Thanks all for the lively and informative discussion on SYA. Here is something that may be helpful (or not).
I truly appreciate the input from Bubbles and Split in particular, especially during the high risk period leading up to the NAL decision.
These charts came out of some thinking about the PLL/SYA tension that has been topical. My view is that if the price of Li remains unexpectedly high due to continued scarcity into the short/medium term then the most likely outcome is that SYA will proceed with completing the carbonate plant quite quickly after the PFS due Q1 2023. To avoid delay and reduce finance risks the funding for completing the carbonate plant will likely be by equity.
There has been substantive investment in the partly completed carbonate plant and completion can be progressed without the additional delays and costs of reworking into a hydroxide plant. The financial incentives point to chemical production as a SYA priority in order to suspend PLL offtake purchases at the earliest opportunity.
The carts contain necessary simplifications. The offtake agreement given by SYA to entice PLL for NAL is in essence a call option over say 50% of production with a strike price of $900. Without an actual PLL Li chemical capability there is no substantive advantage for PLL to take SC6 from SYA when the market price is below $900. The advantage to a pre-capability PLL arises only when the SC6 price is above the $900 strike price.
Let's assume that the lowest offtake price of $500 is a break even price at which there is no payoff (profits), that is $500 is the total cost to produce and sell SC6. The AJM experience points to this as being a reasonable estimate.
The black line is total payoff from a tonne of SC6. The firm loses $500 if a tonne of SC6 is given away and makes $2000 if the SC6 is sold for $2500. The orange line is the PLL position (25% share plus the added payoff from the option). The solid green line is the SYA position with the option in operation. The dotted green line is for 75% of the total payout or the SYA position when the option is suspended. The shaded area is the added payoff to PLL under the option. The red line in the separate chart is this PLL added payoff from the option expressed as a proportion of total payoff. This modeled proportion increases from 30% at $2500 to 34.2% at $5000 per tonne.
Under the model at a SC6 price of $2500, the addition payout from SC6 to SYA from having a chemical plant (with the PLL option suspended) calculates to $132m USD (220,000t*$2000*.3) at full production for a restored 75% share of $330m USD. Then there is the carbonate margin on top...
In my view a fast carbonate plant completion is in play and will release a lot of value for SYA shareholders including members of the board and management. This explains the PLL public posturing with respect to SYA - the longer the chemical plant is delayed the higher the payoff for PLL and the less attractive the SYA position is made out to be, the more difficult it is to fund. Strong incentive for SYA to act quickly. The PLL machinations are not that relevant and the price of Li is just too darn high for anything else to happen.
Opinion only not advice. Good luck all.
(20min delay)