Finniss Pre-Feasibility Study Points to Low-Cost Lithium Operation Generating Significant Surplus Cashflow
Positive Pre-Feasibility Study
- Initial development of Grants lithium deposit generates NPV10 of A$140 million (pre-tax) with an IRR (pre-tax) of 142% at average LOM concentrate price of US$649/t (FOB) over LOM;
- NPV10 increases to A$246 million (pre-tax) and IRR (pre-tax) increases to 202% using US$895/t (FOB) concentrate price (current spot price);
- Project generates A$346 million in revenue and over A$168 million in free cashflow (pre-tax), driving rapid payback period of less than 12 months;
- Initial operational mine life of 26 months, producing a high-quality spodumene concentrate of 5.0% Li2O;
- 1Mtpa DMS processing plant, producing 225,000tpa(see Note below) concentrate grading 5.0% Li2O at nameplate capacity;
- Low capital cost of A$53.5 million (including contingencies of 15%);
- Operating costs of less than US$279/t concentrate (A$372/t), including royalties, generates a robust operating margin of more than US$370/t on low case pricing assumptions;
- Simple DMS plant design will allow for rapid construction timetable;
- Approximately 50% of the total development capital cost expected to be met with US$20 million pre-payment commitment by Core's largest shareholder and major Chinese lithium producer -Yahua Group (SHE:002497);
- Financing discussions advanced with strategic financiers, including global offtake companies;
- Significant potential to enhance Finniss Project mine life and economics through the later integration of the nearby BP33 deposit, and discovery of additional deposits at Finniss; and
- CXO Board approves commencement of Feasibility Study, with target completion date of late 2018, and ultimate objective to propel Core into the ranks of ASX lithium producers in 2019.
Core has taken a major step forward in its goal to become a major Australian lithium producer through the delivery of this PFS, which seeks to unlock a new lithium province near Darwin in the Northern Territory.
Core's development of the Finniss Lithium Project is initially centred on production from the high-grade Grants deposit as an open pit mining operation, and construction of a simple 1Mtpa Dense Media Separation (DMS) process plant that will produce a high quality 5% spodumene concentrate for export.
The high grade of Grants, when coupled with proximity to infrastructure, low capital and operating costs, results in a development capable of delivering A$168 million (pre-tax) in free cash generation over a period of only 26 months. This strong cash surplus will ensure Core is well placed with a first-mover advantage in this exciting new lithium province and lays solid foundations for the building of a long-term lithium production hub.
Existing road infrastructure will provide access for daily road train movements of concentrate product to the Darwin Port for shipment which is located 88km from the Project area. The Project also has other substantial infrastructure advantages, including being close to grid-power, gas and rail infrastructure and being less than a 1-hour drive from the skills, trades, workshops and services in suburban Darwin.
Key PFS Outputs
The PFS clearly demonstrates the Finniss Project economics to be compelling, with globally competitive cash costs that result in high operating margins and rapid capital payback. Key outputs include:
---------------------------------------------------------------------- Table 1 - Key PFS Outputs ---------------------------------------------------------------------- Key Measure 1Mtpa DMS Plant ---------------------------------------------------------------------- Project revenue A$346 million LOM EBITDA A$168 million Pre-production capital A$53.5 million (incl. 15% contingency) Average operating cost over LOM US$279/t (including royalties) (A$372/t) Initial life of mine 26 months (Grants deposit only) Concentrate production over LOM 400,083 tonnes grading 5% Li2O NPV10 (pre-tax) A$140 million A$246 million at US$895/t (FOB) (A$1,193/t) concentrate price IRR (pre-tax) 142% 202% at US$895/t (FOB) concentrate price Payback period 12 months ----------------------------------------------------------------------Unless otherwise stated, all figures above assume a life of mine concentrate sales price of US$649/t (FOB) concentrate, and a USD/AUD exchange rate of 0.75.
The PFS confirms Grants as a financially viable operation, with A$346 million in revenue (pre-tax) to be generated over the 26-month life-of-mine, at a strong operating margin of 57% based on average life of mine sale price of US$649/t (FOB) (A$865/t at 75 cent exchange rate) concentrate, and up to 67% operating margin in the event sales prices closer to the current spot price of US$895/t (FOB) concentrate can be achieved. These strong operating margins provide for a rapid payback period of less than 12 months.
The strong free cash generation from Stage 1 of the Finniss Project development, mining only the Grants deposit initially, is expected to enable Core to be self-funding on future development opportunities within the Finniss Project, including any future development of the nearby BP33 deposit, which has potential to more than double the mine life of the Finniss Project. In addition to the BP33 Mineral Resource, there are a number of additional advanced pegmatite targets within the Finniss Project containing known high-grade lithium intercepts that require follow up drilling. The results from this follow up drilling will provide additional line of sight to organic growth opportunities.
The simple process flowsheet for Grants is based on the construction of a new 1Mtpa Dense Media Separation (DMS) plant, resulting in a relatively low capital cost estimate, and reduced commissioning risk relative to some peer spodumene concentrate operations that require additional capital costs associated with flotation circuits.
Core's Managing Director, Stephen Biggins, commented:
"The results of the Pre-Feasibility Study are highly encouraging and puts the Finniss Project on track to become the Northern Territory's first producing lithium mine.
"The PFS confirms Grants as a simple but high value operation, with minimal spend required on infrastructure thanks to its simple mineralogy and location near Darwin Port.
"With the successful PFS under our belt, we will now look to complete a Definitive Feasibility Study on Grants before the end of the year, while also progressing our development initiatives at the adjacent BP33 deposit, which has considerable potential to further enhance the robustness of the Finniss Project.
"On behalf of the board, I would like to thank everyone involved in this process for their support and for their hard work to-date. We look forward to further progressing Grants into production in 2019."
Based on the positive outcomes of the PFS, the Core Board has resolved to immediately progress to a Definitive Feasibility Study on Grants (Feasibility Study). The Feasibility Study is expected to be delivered later in 2018, allowing for a development decision in early 2019 and rapid transition to construction and production status during 2019 as a result of the simple, low technical risk operation.
Completion of the PFS now paves the way for the Company to advance its offtake and financing discussions, and project permitting to ensure Core is positioned to commence development and construction in 2019 and be delivering spodumene concentrate to customers by the end of CY 2019.
In parallel with the Definitive Feasibility Study, permitting, offtake and financing discussions, Core will maintain an aggressive regional exploration campaign focused on growing the resource base of the Finniss Project to support a long-life mining operation.
Note: There is a low level of geological confidence associated with the inferred mineral resources and there is no certainty that further exploration work will result in the determination of indicated mineral resources or that the production target itself will be realised.
To view the PFS with tables and figures, please visit:
To view the Pre-Feasibility Study Presentation, please visit:
About Core Exploration Ltd
Core Exploration Ltd (ASX:CXO) is an emerging lithium producer focused on development of its Finniss Project near Darwin in the Northern Territory. Core owns 100% of Finniss, a major developing project that lies close to existing infrastructure such as the Darwin Port, grid power, gas and rail infrastructure.
The Finniss Project covers a 500km2 tenement holding and 25 historic pegmatite mines. The project area is about 80km from Darwin Port. Exploration work has generated a near term development timeline, with feasibility studies to be completed over the course of 2018 ahead of receipt of approvals in early 2019 and planned first production during 2019.
An aggressive exploration program is under way, which has confirmed the high quality prospectivity across much of the Finniss Project area. Core's stated ambition is to upgrade Finniss' resource base to fast-track commercialisation options.
Sichuan Yahua Industrial Group Co Ltd
Core Exploration Ltd