Read the fine print of where the bulk of funding is going - NAL. Understand that while the company may have but intentions to use some of the funds to drill in WA ($5m allocated) or "expedite" the Northern Hub ($40m allocated) this was required in any event for those 2 areas of focus but had been expected by many to be funded from NAL operations.
There have obviously been significant cash blowouts at NAL to which no actively trading investor should have had direct knowledge but the company would likely have known for some time.
This reminds me a great deal of the kick the can down the road mentality of James Brown and Alan Buckler at Altura. They kept the financial situation heavily compartmentalised and shareholders in the dark. The SYA CFO Paul Crawford is falling on his sword but it is difficult to fathom that JB and AB were not heavily involved on that side of things. I do hope that the board is expanded with some fresh conservative thinkers to offset the current majority.
Some similarities to Altura include the deal with PLL to secure NAL. I believe it was seen as the only option available to secure NAL and they figured they would deal with it when the time comes. I suspect that the AISC for the PLL offtake will remain above US$810 (SC5.4 basis) and as a result SYA will effectively be subsidising PLL. The ramification of this during ramp up especially, is that SYQ will not have positive cash flow from the majority of product sales and the JV partners will need to cover working capital for some time.
It does feel like James Brown and Alan Buckler have been keeping holders in the dark just as they did with AJM. It could be argued that of they had just held on a few more months they would have seen major success. It could also be argued that if they took the necessary action soon enough, AJM would never have gone into receivership. Either way, I believe they had a duty to provide investors with a clear picture. I don't consider that they have when it comes to NAL
Perhaps this CR will be enough to comfortably cover the blowouts and one would expect the internally revised cashflow figures for NAL. If that is the case then they have acted prudently.
Obviously it is not expected that nameplate is achieved during rampup but I also do not believe it will be achieved at all. This hasn't been advised but then again neither were these significant forseeable cash blowouts. Nameplate will be a target IMO that is never met for any sustained period. I anticipate that AISC will exceed USD1000t at steady state. NAL is what it is. I don't believe SYQ has a magic solution to change that.
This is the point in time when some of these issues will come to light as paper projections like recovery rates in excess of 70% meet reality. Keep in mind NAL is a difficult operation that has failed in the past, albeit under significantly lower market pricing. If you take a look at the photo of the pit in the announcement you may see what a difficult orebody they have to work with.
The PLL offtake will be a thorn in the side for several years to come. I note the presentation now forecasts 1st Carbonate in 2027 on their timeline chart. Another year could comfortably be added to that based on similar projects globally. The PLL can kick has hit a dead end and needs to be properly factored in.
The ambitious forecast assumptions have also hit a dead end and SYA has beem left with no choice but to raise a significant amout of cash through yet another equity placement.
There is of course one major difference between SYA and AJM. There is no debt trap. Whether by intention or whether it wasn't an option, that is a big saving grace.
It may be a painful period for many holders as expectations of NAL being a cash cow are revised downward, however it should be quite a profitable operation in steady state for SYA and it may not be too far down the track before SYQ cash starts flowing in the direction of SYA which hopefully will reduce the need for further major dilution to fund the Northern Hub.
There is upside but this is definitely one of those situations where investors need to do their own DD and not just rely on information from SYA. Unfortunately with the departure of Crawford the majority of the BOD have form in not taking Continuous Disclosure too seriously.
While Quebec can be a bit notorious for permitting - long term holders here will be aware from SYA's Authier experience prior to the NAL acquisition. AKE's James Bay is another example - Moblan does represent serious upside for those with a long term view.
With M&A activity in the sector, I do wonder if SYA would consider selling their stake in the SYQ JV to PLL and use the proceeds to focus on their Northern Hub plans. SYA would come away clean with Quebec regarding their promises along with funding to progress what appears to be a much more attractive project. It might suit PLL to buy out SYA and pay any penalty for not completing a converter at NAL.
I understand that there will be a lot of frustration surrounding this CR and a lot of what I have written people don't want to see.
Although I don't read much HC anymore, I have noticed that many believe the SYA share price to have been capped, manipulated, or that this placement is to help institutions. My personal view is the SYA shareprice has been a reflection of the risks related to a known previously problematic asset in NAL. Risks that are being converted to reality. The need for a CR like this for Capex blowout and changes in expected working capital requirements were some such risks. We are yet to see the complete picture.
To finish, I'll return to the post I'm replying to. I believe that the entirety of funds raised are what were required for NAL in the medium term. The mention of WA exploration and accelerating the Northern Hub along with the figures assigned for those purposes are what SYA could get away with and softened the blow of what this CR is really about.
It allowed them to talk up other potentially lucrative pieces of the SYA asset portfolio in what is essentially a $200m raise for NAL requirements accompanied by the departure of the CFO. The money is not sinply going towards things thar make SYA "look good" unless you consider having NAL including it's ramp up funded as looking good.
I really do believe that SYA has a bright future. No words of mine are going to meaningfully impact that. I do believe that balanced and diverse points of view are required for healthy discourse and to avoid echo chambers. Please do not mistake my words for wanting SYA to fail. I'm simply calling it as I see it and really do hope it is prosperous.
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