Down 80% in a year, are Sayona Mining shares now a buy?

With shares down 80% in a year, will I be buying Sayona Mining stock now?

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Sayona Mining Ltd (ASX: SYA) shares have had a year to forget.

One year ago, shares in the S&P/ASX 300 Index (ASX: XKO) lithium stock were trading for 23 cents apiece. Which was already well down from the highs of 36 cents a share in April 2022, when lithium prices were storming towards all-time-highs.

Yesterday, Sayona shares closed at 4.6 cents, putting the stock down 80% over 12 months.

As you'd expect, that kind of fall has also knocked the stuffing out of Sayona's market cap, which has dropped to $471.95 million.

Unfortunately, this only caused more pain, as the market cap reduction led to Sayona Mining shares being booted from the S&P/ASX 200 Index (ASX: XJO) in March as part of the S&P Dow Jones Indices quarterly rebalance. This means some fund managers, limited to investing in the biggest pool of stocks, won't be able to hold shares.

But the biggest and really inescapable pressure has been the massive retrace in lithium prices over the past 18 months. However, it's worth noting that the price of the battery-critical metal looks to have found a floor in 2024.

So, after crashing 80% in a year, are Sayona Mining shares now good value?

What's been happening with the ASX lithium miner?

Sayona's primary focus is its North American Lithium (NAL) project, located in Quebec, Canada.

NAL is a joint venture project. Sayona Mining owns 75%, and Piedmont Lithium Inc (ASX: PLL) owns the other 25%.

Despite a stabilising lithium price and maiden production in H1 FY 2024, Sayona Mining shares have slumped 37% in 2024 to date.

With maiden half-year revenue of $118 million for the first half, the miner closed out 2024 with a cash balance of $158 million as at 31 December.

But it's been burning through cash since then.

At its quarterly update, released on 26 April, the company reported achieving an 18% increase in production from the prior quarter to 40,439 dry metric tonnes (dmt).

Costs also increased, however, with unit operating costs up 10% quarter on quarter to $1,536 per dmt.

Rather alarmingly for Sayona Mining shares, while the lithium miner's concentrate sales volumes increased by 142% from the prior quarter to 58,055 per dmt, it received an average realised price of $999 per dmt.

Or more than $500 per dmt less than it cost to produce.

Management reported cash holdings of $99 million as at 31 March, down $59 million over the three months.

Time to buy Sayona Mining shares?

With these figures in mind, it's hard to make a case for buying Sayona Mining shares right now.

Indeed, the ASX lithium stock again finds itself among the top-ten most shorted stocks on the ASX this week, with a short interest of 8.1%.

Not that short sellers don't often get it wrong, mind you.

And on the plus side, the Federal government has flagged ongoing and increased support for miners of critical minerals, which includes lithium.

But with the lithium price forecast to remain subdued in the year ahead, and with the production costs at NAL in mind, I'd put Sayona Mining shares on a watch list for now and hold off on buying.

Motley Fool contributor Bernd Struben 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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