425: Sayona Mining and Piedmont Lithium Announce Merger to Create North American Lithium Champion

Sayona Mining and Piedmont Lithium are set to merge, creating a leading North American lithium producer with enhanced scale and growth potential.

Summary

• Sayona Mining Limited and Piedmont Lithium Inc. have announced a proposed merger to create a major North American lithium producer.
• The merger will involve a newly-formed US subsidiary of Sayona merging with Piedmont, with Sayona becoming the ultimate parent entity (MergeCo).
• Post-transaction, ownership will be split approximately 50% Sayona shareholders and 50% Piedmont shareholders, prior to a conditional placement.
• MergeCo will be domiciled in Australia with an ASX primary listing and a NASDAQ secondary listing, and will be rebranded under a new name.
• The merger aims to create the largest permitted and producing hard-rock lithium mine in North America, with potential to develop three additional high-quality projects.
• Sayona's North American Lithium (NAL) achieved consistently strong production, with revenue of $122 million and cash of $110 million as of December 31, 2024.
• NAL's mill utilisation was consistently around 90% with lithium recoveries of 67%, a 7% increase against the prior comparative period (PCP).
• Spodumene concentrate production reached 103,063 dry metric tonnes (dmt), up 57% from the prior year, with sales hitting a record 115,027 dmt, up 59%.
• The company completed 53,444 meters of drilling at NAL and 76,202 meters at Moblan, supported by Flow Through Share funding.
• A new Mineral Resource Estimate (MRE) for both NAL and Moblan is expected during 2025.
• The merger is targeted for completion in mid-CY2025, pending shareholder approvals and regulatory clearances.
• FY25 production guidance for NAL is 190,000 210,000 dry metric tonnes of spodumene concentrate.
• Unit operating costs are projected at A$1,150 A$1,300 per dry metric tonne.
• Capital expenditure is estimated at ~A$20 million, primarily for sustaining capital projects at NAL, and exploration expenditure is guided at ~A$30 million.

Sentiment

Score: 7

Explanation: The document presents a mixed picture. While the merger and increased production are positive, the EBITDA loss and declining lithium prices temper the overall sentiment. The company's strong cash position and cost-cutting efforts provide some reassurance.

Positives

• The merger creates a larger, more competitive North American lithium producer.
• The combined entity will have enhanced access to capital markets with listings on both the ASX and NASDAQ.
• NAL has demonstrated strong operational performance with increased production and sales volumes.
• Drilling programs at NAL and Moblan are expanding the resource base.
• The company has a strong cash position of $110 million.
• Unit operating costs at NAL have declined due to increased production and lower cash expenditure.
• The company has secured customer prepayments, supporting operating cash flows.
• Lithium prices have shown signs of recovery from multi-year lows.
• The company is positioned to benefit from resilient demand growth from EVs and ESS.

Negatives

• The underlying Group EBITDA loss of $37 million was driven by the flush out of high-cost inventory carried over from the NAL ramp up.
• Average realised selling prices declined 35% compared to the prior corresponding period, reflecting softness in the lithium market.
• Inventory movements were $66 million unfavourable to the prior corresponding period reflecting flush out of higher cost inventory carried over from the NAL ramp up and the cycling of a prior year non recurring benefit from capitalised development costs in FY23.

Risks

• The merger is subject to shareholder approvals and regulatory clearances, which may not be obtained or may be delayed.
• Lithium prices are volatile and could decline, impacting revenue and profitability.
• The company's production and sales forecasts are subject to various risks, including operational challenges, inflationary pressures, and macroeconomic conditions.
• The company's exploration activities may not be successful in expanding the resource base.
• The company faces competition from other lithium producers.
• The company is exposed to foreign exchange risk.

Future Outlook

The company expects continued growth in the lithium market, driven by demand from EVs and ESS. FY25 production guidance for NAL is 190,000 210,000 dry metric tonnes of spodumene concentrate. Shipping volumes have been deliberately weighted to Q4FY25 in order to deliver into higher priced forward sales arrangements that commence in April 2025.

Industry Context

The merger reflects a trend towards consolidation in the lithium industry, as companies seek to achieve greater scale and efficiency. The combined entity will be better positioned to compete with other major lithium producers in North America and globally.

Comparison to Industry Standards

• The document positions the merged company to be the largest permitted & producing hard rock lithium mine in North America.
• The document compares the merged company to other North American hard rock lithium producers such as Albemarle, Rio Tinto, Winsome Resources, Critical Elements, Frontier Lithium, and Rock Tech Lithium.
• The document lists the LOM average spodumene concentrate capacity (ktpa SC6 equivalent) of these companies.
• For example, Albemarle's Kings Mountain has a capacity of 350 ktpa SC6 equivalent, while Pilbara Minerals' Pilgangoora has a capacity of 1,642 ktpa SC6 equivalent.

Stakeholder Impact

• Shareholders of both Sayona and Piedmont will be impacted by the merger, with a 50/50 ownership split in the combined entity.
• Employees of both companies will be affected by the integration of operations.
• Customers will benefit from a larger, more reliable supplier of lithium.
• Suppliers and creditors will be impacted by the combined entity's financial performance.

Next Steps

• Obtain shareholder approvals for the merger.
• Secure regulatory clearances for the merger.
• Complete the merger transaction in mid-CY2025.
• Rebrand the combined entity under a new name.
• Integrate the operations of Sayona and Piedmont.
• Prioritise projects and develop a MergeCo strategy.
• Complete new MREs for NAL and Moblan during 2025.

Key Dates