General Discussion, page-1483

#1 Under-promise, over-deliver. There is a chance that they have set timelines they are comfortable will be exceed (although on this view I'd have liked to see the scoping study drop already!!)

#2. All the development study steps above are needed for the hundred million dollar plus operation that building a concentrator involving DMS + flotation would involve. All those steps and the length of them are not needed for a simple DSO operation. I suspect ESS will get some highly appealing DSO offers from their off-take discussions and that may get the ball rolling on a two pathway approach. Short Term - get some ore shipped DSO. While doing that, build a concentrator plant. At the moment, the Chinese are crying out for lithium in any useable form and are pretty skilled at converting it to Hydroxide. I suspect some of the DSO prices reflect figuring out both a good use for the waste rock and processing until high percentages of lithium are recovered.

#3 ESS management achieved a quick timeline from completing infill drilling on Caesium to getting it out of the ground and DSO shipping it. ESS is one of the few outfits in the Lithium space that have actually done a DSO shipping operation (even if small). 19April2018 - still confirming resource with infill drilling but continuity is confirmed. 20June2018 Off-take involving a loan facility is confirmed. 25July2018 Mining proposal approved. 12Dec2018 First Caesium mineral pollucite extracted. If (and it's still an if) management decide to DSO ship some of the surface ore I really can't see why a similar quick timeline would not be achievable.

#4 The mining lease application was lodged on 26 September 2022 and is expected to take six months.

Lets jump forward 4 months to when the mining lease is hopefully granted. If a 500kt first year DSO shipping operation was established and that ore was sold at a net of extraction/crushing and shipping price of US$600/t, DSO shipping would yield US$300m of EBITDA in the first year (less royalties and tax). The capital cost is limited and only readily available mining equipment is needed. Contract crushing could be an option. The operation at that stage would be probably be blasting, crushing to as larger size as customers will accept (less loss in fines, less cost). Get it down to port and ship it out to China. Spod prices might fall so for year two budget only $400/t net. Processes are improved and you do 1Mt of ore in year2 or US$400m of EBITDA. So DSO could deliver US$700m of EBITDA (A$1b of EBITDA) by perhaps mid-late 2025. First revenue late 2023.

Of course as some HC ESS posters (including shareholders) have suggested DSO would be silly to do this because its not extracting the full value of the resource. Its not going down the integrated pathway to possibly get subsidies towards concentrator capital costs. A flotation concentrator might even generate some revenue around 2026 or 2027. The two bits of the puzzle are A) A DSO+floatation concentrator delivers no revenue for 3+ years but DSO can. The second bit of the puzzle they are missing is that A$1b of EBITDA opens up a whole world of opportunity from using slightly over 10% of the existing estimated resource. Firstly it funds what-ever concentration plant you want without issuing additional shares and it probably doesn't delay a concentration plant that much (although the residual resource to mine and concentrate is a little bit smaller). Secondly it allows acquisition of a wide range of further prospective tenements (which will probably make up the 10% and more!!). Thirdly it allows a massive drilling campaign to figure out what's there in currently held and acquired tenements. This is partly why Core has the market cap they do, despite their small resource relative to peers. They are on-track to get bucketloads of cash coming in, starting very soon. That cash will then be usefully deployed hopefully adding value.

Directors/Management are still getting their head around DSO. For years and years DSO lithium mining math didn't work (Spod prices weren't high enough for the price to cover shipping more rock. Also there was no demand). The financial boffins (and yes that's my background - finance) will now crunch the numbers and point out huge dollars to be made at low risk because there is demand and at prices that provide strong margins. Old-timers may scoff at DSO as its not sexy and at low spod prices it makes no money, but the EV boom is creating a shortage of lithium and at the moment not many new mines are ready to supply Spod or DSO (ESS may be one of a handful).

If ESS get the approvals to mean that a DSO could be started up and bring in really strong short-term cash I suspect ESS is either going down the DSO route or being taken over (assuming spod prices stay high). ESS is highly unlikely to get a near-term $500-$1b valuation on a distant commissioning of a DMS+floatation circuit on a small resource. When commissioned if spod prices are still high - yep easily. Deliver A$1b of near-term EBITDA and you will get this sort of valuation (if not more).

As an aside, I'm continually surprised around which stock does best over any given period. On the laws of probability some other lithium stocks will do better. I can't however reliably tell which one's they will be. I've got my hunches and spread across several. You can read this but also DYOR its not financial advice.