Here's what I think :-
To understand better the dissension , manipulations , or tensions (refer it what you like ) in our SP , I believe we first need to separate the reasons why we have these so called apparent ' crickets ' in the trickle down random news and pics , and then disseminate or merge those reasons into those which we can more readily account or interpret to be the cause.
And we can do this from any number of processes including direct comparisons - plus or minus ' this or that ' .
So I would start by breaking the thought processes down to relevant and key one or two word bullet points which highlight the respective discussion categories.
And while the list is not exhaustive nor can it ever be ALL encompassing , I have given it enough thought to be confident that MOST issues will be able to be slotted into or under at least one of these categories as a ' Sub-Groups ' category.
So here are my significant discussion starting points , and as I see them being key inflection and reflection governing factors in causing doubt or dissension among Investors and why the Company's rather sporadic release of updates and critical information.
> Wherewithal / Performance
> Geopolitical / Political
> Corporate Structure / Tax
> Economic ( BOTH Macro & Micro )
Wherewithal / Performance :-
O.K , so I have spoken about this word previously . And it is an important one because our own MD used it with his narrative surrounding performance and ' proving ' to the market if you like that Sayona can indeed turn around the previously failed operation of NAL.
And we can't underestimate the significance of this word as measured by the continued evaluation of performance in any shape or size. Having said that , I am pretty sure that Quebec itself believes that this operation can indeed be resurrected to a point where it can contribute significantly and profitably to Quebec's ambitions and goals towards the electrification of transport and delivery of clean and efficient energy in Quebec.
And while Sayona will clearly be apart of that , the market will continue to evaluate by postulating on every word or even photo released by the Sayona Quebec Management Team.
So what does that mean for us given the latest announcement where Management declared with a bunch of photos that there were now 77 workers now on site when the previous amount advised on 4th August was only 50 with a ' Doubling ' by September . Could it be that the market believes and has taken the view that we are now already behind by at least 23% hence the 29.6% drop back to 25 cents from 35.5 ...and where we came from on 4th Aug when the SP was 22.0 cents.
So while that 61% rise from 22 to 35.5 could account for the increase in manpower to 80 construction workers , the fall back or retrace to 25 would clearly suggest there is more to the story than just the simple interpretation of a delay in works completion. In fact lessor manpower could be good right . And on the other hand if its not good , how long does the potential deficit in manpower to complete equate to the end result in the overall timeline of expected production.
So the messaging is mixed and unclear and which does not declare that estimates in timelines remain on track.
Of course there are many other gauges of ' Wherewithal & Performance ' surrounding Sayona project development. Far too many in fact to include in this single post. However , one would be the much anticipated and historically fraught with issues being the Authier BAPE approval.
I personally am not worried about this as it was clearly known that Authier would be integral to the resurrection of the NAL operation and that this in itself makes it very hard for Quebec to overturn , and has many more wider and wholesale Mining ramifications for Quebec if it doesn't come on line as has been indicated in ALL the proposals.
But you can see how the messaging of continued ' uncertainty ' is playing against the clock of ramping up the desired spodumene output from the overall project. And as such , you can also see why the Authier DFS has been apparently ' stalled ' or withheld from the delivery until all these internals are dealt with.
Geopolitical / Political
I've chosen to include my following narrative and comparison into the Geopolitical Political category simply because what is occurring on the geopolitical and local Quebec and Australian political front is significantly different to the period this time last year.
So let's first look at a significant comparison which I believe is relevant in the context of this MAIN category.
So while every year and every company's entry to the ASX200 indices will be different , if we look to last year when LTR was included in the ASX 200 , they had no real significant news within the first 6 - 8 weeks from the initial announcement on 3rd September 2021.
So after rising 62% ( Sayona 36.5% (3rd Sept) , 61% from 4th Aug ) from 3rd September to 24th September , it briefly retreated 16% for no reason other than the generally unsettled markets which occur historically from the overall cyclically bad September period in the markets around the end of Sept to early October. This was also around the same time Sayona's SP had peaked just before its decline which followed the Moblan acquisition .
So after this brief interruption , LTR's SP went on a predominantly ' newsless ' run and stacked on around 40% in less than 3 weeks following this brief retrace.
So without harping or delving too much into the hows, whys , and what effects , it is clear that what was happening then versus now is completely different. I am referring of course to the now apparent escalations in the war footing events with respect to the Russian / Ukraine conflict in Europe. So comparing the relevant retrace and gains , and the movements in market volatility can be and should be expected to wider given given that LTR's inclusion was NOT subjected to these added uncertainties , and in fact the conflict had not even started. And everyone here would know of the adverse effects and the added economic pressures this conflict has added to an otherwise heated inflationary economic backdrop which has also escalated since then.
Add to that , we also have a somewhat ' Dual ' geopolitical intertwined ' sensitivity ' evolving between our two great Commonwealth Nations in Canada and Australia. And never has this been more evident than just this week when we saw our two leaders come together in discussions amongst the solemness of occasions with the passing of our mutual Royal Highness Queen Elizabeth II. I would have like to use the word ' Somberness ' but chose solemness because whilst the occasion was very somber , the words and thoughts exchanged by our two leaders were quite poignant and serious with respects to how they both see the world evolving and how they can step up and lead in the areas of environmental reform , critical minerals and supply chain sovereignty and security as well as visualizing the world expectations of sourcing these needs from politically stable and respectful jurisdictions bound by common values and human rights.
So I see this as a MAJOR milestone of cooperation , respect , and mutually defined targets - but I also see the complexities being intertwined within each of their separate local jurisdictions - ie Provincial v our States , and that while LTR might have arguably had a looming State election , it did not have that event occurring at exactly the time it had its own inclusion into the ASX 200 index.
So that is a very different set of circumstances in my opinion which Sayona is currently subject to , and which has a very different set of political defining issues where ' Nationalistic ' sensitivities are at the core of Quebec's current issues. And these sensitivities are at a heightened level because of how these issues also relate to the rest of Canada .
Corporate Structure / Tax
This is a really significant category for me. And the reasons are that while we often see incomplete answers and interpretations of offtakes and ' priority ' distributions of spodumene etc coming out of the 25 / 75% current JV for Sayona Quebec , it is equally hard to see why they would want to go forward with Lithium Chemicals production sales and profit numbers being accounted for under the same Corporate / Tax structure as that of the spodumene mining and production.
And Korea and Canada are actually great comparative examples of TWO countries whilst operating in TWO very distinct market reaching jurisdictions , are setting up from a Corporate Tax position to attract foreign capital in many similar ways. And we could literally discuss the issues for hours on end - But essentially Korea who is uniquely positioned in proximity to both China and Japan , has set up 8 unique FTZ ( free trade zones ) where there is significant tax relief , tariff reductions and waivers as well as many other capital assistance programs.
Canada on the other hand, while officially having 9 FTZ also provides huge stimulus via its taxation system - particularly for the added manufacturing and processing stages as well as the more formative early stages of mining prospecting and discovery.
Canada is also obviously uniquely located and well positioned to service the entire supply chains of the GIANT US and North American markets and is the very first of ALL the G20 nations to have effectively set up its ENTIRE nation as one BIG FTZ via the linkage to their many internal programs including its Duty Deferral program , the Export Distribution program , and its Exporters of processing services programs.
So when you look into it further , it is no mistake that we along with the Canadians are aligning ourselves with this very like minded nation of Korean republic which also flows through to Japan and our other ASEAN trading partners.
And you only have to see what PLS has done with the separation of its Pilbara operations and offtake from its lithium processing JV with Korea's GIANT POSCO as highlighted in italics below:-
• Incorporated joint venture (JV) in South Korea agreed between Pilbara Minerals and POSCO to jointly construct and operate a 43ktpa LHM primary lithium hydroxide chemical processing facility (Conversion Facility).
The JV will be named “POSCO-PILBARA MINERALS LITHIUM SOLUTION CO LTD”
So I think the difficulty here with Sayona & Piedmont's JV is that while it too is accounted for the Sayona Quebec assets , expenditures etc..... , it has the added hurdle that anything further ' ventured ' or split under ownership is subject to FIRST agreeing to move to that next stage where I strongly believe a SEPARATE Corporate structure would be chosen for tax purposes etc.....
So while the wording doesn't specifically imply or infer that Piedmont gets a first right of refusal whether it wants or doesn't want to participate , it definitely would preclude Sayona going ahead with a Chemicals conversion plant without Piedmont. In other words , if Piedmont says NO , it doesn't really matter because a different Company ( not Sayona Quebec ) would most likely be formed to transform the spodumene , and in which case would revert to the ' Priority ' rankings of the spodumene going to Quebec's and / or Sayona's sole venture or JV for Chemicals production.
So I can see that this perceived ' indecision ' which may or may not be as result of Piedmont dragging its feet on whether it wants to proceed and / or participate - I can see how this might overhang the SP from the markets point of view until more clarity is provided as to which way Sayona is going to go .....and with whom it is going to do it with.
So this is a very BIG decision for Sayona as I would expect for Piedmont as well. Having said that then , I guess it is perfectly normal to allow your minor JV partner the time to decide whether it wants to be a part of that decision and forward expenditures or not. And this is why I believe we are not hearing anything further as yet. Because a new Company will have to be formed as well I would think.
Economic ( BOTH Macro & Micro )
Although this category is a HUGE category with many issues which can be discussed and at both the Macro and Micro level , I feel it speaks for itself and think there's not much needed to be said apart from the fact that we are obviously in a very different place than where we all were in at the same time last year.
So without going too far into the debate , essentially the economic backdrop is in a much more tender and sensitive place than it was with respect to growth and inflation , war etc.... then we were at the same time last year.
So the question for me though is that because Markets tend to price in these expectations well in advance , how much worse can it actually get given we are 12 months into the cycle and we are already seeing Month on month reprieve in the forward and / or lagging inflationary data.
Yes there will be some Corporate's getting hit on their bottom line profit expectations and forward estimates even now . But with these effects and interruptions caused on developing supply chains will at the same time be being provisioned into their balance sheets in a gradual and progressive fashion potentially leaving upside room for outperformance down the track as is always the case with balance sheet provisioning. In other words, provision the absolute worst and then outperform on those downgraded guidance and finally year end or quarterly numbers.
And there will always be growth sectors - which one only has to look at what has been happening with the counter intuitive moves in the Lithium miners as against broader market indicators to know that we are ABSOLUTELY in one of those sectors right now.
Just look at Sigma Lithium overnight - Hitting another all time high and up 4.85% to C$36.51 and a market cap of C$3,680 billion ( A$4,134 billion ). And all of this when most other lithium majors were down and the broader market DOW down 1.7% and over 500 points.
And to put this in perspective , that's almost A$3 billion in market cap that Sigma has put on since this time last year compared to Sayona who has only put on A$941 million to its market cap where it spent $125 million in acquiring it .....went on to make statements of potential ' doubling ' the resource , doubled the resource at NAL's southern HUB , raised $200 million ( after Moblan ) , set in motion multiple exploration programs here in OZ and abroad , made logistical and preemptive acquisitions ( vis a vis Lac Albert ) , flush with cash expected from options as well as JV Partner ( which we've yet to see on balance sheet yet ) , made the ASX S&P 300 indices and then subsequent ASX top 200 , increased our facilities financing facility MASSIVELY ..... - And yet we are in real terms only A $616 million up ( $551 million if adjust for inflation ) since the same time last year and where Sigma has put on A$3 BILLION in market value.
So it is for all these reasons and many more , that I am still backing in Sayona as a portfolio strong BUY - Whether it gets back to 22.0 cents and from where we started from on 4th August or whether we fluctuate around the key 26.0 range , I definitely see us very much higher as more clarity on the numbers and progress is disseminated by Management when and if they are allowed or when and if matters of direction are decided with current partners.
Meantime - CHILL ,enjoy the opportunities , and mostly enjoy the Footy Grand Finals. And remember that ' Opinions ' are like ' Onions ' ......in that they have many layers with ALL of them equally ' eye-watering ' as the next one. .........
(20min delay)