ASX graphite stock Syrah Resources [ASX:SYR] has released its June quarter production report on Thursday.
SYR shares were flat on the release, as investors mulled over the quarterly’s import.
SYR shares have been volatile in 2022 and are down 25% year to date.
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Syrah Resources Quarterly
Syrah — who owns the Balama graphite project in Mozambique — reported that it produced 44,000 tonnes of natural graphite at 79% recovery with 44,000 tonnes sold and shipped during the quarter.
Syrah has been slowly ramping up its production at the Balama site, selling and shipping 35,000 tonnes during the March quarter and 19,000 tonnes in the December 2021 quarter.
Source: Syrah Resources
Syrah sold its natural graphite at a weighted average sales price of US$662 per tonne.
However, Syrah produced the graphite at a C1 cash cost of US$543 per tonne, a slim margin that led to another quarter of operating cash outflows.
SYR ended the quarter with a negative operative cash flow of US$10.9 million, with a further US$24 million outlaid on investing activities.
Syrah started the quarter with US$204.5 million but the free cash flow losses meant the graphite stock ended the quarter with US$168.1 million.
Syrah is aware of its costs, and even flagged ‘potentially sustained increases in certain operating costs’, which will lead it to review its cost guidance:
‘Balama C1 cash costs (FOB Nacala/Pemba) for the quarter were US$543 per tonne. Higher diesel and consumables costs, additional ex-mine gate logistics costs for Pemba breakbulk shipments and one-off maintenance costs led to higher unit cash costs for the quarter.
‘Due to potentially sustained increases in certain operating costs, Syrah is reviewing Balama C1 cash cost guidance at a 15kt per month production rate. Balama C1 cash costs are expected to reduce as production rate increases beyond 15kt per month with improved shipping options and availability and as improvement initiatives are embedded.’
In other news, more than 76% of the company’s Vidalia active anode materials facility in the US has now been completed, with construction under way.
Now that the facility expansion has reached 100% shareholder approval, it is expected to reach production by September 2023.
Vidalia’s production capacity is also under a new Definitive Feasibility Study, as the company hopes to expand production at the site to 45 thousand tonnes a year on top of the AAM facility’s 11.25 thousand.
SYA share price outlook
Syrah was upbeat about the demand outlook for graphite.
The producer offered its thoughts on the market outlook:
‘Positive momentum in EV sales and penetration, a key leading indicator for natural graphite and AAM demand growth, continued during the quarter despite global recessionary concerns.
‘Global EV sales grew 51% in the June 2022 quarter, versus the June 2021 quarter, to approximately 2.2 million units 1 with strong demand growth in China and ex-China consumer markets.
‘Robust EV sales growth is resulting in high demand for anode material, as shown by total Chinese anode production increasing to above 100kt per month, further announced anode capacity additions in China and record imports of natural graphite into China.’
With graphite prices rising, can Syrah take full advantage?
Ramping up production to scale and lowering its production costs will be crucial.
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Regards,
Kiryll Prakapenka,
For Money Morning
