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Sayona Mining takes note of high priced lithium contracts

High priced lithium contracts bode well for Sayona's Authier project.
Sayona Mining takes note of high priced lithium contracts
Sayona trades on a comparably low resource valuation multiple

Sayona Mining (ASX:SYA) sees good potential for it to benefit from the recent pricing of lithium concentrates being sold from Australia to China, which continues to surprise on the upside.

Two new Australian producers have recently reported settlements for 2017 contract pricing of US$750 per tonne for 6% lithium oxide and US830 per tonne FOB for 5.5% lithium oxide.

Notably, Sayona’s pricing assumption in its pre-feasibility study for its developing Authier lithium project in Canada was US$515 per tonne FOB for 5.75% lithium oxide.

The new pricing regime reflects the much tighter market for concentrates as new projects commission slower than forecast and financing constraints slow the planned development timetables for other advanced projects.

Sayona recently reported its maiden Ore Reserve and pre-feasibility study (PFS) results for Authier which forecast a net present value of C$140 million pre-tax.


Authier lithium project

Sayona’s flagship Authier lithium project is located in Quebec, Canada.

Sayona plans to progress towards completing a definitive feasibility study, mining licence applications, off-take contracts and financing this year.

Key findings of the recently completed PFS include:

- Pre-tax NPV of C$140 million and pre-tax internal rate of return of 39%;
- Annual average concentrate production of 99,000 tonnes at 5.75% lithium oxide;
- Average annual revenue of C$67 million and EBITDA of C$31 million;
- Life of mine strip ratio of 6:1 (waste to ore) and cash costs of C$367 (US $280) FOB Montreal Port;
- Development capital expenditure of C$66 million; and
- Maiden Ore Reserve of 10.2 million tonnes at 1.02% lithium oxide (Proven Reserve: 4.9 million tonnes at 0.97% lithium oxide and Probable Reserve 5.3 million tonnes at 1.06% lithium oxide) delivers a mine life of 13 years.

The company is now looking at a number of optimisation options to significantly enhance the value of the project, including drilling (currently underway) to expand the Mineral Resource and Ore Reserves, further metallurgical and geotechnical test-work, and other downstream value-adding opportunities.

The deposit is open along strike and at depth.


Analysis

Sayona remains focused on rapidly developing its spodumene projects and capitalising on the strong pricing window available for new project entrants in the short to medium term.

Despite the solid progress achieved at Authier, the company still trades on one of the lowest enterprise value per tonne of Measured and Indicated Resource multiples in the global sector being $176 per tonne.

This valuation is more in line with lithium explorers than an advanced project.

ASX peers such as Pilbara Minerals (ASX:PLS) and Altura Mining (ASX:AJM) have comparable valuations of $400-$600 per tonne, representing the potential opportunity Sayona offers.

Opportunity for value-uplift for exists as the project resource base is expanded, optimisation activities are completed, and it’s advanced towards development, which is planned.

The company currently has cash resources of $1.3 million which will fund its development activities in the short term.

Sayona has commenced some preliminary discussions with prospective financiers about options for funding future exploration and development activities with minimal dilution to shareholders.

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Sayona Mining Timeline

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