CXO - Chart Thread, page-9082

If the market were highly negative about Core lithium and remained favourable on other lithium stocks, the current share price would be a clear reflection by the market that Core's future is poor (relative to other lithium miners). The market is however near universally negative towards all the lithium miners. Where projects had large premiums to net assets, those premiums are falling away. Where companies were modestly above the capital invested to get to the current position, many are now trading not only below but well below their net asset backing. While Core's share price movement in the last few years can only be called terrible, a large part of this is however lithium sentiment rather than a specific market evaluation of Core as lacking potential.

PLS is generally regarded as a well-run lithium operation. It has among the largest deposits around and due to operating across the full period of previous high lithium prices, it has a strong cash balance (partly offset by some borrowing). Current lithium pricing means their profitability has crashed. Over the last year their share price has slightly under-performed that of Core but a lot of the time the movements have been both similar in both size and direction, particularly over the last 5 months.


As Manny100 has alluded to, Core has made significant capital investments in DMS plant, site infrastructure and grants pit overburden removal. Core recently acquired the MinRes CSI crushing plant which when installed was advised as a 1.2Mt capacity. Some of that capacity will always be lost in fines and the DMS plant is modestly smaller at ~1Mtpa. It hasn't yet operated for any extended period at that capacity but has been described as well constructed and was built by an industry leader (Primero). If the DMS were to process 1.0Mt of 1.4% material with a 65% recovery rate to a 5% concentrate product the volume would be 182k. Core's transport logistics are comparable to other near-coast Australian lithium deposits and better than most in production or proposed production projects in Canada, Brazil and African deposits in Mali, the DRC and Zimbabwe.

Core's resource of 48.2Mt @ 1.26% Li2O is no longer small relative to a processing rate of ~1Mtpa so potential must exist to expand this if pricing conditions settle at the levels where new and expansion projects are profitable. The two projects planned to give 2020's supply (Grants and BP33) are among the highest grade lithium deposits in Australia. Flotation is complex and Core clearly would prefer to avoid this if they could, but it provides a pathway to obtaining more value from the ore being recovered and through that greater full cycle sustainability. Recovering the ore from the ground typically is the most expensive part of a hard rock lithium operation (unless blessed with a large, at surplus deposit).

Using PLS's terminology Core has completed P180, but that capacity is currently idle awaiting better pricing conditions to restart. There is substantial uncertainty as to what Core's long-term cost structure looks like because performance to date hasn't been even close to the DFS prepared and Core has decided to do a full restart study rather than drip-feeding cost improvement initiatives and through that providing guidance of anticipated future costs. If Core were to operate at around A$1,000/t as other Australian operators have, the project at P180 would have $180m of annual operating expenditure. Staffing is unlikely to be materially above 180 staff so on back-of-hand calculations projected expenditure is $1m/staff member. Clearly labour rates are not that high so most of the cost structure relates to non-labour costs. If labour was the biggest cost, mining in Australia would not have a chance against low cost operations. When the largest cost is not labour, Australia can be competitive if using processes that are not labour intensive such as one operator for a really big piece of equipment. While the Finniss site isn't and will never be the largest mining operation around, its of sufficient scale that it can be an efficiently run site and its now got a CEO who knows how to run a lithium operation.

Beyond lithium prices multiple uncertainties remain:

• What value is there in Gold assets, and if there is value, is it material?
• What value is there in Silver assets, and if there is value, is it material?
• What value is there in Uranium assets, and if there is value, is it material?
• What value is there in the central NT tenements, and if there is value, is it material?
• What is the future cost structure of Grants, or more specifically what cost structure exists to recover the 0.6Mt reserve and the ~1.5Mt that would appear recoverable if the original Grants pit design were implemented?
• What cost structure does BP33 have?
• What cost structure exists for the other Finniss deposits?
• What deposit does Core plan to mine after BP33?
• What is the capital cost associated with starting BP33, restarting Grants any efficiency plans?
• How is it all being funded?

The market doesn't like uncertainty and an element of the weak share price beyond lithium may well be all the uncertainties currently existing.