One step forward but two steps back, page-2

cont.

Is there still value in SYR and what are the risks?
Today's share price move (-13%) in our view reflects a revision to pricing expectations
as the market tries to determine a sustainable long term price. The UBS LT basket price
is US$824/t and we see the market today pricing in less than US$600/t (assuming no value for
BAM). Commercial production was declared from 1 Jan 19. Q1 19 net cash outflows
are forecast at US$20.4m with first positive cash flow on a C1 basis from Q2 19 (prev.
Q1 19). However, with net outflows this half likely to take the cash balance below
US$50m, we think attention will return to the need for a debt facility. SYR continue to
reiterate the key to achieving this will be production consistency and pricing certainty.

Valuation: A$2.64ps (prev. A$2.87ps) DCF @ 13% d.r.
We lower our PT to A$2.65ps (prev. A$2.90ps), set in line with NPV (unch). We retain
our Buy rating but caution share price performance is likely to hinge on confidence in
price lifting and achieving positive FCF.