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Core Lithium Ltd
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Thank you very much to everybody whose dialed into quarterly webcast call, the first one for Core Lithium since we commenced production of concentrate. I'll run through a short presentation and then I go to the callers for questions.
To start, I'd like to recognize the Whadjuk people of the Noongar Nation the [ Witjari ] and custodians of the lands where we are speaking to you from today. And I'd also like to recognize the Larrakia people, the Saltwater people from the Darwin and Finniss area, [indiscernible] and custodians of the lands where we operate.
The quarter has been quite a busy one for Core Lithium. We're in the process of transitioning from an explorer to an operator through the minimum viable project strategy. Grants essentially provides us with the start, and we've produced a concentrate and cash as a result of the last quarter's operations. And we've also completed some work to start BP33 in an early works phase, so we're in the process of commencing that work now. and also working on a study for BP33. BP33 will likely become the cornerstone business.
We finished the quarter with over $150 million in cash and no debt, and we've well on the way to put it together an executive team with our last executive starting in August to look at the operations moving forward, and start to think about further development options out and beyond BP33.
During the quarter, we produced 40,000 or over 40,500 tonnes of spodumene concentrate at a unit cost around $900 a ton. The main shipment of [ 4,500 ] tonnes is for spodumene concentrate in April was achieved. And we recently announced in July subsequent to the quarter, 13,100 tonne shipment. The sales have averaged around 5.35% of lithium oxide. We're on target for quality. We've approved $45 million to $50 million in the BP33 underground mine early works, and the feasibility study is progressing at pace with a target for FID in the first quarter calendar year 2025. The Finniss mineral resources increased by 63%. And probably most importantly, the BP33 resource has doubled.
We've welcomed Andrea Hall to the Board as a Non-Executive Director, and we've finalized appointments with Pierre Milan development and exploration is quite a pivotal role to chart the future for Core Lithium and Paul Benjamin, the EGM for commercial and marketing, another opportunity for us to create value in the way that we think about placing product in the market. We've had no significant incidents during the period.
The CRM, so critical risk management, which focuses on identification and reduction of fatality risk is well underway. And we've also started working quite closely with some of the smaller organizations and community groups in and around the Darwin area, particularly the Finniss area, with 12 groups successfully applying and being awarded the community grants.
The operation has come through the wet season, I believe quite strongly. We were able to gain access into the pit late in March early April that provided some access to ore in this calendar year. We had some further weather in April and since mid to late April after we were able to deorder the pit from that particular event, we've had reasonable access to the bottom of the pit and subsequently good access to ore.
Performance, however, has remained below expected levels, and we'll talk a little bit about that in the coming slides. We have seen some improvement in de-ordering, so the weather event that occurred in April was readily resolved as a result of the good work that the team has been doing on site during the first quarter to upgrade and improve our systems and equipment in that area.
We've seen continued issues with the [ pit walls ] as a result of weathered material. So the feasibility study contemplated more competent material in the upper benches, and we've laid the walls back to accommodate that.
We've also have a series of wall stability monitoring systems in place to check that those changes are working well. And we've also, in the quarter, commenced drilling horizontal boards to depressurize the walls and further improve stability. Work continues on improving mining rates and access to ore at the bottom of the pit has improved now that the wet season is over.
In terms of the wet season itself during the period, we've spent $11 million in establishing and upgrading water management infrastructure, and some of that work will continue on into the current period. We now after about 14 weeks of operations on a campaign basis, so we commissioned or we started commissioning the processing facility in February with the first concentrate produced during February 2023.
The client has run on a campaign basis, so that means that we've accumulated ore on the ROM, fed into the plant and then processed it. So it's been running for a relatively short duration, I think the maximum is up to about two weeks at a stretch. However, this has given us an opportunity to start testing some of the process parameters and understand how the plant will perform. Subsequently, we believe that we're in a reasonable period now to start talking about what we think will produce in the coming year.
Concentrate produced has been on specification, so between 5.4% and 5.6% or matches the contracts that we have struck. And that is not uncommon for processing facilities of this nature to start up. Recoveries have been lower than the original test we have predicted. We've seen an average of about 49%.
The chart on the right-hand side though, you will see that production is beginning to ramp up, and we're actually also seeing a slight improvement in recoveries. We're in the stage now of doing some more work to understand exactly what recoveries we expect to see over the current facility. So we will focus on a number of things moving forward. We'll complete some screen trials, which are underway in the crushing area to understand where fines are being liberated.
We'll continue to do some process tuning, particularly around the ferrosilicon levels, but also the general plant processing. Please keep in mind that the plant has only been running for 14 weeks. It's been up and down during that particular period, these sorts of facilities prefer to run consistently and it makes a lot easier for the operations team. So we're moving into that phase now.
Having said that, in the medium term, we are also considering a number of other options, such as do we need to look at fines processing in particular. So a separate client and equipment to manage that. The feasibility study contemplated something like around 20% or maybe a little bit higher fines. We're probably seeing somewhere in the mid-30s to 40% fines. So based on what we're seeing at the moment, we do expect that some fines processing facility will probably be required.
In the medium term, we're thinking about options such as filter press or belt filter in the longer term and perhaps connected to BP33 might consider a full flotation circuit. I think it's also important to note that this is the early stages of operations. And as much as there are series of improvement projects, there's also some work going on just to make sure that we understand exactly what's happening in terms of recoveries.
So moving into a discussion around guidance, one thing that I would say is that there's probably three areas or two areas rather that we're seeing at the moment, they're a little different to the feasibility study. One would be recoveries, the second will be the host rock characteristics and the third would be the wet season itself.
So we were expecting to be able to run a little more steadily or without the need to operate during the wet season. And what we're actually finding is that we need to be able to operate throughout the year. The host rock characteristics, as I said, not as confident as expected, that's causing challenges in terms of stability of the wall, so we've laid those back. But it also means that we don't have a hard rock for roads as much as we would prefer. So we are bringing some rock into that space.
And then recoveries, as I've described, it would appear that it's connected to the proportion of fines being a little higher than what was contemplated and we're looking at ways to manage that.
So we put all that together and think about guidance for financial year '24. We anticipate the 80,000 to 90,000 tonnes of spodumene concentrate at a C1 cost around $1,200 a tonne, so $1,165 to $1,250, so around $1200 a tonne.
One thing that we will be focusing on right now is an option to produce and sell fines. So the fines material that is currently immediately kind of discharged from the plant before, it is able to go through the DMS plant can be recovered, and we're in the process of working with a customer who is interested in purchasing that material. We'll also look at a series of options to improve the client through [ churning ] and we'll look at a series of options to improve from potentially a capital perspective based on the outcome of the study work that we're doing.
The Finniss sustaining capital, we expect to be around $20 million to $25 million for water management civil works, some port storage infrastructure upgrades, ROM extension and haul roads. We will continue to explore and complete studies to understand what the other opportunities may be across the Finniss leases, and I'll talk a little bit more about some of the other tenements, Shoobridge and Anningie-Barrow Creek and BP33 remains on track for a financial investment decision in quarter 1 calendar year '24. The early works budget has been approved by the Board of $45 million to $50 million.
The BP33, quite encouragingly, we've seen a doubling of the resource to 10.1 million tons. In fact, it's a little more than double, it's looking like it will more likely become the cornerstone asset for Core, so Grant does a fantastic job in terms of getting it started and generating some cash. It's more likely that BP33 will be the cornerstone asset. The early work is underway, so it's probably worth talking a little bit about the strategy there to move quickly and preserve the schedule.
The Board has approved some funding to start the surface infrastructure work and the box cut development to get ready for underground mining. The FID, we made the decision that given such a substantial increase in the resource it would make sense to take a closer look at the study and upgrade it with the new mine plan associated with that new resource.
And so we're in the process of completing that feasibility study, so the scope there would be the decline development, early stope development, ventilation infrastructure, some of the water management and power infrastructure that's required for the underground mine. And we'll run through that process over the coming quarters, and come back with -- to the Board for approval for FID and the target, as I said, is quarter 1 in next year calendar year.
In addition to turning operations, developing the BP33 project, the third tranche in the strategy is the exploration and development. So you'll see there that we've actually also started to complete a series of studies around some of the exploration targets that are beginning to prove up. We've directed the bulk of our exploration spend in the northern part of Finniss so the near mine options. So it's near the current concentrator and the current infrastructure and we'll spend between $35 million or $40 million on exploration in that study work in the coming year.
The majority of the exploration spend will be allocated towards extending and defining existing resources, but we'll also start to test a combination of geochemistry geophysics and drilling at Finniss and at Shoobridge and geochemistry and geophysics in Anningie-Barrow Creek.
To date, what we're seeing is a $2 of exploration spend is turning into a ton of mineral resource. I would anticipate that given that we are spending or directing the majority of that spend in the exploration space to extending and defining existing resources, we will see opportunities come to us in terms of mining options in the northern part of Finniss, that is the objective. We wait to see the results of that work, and then we'll start to define what the growth profile looks like for Core.
I also wanted to take a little bit of time just to demonstrate some of the targets and some of the options that we see in and around Northern Finniss, so you can see there where we expanded out some of the mining options. So this is a combination of study work and exploration extension work to understand where the next mines will be. At the end of the quarter, we had three diamond rigs and one RC rig running, and we're in the process of mobilizing two additional RC rigs to complete the work in and around that area.
It's probably also worth mentioning that from a study perspective, there is also some geotech drilling going on, and there is also some work going on around metallurgical characteristics for some of those ore bodies to inform the study work that's underway.
And looking at the longer term, we're starting to test some of our other lithium exploration areas. So Shoobridge, which is around 300 kilometers south of Darwin under the Adelaide River. Last year, we completed some [ INC ], [indiscernible] tomography and soil sampling in that area. So beginning to sort of test that has then resulted in a plan for 2024 to continue doing some of that surface test work and begin some early-stage drilling. So a couple of some drilling options to start testing some of those targets that the team has identified.
We're beginning to also take a look at Anningie-Barrow Creek which is about 300 kilometers north of Alice Springs, but close to rail infrastructure. And using the [indiscernible], which is a common approach to start to test for lithium in that particular area. So we will get down into that area and start doing some work in the latter part of this year to understand what options and targets there might be at the Anningie-Barrow Creek leases.
So I guess to summarize that particular discussion, we have -- we are focusing on 4 areas. So operational delivery, so safety is a significant focus, so critical risk management is a tool that we're using to identify fatality, risks and manage those and ensure that we have safe operations. We're very focused on achieving the guidance that we've given you today of 80,000 to 90,000 tonnes of spodumene concentrate. We will focus quite closely on recoveries and mine productivity and the -- that all then focuses in on delivering into [ take ] contracts with Ganfang and Yahua to offtake partners who strongly supported the business for a number of years.
Our second piece is to look at sustained growth, so the exploration plan for 2024, the BP33 underground feasibility study and commencing that early works. And then as the data comes in from all of the work that I've described in the exploration space begin to think about our strategy for regional exploration and growth options. And hence, the appointment of Pierre Malan, he will start work with us in August of this year.
How we operate in the area is quite important to myself and the team, the community grants program to support the smaller organizations in and around the Finniss operations in the Greater Darwin area will continue. I will also look at options for local business and associations for the mutual benefit for Core and the local business community.
One of the best examples I could give you is the award of the box cut and surface infrastructure to [ NIC ] for the early works for BP33. We'll build HSE systems and processes that are fit for purpose. And then the fourth one is how we work with our people. We'll take a contemporary approach to workforce management, we look at the way we design jobs, we'll look at opportunities to implement ways of working and stay sustainable that people enjoy working with us and are focused on delivering great outcomes for the business.
We'll foster diversity, and we'll continue to build a strong and capable team. So at that point, I will pause and hand back to Darcy to manage the questions that you may wish to ask.
[Operator Instructions] The first question comes from Hayden Bairstow from Macquarie.
Good morning, Gareth. A couple of ones for me. Just firstly on the fine sales in '24, are we just assuming a 1% grade and hence, the one divided by 6 in terms of the discounted price to just sort of back out what your cash cost assumptions are?
Look, the contract is written based on the carbonate price. So it's probably a new option for Core and we're working quite closely with some commercial partners to identify the way that we'll place that material and the pricing mechanism for that.
Okay. And just on the mill, just wanted keen to understand whether these fines are they coming out both at the front end or through the DMS circuit, so you're actually running the plant pretty fast, and you're just getting a much lower recovery rate and that for the where part of these issues are in terms of mining versus mill capacity?
Yes. No, good question. The way the material presents to the plant goes through crushing and then to the DMS. That fines material is actually taken out of the feed into the plant immediately upon entry to the DMS circuit. So it's not consuming operational space within the DMS itself, but it is a much higher volume stream out to the tailings facility than we anticipated.
Yes. Okay. So with that in mind, when you obviously go BP33, I presume it takes what a year to build it at least once you approve it. How much life have you got in grants now with the new mine design, et cetera. When does that -- when you run out of mind or there versus ramping up BP33?
So we're looking at a transition from grants to BP33 in the 25-, 26-year period.
Yes. Okay. All right, I'll leave there. Thanks.
Your next question comes from Tim Hoff from Canaccord.
I Just had a question on BP33, whether, I guess, the scope of in terms of mine output is still open for question? Or is that relatively fixed still?
Yes. Look -- good question. I think that's really a subject for the feasibility study. We really take a look at BP33, we think about de-risking it from two perspectives, particularly around kind of production and the mine plan in particular, which is where your question is directed towards. The first is to complete the feasibility study. We're using a company Australian mining consultants to help with that particular process as well as some other experienced consultants in the mine planning, Geotech, et cetera.
And then the second thing that we are doing is -- and not starting yet, but we're about to start a conversation with mining -- contract assigned underground mining contractors to see who might be interested in working with us on BP33, and we'd like to engage them early to take a look at our plans to make sure they're practical and they will work.
Excellent. And in terms of, I guess, the idea that you're looking at the screens, is that essentially to capture more of that fines material and then you'll see that into the DMS circuit?
Yes, it's about tuning the plant, understanding what the top size feed is that sort of optimize the plant. Where is the fines being generated? Is it kind of the ore characteristics itself? Is it some way in the way the material is being crushed through the crushing circuit. Or is it actually the way that we're managing it in the DMS itself. So that's the reason for taking a look at more of the top size rather than screen measures. Screen measures how we're kind of managing that, if that makes sense.
Thanks, man, no worries. I'll pass it over.
Thanks, Tim.
Your next question comes from Levi Spry from UBS.
Good day Gareth. Thanks for the call. Maybe just on the mine grades and sort of reconciliation. Can you just talk to a little bit of that to tie off the recovery in the fines talk. What are the grades? And how is that reconciling so far?
I think generally, what I would say is that the grades seem to be matching with what we expected. And in the early phase of the mining operation, where we're probably seeing maybe a little bit more ore than we expected, but I wouldn't get too excited about that. All I'm sort of pointing out is that as we expect. Look, the grades that we expect to see in financial year '24 around 1.46% and in financial year '25 1.35%.
Yes, perfect. And then just when it comes to the offtake, so it's reduced volumes versus what you expected previously. What does this mean for the offtake? How do we model it out? And I guess part of that is also the ceiling prices? How do we factor that in over the 4-year term of the original contract?
Yes. So I think the conversations with Yahua and Ganfeng have continued. Now that we're able to actually talk about what the schedule looks like we'll have more detailed conversations with them in that space. Generally speaking, the conversations have been good and I've been quite flexible in managing the early-stage nature of operations. They're very familiar with this. They actually know and understand how concentrators start, so I don't think they're overly surprised, but we need to have a more detailed conversation about what that looks like in the coming years, to your point.
Yes. Thank you.
Thanks, Levi.
Your next question comes from Alex [ Papinu ] from Citi.
A few questions from me. So FY '24 volume guidance is lower than previously assumed, what plant recovery has been assumed in the guidance? And can you talk to the assumptions that were made in the wet season mining in the original study?
Sorry, wet season mining in the original study?
So in terms of what were your mining rates you [ assume ] around the wet season in the DFS?
Okay, no problems. I misunderstood, I thought you were talking about a different recovery during that period. So we are expecting to see recoveries around the 50% moving forward until we actually are able to put some of this improvement work in place. So we still see some upside in recoveries, but you can probably expect somewhere between what we've actually seen in the past quarter for the period until we start to see the benefit coming out of that improvement group.
Look, I think a number of operations have gone through a similar journey. And we just need to do the same thing to do the work to see where we can get to from that particular point. Generally speaking, the -- we don't anticipate or the feasibility study didn't anticipate too much mining at all during the wet season. What we're finding is that actually you need to be able to manage and mine during the wet season. But we have reduced our productivities and expectations around the wet season.
And to a degree, that's what's actually driving the financial year '25 numbers. So we expect at or better performance out of the mine and out of the processing facility in that financial year '25 but the timing of the ore and the mining sequence means that we're seeing the back end of the year with accumulation on the ROM and not being able to just process all of that material through the plant during that period.
Great. Very clear. And Aussie $45 million to $50 million is a lot of spend before FID, what else do you need to get comfortable with for BP33 before the FID can proceed, and when could we potentially see first production if the FID goes on ahead at 1Q CY '24?
Yes. So I'll just sort of in that first comment, let's just think about what the scope of work is for that surface infrastructure. So the way that we split the project is into two pieces, the initial early works is a box cut. So that's actually quite a reasonable excavation. It's covered with an engineered product and then backfilled. We're also putting in dams and other infrastructure in that area.
So there is a reasonable amount of equipment that is going into that early works. And then the second part of the question, I think the purpose of doing the feasibility studies to understand exactly what the schedule will look like to check this transition from [indiscernible] and BP33. We'll keep the market informed on progress on what we find. And as those details become available, we'll begin to announce them.
Perfect, I'll pass it on.
Thanks, Alex.
Your next question comes from Hugo Nicolaci from Goldman Sachs.
My first one, just kind of following up from some of the previous questions around what season management. Can you just remind us, do you have any room around the grants pit to build another mine water dam?
So the $11 million that we've spent has gone into pumps, pipes, upgrading some of that infrastructure, and we're beginning to start to continue to improve the quality of the sedimentary dams to actually provide some additional storage in some of the mine water dam. So that work will continue over the next year.
Right. And then the second one, just around exploration, obviously this being a very big focus going into '24 and likely '25. I guess now you've got pushing a 20-year sort of resource life at the moment with the current resource and plant. How meaningful would you have to see a new discovery being before you start thinking about expanding that plant or building another one? And when would you think about doing that if you did go down that path, would you need to see the current plant performing kind of closer to name plan expectations before you went down that path?
Yes, I think, look, good question, and I like where it's heading Hugo, it's absolutely something that we're focused on as well. Look, I think in the near term, we need to get our mining operation up and running, to get the plant running, understand what's required to improve recoveries, understand grants in that transition to BP33 and established the BP33 mine.
Look, in parallel to that is some work that's going on to understand where the next mines may be. So that's a combination of the exploration work and the study work that I managed -- sorry that I mentioned. And more longer term is to look at some other prospects around
Shoobridge and Anningie-Barrow Creek to see where -- what they may look like. I think at the end of the day, we need to do that work and understand what that broader range of options may be, and then we'll come back and start defining that growth agenda.
Great. And then maybe I could just ask one more around what your material movements were in the quarter? And then, I guess, just broadly, FY '23, just how impacted, I guess, as the mine movements were versus schedule in terms of the wet season outages?
Look, I think one of the ways that can take a look at that is the mine is in start-up. We were hit with quite a heavy rainfall event in the back end of December that filled the pit. So really, that three months of not having access to the bottom of the pit and slower rates on benches in the upper levels have meant that it hasn't been -- it's been a difficult period for the operations team. I think for us moving forward is what we should be focusing on for the financial year '24 and some of our targets in that space.
Yes. That's fine. I'll come back if anything else. I'll pass it on.
Yes, no problem. Thanks.
Your next question comes from Al Harvey from JPMorgan.
Good Morning Gareth, just following up on the fines materials. So just wanted to clarify what network's been done on spot mineral size across the project. I'm just trying to understand whether this is kind of exclusive to the grands pit all the resources at Finniss at present? And I guess just following that, just what kind of split you're seeing in the lithium report into the markers and the work going on there?
Yes. So I think the best way to answer that question is we're doing a lot of work right now to understand where the funds are coming from and how they're liberated. The initial study work indicated sort of a little above 20%, we're seeing, as I said earlier, sort of 35% to 40%. I think to your point, it's the first time anyone is mined and processed any material out of the Finniss district. So we're in the process of designing a series of studies to understand exactly what is happening in that space and define the improvement pathway. We do know right now that we can excavate and there's a good chance we'll be able to sell the fines material, so that's a great interim measure.
We know that there's some options in the plant for tuning right now. So the ferrous silica dosing, for example, how the various different flows across screens, et cetera. So we're doing that metallurgical test work at the moment. And [ Mike ], to your more detailed question there features into that, and there's a facility that we're working on commissioning in the plant right now to see if we can address some of that.
Great. And sorry, did we have time lines on some of these studies around the filter press, the full float circuit, just any kind of guide there?
So I think the short answer to that is no. Let's just please be clear that the plant has been running for about 14 weeks on and off, the longest duration would be a week or two, we've been running on a campaign type basis. So this is really the earliest we could come out with any particular guidance on what is happening at Finniss and the processing facility right now. We're just highlighting that these are projects that we're in the process of initiating right now and starting to -- for example, just in the last weeks, we first started to engage with Primero to say, look, let's do some study work on these options. So what are the options, let's do the study work on the options will in parallel with that, we'll do the metallurgical test work that you've kind of alluded to, and then we'll actually define the program after that.
Sure, Gareth. I appreciate it is very, very early stage. Just one more before I queue up again. Just looking at the royalties in 2024, it looks like Northern Territory have a 20% net value of production and 24% looking like it's about 8% to 10% of gross revenue. Can you just kind of step us through the bridges to -- between those two and whether or not we're expecting that to be maintained beyond FY '24?
No problem. Thanks, Al. What I might do is ask Doug, if you could respond to that particular question.
Yes. Look, thanks for that, we've given the 8% to 10% just because it is a convoluted net value method, 20% of the net value, as you say. It's not based on, as we outlined in the paper in the release, it's not based on any sort of accounting number. You do get deductions which explained on the NT's website. If you just look it up, but it is a relatively complicated formula. Unfortunately, it's not based on sort of EBITDA or any sort of accounting metric that you might be familiar with.
So it will change over time. So I would caution against just using 8% to 10% going forward because it is profitability based or net value as they call it. So the other thing I would say, which I think we mentioned in the release is that they are going through a consultation period. They being the NT government, and the -- there's been a lot of push both from industry participants and also within the government recognizing that other states, particularly WA, based on the [indiscernible] method, as you know, 5% of royalties -- sorry, 5% of revenues.
And that consultation period is happening right now. So we don't really have an explicit time frame as to when they might come to a landing or if they might change their royalty method, but it's in process and I think there's an appetite from the government to make that change, not to say it will happen, but there's certainly very open to it.
Thank you. Your next question comes from Sam Catalano from Wilson's Advisory.
Hi Gareth. Look, just stepping back for some of the questions that we've had already and notwithstanding the fact that you're ramping up in the early stages of plant commissioning for example. But it seems like you're chasing your tail a bit with regards to the robustness of the due diligence that was done previously into the project as a whole. In my experience, typically, there's a lot of gremlins that typically will take a lot of time to come out and we're not just talking about things like recovery rates through DMS plant.
How comfortable are you that what you've sort of uncovered to date and a sort of circa 100,000 tonne per annum new nameplate, if you like is enough of a kitchen sink? Or are you concerned that perhaps there'll be other things that you're getting to how you're going to develop BP33, for example?
Yes. Look, I think it's always worth keeping in mind that a feasibility study is a theoretical construct based on the best information that's available at the time. As we all know, when you start up, you start to understand exactly what is in the ground, you put it into the plant that's been designed and constructed. You find out how it operates. You'll find issues in there just associated with fairly standard delivered equipment where bolts weren't done up properly, for example. So we're working through all those sorts of issues at the moment. And to your question, the how long do we kind of wait to come out. We've had 14 weeks of campaign operations. That's given us a sense of where we were at. We know that our recoveries are around sort of 48%, 50% moving forward. That's a good baseline to start and to then design a series of pieces of work to enhance and improve.
This is the early stage of an operation, so there will be a lot of activity in that space during this period. But I'd also say that I've worked in quite mature operations that are also continuing to improve and upgrade and something happens in the mine that causes a process upset, et cetera. And that's the nature of operations, and we're working on moving into that steady operations space. And I think the other piece to kind of consider is Core has moved very quickly with this minimum viable project. The smallest resource, low capital entry point into a favorable market. We've been generating some cash, and we're currently working on that transition from [indiscernible] to BP33 subject to FID approval.
And just quickly a follow-up just on OpEx. Obviously, we've talked a bit about the recovery being below study rates and mining rates as well. What do you think is the biggest impact also between the sort of $400, $500 a tonne to $1,200 -- $1,100, $1,200 that you're looking at, at the moment?
Yes. Look, I might ask Doug, if you'd like to answer that question?
Yes. Look, I think part of it is the timing. So in the original study, it was anticipated that significantly more of the overburden for grants would have been moved in FY '23 than actually happened. And we've all sort of -- the issues we've had with the wet season are well documented. So that's the main driver of that. So if you like, a lot of the stripping costs, which are obviously deferred, so they're not necessarily impacting the C1 cost, but they're impacting cash costs in FY '24 would have been in FY '23. So that's part of it.
Look, I think generally, the crushing and the processing costs have come in a bit higher, not hugely materially so, but it's mainly around the mining. I think the unit rates that were assumed in the study were not far out. It's just the volume of material and the timing of when that's moved. So as I said, it was expected that it would be in '23, now it's in '24, less so in '25. So that's -- they're the main changes, a bit higher on site support and day works type rates than was studied. And then the rest is really denominator driven.
So if you were talking sort of 170,000, 180,000 tonnes in the study, when you got to full ramp up and that was obviously envisaged that it would be very early on, certainly in FY '24 and '25. And then you're talking a number that's nearly half that or around 90,000, clearly, that's going to have a significant impact on the unit cost situation. So that's the main driver and the rest is largely timing and some inflation in the cost, but the inflation and the cost is not anywhere near impactful as the denominator.
Thanks.
Thanks.
Your next question comes from Jon Bishop from Jarden.
If I could just go back to the contract, can I assume that it's for the your guidance this year, it's in effect from July 1 in terms of that 50% of the material under the ceiling cap. Is that correct?
Yes. We're in the process of working out what our shipping schedule will be. As I mentioned earlier in the call, that's a conversation that we need to have with Yahua and Ganfeng.
Okay. And then in terms of that feeling respecting commercial and confidence, if I look at visible alpha consensus, the sort of price implied based on production and revenue lines looks at sort of US 3,250 a tonne. Are you able to give us a bit of a steer as to where the ceiling looks? Is it sort of below that number?
Look, it's really difficult to preserve commercial confidentiality and respect for our offtake partners to give too much in that space. We will provide moving forward our average realized price in future updates. I -- look, if we were to put it all together, there will be some softening against stock, but we'll probably best to wait to see where we get to and we're able to provide you with more information.
Yes. No, that's cool. And then just quickly on the June quarterly [indiscernible] there, you've got some receipts from customers. I assume that's free any adjustment for pricing realized. When will that sort of flow through?
Yes, I'll ask Doug to comment on that.
Yes, a good question. Yes, it is before the adjustments. You'll see that flow through in the next quarter when the realized prices, the [indiscernible] plays out. So, obviously...
Is that finalized debt?
No, it hasn't.
Okay. Can I just squeeze in one more, just to be cheeky?
Sure.
Just a broad question. I mean it's a reasonable lump of capital expenditure going out in fiscal '24. Obviously, necessary for BP33 in particular and obviously getting the mine up to a steady state. It is a big chunk of capital going towards exploration, though. I guess my question is along the line of $35 million to $40 million when you're looking at potential requirements for flotation circuits and the like at the back end, is that really a judicious use of capital? I mean you do have reasonable line of sight for mine life in terms of reserves and resource inventories at the moment. I guess I'm just wondering whether that might be better applied to getting those tonnes into production?
Look, I think it's a reasonable question. Let's consider the strategy is to get going and moving quite quickly. So grants pit has a relatively short mine life, let's get into BP33. But more importantly, we've got a lot of ground to cover between Finniss, Shoobridge and Anningie-Barrow Creek, we should understand what those opportunities are and test them and start thinking about what the broader opportunity for Core maybe across those leases.
Thanks for the opportunity.
No problem. Thanks Jon.
Your next question comes from Andrew Harrington from Petra Capital.
Thanks, Gareth, and team. Look, a couple of them have been answered. Just wanted to make sure I understand correctly your recoveries, you're getting about 50% recoveries to spodumene plus another 20% to 30% in fines. Putting in a belt, how does that change and putting in float, how does that change?
Yes. So the -- that's the work that we need to do and to check to make sure that those projects make sense. But essentially, what it means is that we're able to process and get value out of those fines before they go into the fine storage facility, the tailings dam and recover them. And then we actually have a concentrate product that's been operated with additional volume.
But are we talking -- you then become like 100,000 of spodumene and then another 120,000 or 150,000 in fines in sales? Or what's -- what would be the rough breakup of what you actually start selling under an improved recovery scenario?
Yes. So with this campaign nature of the operation over the last 14 weeks -- or sorry, 14 weeks in aggregate of campaign operation. We're able to talk about where we see recoveries at the moment. We're able to talk about some of the options we might take a look at to improve those. But the outcome of those improvements is not clear until we do the work. So the fines sales piece is an interim method to make sure we capture value out of that stream at the moment. And once we're able to take a look at these particular projects, do the study work, understand what the plan forward looks like, we can start to begin to update you on some of those questions.
Okay. And you talked about price of a couple of times perhaps give us a view on what you -- how you're seeing the market and what's your take and where things are and where they might go over the next 12 months?
Sure. So what we're seeing at the moment is still quite strong inbound interest despite asking people just to give it some time. We've got a commission get up and running and find out what volume we have to offer the market. We're still getting regular engagement from interested customers, so it does appear that the broad kind of conversation in the market around being in a structural deficit is probably true.
We're seeing people interested in purchasing the fines, we're seeing people that are still interested in other products to concentrate, BSO, et cetera. So at the moment, we're enjoying quite a healthy market from that perspective. And it's hard to see when we talk with some of those customers' plans, they're talking about multiyear plans. So it looks like there's -- there'll be demand out into the near future at least.
Okay. And lastly, if I may, a hydroxide plant have been sort of moved a few times. Is that something that is now deeply in the back burner or is it something that's still under consideration?
Yes. So I made a few public comments on the downstream processing. At the moment, Core's focus is becoming a mining operator and understanding what opportunities there are to produce concentrate across the leases between Finniss, Shoobridge and Anningie-Barrow Creek, so that's our focus at the moment.
Thank you for your time.
Thank you.
Your next question comes from Matt Stark from [ Red Door Capital ].
Just a quick question, it's a pretty simple one, I think. But going from when you do develop BP33, is that much easier to mine during the wet season.
Yes, very good question and one that is absolutely a subject to the feasibility study. I think on the one hand, look, it's underground, and we're putting a cover over the box cut. There's a lot of that surface infrastructure that we talked about is a lot around managing surface water in the area so that we're going to have good access to BP33. We expect it to be a little easier to mine, but every underground mine has a water management plan and dewatering process in place. The feasibility study will take a look at what we think some of those inflows will be and what infrastructure is required to manage that.
Okay thanks.
Maybe we could perhaps have 2 more questions.
Your next question comes from Hugo Nicolaci from Goldman Sachs.
I just wanted to ask one on the royalty since it came up. At potentially in an territories may be changing that structure and makes it a much cleaner comp versus some of your peers. But I guess as it stands going back to your original study, you'd hope that the state royalty would apply to a DSO product under a sort of internal transfer mechanism. Can you maybe just talk us through how the royalties applied this quarter based on what you've reported? Is that been the case? Or has the royalty being applied on the basis of exports volume prices?
No, really good question. I'll ask Doug if he could comment on that one for you.
Yes. So initially, what was agreed between the company and the NT government is that it is on a DSO basis, so it's sort of a back calculated assessment, and that's valid until the end of the next quarter, so the quarter we're currently in until the end of September, and then it's for discussion as to whether it's going to be based on spodumene or DSO going forward. And so obviously, it depends on your assessed because we only sold one model of DSO and two lots of spodumene, then it becomes an assessment and an agreed value for that DSO, if you like to calculate the royalty, so it makes it probably more complicated to do it that way, particularly if you selling spodumene going forward, but that was what was agreed initially.
Great. And then just so we've got a little bit of color on that process. I mean for this quarter then, how have you gone about calculating that sort of back up for the DSO if you kind of use the one parcel of DSO, you did sell as kind of an approximation in terms of a percentage discount to price or value add sort of discounts or maybe could you hook through how that's been applied.
Yes, you're spot on. That's our reference point that we have, obviously, and we disclosed what that number was, I think it was $951 a tonne. And you obviously have to look at what the spodumene price was at that time to look at the relativities and then it becomes an assessment of logistics really. So what does it cost to get the extra material support and then to China.
Obviously, you're moving in that royalty calculation at least, probably 7x as much material, but then you've obviously got the concentrator processing costs that are not applied in that case, if you know what I mean, because you theoretically bypassing it.
That's clear. And just one more if I could on the royalty, just around the timing of the Northern Territory proposed change. I presume that's probably a lot more longer dated. So would we expect to then see the next update around that maybe with the next quarterly as to whether you've gotten that sort of waiver to apply to DSO going forward or not?
Yes. Based on the workshop forms that I've attended, they are targeting it within 12 months. I have no real feel for whether that's achievable within the logistics of getting legislation through government having gone through a consultation process, but that's what they've told us that they are targeting 12 months. And that process probably started last month. So that gives you an indication, but does that mean they're going to have [indiscernible] in place from 1 July next year? Obviously, I can't guarantee that because it's based on how quickly the government moves.
Yes. No, that's clear.
Sure, I'll take one more question, please.
Your final question comes from Al Harvey from JPMorgan.
Just wanted to shed a bit more clarity on the exploration side of things. So you've got a new exploration manager starting. And I suppose the focus is on resource drilling. Just wondering what split that $35 million to $40 million is going to resource extension and how much is going to regional projects? And I guess, given that all resources are open at depth to start you've called that out in the [ Presso ] that does kind of imply that there's not strike extensions to anything you're seeing out around Finniss?
Yes. So that's sort of $30 million, $40 million that we're talking about also includes study work. So that will be a GMS test work. It will be some geotech work. It will be engineers, designers and others working on preliminary studies. The actual spend is still in that $25 million to $27 million range for exploration. And the split, and let's just keep in mind that I want the team to have some flexibility in this space so that if we find some opportunity, then we'll actually dive towards that. But generally, you could expect probably like 70% to 80% will be associated more with proving up existing resource and the rest would be on testing other areas so more greenfield type work.
And just following that greenfield, there still is greenfields targets, I'm assuming around Finniss or is the move to Anningie-Barrow Creek kind of where you think more opportunity is?
Yes. So the -- we're actually directing the bulk of that spend to the northern part of Finniss around where grants and BP33 is. So there's still plenty of ground to be tested across the Finniss leases.
Thanks, Gareth.
You can actually, just to follow up to that. You can actually get a reasonable picture of that on Slide 11 in the pack that we've issued.
Look, thank you very much to all who have taken the time for the call today. It's an important quarter for a call. You can see that the three areas that we're focusing on is establishing the mining and processing operations at grant progressing with the development of the BP33 project in two ways.
One is to get going with some early works. And the second is to complete the feasibility study based on the more than doubling of resource that we've seen at BP33. And the third is to start testing and looking at further growth options for Core Lithium.
And in the background for that is to build the capability and capacity of the organization to deliver on that and work closely and very well with the local communities and ensure that we have a safe operation that they are comfortable having in their area. So thank you very much to each and everyone for dialing in on the call. I look forward to further conversations as the operations in and around Finniss matures.