General Discussion Topics, page-60646

I had another look at the NAL PFS and put together some ramblings and loose calcs.

Think of this more as me thinking out loud...it's not gospel!

I am still a big believer in the fundamentals and just need to zoom out a little and not get hung up with the day to day stuff.
So, lets start with pg 45.

MODELLING

It outlines the logic and modelling used around the pit economics-

The open pit limits were optimised using the Deswik mining software using the Pseudoflow algorithm. The optimisation was performed considering only the Measured and Indicated resource blocks as mineralised. The Inferred resource was treated as waste. A series of pit shells were generated by varying the base selling price using revenue factors ranging from 0.3 to 1.0. The selected pit shell (serving as a guide for open pit design) uses a revenue factor of 0.60.

The pit optimization parameters used for the base case pit shell are described as follows:

- Overall metallurgical recovery, including ore sorting: 65.8% (NAL ore only)

- Concentrate grade: 6.0%

- Concentrate price: US$850/tonne of concentrate for revenue factor 1.

- Exchange rate: 0.76 US$/C$ - Concentrate transportation cost: C$59.69/tonne of concentrate.

- Processing and G&A cost: C$23.92/tonne ore

- Mining dilution and ore losses are evaluated using optimized stope shapes.

- Within a 10m envelope of the old underground workings, the mining costs were inflated by 30% for the pit optimization.

- Physically limited by the lake Lortie (60m offset) and the mining lease.

Very interesting this point. They have used a pit model of factor 0.60, when 850/t is factor 1.

That means they have basically modelled the economics at 510/t!!! If we can earn that, then we are safe.

So why on earth have we used $850 to calculate the economics of the project as factor 1, and then used the 0.6 model?

Even the crappy PLL deal is valued at 900/tonne, and if we sold on the open market, we could achieve over 8x that amount.
The pfs already ALLOWS for a slip of -+30%. Do we really need to add further discounts to the economics?

COSTS-

Then they inflated the mining costs by a whopping 30%, for anything within 10m of the old underground workings. Why, when they would probably set a 10m offset area you cannot work past, just as they have with 60m offset at Lake Lortie?

Additionally, the preamble to this paragraph does state this model uses a revenue factor of 0.6, so are we to assume that the PFS economics are under done by 40%?

From what I have seen, and some rough calculations, it seems closer to 50%…

And that CORRELATES with 40% loss due to the modelling, and a further 15% loss (midpoint of the -30%) =55%

However, if we conservatively use a 40% reduction in the published economics, (0.6 factor) as admitted by the consultants,

You could see an NPV of 1. 5bill, IRR196 and payback period of 1.2 years (850/t factor1)

The Reality of it, we will probably see a NAL only NPV of 2.5bill, IRR app 300 and payback in 9 months, just prior to SC6 production, even with the PLL deal.

Carbonate/Hydroxide production could add a 5x revenue multiple to that and more to the NPV.

5X , I hear you say...what??? Consider that sc6 is 6k and LCA is 60k or

30kt LCA x 60000/t= 1.8billion revenue/pa

Vs

a 2023 base revenue of around 370million (113k PLL and 55 at market contract price of 4862, with a 168kt annual rate.

A 1.43 BILION increase in revenue...or 4.9x in yearly revenue over LOM.

Don’t just take my opinion on it, check out figure 6 from the PFS-

FIG 6.

Additionally on page 3 they state revenue for LOM is 5.335 billion!!!
Are you kidding!!!

Base case, sc6 ONLY, 27 years at 370 mill/year, is still around 10 billion! See calc above..

Keep in mind, revenue after 2025 onwards will be around 1.8 billion with LCE/LIOH production...PER YEAR, just from NAL.If you want to be conservative, state LCE/LIOH production from 2027 onwards.

OVERBURDEN Pg46

 All Inferred resources have been treated as waste material in the production schedules and the project economics.

The NAL Ore Reserve Estimate-

In addition to the 29.2 Mt of ore, a total of 150.4 Mt of waste and 3.8 Mt of overburden must be mined, resulting in an overall LOM strip ratio of 5.3.

(150.4+3.8) overburden +waste - (13874000+14372000 inferred) = 154.2 - 28.246= 125.954MT

125.954/29.2= 4.313 strip ratio

If we reduce the inferred resource from the wastage, as it will probably be proven up in the future anyway, it reduces our strip ratio to a more acceptable 4.3. It also adds to the resource tonnage.

Particularly when they state-

Sayona will implement a ROM

(Run‐of‐mine) ore stockpile management system, whereby diluted material, lower grade ore and higher‐grade feed will be segregated and managed via a stockpile management plan to ensure consistent feed to the plant. This will allow for production campaigns of similar material, providing the concentrate plant sufficient feed stock to maximise product recovery and grade.

So then why would you classify the inferred resource as waste and add it to your waste/overburden?

I understand it is NOT proven, only calculated, but when you are going to implement a blended ore strategy, surely some, if not all will be useful and not merely waste.

RECOVERY RATES-

The metallurgical recovery rate of the NAL only ore, at 65.8%, is used to calculate the economics, below the 67.7% they claim they could achieve with the Authier ore

Furthermore, Even the blended 67.7% is under done, because with the upgrades to the processing circuit, we should see recovery rates well into the 70’s, AND, greater thruput.

I am sure the flow sheet calculations could have shown this, however, they were not published.

CAPEX pg 21-

The total capital expenditure (CAPEX) proposed for the project is estimated at C$91M, including a

C$14M contingency allocated across the first two years. The present costs estimate pertaining to this

study qualifies as Class 4 – Pre‐feasibility Study Estimate, as per AACE recommended practice

R.P.47R‐11. The accuracy of this CAPEX estimate has been assessed at ±30%.

So, 84mil if we remove 1 year of the contingency, then add in the PLL contribution that Keith has openly admitted to have budgeted for US$20mill. Or C$26

14 mill over 2 years, so 7/year

Our capex contribution could be as low as 91- (7+26) = C$58...

(worst case 91+7-26= 72)

We also have +/-30% capex allowance, but I won't calculate that in... which should be refined to +- 15% at DFS.

So, the economics, of an already robust project, continue to improve.

Then why, on so many fronts, Underdone ...why?????

I can only surmise what has happened behind the scenes.

Possibly-

1. Conservative.........presenting a base case to enable funding. If they had gone to an investment bank, there could show only be UPSIDE from this PFS.

2. Strategically devaluing the SP, to enable a quick and clean CR....and keeping a lid on the SP to allow rapid institutional investment.
4. They wanted the pFS to seem robust but not stellar, to allow the later DFS to prove up incredible economics

3. Strategically positioning themselves for a government grant...

4. They have NO IDEA what they are doing....

5. A combination of ALL OF THE ABOVE.

Personally, it has been an unexpected opportunity, allowing me to improve my holding by over 50%. I know in the long run; I am in a much better position, that it played out this way.

Even I have to zoom out here and stop looking for little clues and insinuated details, which I find myself doing.

With the lack of clarity and lack lustre messaging, I am over it, and I too, need to heed my own advice and just zoom out...

As long as these guys keep pushing behind the scenes, stick to the Q1 23 production timeline, and then accelerate plans to become an integrated refiner, I am still in....Which all my DD still tells me, is actually happening.

That is the destination I am on board for......the rest is just details....