Syrah Resources Limited

Witnessing some headwinds: Syrah Resources Limited (ASX: SYR) is an Australia based industrial minerals company. It is headquartered in Melbourne, Australia, and, it produces spherical graphite through downstream strategy, which is used to manufacture anodes for lithium-ion batteries; and natural graphite recarburizer used in the steel making and iron casting industries. Recently, the company released its first-quarter report wherein the company recorded production of 11.2kt which is below plan. However, the current production rates are improving due to increased recoveries, plant throughput and stability to deliver a significant rise in the production. The first quarter production was affected due to a slower ramp-up in recoveries, due to flotation circuit optimization works and secondary circuit utilization, and lower throughput due to fines dryer outage. The company is targeting the lower end of 2018 production guidance of 160,000 to 180,000 tonnes, with a planned production ramp-up with the split of 25% H1 and 75% H2 for 2018. The group is a cash-rich company with the cash reserve of US$ 80.5 Mn as at March 31, 2018 and zero debt position. The funding position provides a capital base for the future as the Company continues to focus on generating the good return for its investors.

 
Balama Graphite Operation: Production rates improving (Source: Company Reports)

On the other hand, Macquarie Group Limited and its controlled bodies became the substantial holder of SYR by holding 17,102,167 securities and 5.74 per cent of the voting power. Moreover, UBS Group AG and its related bodies also became the substantial holder of the Group by holding 5.66 per cent of the voting power. Further, Credit Suisse Holdings (Australia) Limited, a substantial holder of the Group changed its holding in SYR since June 29, 2018 from 6.38% of interest to 5.26% of the voting power. Meanwhile, the stock price was down by 34.0 per cent in the past six months but up by 6.03 per cent in past one month as on July 10, 2018. The share price was down by 2.341 per cent on July 11, 2018 as there was some speculation in the market regarding Balama Plant coupled with concerns on a poor-quality design/construction and that operator or manager is incompetence or unskilled.  Based on the foregoing, we maintain our “Hold” recommendation on the stock at the current market price of $ 2.920, while outlook for graphite is still in a decent zone.
 

Independence Group NL

FY18 Performance Broadly In-line: Independence Group NL’s (ASX: IGO) stock price climbed up about 2 per cent in the past five trading days after the release of the preliminary metal production update for the June 2018 quarter in which the company gained decent improvement as compared to previous quarter’s performance. According to the release, the group achieved a big step up in metal production rate at Nova during the June 2018 quarter driven by better than nameplate mining and processing rates and higher overall grade, which absorbed downtime and lower productivity in 2HFY18 because of the SAG mill liner issues. Nova nickel production for the June 2018 quarter was up 23% quarter on quarter with production for the full year at 3% below the low end of IGO’s guidance. Further, the management stated that the production at both sites i.e., Tropicana and Long was comfortably within the group’s FY18 full year guidance range. Besides this, Tropicana gold production for FY18 was slightly better than the midpoint of the guidance range and recorded 467,139 ounces of gold in FY18. Further, the Grade streaming is expected to continue into FY19 in conjunction with the completion of the mill throughput development by the end of the calendar year to 8.2Mtpa. We expect that the company will continue to make good progress with the pre-feasibility studies for the downstream processing of Nova concentrates to produce nickel and cobalt sulphates and the Boston Shaker underground at Tropicana, with both studies due for completion by the 2018 calendar year end. The group is expected to benefit from the nickel deficit scenario in 2018 and 2019.


Metal Production Highlights for Q4FY18 (Source: Company Reports)

On the other hand, the company has entered into tenement purchase and JV agreements with three entities owned and controlled by Mark Creasy (the Creasy Group). The objective of this synergistic agreement is to strengthens its position on the highly prospective Fraser Range. Meanwhile, the stock price has been up 58.02% in the past one year but declined by 2.72% in the past one month as of July 10, 2018. Based on the ongoing development, we maintain our “Hold” recommendation on the stock at the current market price of $ 5.0.

 
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