DFS- BENCHMARK MINERAL INTELLIGENCE LITHIUM FORECAST...

DFS- BENCHMARK MINERAL INTELLIGENCE LITHIUM FORECAST AUGUST

BENCHMARK'S forecast was used by Sayona way back when the PFS was published, and by then the data was already outdated.

They also used LOM figures sourced from Wood Mackenzie, which requires thousands to purchase the report, so I haven't been able to access it.
SAYONA then state they chose to use benchmark minerals Intelligence forecast, Q1-2022 and came to the figure of-

SC6 - US$900 for the first 2 years, and $US1242 for LOM.

May 23 2022 PFS

Marketing and Pricing

Sayona has relied upon the Q1 2022 price forecast from consultancyWood Mackenzieto assess its long‐term pricing assumption for the spodumene price. Given recent market and spodumene price volatility,Sayona elected to consider a second source of pricing, the latest Q1‐2022 Benchmark Mineral Intelligence price forecast.As such, over the next two years (2023‐24), Sayona has elected to take the yearly average prices of each forecast for non‐contracted spodumene volume.

For the contracted volume to Piedmont Lithium Inc (refer ASX announcement 11 January 2021), a price of US$900/t is assumed over 2023‐24, while the remainder of the concentrate production uses market prices.

From 2025 and beyond, Sayona is reverting back to market prices for the entire production as it seeks to pursue a lithium transformation project on‐site, leveraging prior investments, in line with its commitments with the Government of Québec related to its acquisition of NAL.

The PFS was being drafted LATE 2021/early 2022, when the forecasters for the mineral market were still thinking lithium was in in a price bubble, and using historic and Q1 2022 pricing.

The latest August forecast from Benchmark is completely different.

They now understand, and forecast, we will be in a supply deficit for the foreseeable future.

Late August 2022, Benchmark CEO states-

A shock to the system will bring prices down but the shock won’t be significant oversupply from China,” Moores, CEO of Benchmark, said.

Longer-term, the lithium market is likely to remain tight this decade but become more balanced by around 2026, pushing prices to more stable levels, according to Benchmark’s Lithium Forecast.

“High prices are incentivising accelerated capital spending which will bring forward the timeline for a number of development stage projects, however the speed of these expansions are struggling to keep pace with growing demand,” Andrew Miller, chief operating officer at Benchmark, said.

“The industry is facing a decade of perpetual change. A broader range of assets across a more diverse group of producing regions will be needed to meet the structural constraints facing the industry, and the increased geopolitical importance being placed on strategic supply chains.”

The supply deficit is expected to worsen from 2030 onwards, as demand grows by another 1 million tonnes LCE in a few years.

The market, as any market, is driven by demand and supply.

They forecast a deficit in the short term, stabilising and balancing in the mid-term, and an increased deficit increasing prices again post 2030.

THE BALANCE OF SUPPLY AND DEMAND WILL DICTATE PRICE.

BENCHMARK'S FORECAST, EVEN WITH ALL PROJECTS COMING ONLINE, IS A PROTRACTED ESCALATING DEFICIT BEYOND 2035.

And the mid term around 2026-2030, I think the terms balance and stable, refers to a plateau and sustained price of lithium, but still at elevated level, say 50K+

How will this effect Sayona's, or ANY Lithium producer moving forward?

The explanation is best explained by benchmark-

Benchmark’s lithium prices are used in supply contracts between lithium producers and the downstream and midstream supply chain, including automakers.

As contract agreements have shifted away from fixed price deals due to greater pricing volatility, buyers and sellers have looked to introduce market-led mechanisms into contracts, using Benchmark’s IOSCO certified lithium prices, or a basket of reported prices including Benchmark’s published grades. That allows them to price contracts in a way which accounts for increased price volatility in recent years and improves market transparency.

The frequency of Benchmark’s published prices also allows contracts that are tied to them to be renegotiated more frequently, meaning contract pricing can move in a more similar timeframe to significant upturns or downturns in spot market pricing.

So, I wanted to see how this shift in lithium price forecast, by the most respected experts in the mineral market, impacted our PFS figures.

This is specific to us but you could plug these forecast figures into any producers

PFS/DFS/BFS figures

Taking into account the forecast comments made by benchmark, I have used an average

SC6 price of US$5000, and LCE price of $50,000, for the next 15 years. Some punters do scoff at this, but these guys are the experts, and lithium pricing has outperformed basically everything,

and continues to rise in price.

It is no longer viewed as a bubble, but a continued, sustained rerate in its supply and demand dynamic.

Joe Lowry actually published much higher pricing in his forecast recently...

If we plug these figures into our PFS, they look like this-

NPV US$3.912billion

IRR 805%

Payback 5 months

All my figures are in US$

We will also have losses/expenditure/capex/opex carried forward, offsetting profit, which should improve our margins.

Calculated on a US$435 million EBITDA with the PLL offtake in place for 2023-2024.

We can test this by plugging these figures into the NPV/IRR charts provided in the PFS.

US$5000, the average I will use for the next 15years going forward

sc6 US$5000= 5000/2200= 2.3

2.3x NPV2259= C$5196= US$3.912 BILLION

NPV US$3.912 BILLION

When the PFS dropped, this has been pointed out previously by other posters as well.

However, with the sustained, elevated price of SC6, LCE and LiOH now becoming a reality and the benchmark pricing into the future, I do not think we will see the massive crash in price that was forecast by some.

Quite optimistic figures, I know.....

I am just trying to start a conversation about current and future pricing, which plugged into our PFS looks outstanding.

And.... THE WHOLE POINT OF THIS IS TO HIGHLIGHT WHAT THE DFS COULD LOOK LIKE.

So when the DFS drops within the next 3 months, which should have revised,

current SC6 pricing a lot closer to the reality of what is happening in the market, it will probably-

BLOW THE PFS AND CURRENT EVALUATION INTO OBLIVION.

So, if you can hang on until the end of 2022, we should be in for a significant rerate.

And remember, this is just SYAQ...SC6 ONLY......AND......no refining.

IMHO, DYOR....

Good luck everyone.....