The scrutany of the cashflow statement has been quite astounding after an unfounded theory was put forward that PLL doesn't pay it's share or if it does it is late. Posters have then embarked on a mission to find any possible indication that PLL is behind on payments. It was intriguing that operating current liabilities were the latest cause for concern as despite the funds going to SYQ being an equity contribution, posters were trying to claim that SYQ is a trade creditor of sorts and with the current operating liabilities not sufficiently detailed in the notes they seem comfortable to assume the entire current liabilities of PLL might be contributable to owing SYA.
As I have tried to explain Sayona Quebec is a separate company and while SYA can consolidate financial information from the JV as a whole in it's reports, that is not at all the same as SYA paying all costs and then invoicing PLL. SYQ and SYA do not share bank accounts and SYA cannot access funds from the JV in the absense of a distribution agreed by the JV. Equity calls are made, as such there should be no outstanding liabilities listed under operating activities in regard to the JV. PLL reports it's involvement with SYQ under investing activities on an uncosolidated basis.
We do difer a little on the basis of shipments. I don't think that if SYQ reasonably anticipated hitting nameplate or exceeding it that signifcant quantities would be shipped oitside the PLL offtake first. I think a longer term view needs to be applied to that. Once operating profits are achieved and there is no need to make equity calls for regular activities then shipping for SYQ first is kind of irrelevant. Right now the 1st shipment had to sensibly be sold outside the OTA because the JV needs funds to avoid calls which neither party would want to be paying.
PLL don't want excessive funds tied up in the JV and SYA would want to avoid any potential to have to further tap the market for funds - bear in mind SYA has other obligations and do not have a near term source of revenue such as PLL with their OTA - given the push to go downstream at NAL there may not be distributions made by the JV for a long time. They want the JV self sufficient and getting some positve cash from sales was a good first step. I have written previously I expect SYQ will be supplying the PLL OTA at a loss in AISC terms on an ongoing basis and that delta will naturally be amplifed during rampup.
The first shipment suited both parties to be sold by the JV outside the offtake. The funds required by the JV have been quite significant for rampup as we have seen through the cashflow statements. It is highly likely that AISC is a long way above US$810 delivered ( how the delivered portion is to be reconciled has not been made clear if the product is not being delivered to the US location, so we can wait and see on that).
PLL would not have wanted to be subjected to equity calls great than necessary and the JV operator has to err on the side of caution. To send first shipments to PLL would have meant potentially another quarter or 2 of significant calls. I would hope that the first shipment is enough to cover the way PLL shipments will be effectively subsidised.
Ongoing, I disagree that first shipments of a calendar year should go to PLL until the offtake is complete. I think that would be a flawed way of managing cashflow, obligations to partners, and likely not in either partner's best interests.
The bottom line is that the JV needs to work with the known PLL OTA commitments to customers and balance that with it's own requirements. It should not be too complicated to plan that out and ensure PLL get what they are entitled to over the duration of each calendar year.
Right now for both SYA and PLL, the markets want certainty regarding plant performance and importantly costs of production. It is most unfortunate that SYA gave only the most basic details in their latest quarterly that has left many questions reqarding the true situation at NAL in it's rampup. It made it appear there is something to hide.
PLL Price at posting:
68.0¢ Sentiment: Buy Disclosure: Held
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