PLL General Discussion, page-2414

One recurring theme I see raised by "visitors" and the Sayona faithful is their thorough misunderstanding of the capital structure of a company, the balance sheet and how a company finances a project.

During the recent RKE Interview KP made the following statement:

"We're well capitalized for what we need to do. And on that point, I think the point I would make is, we think of ourselves as a capital light company. I don't think it's the way the market perceives us, but it's the way I think about it. "

That is really important point. Specifically what that means is that PLL does not require much in the way of capital to be invested to generate revenue and create profit. This is what Elon Musk referred to as "software margins" .. what he said was "there are software-like profit margins to be made in lithium refining – that is, the companies that do it will make a lot of profit from every dollar of revenue". Just remember to be able to refine lithiium one must first mine it - and a brine deposit goes straight to carbonate. But TSLA has to invest lots of capital to build huge factories to stamp out its EVs and batteries and thus it is a capital intensive business.

So anything that can reduce the amount of your own shareholder capital necessary to earn that revenue and return is a very good thing for your shareholders.

I put up a post on SYA forum ... specifically to address the incorrect conclusion about PLL going broke the moment a carbonate plant at NAL is given positive FID ... post https://hotcopper.com.au/posts/73705146/single
have a read ... the picture illustrates AN EXAMPLE .... the text sort of describes what's possible

So PLL is in fact well capitalized for the capital light strategy it is pursuing. If I were running the show (and I'm not) it is what I would try to do. The JV has done the hard yards (and talk of C&M is .. well stupid ... NAL is a strategic NA producer of SC). Having a reliable upstream source of SC to supply a downstream operation is essential. And best yet it comes with the transport cost of up to $200/t.

As KP put it:
"One is North American Lithium in Quebec. That was a brownfield asset, we put into production for around US$100M with our partner Sayona. Our share was around $25 million. And that project was built 10 years ago for $400M. My guess is replacement costs today would be 600, 700 or $800M looking at the feasibilities for other projects - we put that into production for US$100M. That's a capital “lite” project. Very excited about that."

and by extension, as I wrote in my SYA post, it might be possible to get to downstream where a partner effectivelys funds 100% of the remaining equity necessary and then uses their balance sheet to debt finance the rest of the Capex (not saying it must happen that way or that it will happen that way ... it could happen that way) ... making downstream very capital light (also keep in mind that SYQ sold 50% to the partner so now we own 12.5% of downstream refinery (but nothing changes upstream). You can argue amongst yourselves as to what impact that has on the present OTA.

And then out next immediate project - Ewoyaa with Atlantic Lithium - which is again "capital light". Again to quote KP:
"In Ghana, the Ewoyaa project, as you know, it's a DMS only project - by definition - very low capital. The JV, DFS showed CapEx of US$185M. It may creep a little higher than that in this environment. That would be understandable. Compared to other projects of the scale - it's going to produce 350 – 360Ktpy spodumene concentrate, its ultra-light capital. We intend to fund our share of that project by monetizing our offtake agreement. We're entitled to half the material from Ewoyaa for life of mine. We won't have a conversion asset to take that material for the first several - first few years - at least. There are people who are interested in that material and can help, can prepay for that to fund, much if not all of our CapEx into the project. So again, “capital light”."

Monetizing our OTA at Ewoyaa. First of all the Capital Intensity of Ewoyaa is much lower than say Moblan ... just compare the DFS for both projects. So we are spending less capital. Then (just like Atlantic Lithium) we have 50% of production to sell (and we'll own 40.5% of the project) and the intent is simple ... prepay a portion in advance ... (as noted earlier ... common in O&G called a VPP) .. which is essentially deferred revenue for the out years. 150Ktpy at $1,500/t x 4 years = $1B. Using say 20% is $200M ($50M is revenue and $150M is deferred revenue. There is more than enough in that OTA that can be monetized ... just ask Livent (now Arcadium) about their deal a couple of years ago securring a prepay of $198M from GM for a 6 year OTA to guarantee supply.

So again - capital light. Anyone who suggests that PLL will not be able to fund their capex requirements is "dim".