Syrah Resources Ltd (ASX: SYR)

SYR Details

Entering leading geographic market for natural graphite:Syrah Resources stock price surged about 4.5% on September 08, 2017 at the back of the positive update from the group with regards to inking a binding sales agreement with Jixi BTR Graphite Industrial, a wholly owned subsidiary of Shenzhen BTR New Energy Materials (BTR, the manufacturer and leader of technology development of battery anode materials for lithium-ion batteries). The agreement is for 30,000 tonnes of graphite from the Balama operation in the first year of production with other terms being kept confidential. It has been further highlighted that SYR along with BTR will continue to develop other elements of the previously announced Memorandum of Understanding, including potential supply chain cooperation. This move will help SYR enter a leading geographic market for natural graphite and leverage on forecast growth in energy storage and electric vehicles’ sector. In its August update, the group also confirmed about key sales agreement with Hiller Carbon, Marubeni and MINERALS GmbH, with regards to providing the baseload of industrial market flake sales from Balama to North America, Asia and Europe. Recently, the negotiation of a Mining Agreement by Syrah’s wholly owned subsidiary, Twigg Exploration and Mining, which is the holder of the Balama Project, was finalised with the Ministry of Mineral Resources and Energy of the Republic of Mozambique; and this agreement has been approved by the Government of the Republic of Mozambique. Although few concerns have been earlier raised with regards to their cash flow updates, the present scenario with various agreements in place is expected to pave path for an improved performance. We maintain a “Hold” on the stock at the current price of $ 3.45
 

Balama Project has Largest Defined Reserve and Resource (Source: Company Reports)

South32 Ltd (ASX: S32)

S32 Details

Increase in Mineral Resource and Ore Reserves: South32 Ltd has witnessed a 42% increase in total estimated open cut Mineral Resource to 29 Mt with a 20% reduction in total estimated underground Mineral Resource at its Cannington silver-lead-zinc mine. Further, there has been a 24% rise in Measured Mineral Resources because of a reclassification, and this considered confidence in both geological and grade estimation continuity. S32 also reported a 9% increase in total estimated underground Ore Reserves with a 31% increase in Proved Ore Reserves, at the back of additional drilling and an updated resource model and mine plans. The group had earlier postednet profit of US$1.2 billion and revenue of US$6.95 billion, up 20%, for the year ending June 30, 2017, at the back of high operating leverage and stronger commodity prices. A key highlight of the group’s result was free cash flow more than tripling to US$1.9 billion. Accordingly, S32 could announce a fully franked final dividend of US$334 million, representing half of the miner’s underlying earnings in the second half. S32 had demonstrated a robust performance across its aluminium supply chain, including record production at Mozal Aluminium. Further, there was a cumulative saving of about US$700 million over two years driven by a US$360 million reduction in controllable costs. The group is expected to benefit further from commodity prices. The stock has already run-up 44.4% in last one year (as at September 07, 2017) and is trading at higher levels. We give a “Hold” on the stock at the current price of $ 3.12

Earnings Profile (Source: Company Reports)

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