Australian lithium miner Core Lithium (ASX: CXO) has provided its half-year report for the period ended 31 December 2022.
The half-year to 31 December 2022 was underpinned by significant operational and corporate activity as the Company transitioned from mine developer to lithium mine operator and producer.
During the reporting period and, early into the 2023 year, Core commenced the final construction milestone – commissioning of the dense media separation plant (DMS) to produce first spodumene concentrate.
Key milestones
- Commenced mining of lithium ore at the Grants Pit
- Commissioned the crushing and screening plant
- Awarded a five-year operations and maintenance contract for the DMS plant to Primero
- Completed construction of the DMS plant, and advanced commissioning to a point where concentrate production has commenced (subsequent to period end)
- Upgraded Finniss’ Mineral Resource Estimate (MRE) by 28% and Ore Reserve Estimate (ORE) by 43%, and extended Finniss’ life of mine to a minimum of 12 years (ASX announcement 12 July 2022)
- Concluded 2022 drilling campaign targeting Resource and Reserve upgrades to further extend Finniss’ life of mine
- Successfully completed a $100 million equity raise to fund an extensive drilling campaign in 2023, pursue growth opportunities and provide additional working capital
- Significant additions to leadership including appointment of CEO Gareth Manderson, COO Mike Stone and subsequent to the half year, CFO Doug Warden
- Announced corporate head office relocation to Perth, Western Australia (subsequent to the period end)
Sustainability
A series of engagements with the local communities were completed to support safe transport of the first shipment of DSO from the Finniss mine to the Darwin Port. A business wide sustainability assessment was undertaken, and the findings and recommendations will form the basis of the ESG framework.
Early mining
In mid-September 2022, Core uncovered first lithium ore at the Grants pit and commenced mining. In the December quarter, following the commissioning of the crushing and screening plant, sufficient ore was mined to produce a one-off Direct Shipping Ore (DSO) shipment. The DSO shipment was trucked to Darwin Port in December and shipped to customers in China in early January 2023.
The Northern Territory, and much of northern Australia, saw significantly higher than average rainfalls in the month of December. At the end of reporting period, this led to the accumulation of a significant volume of water in the base of the stage one portion of the Grants pit. Impacts of the wet season on mining volumes are being assessed and strategies implemented to manage this impact in the March quarter.
Construction to operations
The crushing and screening plant was commissioned in November and successfully crushed first ore from Finniss to be shipped as a DSO cargo.
The DSO shipment allowed Core to commission all logistics processes and procedures between the Finniss Operation and Darwin Port.
In the September quarter, Core implemented a double shift to accelerate construction of the DMS plant ahead of commissioning activities.
Subsequent to the reporting period, Core completed construction of the DMS plant and advanced commissioning to a point where concentrate production has commenced. Commissioning of the DMS plant represents the final construction milestone for the Finniss Lithium Operation.
Sales and marketing
Core used a digital exchange platform to successfully tender a shipment of 15,000 dry metric tonnes (dmt) of spodumene DSO, with an average grade of 1.4% Li2O. The tender was offered on a CIF basis to several pre-screened participants active in the lithium-ion battery supply chain and sold for US$951/dmt.
Trucking to the Darwin Port commenced in November and loading of the shipment onto the Rossana commenced in late December. The ship departed Darwin Port on 4 January 2023 for Fangcheng, China.
In October 2022, Core concluded discussions with Tesla regarding a definitive product purchase agreement without an agreement being reached.
The Company continues to receive strong inbound interest in lithium spodumene concentrate from Finniss and is well-positioned to capitalise on high demand for available battery grade lithium concentrate to complement existing binding offtake arrangements with Ganfeng Lithium and Yahua.
Exploration
In mid-July 2022, Core reported a Mineral Resource Estimate (MRE) and Ore Reserve Estimate (ORE) update based on results from drilling undertaken in the 2021 drilling season.
Importantly, the updated MRE and ORE supported a minimum 12-year mine plan for Finniss – representing a 50% year-on-year life of mine increase (12 July 2022 announcement).
- The Finniss MRE increased by 28% to 18.9Mt @ 1.32% Li2O.
- Measured and Indicated Resource categories increased by 61% to 13.3Mt @ 1.40% Li2O.
- About 70% of the MRE is now in the higher confidence Measured and Indicated categories, with excellent conversion of Inferred to Indicated.
- The Ore Reserve Estimate for Finniss has increased by 43% to 10.6Mt @ 1.3% Li2O.
As part of Core’s continuous work to grow the Finniss Mineral Resource, the Company undertook extensive drilling in the reporting period.
In September 2022, Core completed a 12-hole deep diamond drilling program at BP33 – the second proposed mine at Finniss. The program was largest undertaken by the Company to date.
Drilling intersected the main BP33 mineralisation at depths of up to 470 metres below surface, and a further five holes intersected variable thicknesses of mineralised pegmatite associated with the southern BP33 body at depths below any previous drilling, and up to 420 metres below surface.
Importantly, new spodumene intersections were reported more than 400m outside of the current Mineral Resource, which is expected to deliver substantial ore body extensions.
In mid-December 2022, Core received assay results confirming that deep diamond holes NMRD035, NMRD038 and NMRD039 all intersected variable thicknesses of spodumene mineralised pegmatite at depths below any previous drilling, and up to 830m below surface (5 October 2022 announcement).
Significant intersections included:
- 72.74m @ 1.56% Li2O in NMRD038 including 14m @ 2.00% Li2O
- 22.0m @ 1.60% Li2O in NMRD039including 6m @ 2.16% Li2O
In addition to drilling at BP33, Core conducted reverse circulation and diamond drilling at the Hang Gong deposit, and the Far West and Bilatos prospects that focused on confirming additional open pit deposits.
Far West and Hang Gong are adjacent to the DMS plant and Bilatos is within trucking distance, 22km south.
Several encouraging assay results were received at Far West, Hang Gong and Bilatos including (16 December 2022 announcement):
- Bilatos: 61m @ 0.87% Li2O in SRC094 (from 48m) including 8m @ 1.57% Li2O (from 83m and 8m @ 2.01% Li2O in SRC087 (from 50m)
- Far West: 12m @ 1.66% Li2O in FRC300 (Far West Central) from 124m and 8m @ 1.56% Li2O in FRC299 (Far West North) from 137m
- Hang Gong: 11m @ 1.36% Li2O in FRC345 (from 179m), 7m @ 1.86 Li2O in FRC346 (from 157m) and 10m @ 1.35% Li2O in FRC351 (from 182m)
Drilling for the calendar year concluded in mid-December.
Events Subsequent to reporting date
In January 2023, the Group recorded its maiden DSO sale. The proceeds from the sale were USD $14.0 million (AUD $20.1 million) and were received on 17 January 2023.
Drilling completed as part of the ongoing Finniss Lithium Operation exploration program has led to a more than doubling of the Mineral Resource Estimate at BP33 from 4.37Mt @ 1.53% Li2O to 10.1Mt @ 1.48% Li2O (ASX announcement 6 March 2023).
Corporate
On 3 October 2022, Core completed a fully-underwritten institutional placement to raise $100 million.
The raising strengthened Core’s balance sheet and provided flexibility to pursue growth options, accelerate resource growth, advance development of the BP33 underground mine and provide working capital in the ramp up to completion of construction at Finniss.
The placement was well supported by new and existing high-quality domestic and global institutional investors.
Core issued 97.1 million shares at $1.03 per share, representing a 6.8% discount to the 29 September 2022 closing price of $1.105 and a 13% discount to the five-day volume weighted average price of $1.184.
In August 2022, Core announced the appointment of Gareth Manderson as Chief Executive Officer.
Mr Manderson is a well-credentialled mining executive with 28 years’ experience in the mining and minerals sector and joined Core after having served in various leadership and technical roles within mining giant Rio Tinto for more than 22 years. Mr Manderson commenced his role on 8 August 2022.
Core further built its organisational capability with the appointment of senior executives:
- Samantha Rees – Executive General Manager, People and Culture
- Mike Stone – Chief Operating Officer
- Melissa Winks – Executive General Manager, Sustainability
- Andrew Forman – Interim CFO with Doug Warden to commence as CFO – effective 17 April 2023
The evolution of Core’s leadership team aligns with the Company’s decision, announced subsequent to the period, to relocate its head office to Perth – the corporate centre of Australia’s lithium industry.
Liquidity
At 31 December 2022 the Company had a cash and cash equivalents balance of $125.3 million (30 June 2022: $135.2 million).
Significant cash inflows and outflows during the half-year included:
- receipt of $96.2 million (net of fees) from capital raising activity in the period;
- receipt of $1.7 million from exercise of options
- payment of $84.2 million for construction activities
- payment of $10.0 million for exploration activities
- $13.4 million for corporate and other expenses
