3 tailwinds to consider for Sayona Mining shares in 2023

Sayona Mining (ASX: SYA) shares have been careering through a wild ASX rollercoaster ride for two years now. Soaring from AU$0.01 in January 2021 to AU$0.36 by 22 April 2022, the lithium explorer then crashed to AU$0.13 by 24 June 2022, before rocketing to AU$0.33 on 9 September 2022.

And having corrected to AU$0.23, 2023 is likely to see further volatility. But despite this, SYA shares are up 2,200% since the start of 2021. And they could have much further to go.

Sayona Mining share price: 3 tailwinds to consider

1. Geographical diversification

Most emerging lithium producers have their portfolio concentrated within a single geographical territory, usually within Australia, China, Africa, or the South American lithium triangle. But Sayona is appealing because it holds multiple interests in mines in both North America and Australia, two regions with strong regulatory protection.

In Quebec, it has assembled a northern lithium hub centred on its Moblan Lithium Project, and a southern hub centred on the North American Lithium (NAL) operation, including the potentially world-class Authier Lithium Project. NAL is expected to start production early in 2023, and SYA is analysing the potential to also engage in downstream processing.

In Western Australia, it holds a large tenement portfolio in the world-famous Pilbara region. Its lithium projects are subject to a earn-in agreement with Morella Corporation, but it’s also exploring for gold in the region, and for graphite at the Kimberly Graphite Project.

This geographical and metallurgical diversification could be a strong positive for investors looking to broaden their risk profile.

2. North American Lithium Momentum

Sayona aims to become the largest lithium producer in North America, a worthy goal in the home of Tesla, Ford, GM, and Chrysler.

Last month, it announced a new strategic acquisition, whereby subsidiary NAL has entered an earn-in agreement with Jourdan Resources over the Vallee Lithium Project in Quebec. NAL is acquiring 20 claims out of the total of 48, spanning almost 2,000 hectares, with a right to earn a 51% majority stake in the remining 28 in the future.

Overall, NAL is committing to spending CAD$4 million on exploration for a 25% interest, while it can get up to 51% interest by spending CAD$10 million over the next two years. Managing Director Brett Lynch believes ‘this is an excellent opportunity to swiftly expand NAL’s potential resource base, paving the way for an increase in NAL’s future mine production capacity.’

And more recently, it’s announced that the restart of NAL has advanced, with procurement and permitting activities now 98% and 96% completed respectively. The company also notes that construction activities have ramped up, including the completed installation of HP300 and HP400 cone crushers.

This leaves recommencement of production a near certainty in Q1. Better still, costs are being firmly controlled despite the inflationary environment, with financial commitments to the end of October totalling CAD$46.1 million, just under the allocated CAD$47.6 million.

Once operational, the existing plant has the capacity to produce up to 220,000 tonnes of spodumene concentrate or 30 kilotons LCE per annum. However, SYA is planning to expand this production after signing the earn-in agreement with Jourdan.

3. Macro factors

Sayona was recently promoted to the ASX 200 as part of the September quarterly rebalance. Other than the prestige, its share price will now be supported by passive investors buying index trackers which now include the mining company.

Lithium prices also remain elevated compared to historical norms. In China, lithium carbonate is trading for 577,500CNY/tonne, only 20,000CNY below its all-time-high last month. With demand for the silvery-alkali metal, in addition to gold and graphite, set to continue to increase through 2023, prices could stay elevated as production commences.

Gold demand could increase as Federal Reserve Chair Jerome Powell notes that the pace of rate increases will slow, and lithium and graphite are set to experience a demand gap as the EV revolution accelerates.

This leaves Sayona Mining shares ideally placed for 2023.

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