Finally @arfbarf the proper "cost" metric is being scrutinized .... COST OF GOODS SOLD!
Remember, the SYQ OTA with PLL has DAP price ... Delivered At Port ... to Cherryville NC. SYQ pays to deliver SC to PLL's doorstep 50% of NAL production. So they (SYQ) save a few bucks by only going to PoQ. It becomes PLL's "problem then right" ... but Corpus Chrisi TX isn't China so that's good.
Concentrating on the 50% that is SYQ's to sell, I've said this many times ...What's preventing TSLA from buying all that production? Well first of all:
1. Corpus Christi Hydroxide plant is not finished yet (seen no announcement of its opening) ... it was supposed to enter commissioning H1'24 and ramp up in H2'24 ... clearly that does not appear to be in schedule. TSLA did not talk about it in their Q2 earnings call nor was there any Q&A on it.
Last 3rd party fly footage I've seen was as of 4 June 2024 update
2. When that refinery is finished, operating and then possibly expanded, where will the SC come from? Well obviously there is the OTA that TSLA has with PLL for effectively half of PLL's NAL production (so 25%). Then TSLA also has an OTA with LTR (100Ktpy 1st year and then 150Ktpy SC after)
Seems find of silly to me you would ship that from WA (Geraldton) to US (Corpus Christi) which is a little over 11,000 nautical miles via Panama Canal, when you have (a) opportunity to buy from Canada (b) opportunity to "redirect" shipments what I mean there is TSLA has numerous agreements with Chinese refiners ... for both hydroxide and carbonate. They extended their agreement with Yahua in Aug '23 to purchase between 207Kt - 301 Kt (call it 255Kt at midpoint) for roughly 7 years ... so ~36Ktpy ... roughly equal to what Corpus Christi would provide. To produce ~36Ktpy LiOH you'd need about 260 - 280Ktpy SC6
3. Many companies have highlighted their funding intentions to include a prepay for signing an OTA as a way of securing that supply long term ... this includes SYQ (SYA), PLL, A11, LRS, .... yet very little news has come to the fore ... for good reason I think.
Now TSLA is no charity - its is shark (or a killer whale). TSLA may well see its opportunity to "take" 50% of NAL ... in other words at the asset level ... which means 50% of SYQ ... which would mean SYA is selling 2/3 of 75% equity ownership. How much above "carrying cost" (after impairment as judged by TSLA) would TSLA offer. I'm sure they would see it as offering a "lifeline" to a struggling operation. All that cash goes to SYA. Now that TSLA owns 50% it might be inclined to make an advance payment for production.
Having laid that out SYQ now is owned 50% by TSLA, 25% by SYA and 25% by PLL. Anyone think Canada will force Elon to go downstream in Canada? Now how important is the "minority rights" part of the shareholder agreement.
That scenario puts an extreme economic cloud over SYA's interest in SYQ given (i) TSLA owns 50% of SYQ and so will surely pay some form of transfer payment price ... or simply note what PLL pays and ask why pay more? (ii) PLL owns 25% of SYQ but has 50% of production ... I make the assumption that NAL will produce at above 226Ktpy (iii) SYA owns 25% of SYQ but has not direct title to production ... 100% production is sold. It will however get 25% of whatever distributions are paid by the JV when it is FCF +ve.
There a going to be some tough decisions to be made should prices remain this low for longer. Can not see TSLA letting NAL slipaway.
SYA Price at posting:
2.7¢ Sentiment: Hold Disclosure: Held
(20min delay)