Why the Core Lithium (ASX:CXO) share price is charging 5% higher today

This lithium explorer is rising on Monday…

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The Core Lithium Ltd (ASX: CXO) share price has started the week strongly.

In morning trade, the lithium explorer’s shares are up 5% to 30 cents.

This latest gain means the Core Lithium share price is up 76% since the start of the year.

Why is the Core Lithium share price charging higher today?

The catalyst for the rise in the Core Lithium share price today was the release of a positive announcement this morning.

According to the release, the company has successfully completed the definitive feasibility study (DFS) at the Finniss Lithium Project.

The release explains that the Stage 1 updated DFS confirms that Core Lithium is well positioned to be the next lithium producer in Australia.

Positively, the study found it to have excellent DFS economics. Management notes that this is reflected in reserves-backed pre-tax IRR of 53% and pre-tax net present value of $221 million and life-of-mine EBITDA of $561 million from revenue of $1.3 billion.

Furthermore, the project has low initial capital expenditure of $89 million (including pre-production mining costs). This enables a two-year payback and confirms Finniss as one of Australia’s lowest capital intensity lithium projects.

The life-of-mine average C1 operating cost is estimated to be US$364 per tonne concentrate, which it expects to generate a robust average operating margin of more than US$370 per tonne.

Lithium fines

In addition to this, the study found that Core Lithium could potentially produce and sell approximately 110,000tpa of lithium fines with grading of approximately 1.0% Li2O, with no incremental mining activities required

Positively, this would come with low incremental capital cost of $8.4 million and marginal operating costs for processing, storage, haulage to port and ship loading of US$21/t of lithium fines.

Furthermore, Core Lithium has received non-binding interest from potential offtake partners for lithium fines by-product. This includes interest with indicative pricing between US$75 to US$85 per tonne.

Another positive from this is that it has the potential to also reduce tailings stream and waste impact on the environment.

Management commentary

Core Lithium’s Managing Director, Stephen Biggins, said: “The Definitive Feasibility Study confirms Finniss Lithium Project as a simple, low risk and low capital intensity project with high cash generating potential, and puts Core on track to become Australia’s next lithium producer.”

“The study highlights the Project’s attractive combination of high-grade Ore Reserves, simple DMS processing producing a high quality concentrate, and proximity to nearby existing infrastructure including the Port of Darwin.”

What’s next?

Mr Biggins advised that the company will now aim to finalise its funding before making a final decision on whether to go ahead with the project later this year.

He commented: “With the updated DFS now completed, we aim to finalise funding over the coming months, to allow Core to make a Final Investment Decision in 2021 and fast-track construction. We are also maintaining our exploration momentum, with the aim to more than double the mine life and Resources of the Project.”

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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