Core Exploration welcomes ‘compelling economics’ in PFS release for Finniss lithium project

Core Exploration’s (ASX: CXO) wholly-owned Finniss project is on track to become the Northern Territory’s first producing lithium mine, thanks to the encouraging results of its just-released pre-feasibility study.

The company today announced the key points of the study, saying it clearly demonstrated the “compelling” economics of the project, “with globally competitive cash costs that result in high operating margins and rapid capital payback”.

The proposed development of the Finniss project is based on open pit mining of the high-grade Grants lithium deposit and the construction of a 1 million-tonne-per-annum dense media separation process plant to produce a high quality 5% spodumene concentrate for export.

The pre-feasibility study projected A$346 million in revenue generation and A$168 million in free cash flow over the 26-month mine life.

It also estimated a strong operating margin of 57% based on an average life-of-mine sale price of US$649 per tonne (FOB) of spodumene 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 mean the development could pay back its estimated A$53.5 million capital costs in less than a year.

“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,” Core managing director Stephen Biggins said.

He said the company would now look to complete a definitive feasibility study on the Grants deposit before the end of the year, while also progressing development initiatives at the adjacent BP33 deposit to potentially double the mine life of the Finniss project.

According to Core, the definitive feasibility study is expected to be delivered later this year, which would allow for a development decision in early 2019 and rapid transition to construction and production status within that year.

“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… be delivering spodumene concentrate to customers by the end of calendar year 2019,” Core stated.

The company has already signed a binding offtake agreement with its largest shareholder and major Chinese lithium producer Yahua Group to supply 1 million tonnes of lithium direct shipping ore from the Finniss project.

Under the deal, Yahua has agreed make a US$20 million pre-payment commitment, which will cover about 50% of the total capital cost of developing the project.

Finniss lithium resource

In early May, the company reported an upgraded resource for the Grant deposit of 2Mt grading at 1.5% lithium for 30,000t of contained lithium.

Later that month, Core reported a maiden resource estimate at BP33 of 1.4Mt grading at 1.4% lithium, growing the overall mineral resources of the Finniss lithium project by 70% to 3.45Mt at 1.4% lithium.

In early June, the company announced the commencement of an aggressive exploration and resource expansion drilling campaign at the Finniss project. Three rigs are currently drilling at the project with 40,000m of drilling expected to be conducted over the next 12 months.

Core shares were sitting 2.33% higher at A$0.044 following the release of the pre-feasibility study by afternoon trade.