Syrah Resources forced into trading halt as ASX queries details of deal with Tesla

No details, no trading – the ASX has halted the exchange of Syrah shares as it queries the details of a graphite deal with Elon Musk’s Tesla.

Graphite produced from Syrah Resources’ Balama mine in Mozambique.

Syrah Resources’ best day of trading in 18 months was brought to a premature halt by the Australian Securities Exchange on Thursday, after the company announced it had cut a deal to supply graphite to Elon Musk’s Tesla.

Syrah shares jumped sharply on the morning announcement, up 47c to an intraday high of $1.795 – a jump of about 35.5 per cent – before the ASX put the company in a trading halt, pending a response to a query on the details of the announcement.

The company surged after saying it had cut a deal with Tesla to supply processed natural graphite from its active anode material plant in Louisiana, for use in battery anodes made by the car and battery giant.

Syrah is already operating a small plant at its Vidalia facilities, but is yet to make a final investment decision for the full scale commercial plant, which it says will produce about 10,000 tonnes of active anode material a year, with a decision by its board expected early in the new year.

But the company said on Thursday it had reached an agreement with Tesla to sell “the majority” of the material produced at the expanded manufacturing facility.

Syrah said the deal depended on qualification tests, needed to ensure the plant could consistently produce material at the correct specifications, and its output would be sold “at a fixed price for an initial term of four years”.

The company did not give further price or volume details in the announcement.

“The agreement provides a compelling foundation to proceed with the initial expansion of Vidalia’s production capacity. Syrah plans to make a final investment decision for construction of this expanded facility in January 2022, subject to financing commitments,” the company said.

In the wake of the announcement Syrah shares put in their best one-day performance since mid-2020, hitting a peak of $1.795 in early trading, Syrah’s highest levels since February 2019.

But the ASX has grown increasingly wary of announcements involving deals with high-profile companies such as Tesla, particularly when they are light on commercial details, and forced Syrah into a trading halt shortly after midday pending a response to a request for further information on the deal.

Shares in the former market darling were once worth more than $6.60 each, at their peak in mid-2016, but have fallen dramatically since as the company has struggled to turn its massive Balama graphite deposit in Mozambique into a consistent money-spinner for shareholders.

The company halted production at the mine in March 2020, as the coronavirus pandemic took hold, and did not resume operations until a year later.

Syrah booked a $25m loss for the last financial year.

Shares in the company were trading at $1.65, up 32.5c or 24.5 per cent for the day, when it was placed in a trading halt.

Originally published as Syrah Resources forced into trading halt as ASX queries details of deal with Tesla