Stocks In Focus: Core Lithium, July 2 2025

0:10G'day and welcome to Motley Fool Stocks in Focus. the ongoing weekly series both on YouTube and on the Motley Fool Money podcast where we peel back the layers on some of Australia's biggest, best-known, widely held, or most topical ASX-listed companies, the ones we figure you might like to know a little bit more about, brought to you, of course, by our expert analysts here at The Motley Fool. Now, before I introduce today's guest, I'm going to give you the usual boilerplate. You know it by now. Say it with me. We only give you general advice, not personal advice. What does that mean? It means we can tell you what we think about a company or an issue or a topic, we can't tell you what you should do as a result.

0:45Your decision, that's the personal bit. You go to make your decision for yourself or seek licensed financial advice from a personal financial advisor. We just do general advice. We don't know your circumstances, needs or objectives. So be wary of that. The only thing I will say is we're recording these things at a point in time. The internet is forever, for better or worse. Maybe the podcast feed is too. I'm not sure. Either way, if you're watching this or listening to this days, weeks, months or years after the recording, anything could have changed and probably has. Maybe our views are exactly the same.

1:11Maybe things have changed dramatically. We can't know because we don't know what the future holds. So we'll do a bit of analysis based on what's happening right now. You get to decide whether it's appropriate and make sure, as I said, if it's after the fact, you decide based on what's changed since whether the thesis still holds, whether the analysis is still up to date. All right. That's out of the way. And with that, I'll introduce Motley Fool Analyst, Mitch Lawler. G'day, Mitch. How are you, mate? I'm well, thanks, Scott. How are you? Very, very well. Thank you for being part of Stocks in Focus.

1:39By the way, I'm going to do another quick ad. If you're on the YouTube channel, please like and subscribe. Why? If you like the video, if you think it's good, Mitch is going to do a great job, I bet. Guaranteed. Well, almost guaranteed. He will. If he does and you like the video, other people will see that video. It pops up in the algorithm on YouTube. It's good for us. It's good for them. If you like it, by the way, it's good for our ego. It's good for Mitch. So, you know, I hope it bloke out. If you subscribe, then you'll get notifications if you hit the bell when we release new content. We release our stocks in focus every week, a stock of the month, monthly, what I've been reading, YouTube live, Motley Fool TV, lots of great stuff on the YouTube channel.

2:11Occasional rants from me, by the way, you will have seen some of those. So yes, please do continue to be part of it. If you're on the podcast feed, by the way, hit subscribe on that one. You probably have already, but go and see the other guys. Go to YouTube and see what we're doing over there. If you're on YouTube, think about this Motley Fool Money podcast feed as well. All right. That's enough of that. Mitch, you're going to talk about a company, speaking of topical, I don't know. I'm going to go out on a limb. I don't think there's any more topical industry sector of the ASX right now than the lithium space.

2:38It's been a rollercoaster ride. You're going to talk about a business called Core Lithium. So just maybe start with what Core Lithium does. Yeah, Core Lithium is a lithium mining company. And people who have tracked the sector for a few years now would know that lithium has certainly gone through a wild dried. There's been the highs, the very tippy top of the highs probably a year or two ago and the not so good times in the past year or so. So, Kort Lithium has actually been mining lithium and producing it rather than being in the earlier exploration stages. And it really hit full stride, I think it was probably about two years ago or so, and it was making over$100 million in annual revenue.

3:30And then since then, the lithium price has fallen and they've gone into a bit of a caretaker mode with the company, really selling more the stockpiles of lithium. But if I backtrack a little bit, Core Lithium, they have a mine, it's called the Finnis Lithium Operation in the Northern Territory. It's located about 90 kilometres away from the Darwin port and they also have a handful of tenements across the Northern Territory and South Australia that are prospective. There's nothing that they've discovered there yet, but it's nice to have those up their sleeve as well. Nice, good summary. I don't know when this is going to air, actually.

4:14I'm going to be in Darwin over the next, sometime in July. So I will keep an eye out to see if I can see any core lithium signs around. Mates, let's go then to, obviously lithium, as you mentioned, It's been high to highs and low lows. The challenge for lithium providers has been that, like all miners, you can control your own operations, but you can't control the price. And so your point about the revenue thing was you can't do anything at all as a miner to impact the selling price. You can manage your costs, you can manage your operations, you can do all that sort of stuff, but you are at the mercy of the market.

4:42And that's kind of a lesson for all commodities investors, I think, whether you've been doing it for a while, whether you haven't done it yet, just keep that in mind. Most companies can control the price they sell for. Mine is a price taker. That's just the way these things work. And so there is that element of both risk and upside, because again, if the price skyrockets, they get the benefit of that, as you kind of mentioned already with Core Lithium. Mate, let's take a company now. Let's turn to the investment thesis, because in this Stocks in Focus series, we do the pros and the cons of a potential investment.

5:10We're not going to give a formal recommendation here, by the way, but I will ask Mitch at the end what he thinks long-term prospects are. But before we get there, mate, let's take us through the pros and the cons. Why would someone watching or listening to this be considering an investment in core lithium? What's in the pros column? In the pros column, I would say that the best thing that core lithium has going for it at this point in time is that it already has a modern day separation plant constructed. It's been in operations previously. So the moment that lithium prices actually get back to a more attractive level, core lithium can sort of just, you know, it's not as simple as flicking a switch, but you could almost say that compared to mining companies that are still in the exploration stage or construction stage of their processing or separation plants.

6:03So, it's great that they already have that in place. It de-risks the company by a substantial margin. They also have a potential 20-year mine life based on current studies. So, that's not too bad. It's longer than some, shorter than others. And there's multiple deposits in the surrounding area on tenements that they have that they're yet to explore. So, it could expand their mineral resource allocation that they have at the ready and extend that mine life. So, those are some key positives that I think sort of set Core Lithium apart from maybe your more speculative exploration or junior lithium mining companies.

6:50Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener. Let's go to the other side, mate. Let's look at the cons. and again, we're not trying to be balanced for the sake of it. We're trying to list both of those. Again, I will ask Mitch at the end, but if you're looking at quality thinking, yeah, I might be interested, what would you caution people at least consider before they invest? What's on the con list? The biggest one is their cost of, well, essentially their unit economics, their cost of operating and at last check, they put out a study basically assessing the feasibility of returning to operations just recently.

7:32I think it was the last month. And they're forecasting the price of about$1 ,300 per tonne of Spudeman concentrate, which is a type of lithium product. So, currently though, the price of lithium is more around$625 per tonne. So, their analysis, their expectations of the long-term price of lithium is more than or basically double what it currently is. And so, that really, I think, puts a question mark on the economic viability of their operations. Because as you mentioned, it's a price-taking operation. So, your cost to mine is probably going to be your most determinate factor as to how profitable the business can be or whether it's actually viable whatsoever.

8:26And yeah, cool lithium is not in the good sort of green zone, I would say, when it comes to its unit economics compared to some much larger lithium mine sites like the green bushes in Western Australia. It has a very low mining cost. So yeah, I'm a little bit cautious as to the long-term economic viability of their operations and also the balance sheet of the company. They have about$30 million in cash at the moment. If they need to raise more capital, that risks diluting shareholders further. And that's a possibility if lithium prices don't return in the near term. Yeah, cash burners are going to get you.

9:16If you don't, if you can't pay the bills, at some point you go to cap in hand to a potential equity raise and very rarely are you getting a good price at that point. The company, at least, the buyers might be, but if you're selling an existing shareholder, that dilution can be particularly expensive. Mate, let's then wrap that up. Obviously, we've got potentially some good opportunity there. If the price does recover, Callithium is absolutely poised to do very, very nicely, as you say, return to some of those heyday months, 11 years really, of a couple of years ago. On the flip side, of course, as you rightly point out, if the price doesn't recover, then this is an expensive stranded asset.

9:52That's a pretty wide range, I've got to say, of potential outcomes. So if you're thinking about core lithium, at the Motley Fool, we always take a long-term view. So I don't know or care what happens in the next few years. I'd love to know, but I'm not going to. So we don't try and predict the short term. Over five years, maybe five years plus, what do you reckon the odds are that core lithium beats the market from the current share price? Oh, it's dangerous to give it odds. isn't it? Look, I think it's one of those scenarios where if you're a speculative investor, maybe this is something that you'd want to throw your hat into the ring on.

10:25But the game of investing really is, I think, more about looking at companies that there are more known knowns than there are in the unknown field of outcomes. And I spoke to you recently about Terry Smith and a book that I've been reading as his, Investing for Growth. And he puts out a good example of a famous punter by the name of Alex Bird. And he won a lot of money, 500 consecutive bets that he won on because he worked out that he could stand at the end of the racetrack right in line with the finishing post and close one eye and he could get the photo finish himself before there was time enough for it to develop.

11:09Back in those days, they actually had to wait for it to develop. And the bookies were taking bets while they were processing the photo. So, Terry Smith summarized that in the way that he wants to invest the way that Alex Bird made bets, which is bet on when you know the outcome. When you already know that it's a successful business, it's already making money, there's no real questioning involved. Unfortunately, in the case of core lithium, I think there's a lot still open to interpretation, a lot of questions, a lot of balls up in the air still. So it's not one that I would particularly put a high chance on outperforming the market because there's just so much uncertainty for this business.

12:01Great description, man. I like that a lot. If you're watching this on YouTube, by the way, you just saw me put on my glasses and have a quick read. We're pre-recording about a month's worth of this. As I've already mentioned, I'm going to be up in Darwin and doing the top end over July 2025. And so I was making sure that actually Mitch's video was up, will be up by the time this goes around. It absolutely will be. It'll be the most recent what I've been reading video on our YouTube channel. So another reason to hang out on the channel if you're already there, we'll jump over from the podcast, check out Mitch chatting about investing for growth.

12:28Lots of good stuff, as I said, on the channel. Not an intentional plug, but given Mitch, I just want to make sure that we're actually we're going to have it in that sequence because it wouldn't be the first time I've pre-recorded these out of sequence and got ourselves in trouble. Mate, thank you very much for sharing your thoughts on Core Lithium. By the way, if you're not a resource investor, you may be interested, or maybe you have had a dabble, some of Mitch's thoughts there do apply to other commodities as well. Price-taking commodities, we don't really control the price. There's just extra risk there.

12:51And it's no surprise, there's not a lot of resources recommendations here at The Motley Fool, largely for that reason. We're trying to put the odds in our favor. Let's go back to the betting analogy. Doing that is really, really difficult when you've got such a large unknown, which is, how much am I selling the thing for. I mean, it is so fundamental. It doesn't mean you can't make money as a miner. It doesn't mean you can't make money as a mining investor. It just means there's a meaningful additional layer of risk there just to be mindful of. Even if you're selling it profitably, it doesn't mean you're going to necessarily sell it at the price or at the profit you're used to.

13:20And so you've got to choose your buy price really, really carefully, allowing for that possibility. All right. That's it from us. Mitch, thank you for sharing your expertise. Thanks for sharing the download on Core Lithium. I now know more about it than I did previously, so that's a win. And thank you for watching and for listening to this Stocks in Focus. We'll be back in the same place next week. Until we do, Fool on.

14:02Thank you.