Core Lithium (CXO) - DFS Allows Funding Talk to Begin in Ernest

Core Lithium is an Australia-based emerging lithium producer. The company is developing Australia's most capital-efficient and lowest-cost spodumene lithium project, the Finniss Lithium Project. This project has the best-supporting infrastructures and logistics chain to Asia than any other lithium project in the region. 

We met with Stephen Biggins, Managing Director, Core Lithium. Stephen has over 25 years of experience as a geologist and an executive in the mining industry. In the past 11 years, he has led Core Lithium through the acquisition, discovery, and definition of the first lithium project in the Northern Territory, one of the highest-grade lithium resources in Australia. 

Stephen previously served as the founding director of Southern Gold and Investigator Resources Ltd. His educational credentials include an honorary degree in Geology and an MBA as the founding Managing Director of several ASX-listed companies. 

Company Overview

Core Lithium is an emerging lithium producer with an experienced team of directors and management in the mining industry. The company was founded in 2010 and is headquartered in Australia. The company's flagship project is the Finniss Lithium Project located near Darwin Port in the Northern Territory, Australia.  They are listed on the Australian Stock Exchange (ASX: CXO). 

The Finniss Lithium Project 

The Finniss Lithium Project is under 100% ownership of Core Lithium and hosts a JORC 2012 compliant mineral resource of 15Mt at 1.3% lithium oxide. This project is spread across a land area of 500 square kilometers and is located in one of the most prospective areas for lithium in the Northern Territory. 

This project has a strong infrastructure and is located close to grid power, gas and rail. The Darwin port is located 88km from the Darwin Port, Australia's nearest port to Asia. 

DFS Release and Response

Core Lithium recently published a Feasibility Study on the Finniss Lithium Project, a low-risk, high-quality lithium project with excellent economics, low CapEx (Capital Expenditure), and highly competitive operating costs. 

The release of the DFS (Detailed Feasibility Study) demonstrates the company is construction-ready with a fully-approved lithium project. The company already has the backing of the financial markets and customers. They are currently in the process of implementing a production plan. 

Following the release of the Feasibility Study, there has been a positive response from the market. As the company moves into construction and eventually production, the project will observe further de-risking. This will also result in a multi-fold jump in Core Lithium's overall market cap. 

Financial Capabilities

Core Lithium has a cash flow of AUD$40M with a project CapEx of AUD$89M. They are currently looking to raise capital and are in talks with multiple parties for off-take agreements along with significant customer project finance support. As the DFS has been concluded, the project is now ready for presentation in the debt finance markets for raising additional funds. 

The company is looking to raise the required capital by the end of 2021. As the project features excellent economics along with a low-CapEx, the company has various financing options and is seeking the right cost-to-capital along with the ideal risk profile for the financing. The company has garnered significant support from its customer base as it moves towards the production stage. The company has both debt financing opportunities along with customer financing options, which ensures that raising the additional capital won't pose a significant challenge. 

The company recently signed up a power supply connection agreement and is currently working on a mining agreement. They are also working on an EPC (Engineering, Procurement, and Construction) agreement along with recruitment. They are working on putting organizational systems in place as they move closer to construction.

Core Lithium is currently working towards expanding its resource. The results of the DFS have allowed the life of the mine to be expanded from 8 to 10 years. The company has defined an exploration target of 10Mt-16Mt and currently has 3 drill rigs on-site. In the coming 15 months, they are looking to double the resource and further increase the life of the mine. 

The company's cash operating costs stand at USD$364/t for the life of mine along with >50% ROI (Return on Investment) due to the low project CapEx. The spot price of lithium along with the forecasts of growth further amplifies the overall profit margins. They are looking towards an annual production of 200,000t which is in line with other Australian producers. This will amount to 10% of the country's lithium production. 

The company has additional exploration targets where they are looking to produce anywhere between 4x-6x of their current targets to meet the rising market demands. They are in the process of laying the foundation towards doubling their capacity by 2024. 

Currently, there's a market shortage of Spodumene in the lithium batteries supply chain. Core Lithium has garnered a good working relationship with China's Yahua as a customer, various converters in China along with OEMs, cathode manufacturers, and battery manufacturers. 

Core Lithium is currently focusing its supply chain towards the Asian market, and as the project expands, they intend to broaden its reach to the US and European markets. This will be possible once the global conversion capacity expands, paving the way for new customers. 

Lithium Market Challenges

In the past 18 months, there has been a lack of investment in new lithium supplies in the market. As the world moves towards EVs (Electric Vehicles), the demand for lithium continues to grow across multiple industries. However, there's been a significant disconnect between the actual lithium supply available in the market and the demand by car manufacturers. Over the next decade, the demand for lithium is expected to grow eight folds.

Another challenge is that processing battery-grade lithium requires a certain level of expertise, which further impacts the global supply as a limited number of companies have the technical know-how and resources to provide high-grade lithium for use in batteries. Core Lithium is looking to bridge that supply gap through their fully-approved mining project based in a Tier 1 mining jurisdiction.

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To find out more, go to the Core Lithium Website