I don’t think it’s great, but I have no position long or short so take anything I say with the necessary pinch of salt. I think SYA are very clever the way they have marketed this company to retail shareholders (as evidenced by the heavily retail-shareholder register) so a Friday afternoon DFS release caught my interest - if they really had great confidence in this study I suspect it would have been released differently (I didn’t buy their excuse given on Twitter).
I do think there are some clear negatives in there that many bulls will dismiss for now, but may come to realise how significant they are later. For example:
- strip ratio has increased from 5:3 to 8:3 - sustaining capex is up considerably - cash cost has increased from C$609 to C$817 - confirmed they’ll be producing SC5.4 not SC6.0
As an aside, I’ve previously mentioned the challenging geology on this deposit - the four points above are further evidence of what is coming: it will be expensive to mine this ore, plain and simple. I know people will ignore or dismiss this given I’m a non-holder and that’s fine, but it’ll absolutely come out in the quarterly cashflow reports - wait and see. Production costs will be high, and revenues will be capped by the awful PLL offtake terms. Again, you have to step back and ask WHY are so many institutions short this stock? I think it’s twofold 1) the retail share register had driven this to a dizzy valuation and 2) institutions are more across the history/geology of the deposit that busted two former operators (whereas retail tends to simply blame previous low lithium prices, which is only part of the truth, not the whole truth).
With the above in mind it’s no surprise to me that Sayona will be wanting to focus retail investors minds on the headline NPV figure, rather than some of the less exciting figures in there. I think at some point within the next 6-12 months they are going to have to raise further capital to fund the ongoing operations/sustaining capex. The PLL offtake price won’t be US$900 / C$1,200 if they’re producing SC5.4, it’ll be lower. There is very little margin left in it, if any, for SYA.
With the above said I think they deserve great credit for getting NAL up and running on time and budget - but the really hard work starts now, and you’ll see this in the numbers that start rolling through each quarter. Cheers
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