Just one month after saying it would try to avoid a dilutive equity raising, Syrah Resources (ASX:SYR) is raising $94m at the company’s lowest share price in 5 years

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Syrah Resources Ltd (ASX:SYR) today provided a company update and announced a fully underwritten $94 million institutional placement at a share price of $2.23.

The raising represents a relatively modest discount of 9.3 per cent to the $2.46 the Syrah share price closed on the ASX yesterday, September 3 2018.

Zoom out though, and the placement share price of $2.23 is the lowest the company has closed at since September 2013, or 5 years ago.

This comes just one month after an article in the AFR said Syrah Resources CEO Shaun Verner will defer spending if it helped the company avoid an equity raising.

The article said Syrah Resources chief executive Shaun Verner had signalled he was willing to delay the company’s push into battery grade graphite production if such a move is required to avoid a dilutive equity raising.

The placement announced today is to complete the rampup of the Balama Graphite Operation through to positive cash flow, progress Syrah’s Battery Anode Material strategy to the end of 2019, fund the evaluation of the Vanadium Resource at Balama, and fund corporate, general and administrative costs (including transaction costs).

In an update on its Balama Graphite Operation, Syrah said it has made significant progress in the ramp-up and de-risking of the Balama. The company reiterated it is on track to achieve CY2018 production guidance of 135kt to 145kt, as previously announced to the ASX on 30 July 2018.

Cashflow positive

The company said commercial production is expected to be declared during Q4 CY2018 and Balama is targeted to be operating cash flow positive from late 2018.

Syrah Resources is one of the most heavily shorted ASX shares, with the naysayers betting the company needed another heavily dilutive capital raising.

Although not heavily dilutive compared to its most recent share price close, the raising is coming at a relative low point. Syrah shares traded as high as $4.83 at the beginning of 2018. The Syrah Resources share price hit an all time high of $6.60 in June 2016.

Syrah shares will be placed in a trading halt until the earlier of the commencement of
trading on 6 September 2018 or an announcement by Syrah regarding the completion of the
placement.

Contributors to this article may own shares in some of the companies mentioned in this article. The Capital Club has a thorough disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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Bruce Jackson has 30 years of hands on investing experience. He is passionate about stock market investing, running his own portfolio and SMSF. His focus is on small cap growth stocks. You can contact Bruce at brucej@thecapitalclub.com.au