The Syrah Resources share price is down 30% this year: Is now the time to buy?

The Syrah Resources Ltd (ASX: SYR) share price has fallen more than 30% so far this year and is currently trading at $1.06 per share – so is it time to buy the dip?

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Syrah Resources Ltd (ASX: SYR) share price has fallen more than 30% so far this year and is currently trading at $1.06 per share – just shy of its 52-week low of $1.03.

So, is Syrah another failed mining stock destined for decline or is now the time to buy the dip and ride the lithium-ion battery boom throughout 2019 and beyond?

Why has the Syrah share price been on the slide in 2019?

The current share price represents a multi-year low for the Aussie graphite miner as it continues to battle lower prices and higher-than-expected operating costs at its cornerstone Balama mine in Mozambique. In its latest Q1 2019 update, Syrah announced expected production of 45 kilotonnes (kt) at the low end of its 45kt – 50kt guidance range with sales volumes expected to exceed production.

The expected Q1 2019 weighted-average graphite price was cited as US$460 – US$470 per tonne which was down sharply on its US$500 – US$600 per tonne guidance. Management put down the significant difference down to product mix and faster than anticipated progress towards close out of lower-priced contract volumes in 2018.

This Q1 result follows a weak Q4 2018 result which saw the company's share price fall as much as 8%. In that update, quarterly graphite production came in at 33kt which translated to 104kt of full-year (FY18) production with an 80% fines and 20% coarse flake graphite mix.

The anticipated increase in graphite and lithium prices has materialised thus far for the company which has hurt overall profitability and raised concerns about the company's short-term share price performance.

Where's the upside for Syrah?

The company's Balama mine is the largest graphite mine in the world which puts Syrah in the box-seat to capitalise on higher demand for lithium-ion batteries from an electric car or in-home battery storage boom – should it eventuate.

Delays in the Tesla Model 3 production and ongoing uncertainty in global trade certainly haven't aided the company's profitability woes so far in 2019.

With battery technology always evolving, and the company relying heavily on China for continued demand, there is a risk that Syrah gets left with a whole lot of graphite with no buyer on the other side.

I'm a big believer in Syrah and think they have the ability to control global graphite and graphene supply but the risk of technological obsolescence does remain for the group. At $1.06 per share, I'm of the view that it's worth rolling the dice on what could be a major global player in the global renewables push in the next 5-10 years.

For those who aren't as bullish on Syrah's near-term prospects, then maybe these buy-rated growth shares could be better options for your portfolio in the meantime.

Motley Fool contributor Lachlan Hall owns shares of Syrah Resources Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Man sitting in a plane seat works on his laptop.
Opinions

Expert reveals 2 ASX stocks to sell — and 1 is a recent IPO

Toby Grimm from Baker Young shares his insights.

Read more »

Happy teen friends jumping in front of a wall.
Share Gainers

Guess which 4 ASX 200 shares are rocking new 52-week highs today!

Investors just sent these four ASX 200 shares to one-year-plus highs.

Read more »

A young woman holds her hand to her mouth in surprise as she reads something on her laptop.
Broker Notes

Why are Platinum shares rocketing 13% today?

This fund manager is getting a lot of love from investors today. Let's find out why.

Read more »

Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.
Share Gainers

Why Evolution Mining, Orthocell, Platinum, and Turaco shares are charging higher

These shares are having a better day that most on Thursday.

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why CSL, Imricor, Jumbo, and Netwealth shares are falling today

These shares are under pressure on Thursday. But why?

Read more »

Three happy office workers cheer as they read about good financial news on a laptop.
Broker Notes

Morgans says these ASX stocks can rise 30% to ~50%

Let's see which shares could generate big returns for investors.

Read more »

a mine worker holds his phone in one hand and a tablet in the other as he stands in front of heavy machinery at a mine site.
Broker Notes

Does Macquarie rate Fortescue shares a buy, hold or sell?

The broker has given its verdict on this popular mining stock.

Read more »

group of traders cheering at stock market
Share Market News

We could see the ASX 200 at 9,000 points by 2026. Here's why.

I wouldn't be shocked to see more records this year...

Read more »