On Thursday the Syrah Resources Ltd (ASX: SYR) share price continued its fantastic run with a 4% gain to $3.30.
This brought the one-month return for the graphite miner's shares to a sizeable 21%.
Why have its shares gone gangbusters?
Last month Syrah announced that it had finalised the negotiation of a mining agreement with the Ministry of Mineral Resources and Energy of the Republic of Mozambique for its Balama project.
This agreement not only brought Syrah one step closer to finally commencing production at Balama, but it provided the company with clarity around the governing laws and contractualised the mining rights and other obligations.
This appears to have given short sellers a lot to think about.
Syrah has been one of the most shorted shares on the Australian share market almost all year, but with production commencing reasonably imminently and its shares surging higher, I suspect short sellers may be closing positions in a hurry and pushing the Syrah share price even higher.
This is because in order to close a short position a short seller must buy shares to replace the ones they have sold.
Should you invest?
There's no doubt that Syrah has a world-class asset in the Balama project. The big question, though, is what impact its production will have on global graphite supply.
There are concerns that the increased supply could put pressure on graphite prices.
But should demand for graphite to be used in lithium batteries grow as strongly as predicted, then there's every chance that prices will remain high and Syrah could profit greatly.
For now, I think the prudent thing to do is to wait until production commences before making a move. In the meantime investors can gain exposure to the lithium battery boom through miners such as Galaxy Resources Limited (ASX: GXY) and Kidman Resources Ltd (ASX: KDR).
