Tough times indeed mate...and when I say that, it certainly is the psychological battle that is the toughest.
The backdrop of a weak lithium price and softening macro conditions, certainly are not helping either.
There are strong ties between the lithium price and the SP of the participants in the sector, a correlation which spans across most commodity sectors. Manipulate the commodity price and with it, you manipulate the SP of the participants in the sector.
Add to that what seems a continual flow of bad news from some producers, which is heavily affecting the sentiment in lithium.
Late, overbudget, this project hasn't gone to plan...that project is scraped....struggling in the ramp
It REALLY highlights how fortunate we are with this brownfield site at NAL.
Not that its perfect...
Challenging mid tier resource which is tricky to mine and tricky to concentrate.
Multiple purification stages, ROM ore grade stockpiling using the centre of the seam....
BUT
Probably one of the best located lithium mines in the world.
An existing pit with exposed seams of lithium and overburden already taken care of in some areas.
Established infrastructure-Power, roads, tailings dams etc...etc.... permitting and a human resource probably unparalleled in any other lithium mine worldwide. I mean who has over 60% employees who have worked there before? Try doing that in a greenfield site- impossible.
So, Is this the KEY to our, by all accounts, successful ramp up?
Who else has an engineering company who knows the place inside out and been involved in over a decade?
An engineering company Who knew the issues and the bottlenecks with the first iteration of this story.
Not many have had this luxury... if any...maybe PLS resurrecting Altura...but even they had long ramp problems...
No my friend, NAL was never a tier 1 asset and resource, but a stone on the path to cashflow and the the path to building the company with a Tier 1 asset firmly in its sites.
Issues around us, particularly in new ventures abound.
These include CXO's issues in the pit and during ramp, and MINRES recently dropping plans to push on with hydroxide production.
There is not a lot of confidence in the sector at the moment, particularly compared to 12 months ago.
You could say, an opportune time to downramp, and send sentiment to all time lows....
Sentiment which heavily impacts the retail investor and sentiment which would drive them to sell.
And some data suggests most of SYA's current capitulation in SP, has been led by retail sales, while we see some institutions increase their holdings, the BOD buying in the millions, and even Aus Super, coming onboard in a big way.
Our SP, as well as many others, being at these 12 month lows is painful to say the least.
We have cycled in and out of these lows. Historically a capitulation event such as we are seeing now preceeds a major bull run.
However, if the lithium price remains soft and the newsflow does not start to flow, we could be stuck down here for a while.
Many investors, both institutional and retail, would be seeing red across their ledgers for SYA, CXO, VUL, MIN and many others.
Even Albemarle, who saw its SP hit US$325 last November is back to US$183 currently...and they didn't even have a cap raise!!
No one is immune...
This is the bottom end of the price cycle for lithium, as it fluctuates in a volatile market.
Sector analysts predicting a recovery in the price, at odds with financial analysts predicting further pain....
So who is right?
I prefer to listen to the people in the sector, particularly the current producers and pay attention to what they are saying...
Its interesting that the head of global commodities at GS, Jeff Currie, recently moved on.
An institution in his own right,he was predicting a commodity super cycle, at odds with GS's doom and gloom for lithium. He was at GS for nearly 3 decades, and had such a standing in the commodity community, there was not a meeting with a CEO, an oil minister or a hedge fund founder, that he could not get. Interesting also that has been one of many high profile exits from GS in recent months...
Reuters-
"We expect a structural bull market in commodities, very similar to what we saw in the 2000s or the 1970s," Currie told the Reuters Commodities Summit .The firm "has greatly benefited from Jeff's thought leadership on a broad range of topics and his ability to identify fundamental commodity market themes well before others," Jan Hatzius, Goldman's chief economist and head of global investment research, wrote in the memo.
On CR's, from what I am seeing, it is getting increasingly difficult to raise money.
Some of the latest CR's I have seen, have been raised with really poor terms and deep discounts to the SP. This is not just confined to the lithum sector either.
This situation of raising capital, seems to have shifted from raising when required on good terms, to raising when you can, when someone will give you the money, and hence on poor terms.
The alternative is of course to borrow at these high rates.
The highest they have been in over a decade and in a high inflationary/high cost period, where opex and capex are also high.
The instos know this is the alternative that pre revenue or low revenue start ups are facing, so crunch them on the deal.
You want interest free cash?? We will take X amount of shares at this price...thank you very much...Godspeed matey...
And I am not trying to justify our CR, but in hindsight, it seems to have been a good decision.
I remember thinking the same thing last year....but only with hindsight...At the time they are announced, I feel as deflated as the next guy.
The financial markets have decayed since then and crunching a deal currently is really tough...
If we were to have a shortfall in working capital now....we would be screwed.
The dilution would have been 60%-100% WORSE.
Can you imagine, going to the market to raise when our SP is 11.5....faaaaark...
With the discount it could be 9c....double the dilution in excess of 2 billion shares.
So, Brett and the BOD's deliberation at the time..
.lets raise now while we can at 21c, discount to 18........ does not seem as painful as it did when it was announced back in May.
As a comparison, CXO just raised at 40c...they were trading at around $1 just last month, before announcing ramp problems, dropping back into the 60's, then went for a CR because projected revenues would not materialise....and raised at 40...wow...
And remember, CXO did a CR going into production as well as this latest one.
As for our share price, we should be seeing the bottoming of its cycle, aligned with the lithium price.
Fundamentally, I have not uncovered anything to cause this.
Ramp issues were my primary concern, and may still be a problem, as I have not seen the latest data to identify how much we are producing.
Our opex at this stage would be elevated, as the circuit is tuned and refined to optimise production and target nameplate.
Exact details, I don't have, only the comms from the company which indicate we are travelling OK, with the production figures looking OK.
It would be nice to verify that in an announcement, but they have been hard to come by lately.
So for the moment, we work on the previous projections and indications that the ramp is going well.
No major injuries, no major malfunctions, and no big ticket machines needing replacement....we battle on.
The recent second offtake negotiation, sounded like it was close. Close enough for them to publicly state that.
As for the status of this relationship and these negotiations, I am going to try and find out as much as I can.
Has the relationship soured to the point it is severed forever, or are they still deliberating on the finer points of the deal, the lawyers stringing it out as only they know how?
If they are still at the table, this may be the only boatload going into the spot market.
The next 2 shipments go to PLL, then the shipment after that, say October/November, could be into the new offtake...Oh, and we should be pumping out an average 600-650 tpd of sc5.5 out by then .
Tough times indeed, and if you have held for this long, maybe you are willing to hold a little longer.
Personally and for my situation, there really is no point selling into these lows...
The fundamentals keep me hanging in there and as long as there is not a big shift in position on that front, then there will not be a big shift in my position in SYA.
Good luck everyone....
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