Transcript: Core Lithium (CXO) - Tesla Partner - "We Want All You Can Produce"
Interview with Stephen Biggins, MD of Core Lithium. Core Lithium is Australia’s most advanced new Lithium producer, developing one of Australia’s most capital efficient and lowest cost spodumene Lithium projects located near Darwin Port in the Northern Territory, Australia which is near construction ready.
Core Lithium is aiming to complete project finance in the next few months and be in construction by Q3 of 2021 which means production of high quality Lithium products is planned to commence at the Finniss Lithium project by the end of 2022.
- 2:40 - Company Overview
- 3:23 - Plans & Potential of the Uranium Projects
- 5:51 - Spogemine Project: Update on Progress, 40% Offtake & FID
- 7:41 - Disconnect in the Market: What's Holding People Back?
- 11:05 - Focus On Financing Means IRR & NPV Number Delays?
- 13:17 - Timing for Deliverables
- 14:02 - Getting into Production: Process & Potential Hurdles
- 18:41 - Update on the Gold Project
Matthew Gordon: Stephen how are you sir?
Stephen Biggins: Hi Matthew good to see you again.
Matthew Gordon: It says here at the end of February so not too long ago. How have you been?
Stephen Biggins: We’ve been busy. I'm telling you. The Lithium market is running really strongly from an investment sense, but particularly the fundamentals of Lithium prices are continuing to increase. And yes there are a number of examples out there of the Lithium supply chain continuing to increase and expand aggressively.
Matthew Gordon: Beautiful. You were telling me before the show that sports is back on, you're enjoying a normal life down there in Adelaide, bit jealous actually.
Stephen Biggins: Yeah, that's right. The local Derby was on so it was a big crowd there. The downside of that is that winter sport is for my children so that's the downside.
Matthew Gordon: We're now allowed to travel to Australia. But I suspect we'd still have to do a 2-week quarantine if we arrived there, is that right?
Stephen Biggins: I think so, you would. You might get a special case, I’m not sure.
Matthew Gordon: Stephen, I appreciate you coming on, just a couple things I saw that I wanted to just touch base with you about. And we're sort of nearing that FID stage. So before we do, give us that 1-minute overview of your business, for people new to the story, and I'll pick it up with some questions from there.
Stephen Biggins: Yeah, sure. So Core Lithium is Australia's most advanced Lithium producer. Project is near construction ready. We're right at the front of the line of new Lithium production in a global sense. And we're aiming to complete finance of the project over the next few months, and be in construction on the project by the end of the year, which will on that basis be starting to produce high quality Lithium projects out of Northern Australia by the end of 2022.
Matthew Gordon: Okay, good. I want to start off with something which could be significant, but up until now have been largely ignored which is the Uranium projects that you have. Uranium equities have seen an uptick, general interest in Uranium coming back from generalist investors, we've seen people like Sprott picking up the UPC project. We've seen Biden talking about clean energy. So it's of the moment again, what are you going to do with those assets?
Stephen Biggins: Yeah, well, the company has a high quality, JORC compliant Uranium resource in the Northern territory in Napperby, which was worked out previously by Toro Energy and Deep Yellow. So we're going to take that to find a pathway for that to be active in the current sector. We also have quite a significant Uranium exploration play just adjacent to Beverley in South Australia, where there's 2 or 3 operating Uranium mines. So there's some significant Uranium assets in the portfolio that we think will probably find a sort of a corporate or a separate pathway to advance those projects.
Matthew Gordon: Okay, so meaning what because like, for instance, with the JORC report, what does it say about the scale of that project?
Stephen Biggins: Currently, it's a JORC resource of about 9Mlb within an exploration, that's probably about double the size of that. So we think there's a really obvious opportunity to expand the resource. And we've been doing some R&D, sort of quietly in the background on some processing techniques that can look to upgrade the results as well.
Matthew Gordon: Okay. And so, are you spending much money on that this year? I mean, you know, it's off at the moment, I know you've got to focus on the core project, but can we expect to see some kind of news on this, this year?
Stephen Biggins: I think there might be some corporate activity news, but in regards to sort of management and budget focus, that's really on our Finniss Lithium project and moving that into construction, but I would suggest there might be some corporate news regarding Uranium assets this year.
Matthew Gordon: Okay, so watch this space on the Uranium. Okay, fine, fair enough. We will be watching with great interest because I think there is great interest out there. Let's get back to basics. So you've got a spodumene project, quite a large one, 40% offtake, spodumene prices continue to rise and you're going to get to an FID decision by the end of this year. So good news, isn't it?
Stephen Biggins: Yeah, it is. The hard work we've put into the project over the last 5 years is bearing fruit. We're in an excellent position with the project construction ready and in some ways, we're sort of caught between the sort of dynamic where the downstream EV supply chain really wants to sponsor and support new supply and diversify new supply. So, we're getting some really strong and positive messages from our customers and potential new customers about providing a significant level of project finance for us to build the project alongside our offtake agreements. And so we think over the coming months that we will be able to complete the final offtakes along with a significant project finance piece that makes the project finance solution for the project obvious and enable us to achieve our FID goals sooner rather than later and get the project into construction this year. The real driver there, Matthew, is that Lithium prices are continuing to increase. The numbers I'm hearing now are over US$700 a tonne out of Australia. We want to get our project into construction as quickly as possible, because that's highly profitable for us and the project and particularly our customers want us to get into production as soon as we can, they need our product in an urgent way.
Matthew Gordon: What's the disconnect, you help me here because last year, when Lithium prices were rising, no one cared about the equities and that's possibly because they didn't think companies could get funded, I don't know. And again, since we spoke in February, your share price has moved sideways. What do we need to understand about the market, the macro to get excited, again?
Stephen Biggins: Electric vehicle sales are continuing to increase. The amount of Lithium chemical needed to produce Lithium batteries is increasing, the amount of capacity that's being built around the globe, even our own customers Yahua are more than doubling the capacity. And there still hasn't been any significant increase in the Lithium supply side, because it takes years to get to that point. So yeah, it's taken us 5 years to get to this point where we're construction ready. We're in the right place at the right time. And the underlying message is that more Lithium is needed if Tesla and the rest of the EV industry wants to achieve its goals and the Lithium prices continue to increase until more supply hits the market.
Matthew Gordon: But again, you're a spodumene producer, Chinese partner, he is currently testing with Tesla to supply a hydroxide product into them. So it's all good, it all seems to work. Are people nervous though, about the amount of supply that could come into the market, is that what's holding people back? Because I know all Lithium companies, in the first 4 months of this year saw a pop in their share price, what's making people nervous now?
Stephen Biggins: I think there was just a macro level, there was a bit of nervousness in the markets a few weeks ago, and it made me sort of upset some of the momentum sort of trade into some of the junior stocks. But in regards to the fundamentals, Lithium price continues to increase, the amount of Lithium that the world needs continues to increase. And there is a shortage of supply and it's now and it's gonna get worse and the price is going to continue to go up.
Matthew Gordon: But supply demand suggests that there's a shortage now because the price hasn't been strong enough for people to get into production. And people haven't been able to fund their pilot plants, their demo plants, full commercial plots. But when the prices are starting to get toppy, like now, it's going to be very encouraging for fanciers and Lithium wannabe producers to get into production again, and that's going to create this kind of roller coaster on Lithium prices, isn’t it?
Stephen Biggins: The world's taken whatever it is a couple of decades to get to this level of Lithium production and it needs to triple that level in the next 3 years. They could do it 8 times by 2030.
Matthew Gordon: Okay, so there will continue to be a shortage as far as you're concerned because of the demand side.
Stephen Biggins: Yeah, the absolute levels have increased, terms are now significantly higher.
Matthew Gordon: Okay, let's get back to financing. Just want to have a poke around there on supply demand with you. Let's talk about financing. So you got a 40% offtake agreement in place, great, that must help with your ability to go and get debt. So where are you with those conversations, because you're aiming for the end of this year, that's not too far away.
Stephen Biggins: Our thinking was, last year, that focus would be around a significant debt finance pace for the project, as part of that sort of a financing solution. But I think over the last few months, with the level of enthusiasm and support that's coming from customers and potential new customers, and the desire to support us to get into production, is that I think that the financing solution for the project is likely to come. The emphasis for that is likely to come from a customer finance pace, and less emphasis on debt finance. And in some ways, the debt finance process is probably a longer, more sort of arduous one. And as I said, customers want us to get in production as soon as we can. And from a company's perspective, with the price above now above $700, we will get into production as soon as we can, because we want to expose the project and add product to those prices.
Matthew Gordon: Okay, so customer financing, that's interesting. Is that why you've been so slow to put out the IRR and NPV numbers?
Stephen Biggins: Well, I think we've been focused, if you like, on what we think is going to be the best finance solution for the project and that's coming from our conversations and negotiations with our customers.
Matthew Gordon: Right, okay. But to that point, they don't care what your NPV and your IRR are, do they?
Stephen Biggins: They want to know, they want to see the quality of their product and the tonnes coming out the door.
Matthew Gordon: Right but your shareholders want to see these numbers, they want to see the IRR. They want to see the NPV, they want to understand what you're going to be capable of. So what's holding those numbers back, when can we expect them?
Stephen Biggins: Well, I think it's probably really we're on track to release those this quarter. But our emphasis, if you like, is really on the key goal, which is financing the project and getting into production this year. So that's where we're putting our focus.
Matthew Gordon: Into production next year you mean?
Stephen Biggins: No, to finance the project as soon as possible and start construction of the project this year.
Matthew Gordon: I thought you said get into production this year so I was just.
Stephen Biggins: Yeah, so I need to correct myself. We’ll start construction this year.
Matthew Gordon: Okay, so start construction this year. So that's quite quick built, not too complicated by the sounds of it there.
Stephen Biggins: Yeah, so timing from FID to first production is in the order of about 12 to 15 months.
Matthew Gordon: Right. Okay. Not too shabby. So that gives us a sense of when the FID will be at the end of this year. It'll have to be at the end of Q3, beginning of Q4 by the sounds of it.
Stephen Biggins: Yeah. We're pretty confident about Q3.
Matthew Gordon: In terms of the kind of long poles in the tent, or the long lead ordered times on, on the things that you're going to need, have you placed those orders already in that expectation?
Stephen Biggins: Well, the terrific thing about raising $40M earlier in the year is we're in a really good position to get the company organised to FID with a level of momentum. So, when we get to that point, we're already in the process of putting our key contracts in place, companies' systems and those sort of orders for human resources and equipment that we'll need to build the project.
Matthew Gordon: Well, there's the big part of all of this, which is can people kind of skip over normally, it's the people that you're going to have to hire and get on board, what's happening in Australia with regards to that, because there's a lot of mining happening in well, Gold, battery metals, base metals, they're all trying out for personnel. I mean, do you envisage any problems getting the people that you want?
Stephen Biggins: I think it's probably more difficult for those mining projects that require fly in, fly out. Whereas our project is a 45-minutes drive from the suburbs of the capital city, so much easier to access, good quality skills and people that are based residentially in the suburbs of capital city.
Matthew Gordon: Well, that's good news. And just to kind of casually, go over the 40% offtake agreement, which is not an insignificant achievement, and what's happening with the rest of that, how you're viewing that now, do you want to sort of certainty or the ability to continue to sell it in the open market.
Stephen Biggins: Certainly, what I can say is that there's a significant amount for that remaining product. So existing customers, they want more, the new guys, they want more. We're receiving inquiries from all over the world looking to get access to good quality spodumene concentrate from our project. So over the next couple of months, we'll have to complete those agreements alongside some really significant project finance solutions. And as I said, we expect those to put us in a position where we can finance the project in the next quarter, and start construction of the project next year and be in production by the end of 2020. And there's some pretty attractive sort of valuation statements about core if we're going to be valued as a producer next year.
Matthew Gordon: Well, I mean, talking about that, I was kind of intrigued, so you look at the Galaxy Orocobre dea. and the sorts of numbers they're talking about, obviously, it's nice to compare yourself to people like that's $4Bn bucks worth of valuation there, you know, you are at 270ish today. You've got ways to go, but how do you get there? You've got a decent sized project, there are good margins and so forth. But people don't seem to have cottoned on to the scale of what you're talking about. What are you going to do about it?
Stephen Biggins: Well, essentially, it's financing the project, building it over 12 months, and at that point, we will be a producer. There's no producer on the ASX currently, that's got value less than $2Bn.
Matthew Gordon: So what do you do about it?
Stephen Biggins: We commit our plan, we execute our plan, and we have all those parts of the jigsaw lined up, and they will play out, and we expect to be very successful.
Matthew Gordon: Right. Well, I guess we'll have to sit back and see you delivering that this year and the scale of the opportunity is reliant on you being able to get funding at a price that's right. But you were telling me you're reasonably confident in your conversations at the moment, is that what I'm hearing.
Stephen Biggins: Yeah, from support from customers, from interests from equity markets all over the globe, and interest in finance. So, the world wants to support new Lithium supply and we are Australia's next Lithium producer. So there is a lot of support. There's a lot of love in the room for us to get into production.
Matthew Gordon: Okay, fine. How's the Gold project?
Stephen Biggins: Good, where we've just appointed a Gold exploration manager. He's delving into the data. It will be outside next week, and we expect to start drilling on the Gold project in the next few weeks as well.
Matthew Gordon: Okay, brilliant. Thanks for the update. Stay in touch. Let us know how you get on. I'm keen to understand timings this year. So please pick up the phone.
Stephen Biggins: Yeah, terrific Matthew, good to speak to you.