Core Lithium Ltd

Core Lithium (ASX:CXO) is an emerging lithium producer focused on developing its flagship Finniss Lithium Project in the Northern Territory of Australia. The company owns 100% of the Finniss project, which is currently on care and maintenance following the suspension of mining operations in early 2024 due to challenging market conditions. Prior to the suspension, Finniss was Australia's first lithium mine outside of Western Australia, with production commencing in 2023.

The Finniss project benefits from excellent existing infrastructure and proximity to Asian markets. It is located just 88km from the Port of Darwin via sealed roads, providing Core with one of the best logistics chains of any Australian lithium project. The operation includes a 1 million tonne per annum dense media separation (DMS) processing plant, which achieved production of 95,020 dry metric tonnes of spodumene concentrate in FY2024 before operations were paused.

Beyond Finniss, Core holds an extensive exploration portfolio across the Northern Territory and South Australia. This includes over 500 square kilometers of highly prospective ground in the Bynoe pegmatite field near Darwin. The company's strategy is focused on advancing and testing targets with potential to host meaningful lithium deposits within trucking distance of the Finniss processing plant.

‍

Core Lithium represents an opportunity to gain exposure to the growing lithium market through a strategically located, high-quality asset base. While operations are currently suspended, the company is well-positioned to restart production when market conditions improve.

The global transition to electric vehicles and renewable energy storage is driving strong long-term demand for lithium. Despite recent price volatility, most industry forecasts project significant supply deficits emerging in the lithium market over the coming years as demand growth outpaces new supply. As one of the few construction-ready lithium projects globally, Finniss could play an important role in meeting this demand growth.

Beyond Finniss, Core's extensive exploration portfolio provides significant organic growth potential. The company's large landholding in the Bynoe pegmatite field offers numerous targets for resource expansion within trucking distance of the existing plant. This creates optionality for future production increases or mine life extensions at relatively low capital intensity.

‍

Core Lithium is led by an experienced management team and board with a strong track record in the resources sector.

Paul Brown, serving as the CEO, was appointed in June 2024, Brown brings over 25 years of experience in the Australian resources industry. He previously held senior executive roles at Mineral Resources and Hastings Technology Metals, with particular expertise in lithium and iron ore operations.

James Virgo, CFO, joined Core in March 2024, bringing over 12 years of experience in finance and commercial roles within the mining and professional services industries. His prior experience includes senior finance positions at Resolute Mining.

Greg English as a Non-Executive Chair. English is a co-founder of Core and has over 30 years of mining engineering and legal experience. He has served on the boards of multiple ASX-listed companies.

The board is rounded out by experienced non-executive directors Heath Hellewell and Malcolm McComas, who bring extensive mining, finance, and corporate governance expertise.

This leadership team combines operational experience, financial acumen, and industry knowledge - critical attributes for navigating the current market challenges and positioning Core for long-term success.

‍

Core Lithium's growth strategy is centered on optimizing the Finniss operation for an eventual restart while advancing its broader exploration portfolio to create additional value. Key elements of this strategy include:

1. Operational readiness: The company is maintaining the Finniss assets in a restart-ready state while undertaking studies to enhance future operations from cost, product quality, and sustainability perspectives. This includes a detailed bottom-up assessment of the cost base and operating model.

2. Resource expansion: Core is focused on growing its resource inventory within trucking distance of the Finniss plant. The FY2025 exploration program will target both larger standalone deposits and clusters of smaller deposits that could support shared infrastructure.

3. Processing optimization: Studies are underway to evaluate potential modifications to the DMS plant that could further improve recoveries and concentrate quality.

4. Project pipeline development: Beyond Finniss, Core is advancing early-stage exploration at projects like Anningie-Barrow Creek and Shoobridge to create a pipeline of future development opportunities.

5. Diversification: While maintaining its primary focus on lithium, Core is allocating some exploration effort towards other commodities within its portfolio, including gold and uranium targets. This provides optionality and potential for value creation across market cycles.

6. Strategic partnerships: The recent acquisition of a stake in Charger Metals and its Bynoe Lithium Project demonstrates Core's willingness to pursue value-accretive opportunities that complement its existing asset base.

‍

Core Lithium maintains a strong balance sheet, with $87.6 million in cash as of June 30, 2024. This provides a solid financial foundation to fund care and maintenance activities, ongoing studies, and targeted exploration programs while awaiting more favorable market conditions.

In FY2024, the company generated revenue of $189.5 million from the sale of 97,423 dry metric tonnes of spodumene concentrate and 66,140 wet metric tonnes of lithium fines. However, the sharp decline in lithium prices during the year significantly impacted profitability, resulting in a net loss after tax of $207.0 million. This loss included non-cash impairment charges of $119.6 million related to the Finniss project assets.

The decision to suspend operations at Finniss has dramatically reduced Core's cash burn rate. Care and maintenance costs are expected to be relatively modest, allowing the company to preserve its cash position. Core has no debt, providing financial flexibility and reducing near-term capital pressures.

While the near-term financial outlook remains challenging due to low lithium prices, Core's strong balance sheet and low-cost asset base position it well to weather the current downturn and capitalize on an eventual market recovery.

‍

Core Lithium presents an intriguing investment opportunity for those seeking exposure to the long-term growth potential of the lithium market. The company's high-quality Finniss project, strategic location, and strong balance sheet position it well to navigate the current market downturn and capitalize on an eventual recovery in lithium prices.

While the suspension of operations at Finniss creates near-term uncertainty, it also demonstrates management's willingness to make difficult decisions to preserve long-term shareholder value. The ongoing optimization work and exploration programs have the potential to enhance the project's economics and create additional value beyond simply restarting the existing operation.

Core's extensive exploration portfolio and growth strategy provide multiple avenues for future value creation. The recent strategic investment in Charger Metals highlights management's ability to identify and execute on value-accretive opportunities even in challenging market conditions.

Investors must carefully consider the risks, particularly around lithium market dynamics and restart execution. However, for those with a long-term view on the lithium market and appetite for higher-risk resource investments, Core Lithium offers an attractive mix of existing infrastructure, near-term production potential, and significant exploration upside.

The company's strong cash position and debt-free balance sheet provide resilience through the current downturn, while its strategic location and high-quality product should make it a preferred supplier in a recovering market. As the electric vehicle revolution continues to drive lithium demand, Core Lithium appears well-positioned to play a meaningful role in the global supply chain.

‍