SYRAH RESOURCES LIMITED (ASX: SYR)

Encouraging potential despite short-term headwinds: While this stock has been one of the short-selling stocks in the recent times, Syrah Resources still holds good resource potential given the latest developments. The Mining Agreement signed by his Excellency Ernesto Max Elias Tonela, the Minister of Mineral Resources and Energy, on behalf of Government of the Republic of Mozambique, and Syrah’s wholly owned subsidiary, Twigg Exploration and Mining has marked the final step in the process for obtaining an approval on the Mining Agreement by the Administrative Court in Mozambique for enforcement. This agreement also consolidates all prior project documents and approvals. Along with this, the ramp up production of flake and fines graphite at Balama with increased recoveries and production achieved in February 2018, has been tracking well. However, the company lately cited an issue regarding the dryer of the fines graphite circuit (Fines Dryer) at the Balama Operations that led to a damage to the Fines Dryer refractory bricks and the flame tube. The group’s coarse flake graphite circuit dryer (Flake Dryer) is independent of the Fines Dryer and thus the group is looking into mitigating production impacts with the assistance of the Fines Dryer vendor. On the other hand, the group’s sales agreement with Zhanjiang Juxin New Energy Materials in China, a spherical graphite and anode materials producer, for 20,000t of natural graphite in 2018, has provided a ground for a better outlook while short-term issues are being resolved. SYR stock soared up by 4% on March 16, 2018 with rise in positive sentiments and we give a “Hold” at the current price of $3.85
 

SOUTH32 LIMITED (ASX: S32)

Resurrecting momentum: Up 5.6% on March 16, 2018, South32 seems to be gaining some traction with a decent outlook. The group recently changed its buy-back program that is now planned for the period 11 April 2017 to 10 April 2019 (inclusive) or earlier if US$845m worth of shares are bought back prior to that date. The Company intends to buy back shares with an aggregate buy-back consideration of US$539.8m. With the momentum rebuilding, the stock has also been added to S&P/ASX 20 Index effective March 19, 2018. S32 has also maintained its FY2018 guidance for all operations with the exception of South Africa Manganese where market demand and record performance has underpinned an 8% increase to its prior estimate. Further, South Africa Energy Coal will now be managed as a stand-alone business from April 2018 and a decent South African Rand (US$301m) investment has been approved for Klipspruit colliery life extension by at least 20 years. The target to reduce controllable costs by US$700m and sustaining capital expenditure by US$200m over two years has been a good indication by the group. We give a “Hold” on the stock at the current price of $3.38
 

Strong Portfolio (Source: Company Reports)

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