Core Lithium Ltd

ASX:CXO

Earnings Call Analysis

Earnings Call Transcript 2024-Q1

[Operator]

Hello and welcome to the Core Lithium September Quarterly Report Conference Call. [Operator Instructions]It is now my pleasure to introduce CEO, Gareth Manderson.

[Gareth Manderson, executive]

Thank you very much for taking the time this morning for Core's quarterly and the first quarterly against guidance and the first quarterly, I'd argue, in operations or a ramp-up of operations at the Finniss site, Grants, and the concentrator operations. With me in the room, I have Doug Warden, CFO, who will also be available to take questions at the end. I'll run through the slide presentation that we provided earlier this morning and then open for questions afterwards.So this would be the first portal where we've been able to achieve integrated operations through the commissioning of the concentrator establishment of mining operations. So essentially pit through to port. And it's the first period where we've had steady ore delivery from the plant -- sorry, steady ore delivery to the plant coming out of the wet season of the last year.We are focused on 3 things building the business around the Finniss operations, so the Grants mine, developing the BP33 project, and exploration and growth. Highlights this quarter include an 8% increase on total material moved, spodumene concentrate production of a little over 20,000, so 20,692 tons, and recoveries improving up to 50% for the average in the quarter.And I'll go through a little bit of detail around recoveries, as I know there'll be a few questions around that. We've also completed the prepayment tons. So you might recall that we embarked upon some prepayments to manage cash flow and secure or manage risk during start-up of our operations. So they are now complete and fulfilled.We've actually started fulfilling volume into our offtake, our long-term offtake agreements with Ganfeng, and a solid average realized price at delivered grades, so not reference back to SC6, but at delivered grades [ $2,550 ] per ton. As I said, BP33 is progressing well. We've got the feasibility study underway and the early works is in flight, and we've got some photos and a little bit more information at the back end of the presentation this morning.And most pleasingly subsequent to the quarter, we've had the BP33 measured and indicated resource upgrade by 89%. So that improves the confidence and actually supports the mine plan and feasibility study work that's going into BP33 at the moment.Cash balance at the end of quarter was $202 million and that includes the placement and SPP raise earlier this year, and that was targeted at providing balance sheet flexibility and preserving our options, preserving our strategy to continue to develop the BP33 project and the exploration program while having the Grants mining operations starting up.We did have 1 reportable injury during the quarter, so a hand injury that required some medical treatment, not lost time and we've embarked upon critical risk management. So that's about understanding the risks around fatality and ensuring that we have those controls in place and engaging people in the identification and application of those controls during the work that they're undertaking at the site.During the quarter, we had a strong focus on improving our mining and processing operations. So in the mine, you can see an 8% increase in TMM but also very pleasingly through blasting improvement and dig unit availability improvement, we've been able to see record ore extraction at the end of September. This meant during the quarter we've seen consistent ore feed that has enabled us to be a little bit more strategic in the way that we present ore to the concentrator.We've also installed a second radar to improve the monitoring of pit wall stability at Grants and a significant amount of work has been done in wet season preparation to haul road upgrades, water storage facility, and new -- water storage facilities and improvements and new dewatering equipment.At the end of the quarter, we had 165,000 tons of ore on the ROM pad and that's rising to well over 170,000, actually closer to 180,000 as we speak current month. That is a focus for us as we enter into the wet season in the Northern Territory at the back end of this calendar year.To enable some of the improvements that we've been driving in the concentrator, we've had some great negotiations with our offtake partners. One has, -- as we've actually secured and resolved an agreement to go down to a grade of 4.5% and the other is very close to being finalized. And I'll go through a little bit more detail around the plant recoveries and how that's connected to that program later in the presentation.At this point, I'll pass it to Doug to run through the financials.

[Douglas Warden, executive]

Thanks, Gareth, and good morning, everyone. I just want to take a few minutes to add a bit more color to the cost and cash flow performance for the quarter for you. So C1 unit costs for the September quarter of $904 a ton were broadly in line with the previous quarter. It's important to note that that C1 cost is net of $985 a ton of mining costs which were deferred to inventory in the quarter.So this basically relates to a build of all stocks on the ROM pad as we prepare for the wet season, and we expect to continue to do that over the next couple of months heading into the end of the calendar year.So cash costs before this inventory adjustment were $1,889 a ton as is shown in that table. You'll note from the unit costs for the quarter that they were broadly in line with previous quarter despite production being 40% higher. This is not because our cash costs were significantly higher, but it's to do with the strip ratio for the September quarter being broadly in line with the life of mine average.And therefore the majority of those waste costs were charged to the P&L and therefore unit costs. Whereas in the June quarter, the strip ratio was considerably higher than the life of mine average, as we were doing more of a cutback, and therefore a much greater percentage of the waste costs were deferred to the balance sheet to be then amortized over the life of Grants.The operating cash flow, or cash outflow I should say of $26 million was impacted by the timing of shipments with approximately 8,500 tons of concentrate at port as at 30 September, which was included in the early October shipment. This together with a repayment of nearly $28 million to Yahua in respect of a QP adjustment.This related to the prepaid arrangement and was a result of the significant fall in the spodumene price between the date of the prepayment and the end of the QP. Also excluded from the cash flows related to this prepayment was the 13,000 ton shipment in early July. That cash was received in quarter 4 of FY '23.And finally CapEx for the quarter of just under $20 million included $8.5 million for the BP33 box cut, with the remainder relating to our Finniss operations, which included $3.3 million for water storage facilities, and $2.4 million for site establishment costs, and $2.5 million in deferred stripping.That's all from me. I'll hand back to Gareth to conclude.

[Gareth Manderson, executive]

Thank you very much, Doug. I'd just point listeners on the call to slide 8 in our pack, and you can see the trend line there around both production and recoveries. I just wanted to call out that there's 2 focus areas for that. One is to look at our commercial agreements, and that's probably the minor one.The main one is to actually take a look at the operations and start to tune and improve that. We've seen a number of things that have come through in these trials, and I would just say that there's 2 things that are impacting the variation that you see in the quarter and the recovery at 50%. One is a series of trials have been run. The second is that we've made sure that each of our shipments have met our customer specifications.We've subsequently been able to settle on an approach with our customers where we were able to reduce grade and increase lithia units, so that's the benefit to the customer is increased lithia units in the overall and reduced grade enables some of the improvement work that we're driving in the concentrator at the moment.So, from a recovery perspective in the facility, we've built up the ROM and are now looking at feed blending and management options. We've embarked upon a series of crushing trials and have moved to a [ 10 mill ] feed size from a [ 6 mill ]feed size into the plant to reduce fines.We've also looked at set points in how we're operating the plant, and we've actually embarked on a couple of debottlenecking-type projects to increase rate. So you can see our focus there on the preparation and management of feed, optimization of the plant, and debottlenecking to improve rate.Essentially, what that has meant is that we've seen recoveries with a -- on an average basis, quarter to quarter, a mild uplift. But what I would say towards the end of the quarter and then into October, we've seen quite a nice improvement as we start to settle in on what our operating parameters may be moving forward to match the commercial agreements and the improvement in the plant. And in the first couple of weeks of October, we're averaging around 55%, and rest assured, our improvement program will continue into the coming months.So if I have to summarize all of that, we're saying for the full year, we're not changing our guidance. We anticipate to be on track to reach production unit costs and CapEx guidance for the financial year. We'll continue to embed this approach of integrated operations from pit through to the port.And we're doing a lot of work to get ready for the wet season as well. So we've seen the ROM stocks build and will continue to build up through till December. And then as the wet season starts to hit, we'll change the mining sequence and start to do more development work in the upper benches that will be less impacted by the wet weather we anticipate. And we're continuing on with the BP33 work and the exploration program.So I'll just step through the slides. If you take a look at slides 10 and 11, you can see the progress that's being made with BP33. So the box cut current excavated is 340,000 -- 354,000 tons with a total of 393,000 tons. So, great progress cutting the box cut. And you can see the wider end or the lower end of the box cut there. So there's another bench or so to go.On the slides on -- sorry, on the photos on slide eleven, you can see the first footing pores for the tunnel liners in the upper part of the decline. So this is the decline that gets us through to the portal. And then the slides on or the photos on slide 12, you can see photos of the tunnel liners that have been delivered to site ready for assembly. And the right-hand photo shows you the steelwork reinforcement that goes into the footings for the tunnel liner.On Slide 13, very pleasingly subsequent to the quarter in October, we were able to announce that the measured and indicated component of the resource for BP33 has increased to 89%. We've subsequently also seen an increase in grade and a slight increase in volume. But it's really more the grade and the confidence.That is the substance of that particular announcement, which I think provides a great runway for the mine plan and the feasibility study that's due for presentation and contemplation by the Board to FID in quarter 1 calendar year next year.So, in summary, our focus is on safe operations, particularly with the establishment of critical risk management, so what are the fatality risks associated with the work that we do, how do we make sure that the right controls are in place and in people's minds as they're doing in each and every task.We do -- we are working very hard to meet the spodumene production guidance and I'm really pleased and very impressed by the work that the team in the mine and the team in the concentrator have been able to do to improve productivity. And in doing those things, we'll deliver into offtake contracts, so our agreements with Yahua and Ganfeng.Exploration plan is continuing. We're still on track to complete that. You will recall that the predominant focus of exploration is finding and improving our mines, particularly in the first part of the planned period, BP33 and Carlton in particular, you've seen some announcements in that space.The BP33 underground feasibility study is continuing. We'll look at fine-tuning. So based on the information that we're getting from the exploration program, we'll continue to fine-tune and understand what the strategy around the tenement packages that we have across the territory and how we might sequence options in the future.The Community Grants Program, we're into our second round, really pleased, more than a dozen community groups have benefited from that very modest request. So it's a fantastic kind of win-win for Core to be able to be engaged in the community and support some of those local community groups.And we're learning from our first period of operations. So whether it's the mine, whether it's the concentrator, whether it's the BP33 early works, what do we learn this month, how can we improve on that in the coming month, particularly around safety.And of course, the DNA of the business. So the contemporary approach to workforce management to ensure that we have a safe, sustainable and cost-effective production outcomes and we'll continue to build an experience-based and a capable team to deliver for our shareholders.So at that point, I will pause and open for questions, please.

[Operator]

[Operator Instructions] And our first question comes from the line of Jonathan Mannes with Bank of America.

[Jonathan Mannes, analyst]

I just wanted to check on reducing your grade from the sort of 5.5% to 5%, but you don't have any reductions in operating costs. Does that sort of imply that moving forward, we're sort of expecting operating margins to remain slightly under pressure while we're getting through our recovery improvements? And just any color that you can provide on when we might start to see operating costs move in line with the reduction in grade.

[Douglas Warden, executive]

Yes. Thanks for the question. Yes, look, it relates to -- you're talking about the $902 C1 cost versus $904. Yes. So it relates to this issue around the stripping, that I was referencing in my opening remarks. So essentially in the June quarter, the strip ratio in that quarter was much higher than the life of mine average. It was basically double the -- more than double the life of mine average. And so the costs associated with that stripping overwhelmingly were deferred to the balance sheet.So the way you think about it is the June quarter benefited from that because our policy is where the strip ratio is above the life of mine average, we defer cost to the balance sheet. And where it's below or at the level of the life of mine average, we hit the P&L with those stripping costs.So June quarter benefited from stripping costs being deferred, whereas the September quarter was broadly in line with the life of mine average stripping ratio. And therefore, those stripping costs hit the P&L. So that's the main reason that you didn't see a reduction in the unit cost despite the fact that production was 40% higher. Does that answer your question?

[Jonathan Mannes, analyst]

Yes. No. Well understood. The other one I had was just around the -- around your ability to continue to place fine products into the market. And I've heard from some of your peers and sort of industry contacts that, you know, the DSO and the low-grade products are starting to, you know, not be favorable, given the dynamics that we're seeing in lithium ore in conversion markets. I'm just wondering if you have any color that you can provide on your appetite to continue taking that product.

[Gareth Manderson, executive]

Yes, look, I think that's a fair question. There's a few value levers for Core in that space. So one is that it, you know, obviously, provides additional space in our tailings facilities. So extraction of that material reduces the need for dam wall raises and capital spend in that space. And then, probably more importantly, and to your point, it's a product that has some value in the market. It has to date, we are still seeing interest in that product but we are mindful that as prices for spodumene concentrate come down, it may come under pressure. So we're watching that and we -- you know, based on demand and pricing. So if we can't get the right sort of pricing from that and it doesn't make sense from a business perspective, we won't sell that product into the market.

[Jonathan Mannes, analyst]

Understood. I'll get one more in if that's okay. So given that you've renegotiated some of your offtakes to be able to take the 4.5% product, should we expect you to remain around 5% through the rest of the year and into next year? Or do you think you'll continue to drop that product quality down with a view on trying to bolster recovery rates?

[Gareth Manderson, executive]

Yes. Look, the flexibility that we've got there in those contracts, we'll see a sort of, I would say a minimum of 4.5%. So it'll probably give you a little lower than the 5% that we announced in this quarterly. And subject to production runs and our customers, you'll expect it closer to the 4.5%.

[Operator]

And our next question comes from the line of Hugo Nicolaci with Goldman Sachs.

[Hugo Nicolaci, analyst]

Gareth and Doug, thanks for the update this morning, lots to peek through. A couple of questions from me, please, and maybe just quickly a clarification, first off, just your unit cost, you report that's on an actual grade sales volume basis, right?

[Douglas Warden, executive]

It's based on production. Production of concentrates. It's not -- equivalent, if that's what you're asking.

[Hugo Nicolaci, analyst]

Yes. So it's production of actual grade. And that's -- yes, that's the whole way through, even with royalties?

[Douglas Warden, executive]

Yes.

[Hugo Nicolaci, analyst]

Yes. Great. And then, I guess, just jumping across to the mining piece, you know, highlighting the increased material movements in the quarter, I was just hoping you could maybe talk through a little bit more color just around the amount of ore and the grade coming out of the mine at the moment. And then how you expect that to kind of shape up over the rest of the FY '24 year. Just given that you've, off the top of my head, guided to $45 million to $50 million in deferred stripping costs this year, but spent only $2.5 million in deferred stripping in the quarter.

[Douglas Warden, executive]

Yes. No, we actually -- this stripping is causing a little bit of confusion, and I understand why. So we -- the $2 million that we reference in the capital section of the report, that's the amount that was deferred to the balance sheet. So there was actually a much greater cost that was absorbed into the P&L and therefore into the unit costs. So the total waste cost for the quarter, to give you a feel for it, was net $27 million.But only 2 of that was referenced in the CapEx went to the balance sheet and the rest hit the P&L. So that was the point I was making before. So we moved, just to put you in the picture, almost 2 million BCM of waste, 1.94 million to be precise in the quarter. So, yes, does that answer your question? Happy to take it offline -- go ahead.

[Hugo Nicolaci, analyst]

Yes, no, so I might follow up on that one, but that's a helpful start. And then I guess, just follow up from the previous question around the lower grade that your customers are happy with that 4.5% I mean just firstly, is that 4.5% for the duration of your offtake agreements or maybe just for the next, you know, 9 to 12 months? And, you know, in terms of pricing on that lower grade product, are you still expecting a linear grade adjustment to a 6% price, or are you starting to see a discount emerge there with lithium price declines?

[Gareth Manderson, executive]

There are some minor discounts, but we're not overly material against the realized price. One of the agreements is locked in. We're actually in the process of finalizing, but it's very close for the second one to accept those. And the benefit for the customer is a higher lithia content, so they get basically higher volume. And for us, it actually provides a bit of flexibility in the operation of the plant so we can improve recoveries and deliver those higher lithia units.

[Hugo Nicolaci, analyst]

Great, Thanks for that, Gareth. And then, maybe just squeeze one more in. You touched on the debottlenecking works that you're looking to do. I was just wondering if you could expand a little bit on those. And I think concentrator feed rate historically was kind of 1 million to 1.1 million tons per year. What uplift you might expect to get out of those debottlenecking works?

[Gareth Manderson, executive]

Yes. So this is -- there's a couple of ways to improve performance in a processing facility. So it's throughput rate, its availability, and it's recovery. And so we are focusing on all of those. So the recovery piece, you would say, is tuning the plant, the reagent, the dosing, et cetera. There's some work that's been done to look at feed size into the plant, reduce the proportion of fines, those sorts of things. In the availability of the plant, so uptime, it's really actually, to be honest, quite pleasing to see that that has become an issue for the team to start working on, which they are doing.So excessive wear in places, blocking of pipes, those sorts of things. You know, understand, resolve them as quickly as we can, but also get to the root cause and see how we might be able to improve.And from a rate perspective, it's really just looking at product through the plant and what it is that's holding us up. So there's some modifications that have been done to some screens, for example. Apart from that, what I would say is the sorts of things I've seen in other facilities will be pipes, pumps, control loops, things like that, that just make sure we're just maximizing the throughput through a bottleneck. So you run the plant, you find out where the bottleneck is, and then you put an engineering solution in place to improve that and you go to the next bottleneck.

[Operator]

And our next question comes from the line of Adam Baker with Macquarie.

[Adam Baker, analyst]

Morning, Gareth and team. Just maybe a quick one on recoveries, if I may. What do you think is achievable for the recoveries with the DMS circuit moving forward? And thanks for providing that chart in the slide pack, which provides the monthly break down in recoveries. I see you got up to 53% there in August. Do you think that's a level that could be sustainable moving forward?

[Gareth Manderson, executive]

In the first part of October, we've seen 55%. We're quite aware of what others have done, or at least publicly disclosed. And so there's some objectives that we're setting the team in that particular space. I would say that, look, the last quarter has been a series of trials, a series of options have been progressed.We're settling in on an operating or a set of operating parameters, operating recipe, if you like, to kind of stabilize it at the point that you see at the moment. So what's our target grade? What's the -- what are the set points in the plant? And then, Adam, we're going to start to kind of step up from there.So at this stage, I'm comfortable to say that we'll be able to achieve above the 50%, and I'd like to be at something similar to what we've seen in the first couple of weeks of October. And then, you know, the team, you know, I don't have to push them very hard. They've got aspirations to move higher than that.

[Adam Baker, analyst]

Great. And maybe just one on the inventory, encouraging to see such a big build of inventory there. I guess some key learnings from last year's wet season there. It looks like you've almost got a quarter's worth of production mill feed there. So just wondering, you know, worst case scenario, if it is quite a wet season and, you know, the water becomes an issue with the pit and things like that, how do you go for road access and getting connecting your mill into port? Is that something that becomes an issue in the heat of the wet season?

[Gareth Manderson, executive]

Yes. Good set of questions there. So, look, really pleased to see the ROM build up. I think that's as a result of the productivity improvements in the mine, and particularly, you know, bench turnover at the base of the pit where the ore is. So that is a focus for us to get ready. So it's a -- there's a bit around this integrated sort of pit-to-port strategy that's at play there. There's also a bit around the mine sequencing and preparation for the wet season to build those volumes, which will be a significant focus up into the wet and into December.Look, everyone talks about what size is the wet going to be. I think that we just need to be ready for it. It's not so much the wet that's the issue. It's the pattern of rain and the heavy falls that you get, as you're starting to kind of point to, Adam. So what we want to do in the -- I guess, in the coming months is get ourselves in a strong position to decouple the mine from the concentrator. So the concentrator has the ROM that's available to it. And so you see that ROM build and it's built -- but still building quite well over the last few weeks, subsequent to the quarter.In terms of your question around from the mine itself, so delivery of concentrate through to the Darwin Port, it is an all-weather access road. Like most roads in the territory, during the wet season, they can become inundated with water. I don't anticipate that we will see any significant outcomes, as long as we don't see anything worse than what we've seen in the past, which is, you know, a few days of water across the road, for example.But so far, we've been able to get people in and out quite regularly. But to your point, if there is quite an excessive rainfall event, you know, we see lots of impacts through the territory on the news, and you know, Core won't be immune from that. Our approach is really more around making sure we control what we can. So let's get ROM up, let's run the concentrator well, get our concentrate stocks up in between the port and the plant during that period, and then we'll monitor the weather and we'll respond to that as required.

[Operator]

And our next question comes from the line of Tim Hoff with Canaccord Genuity.

[Timothy Hoff, analyst]

Thanks for the quarterly update. If I'm just looking at your cash operating costs and your tonnages, it implies you've spent about $40 million on costs this quarter just passed. [ Should ] we expect that to fluctuate much throughout the year? Obviously, wet season, you're moving less material and you're going to be taking material off the stockpile. And how do we think about that $1 million figure throughout the year?

[Douglas Warden, executive]

Yes, I think, Tim, that's a reasonable estimate. Obviously, as we've dealt with a few of the questions so far, you know, this whole issue around how much is going to the balance sheet and how much is going to P&L. But in -- as I've emphasized, in this quarter just gone, most of the stripping costs went to the P&L, except for $2.5 million. So when you extrapolate the numbers out and come up with $40 million, you know, that's not a bad number.And I'd also note that that's net of about $4.8 million in margin associated with the fines. That's in the fine print as well, you can see in the report. So, yes, but I think, you know, processing and crushing, they'll be fairly consistent. And as we're mining, it's just what goes to the P&L and what goes to the balance sheet, and we'll try and make that as clear as we can going forward.

[Operator]

And our next question comes from the line of Al Harvey with JPMorgan.

[Alistair Harvey, analyst]

Gareth. Just another one on recoveries. So I appreciate your comments that a lot of trial work going on in the quarter. Just wondering if you'd give us a bit more of an update on those improvement projects you've outlined on, I think its slide seven. Particularly interested in the Met work that you've been doing. I'm just, guess I'm trying to get a sense of whether or not the fines issue is primarily geological or if it's comminution-related. And I suppose by extension, how that impacts your works on exploring the addition of a float circuit?

[Gareth Manderson, executive]

Sure. So fines generation, as we all understand, will be either through the plant itself in the crushing area or at the drill and blast step or a function of the ore body. What we're seeing is that the ore body itself probably has more fines than anticipated. We don't believe that, at this stage at least anyway, it's not the area that has got a lot of focus on in terms of blasting, creating the fines.We have, however, and I have talked about some blasting improvements. So we've looked at the blast design and the equipment that we're using around blasting to improve that. That's actually to kind of reduce oversize and ensure that we don't have additional fines generation as a result, you know, improved load and haul, those sorts of things, and bench turnover at the bottom of the pit. So that's been quite positive.But that's not -- and hasn't had, to date at least anyway, an impact metallurgically. We've run a series of trials around feed size and for a period of time, there we were actually blending, -- or sorry, running on a campaign basis 6 mil and a 10 mil size. We're able to now move to a straight 10 mil size. So we do think the majority of our fines generation, so not ore related, but generation related, actually was in the crushing area, so we're optimizing that. We'll continue to work in that space.In terms of metallurgically, you know, we've talked about the microclassifier, we've talked a little bit around dosing of the ferrosilica, for example, and we're doing a lot of work at the moment around presentation across screens and management of screens, which is a combination, I guess, metallurgical, but also probably a rate improvement step as well. So what fraction and grade is going across the screen and are we getting the right throughput across that screen?

[Alistair Harvey, analyst]

And yes, I guess, yes, how that's making your thoughts around the float study?

[Gareth Manderson, executive]

Sorry, yes, the float study. So the float is in study at the moment. We've taken some metal -- or we've taken some metal bulk samples, I think I mentioned that before. We are -- the bench-scale testing is progressing at pace and the study is underway in conjunction with the BP33 study. So we see lots of improvement opportunity right now in the current facility without a fines treatment circuit and we know that some others have been able to achieve, you know, reasonably high recoveries and so we're on that pathway.So we don't see us urgently needing to move down the pathway of a fines treatment plant today, but what we do see is a realistic option for the future, given the capital and complexity associated with that plant, it makes more sense to attach it to a project like BP33 rather than Grants.

[Alistair Harvey, analyst]

Great. And I guess I can see the -- there's still the feasibility ongoing with the filter or belt press. I was kind of under the impression that that's float circuit recoveries, but perhaps I'm wrong. I'm just trying to understand how -- where that sits in with respect to the potential float circuit and if that's part of the BP33 work as well.

[Gareth Manderson, executive]

Yes, so that equipment would possibly become part of our float circuit, if you like, and it's a -- it was flagged early as an initial, faster, lower capital solution to address fines at the end of last quarter. Where we're at now is that if you think about our float circuit, we would attach to BP33, the filter type operation is, you know, given the capital and commitment associated with that, and then also given what we can see is the pathway at the moment in the current plant and the improvement options and further work that can be done there, we're really focusing on that first because that's a no capital or very minor, you know, cash spend type options, and at the moment it's very little spend. It's really more about tuning and optimization.

[Alistair Harvey, analyst]

Great, Gareth. And just one quick one. Apologies if I missed this in your opening comments, but just wanted to see if there'd been any update on the Tesla correspondence flagged back in August.

[Gareth Manderson, executive]

No, look, we're still working with Tesla, as we've said before, to see if we can come to some resolution without litigation.

[Operator]

Our next question comes from the line of Jon Bishop with Jarden Group.

[Jon Bishop, analyst]

Well done on a good quarter. Looks like you've covered a huge amount of ground there at site, so well done to the team. Just to extend a little bit further on the flotation question that Al asked before, I mean, obviously, it's too early to give full details, but I would assume economically you're working with a broad ballpark on sort of a lump of capital associated with the plant just to stress test tolerances. Are you able to give us an idea of what sort of range of number you're looking at if you were to go down flotation for BP33?

[Gareth Manderson, executive]

Jon, thanks for the question. Appreciate the feedback for the team and we'll definitely pass that on. But, look, I completely appreciate that we would like to understand the capital cost and what the range might be for the flotation plant. It's a question I'd like to answer as well. Unfortunately, we're in the process of completing the study, and so I think I just need to let the team complete some more work on that.You know, quite genuinely, the last update, they're still trying to understand what the flow sheet and the design may look like, so obviously that needs to be settled first prior to understanding exactly what the capital costs may be. And then the second thing to kind of consider there is it's really more associated with BP33. It probably doesn't make sense with the mine life at Grants, at least not at this stage. So we will consider it as part of that BP33 work.

[Jon Bishop, analyst]

Yes. Okay. So is it fair to assume that with your final investment decision on BP33 and the feasibility estimate that flotation will be a consideration of that work, or is it sort of -- I know it's being run jointly, but is it going to be a later piece?

[Gareth Manderson, executive]

I think for the concentrator, there's 2 things to think about. One is how much improvement can we extract from the concentrator as is with that improvement program that we've talked about, minimum or low capital? And then what benefit might a higher CapEx solution like fines treatment plant attach to that? The 2 ore bodies, the test work that we've done to date and the progress to date is still suggesting that the 2 ore bodies, Grants and BP33, process in a very similar way.So that would mean that whatever solution we define for Grants in the concentrator space would more than likely naturally flow through to BP33. So I'd say for BP33, we should consider it as an underground mining project and then think about the float plant as what's the processing solution required for the Finniss operations.

[Jon Bishop, analyst]

Yes. That's very clear and very fair. Just on BP33, again, I realize it might be getting ahead of things, but how should we think about how the mine development might look? I mean, obviously, you've had some good gains on drilling confidence and resource confidence. Obviously, the depth extension, therefore, has significantly extended the ore body at depth. Are you able to sort of give some ideas as to how you're thinking about mining that ore body and, therefore, what the upfront development capital might consider? I'm not looking for a number, but, you know, how it might look, are you having to decline a fair way down the ore body, so on and so forth?

[Gareth Manderson, executive]

Yes, look, it's still probably a little bit more around the mine plan, so let's just keep in mind, you know, we only announced that increase in confidence around BP33 a few weeks ago. So that will go into the mine plan. That's part of the study work. You know, we'll probably -- we're working to optimize, to your point, the productivity of the mine with the access to ore and timing to ore. So we'll probably -- I think it's probably best, Jon, to wait till we do a little bit more work and come back with a bit more of a picture around what BP33 mining sequence might look like.

[Jon Bishop, analyst]

Yes. Fair enough. I realize I'm sort of putting you on the spot. One final question then, you did make reference to your monitoring of pit wall stability at Grants. Are you able to sort of provide some commentary as to how that is actually looking? Are you still seeing geotechnical issues? Obviously, with the monitoring, it allows you would think to get ahead of those issues and address them before they become a manifest issue. But are you able to talk to how the geotech is shaping up for Grants in particular, and perhaps even BP33?

[Gareth Manderson, executive]

Yes. So I think it's fair to say that all mines have a geotech component to them. All of them require monitoring and a careful set of controls and then, you know, trigger action response plans associated with that. We're no different. We're probably seeing -- as we've started to kind of do that work in the Grants pit, we're seeing that we've got kind of the east and the western walls, if you like, probably the 2 areas where we felt that the radar kind of monitoring equipment would suit.So rather than having 1, which we put in some time back, we've actually got 2, so we can just get a better look at both of those walls. And you know, people will probably understand that if you're directly opposite and you've got that scanner scanning from the other side of the pit, so to speak, you get a better picture of what's happening there. So that's really why we've done that, just to get better data and information.You can see in the photos there that the pit's looking great at the moment. One of the things that we need to be mindful of is that with water and rainfall and the wet season coming, that's usually the area that starts to test some of the stability in those walls. And so we'll make sure that we monitor it very closely. We wanted to make sure that we had the right equipment in place to support the teams to do that, hence that change.

[Operator]

And our next question comes from the line of Kate McCutcheon with Citi.

[Kate McCutcheon, analyst]

Can you just provide some comments on the physicals for the quarter? So Hugo asked about mining. So if I can ask about processing, can you give some comments on milled tons and grade for the quarter and how that is reconciled versus reserves or expectations?

[Gareth Manderson, executive]

Yes, go ahead.

[Douglas Warden, executive]

Yes, so milled tons processed for the quarter were just under 150,000 tons. Crushing was a bit above that. And I've already talked about the waste mine being just under 2 million BCM. The ore tons mined for the quarter were just under 320 kilotonnes. And so hopefully that helps. What -- does that cover all your questions, Kate?

[Kate McCutcheon, analyst]

Yes. And then just maybe some comments on head grade and how is that performed versus reserves?

[Gareth Manderson, executive]

Yes. So, from a reconciliation perspective, we're seeing kind of at or a little bit better than in terms of sort of volume and grade. So I wouldn't get too excited about it. It's not a huge percentage, but it's enough to say that I'm really pleased with the work that was done to define the ore body at Grants. So we're seeing good reconciliation, essentially.

[Kate McCutcheon, analyst]

Okay. So we should think about grade being at reserve or similar to reserve.

[Gareth Manderson, executive]

Yes. Yes, I think that would...

[Kate McCutcheon, analyst]

Excellent. Great. And then last quarter, we spoke a bit around the royalty discussions with the government. Is there any update there on how that's been thought about, whether on a DSO price or a spot con price?

[Gareth Manderson, executive]

Yes. So the royalties that have been applied are the current NT Royalty scheme. So the -- our engagement with the government is positive. We put our submission in. We're waiting to hear from them. We expect something coming back from the NT government in the early part of next year, so very early next year. But we -- right now, it's sort of quiet because we've put our submissions in, as have others, and we're just waiting to hear a response.The recommendation and suggestion we've made to the NT government is that they take a look at the WA regime. It's simple. It's well understood. And it would be, you know, it would mean the NT is on a similar basis to WA, so from a competitive perspective, it sort of removes that issue.

[Operator]

And our next question comes from the line of Andrew Harrington with Petra Capital.

[Andrew Harrington, analyst]

Sort of following on the float, no float question and fines and recoveries, what happens to the fines if they're not sold? Are you going to stockpile them, or are they just going to be put into tailings?

[Douglas Warden, executive]

Yes. So the grade of the fines that we've been able to extract from the tailings facility and send to sales around 1.3%, so it's actually reasonably good grade. If we can't sell it, we will -- sorry, if we can't sell it at a reasonable price in a reasonable market, I think it makes sense to stockpile it, which we will do. So there's a few benefits to that. I think one is it becomes, you know, maybe you might consider it a lower-grade stockpile that can be dealt with later, or it's ore slash and it reduces the volume that's stored in the tailings facility, so it mitigates the need to raise dam walls as often.

[Andrew Harrington, analyst]

Yes. So just to confirm, you said 3%, what's coming out as fine, 3%?

[Gareth Manderson, executive]

1.3%.

[Andrew Harrington, analyst]

1.3%.

[Gareth Manderson, executive]

Yes. One point -- yes, yes. I wish I had that Andrew.

[Andrew Harrington, analyst]

And please remind us, what's the life of mine strip ratio expectation that you've got for Grants.

[Douglas Warden, executive]

It's about 15 to 1.

[Andrew Harrington, analyst]

15 to 1, okay. And lastly, seems a lot of my questions have been answered already, the $27.7 million repayment to Yahua, where does that get shown in the cash flow statement? Has that been taken out of revenue line, or?

[Gareth Manderson, executive]

Yes, it has.

[Andrew Harrington, analyst]

Sorry, Yes. I might have trouble with my line. Is that yes?

[Gareth Manderson, executive]

Yes.

[Operator]

And our next question comes from the line of Richard Knights with Barrenjoey.

[Richard Knights, analyst]

Hi, Gareth, Doug. Just a quick follow-up on the royalty payment. I mean, it looks like we're seeing a fair bit of volatility quarter-on-quarter with that royalty number. It looks like it was about $500 a ton in Q4 last year, down to sort of $150 a ton in this past quarter. How should we think about that going forward? Is there a simple way to think about it? Obviously, the Northern Territory regime is fairly confusing. But what's the best way to think about that?

[Douglas Warden, executive]

Well, yes, the volatility is driven by the fact that it's profit-based. So it's 20% of, you know, the sort of -- the language I think is net value. So you can go onto the website and have a look at what that is, but unfortunately, the 20% that -- the number that the 20% is applied to is not sort of reference to any commonly understood accounting number.But they do sort of outline in broad terms at a high level what deductions you get. So obviously, if the price comes down, the profit or that net value comes down, and therefore, the royalties lower, and that's what you're seeing quarter-on-quarter essentially.So, you know, as Gareth said, we're advocating the ad valorem method that's used in WA, 5%. Whether they go to that, who knows, but certainly have made noises that that's appealing to them to go to a simpler ad valorem-based method. We'll see what happens.

[Operator]

And our next question comes from the line of Brett Hucker with Canaccord Genuity.

[Brett Hucker, analyst]

I appreciate the color that you've had on the call so far. I'm just curious on that quarter-end shipment, the 10.2, and I may have missed this, but how should we think about that in terms of specs and realizations achieved? I'm not sure if you can comment on that. In terms of grade and prices...

[Douglas Warden, executive]

The shipment that went in September you're talking about?

[Gareth Manderson, executive]

October.

[Brett Hucker, analyst]

Yes.

[Douglas Warden, executive]

You're talking about October?

[Brett Hucker, analyst]

October. Yes, October.

[Gareth Manderson, executive]

So let me answer this, but I don't think it's answering your question. It's on spec. Gan -- on its way to Ganfeng, it'll attract the same terms as any shipment into the offtake agreement. That -- what's the -- that probably doesn't answer your question, I don't think.

[Brett Hucker, analyst]

Well, I was hoping for more, but that's fine if you can't comment. I understand you may not be able to.

[Douglas Warden, executive]

So you're asking, Brett, more around what the grade was and therefore...

[Brett Hucker, analyst]

Yes, I'm interested in the grade, specifically in the grade and the price achieved. Can you -- if you can comment, you may not be able to.

[Douglas Warden, executive]

Yes, look, we'd probably rather not comment on the grade. I guess it probably suffice to say that, in line with the commentary that we've put in the quarterly, we're approaching it to -- our approach to production and, therefore, to the sales contracts is more tons at a lower grade. So I guess that's probably the best explanation...

[Operator]

Thank you. I would now like to hand the call back over to CEO, Gareth Manderson, for any closing remarks.

[Gareth Manderson, executive]

Excellent. Well, once again, thank you very much for people taking the time to dial into the call. Appreciate the questions and the interest in Core. We're focused on 3 things moving forward. One is to develop the business in and around Grants. You can see we now have 4 shipments of concentrate, improvement in recoveries, improvement in mining operations, and a lot of work going into preparation into the wet season.BP33, so the early works, is progressing well and at pace, and the team is working to get as much of that done prior to the wet season as possible, and they're doing a great job. And we're also in the process of establishing that feasibility study for presentation and consideration for an investment from the Board in quarter 1 calendar year next year.And then the exploration program is probably halfway through now in the -- given that we have sort of a wet season, dry season impact. We've been directing the effort towards proving up mining options and supporting studies in the early period, and now starting to test some of the options that we see, predominantly around North Finniss, but also testing Central Finniss, and we'll take a look at Shoobridge and Anningie-Barrow Creek with some preliminary work as well with all going to plan.Thank you very much for your interest today. I appreciate the time on the call.

[Operator]

Ladies and gentlemen, thank you for participating. This concludes today's program. You may now disconnect.