As most of you that have read my posts for a while will know, I am a very strong believer that an integrated NAL is the ONLY way to be successful in the long run. Yes there will be times where spodumene increases greatly in price and we will get larger returns, but this seems to go up and down and up and down. During the down turns it will be very difficult to keep the plant running if we are not integrated.
There has been no talk of actually going down stream in the past year, and we are approaching a time period where there will be no way to make a 2026 commitment even if we wanted to. I don't know where Lucus Dow sits on this issue, but I do know that we have not made any effort in the last 12 or so months which tells me this is likely not even in consideration.
There are 2 main arguments as to why the carbonate plant should not go forward, the first is funding and the 2nd is not having the skill set to do it. I will address these here and hopefully give you some thoughts that perhaps would help on both fronts.
From a funding standpoint, we know we need around 555 million total outlay to build the plant. We do not have that sort of dough laying around and at today's lithium prices we are not likely to be able to generate anything towards this goal. However both the government of Quebec and the federal government have a huge incentive to have production in Canada and I believe would be willing to fund a portion of the costs. We really need not look any further than Nemaska, for answers on how much they they would be willing to spend to help us.
https://www.lesaffaires.com/secteurs/energie-et-ressources-naturelles/quebec-injecte-250-m-de-plus-dans-nemaska-lithium/
This would be the 3rd such investment into Nemaska since their inception and to date, they have no mine and no refinery. Sayona was brought out of administration 6 months after Nemaska restarted and was able to get the mine back into production in March of 2023.... Nemaska on the other hand has incurred delay after delay and is now projected to be open in 2026/7 with a whopping CAPEX in excess of 2 Billion C$.
The government has signaled to Sayona that they would be willing to invest into our project, but to date Sayona has been determined to not focus on downstream. But the money would be available if they asked.
So nearly 1/2 of the project could be funded without a lot of effort. So now lets focus on the remaining dollars needed.
Prior to Sayona taking over in 2021, and when CATL had ownership, IQ had issued a 100 million loan to NAL. The terms of the loan were very very very generous, allowing for a low interest rate and no loan payments until the build was complete. In other instances IQ has made similar loans to companies a 0% interest. I believe IQ would make a similar agreement with SYAQ. If I were Sayona I would go one step further and ask that loan payments do not start until nameplate is achieved, and I believe IQ would do this because if not they risk several of their larger automotive deals going down in flames, in this case trading millions to save billions. This type agreement is not without risk from either party, but I believe that Sayona a shown a track record of bringing projects in on time and close to budget. Piedmont should not have an issue with this arrangement because while the build is happening they would still have their OTA terms with Sayona and would not need to reach into their pocket until the first loan payment came due. The 2nd option would be to sell the carbonate plant to a 3rd party to operate and to sign an OTA with the 3rd party.... the funds raised by the sale of the carbonate plant could then be used to kick start Moblan. I feel like the 2nd option would be much harder to achieve due to not owning the full integration and logistics of 2 separate entities working in close proximity to one an other could be challenging.
The 2nd constraint of not having the knowledge to produce carbonate is an issue, but not insurmountable. The recent slow ramp up and challenges in WA are often pointed out as reasons that Sayona would have a difficult time producing as well. After all these are brand new hydroxide plants in WA with the latest technology and their results have been tepid at best. They are now curtailing production and costs have been very high. I get all of that, yes, but there are several things that I believe are not being considered with respect to NAL.
1. We will be producing Carbonate not Hydroxide. Hydroxide is a much tougher product to make than Carbonate, some have said that hydroxide could be 2 to 3 times more difficult to produce.
2. Canada has been at the forefront of battery technology for over 50 years. Jeff Dahm at dollhouse university is the leading expert and has been signed on as a consultant with Tesla for the past 10 years. Because of this universities in Canada have better programs that equip their students with both the knowledge of battery construction but also with the chemical know how. I would rate Canada's battery tech education very high and therefore they would have a much higher pool of talent to pull from, you also have fortune 500 companies like DOW chemical and BASF with legends of chemists that could be contracted or even hired to operate the plant, these are assets that Australia lacks sadly.
3. Lastly when we bought NAL it was a past producer of lithium carbonate. There were a lot of learnings that took place and that knowledge was captured in process documents, maintenance routines, and lessons learned sessions. Many of the employees that operated back then are still around to draw knowledge from..
When Elon Musk decided to build a refinery you never heard him say, it will be too hard or because someone else failed I am not going to try, no, he funded it and is building it, and I am going to assume he will successfully run it at well.
The difference to us as shareholders is this. Selling spodumene when prices are low is going to be break even at best venture, one where you never make enough money to progress any of your other projects, one where you are only one difficult quarter away from closure. An integrated mine with lithium prices where they are today can still generate over 100 million dollars per year, likely more and in good years when prices are elevated we can do 3 to 4 fold that number.
Yes, we are in a challenging environment, but that should not preclude us from planning our next steps, share holders who signed on specifically because we believed in the integrated NAL facility deserve some effort for the cash that they have offered, nothing I am proposing here should present additional risk. I do believe that if Sayona decides to turn a blind eye on the Quebec government that they will likely make other efforts such as Moblan more difficult to permit and ultimately could prohibit our progress on other key initiative.
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