Mozambique Mining: Syrah Resources is counting the cost of a fire at Balama’s graphite mine

Syrah Resources has struck more turbulence in Mozambique, with a fire affecting processing equipment at the company’s Balama graphite mine.

Shares in Syrah were placed in a trading halt on Tuesday morning to give the company time to assess the damage from the fire, which continues a tough year in which the miner has struggled to get its new kit working efficiently at Balama.

Syrah said there had been no injuries from the fire, which had been isolated in a section of the plant that separates different types of material, known as a “primary classifier screen”.

“At this stage it appears no major structural damage has occurred, however damage to the screen deck, pipe and electrical equipment has been sustained and an assessment of the repair time and the impact on production is being undertaken,” Syrah said in a statement to the ASX.

The fire comes barely a month after Syrah appeared to have turned the corner on its tough year with a $94 million equity raising that many investors saw as the last time it was likely to require a funding injection from shareholders.

In the weeks since that equity raising Syrah’s long reign as the most shorted stock on the ASX, a mantle it held for the best part of a year, has ended, with the company falling to become the fourth most shorted, with short positions declining from more than 21 per cent in August to about 16 per cent in recent days.

Multiple issues

Unexpected damage to its processing kit at Balama in March ensured production was below expected levels and product splits for eight weeks.

The company also had its plans to build a graphite beneficiation plant in the US state of Louisiana delayed when local residents opposed the company’s original preferred site for the plant.

Syrah has since found and started work on a different site in Louisiana.

The company cut its production target and pushed back the timeline for when it became cash flow positive in July, while there were also terrorism concerns in the part of Mozambique where Syrah operates.

Perhaps the most significant concern for investors has been Syrah’s concession that early shipments of its graphite were fetching lower prices than those reported by price setting agencies.

The company had been expected to receive a premium to the reported industry prices, and Syrah has sought to assure investors that it will eventually fetch premium prices.

Syrah shares last traded at $2.33. The stock traded as high as $4.83 in January, and was fetching more than $6 in June 2016. By Peter Ker | The Australian Financial Review