Shares of Australian miner Core Lithium (AU:CXO) crashed over 21% today following the announcement of a strategic review of its operations. Management has hinted at the possibility of focusing on ore mining while also mulling temporary stoppage of mining operations, commercial solutions, and reductions in exploration and other discretionary expenditures. Year-to-date, CXO shares have lost 74.1%.
ASX-listed Core Lithium Ltd. is engaged in the exploration of lithium and copper deposits in the Northern Territory and South Australia. Its projects include Finniss Lithium Project, and copper, zinc, and lead projects. Global lithium prices have plunged this year, driven by a sluggish demand for electric vehicles (EVs). This, in turn, has impacted the performances of lithium explorers.
Further Details About the Strategic Plan
Core Lithium noted that the price of spodumene concentrate (the most common lithium-containing hard rock in the world) has dropped by 40% since October and more than 80% so far in 2023. Consequently, the company is seeking ways to reduce operating costs and enhance productivity. While the company is mulling various strategies, it has made one firm decision – suspension of the underground mining work at its proposed BP33 mines, especially considering the difficulty in construction during the wet season.
Despite the odds, CXO has been able to make solid shipments this quarter. The company shipped 10,350 tonnes of concentrate in October and 10,188 tonnes in November. It is on track to make a meaningful shipment in December. Core Lithium seeks to give more clarity on the initiatives along with its first-half 2024 results due on March 7, 2024.
Is CXO a Good Stock to Buy?
Yesterday, Macquarie analyst Hayden Bairstow downgraded CXO stock to a Hold from Buy. The analyst cited elevated fixed costs, a small production base, and the possible need to raise additional debt/equity as reasons for the downgrade. Plus, Bairstow cut the price target on CXO to AU$0.32 (20.8% upside) from AU$0.60.
On TipRanks, CXO stock has a Moderate Sell consensus rating based on two Buys, one Hold, and four Sell ratings. The Core Lithium share price forecast of AU$0.36 implies 34.2% upside potential from current levels.
