Just catching up on the last few days.
Well, I know we were all expecting a tough quarter, arguably the toughest we will face.
There are areas where we have undoubtedly improved in terms of production, but what has thrown myself and many of you is this opex.
The trend is not good....
I would like to think this is the highest opex quarter we will have, but I said that last quarter....
The raft of excuses is alarming...
If its not Winter, its water, or underground, or plant closure, or, or, or....
Over a year down the track of production and the opex is still not coming down.
Its not even stable.
Its going up!
.
The excuses-
Dewatering the pit...minor cost
Underground workings- Was well in hand when we visited and as explained by Sylvain, was nothing major.
Just excuses...
We have 1.6 quarter left of cash, without diluting using the ATM, which expires in 2025.
And a fair chunk of that was via the FTS, so can only be used for exploration and greenfield development. At a very rough guess around 30M.
So really maybe only 1 quarter.
The HOPE strategy is in play...
.
What they may do is wait until the next quarterly which should hopefully show-
- Increased plant reliability, throughput and production
- Increased realised priced- US1100-1300, after shipping losses should see us around AU$1350- 1600
- Lower admin and wages- Around the 10-12M mark, some of the current cost were due to retrenchments
- Lower opex- Commissioned dome, better weather and jaw crusher, plant utilisation Opex app 1250-1300/dmt (US$812) as well as gains in plant efficiency
- Lower capex- Tailings complete, dome complete, jaw crusher complete
- Lower exploration expenditure- Moblan drilling/DFS complete, minor drilling at NAL
- Rumours GM, aka the Marlin, may still be in play in some capacity
- And with that, provincial and federal funding
- Sale of Troilus shares
- Retrospective incoming revenue and, with increasing lithium pricing, outbound shipments being adjusted up, as an at port adjusted inflow
Packaged up, it would make a much better read than the current quarter and would get us much closer to breaking even.
Breaking even....hmmmmm.....
.
But even then, our cash reserves would be down to low levels (without the ATM or the FTS) and would probably require a CR.
Maybe 1 quarter remaining...that's cutting it very fine indeed....
And a lot of the cash in the coffers was earmarked for exploration and greenfield development, as it's cash raised through the Canadian Flow Through Shares system.
And the company has not historically touched that unless it is specifically for the aforementioned purposes.
An then hit the market for a CR at 3c or 2c .if we are lucky.
.
The biggest alarm bell for me is the mentality of the board.
It really seems to not have changed since the Altura days.
Keep producing and selling at a loss...keep producing and selling at a loss.....keep producing and selling at a loss......
And hope....hope the macro improves, hope the spot price will improve......
How did that work out for you last time???
So this really is a strategy underpinned by hope, something they say you should never do.
.
I wonder if Brown and Buckler kick themselves that they let Altura fail on their watch.
I wonder if they look at the success of PLS, its billions in the coffers, expanding production, multiple offtakes and partnerships, and think to themselves, 'that should have been us....if only we could have held on a little longer.'
And I wonder if they think to themselves, 'we will not let that happen again'
So although they have certainly learnt some tough lessons from Altura, the thought of another failure, under similar circumstances would be very difficult for their ego to handle.
If we go down, the big fella has no skin in the game and has another 600k gig to just float into at 1MC...and for me as well as many others, this a big red flag.
At least Buckler and Crawf stand millions to lose.
.
On that, Crawf....now an ED....the man who is in perpetual retirement...just slipped sideways from one role to another, and still gets a paycheck. FFS....the 3 Amigos are inseparable...as long as they have Bucklers, and each others backs.
I expect Crawf to still be on $350K plus bonus shares, and I would imagine Dougal's salary has now significantly increased to $350k as well as bonuses.
So they keep producing, and try to reduce the opex....except it keeps rising.
They Try and reduce costs...except the quarterly burn is still huge
The golden boy Sylvain, and the experienced miner and producer James Brown, seemed a symbiotic match made in heaven.
But Even with these 2 seemingly pillars of the industry, with decades of experience, the metrics are still headed in the wrong direction.
The alarm bells have been rigging so long, the bell is warn out and broken.
So they HOPE.
.
And HOPE that lithium prices keep moving in the right direction, even though they probably also know China is controlling the strings and could tank the price at any time.
Hope, that the coffers have enough to keep the lights on long enough for the lithium price to rebound to a sustainable level.
It is a very fine balancing act they are cutting it very fine indeed.
Many outside the Sayona faithful are very critical here.
They look at our SP, the chart, the sector, our resource, management, our opex and losses, and wonder why CM has not been initiated.
With a fresh pair of eyes, it very easy to come to that conclusion, particularly taking into account the previous failings of this management at Altura, as well as the previous failings of NAL,
the resource itself.
It seems to be playing out the same way, and the BOD seem to be reacting in a similar fashion. keep going...it will turn around....keep going, the price will bounce.
.
The major difference here, is they learned a major lesson NOT to carry debt into a contracting market.
I will give them a big tick for that, and as unpalatable as the last CR at 18C was, some CR's, in hindsight are a God send.
For us, this is definitely the case...
What I would give to be back at 18 now!!!
But at these metrics, this is unsustainable.
.
The market sees this and is not supportive of us.
It values us on what is on the page and what is in the ledger.
And the market has seen this for quite some time.
JB told me at the AGM that he believed our SP was tracking the lithium price and in lock step..... and it was for a while.
I argued the point we had decoupled and were retreating ahead, but he would have none of it.
Fast forward 6 months and this decoupling was little to begin with but massive now.
When the lithium price recovers nearly 50% from its lows, but we continue to sink and set new lows....well....suffice to say the point has been settled.
.
Its more than just the lithium price, much more, and the market was seeing this way in advance.
With this opex, our outgoings, a depressed lithium price, the crap PLL offtake, a dwindling cash reserve, questionable board, and mid tier resource, we are currently un-investable, and probably have been for quite some time.
No fund manager in their right mind, would risk a clients funds, on investing in Sayona..... currently.
This reality has certainly manifested itself in the SP.
There is just no liquidity, no volume.....no confidence.
Buying has dried up except for a few traders and shorters, who are still trying to extract the last scraps from this palliative corpse.
.
Having said that, the liquidity in this part of the sector as a whole has dried up.
The fund managers I have spoken to say the only way they will rotate back in, to pivot back into non blue chips, is if there is an opportunity just too good o pass up, or when rates start coming back down and they can no longer earn 5/6/7% with little to no risk.
I get it, why would you?
And when they start earning 4% or less, these billions will start to cycle back to the riskier equities, like us.
So where does that leave us?
.
From what I can tell, this next quarter has to be our best ever.
As I stated above-
Reduced opex, capex, admin and wages
Increased realised price, recovery rates, tonnage and plant reliability
We need an offtake, and if you can't get one, start an auction for increased realised prices
Government funding has never been so critical.
Federal, provincial, IRA....just get it done. Knock on doors, lobby...push...push hard....
Chairman and CEO.
We need a superstar chairman who can attract a great CEO...a fulltime CEO, none of this part time BS.
But I fear that will never come.
I mean, who would want take on what this has become?
If you can turn it around, you would be a superstar, but if you cant, its career suicide.
In its current state, with this current board and financials, we will just not attract the right candidates.
.
I am usually a glass half full kind of guy.
But this dire situation is definitely glass half empty...and draining fast.
I still hold, and have bought here and there, but the buying is done....no more...
I hold because its not worth selling.
I hold and now too, I HOPE........
(20min delay)