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Core Lithium half-year report preview

Core Lithium’s earnings should be reported early next month. Here’s the key information to know in advance.

lithium Source: Bloomberg

Core Lithium earnings date?

Core Lithium (ASX CXO) has not yet given an exact date for its half-year report. However, last year’s results were released on Thursday 10 March, so Thursday 9 March is likely the best estimate.

Core Lithium earnings preview — what do analysts expect?

Broker opinions are changing constantly on Core Lithium, with CommSec data showing two tipping it as a strong buy and four as a strong sell. Of course, this disparity of opinion is because CXO shares are inextricably linked to the uncertainty of lithium prices.

Goldman Sachs correctly forecasted the dip from the start of the year to AU$0.95, as opposed to Macquarie which had previously predicted a rise to AU$1.30. It’s worth noting that larger lithium growth stocks, such as Pilbara Minerals, experienced severe volatility in the run up to their sky-high valuations — rapid growth is usually followed by pullbacks in the mining sector.

For context, CXO shares spiked to AU$1.87 on 14 November 2022, and have therefore nearly halved in value in a little over three months. But similar previous falls have been followed by recovery.

Key project

CXO’s key project is the Finniss Lithium Project, located within the Northern Territory close to power stations, gas lines and rail transport, and is only 88km from Darwin Port, Australia’s closest port to Asian lithium processing giant China. The DFS highlights concentrate at a C1 Opex of US$364/t and AU$89m Capex through gravity processing, along with an initial 10-year mine life.

And importantly, the project has been awarded Major Project Status by the Australian Federal Government, is exceptionally capital-efficient, and overall has arguably the best lithium logistics chain to Asian markets within Australia.

Recent updates

As well as appointing experienced new CFO Doug Warden in February, Core Lithium recently provided investors with a quarterly activities report covering the three months to 31 December 2022.

Highlights included its first shipment of 15,000dmt of Direct Shipping Ore, with an average grade of 1.4% Li2O, sold for US$951/dmt and delivered to Fangcheng in China. The company has also awarded a five-year operations and maintenance contract to Primero, which is constructing a Dense Media Separation plant which should start producing spodumene concentrate during H1.

Having completed a $100 million equity raising in October 2022, CXO ended last year with $125 million in cash, which does not include proceeds from the sale of DSO which were received in the subsequent quarter.

CEO Gareth Manderson enthused that ‘Core Lithium has continued to reach key milestones this quarter including the mining of ore, commissioning the crushing plant, sale of pre-production direct shipping ore (DSO) and the successful completion of the $100m placement.’

However, the company was negatively impacted by Tropical Cyclone Ellie, which brought some production challenges.

Lithium price trajectory

Two competing narratives are interplaying for the future of lithium prices.

On one hand, Chinese lithium prices have fallen by 30% since their record high but are still eight times higher than a year ago. And as the anticipated global recession picks up, CATL is reportedly in talks with automakers to offer steep discounts in return for exclusivity contracts, fearing competition from smaller start-ups.

Chinese demand in general seems to have weakened, despite the country’s exit from ‘zero-covid’ lockdowns. This is exacerbating fears of a wider global recession.

On the other, Tesla CEO Elon Musk is reportedly considering buying Canadian miner Sigma Lithium to secure supply, as the long-term supply gap is only expected to widen over the next few years. It’s worth noting that new lithium mines can take up to a decade to start production in response to increasing demand.

Indeed, the International Energy Agency’s 2022 Global Electric Vehicle Outlook report saw EV sales double in 2021 alone. Moreover, lithium giants including SQM and Albemarle have recently posted surging profits, and both have speculated that the recent price falls will be followed by a renewed bull market for the sector.

CXO shares: a bellwether for the Australian lithium sector

As an $AU1.75 billion company, many do not see Core Lithium as a high-risk proposition, but it does have much more room to grow. For context, Pilbara Minerals at AU12.77 billion was worth a similar amount only a couple of years ago.

This makes CXO results important not only for the company’s investors, but also as a bellwether for the growth of Australia’s burgeoning lithium sector.

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