Elevra Lithium - Earnings Call - Q3 2025

Transcript

Operator (participant)

I would now like to hand the conference over to Mr. Lucas Dow, Managing Director and Chief Executive Officer. Please go ahead.

Lucas Dow (Managing Director and CEO)

Thank you. Hello and welcome, and thank you for joining us today. I'm joined on today's call by Dougal Elder, our CFO; Sylvain Collard, our President and COO of Canadian Operations; and Andrew Barber, our Director of Investor Relations. We've scheduled today's call to be able to cater for people both here in Australia and also North America. As a consequence, we released our quarterly results last night, Australian time, in order to give everyone an opportunity to review our performance. With that, I'm pleased to present Sayona Mining's update for the March 2025 quarter. Despite challenging conditions, we've maintained operational momentum, progressed critical corporate initiatives, and reinforced our long-term growth platform. During today's call, I'll step through operational results, our exploration activities, a corporate update, and our financial position before turning the call over for questions.

Before we begin, unless specified otherwise, all dollar amounts quoted on the call are AUD. Let me begin with our health and safety performance. Over the March quarter, our total recordable injury frequency rate improved as compared to the previous quarter, which had been impacted by safety performance at our mobile and drilling campaign. At North American Lithium (NAL), we sharpened our focus on lead indicators, including stronger hazard identification and proactive near-miss reporting. Specific improvement initiatives included targeted workforce engagement during toolbox and health and safety meetings, leadership engagement with supervisors and managers, and reinforcement of safe work behaviors and risk ownership at the frontline level. These measures are critical to continue to embed a strong safety culture as we grow.

On ESG and permitting, during the March quarter, we launched tender processes for environmental and biological studies needed to support permit applications for both the NAL brownfield expansion and Moblan greenfield projects. Timing of work is critical, as biological studies must align with the Northern Hemisphere summer survey window to be most effective. Now moving to mining and crushing operational performance at NAL. At NAL, total ore mined for the quarter was approximately 322,000 tonnes, down 13% quarter-on-quarter. The volume of ore mined in the quarter reflected an operational decision to leave exposed and accessible ore in the pit rather than mine it. By leaving uncovered ore in the pit, we avoided unnecessary ROM stockpile rehandling activities and associated costs. Importantly, total material movement, including waste stripping, increased 15% quarter-on-quarter, positioning us with greater in-pit ore availability for future quarters.

We achieved improvements to drill and blast practices and activities, including new emulsion products to enhance fragmentation and reductions in downstream rock-breaking activities by reducing oversized material, all of which support long-term mining efficiency. However, the March quarter was not without challenges. Unseasonable thaw and refreeze cycles impacted crusher circuit performance. Specifically, we saw temperatures rise well above zero degrees Celsius, which caused frozen material to thaw and solidify in some instances, followed by snap freezing conditions where the material refroze, impacting equipment performance. This resulted in conveyor belt failures and ore blockages. Such failures led to around 120 hours of unplanned mill downtime in January alone. While our crushed ore dome helped to mitigate these impacts, its storage capacity alone provides for about one and a half days of mill feed.

As a mitigating action, additional mobile crusher units were deployed to further strengthen resilience against weather variability, noting that these adverse weather conditions are not expected to persist beyond winter. We're also confident that the mitigating actions, combined with contingency planning, will not see a repeat in future winter seasons. In relation to processing performance, the mill processed 287,782 tonnes of ore at an average feed grade of 1.13%, slightly below the December quarter. Processed plant utilisation for the March quarter was 80% as a consequence of both the unseasonal weather interruptions and a scheduled five-day maintenance shutdown to realign the rod and bore mills. Pleasingly, despite these setbacks, lithium recovery improved 269%, up 1% from the previous quarter.

This improvement result was underpinned by continued process discipline, effective use of magnetic separation, and optimisation of flotation circuits, including introduction of a new collector reagent that delivered a record 72% recovery in March. As a consequence, spodumene concentrate production for the quarter was 43,261 tonnes, with this result having been impacted by the adverse weather conditions and the associated crushing circuit performance, combined with the scheduled major mill maintenance shutdown. Now moving to sales for the period. Total concentrate sold in the marked quarter was 27,030 dry metric tonnes. This was in line with prior guidance, with sales volumes for the second half of financial year 2025 being split roughly 30% in the March quarter and 70% in the June quarter, deliberately skewed to capture higher forward sales prices versus those available in the spot market.

Revenue for the quarter was AUD 31 million, reflecting lower volumes, but supported by an 8% increase in average realized selling price of AUD 1,142 per tonne on an FOB basis. All sales during the quarter were Piedmont under our existing off-take agreement. In terms of unit operating costs, unit cost per tonne sold on an FOB basis rose 7% quarter-on-quarter to AUD 1,374 per tonne. However, in U.S. dollar terms, cost fell 1% from $837 per tonne to $830 a tonne, a function of currency movement. The cost increase in Australian dollar terms reflects greater pre-stripping activity and higher processing expenditure associated with the major mill maintenance shutdown. Despite these temporary pressures, NAL remains within FY2025 production and cost guidance ranges, a key achievement given external headwinds. Now focusing on exploration and resource growth.

Within Quebec, following two intensive drilling years in 2023 and 2024, where over 129,000 metres were completed across NAL and Moblan, field exploration activities have now wound down. Focus has shifted firmly to compiling those results and updating mineral resource estimates for both assets. Updated mineral resource estimates or MREs are targeted to delivery in the second half of calendar year 2025. It's worth highlighting that the drilling success over the past two years has significantly expanded our resource base, supporting long-term operational flexibility and growth planning. Additionally, we're taking a disciplined approach by relinquishing lower priority tenements at Tansim and Pontiac, sharpening our capital allocation. In Western Australia, exploration continues across both the Morella Joint Venture and the 100% Sayona owned projects.

At Mount Eden, a Morella Joint Venture project, planning is underway for follow-up drilling following strong rubidium and lithium intercepts, including assays of up to 0.559% and 0.63% respectively. At Tabba Tabba, reverse circulation drilling has continued our understanding of the lithium prospectivity along the six-km Western Gabbro corridor. Turning now to corporate development and specifically our proposed merger with Piedmont Lithium. Key milestones achieved during this quarter in relation to the merger being regulatory approvals were secured from both the U.S. and Canadian governments, specifically ICA, HSR Act, and CFIUS approvals. These regulatory clearances significantly de-risked the transaction timeline, which we expect to complete mid-calendar year 2025.

Next steps for the merger include shareholder votes for both Sayona and Piedmont, which are expected in the coming months. Sayona will convene an extraordinary general meeting for approval of the merger itself, a conditional AUD 69 million placement of Resource Capital Fund 8, RCF, at AUD 0.032 per share. It is important to note they'll be on the same terms as announced in November of 2024. At the AGM, we'll also be seeking approval for a share consolidation at a ratio of 150:1 and a name change to Elevra Lithium Limited. As a recap, the post-merger structure will have an approximate 50/50 ownership split between Sayona and Piedmont shareholders. Board structure will reflect balance and depth, with four directors nominated by Sayona and four directors nominated by Piedmont. I will serve as Managing Director and CEO, and Dawne Hickton from Piedmont will chair the new board.

The compelling strategic rationale is transaction is underpinned by this merger creating the largest hard rock lithium producer in North America. Dual ASX and NASDAQ listings will provide improved access to global capital markets, and the combined portfolio offers scale, growth optionality, and significant synergies across operations, logistics, and marketing. In relation to Sayona's financial position, closing the quarter, Sayona held cash and cash equivalents of AUD 88.9 million, down from AUD 110.4 million in December 2024. The cash decrease reflected lower planned sales volumes, AUD 7 million operating loss from NAL, AUD 3 million of sustaining capital expenditure, AUD 7 million payment of exploration invoices under flow-through share funding as flagged last quarter, and AUD 4 million of merger-related transaction costs. Importantly, NAL continued to approach a cash break-even position, recording a relatively modest AUD 6 million operating cash outflow for the quarter.

With a forward look to Sayona's financial position, subject to shareholder approval, the conditional AUD 69 million placement will significantly strengthen the post-merger balance sheet, and a AUD 0.032 per share reflects the value that RCF placed on Sayona. Combined with the disciplined capital management, this positions us to fund development activities across the merged company project portfolio and to accelerate value realisation. In closing, despite external challenges, Sayona delivered resilient operational results, maintained strategic discipline, and made critical progress toward completing a transformational merger. Fully production guidance range of 190,000-210,000 tonnes remained intact, with unit cost guidance range also reaffirmed. Updated mineral resource estimates NAL and Moblan, plus drilling momentum in Western Australia, provide a clear growth plan. The Elevra platform post-merger will offer unrivalled exposure to American lithium growth. We remain confident in our ability to generate long-term sustainable value for all stakeholders.

Thank you, and I'm happy to take questions.

Operator (participant)

Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Austin Yun with Macquarie. Please go ahead.

Austin Yun (Equity Research Analyst)

Good morning, Elizabeth and team. Just two questions from me, please. I can see that this quarter was impacted by this unseasonal weather condition. I wanted to get some color on the improvement in the last quarter of the year. Has the utilization gone up in April to date now? The second question is around your capital spending plan for the next year in terms of your plan for exploration and any significant capital outflows. Thank you.

Lucas Dow (Managing Director and CEO)

Thanks, Austin.

Thanks for the question. I think a couple of things. Fingers crossed the adverse weather is behind us, but as I mentioned in my opening remarks, Sylvain and the team have put a number of mitigating and also contingency planning activities in place. Specifically, we have mobilized a scalping and also a mobile crushing facility that, in short, allows us to be able to bypass the crushing facility and feed directly into the dome. I will pass to Sylvain in a moment. You can give a little more color on that, Austin. On the back of that, we have started the final quarter quite strongly. We are certainly encouraged to come in home with a wet sail on both volume and cost. In relation to your capital, probably the most significant piece on the capital front for FY 2026 relates to another tailings dam raise that is required.

You'll see an increase for that. We'll be out with guidance with our August results, but it's not materially—I don't expect it to be materially greater than this year. In terms of exploration activity, we don't have any exploration activity planned in FY 2026. As I'd mentioned, we're really focused on consolidating the MRE updates and getting busy with the feasibility studies for both NAL and Moblan. Sylvain, I might just kick it across to you, and maybe just want to walk Austin and the rest of the folks on the call through a little more detail of how those adverse weather conditions impacted us and then what you and the team have done on site.

Sylvain Collard (President and COO of Canadian Operations)

Yeah, for sure. Thank you, Lucas.

Maybe just to put in perspective what happened exactly between December 25th to December 21st, the temperature in the Abitibi region went up for five days over zero degrees Celsius. You understand the snow was melting quite intensively. At the same time, we had over 35 millimeters of precipitation, which is very unusual in the region and has been creating a lot of impact, especially on the ROM pad. For five days, it was very difficult to see the crushing area. After that, the temperature decreased down to 30 degrees. You can understand, like Lucas explained very well, the solidifying material was going everywhere in the crushing area, and boom, you have -30 degrees. Even if we have a heating system, when you have that kind of temperature mixed with slurry and water, everything has been freezing very drastically.

We had to put back some heating system and the system to be able to remove that material. What we had in terms of mechanical issues was plug-in feeders and screens, and the major impact was mainly on conveyors. You need to understand 75% of our conveyors are starting from inside the crushing area, but 75% are outside and not well protected for winter conditions. We had some issues with ripping conveyors, mechanical supplies breaking off, and also we had to work in extreme cold temperature to fix all of it. That is why we lost so many hours in terms of operation. What you want to hear is what was the immediate action.

We have in place a crushing swatting just to make sure they are focusing only on the crushing area just to make sure they complete the proper maintenance and fix the major issues. Also, at the same time, we have been mobilising a crushing mobile crusher underground pad. This one is able to provide MG20 material, which is roughly zero to a quarter of an inch. This material can be refed directly to the crush or dome and refed the processing plant. As we speak right now, we still have that crushing mobile crusher at site, and we're using also a scalper to produce 15%-20% of MG20 material to refed the systems. It's going very well. The approach will be exactly the same for next year. We're planning to keep the scalper in place using the C150 crusher.

In terms of producing that contingency material, we'll be producing for each tonne we process, 15%-20% of MG20. We're going to be in very good shape next year when the winter will come back with sufficient MG20 material to go through that fluctuation in terms of temperature. This is the plan for next year.

Austin Yun (Equity Research Analyst)

Thank you.

Operator (participant)

Your next question comes from Andrew Harrington with Petra Capital. Please go ahead.

Andrew Harrington (Senior Resources Analyst)

Hi. Good morning, gents. Thanks for the time. This is more of a broader question on the post-merger company. Assuming prices stay where they are, where does realised price—is there any impact for the merger on realised prices? Following your commentary in the quarter about shipping costs being excluded for Piedmont deliveries, does the post-merger entity have a different cost structure? I have a second question, if that's all right.

Lucas Dow (Managing Director and CEO)

Hi, Andrew.

Thanks for the question. Yeah, I think we're obviously continuing to evaluate what the forward curve's doing and so forth. You'll see that we've taken advantage of being able to lock in some of those opportunities when the forward curve's in good tango. They provide some price protection. They're levers that will continue to play out. As you flagged, post the completion of the merger, the Piedmont off-take agreement will fall away, which does provide a freight benefit for that volume that had gone out last quarter, which will fall away. I think on a combined basis, we're still very confident of the synergies being realised as we move forward, being able to put those larger volumes together and so forth, and be able to balance that out in addition to being able to manage those tonnes in a more effective way.

Andrew Harrington (Senior Resources Analyst)

Would that mean that costs would—the guidance for this year was sort of, let's say, AUD 1,200 midpoint. Is that going to improve in FY 2026, 2027, or?

Lucas Dow (Managing Director and CEO)

Yeah, we're certainly focused on it. We're certainly focused on improving our cost position. I mean, it's all about getting NAL to cash break even or better, Andrew, and we'll be out with guidance for FY 2026 with release of our August results.

Andrew Harrington (Senior Resources Analyst)

Okay. You're almost up there. Even as we just—

Lucas Dow (Managing Director and CEO)

We're starting to close in on it, but there's still more work to be done. Setting aside some of the unseasonal weather and so forth, we'd have been pretty close. Anyway, more work to do, but as I said, we're confident we'll be able to rein that in.

Andrew Harrington (Senior Resources Analyst)

Okay.

Then the second question, what is the scope and timing that you're looking at for the NAL expansion in terms of when would you ideally begin and what's the scale in terms of you in the sky? What's it look like? What do you want to do? Market where it is today is very difficult, but what's the plan?

Lucas Dow (Managing Director and CEO)

Understood. Thanks, Andrew. I think probably two things. One, the environmental and biological studies have kicked off. All that work required for permitting is underway. That is endeavoring to de-risk the production profile or the development profile on that basis. The other key important piece of work that's happening at the moment is the updated MRE on the back of those results. I think that'll help shape it.

We certainly are looking at a material expansion, whether that's 50% or 60% or doubling of additional 50% or 60% over and above NAL's current capacity, or whether it's a doubling of the capacity piece that we're going to work through. Silvana's underway with a scoping study to work that out. Once we're through that, we'll then zero in on that preferred option and then have more specific timing around when we might be able to bring that project to market in light of, one, both market conditions and, two, also what the permitting regime is depending upon the ultimate capacity that we go for.

Andrew Harrington (Senior Resources Analyst)

Okay. Thank you.

Lucas Dow (Managing Director and CEO)

Thanks, Andrew.

Operator (participant)

Once again, if you wish to ask a question, please press star one on your telephone. We'll now pause a short moment for questions to be registered. There are no further phone questions at this time.

I'll now hand it back to Andrew Barber to address any written questions.

Andrew Barber (Director of Investor Relations)

Thank you. Lucas, we have a couple of questions. Firstly, if Moblan was a standalone project, it'd be valued somewhere north of AUD 400 million, possibly, even in today's pricing environment. At this point, analysts don't seem to be attributing that value. What's being done to help change that?

Lucas Dow (Managing Director and CEO)

Yeah. Thank you for the question. I think a couple of opening remarks, then I'll just pass it over to you, Andrew. I think a couple of things. Obviously, challenging environment at the moment. It's a challenging environment within the market at the moment around greenfield projects, given the market is in a state of oversupply and so forth. The market's not necessarily rewarding the excellent results we've seen at both NAL and Moblan. The key activities for us is to get those MRE updates complete.

As I said, we expect that to be in the second half of this calendar year. That will be important because I think that will give people a very clear insight in terms of the potential for both NAL and Moblan from a reserve perspective rather than just what we have seen on a resource basis. Getting that work done is critically important. I think the other part that we certainly want shareholders to be aware of is that we have had a concerted effort over the last nine or ten months around engaging shareholders and making the market aware of what is in our portfolio and in our stable of development opportunities.

Andrew, you might just sort of walk those folks on the call through exactly the type of activity we've done so that I guess, in short, I want to make sure that people recognize we're certainly not sitting back on our hands. We're out there beating the drum about these projects, but there's a logical process we need to go through. Andrew, over to you.

Andrew Barber (Director of Investor Relations)

Yeah. Thanks, Lucas. Look, firstly, I'd say that just even these webcasts and teleconferences have been a key initiative over the last 12 months that I know investors have been asking for. It gives everyone an opportunity to ask questions and for us to address queries that we have received and do so in a public group forum so everyone can hear the answers. Other things that we've been doing have been investor videos that you'd find on our website.

We've undertaken interviews with Howard Klein's Rock Stock channel to go through hour-long detailed sessions with him. We've undertaken quite a bit of marketing with trying to expand our institutional investor base in Sydney and Melbourne. We saw the results of that with the support we received in the capital raise last November, December. We brought in five or six new long-only Australian institutional funds, which obviously helps with the quality of the register. We've also commenced working in the U.S. and Canada with Piedmont Alliance shareholders and brokers. Obviously, as the merger progresses, it's important that we bring those people along as well, and they get to understand who the management team will be for the conveying entity going forward. That work's been undertaken. We've attended conferences at past markets, Mines and Money, PDAC.

In the next month, we'll be attending the Canaccord Global Mining Conference, the mining investment event in Quebec, and we'll have a number of others that we will attend during the year. We have been undertaking a fairly active program that's focused on both making sure that retail shareholders have access to information and have access to ask questions and engage with yourself, Lucas, and the team, and also expanding that reach into Australian and international institutional investors.

Lucas Dow (Managing Director and CEO)

Thanks, Andrew.

Andrew Barber (Director of Investor Relations)

Okay. I'll move on to the next question. It was about in pit crushing, which I think's been answered. The next question then is, at Moblan, is there enough cesium content to contemplate adding a circuit into the flowsheet to capture it?

Lucas Dow (Managing Director and CEO)

Yeah, that'll be work that Sylvain and the team will pick up as part of the updated DFS for Moblan.

As a probably side note, we're looking at all potential byproducts, both NAL and Moblan. In fact, we've had a look at tantalum at NAL as well. So we're certainly not sitting there letting any of those byproducts go to potential byproduct streams go to waste. We're working through that methodically, and they'll feature as part of those respective studies for NAL and Moblan.

Andrew Barber (Director of Investor Relations)

Okay. Great. Thank you. On the consolidation that's proposed, why was the ratio chosen at 1 to 150 rather than a more modest number?

Lucas Dow (Managing Director and CEO)

Yeah. Great question. A couple of reasons. One, one of the key elements, particularly with the merger in mind, is ensuring that the ADR, so the stock that'll trade on the Nasdaq, are appropriately priced.

In short, if we were just to roll over at the current levels, we would have challenge, we would struggle to be able to attract investors in the U.S. One, investor ability in the U.S. The other component as well, particularly for institutional shareholders, is that they'll have a certain amount of volatility that they can have within their portfolio. The reality is the level of our share price at the moment in their pricing is that you see extreme volatility with relatively small movements, which then basically precludes being able to bring on institutional investors. It is a key part from about ensuring that for Elevra, the merged company is investable both in the U.S. and in Australia. I think probably just the other point, we'd have some feedback from retail investors.

I just want to reiterate, with a share consolidation, no one's losing their shareholding. It's effectively the same size pieces. The market cap is unchanged. It's just how it's carved up. Rather than having a very small slither, you just get the pieces are just carved up a little larger than having a whole heap of tiny pieces within the pieces. I think it's just important that, particularly for retailers, I know there is a little bit of concern there that certainly retail investors are not disadvantaged on the back of consolidation.

Andrew Barber (Director of Investor Relations)

Great. Thanks, Lucas. Moving on to the DFS for now, have you got an estimate of when that will be ready? The same for Moblan.

Lucas Dow (Managing Director and CEO)

Yeah. As I mentioned earlier, key things for us, get those environmental and biological studies underway, which has occurred.

In parallel, get the MRE updates completed for both NAL and Moblan so that the mine planners can go to work in terms of understanding what those pits will be able to support. From there, the processing work will ensue. We will have more to say around those specific timelines. In short, the approach we are taking is we will have scoping studies for both of those projects initially, and from there, we will zero in on a definitive case, and it may well provide us the opportunity to move straight to DFS rather than have to go to a PFS and then IL.

Andrew Barber (Director of Investor Relations)

Great. Thank you. Now, a question on the Tesla contracts that Piedmont has. When is that expected to end, and is it likely to be extended?

Lucas Dow (Managing Director and CEO)

Yeah. The Tesla contracts are Piedmont contracts. Effectively, they will not come across until post-completion of the merger.

At that point, we'll have a look at it. I think ultimately, the way that we'll be approaching contracts for Elevra, the merged entity, will be on whatever provides the best return for shareholders. As we understand, Tesla has been a good customer with Piedmont, but ultimately, we need to understand, is that the very best we can do, or are there other alternatives that we might have that generate a better return?

Andrew Barber (Director of Investor Relations)

Thanks, Lucas. Just flipping back to Moblan now. Is Investment Quebec committed to Moblan, or are they looking to sell their share of that project?

Lucas Dow (Managing Director and CEO)

Look, ultimately, that's a question for Investment Quebec, but what I would say is that Investment Quebec have been a great partner. They've participated and contributed through all the exploration work that we've done at Moblan.

They continue to be great supporters of the project, and we value their partnership.

Andrew Barber (Director of Investor Relations)

Okay. Thank you. Lucas, Ashley, that's all the questions I have now.

Operator (participant)

Thank you. I'll now hand back to Mr. Lucas Dow for closing remarks.

Lucas Dow (Managing Director and CEO)

Thanks, Ashley. Look, thanks everyone again for people joining, including also for the questions and the continued support. We're very excited about this next quarter in terms of delivering both on volume, costs, and then importantly, concluding the merger as well. Thanks again, and have a great day.

Operator (participant)

That does conclude our conference for today. Thank you for participating. You may now disconnect.