Sayona Impress With Robust DFS

At a time when there is not much enthusiasm for lithium (at least not on the surface) due to a disastrous 2023 year for the white stuff, Sayona (ASX: SYA) has injected a dose of much needed positivity with the publication of its Moblan Lithium Project DFS (ASX announcement 20/02/2024).

The DFS is full of good numbers, including:

·       A post tax NPV8 of US$1.64 billion

·       Post tax IRR of 34.4%

·       2.3 years payback

·       1.8Mtpa processing throughput

·       Annual product rate of 300kt of 6% spodumene concentrate from an average feed grade of 1.36% Li2O

·       LOM mass recovery of 74.7% through the concentrator

·       Combination of DMS plus flotation circuits

·       21 years life of mine

·       Average LOM strip ratio of 2.3:1

·       OPEX US$416.55 per tonne of product

·       All in sustaining cost US$561.03 per tonne of product

·       Total CAPEX estimate US$722 million

·       Average 6% spodumene LOM price US$1,990/t

Now, let’s digest some of those numbers shall we?

A NPV of US$1.64Bn and IRR of 34.4% speak for themselves I would say. But what’s behind it? Well, I have to say that a particular number that impressed me was the mine strip ratio at 2.3, now that is a very very very low strip ratio for a lithium mine, which I think makes this project unique and in an enviable position considering I’ve seen lithium mines operating with strip ratios nearing 20 and still making money.

A processing mass yield of almost 75% is also a top tier metric, meaning that with such low mine strip ratio and such high mass recovery through the concentrator, this project is producing low levels of waste, which in turn translates into rather substantial CAPEX and OPEX savings, and off course the above reflects in their comparatively low unit operating cost and all in sustaining cost (US$416.55 and US$561.03 respectively). I mean take it this way, with such a depressing spodumene pricing as the one currently being experienced in the spot market (around US$850/t) this company would still be making US$433.5/t on an operating basis and US$289/t on an all in basis from Moblan, not bad at all huh?

Now, they have assumed a LOM average price of US$1,990 and whilst this is way above current pricing, I’d say this assumption is perfectly reasonable because there is no way a spodumene price below $1,000/t can be sustainable in the long term, simply because a pricing like this won’t allow for new supply to come on line to meet the ever increasing demand of lithium chemicals, therefore pushing the market into deficit of raw materials, therefore pushing the price up…you know, just market fundamentals playing up.

With Sayona being the only established lithium producer in North America at present and with a massive market for EV’s and few big players in the lithium chemical industry at their doorstep, I think this company has solid potential to become a multibillion market cap by the end of the decade, and Moblan’s DFS is one step further towards that direction.