Core Lithium Ltd (CXO) Earnings Call Transcript & Summary

Good day, everyone. Thank you for standing by. Welcome to Core Lithium June Quarterly Investor Webinar. [Operator Instructions] Please be reminded that today's conference is being recorded. I would now like to hand the call over to your first speaker today, Mr. Paul Brown, CEO. Thank you. Please go ahead.

Thanks, and good morning, everyone. I'm Paul Brown, the CEO for Core Lithium, and I'm also joined here today with my CFO, James Virgo. So we're really looking forward to, I guess, engaging and presenting today. Some of you may have been on the call with us and our update yesterday, but what we really wanted to do today is to engage with our loyal shareholders. And I just wanted to say, over the last several weeks, I've had some really good engagement with a number of you. I'm listening, I'm hearing some of your challenges and certainly some of the frustration. So I'd just like to acknowledge and thank you for those that have reached out and engage. It has been much appreciated and certainly look forward to continuing the dialogue. So look, I would just like to provide a bit of an overview about myself. I'm a mining engineer. I've been in the resource industry for a couple of decades. It's the only industry I've ever worked in. I come from, I guess, a pretty interesting field. Actually, I originally started as a -- I did an apprenticeship, but then soon realized that my passion was really leading operations and managing people. So I end up doing, I guess, a mining degree. And I've had a really exciting career with several resource companies, the likes of Fortescue Metals, HWE Mining and Mineral Resources. My experience really extends bulk commodities. So being the WA-led iron ore is something that I'm very familiar with. But more importantly, since around about 2015, 2016, I've had a lot of lithium experience, and that's predominantly been with Mineral Resources. I built and operated the Mount Marion mine and certainly did the same for Wodigna through 2017, 2018. So I really do understand the market very well. We've got a lot of experience dealing with Chinese and Chinese customers and others abroad. But more importantly, I have a lot of operational experience and it can really relate to some of the challenges that the Core has seen as a young organization stepping from exploration to producer. But what I really like about Core, we've got a great asset out there in the Northern Territory. Our infrastructure is very, very close by. Some of the advantages that we do have is being so close to the port, an all-weather road. Being on Indonesia, China, doorstep, which creates a different opportunity than being all the way down in Esperance and other. I touched on the operation itself has been built really well. The processing facility, which is obviously where we make our -- make or break any organization is solid, walking through that. And again, I've got a lot of experience in dense media separation, the plant. I was very, very pleasantly surprised just how well it's been built. I think if you look at any organization, especially in lithium and I'll stand corrected, but any organization that discovers a lithium deposit build something and ramps up, it's really, really challenging. In fact, any commodity is, but particularly lithium, you've got to learn a lot about how you're mining it, certainly how you put it on the ROM and feed it through the plant. And I'd just like to recognize just how well the team have adapted to that challenge over a relatively short period of time. I'll get into a bit more detail. We're seeing month-on-month consistencies with very high recoveries through a dense media circuit is really impressive. So I'm excited to be here. I look forward to engaging and meeting more of you over the time. I'd just like to, again, thank you for your support. I'll hand over to James now. I'm really excited. James has been in the organization for a while. When I got here, he was Interim CEO, and I quickly learned a lot about James and where his talents were. So I'm very excited that he accepted the full-time position of CSO, so together -- CFO, sorry. So together, we look forward to taking the organization forward. I turn over to you, please, James.

Thanks, Paul. Yes, as Paul mentioned, I've been with the company for just a little over 12 months in that CFO role in the interim capacity since March and then appointed in June. I'm a qualified chartered accounts with a background in professional services, but very focused on the mining industry. I think my most relevant experience recently I was the General Manager Finance and Investor Relations at Resolute Mining, which is an ASX and LSE-listed gold miner. Frankly, was not without its challenges. A lot of experience around debt and equity funding, managing a company through quite a challenging financial period and through a lot of other activities within that business over the last 4 years. So I'll speak to you a bit later and touch on the financials, but I'll hand back over to Paul to discuss the quarterly report. Thanks, Paul.

Thanks, James. So look, just running through our Q4 highlights. So our monthly recovery is around at 63%, again, a really excellent result considering we're at the end of some of those low-grade stockpiles. So again, it demonstrates the skill set of the team that was there operating that plant and as well as the advantage we're going to have once we do get operating again. We produced a bit over 20,000 dry metric tonnes of spodumene grade was 4.8%, and we had a cash operating unit cost of $400 -- $644 a tonne. Sales and marketing, we sold a record of 33,000 dry metric tonnes. We achieved an average SC6 price of a bit over $1,000. We had also shipped nearly 20,000 dry metric tonnes of fines, and we also have spodumene concentrate available for sale at some point in FY '25 with around about 5,178 wet metric tonnes. Exploration team did a tremendous job. We increased the resource -- or the Mineral Resource to 48.2 million tonnes. So it was an increase of about 58%. Pleasingly, and again, I've said this a number of times and certainly echoed it through our recent updates. Our cash balance is very strong. We finished with $87.6 million, and importantly, we're still debt free. Sustainably, I touched on this a bit yesterday. We have an excellent safety record. We have great stockholder engagement. We have really good solid relationships with the Northern Territory government. So that's a credit again to the team that has operated our mine site and shutting down any mine or reducing workforces can be particularly challenging, but pleasing that we did that safely with no recordable injuries. So one of the key things that Greg and the Board have asked me to do is really make sure that when we wound this site down that we remain restart ready and that's certainly something that we've been able to do. I have the unfortunate experience over a number of businesses to need to mothball mines into care and maintenance. Wodigna was probably the last mining site that I did. And certainly, we had a different lens on that. We shut that down for multiple years. In fact, it's probably around 3 or 4 years. So we had a very different lens on how that needed to look. But what we're doing at Finniss is really making sure that the shutdown, the work activities and how we're preserving the asset makes sense. We think that the market at some point will respond in a positive manner, and we want to be there to capture the upside. So that's certainly how our site has been placed into care and maintenance. So it is certainly restart ready. We are managing water and a variety of other things on site. So we'll be in a very strong position to capture the upside. Some of the other things I will, I guess, touch on, as I briefly mentioned, we have -- Finniss is highly valuable infrastructure and we know how to operate it. And when we get going, we will be in a very different position from a recoveries, from a grade profile and certainly from a cost base. What my key focus is right now is really pulling costs out of our current operating parameters, whether that be here in the office. But more importantly, we're looking at all of that data that we've managed to capture over the last 18 months of operations. And one of the areas that I particularly enjoy is pulling costs out of business as I come from a contracting background where every dollar you spend is a dollar you never put in the bank. So I've got a particular focus in the lens. I have operated some very challenging assets over my career, and I've been able to make them work. So I really look forward to, I guess, in time presenting a strategy and certainly a cost base that will allow us to, pending market conditions, operate in a sustainable manner. But I need some time to be able to do that. James and I are working incredibly hard to, I guess, set the culture that we require and certainly bringing the right people into our organization that have done this before. And we expect to, I guess, put some more color on what this looks like in the first half of 2025. So I will just hand over to James to touch on our financial highlights, and then I'll continue on with my last part of the presentation.

Thanks, Paul. Yes, as Paul mentioned, I'll briefly touch on some of the cost and cash flow performance for the quarter, but also the financial year. So as Paul mentioned, record quarterly shipments of 33,000 tonnes of concentrate, generated $41.7 million of revenue for the company. These were offset by some QP outflows during the quarter, which results in net cash receipts from customers of $37.6 million. Total shipments for the year were about 97,500 tonnes of concentrate, with 66,000 tonnes of fines. Of note, 12,800 of those tonnes were delivered at the start of the year to the prepayment arrangement that was organized at the end of last financial year. The impact of these prepaid tonnes and brought forward QP adjustments over the year results in total receipts from customers of $108 million. These are all Australian dollar figures. Moving on to our operating costs. Unit costs for the quarter were the lowest of the year at $644 a tonne. It is important to note that those costs don't include mining, but they do demonstrate the strict cost control that commenced during the start of this calendar year and the focus on rightsizing operations during this process. The full year unit costs were $1,396, which were within the revised guidance that was provided in January when mining was suspended. As Paul mentioned, there's a number of areas we're working on. So we don't believe that these unit costs reflect where we see the business to be once we get to that restart stage, and we are working on a number of areas to reduce that number. On our CapEx, we rapidly implemented the various cost control measures during the second half of the financial year, with most of them -- with the majority of the CapEx completed before the June quarter. CapEx and exploration for the year in the majority landed at the low end of the revised guidance with the spend on the BP33 early works in line with expectations. So what does that all mean? Cash balance at the end of the year, as Paul mentioned, we ended at $87.6 million and Core remains debt free. I'll hand back to Paul to wrap up the quarterly presentation and move to questions.

Thanks, James. I guess the next area I want to touch on is our exploration and just provide a bit of color and over how I'm thinking about exploration and I guess in every organization that I have operated in, exploration is featured either prominently or certainly as a value add. And what we're looking at here from our exploration is a real value add. We do have extensive tenements right through the Northern Territory and down into South Australia. We have spent the right amount of money and focus in and around our asset and our mine site, BP33, Grants, et cetera, and really understand that resource very, very well. But during that, there's also some other indicators and some other exploration upside. But I want to be able to go and look at, and one of the key strategies that we do have, again, touching on our world-class infrastructure is within a 30, 40 or even a 50-kilometer radius. We do have some excellent potential to either just have new discovery and/or certainly link up the pegmatite systems that we know that exists there. So exploration will be a key driver for us over the next 12 months, but certainly when I'm looking at exploration spend, I want to be able to bring back value through that spend. So we do have a really good solid plan and certainly a very experienced exploration team that know the area very, very well and have been with us over a long period of time. So I look forward to updating you all on our results. Our budget is around that $8 million to $9 million. That makes sense for where we currently are, as I said, around half of that will go towards our exploration within trucking distance of our processing infrastructure that's particularly important. That has best potential for value creation. We want to be able to build on the 48 million tonnes of resource, which will certainly enhance our production profile over many years. Prioritizing large targets or areas with potential cluster of deposits and certainly walking around and understanding the geology a bit more and the engagements I have. I'm very excited about our targets. There are some other things we also want to do that we're currently not getting a lot of value from the market is advancing our targets in Central Australia. There is excellent potential for rare earth, Iranian-based metals, et cetera, whilst our focus is on improving our position as a lithium producer. These are all important parts and an important strategy that we need to act on and bring into our business. The other thing, I think, that's not very well known. We have [ 8 million pounds ] at Napperby. That's a uranium deposit. It's a pretty interesting area with good opportunity of consolidation. So that's another area that we will be poking around on and looking to add more value to that particular asset also. So look, just to summarize, our operation was paused safely and in a manner that can start again very quickly to capitalize on the upside. Our balance sheet is strong, and I want to emphasize that, that is my focus in any organization, good or bad, from a market perspective, you've really got to manage your balance sheet and is something that James and I focus on daily. So that $87 million we worked really hard for that, and we want to be able to maintain that and act very responsibly with how we spend. We're going to keep the operation restart ready. It's a very interesting market. And certainly, in my time, I've seen this is probably the third swing inside of 8 or 9 years. So the market is immature. It is dominated by China, but there is a lot of green shoots out there and it will swing again, all commodities do. And what I will say about our spodumene is that our customers really like it. It's very [ caused grain ]. So one of the advantages that we have, especially through dense media is we don't have to necessarily crush our water to process it and turn it into bug dust, where some of the challenges are when you are processing spodumene and you're wanting to produce a hydroxide or a carbonate, you lose a lot of product in the front end of the kilns. So our customers really enjoy our product and certainly are showing great support for you. Our exploration this year, we'll seek to enhance and restart the plan through resource growth and advance a multi-commodity target which I've touched on. And certainly, I think our announcements, we're drilling at Shoobridge, for example. So we look forward to providing further updates on that. I think just to summarize, we will go through a few questions and thank you for those who have shown interest and asked questions. Again, much appreciated. Shareholders are absolutely our focus. We want to drive long-term value. James and I are absolutely committed to be able to do that. We do have a very good asset. We can't control, unfortunately, the market conditions. The market is relatively weak -- is weak across the board, not just in this particular commodity, but certainly empathize with where we are and where our shareholders see us, but we will be working very hard to improve that position through the metrics that I've just outlined. So James, I'll hand over to you for questioning, and we can go through them, please.

Thanks, Paul. So as call participants are aware the questions were sent through the webinar platform, we've received many questions. So what we've done is aggregated them into themes given there was a lot of duplication. So I'll briefly run through the questions and then, Paul, if you can answer them. If there's anything I can add on, I'll add that to the end. So the first question theme was we received a lot of questions about restart timing in lithium prices. Can you give us a bit of your thoughts around what a restart timing looks like and thoughts on the spodumene price environment?

Yes, certainly. Look, this is obviously a topic that's well we're spending some time on. What I can't control, as I said, is the market, but what we can control are the things we do inside of our organization. And whilst we've been -- we've suffered the downside but we will maximize the upside. We're not an explorer that's needing to go and fund, get approvals, et cetera, to build a processing facility and a mining operation. We have all that in place. We have the existing supply chains. We have a very supportive Northern Territory government. So my job is to get ourselves ready is to create the right culture and one that's high performing and one that see things very differently because we do have some challenges. So we will bring in the right people that will help us work through those challenges. And in the end, produce a result that will allow us to get back into operations sustainably. The market conditions and how we see it here is it won't just be a spodumene price that will dictate a restart, that would be number of other conditions, including how our customers respond and I see in the market. Spodumene will clearly play one part of that. But there'll be a number of things that we'll assess, but the most important one will be our cost base. And that's the area that we are working through. We'll do a bottom-up build on Grants and BP33. And we'll engage when that work is completed, but that's certainly a lot of work to do. And it's an enormous effort to get a mining operation going. It's an enormous effort to also place it into care and maintenance. So when we get going again, my role here is to make sure we can operate sustainably within the boundaries of what market allows us to do.

Thanks, Paul. Touching on that a bit further. We have had a few questions around and thoughts around potentially staged operations, strip ratios, dewatering times. So maybe just a couple of thoughts on those areas around mining and processing perhaps that you think are opportunities that we can look into.

I think what the logical restart looks like, from my perspective, is we will go back and mine Grants, and we'll reoptimize that pit. And we certainly have the talent and the skill set in our business to be able to go and do that now. So that work is being done. We certainly won't be looking to extract ore out of that particular area. We'll go back in a pit design that makes sense that obviously minimizes waste movement and maximizes our opportunity to get the ore out in the most cost-effective way. But what we would like to do is also move to BP33. That's a fairly significant development for us. It's our second mining operation, and it will certainly be a longer life than what Grant has been. So really, it's a balancing act to make sure that we can start up and have the right cost base, have the right capital input and develop those assets efficiently. So that's how we're thinking about that strip ratios, unfortunately, what's in the ground is what's in the ground. But the real smarts is in the engineering and how we look at the asset and the ore body. So we will bring in the best talent in areas that we need help on. From a processing perspective, again, we'll bring in some talent there. I have one particular individual that is not announced yet that will come and join us, and I look forward to providing more color on him and his experience. But from a metallurgy perspective, there's simply no one better in the industry, and I've worked with this person for a long time. So an area that I really enjoy is processing and metal refining. And it's an area I've been very successful in. So that's the other area that we really capitalize on when we do start up. Obviously, there's 18 months' worth of lessons that we have learned. But there's an awful lot that I know and others know that we come into the business to help us improve on the great work that's done there in and around that dense media circuit.

Thanks, Paul. Only a few more questions. We've received a few questions about share price movements, just a couple of your thoughts on that. Obviously, you've touched on a range of activities that are within our control already.

Yes. Look, I certainly sympathize and recognize that where our share price is. But what I will say is, hopefully, you've heard from me and James over the last couple of days around how we're going to manage business and how we're thinking about optimizing and certainly going about adding value to our business. The market is the market and commodities, unfortunately, we've seen it here in WA a number of times. They swing up and they swing down. But recognize where we are, we've got a world-class asset out there. We actually have the infrastructure to support a restart, which is a hell of a lot better than a lot of others that are out there in this particular commodity as well. So whilst the share price is where it is, there's great opportunity for us to continue to build a great business.

Last question, one question around exploration. Could you give us a bit of your thoughts around the rationale of the regional exploration program. Obviously, we have Grants, BP33, but we've touched on the regional program. And then more recently, we received a question around Napperby. So just maybe your thoughts around that regional program and how that might fit into the FY '25 plan?

Look, I'll start with Napperby. Uranium is starting to become -- well, it has become an interesting topic globally. We have the fortunate tenement that has a resource that's reasonable. We think there's further value to add there. And as I said, there's potential for regional consolidation in and around our particular deposit. So we need to go and go and further drill that out and add to that resource. That's the aim. Obviously, it's exploration. So there's nothing guaranteed. But that would be certainly an interesting target for us, and again, as an [ 8 million pound ] resource base. Look, as far as the rest of the exploration, it's a strategy that makes sense. As I briefly touched on before, we've done a lot of resource definition in and around where we're currently operating, but there's some really interesting targets and known pegmatite systems that we want to go and build on. And typically, again, walking the ground, tin and tantalum has been mined in and around our region for quite a long time. Obviously, it hasn't for a long time, but it did a long time ago, and that's where you find fertile pegmatite structures for lithium. And certainly, we're not just going out there. [ Upwindly ], we've got a really good strategy. We've got a good data set that supports our targets. And our strategy is we've got a great asset. We want to add to the resource within a trucking distance in an area that makes sense. As far as the other metals, whilst we're not pivoting to anything in particular. We are a lithium organization. There's other anomalies and targets that we just have to go and do the work because it really does make sense. There's some interesting things out there across our tenements. And once we complete those programs, we'll certainly update the market. But our strategy sound and as the dollar spend is as well. So that's really a bit of color on exploration.

Thanks. Last question was just around what are your sort of thoughts around the key highlights, ambitions, priorities for the next 12 months? I think clearly, you've touched on a few of those, but maybe just use this as a concluding point on this.

Yes, clearly, cost is absolutely our focus based on exploration, which will feature in and around our conversations and our updates. And of course, rebuilding our models and being in a position to restart and capture the upswing of the market. That's really the 3 key priorities that we have. There's obviously a lot of other priorities as well is growing a team in a way that makes sense, developing a culture of high performance and bringing in individuals that have the experience to really take us forward in a rapid rate of knots. We're not just an exploration company anymore. We are a producer. We're well ahead of a lot of other organizations and aspiring organizations, we've already walked that panic. So our priority will be to get back to where we were, but in a sustainable manner. So there's an awful lot of work, but there's some priorities there. I think that probably resonates and makes sense with everyone.

Thanks, Paul. I really appreciate all the questions coming through. Hopefully, we've answered them in that aggregated fashion. So that's the end of the question session. So I'll hand back to you, Paul, to wrap up.

So thank you. It's been a pleasure to provide an update. And for those that I've met again, thank you for the warm welcome. There's been a lot of correspondence, e-mails, chats and other. We look forward to continuing to engage, and we are listening. Communication is something that has come up a lot. You're seeing some communication from us last week and certainly more this week. So that message is loud and clear. And we're really looking forward to delivering results and providing those updates that when our programs conclude and certainly when our modeling and cost base modeling work is done also. So thanks, and look forward to future engagement.

Thank you. That does conclude today's webinar. Thank you for your participation. You may now disconnect your lines.