Shares Plummet As Syrah Resources Declares Force Majeure Amid Violent Protests in Mozambique
Shares of Syrah Resources plummeted as the Australian mining company declared force majeure for its Balama graphite mine in Mozambique. This drastic measure follows prolonged civil unrest in the African nation, which has severely disrupted operations and triggered loan defaults with U.S. government agencies.
The company stock fell as much as 32% in early trading, recovering slightly to close down 27% at A$0.1925 (US$0.1234) in Sydney. This marks a staggering decline from its November 2022 peak of A$2.62, underscoring investor concerns over the company’s future amid ongoing turmoil in Mozambique.
The unrest, which stems from protests against a disputed election held in October, has plunged the country into chaos. Over 100 people, primarily protesters, have been killed in clashes with security forces. Thousands more have been injured or arrested in what human rights organizations are calling a humanitarian crisis.
Syrah Resources’ Balama mine, a significant supplier of graphite essential for electric vehicle batteries, has faced severe operational disruptions. The company reported that transportation routes to the site remain impassable, and its processing plant has been forced to halt operations. Workers have been sent home, and security contractors have been deployed to safeguard the facility.
In a regulatory filing on Thursday, Syrah confirmed that the unrest has resulted in defaults on its loans with the United States International Development Finance Corporation and the U.S. Department of Energy.
“The impacts and duration of the protest actions have triggered events of default in the company’s loans with United States International Development Finance Corporation and U.S. Department of Energy,” the filing stated.
These loans, valued at $150 million and $98 million respectively, were intended to support Balama’s long-term capital needs and to fund a downstream graphite processing facility in the United States. The company emphasized that despite its efforts to resolve the unrest through legal and diplomatic channels, no resolution has been achieved.
Civil Unrest in Mozambique
Mozambique’s ongoing crisis has created a volatile environment for businesses operating in the country. The protests erupted following the October general elections, which many opposition groups and international observers criticized as fraudulent.
While the government has sought to suppress dissent with a heavy-handed response, the violence has exacerbated tensions in a nation already grappling with poverty and corruption.
Other companies, such as Perth-based South32, have also been impacted. Earlier this week, South32 withdrew its guidance for its aluminum smelter in Mozambique, citing interruptions in raw material transport.
The Balama mine is one of the world’s largest graphite suppliers, a critical component in lithium-ion batteries used in electric vehicles, renewable energy storage, and electronics. The importance of this resource has drawn attention from the U.S. government, which has sought to secure a stable supply chain for EV manufacturing amid rising demand and increasing competition with China.
Syrah’s downstream processing plant in Louisiana, which processes natural graphite from Balama into active anode material, is a key part of this strategy. Disruptions at Balama could ripple through the broader EV supply chain, potentially delaying production targets for major automakers and energy companies.
Uncertainty
Syrah has not provided an estimated timeline for resuming normal operations at Balama. The company is working closely with Mozambican authorities, local leaders, and community groups to seek a resolution, but so far, these efforts have been in vain.
“Sustained efforts by the company to achieve a positive resolution of protest actions through lawful and constructive dialog… and the pursuit of legal avenues have been unsuccessful to date,” Syrah stated.
The uncertainty surrounding Balama’s future leaves Syrah’s largest shareholder, AustralianSuper Pty Ltd., which owns a 32% stake, in a precarious position. The pension fund’s exposure highlights the broader risk to institutional investors in emerging markets.
For Syrah Resources, the road to recovery depends on its ability to navigate both the civil unrest in Mozambique and the financial fallout from its loan defaults. Analysts warn that prolonged instability could push the company toward insolvency, potentially affecting graphite supplies worldwide.
Information for this story was found via Mining.com and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.