It has been a year to forget for Sayona Mining Ltd (ASX: SYA) shares.
Despite the lithium miner delivering its first revenues this year, its shares are on course to record an annual decline of approximately 64%.
As a comparison, the ASX 200 index is up around 8% since the start of the year.
What happened to Sayona Mining shares this year?
Investors have been hitting the sell button this year in response to falling lithium prices.
The lithium spodumene price was fetching US$1,380 per tonne in China earlier this month. This is down significantly from an average of US$4,368 per tonne in 2022.
This is squeezing the profit margins of lithium miners. So much so, Core Lithium Ltd (ASX: CXO) recently revealed that it might have to curtail production. It has already suspended its underground development to conserve cash.
Will 2024 be better for Sayona Mining?
Whether or not Sayona Mining shares have a better year in 2024 will be almost entirely dependent on where lithium prices go.
Unfortunately, most analysts are forecasting further declines due to an oversupply of the battery material ingredient. For example, Goldman Sachs expects the following for the next three years for lithium spodumene in China:
- 2024: US$1,250 per tonne
- 2025: US$800 per tonne
- 2026: US$1,126 per tonne
As per its most recent quarterly update, Sayona Mining reported an operating unit cost of A$1,231 per tonne. At current exchange rates, this equates to approximately US$840 per tonne.
While Sayona Mining remains profitable at current spodumene prices, if it doesn't cut costs, it will be operating at a loss in 2025 if Goldman Sachs' estimate proves accurate. This would eat into its cash reserves and could mean the company needs to raise funds to support its growth plans.
Though, it is worth noting that the market is extremely bearish on Sayona Mining shares and appears to be pricing in these risks. As a result, if lithium prices rebound next year, then it wouldn't be surprising to see its shares rocket higher. But only time will tell if that is the case.
