Discussing valuation, page-21

Stanislar, there has been bad management, particularly at the board level. There have been many avoidable mistakes and poor decisions. Particularly by Jim Askew. 

Cartex, given multiyear lead times 20% prices movements are not required before a decision to invest in new production is made.  Equally #2 and #3 are not required. 

There is very little chance this company goes bankrupt. But if the management team doesn't improve operations quickly (particularly with production and port issues) they could burn through the $100 million and need to raise again. 

If they get cash flow positive the stock and company will be fine.

Fortescue made a more aggressive decision to invest in a new mine back in 2004/2005. At the time iron ore prices had risen. But the actual price at the time of investment was still not above FMG's cost of production. Their product quality (wet iron ore) was also very low and as predicted has traditionally sold at a steep discount to benchmark. So FMG brought on a large mine, with poor product quality, into a market that was reasonably well supplied. FMG won when Chinese demand spiked as they had predicted. Syrah is a making a similar decision except that they are a low cost producer with good quality. I would also argue that with battery production plans and large auto manufactures committing billions to EV that "visibility" for increased graphite demand is much higher than it was in iron ore in 2005.

Graphite sets up very similar to iron ore in 2004. In 3 years (2006/2007), Chinese demand kicked in and iron ore prices tripled. The same will happen in graphite although the price movement should start much earlier and go higher. As we have seen from Syrah's struggles to create production, it will be many years AFTER that price spike in which a meaningful supply spike can occur. That should give Syrah 4-5 years of extreme profits. After that they should still enjoy nice margins and as a low cost producer. 

FMG's stock was .25-.50 in 2005. It peaked at $12 in 2007. Today the enterprise value of FMG is $15 billion. 

From 2011-2013 graphite prices tripled. The demand "impulse" which lead to that squeeze was much smaller than what is coming from EV. Even with conservative assumptions regarding EV penetration it is clear that graphite prices will overshoot price highs when demand kicks in.