The Core Lithium Ltd (ASX: CXO) share price is having a difficult start to the week.
In morning trade, the lithium miner's shares are down 14% to 74.5 cents.
Why is the Core Lithium share price crashing?
Investors have been hitting the sell button on Monday following the release of the company's fourth-quarter update. Here's a summary of what Core Lithium reported:
- Cash receipts of $114 million
- Quarterly spodumene production of 14,685 tonnes (up from 3,589 in Q3)
- Spodumene concentrate shipments of 5,423 tonnes
- C1 cost of A$902 per tonne (A$1,416 per tonne including royalties)
- FY 2024 and FY 2025 guidance under expectations
What happened during the quarter?
For the three months ended 30 June, Core Lithium reported a huge quarter on quarter increase in spodumene production to 14,685 tonnes following the ramp-up of the Finniss lithium project. However, this performance was below expected levels due in part to further inclement weather in April.
Nevertheless, this supported concentrate shipments of 5,423 tonnes, which underpinned cash receipts of $114 million for the three months.
For the 12 months, Core Lithium's spodumene production was 18,274 tonnes with lithia recoveries of ~49%. Work is underway on improvement initiatives to support higher levels of production in the future.
In respect to costs, management advised that its quarterly unit costs came in at A$902 per tonne. This reflects the continuing ramp-up phase of the Finniss project and a significant non-cash deferral of waste stripping costs (A$1,176 per tonne) associated with the Grants open pit.
These non-cash costs will be depreciated over the remaining life of Grants. The unit costs for the full year were A$1,230 tonne.
FY 2024 and FY 2025 guidance
Management has provided investors with an idea of what to expect over the next couple of years. Judging by the Core Lithium share price performance, they appear to have not liked what they have been told.
Core Lithium's guidance for FY 2024 is for spodumene sales of 90,000 to 100,000 tonnes and spodumene production of 80,000 to 90,000 tonnes. The latter is lower than study estimates due mainly to lower recoveries, mine plan adjustments, and mining rates. It expects its C1 costs to be A$1,165 to A$1,250 per tonne.
Unfortunately, in FY 2025 things aren't looking as positive as investors might have hoped. While the company is expecting its monthly mining and processing rates to be above FY 2024 levels, its overall production in FY 2025 is expected to be below FY 2024 levels.
This is due to a three-month gap in ore supply from the mine and processing plant capacity constraints resulting in a ROM pad stockpile building at the conclusion of FY 2025.
Core Lithium's CEO, Gareth Manderson, commented:
[W]e have undertaken a thorough budgeting and forecasting process and provided production and cost guidance for FY2024 and an early view of the 2025 production outlook. Production forecasts are lower than what was anticipated in the July 2021 Definitive Feasibility Study and cost expectations are higher. Following this review, we are working through a suite of improvement projects to drive Finniss operating performance to deliver higher mining rates, improve lithia recoveries and commercialise the fines products.
As is common during the project start-up phase, we are continuing to better understand the Finniss ore processing characteristics and mine performance with several key learnings being implemented. Grants remains the starter operation which is delivering near-term cash flow to fund our growth. BP33 is the next mine to be developed and the more significant operation which underpins the business.
This update appears to demonstrate why Core Lithium shares are among the most shorted on the Australian share market.
