Date of Data Capture: 4/10/2017
Name: SYRAH RESOURCES LTD (SYR)
Classification: Integrated Mining: Graphite
Current Price: $3.51
Market Capitalisation: $1.05B
Forecast Sales Growth: First Production 3Q 2017
Yield Estimate: 0%
Consensus Price Target: $4.42
# Covering Analysts: 5
Discount at Current Price: 25.93%
Price Target Trend: Decreasing
Signal Timeframe: Quarterly-Monthly-Weekly
Trend Bias: Up-Down / Long-Medium
Focus: Capital Growth
Set up Notes:
• Syrah is making its way out of a recovery base after bouncing off strong historical support at $2.50 following a fall from $6.50 – it has done this before with similar setups to right now.
• Fundamentals are lacking here due to the early-stage of the company moving to first production, sales and earnings by the end of 2017. Consensus targets have followed the price down but forecasting get aggressive into 2018.
• Technicals are very attractive with good multi-timeframe momentum and positive signalling setting up the same way as two previous uptrends in 2013 and 2015 gaining over 100%.
• Resistance targets sit at $4.00, $4.50 and $5.50 with support layered at $3.50, $3.00 and $2.50.
Growth Focus: Syrah Resources Ltd (SYR)
Our primary focus here is capital gain, we will select our stocks from the ASX top 500 All Ordinaries Index.
Derived from the Greek word for “to write” graphite is a form of crystallised carbon whose properties have a great many uses ranging from pencils to metallurgy and nuclear fission regulation to highly conductive electrodes. It is the current importance of the last attribute that leads us to Syrah Resources Ltd (SYR) a cashed up and soon to be new major graphite producer, whose growth potential we see crystal clear.
Established in May 2007 and headquartered in Melbourne, Syrah is developing their 100% owned Mozambique asset; ‘Balama Graphite and Vanadium Project’ into first production by the end of 2017. Balama is the world’s largest graphite deposit and ramping up production on the back of earnings will see them eventually become the world’s major supplier of graphite concentrate. Their timing should spark your interest as graphite is a major component of lithium ion batteries used in electric vehicles, a market forecast for aggressive demand growth.
After listing on the ASX in September 2007 Syrah were thrust into the crucible of the GFC before beginning a scorching recovery in 2009. Having reached a more stable range since 2012 we have seen a number of major trend cycles that correlate very well to our long-term model, which is signalling the emergence of a new greater uptrend right now. More recent history shows them breaking linear resistance early in 2017 before leaving behind their recovery base last month.
Old resistance has become new support at $3.50 with more behind at $3.00 and $2.50, and we see some exciting resistance targets sitting high above at $4.50, $5.50 and $6.50. Consensus analyst targets are some 25% higher than present pricing and while these valuations have been falling they have really only been following the price lower – likewise we expect higher prices to drag targets higher going forward.
Last month’s capital raising at $3.38 has SYR debt-free and well-funded through to first earnings and lends nearby psychological price support. Adding future price support is the Balama project also hosting the world’s largest vanadium deposit - with this metal being a key component in lithium ion batteries prices have been charging ahead along with other new-energy commodities. This future world-class graphite and vanadium mine has low strip ratios, very high grades and is capable of significant production levels for a 40+year mine life - their growth potential from here is elementary and not written in shades of grey.
The graphite sector should experience ongoing heat transfer from the lithium/EV space and Syrah has aggressive forecasting ahead as they get production rolling and then ramping up. With enough cash to get them across the finish line and with offtake agreements in place once they get there, we believe Syrah has growth potential that is truly electrifying.