Can Core Lithium shares recover to all-time highs?

Core Lithium (ASX: CXO) shares hit a record AU$1.67 in early November before the tumbling lithium price saw the ASX company fall to as low as AU$0.79 by 24 March 2023. At exactly AU$1.00 today, the company has made a start to the recovery, buoyed by first sales and lithium’s recovery.

For context, lithium carbonate was trading for 597,500CNY/T in early November, fell to 165,500CNY/T by late April 2023, and has since recovered to 312,500CNY/T. The end of Chinese government EV incentives, in addition to overstocking by battery companies including CATL, saw demand for the silvery-alkali metal slump in Q1.

But the wider picture could be more buoyant.

Macquarie considers that global lithium demand will rise by 76% to 1.57 million tons between 2022 and 2025 — and China remains dependent on imports for 55% of its lithium needs. And the country has also placed circa 29% of its domestic lithium salt production at chance of disruption, after its ‘lithium capital’ Yichun announced a crackdown on unlicensed and environmentally damaging mining.

Core Lithium shares: quarterly activities

In late April, Core reported on activity between January to March. In this time, the dense media separation plant was completed, with first concentrate produced in February 2023. A maiden 3,500 tonne spodumene parcel was transported to nearby Darwin port in March, and full activities were continuing after the wet weather disruption.

In terms of sales, the first cargo of 15,000dmt of spodumene Direct Shipping Ore was shipped in January. With payment already received, the company has also secured prepayment of an additional 18,500 tonnes from Yahua.

And exploration news, results from the 2022 drilling saw the flagship Finniss’ Mineral Resource upgraded by a whopping 62%, with the lithium company now expending an additional AU$25 million on continued drilling to target additional mine life and expansion potential.

At the end of the quarter, the AU$1.88 billion company held AU97.8 million in cash excluding prepayments, with first revenue of AU$20.1 million hitting the accounts in January.

Maiden shipment and BP33 authorisation

In mid-May, Core announced that the Northern Territory government had approved the BP33 underground project, which is the second proposed mine at Finniss. Excitingly, approval of the mining authorisation and the Mine Management Plan represents the final step before the board takes an investment decision. BP33 is just five kilometres from the DMS plant and has a mineral resource of 10.1MT at 1.48% lithium hydroxide.

Further, the company noted that loading of the first shipments at Port Darwin had finally commenced, with Deputy Chief Minister and Minister for Mining and Industy, Nicole Manison, attending the loading of the initial 5,500 tonnes.

CEO Gareth Manderson enthuses that this was a ‘significant milestone,’ and further that the ‘focus now is to complete commissioning of the DMS plant at Finniss and ramp up our integrated operation.’

A week later, the company announced that it had approved early works funding for BP33 worth between AU$45 million and AU$50 million, with initial construction awarded to Northern Australian Civil. A final investment decision is to be made in Q1 CY24, but current numbers mean a positive decision could be likely.

Manderson notes that this represents a ‘positive, incremental investment decision that allows initial works to be undertaken while the feasibility study is completed...we will continue focus on the safe ramp up of the Grants open pit and concentrate production through the DMS plant.’

Where next for Core Lithium shares?

Core Lithium has caught the attention of short sellers in 2023, with Citi analysts arguing that the shares are only worth AU$0.75 based on a price comparison to its net asset value, which is higher than peers. Meanwhile, Macquarie maintains an ‘overweight’ rating on the ASX lithium stock alongside an AU$1.30 price target.

The company is now producing and in an expansionary phase. If lithium continues to recover, a recovery to Macquarie’s price point, and even beyond to new highs, seems potentially feasible.

But early stage mining is not risk-free.

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