Actually there could be another option that could play out. From what has been posted in the DFS for LU7, they intend to build a carbonate plant not a hydroxide plant. They also intend to use the blueprints that were used to build the Jiangsu carbonate plant in China. Ironically this is exactly the same blueprint that was used to build the plant at NAL and updated by CATL. So it would sort of make sense for both LU7 and Sayona to do one of the following:
Sayona sells portions of the equipment that is currently at NAL sitting idle to LU7
Sayona give the equipment to LU7 for an equity stake in the carbonate plant.
This would absolutely be a good deal for both companies as LU7 may have trouble purchasing some of the items needed from China because they have blocked some items from leaving the country to keep their upper hand. They would also not have to wait as long to take delivery since these items would be already in country. And from Sayona standpoint we would either gain equity or gain cash and at the same time clear out a lot of space that would allow us to grow our spodumene production, without having to build new.
When I first visited NAL, I was told the Kiln alone was a $50m piece of equipment. I don't expect that is what it would be worth on the used equipment market, but that gives you an idea of what just 1 piece of equipment is worth. The Kiln is actually kept in working order and is tested on a regular basis to ensure it is in proper condition.
So whether we use this to gain equity or cash, I think its a big win, moreover I am expecting that we would also work out a decent deal for some SC6 with LU7 since we will likely be the only source of it in N. America. In the next few years we may see SC6 going to Tesla and to LU7 and none to China, this would be a huge win for shipping cost and absolutely place us on the bottom of the cost curve, add to that, that we will be producing 2 to 3 times what we are today with a higher grade and lower strip ratio which will also drive our unit costs down and you got a business that will be the envy of those producing in Australia and shipping to China.
This wont' all happen over night, but I think post merger we will start hearing more details.
SYA Price at posting:
2.1¢ Sentiment: Buy Disclosure: Held
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