Core Lithium Ltd (CXO) Earnings Call Transcript & Summary

Hello, and welcome to Core Lithium's December Quarter Investor Call. Today's call will start with investor presentations, followed by a question-and-answer session. [Operator Instructions] I will now hand the call over to Core Lithium's, CEO, Mr. Paul Brown. Please go ahead.

All right. Thanks for the introduction. Warm welcome to everyone. It's great to see so many on the call. We look forward to presenting our quarterly update with you all today. And firstly, I'm just joined by my CFO, James Virgo. Moving through the slide deck, I just want to draw everyone's attention to the usual disclaimers. Please take the time to have a read and understand it. Just moving to our quarterly highlights. So the December quarter saw a consolidation of our focus and activities since processing operations ceased at Finniss mid-last year. We've made a good range of progress on a number of fronts. The Restart Studies, we've made significant progress. I'll touch on that later in the slide deck. Our spending levels have slowed in line with our budget, leaving the balance sheet in a really strong position with around about $50 million in cash. At Finniss, the site is well prepared for the wet season, and we've maintained a high environmental standard as we keep our site on Restart Study. We've also returned some very positive drilling results from lithium and gold in and around the Finniss area, more specifically at Shoobridge. Our sustainability performance. I mean this obviously remains a key focus of myself and my management team. I'm really pleased to report we're executing really well. This is a critical aspect of maintaining our license to operate in the Northern Territory. I'll just move through a few highlights. So we had no environmental incidents. We have seen 2 minor safety incidents with our drilling contractor. But I will point out up until then, we haven't had any safety incidents. So the team really did well executing that, our strategy and our drilling program, but disappointing, we did end up with 2 minor safety incidents. They certainly didn't result in any lost time injuries, and they were managed really well with some key learnings implemented across the remainder of the drilling program. Along with maintaining the site in a restart ready position, a key focus for the quarter was wet season preparation. The onset of the wet season in mid-January was later than usual, and we're in a really good position and well prepared for the onset of the rain. Pumping and piping infrastructure is installed and in good condition with significant water storage capacity available at site. We're also working on keeping weed levels under control at our mining and processing sites with the purchase of a weed spray unit in that period, again, a key requirement under our environmental license. Just moving to our activities on restart in our study. So like in terms of mining, we've done a lot of work on BP33, which is our underground development. That will be our second mine apart from Grants. So BP33 hosts more than 90% of our current 122.5 kilotonne lithium ore resource. It will be the cornerstone of our initial mine plan and certainly form a key part of our restart. We're investigating a range of ways to make this development asset, lower cost, more efficient and certainly higher in return. As you can see from the slide, in order to achieve these objectives, we're looking right across the project for ways to optimize the mine design, mining methods, reducing our mining dilution, really understanding mineralogy and network ventilation and certainly dewatering. These work streams will start to be finalized in the current March quarter. So we're looking forward to reporting the outcomes when we finalize these key work streams, and we'll most likely report that in the middle of the year as per previous discussions and plans, but we are on track to deliver a Restart Study. We're also looking really closely at Grants. I think Grants open pit presents a really good opportunity for us. That will be -- that's our existing pit and certainly where we will start mining. So we're looking at ways to mine that more efficiently and certainly looking at options to try and extend that mine life, again, looking at mining methods, mine design and cutoff grades. So specifically, now focusing on processing. And just as a reminder, when we did finish processing last June, our recoveries were at 65%. So the team did a remarkable job. If you have a look at our ramp-up compared to certainly others, I've spoken about this quite a bit, we really did achieve some fantastic results. So we're expecting to start this thing up with all those key learnings and really hit the ground running, but I really wanted to call out the 65% recovery. So we are looking at ways to improve recoveries and operating costs while minimizing capital. This has included considerations about whether we change or add to the current dense media separation circuit and looking at new technologies, which might be able to support or adapt and improve recoveries and efficiencies. At this stage, we're not expecting any major changes to the current Finniss plant, which would require significant investment, but that is certainly a positive. Our recent focus on applying the learnings from the previous operating history and opportunities for greater efficiency and incremental improvements based on the expertise of our new management team. We have a relatively new well-built, well-maintained plant, which I think we can get more out of by applying more discipline and certainly more planning. On top of the mining and processing, we're also keeping a close eye on the market. We have seen a slight positive uptrend in spot prices recently. We've also been in China talking with our customers about our restart objectives and plan, which was certainly well received. We look forward to reporting results of the Restart Study, again by the middle of 2025. And, and I'll now hand over to James to run through the corporate balance sheet and financials.

Thanks, Paul, and hello, to everyone. I'll briefly elaborate on the quarter's cash flows and the balance sheet. So referring to Slide 7. As Paul mentioned, we'll close the quarter with approximately $50 million of cash in the bank and continues to remain debt-free. I'll walk through the key movements during the quarter. Costs for the quarter reflect care and maintenance activities, exploration and corporate activities with no residual production-related costs carried over other than the QP payment that was made. Cash flows are now stabilizing and align with our anticipated budget projections. One-off nonrecurring payments of $3.5 million for the QP related to the May and June shipments that were completed last financial year. This payment closes out all open sales transactions from the prior year. Finniss site's maintenance costs of $3.4 million related to site and DMS plant care and maintenance, site salaries and the Finniss safety and security. With wet season in preparation works underway, some costs are higher, in line with our seasonal expectations. Exploration expenditure of $3.4 million primarily relates to drilling, sampling, assaying and ancillary activities for the Finniss Shoobridge and Blackbeard projects for further details on activities to come later in the presentation. There was a favorable AUD-USD movement for the company. So that saw a $2.7 million cash flow impact, which offsets the unfavorable movement in the previous quarter. We continue to be focused on strict compliance with our budget, and cash flows remain within our expectations. One other point to reiterate is we still highlight that we have approximately 5,000 wet metric tonnes of spodumene concentrate at site and 75,000 wet metric tonnes of lithium fines. These are available for sale but depending on market conditions. And with that, I'll hand back to Paul.

Thanks, James. So just moving to our exploration and exploration results for specifically lithium. So I'll briefly touch on some encouraging results we achieved at 2 projects in the quarter. Our key focus for exploration in 2024 was targeting lithium targets within trucking distance of our Finniss infrastructure. These targets have a potential to create the most value, if they can include it in our future mine plans at Finniss, utilizing our infrastructure. At Blackbeard, which is on an already granted mining lease around 20 kilometers from the Grants processing facility, we had a great result of 63 meters at 1.67% lithium oxide, adding to another quite similar wide high-grade [ hit ] from the previous drilling campaign. Blackbeard shares similarities in geometry and grades to BP33, which is a -- we have an ore reserve of 8.68 million tonnes at 1.38% lithium oxide has been identified to depths of 800 meters. So again, that's our -- will be our second deposit. So Blackbeard specifically remains open at depth with the deepest hole so far returning the previously mentioned 63 meters at 1.67% oxide (sic) [ lithium oxide ] at only 250-meter vertical depth. So whilst this is encouraging, there's certainly more work to do there, but there's clear resource potential and this is certainly an area of focus as we review how we're going to shape that asset or potential asset in the coming months. Moving to Shoobridge. So again, just to refresh Shoobridge was a prospect. Again, we targeted lithium specifically, but in that first drilling campaign we had, we intercepted a number of positive gold intercepts. So during the quarter, we received the final results for remaining 7 holes of RC drilling at [ Shoobridge ] results were in line with those previously, returning shallow [ hits ] over mineable widths with grades up to 19 grams per tonne. Following these positive results, we completed a second phase late in the quarter and before the wet season hit us consisting of close to 3,900 meters, which really is 27 RC holes and around about 500 meters, including 3 diamond drill holes. So we haven't announced that program yet, and we're expecting those results to come in, in the coming weeks. So the Shoobridge project is located in a highly prospective gold mining district with several multimillion-ounce deposits within 100 kilometers of our project. It's still fairly early days. But based on our drilling to date and the gold prospectivity in the surrounding region, there's certainly encouragement to do more work along the 4.5 kilometer trend that we have or have identified so far. We'll certainly continue to do more work on targeting -- in the region before deciding what next steps and certainly how Shoobridge fits into our overall strategy. So look, finalizing our value proposition remains consistent. Concluding our highlights, obviously, we've got strong sustainability Restart studies is well progressed and due to be out by mid-calendar year. Our exploration results have been positive and strong. And we're certainly very well positioned for a lithium market recovery. I'll now hand back over to the operator and look forward to answering some questions along with James.

[Operator Instructions] Our first question comes from Richard Knights from Barrenjoey.

Just wanted to ask a question about cash burn going forward. So if I strip out the QP adjustments and the FX, it looks like your burn rate is about $10 million for the quarter. Is that the way I should think about it over the next couple of quarters in particular, given you're sort of heading into the wet season? Is there a risk that, that gets a little bit higher in terms of care and maintenance spend?

Richard, it's James here. I'll answer that question. So exactly the way you're thinking about it is the right way to take out those nonrecurring QP and FX differences. I think you must consider that there's the wet season as you alluded to. So there was a little bit more spend coming through that December quarter as we lead up to that sort of seasonal period. So that will have a marginal impact on the December and the coming March quarter. The other thing to remember as well is that, as Paul alluded to, all that drilling was done pre the wet. So there was a bit of drilling that came through in that December quarter as the wet season comes in drilling completely stops. And we do have assays and a few other exploration costs. But again, that cost component of the business will significantly reduce. So we do see the coming quarters have a reduction compared to the December quarter. I will just acknowledge that the March quarter will have a little bit of that seasonal impact from the weather.

Yes, I think probably just add to the care and maintenance activities, Richard, we did put the care and maintenance schedule and budget together at the start of this current financial year. And pleasingly, those activities and schedule are being maintained. And as I sort of previously mentioned, we are on a fairly light touch care and maintenance. We certainly haven't wrapped the plant up, expecting to be on an extended care and maintenance period. So I think that what we're seeing is that those costs and activities apart from seasonal pumping and various other things to do with weather are relatively consistent. So over the next couple of quarters, we see those activities being maintained. And certainly, we haven't seen any major costs being added into those activities either.

Yes. Okay. And actually just a follow-up, just if I've got you. Just on Blackbeard, I mean it looks like you've made a discovery there. How important is it to you to sort of continue drilling that prospect and build it up to a resource? And if so, do you expect to have a resource on that in 2025?

Sorry, Richard you're cutting out, but I think the question was largely around Blackbeard. Are we going to have a resource in '25?

Yes, that's right. Yes, that's right.

Look, I think we will be doing more work on that. So we are reviewing results of our completed campaign. And certainly Blackbeard obviously being 20 kilometers away from infrastructure being on a fully approved mining lease and the grade and intercepts we've had would indicate that we'd want to go and continue doing work there. That certainly hasn't been finalized. We've got our geologists [ growing ] over that program at the moment, and they'll look to present something from a program to James Bruce and I in the next few weeks. So looking really positive. And certainly, some key indicators there that would be encouraging us to go and do more work.

[Operator Instructions] I see no further questions on my side.

We'll move to some written questions that we received through the webinar platform. As you can appreciate, the questions are largely in a few key things. So what I'll do is aggregate them into buckets essentially. So the first question really relates to that quarterly cash spend comparing the September quarter with December, noting that the carrier maintenance costs have decreased. So I think the key thing to acknowledge there is as the site transitioned from production into the full care and maintenance in the December quarter, there was that natural step-down between September and December. So exactly as Paul alluded to, the site is being maintained in the restart ready state. So there is that continued spend, but certainly a big step-down from the September quarter.

Also, where restart study work is continuing, engineering, third-party validation samples, et cetera.

The next question, which we received is about our stockpile, Paul. So as I mentioned, we have 5,000 tonnes of concentrate there. I know as well the fines material. So I just wanted to get your thoughts on how we see that stockpile and do we consider selling it or what are our views on that material?

Look, our review is -- our views remain consistent. We have James said 5,000 tonnes of good quality coarse grain spodumene sitting at site. One of the advantages of spodumene, it certainly doesn't deteriorate, is well protected and being well managed and secured on-site. So look, obviously, when the market returns and the time is right, that provides us great flexibility to sell into the market. But currently, that's not what we're looking at doing, and we certainly don't need to be doing that. As far as the 75,000 tonnes of fines, yes, look, similar option to the spodumene concentrate that's there. So when the market returns and the time is right, again, great flexibility for us to do a number of things. But currently, again, well preserved. We're in no -- there's no urgency to sell any of that.

Thanks, Paul. That's probably all the questions we've received through the platform. I believe we've answered the rest of them through the discussion that we've already had. So I might hand back to Paul to conclude and then to the operator.

Yes. Look, again, just thanks for joining. We really appreciate the interest and certainly to our shareholders, thank you, again. There's been a lot of great engagement. Hopefully, our quarterly update has provided you a really good understanding of where our financials are and certainly where our Restart Study and other activities are at. We're really pleased with our quarterly. Obviously, the market still remains certainly a challenge, but our balance sheet is strong. We've got a very strong focused management team, and we look forward to reporting our Restart Study works over -- in the coming months. So thanks for joining us.

Thank you. This concludes today's conference call. Thank you all for participating. You may now disconnect.