Will Sayona Mining turn a profit in 2023?

This year is shaping up to be transformative for Sayona Mining Ltd (ASX: SYA).

The lithium up-and-comer expects to restart production at its flagship North American Lithium (NAL) project this quarter. That should see the company with saleable spodumene concentrate in its hands.

No doubt, then, many market watchers might be hopeful the company’s bottom line could end in the green this year. However, there’s likely more to its journey to profitability.

The Sayona share price is currently 23 cents, 62% higher than it was this time last year.

For comparison, the S&P/ASX 200 Index (ASX: XJO) has fallen around 3% over the last 12 months.

Let’s take a closer look at what 2023 might bring for the ASX 200 lithium share and when investors might expect it to become profitable.

What might 2023 hold for Sayona Mining?

Fans of Sayona Mining may be excited about the company’s plan to kick off production at the NAL operation in the coming weeks.

It boasts a 75% holding in the operation, with the other 25% owned by Piedmont Lithium Inc (ASX: PLL).

The restarting of the NAL operation will see an offtake agreement with Piedmont come into play, entitling it to snap up the greater of 113,000 tonnes of spodumene concentrate or 50% of the operation’s production.

Indeed, Sayona’s first revenue will likely occur this year. Though, there’s more to profitability than a revenue stream. Let’s dive into the company’s balance sheet.

Breaking down the ASX 200 lithium company’s balance sheet

Sayona Mining’s net cash flow came to a $25.6 million loss in the September quarter. Of that, $5.1 million went towards exploration and evaluation, while $15.5 million was spent on development activities.

Sayona Mining is developing its 60%-owned Moblan Lithium Project and its Authier Lithium Project. It’s also exploring a recently acquired parcel of claims to the west of Moblan.

On top of that, it boasts lithium, gold, and graphite projects in Western Australia. Though, the majority of its Australian lithium assets are subject to earn-in agreements.

All that exploration activity, as well as upgrades to the NAL operation (tipped to cost around $100 million), mean the company’s expenses are relatively notable.

It ended the September quarter with $159.2 million of cash and equivalents. The company previously said it had enough cash to fund it through to the end of this financial year.

After that, it will likely need extra cash to move to the downstream processing of spodumene to lithium carbonate and hydroxide.

When might Sayona Mining post a profit?

With all that in mind, while it’s possible Sayona Mining could reveal a profit this year, I won’t be surprised if it doesn’t.

However, the company is planning to bring its Abitibi hub – comprising the NAL operation and the Authier Lithium Project – into production over this year and next.

The hub is expected to produce up to 220 kilotons of spodumene 6%, or 30 kilotons of lithium carbonate equivalent.

The milestone could produce “sustainable cash flows”, putting Sayona “on a fast track to go downstream into value-added lithium carbonate or hydroxide production”, the company said in its latest quarterly update.

Meanwhile, production at Moblan is tipped for 2025 to 2026, and the company is planning to continue expanding its production capabilities into 2027 and beyond.

Thus, profitability might not evade the ASX 200 lithium share for much longer.

The post Will Sayona Mining turn a profit in 2023? appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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