Sayona Mining (ASX:SYA) to produce first vertically integrated lithium plant in North America


by Tim McGowen

Sayona Mining Limited (ASX:SYA) Finance Manager Dougal Elder provides an update on the company, discussing commercial production, the offtake agreement with Piedmont, the PFS for the lithium carbonate refinery, the upgrade of the Moblan resource, and the timeline for lithium hydroxide production.

Tim McGowen: We're talking today with Sayona Mining (ASX:SYA), who is an emerging leader in the supply of lithium for North America's electrification. We have with us Dougal Elder, who is the Finance Manager for the company. It's got an ASX code of "SYA" and a market cap of around $1.8bn.

Dougal, thanks for your time.

Dougal Elder: Thanks, Tim.

Tim McGowen: Now, when we're talking lithium, investors always have an opinion on the lithium price, and obviously in regards to the global macro situation recently, we've seen quite a serious pullback on the lithium price. What's your view on the lithium price?

Dougal Elder: Yeah, it's an interesting question, Tim, and I think it's something that a lot of the market is very interested in. I think probably what we saw over the last 18 months or so was a bit of an overshoot to the upside. So, the fact that the price has corrected a little bit is probably not really a surprise. What's driven that, there's probably a number of factors impacting it, but a lot of the commentary from the market experts seems to be the price is being driven by lower domestic prices in China, and that's recognisable because the export pricing hasn't fallen as far versus the peak. So, I think that's something to point to. The other interesting point to point to is that there's a bit of a floor price emerging in the CME futures price, which hopefully gives investors hope that the prices won't fall too much further.

Tim McGowen: Dougal, so can we get an operational update on your North American Lithium project, now that production's kind of ramping up, you're ramping up commercial production in early second half of 2023, and also we note that the project did produce 6 per cent spodumene concentrate last quarter. Was that expected for an early production, or was that above expectations?

Dougal Elder: Yeah, absolutely. So, NAL kicked off the start of production in March. So, about a month ago. We produced around 3,500 tonnes to the end of March. So, well ahead of our internal budget. In March, NAL produced 6 per cent over 6 per cent concentrate over a number of days during that month. And that was really around demonstrating that NAL is capable of that 6 per cent standard. But what we are going to pursue is a 5.4 per cent grade product to produce and sell. And that's really around generating the best margins for the joint venture, where the additional tonnes that we can produce by lowering the grade offsets the lower price. So, we think that that's in the best interest of the joint venture to drive for those additional margins.

In terms of the ramp profile, it's a very aggressive ramp. We think that NAL will be at the nameplate capacity of around 226,000 tonnes run rate by October of this year. To the end of April, we're ahead of budget for the cumulative two months. So, everything's on track so far, and we look forward to providing a further update at the end of June.

Tim McGowen: Dougal, now you touched on that 5.4 per cent spodumene concentrate, but your contract with Piedmont Lithium (ASX:PLL) has a reference cap price of $900 a tonne for 6 per cent spodumene concentrate. So, how does that discounted concentrate grade affect contract pricing?

Dougal Elder: Yeah, that's right. So, the NAL will target to produce and sell 5.4 per cent grade product. The existing offtake agreement with Piedmont and likely any future additional offtake agreements that we're in the process of finalising will be based on an SC6 standard. So, there'll be a quality adjustment for any grade lower than that. But obviously the only reason we would do that is that there is an additional margin benefit to the joint venture for selling at a lower grade. So, NAL would receive a lower price than the SC6 standard equivalent, but the extra tonnage benefit that we get for producing at a lower grade far outweighs the price discount that we get. So, all in all, a great outcome for NAL.

Tim McGowen: Now, Dougal, you previously mentioned that the PFS to complete the already partially built lithium carbonate refinery is due soon. How will this refinery change the nature of your business? And which market is the refined lithium product likely to be sold into?

Dougal Elder: That's right. So, when Sayona and Piedmont purchased North American Lithium from Investment Quebec, the government of Quebec, in 2021, they acquired a plant that had a partially constructed lithium carbonate facility already on site. We are undertaking a process to complete a feasibility study into the completion of that partially constructed plant. That's currently going through internal management and board reviews at present, and will be released to the market very soon. But that provides a very unique opportunity to both Sayona and Piedmont, as well as the government of Quebec, to be the first and only integrated plant in North America to produce from mine to concentrate to downstream chemicals, all within the same site, for delivery into the US. So, a very unique opportunity presents itself, given that that plant is already partially constructed, and we would anticipate a very low capital cost to complete that construction versus a greenfield site.

Tim McGowen: Dougal, you recently had a significant upgrade with Moblan, where you have a 60 per cent JV with the Quebec government. That's in a vehicle called SOQUEM. What are your expectations around the aggressive build-out?

Dougal Elder: That's right. So, we've just released a mineral resource upgrade for the Moblan project, 51 million tonnes at 1.31 per cent. And I think underlying that is our understanding that Moblan is a very remarkable deposit. It's high grade, it's low strip, it's a very flat, singular, tabular orebody. So, very, very exciting. And the resource that we just recently released was only based off 37,000m of drilling last year. We plan to more than double that this year, which we expect to be completed by the end of July. So, a very significant opportunity to build out the Moblan orebody. And I think that sits within the broader northern hub context, where we have the Troilus claims to the east of Moblan, which is a thousand square kilometres of unexplored land that is completely unexplored for lithium. And we also have the Lac Albert Prospect in the west of Moblan. So, significant regional opportunity to further build out the northern hub to become a leading supplier of lithium and lithium products.

Tim McGowen: Given the potential for an even larger resource at Moblan, which you spoke about, and nearby Troilus, which you recently acquired, can you talk to a potential timetable for potential lithium hydroxide production, and what are Sayona's ultimate aspirations for that northern hub?

Dougal Elder: That's right. So, we're currently undertaking a 60,000m drill program at Moblan today. We're about 20 per cent of the way through that program as at the end of March. So, we think that will be wrapped up by the end of July of this year, with a further mineral resource upgrade to come, following that.

In terms of the broader scene, obviously the Troilus ground that we acquired last year from Troilus Corporation provides a regional opportunity for us to further grow that hub, and there's pegmatites on the east of the Moblan property which are likely to extend through into the Troilus ground. So, significant opportunity there for us to further grow the resource space in the northern hub.

In terms of timelines, we've set an ambition to have 100,000 tonnes of lithium hydroxide production from the northern hub by 2030. So, very aggressive timeline. To work back to that, we would need to be producing spodumene concentrate from the northern hub by around June of 2027. So, I think that talks to the multiple work streams that we're undertaking in parallel. We've got feasibility studies ongoing for the Moblan project. We've got a 60,000m drill program underway. Environmental studies are progressing. And we really look forward to the definitive feasibility study by the end of this year, which will then hopefully kick off the construction and final permitting stages for that project. So, a very exciting opportunity not only for Sayona, but also the government of Quebec.

Tim McGowen: And just on the government of Quebec, can you talk to their support for vertical integration in the northern hub, given they're a 40 per cent JV partner?

Dougal Elder: That's right. The government's strategy is actually province-wide. So, Sayona has aligned ourselves to the government's strategy, which is about creating a vertically integrated battery metal supply chain within the province of Quebec from mine through to concentrate through to downstream refining. Sayona's targeting that in both of our hubs, both at the Abitibi hub, cornerstoned by NAL, supported by the Authier deposit, and in the future also Tansim and the Valley Lithium project, which we're running into. And in the northern hub, we've got Moblan, which cornerstones the northern hub, supported by the Troilus claims and Lac Albert.

So, hub and spoke model at both hubs, vertical integration, aligned with the government's strategy, and we think that's going to be a winning combination, as North America rapidly pursues the development of critical minerals.

Tim McGowen: Dougal Elder, thanks for your time.

Dougal Elder: Thanks for having us, Tim.


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