IT’S been a hectic 2019 for emerging Australian lithium developer Core Lithium (ASX: CXO), and it’s not even the second half of the year.
Core has taken major steps forward in its goal toward becoming Australia’s next lithium producer, focusing on high quality lithium spodumene concentrate through the mining and processing of high grade spodumene pegmatites located at its wholly-owned Finniss Lithium Project, in the Bynoe pegmatite field in the Northern Territory.
Core’s flagship asset is also conveniently within one hour’s drive of Darwin Port, Australia’s closest harbour facility to Asia.
The company is initially developing one of Australia’s highest-grade lithium resources at the Grants Deposit and is actively assessing the additional development potential of a number of recently discovered lithium resources within the region comprising the Finniss Project.
And now the company has just entered into an $8.1m agreement for the sale of a private royalty from Finniss to Canadian royalty company, Lithium Royalty Corporation (LRC).
LRC was established to pursue investment opportunities in the battery materials sector, with a focus on lithium, and will earn a 2.5pc royalty over production from the Finniss Project.
Alongside the move, Core has also invited shareholders to participate in several near-term milestones and growth strategies ahead of the development of the Project this year.
Project financing
LRC has already established lithium royalties over other high-quality producing and near development lithium assets, including Galaxy’s Mt Cattlin lithium mine.
Under the terms of the Finniss agreements, $6.875m of the $8.1m amount will be paid on execution and held in escrow and released to the company upon the transaction receiving approval from the Foreign Investment Review Board (Stage 1), expected to be completed in July/August.
The balance of $1.25 million is conditional on the company announcing a 15mt JORC Mineral Resource for the Finniss Lithium Project and the company achieving continuous operation of the processing plant for more than 14 consecutive days (Stage 2).
The royalty rate on receipt of initial proceeds under Stage 1 is 2.115pc, and increases to 2.5pc upon achievement of the Stage 2 milestone and payment of the balance of the purchase price by LRC.
In order to ensure existing shareholders are able to participate in the company’s growth, Core has announced a Share Purchase Plan to raise up to $2m for all eligible shareholders at an issue price of 4c per share, which is a 17pc discount to Core’s last closing price.
The SPP is partially underwritten up to the amount of $1m by sophisticated and institutional investors.
Funds received from the SPP and $8.1m investment will be used to progress Finniss development plans, near term mineral resource growth and conversion, as well as focused exploration to improve the production profile further and extend the mine life within the broader Finniss Project area, and for working capital purposes.
Mad March
During the March quarter, Core had been focused on a number of initiatives aimed at further enhancing the value and potential of Finniss, as the company progressed a Definitive Feasibility Study on the project, which was released in April.
In the reporting period, Core recorded a number of achievements.
It increased the global mineral resource of the Finniss Project to 8.85Mt, while being awarded the first ever lithium mineral lease in the Northern Territory.
The company also selected its preferred lead contractors for various packages of work at Finniss, and made key appointments, including the recruitment of Simon Iacopetta as Chief Financial Officer.
Definitive Feasibility Study
The DFS confirms that Core is well positioned to be the next operational lithium mine in Australia.
The company reports that the mining of high-grade ore reserves of 1.4pc lithium oxide, combined with exceptional spodumene metallurgy, enable Core to produce high quality, coarse concentrate using low-capex, gravity-only DMS processing.
Core’s development of the Finniss Project is initially based on the development of the ore reserves within the high-grade Grants and BP33 deposits as standard open pit mining operations, and the construction of a simple 1Mtpa DMS process plant to produce up to 180,000tpa of high-quality lithium concentrate with robust operating margins.
The DFS stated that a modest pre-production or start-up capex of $73m and strong cash flows enable quick capital payback of less than 1.5 years and confirmed that Finniss is one of Australia’s lowest capital intensity lithium projects.
Core has, through dedicated exploration, increased the aggregate mineral resource and ore reserves for the entire Finniss Lithium Project by more than 500pc since the start of 2018, and plans to add further mineral resources and ore reserves to extend the life and increase the strong positive life-of-mine cash flows of the Project.
Core’s managing director, Stephen Biggins, said the DFS for Finniss had highlighted the significant potential of the Project and put Core on track to become the NT’s first lithium producer.
“The DFS confirmed Finniss as a simple but high value operation, in part due to the minimal spend required on infrastructure thanks to high grade spodumene reserves in close proximity to Darwin Port,” he said.
“We are maintaining our exploration momentum, with the aim of materially increasing the potential mine life of Finniss before we commence first production.”
Core is targeting production from Finniss 2020 and has already clinched an agreement with Ya Hua International Investment and Development Co (“Yahua”) to expand offtake commitment by 50pc to 75,000t per annum of 5.5pc lithium oxide concentrate.
The agreement includes a floor price, guaranteeing a robust operating margin and revenue for the first two years.
Yahua is one of China’s largest lithium hydroxide and carbonate producers and is a wholly owned subsidiary of $2b market value and Shenzhen-stock exchange listed Sichuan Yahua Industrial Group Co., Ltd.
Yahua has also agreed to provide a $29m pre-payment to support financing the development of the $73m lithium mine and processing facility at Finniss.
As part of the company’s strategy to bring the project online by the end of 2019, Core has also locked in an agreement with Darwin Port, giving it the capacity to ship either 1mt of DSO or 250,000tpa of lithium concentrate.
