The Mine Builders: Sayona MD Brett Lynch on the ‘breathtaking’ North American lithium opportunity
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In 2017, Sayona Mining was one of more than 100 lithium exploration stocks on the ASX.
But “an avalanche of supply” led to plummeting prices, Macquarie and Morgan Stanley said ‘I told you so’, and these companies and their investors bailed into more appealing metals, like gold.
Only a few ASX-listed lithium explorers and project developers stayed the course.
In 2021, lithium prices are seeing their first sustained rise in years and this handful of hard-nosed explorers are now in the box seat.
The $15m windfall will help advance Sayona’s flagship advanced Authier project, its emerging Tansim project, and its long term plans for a vertically integrated lithium hub in Québec’s Abitibi region, underpinned by a company changing bid for the mothballed $400m North American Lithium (NAL) mine.
Sayona will also benefit from the Québec government’s aim of developing a complete lithium value chain — from mining through to downstream processing — and its closeness to emerging US battery markets.
We ask Sayona managing director Brett Lynch why it’s time to get excited about the company’s prospects.
“Sayona had to accommodate and adjust when it was tough to even raise a dollar,” Lynch says.
“But that didn’t stop us from committing to this [Authier] project from a long way back. We have always held a long term view on the EV revolution.
“We knew that we would have to deal with that poor sentiment on a short term basis, but in the longer term, the EV revolution would be completely transformational.
“In the two years I have been at Sayona [the lithium market] has literally gone from bust to boom.
“We will go through many more cycles, but the overall trend is clear – the world is transitioning to renewable, sustainable electric energy.
“We want to lead it.
“There’s also opportunity in even the direst situations.
“I recall one of my very first trips to Quebec to visit our flagship project Authier.
“When I was on site, I could look over the hill and see a mothballed lithium operation called North American Lithium (NAL) only ~30km as the crow flies from Authier.
“NAL had gone into administration, but it was a mine that had ~$400m invested in it. It had a large concentrator, and even the start of a lithium carbonate processing plant.
“For a number of reasons, the operation was never a success, and could not be sustained through those really tough pricing times.
“We have now done millions of dollars’ worth of due diligence to come up with a scheme that combines and integrates the low capex Authier project with the infrastructure at NAL.
“We, alongside our partner Piedmont, can turn NAL around.
“What Quebec needs, what the North American market needs, is a plan to turnaround an existing asset which is ready to produce spodumene.
“That’s what Tesla and the rest of the North American market needs, today.”
“Pending the monitor’s [administrator’s] decision, it should be within the very near future,” Lynch says.
“We have recently submitted a revised offer and we are confident of our prospects for a successful turnaround at NAL.”
“You have to be confident.”
“We have been working with Ernst & Young to help shape, clarify and refine our business development strategies,” Lynch says.
“They forecast that by 2030 North America would need at least 10 ~20,000tpa hydroxide plants to meet its own demand. Right now, all hydroxide is imported.
“It is a phenomenal number when you think about it. How can you possibly build 10 plus plants that quickly? It’s mind boggling.
“That’s why our strategy is ‘little steps but very quickly’, because the demand is going to be there.
“Lithium demand forecasts are not being downgraded – they just keep going up.”
“We asked — what would the most successful lithium development strategy in North America be?” Lynch says.
“That led us to bid for NAL, it led us to partnering with Piedmont, and creating a strategy to build an integrated local supply chain for lithium hydroxide production.
“We can see a model where we link these smaller more isolated deposits that – on their own – may struggle to get through the peaks and troughs.
“We are looking to develop a single larger production facility that more efficiently can process and deliver quality 6% spodumene on a low cost, higher reliability basis than the standalone models would be able to do.
“That is what NAL represents. It is a world scale plant, which has capacity to produce over 200,000t a year.
“That gives us enough volume to supply a world scale downstream hydroxide processing facility.
“We are committed to that integrated business model. We think it makes a lot of sense, even though it’s very tricky and [bankrupt lithium miner] Nemaska is a classic example of a mining company unable to make that giant leap.
“Same as NAL – the theory was right, but the chemicals business is not the mining business.”
“Exactly right. We are always looking to learn from the past to be more successful in the future,” Lynch says.
“Nowhere is that more important than an embryonic industry like lithium production. I mean, no one was even doing it five years ago.
“Mining lithium alone has its challenges. Certainly, the dilution issues which plagued NAL literally meant that in the end the operation wasn’t even viable.
“You don’t want to learn that after you build the mine.
“In our assessment, the root cause of the problems at NAL were around ore grade and iron content.
“We believe transporting and blending our nearby clean ore at Authier — a singular, tabular 20m wide orebody — with NAL ore is the unique solution. That is key to addressing the orebody disadvantages at NAL, which has many thin seams.
“Also, if you look at the current hard rock model, most spodumene – 6% spodumene, 94% rock – gets put on a ship to China where it gets processed into hydroxide.
“From a financial and environmental perspective, sending 94% waste rock around the world doesn’t make sense.
“The reason the EV revolution is underway is because people want to address our carbon footprint.
“That’s why we want to mine spodumene and produce hydroxide in North America. We think that will be the key to success.”
“It was another one of those little steps. We knew we needed a partner to develop our business. We will need even more as we go downstream,” Lynch says.
“But the US market will be very important to us, so a partner who had good channels into the US is ideal.”
Piedmont has signed a deal with Tesla, which ticks one of those boxes.
“Piedmont is working furiously to get up and running in North Carolina, like Sayona is in Quebec,” Lynch said.
“We are developing a similar integrated processing plan. We think along those same lines.
“It wasn’t about competing, because there will be more than enough market. It was more about ‘how can we establish a strong leadership position as relatively small companies? How could we take first mover advantage?’
“We can achieve that better together.
“That deal came together pretty quickly. They now own 19.9% of our Australian stock and 25% of our assets in Quebec.
“We also agreed to an offtake arrangement, which was great for Piedmont as well to ensure supply on contracts they have already signed.
“That was a significant dollar value – circa US$500m worth of offtake over life of mine – secured to underwrite the development of Authier and Tansim.
“That gave us a boost and made project development far less risky.
“Together, we are now looking to take that next little step to acquire NAL.”
“Our commitment. We are going to be one of those ‘five year overnight success stories’, and that is only because of our commitment,” Lynch says.
“What assets should we acquire? How will we operate? How do we build a profitable, sustainable business?
“That’s what we have been working on for the past five years.
“That experience will come to the fore once we get out of the blocks and start operating.
“The second is our North American focus. There is only a handful of players at our level in North America.
“Electrification in North America is going to be a breathtaking market opportunity.
“North America wants to source from North America. Like Piedmont, we have the right product, in the right place, at the right time.”