The tide is out....

First time HotCopperposter but long term reader.  The tide is indeed out and the syrah yacht is nothing but a rust bucket underneath after that disastrous Qtrly and I am now officially classified as disillusioned 'former' Syrah true believer. I've got a fair bit invested at the low $3 average and have held since the Tolga days. Below is a short summary of my take on Syrah’s share price from here and then more detail behind my pessimism for those who care to read:

-Next 6 mths (longer?) $1-2: Syr stated positive cash flow in Q2, even if that's correct it means the sp is atthe mercy of shorters and traders until end of July (release of June Qtrreport). Ever see a nature doco where an orca captures and torments a stillalive seal? Well think of syr sp as the seal and the orca as shorters/traders.

-Longer term $2-3: Drivenby slight improvement in unit cost and low received graphite prices.  I expect they will burn through a fair bit of cash before they get cashflow positive and we will have to deal with a dilutive cap raise at a low price.

-Longshot $3-4:  Triggered by something miraculous like a spherical supply contract with Tesla (or similar).  Or a company like Glencore making a takeover bid for the Vanadium resource like the rumours a few years back.

My take on the qtrlyand company direction:
Graphite demand
The thing I interpreted from the Qtrly wasthat demand sucks i.e. “250kt natural graphite subject to market conditions”.  That statement was hardly a ringing endorsement of solid demand and their presentations are loaded with futuristic statements of reduced Chinese output, becoming a net importer etc.  That doesn’t appear to be happening and we may have to wait a long time for demand to match the hype.  Didn’t they previously state almost all 2019 production (@250-300kt!) was pretty much already locked up with existing customers?

Cash
Seriously WTF…where the hell did $550 per tonnecome from??  That's >20% worse than syr ever disclosed to the market and light years away from the sub $300/t they promised as production ramped up.  And now that great chart in the qtrly showing they really need to run the plant at 250ktpa to bring the unit cost down to a reasonable level and that relies on the same shaky demand i.e. “subject to market conditions”.

G price
Be nice to know how much product has been sold atwhat part of the massive $375-700/t price range. My suspicion is the basket price sits solidly in the bottom half and will do for quite some time based on demand.

BAM
How many times have the goal posts changed here– if I recall correctly it wasn’t too long where mgmt were talking BAM startingcapacity 20ktpa or even 50ktpa. Now we've got 5ktpa capacity and sending out small samples for testing!  Where is the Maurebeni offtake for 50ktpa - that offtake had a clause that syr needs to demonstrate commercial productions by Dec 2019?  I noticed mgmt hasn’t spoken about that one for quite a while! Where is the transparency and or disclosure obligations by mgmt??  Also noticed in the qtrly they are now talking about unpurified spherical graphite and downstream production using ‘high temperature treatment”.  My concern with those lines are they might be having trouble with the graphite purifying processes (using acids) at BAM and are now investigating high temperature purification processes.   Either way the lack of detail shows the poor transparency by mgmt and suggests we may have bad news about the BAM in coming qtrs.

MGMT

In short terrible performance!  They really really need to pull their finger out and start focussing on reducing cash outflow, Q1 2019 forecast US$20M and US$10-15M for 2019 sustaining capital.  That’s US$30-35M from a cash balance of US$77M already spoken for.   Hello cap raise at potentially current low prices!   Do we really need to be burning cash for capex like cell 2 of the TSF right now?? I’d like to hear them start talking about how they plan to reduce cost per tonne besides just hoping for demand to lower the unit cost.

 

Overall, I dread every market release by thismob and they have no more potentially positive announcements left in thetank (e.g. mining agreement finalised, commercial production achieved).  I was amazed at how low the share price has been and thought it was just shorter manipulation, in hindsight the shorters have seen the environment and developments here perfectly so well played to them!

I will be happy to be proven wrong about anything I’ve written here, theway the company is currently going getting back money I invested will be agood outcome!!