Core Lithium’s cash balance, which should swell to $221 million with the proceeds from an institutional raising and share purchase plan, will turbocharge ramp-up activities and a suite of near-term growth projects planned for the company’s Finniss lithium operation in the Northern Territory.
This week, Core (ASX: CXO) banked $100 million and announced the SPP to raise up to a further $20 million. The placement of 250 million new ordinary shares was fully underwritten by Macquarie and Canaccord at a price of 40¢ per share – a 30.2% discount to the five-day volume-weight average price of 57.3¢.
In common with the challenges faced by all ASX-listed lithium producers, the production ramp-up at Core’s Finniss project has been slower than expected. Guidance delivered by Core in July was lower than figures released in the Finniss 2021 definitive feasibility study, mainly because of lower recovery rates achieved during commissioning of the concentrator plant.
It mirrors the performance of the other producers, which have struggled to replicate DFS numbers and endured longer-than-expected ramp-up periods.
When coupled with a relentless short-seller attack that has captured the entire ASX lithium sector in the last 30 days – think Pilbara Minerals (peak $5.37 to a low of $4.59), Global Lithium ($1.89 to $1.58), Delta Lithium (95¢ to 68¢), Liontown Resources ($2.89 to $2.55) – and investors might be pondering the timing of this significant Core capital raising.
But the timing was important for Core’s big-picture plans.
Core has incorporated learnings from the three-month pause during its first operational wet season – one of the unavoidable challenges of operating a mine in the Top End – and also acknowledged the first spodumene concentrate sales arrangement with foundation customer Yahua, which because of the sudden weakness in lithium prices, will not deliver as much cash as initially anticipated.
In other words, Core needs the financial flexibility delivered by this week’s capital raising to make hay while the sun shines, including the significant scopes of work and timeframes to advance the scale of Finniss’ long-term potential.
Coinciding with the capital raising was this week’s low-key sod turning event at the BP33 underground project – the second proposed mine at Finniss and the expected long-life cornerstone of a multi-mine Finniss operation. The sod turn officially opened a $45-50 million early works program at BP33 that will be conducted in parallel to an updated feasibility study based on the asset’s upgraded mineral resource of 10.1Mt at 1.48% Li2O.
The parallel streams of early works and DFS should prime BP33 for the immediate commencement of the next phase of capital works following a positive final investment decision, which is targeted for the March quarter next year.
Core has also allocated $25 million for a series of programs and studies aimed at optimising mining operations, and debottlenecking and improving plant recoveries.
In addition, the beefed-up $35-45 million exploration program for 2024 will translate to 90,000 metres of drilling, primarily focused on developing near-mine deposits to the north of Grants into potential mines as well as exploration at other Top End prospects such as Shoebridge, Anningie and Barrow Creek.
Core is living the reality of an ASX-listed company that has to manage a long-term approach to building sustained shareholder value with the relentless challenge of daily share price movements – often out of a company’s control. To Core’s credit, it has been resolute in a focus on long-term value through delivery of milestones against set timeframes, which should complement the success already achieved by becoming one of only very few ASX-listed lithium producers.
Now that Finniss has delivered quality spodumene concentrate consistently – and from an ASX perspective when compared with the peer group in near-record time – the second prong of Core’s strategy is to grow the Finniss operation through expanded and extend mine output and systematic exploration beyond the current 12-year mine life.