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Core Lithium shares: ASX 200 buying opportunity of 2023?

Core Lithium shares are dipping after management churn, volatile lithium prices, and Chinese political instability. But sales at Finniss have at last commenced.

core lithium Source: Bloomberg

Core Lithium (ASX: CXO) shares have been one of the astonishing success stories of the lithium bull run, having increased by a staggering 1,400% compared to pre-pandemic levels, to AU$1.34.

However, sporting a market cap of AU$2.45 billion, the ASX 200 lithium stock has experienced severe volatility over 2022, and has fallen hard from its record intra-day AU$1.88 that it achieved just three weeks ago.

But for those with a healthy risk appetite, this pullback could represent a buying opportunity.

Core Lithium share price: a brief overview

CXO is developing one the most capital-efficient and lowest-cost spodumene projects in Australia, the Finniss Lithium Project, located within the Northern Territory. For context, Finniss is ideally located 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.

Last year, the company released an encouraging Definitive Feasibility Study and Scoping Study on the Project, highlighting potential production of an average 173,000tpa of high-quality lithium 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 now, much of the risk associated with the initial exploratory stages has dissipated. As Core argues, the company could now be ‘at the front of the line of new global lithium production.’ Finniss has been awarded Major Project Status by the Australian Federal Government, is exceptionally capital-efficient, and has arguably the best lithium logistics chain to Asian markets within Australia.

australia Source: Bloomberg

Where next for Core Lithium shares?

Naturally, the recent dip is shaking investor confidence. Goldman Sachs and Credit Suisse recently sounded warnings over the soaring lithium spot price in China, which has come down from its record 597,500CNY/T on 11 November 2022 to 577,500CNY/T today, coinciding almost exactly with Core Lithium’s share price fall.

However, the warnings may be overblown given wider analyst disagreement over lithium’s near-term trajectory. EU Commission President Ursula von der Leyen argued that ‘lithium and rare earths will soon be more important than oil and gas,’ ASX 200 favourite Pilbara Minerals continues to set fresh records at the Battery Materials Exchange, and titan SQM has forecast that prices will stay elevated through 2023.

However, there’s also been several recent personnel changes at the top, coming at a delicate time in Core Lithium’s strategy. CFO Simon Iacopetta is stepping down, though has promised to stay on to support an orderly transition. COO Blair Duncan has already left after five years of service and has been replaced by Mike Stone. And Samantha Rees has just taken on the role of Executive General Manager People and Culture.

Of course, these are suitably qualified replacements, but management churn can worry investors, even if there is nothing more to it than bad timing.

But there’s also the political volatility in China to consider. In addition to the dip in Chinese lithium prices, mixed news regarding the relaxing of the country’s controversial ‘zero-covid’ policy in the wake of serious civil unrest is making predicting levels of short-term demand complex. Incredibly, the country which prizes stability over all else could now have the faintest possibility of forced regime change.

And with minor production delays due to the ongoing bad weather, investment bank Macquarie has cut CXO’s price target by 5% to AU$1.80, putting further pressure on the stock.

However, Core Lithium’s investment case was supercharged on 11 November, when the ASX lithium stock released a business update telling investors that it had finally ‘completed the first sale of a spodumene direct shipping ore product (1.4% Li2O) from its Finniss Lithium mine.’

The 15,000dmt cargo was sold for US$951/dmt, and loading of the ship at Darwin Port was set to commence days ago. CEO Gareth Manderson notes that the sale represents ‘another signification milestone for Finniss, and is a very positive step towards our objective to export from Darwin Port before the end of the year.’

With Core Lithium shares dipping, now could be the time to take advantage of the popular ASX 200 lithium stock.

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