Core Lithium Ltd
(ASX: CXO) Share Price and News
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About Core Lithium
Core Lithium is an Australian exploration and mining company specialising in lithium. Founded in 2010, it has the Finniss Lithium Project that began production in April 2023.
Core Lithium Company History
Lithium was first discovered at the Finnis Project in 2016 and the project has grown ever since. The April 2022 Definitive Feasibility Study (DFS) reported a JORC compliant Mineral Resource of 15 million tonnes (Mt) at 1.3% lithium oxide. The study reported a Pre-Tax IRR of 80%, an NPV of $114m and free cash flows of $158m from $501m revenue. A 180,000tpa operation was anticipated.
Unfortunately, lithium prices came down from all time highs and may still continue to. By the end of 2023, the company had suspended production and told investors it would just focus on processing stockpiled ore.
Future Outlook of Core Lithium (ASX: CXO)
Core Lithium's future outlook appears challenging, yet it holds potential for recovery. The company's decision to halt operations at the Finniss mine and focus on processing stockpiled ore until mid-2024 would concern investors.
But, it is said that those who don’t learn from history are doomed to repeat it. The last lithium boom in 2017 occurred as producers failed to anticipate the demand shock from China’s subsidy-driven roll-out of EVs. The boom soon turned into a bust as the supply response, especially from hard-rock spodumene producers in Australia, overcame the increased demand. As a result, many lithium projects were deferred or even terminated, building the base for another lithium boom later on.
In our view, history is repeating itself here and Core Lithium can eventually get itself back off the ground.
Investors should also remember that it is continuing exploration activities at the project that could have further lithium. Indeed, the company has a second mine (BP33) that was supposed to commence production in 1HCY24 and deliver 1Mtpa, although this is on ice for now. We also think that it is realistic prospect that it could become a takeover target given it has such a high-quality asset.
Is Core Lithium a Good Stock to Buy?
All things considered, we think it is. It is true that investing in Core Lithium currently carries a high level of risk due to the volatile lithium market and the company's recent operational challenges. The sharp decline in its share price reflects market uncertainty and the impact of falling lithium prices.
However, for investors with a high-risk tolerance and a long-term investment horizon, Core Lithium could present an opportunity. The anticipated future demand for lithium, driven by the electric vehicle and renewable energy sectors, suggests potential growth for lithium producers. As market conditions stabilize and Core Lithium adapts its operations, there could be a significant upside for patient investors.
Our Stock Analysis
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Frequently Asked Questions
Core Lithium Ltd primarily focuses on lithium exploration and mining, with its flagship Finniss Lithium Project near Darwin. They also explore other minerals, such as copper, but lithium remains their key commodity, aligning with the growing demand for battery materials.