The Core Lithium Ltd (ASX: CXO) share price is trading lower on Tuesday morning.
At the time of writing, the lithium miner's shares are down 1.5% to $1.00.
Why is the Core Lithium share price falling?
The weakness in the Core Lithium share price may have been driven by a broker note out of Goldman Sachs.
This note was in response to the company's mineral resource update on Monday, which revealed that it has more than doubled its resource estimate of the Finniss Lithium project from 4.37Mt at 1.53% lithium oxide to 10.1Mt at 1.48% lithium oxide.
While on paper this looks great, Goldman highlights that it isn't necessarily as good as you might think. It explained:
While BP33's resource has more than doubled, this translates to only a ~20%/30% increase in Measured & Indicated / Total resource respectively at Finniss, with more than half of the additional resource in the lower Inferred category and at depth (>400m), limiting near-term production upside.
What impact has this had on its valuation?
Goldman has now factored in this increase. And while it extends its life of mine estimate, it hasn't made a difference to its near term earnings and valuation. As a result, the broker has made no changes to its recommendation and retains a sell rating and 90 cents price target on its shares. It explains:
We now model the additional ~3Mt of M&I resource, which on current processing capacity adds ~2.5 years of additional production life at Finnis, extending our life of mine (LOM) to nearly 15 years, though we lower our nominal value for exploration and growth with this resource increase now in our base case.
Our near term earnings are unchanged, including near term production delays from wet weather and forecast declines in lithium pricing, with a minor increase in NAV and our A$0.90/sh PT remaining unchanged.
