Australia’s hottest lithium project – Core Lithium | Summer Series

Bryce: [00:00:22] Welcome to the Equity Mates Summer Series proudly brought to you by Sharesies. Over 12 episodes, we're deep diving into some of the most exciting, interesting and well known companies from Australia and the US. Each episode we're also joined by an expert to help us unpack the key metrics the bull case and the bear case for each company. My name is Bryce and as always, I'm joined by my equity buddy, Ren. How are you going? 

Alec: [00:00:45] I'm very good, Bryce. It wouldn't be an Australian investing podcast series on individual companies without a lithium stock. At first we actually had multiple lithium stocks. So we figured that one was enough. 

Bryce: [00:00:58] One was enough. But you're right, we are digging into core lithium today, a company that has been well spoken about this year in the Equity Mates community and the broader investing community here in Australia. It's been pretty well covered as well. And our expert joining us in the second half of this interview is none other than Henry Jennings from Marcus today, who actually had coal, lithium as his high conviction stock at Fin Fest in October 2022. So I can't wait to hear his thoughts on Core lithium. 

Alec: [00:01:29] We could just not do the recording with him and just play that fine first recording. 

Bryce: [00:01:33] Yes. I think subsequently he has told people to sell because it ran so hot. So interestingly. Interested. To get his thoughts on where it's at now. 

Alec: [00:01:42] If people do want to see that. YouTube Equity Mates. YouTube.com/equitymates. All of our fan fest stuff is that. 

Bryce: [00:01:49] That's right. Now the Equity Mates summer series is proudly supported by Sharesies and we loveSharesies for two reasons. The first is that there is no minimum to start investing. It's incredibly accessible. You can get started with a matter of cents. You can buy shares or portions of shares on the shares platform for just $0.01 you can get into Berkshire Hathaway. That I think is trading at a $400,000 or thereabouts. You can get in on that for only a matter of cents. And the second reason is, as we've spoken a lot about on this show before, that is dollar cost averaging shares is allow you to auto invest, which means you can truly execute dollar cost averaging in Australian in US and New Zealand markets, all those markets are available. Download the Sharesies app or visit ww dot shares e-com dot aew to learn more and if you'd like $10 into your account to get started, there is a promo code that is available to everyone. It's not Equity Mates specific and we don't earn anything ourselves from it. It is GROW. Use that for $10 promotion to businesses apply. Let's do it, Ren 

Alec: [00:02:52] Take breath. Well, you forgot the last part of the. Arguably the most important part. A reminder that while we are licenced, we are not aware of your personal financial circumstances. This is not a buy or sell recommendation. Any advice in the show is general only. We're here to educate and to entertain, seek professional advice. 

Bryce: [00:03:11] Entertain and educate depending on which way you look at it. Educate and entertain. 

Alec: [00:03:16] Didn't know that that order of those two words made a difference. But let's not Look down. On it as we Core Lithium. 

Bryce: [00:03:23] Yes. As we've been starting these episodes company in a sentence Ren. What have we got? 

Alec: [00:03:28] Lithium miner with mines in the Northern Territory in South Australia. 

Bryce: [00:03:31] They go because, as we say, if you can't explain your company in 30 seconds, you shouldn't be investing. Yes, you just did it in ten. 

Alec: [00:03:39] And when we say Northern Territory in South Australia, the focus is on Northern Territory. Really? 

Bryce: [00:03:44] Yeah. Yeah. They just started actually getting stuff out of the ground this year in Northern Territory. 

Alec: [00:03:49] Not even this year as we're recording this month was the first shipment to port. 

Bryce: [00:03:55] That's why it's going gangbusters. 

Alec: [00:03:57] 88 cases the Darwin port. 

Bryce: [00:03:59] Let's take a look at the history so they discovered lithium at now Finniss in the Northern Territory in 2016. As Ren said, it's located 88 kilometres away from the Darwin port. 

Alec: [00:04:09] And you know what, Bryce a sealed road from Darwin. So that actually Matters. 

Bryce: [00:04:14] Sealed roads. Why does that matter? 

Alec: [00:04:17] Well, because you can, your trucks can. It's easy for your trucks. 

Bryce: [00:04:20] Yeah, sure, that makes sense. 

Alec: [00:04:22] Well, don't be like. 

Bryce: [00:04:24] Is that a competitive advantage? 

Alec: [00:04:25] It is. And it's something they call out in their equity raising deck. Those sealed roads to Darwin. 

Bryce: [00:04:32] It's not the electric self-generating electric train that 12 night Twiggy has, but we'll give it a sealed road. I have been working. 

Alec: [00:04:44] Bryce Leske to good for a sealed right over here. 

Bryce: [00:04:48] So since 2016 and they've really been working to get the mine built and actually getting some lithium out of the ground and as you said, Ren March 2022. They commenced mining and subsequently this month they actually started shipping lithium. 

Alec: [00:05:03] So that's its history, short history called lithium. Today it is developing one of Australia's most capital efficient and lowest cost lithium projects at Finniss and they've already signed some big deals for offtake, some big. Customers, including Tesla, a four year deal with Gan Feng Lithium are to take 300,000 tons. A four year deal with Yahoo! Are also to take 300,000 fun tons. God, I'm stumbling over my words. And then a four year deal with Tesla to take up to 110,000 tons. The point being that lithium is so in demand that this mine was wasn't even built yet and they were already getting these big multi-year offtake agreements.

Bryce: [00:05:50] Well, it's funny you say that mining is in demand because as at the time of recording and this is at the start of December last night on ABC News, Alan Cole loves to show lithium the price of lithium. Okay. All right. It's a weekly chart that he'll throw up and lithium continues and is currently at an all time high. And we'll get to some of the price and drivers of that shortly. But I just thought it was timely given that we were recording this episode today. 

Alec: [00:06:16] Yeah, I particularly want to talk about the C1 costs, like the cost to get or out of the ground and to get it to port when we're talking about the company when analysing this company. It's got its mind today that it's operating, but it really sees its future in lithium, in the surrounding areas. And so while it's mining where it is mining, it's also exploring around that area. It's got over 500 square kilometres of tenere, over quite highly prospective ground for lithium in the Northern Territory at Finniss. And if you look at the investor charts, sorry, the maps in the decks, they, you know, they're exploring at some places that feeling pretty positive about other places. So they basically think they can take what they've got and expand it and they think they're going to be mining lithium in the Northern Territory for a while. 

Bryce: [00:07:04] Yeah, at low cost. So they say love to say it. We've got one of the world's lowest cost iron ore producers in Fortescue. Yeah. And one of the lowest, hopefully one of the lowest cost lithium producers as well. Sitting in our backyard.

Alec: [00:07:18] We are right now the world's largest lithium producer, but we do not have the world's largest lithium deposit. No. Do you know what that is? 

Bryce: [00:07:27] Bolivia. 

Alec: [00:07:28] I think it's Chile. I think Chile's third really failed with them. 

Bryce: [00:07:32] Bolivia, Argentina and Chile.

Alec: [00:07:34] And you know what the good thing that Australia does. So there are two ways to mine lithium. The first is good old Australian mining. Lock it up, dig a hole. Yeah, take it out of the clay or in the ground. And then the second way, which is really the way that the South Americans do it because of where their deposits are, is to pump underground water to the surface and then basically like it. Yeah. Evaporate it. Yeah. Scientists correct me if I'm wrong, but I'm pretty sure our way is a lot more environmentally friendly than the South American way. 

Bryce: [00:08:07] Digging it.

Alec: [00:08:08] Up, digging it rather than evaporation, getting to the underground water to the surface and Evaporating. 

Bryce: [00:08:13] Fascinating process that one but yeah the core lithium at digging. A look at the cost to produce around because it's obviously a key part of an investment thesis when it comes to looking at miners and thinking about which which ones to go with. Then if they do say they're going to be one of the cheapest, they believe that they can produce 173,000 tonnes of high quality lithium concentrate. Now here's some jargon at a C1 OpEx. Of $364 US dollars a tonne. 

Alec: [00:08:51] Yes. And what's the price of SPODUMENE concentrate? 

Bryce: [00:08:54] So in The current price of Lithium, SPODUMENE is sitting at just over 6,000 USD per tonne. Yeah. So let's just put that into context. If we've got the numbers right here, they're producing C1 OpEx of $364 a tonne and then selling it for over $6,000 a tonne. 

Alec: [00:09:17] Yeah. And I don't know how this episode will be edited out, but for context for people, Bryce and I have spent about 10 minutes googling and reading cause stuff because we feel like we missed a zero somewhere in those numbers. But no, that's the company says they can get 173,000 tonnes per annum out of the ground at that three $64 a ton mark. And then that's their cost. And then the price is around 6000, 7000. And Bryce, just a quick bit of jargon. We've said say one a few times, we should explain what it means. It's basically like the direct cost of production. So your cost to get the mineral out of the ground, to process it if you need to, and then freight to get it to your customer. 

Bryce: [00:10:02] Yeah. I mean if you if you're doing some Googling into the prices of lithium spodumene, which is what they're digging out of the ground, the price rise this year has been astronomical. 

Alec: [00:10:11] It has been. 

Bryce: [00:10:12] Yeah. There are articles written in July saying that the prices for lithium spodumene are projected to. Average about two, $2,000 a ton and aides to about 2000. But they're kicking at the moment. 

Alec: [00:10:25] Well, I mean, core lithium have their own their own projections. But again, confusingly, the price is different. So the spot sorry, the spot price in September 22 is just under 7000. Which is right. Core forecast in F 23, that price will come down to just over $3,000 a ton. And I think there will be a pretty smooth trend line down by F 27. They think it will be just a bit over $1,000 a ton. And they think the long term price will be around $1,000 a ton. So keep in mind that still like a 65% gross margin, you're selling something for $1,000 and you're spending $350 to produce it. 

Bryce: [00:11:08] It's an interesting dynamic because the demand for lithium is not going to be, But there's going to obviously be more supply on line. 

Alec: [00:11:16] Well, two things, and this is probably the key thing when I think about lithium generally. There's obviously always going to be demand. But the first thing is the supply question. When will South America get their act together and produce? And they are. But then the second thing is, right now, lithium ion batteries are our best form of storing energy. And so they go in everything. But you have to think that if lithium becomes a really if if lithium becomes the bottleneck in the system, it becomes the constraint either because of cost or because of availability of the resource. There will be a huge economic incentive to find another way to efficiently store energy or store electricity without lithium. Like two other types of batteries, is what I'm saying. 

Bryce: [00:12:03] Yeah, but isn't isn't it? I mean, it's not like that. There's been an abundant supply of lithium to date. 

Alec: [00:12:10] But supply and demand have been in concert. Look at your Allen holograph. 

Bryce: [00:12:14] You're not there. Not now, though. 

Alec: [00:12:16] No, they're not now. That's why there's an economic incentive now. But that wasn't for you. You know, when. Apple was putting a lithium ion battery in our phones and in our computers, they could get the lithium they need. 

Bryce: [00:12:27] I was like 5 to 8 years too Early on the lithium. 

Alec: [00:12:29] There was literally. There's a mine I think in WA that is now one of the biggest lithium mines in the world. But like when it was started operating as a mine, it was a gold mine. And I think it's Ciena. Oh, really? I think. And they just didn't they didn't care about the lithium, but now they care about the lithium. That's capitalism, baby. Yeah. 

Bryce: [00:12:51] So let's have a look at the Numbers for lithium market cap. Two and a half billion, it's up 112% year to date. Hot stuff and it is up 1,114% over the past five years. 

Alec: [00:13:05] It's ten bagged before it's brought in a dollar of revenue. 

Bryce: [00:13:09] It's always the case with these.

Alec: [00:13:12] always The start of mining companies.

Bryce: [00:13:13] Well and then you look at what. Yeah. And then say what happens from here. But great if you're a lithium investor. Five years ago revenue, Ren. 

Alec: [00:13:22] An even better if you're a microsoft investor. 30 years ago. 

Bryce: [00:13:26] Revenue, Ren.Pre-revenue revenue. Yeah they've only they will just start generating they did make a loss this last year of seven and a half million dollars. 

Alec: [00:13:34] Would have been amazing if they made a profit China. 

Bryce: [00:13:36] Given that they're trying to scale up their operations. 

Alec: [00:13:38] Given that they have no. Revenue. 

Bryce: [00:13:39] Well, that's of course. Yeah. 

Alec: [00:13:42] Yeah. They spent seven and a half million dollars last financial year building out the mine as expected. 

Bryce: [00:13:49] So we're going to get Henry's thoughts on Core Lithium. But before we turn to that, it is worth just going through some of the numbers that we haven't touched on in terms of our industry and macro. So Ren, you spoke about the two ways that you can dig up lithium from the ground. Australia has the literal dig it up. South America has to force it up with water from the From the border. 

Alec: [00:14:12] So I'm just I'm just writing ahead. We've got the world's largest lithium supplies. You've got Bolivia, number one, Argentina, number two, Chile number three. But if you just Google World's largest lithium reserves, the first response is Chile number. But then in your defence, if you go to the second or the second one, it's Bolivia, Argentina, Chile. That's probably the one you used. Third Chile largest. 

Bryce: [00:14:40] How many how many tonnes. I'm pretty sure I got this from the like the lithium body. Because I had this same thing when I was having for doing some research. 

Alec: [00:14:48] Another one. So another one says Chile, another one. I think. 

Bryce: [00:14:52] We can agree that it is South America 

Alec: [00:14:56] It's called the lithium triangle. Yeah. Argentina, Bolivia and Chile together account for more than 63% of the world's lithium reserves. 

Bryce: [00:15:03] Yeah, so let's put that into context. Australia ranks fifth depending on which list you look at with about 6 million tonnes metric tons of lithium reserves. 

Alec: [00:15:13] When we're talking about individual companies, who cares if they're how much? Australia has. Like if you want to invest in coal, lithium or science or mineral reserves, you only really care about how much they have and what it cost to produce. Yeah. And then you're just like, yeah, yeah. You know, you could have an America. Well, that was another one. Ciena. That's big in North America, right? Yeah. Canada. 

Alec: [00:15:38] North America doesn't top any of these lists, no lithium reserves. But if they have enough and they can produce it cheaper and they can get it out. 

Bryce: [00:15:47] Top three lithium producing countries. Australia sits at the top 55,000 metric tons a year, then Chile, then China getting in there. China produces 14,000 metric tonnes a year. 

Alec: [00:15:58] So add those three together, 55, 26, 14, that's 95,000 metric tonnes. In 2021, the world produced 100,000 metric tonnes. Yep. So those three are the big three for now. Yeah. Obviously Argentina and Bolivia will come to the party at some point, but right now they're the three. So in 2021, the world produced 100,000 metric tons of lithium. What do you think the world's demand for lithium is this year? 

Bryce: [00:16:29] Four times that. 

Alec: [00:16:30] It's almost like you read the script. It's actually five times 500,000 metric tons. Yeah. This year, that's what expected demand is going to come out up by 2030. Experts think it will be 2 million metric tons and we produced 100,000 metric tonnes in 2021.

Bryce: [00:16:48] So we need a lot of supply to come into the market ASAP. Otherwise the price of lithium feels like it's absolutely going to go to the moon. Or as you said, it becomes so expensive that it becomes a little prohibitive. 

Alec: [00:17:03] It's a constraint and then we innovate around that constraint. It is important to note, though, that when we're talking about individual companies, some of like, you know, where the world's reserves don't matter so much, like if you're just looking at coal or you're looking at Ciena or any of these lithium mineral resources, any of them, it's how much do they have? What can they get it out of the ground for? And then what's the lithium price? Some of these bigger conversations around like where the rest of the world gets lithium from not as relevant. Yeah, obviously supply and demand affects price, though. So lithium has now become a real security concern. And I think that security story is no clearer than in Canada. So in November, Canada forced China and Chinese companies to sell their holdings in three Canadian mining companies. I think at least one of no I think all three of them actually were lithium miners. Canada didn't want China touching the lithium miners like that's that's the level that we've got to now. 

Bryce: [00:18:06] Yeah, well, it's a major input into some pretty important technologies. And so you can understand why. Well, particularly given that China is one of the biggest producers as well, it's becoming a bit of a political. 

Alec: [00:18:21] And one of the

Bryce: [00:18:22] Point and uses. 

Alec: [00:18:23] Yeah, yeah yeah. I think that that's the main thing for Canada. They don't want their mining companies to have to sell to China. 

Bryce: [00:18:30] You're also saying some pretty interesting joint ventures and collaborations between technology companies and lithium suppliers as well as we've seen Tesla. I'm not sure if it's fallen through with him or not, but they did a deal with core lithium and likely to say more so pretty important resource. 

Alec: [00:18:46] That is a good call out because I think earlier in the piece I said they had a deal with Tesla. I think it did fall for you. Go do your own research. 

Bryce: [00:18:54] Marianne, before we take a quick break, a reminder, you can access core lithium via the Australian Securities Exchange. The ticker is CXO and you can access the Australian market plus US market and New Zealand markets on this Sharesies this platform with no investment Minimum. Sharesies helping to create financial empowerment for everyone. Their vision is to give someone with $5 the same investment opportunities as someone with 5 million. So invest with no minimum withSharesies all investing involves risk. This is not a recommendation and you should perform your own research promotes and says apply. Now we're going to take a very quick break and we'll be right back to discuss coal lithium with none other than Henry Jennings, analyst and investment manager at Marcus today. 

Bryce: [00:19:46] So, Ren, we're super excited to welcome Henry Jennings, analyst and investment manager from Marcus today to talk us through the bull case, the bear case, the key metrics and what core lithium looks like for the next ten years or so markets. So, Henry, welcome back. 

Henry: [00:20:02] It's good to Be here again. 

Bryce: [00:20:04] Yes, absolutely. I can't wait to get stuck in. So the first question we've been asking all our experts, Henry, is around the metrics. Ren and I have had a bit of a chit chat about the numbers behind Call Lithium, but when it comes to analysing these sorts of mining stocks, what are the key metrics that you're looking at? 

Henry: [00:20:21] Well, I guess one of the key metrics is how big the deposit is in terms of and in terms of mine life as well going forward. But the other one, which is probably the most important at the moment, is the fact that it is Johnny on the spot. It is the guys that are next in production. In fact, they've already started shipping DSO this well. They've did their first shipment recently, which raised about 20 million bucks. So that is the important thing. They are the guys, the next producers now. The finished project near Darwin is not the biggest project. It's not as big as Pilbara, it's not as big as some of the South American ones obviously, but it is the next one there. And of course that means that they can take advantage of the high prices that we're seeing. And lithium now. You know, we have seen the lithium price plateau a little bit and come off a smidge and we've seen some sort of decrease in Chinese EV sales. But let's face it, if you looked at home is not exactly going to buy a Tesla. Right. So that's understandable. But so for lithium, it is really about the mine life, which we know is relatively short, but it also is about the exploration and the drilling, which is going to extend that. And there's plenty of opportunities around that as well. There's a company next door called Lithium Plus LPM is the stock code, which has a lot of ground around them and they've had some quite interesting results as well. So it really is, I guess for me about taking advantage of those high spot prices and unfortunately it doesn't happen instantly. You know, they've been building this project for a long time and there is some issues that we will talk about in a minute potentially with that in terms of ramping it up to get to that full production, because you don't just turn a mine on and instantly it's at full production. That's not how it works. So it takes a little while to work that out. So it is about taking advantage of the current prices. And at the moment the market is valuing course lithium at sort of $2,000 a tonne for for their product as opposed to where it is, six, seven, $8,000 a tonne. So it's it's very undervalued if you were to put in spot prices, which is sometimes a dumb way of doing it. But if you did that, you know, you come up with a valuation around five bucks. 

Bryce: [00:22:29] Just on that with entry into companies like this. You've mentioned that you know, the it's great because it's live now and lithium prices are high. But, you know, as part of the summer series, we did look at another of the lithium companies, Ciena Mining, which has their back in Canada, and they're about to come online. And then there's probably a handful of others that say the next two years is the entry points to these companies. What like just before they come online, or how do you think about getting in on this? 

Henry: [00:23:00] Well, I guess it depends on how much risk you want to take. I mean, they go through a cycle. They obviously go through the drilling cycle and they have to then get the money to do the project and they have to build the project and they have to ramp up and then they just become a producer. So depending on where you are, on that risk curve is where you want to invest. Buying something that I bought called Lithium five, six years ago when it was a glint in its mother's eye and it was $0.05, you know, they even did a capital raise, a share purchase plan at $0.31. And I topped up then. And that wasn't that long ago. And as the timeline of mining projects, they get closer and closer to production. You do get that value uplift because it's de-risked the project. Now the question I guess is once you start production and you get up to sort of the boilerplate capacity of production, where do you go from there? Because then it's kind of a diminishing asset, if you like. They're getting cash in the door, but it's a diminishing asset. So they've got to keep drilling to do that. So it tends to be maybe the share prices plateaued a little bit after the production kicks in. And then there's always issues of maintenance, production problems, weather, all this sort of thing that then becomes far more kind of prosaic in terms of the actual thing, rather than that that big hope and the big optimism that we have you know, project starting they're going to take advantage of the big prices depends on where you want to be in that risk and obviously if you're just investing at the five cent mark, there's plenty of risk because they've got to get defences and bankable feasibility studies, offtake agreements, all that sort of stuff. So that is risk And You have to start, I mean this. Five or six years ago, I bought this thing five or $0.06. So it can be a long journey, can be a very lucrative one. But for years it did nothing. I got I got bored senseless. I'm surprised, to be honest, I didn't lose interest. 

Bryce: [00:24:56] You always See believed in. Like, it's not like it was the only lithium option. 

Henry: [00:25:00] No, it wasn't. I guess part of the thing that made me keep it was that I had a meeting all those years ago when I first bought it with Stephen Biggins, who was the CEO and the driving force behind the project. So meeting the management and seeing that these guys could do what they say they were going to do. Kind of gives you confidence and optimism to hold it. And, you know, it does get stuck away in the bottom drawer and you think, okay, well, one day it'll happen and sometimes it doesn't and sometimes it does, and in this case it does.

Alec: [00:25:34] Now, Henry, talking about the metrics, one that Brice and I got a little not stuck on but surprised by was the C1 cost, the the direct cost the company forecast that they can get 173,000 tonnes of lithium out of the ground per year at $364 a tonne. And the spot price is, what, over seven turns, what, six or $7,000 at the moment? Is this company just going to print money for a fee?

Henry: [00:26:04] Well. If you look at the example, for instance, of Pilbara, you know, that is a money printing machine. 

Alec: [00:26:12] Now what does this OpEx cost come in? 

Henry: [00:26:16] I can't remember if it's off my head, but it's pretty low compared to the prices. And you've got to remember, all these guys will be doing bankable feasibility studies and all their studies will be based on really, really conservative numbers. This big leap in lithium is just a massive sort of cream on top for these guys. And you can see even with the coal companies, you know, the Whitehaven's and the new hopes that this is these extraordinary times that we're living through in some of these energy materials. So as a result, you know, the costs look quite cheap, but they probably weren't when they did, you know, all the studies and everything. And they if they can achieve that, they're going to make an absolute monster and they're going to be churning out cash once they get to capacity, churning out cash and taking advantage of those high prices. But some. And they will become a mini Pilbara. And they won't really know what's at the Pilbara now. Got to the stage where they don't really know what to do with all the money. But it's the same with, you know, Whitehaven and all these guys. What do you do with all this cash? The market hates you buying, you know, making acquisitions. And we've seen this time and time again with resource companies. When they make lots of cash, they don't know what to do with it, so they go and spend on something dumb. BHP and Rio Classic used to buy things at the top of the charts. They had so much money and the danger is that they do that. Now there's a sort of precedent that dividends start to flow. Pilbara we've seen them now talk about their dividend policy for 2023 and they could have a $0.34 dividend, in which case that's a pretty flash yield. 

Alec: [00:27:54] And I know investors are impatient and they hate to see money sitting in a bank account. It's either like do something good with the buyback shares or give it to me and I'll do something with it. But surely from just forget the investors, surely from a business point of view, it makes sense to put it in a bank, wait for the market to turn and then buy things at the bottom of the cycle. 

Henry: [00:28:14] It makes perfect sense. 

Alec: [00:28:16] But no one does it.

Henry: [00:28:17] Well, some people do. But it's you know, it does make perfect sense, you know, but investors and share and you know, shareholder activists are pushing and they push BHP to split the demerge the now the UK listing and all that and get rid of the oil and gas assets which they've done. There's a lot of pressure on these companies to give rewards to shareholders. You know, it might be a small token one. And also remember that there are an awful lot of funds out there that can't invest in a company that doesn't pay a dividend, which is why News Corp pay whatever it is, a cent or something, because it's a token and everyone goes, well, why did you bother? And you think, Well, there's a reason why they bother is because that way a fund who's only allowed to invest in companies that pay a dividend can invest in News Corp and at some stage call lithium will be throwing out enough cash to start paying that back to shareholders. Having taken care of the fact that they've got to drill and explore and enlarge and keep, you know, developing the resource that they've got because it's kind of it's a weird it's not a big yeah, it's not a big hole in the ground that they're going to produce. There's a lot that sort of spots, it's concentrated in spots the same as lithium. Plus next door they've got these sort of five or six different spots and together they're a good resource, but individually they're probably not. So it's only when they're close combined and close to infrastructure as well. Of course it's only 90 k's from Darwin, which makes it that attractive along. 

Alec: [00:29:44] A sealed road as we learnt. 

Henry: [00:29:46] Got a love of seal Brought in To get one in Sydney. It's to get a sealed road in Sydney with potholes. 

Alec: [00:29:54] When they discover lithium under Darwin, that's What. 

Henry: [00:29:57] It's there. I mean, lithium is not the you know, it's not that uncommon. I think it's one of the most common materials in the Earth's crust. It's just finding it in the right place and being sufficient concentrations that it's economic, you know, there's lithium in seawater. Um, but not very tiny weeny yeah. Tiny weeny amounts.

Bryce: [00:30:18] So, Henry, you pitched core Lithium as your high conviction stock at Equity Mates Inaugural Film Fest 2022. Yeah, absolutely. Went on a tear after that.

Henry: [00:30:26] It did. 

Alec: [00:30:28] The FinFest, but is that what they said? 

Bryce: [00:30:35] But it went on a tear. And then I'm going to say about two weeks ago from time of recording, it's early December, you put out a sell. 

Henry: [00:30:44] I wasn't an outright sell. It was more a take profit, take the profit. Mainstream. Because it had run, you know, it was a dollar $15.16 that that weekend the film festival on Friday and it got to your dollar 90. Yeah. Within a month. You know which was, which was great. But you know it's. 

Bryce: [00:31:02] You say it like it's a bad thing. 

Henry: [00:31:04] Well I it is a bad thing in some respects. It is a bad thing in some respects because you don't want the fireworks that flash into the sky, big bursts of flames. And then and, you know, it looks really pretty and then crashes the earth and takes out someone's house, you know? You want the noise. Yeah. Gradual grind the Burnie up she goes yeah. And it's no it's the quiet achiever and but you know you turn around in six months time and it's a dollar 80. You think oh that's nice. Rather than what was up she goes then doing like down to earth again and that's, you know that that does put people off, especially if if they, if they came to the story somewhat later than film fest and they're sort of long at one 6170. And then it crashes 2 to 135 days going well this is. This is a suboptimal experience whereas you know, those that got in early and was shrewd enough to say I want this, nothing goes off in a straight line forever. So. [00:32:01][57.2]

Bryce: [00:32:02] So, okay, so it was a trim or take profits. Is there still a bull case from here for you? Is it what's the case that. [00:32:08][5.9]

Henry: [00:32:08] Well, there's definitely a bull case. Obviously, they're coming into production. Yeah. The reason that I said trim, apart from the share price, was that all along the story had been that we going to get production in 2022. Yeah. Last quarter of 2022 and they have had this DSO production which they didn't bargained for. This was direct shipping oil which they didn't think was going to happen and that has happened. But the big production or the start of the big production is not happening to the first quarter of 2023. So that is a bit of a negative. That's why it was kind of a trim, take some profits because the market was all getting excited. And I think that also there was an excitement that part from FinFest and you guys obviously. But but there was also an excitement there was a lot of speculation at the time about takeovers, you know, and it makes sense. At some stage the majors are going to look at this space and if they haven't gone double, you know Missed it.Then they missed Pilbara. Pilbara is now $15 billion company whereas core lithium is a fraction of that size and is not going to be another Pilbara. But equally it could be the base of a mini Pilbara and it could be something that someone could buy. So I think there was a bit of media speculation in there and I think there still is. And that's why, you know, I think some of these if you're Rio say you don't buy the company when it's $0.05 because it's got all that risk. But once it gets into production, someone else is done. All the hard work, it's not like they're short of cash, someone else is done, all the hard work, and then they can start to reap. They know how to they know how to sweat producing assets. Yeah, they're not always great explorers. They'll let someone else do that and then they'll take it on once it starts to produce. So that I think there is that's one of the bull cases. Obviously, high lithium prices is a big bull case for it. And You know, it's In the right place at the right time. There are some negatives if you want me to talk about the natives. 

Alec: [00:34:20] Yeah. Yeah. Well, let's get to that bear case. What are the negatives?

Henry: [00:34:24] Well, the negatives, obviously, is the lithium price, which has gone up in a straight line, pretty much the same as for lithium price. The other negative we have seen is there has been quite a high turnover of senior management. Now that can be okay because the guys that drill and explore and then create the project not necessarily that interested in running it from there. They get turned on by going and finding a new deposit, developing it, do all the studies that's their thing. It's like, you know, it's like any business. There's certain people like certain parts of it and other people are happy to take over the more boring, let's just dig the dirt out, send it to China, that side of things, which is a bit less exciting. So but there has been quite a high turnover in senior management also has been quite wet up there. So we potentially could see some delays to that production coming through, which would then disappoint the market as well. So there are some negatives. The ramp up is always, you know, things go wrong, things break. It's you know, it's when you're starting a new project, starting a new mine, producing, then you've got to you've got to produce. And if something goes wrong or a bit breaks or whatever, or it's the wrong part that gets sent from wherever, then, you know, things can take time. So there is a risk of delays to that production. And senior management has been a bit of a bright you know, it's a bit of a roundabout at the moment. 

Alec: [00:35:57] Well, one other so you mentioned the lithium price there and, you know, pricing I was speaking earlier in this episode about Argentina, Bolivia and Chile, the lithium triangle or whatever they call it. You know, Australia produces, what, more than double Chile at the moment, but the biggest deposit in the world is over there. What's going on over there? Is there chance that a massive supply from South America comes into the market or like. 

Henry: [00:36:26] No. I think is the answer. Right. Well, you know, there's. There's a number of that in part from the fact now Chile's just got a new president, new government. And I you know, we're seeing environmental concerns, especially in Chile, from farmers. The brine business is pretty water intensive. It takes a lot of water can you know, you end up with a big pile of waste. Farmers aren't particularly chuffed. I mean, everyone wants to electrify the planet. Everyone wants electric vehicles and to make it a green place. But the ironic thing and the tough thing is that in order to do so, we've got to dig this stuff up or evaporate it or do something against, you know, materials mining. We need to do that. And but nobody wants it in their backyard in Chile. It's probably easier in Argentina because where it is is not farmland. It's high up. There's not so much rainfall. I was talking to a guy from Argosy, which is which is in sort of Brazil as well. They, you know, they don't have the same problems that they have elsewhere. And the whole brine game takes a long time. Yeah. You know, you're looking at 18 months unless you speed it up with some technology and the technology is not really sufficiently developed on sufficient scale To Just flip the switch and go, yep, you know, there's the lithium. Yeah, that's the problem. That's why prices are going to stay relatively high because the supply just really isn't there. Yeah. And it's not just projects are hard to come by big ones. Geology is you know people don't want it in their backyard. Fun in the projects is hard and also finding the people you know it's it's I saw a guy present at a conference and he was saying that basically geologists are getting old and dying and there's no young kids that want to go into the mining industry really well because they're all want to save the planet. My industry's dirty. 

Alec: [00:38:27] Certain irony there.

Henry: [00:38:28] Yeah, they want to save the planet, but they don't want to actually go and work in sweaty, hot, dusty places in the middle of nowhere where they're surrounded by, you know, nasty creatures and no, you know, all this sort of stuff and degradation, deprivation, rather, you're not going to be able to go out with your mates. You know, you're going to be on an alcohol free place in the middle of nowhere. Fine, fine. I don't want to do it. It's dying. The guy actually did a straw poll of the hundred people in the room, and they were all old people like me. And they said, who knows? A young person that's starting university that's going into something to do with mining, geology or engineering or something like that. One person out of 100 put their hand up well. 

Bryce: [00:39:09] They go. 

Alec: [00:39:10] Well, if any young people are listening, there's probably going to be plenty of jobs in Lithium mining. 

Henry: [00:39:16] There's always plenty of jobs in mining. Full stop. Yeah, but it's not very conducive for young people's social lives. 

Bryce: [00:39:23] Well, Henry. To too close. Speaking of the future of core lithium, if it is successful in its ambitions, what do you think it looks like in ten years? 

Alec: [00:39:33] And maybe we actually extend it to 12 years. 

Henry: [00:39:42] You know, this this is a great start for them. They've got a lot of cash that's going to come their way. The question will be what they do with that cash over the next ten, 12 years. Obviously, there's going to be some drilling and exploration, but there will be some acquisitions because it's kind of, you know, you're building a foundation of a mining house or mining company on one project and then you kind of know bit Pac-Man like you kind of extend from there all around, whether it's neighbours, whether it's in a different country and you diversify as well. So, you know, it'll probably be a very different looking business in a decade. There was obviously still B lithium, if lithium is the thing and I suspect it will be, but it won't just be the finished project of Darwin, it will be something in Darwin which is the bedrock and the cash cow that's producing the money that then allows them to go and pay dividends and then to go and buy other projects elsewhere in the world or in Australia. 

Alec: [00:40:44] Is there a chance that they decide we do exploring around Finniss. There's nothing else that's sort of good enough to mine. Rather than trying to build a long term sustainable business, we're going to sweat this asset, be as cost efficient as possible, give you guys as much money as possible. But in 12 years, we will no longer be a going concern. Like, does that happen or not? 

Henry: [00:41:08] It's it's you know, these are these are lifestyle businesses as well for the directors. Yeah. I don't want I don't want to, you know, I don't want the zero Situation where it's just a diminishing asset. The whole idea is to try and get it up there. Yeah. And keep it up there. Yeah. Through acquisitions, through new exploration. Replace what you've dug up that's there. That method. Yeah. That's what they do. It's very, it's very few mining houses or mining companies that just basically exhaust the asset sale. 

Alec: [00:41:38] Yeah. Love to say that though. It's like in 12 years our share price will be zero due discounted cash flows. We're going to spin off cash. But you know, well, this is a one project deal. 

Henry: [00:41:48] I can't I can't think of too many that do that price. 

Alec: [00:41:52] And I'm going to get into geology and we'll do it for. 

Henry: [00:41:57] It would be an interesting business model. I mean, equally it's an interesting business model to plough the money back into the company, to try and keep finding more to replace the stuff you've done. Because the risk is that you can't and you do end up wasting the money and then becoming the company that goes to zero.

Alec: [00:42:15] Eventually every company goes to zero. 

Henry: [00:42:17] We all go to zero. Everything goes to Zero. It's the nature of the beat. 

Bryce: [00:42:23] Well, Henry, we will leave it there. A massive thank you. Thank you to shares these for supporting the summer series. For more information, head to sharesies.com.au today you to learn more you can download the Sharesies app. But Henry, you said before that you reckon you can only speak to it for 5 minutes. You I feel like you could speak to this for another hour or so. Thank you so much for your time. It's an absolute pleasure. Well called at our fan fest. If you didn't get a chance to see Henry or Marcus at FinFest, their presentations are available on our YouTube channel as well. You can listen to Henry's Theses on Core Lithium, as well as the presentation he did with Marcus. So thank you so much. Ren, we'll leave it there and pick it up next week. 

Alec: [00:43:05] It sounds good.