We can talk about Revenue and the current status of currently having NO OTA for the 50% remaining available spod. But the fact remains that the recent NAL DFS to a degree gives us that amazing road map for potential revenue in those FIRST 4 years.
Then there are the other amazing takeaways from proper analysis of the DFS. Like the fact that it is also important to remember that an NPV or IRR calc within an ' Economic Assessment ' of a project is basically JUST an ' Economic Model ' which includes a myriad of best case yet conservative forecast assumptions including ALL economic and financial parameters as well as the UPFRONT capital , ongoing capital , operating costs including G&A , government and third party royalties , TAX rates ,. Depreciation rates. Add to all this the most important variable in the modelling being the TIME PERIOD associated with these economic parameters and the return it will generate.
And contrary to some of what has been discussed on the forum since this ' Preliminary Technical ' study has FINALLY been released , is that it is NOT unusual in itself to have the ' Accounting ' Rollup ' of TWO separate Divisions which account for the transfer pricing aspect of the Concentrate ' input ' and its associated costs to the Downstream converter.
So it only follows then , that it should be NO surprise to see it connected and yet at the same time separated due to SIGNIFICANT tax incentives and allowances applicable to the Chemicals Conversion aspects and LARGER industrial operations versus the straight up mining and extraction side of the business structures. Perhaps this is NOT properly illustrated in these studies with the Carbonate showing NPV discounted tax revenues for the project of C$820 million or a rate of 28.6% while the revised DFS concentrate show these tax streams coming in at a tax rate of 31.7% or C$634 million which was up from the mere C$201 million or 21.1% shown in the earlier concentrate PFS.
So while it is BOTH realistic and beneficial to be showing your projects will indeed contribute to Quebec from a tax revenue stream point of view , you can better believe the rates will be significantly different given some of the concessions available for LARGE projects employing greater numbers with considerable larger invested assets. So on the surface it looks as though we will be contributing to Quebec at the tune of a combined project tax of just over C$1.450 billion. And that's a LOT of bickies .....
So examining all of this , there is nothing untoward's in Sayona ' Mining Concentrate ' division charging Sayona Quebec ' Chemicals ' division C$1,557 per tonne for its ASSUMED 6% concentrate verses the C$1,352 per ton for the NAL DFS 5.74% ....which is now stated in the Preliminary Technical Study as 5.82%. So that's another C$205 per tonne that if ultimately plays out results in another uplift to the concentrate DFS should they achieve 6%. And if they don't , then this will have to be reflected in a more detailed revised PFS or DFS for the Carbonate studies.
What's interesting to me is that while most other inter-relating / connected production data seemingly agrees - Like the 186,000 tpa for years 5 through to LOM. This is obviously consistent with the revised DFS LOM of 20 years less the FIRST 4 years @ 226,000 tps spod etc...
What's interesting though with respects to the PFS to DFS on the concentrate is the difference in some of the key financial and economic drivers.
So on close review and inspection , we have basically an economic model in the DFS which 9.7% more ore at a significantly higher rate of 60% more waste to ore , spending 78.6% more in sustaining capital ( C$165 million ) , producing 2.8% less overall LOM project revenue or C$198 million ...based on a 8.9% per tonne higher forecast spodumene price. All of which then results in an an INCREASE of 6.5% increase in LOM ASIC and a 34 % increase in cash costs per tonne....which then leads to AMAZINGLY a 4.45% increase in project EBITDA or C$142 million more after ALL those apparently adverse swings in some of those variables.
So how did we do it then. How did we create this significantly higher project economics and financial outcome of 447% increase in FCF for the first5 years and a staggering almost mouthwatering IRR increase to 4,701% from 140%.
And in the words of Paul Keating ...." there is no Magic Pudding " . Well in our case , there obviously was and is. And that is the simple fact of the combination of creaming the Top line with the first 4 years of hitting nameplate at 226,000 tpa coupled with the ZERO cost of upfront capital due to the sunk costs together with the significant drop in LOM to 20 years from 27 years. There is also the fact of the HIGHER forecast spod price to C$1,352 which plays a BIG part as well.
So yes a LARGE part of this flow through economic benefit is the fact that we are doing the same production in 25.9% less time than what was shown in the PFS. Despite all the upwards revised cost variables.
And the whole reason for this is the fact that in an IRR calculation within an NPV model , the IRR is the discount rate expression in percentage for the SUM TOTAL of the ANNUAL rate of return on a project over the life of the project after discount ALL cashflows back to ZERO. So in effect it should NOT b e all that surprising given the IRR is a function of the Exponent expressed in NUMBER of time periods in the DENOMINATOR of the NPV calculation. Therefore in isolation of the the component of the NPV calculation , if you decrease the number of years LOM or time periods in the exponent , you will inherently INCREASE the expressed IRR in multiples. And in our case substantially when you bring forward by 7 years or 26% of ALL the relevant cashflows and have NIL in the upfront capital costs in establishing the plant necessary in achieving these income streams.
And this is especially so when you increase substantially by over 50% , the forecast tonnage for those FIRST 4 years to nameplate 226,000 from 150,799 tpa in the PFS on almost a 9% increase in sales price per tonne.
Imagine what the figures might look like if the ' Market ' price per tonne was more like what Sigma had forecast in its DFS of US$3,300 per tonne ...or something like that. And why not as the average US$ per tonne over the last month has bottomed out at just over US$4,000 per tonne , but you don't really see it effecting Sigma Lithium's price all that much to the downside from where the SC6 price has come from the last 12 months.
So what would a price of US$3,000 per tonne do for our DFS estimates and modelling. Well it would literally BLOW it out of the water right. A mean a near doubling in top line sales price per tonne at the same ASIC and cash cost per tonne. WOW . So we're talking about a combined sales stream of US$440.7 million per year for those FIRST 4 years at what looks to be HALF at break even ( ie Piedmont Off-take ) , and the other HALF at over 300% margin on ASIC measured price per tonne. Whats that then going to do to the FCF calculation of whats currently reflected as over C$1 billion in those FIRST 5 years. Well that would be C$2 billion at least wouldn't it.......
And C$2 billion FCF can buy you a lot of investment in other income producing plant.
So i guess if its good for Sigma to have inserted expected sales prices per tonne of this magnitude , why would it be unreasonable to expect that Sayona would achieve these sorts of prices on its 50% NAMEPLATED production forecast for the FIRST 4 years.
Could it be that Sayona simply chose to use the lower sales prices to offset as a buffer to maybe NOT achieving nameplate in any of those FIRST 4 years. Because that would be the conservative thing to do. However , everything they are saying in their presentations and the narrative would suggest that they are indeed on track to achieve nameplate from YEAR 1.
So yeah on the basis of all this , Sayona could be considered to be at least 50% TO 60% undervalued at present . And that is JUST for the NAL spodumene operations. Nothing in that calc for NAL Carbonate or indeed Moblan JORC'd MRE.
So once the Market ' twigs ' all that and the fact that its this FCF which will drive this forward , a $4.4 billion market cap just for the NAL income generating spodumene operation is not out of the question.
Now who says that 40 - 42 cents from where we are now is NOT worth the wait and something which would resemble quite an extraordinary return over the next 6 - 12 months. Add to that the ' catch-up ' when reality kicks in on these cashflows , and all of a sudden the Carbonate or even Hydroxide plans start to be baked into the SP from those levels .
According to the Carbonate PTS , that's another C$2 billion in NPV so that's an increase from those 40 cent levels to the now 60 - 62 priced levels. What about the potential 50% increase to Moblan expedited by a completed DFS and a path forward on permitting and development. What will that add to the sum total of the parts when that emerges as well.
So there is still A LOT to look forwards to over the coming months despite those who are endeavoring to paint a picture of a continuing ' stagnant ' SP .
Its just whether you are prepared to make that investment now given some of the apparent uncertainties and ' unknowns ' as well as Management's track record in keeping to their suggested timelines. Could just mean they ( Management ) think its close and so why bother updating something they feel the ' Market ' will take care of in the shorter to mid-term timeframe. Still doesn't make their Management style ideal or best practice . But one still has to contemplate this as a potential scenario as to why they are letting things slip out on the update side of things.