Why the Syrah Resources (ASX:SYR) share price has more than doubled in 3 months

On 7 October 2020, Syrah Resources Ltd (ASX: SYR) shares closed at 47 cents. By the close of market today, the Syrah share price was trading at $1.21, up 2.5% for the day and a whopping 157% since 7 October.

According to Syrah Resources, the company’s vision is to become the world’s leading supplier of quality graphite products, specifically active anode material (AAM).

Let’s take a closer look at what the company does and how it managed to double its share price over a three-month period.

What’s been driving the Syrah share price?

The Syrah share price hit a 52-week high in December 2020 when it popped to 95 cents. This achievement followed an announcement regarding the company’s Vidalia, Louisiana AAM production facility in the United States. 

In the 1 December 2020 announcement, Syrah revealed it had completed a bankable feasibility study (BFS) for the expansion of the Vidalia site. The AAM produced at the site is an important component of lithium-ion batteries, which are commonly used in electric vehicles and portable electronic devices. 

This was a significant win with respect to Syrah’s goal of becoming the first vertically-integrated producer of natural graphite AAM outside of China. With its US location, Syrah is seeking to actively participate in the electric vehicle market across the States as well as in Europe.

What’s a vertically integrated producer?

Vertical integration is a business strategy under which a company controls its own supply chain. In the case of Syrah, the graphite necessary to produce AAM is being mined via the company’s Balama graphite operation in Mozambique.

A vertical integration strategy can benefit a business in many ways. For example, it can assist a company to maintain supply chain control, achieve significant cost savings, and make general efficiency improvements along its production chain. By mining its own graphite, as opposed to sourcing it from an external supplier, Syrah seeks to uphold greater control over the raw materials necessary for AAM production at its Vidalia facility.

What’s next for Syrah Resources?

According to Syrah’s latest quarterly report, the company is on track to achieve its goal of becoming the first vertically-integrated producer of natural graphite AAM outside China. The company reported ending the quarter with a strong cash balance of US$44 million.

Syrah’s quarterly update also cited a timeline which includes the first production of AAM occurring at the Vidalia site in the first quarter of 2021. The company expects to dispatch AAM to potential customers for evaluation in the second quarter of this year. 

Over the past couple of months, Syrah Resources has been reasonably accurate with predicting the timing of important company milestones. AAM production is a big one, and investors will no doubt be watching the Syrah Resources share price to see whether the company can continue meeting its anticipated deadlines. 

More reading

• Why CSL, Lovisa, Lynas, & Syrah shares are dropping lower
• Why the Syrah (ASX:SYR) share price is sinking 10% lower today
• Why the Syrah Resources (ASX:SYR) share price is in a trading halt

Motley Fool contributor Gretchen Kennedy has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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