Why are Sayona Mining shares down 80% in a year?

This lithium miner is having a tough time. What's behind this?

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Sayona Mining Ltd (ASX: SYA) shares were out of form again on Tuesday.

The lithium miner's shares started the shortened week with a decline of 5% to 3.7 cents.

This latest decline means that its shares are now down a whopping 80% since this time last year.

To put this into context, if you had invested $10,000 into Sayona Mining's shares in June 2023, you would now have approximately $2,000 left. That's $8,000 in paper losses that shareholders are nursing.

But why has this happened? Let's dig a little deeper and find out.

Why are Sayona Mining shares down 80% in a year?

Firstly, it is important to note that Sayona Mining isn't an isolated case. A good number of ASX lithium stocks have been sold off over the same period.

For example, Core Lithium Ltd (ASX: CXO) shares are down 90% and Liontown Resources Ltd (ASX: LTR) shares are down over 60%.

The catalyst for this has been a collapse in lithium prices due to a surplus of the white metal.

And with many analysts believing that supply will outstrip demand for the foreseeable future, prices could remain at these levels for some time to come. You only need to look at Goldman Sachs' forecasts for the lithium price to see this.

This could be particularly bad news for Sayona Mining and its shares. That's because unlike Core Lithium, which has suspended its mining activities, it is continuing to mine lithium despite these low prices.

So much so, the company is actually spending more to pull lithium out of the ground than it receives from buyers. That's a terrible business model and is burning through its cash reserves at a rapid rate.

Burning cash like kindling

According to its most recent quarterly update, Sayona Mining's production increased 18% quarter on quarter to 40,439 dry metric tonnes (dmt).

This was achieved with a unit operating cost of A$1,536 of dmt, which was up 10% quarter on quarter. And while its sales volumes more than doubled to 58,055 dmt, it reported an average realised selling price of A$999 per dmt.

This means that it was losing over A$500 for every tonne of lithium it was sending to customers.

As a result, Sayona Mining's cash balance dropped from A$158 million at the end of December to A$99 million at the end of March.

Clearly something has to change. But judging by the performance of Sayona Mining shares, investors aren't overly confident that things will improve any time soon.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. 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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