Core Lithium shares crash 21% on bombshell announcement

This miner is having a tough time because of weak lithium prices.

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Core Lithium Ltd (ASX: CXO) shares are heading into the Christmas break with a very disappointing decline.

In morning trade, the lithium miner's shares are down 21% to 26 cents

Why are Core Lithium shares crashing?

Investors have been hitting the sell button today after the release of a bombshell announcement this morning in relation to its strategic review.

According to the release, Core Lithium is looking at curtailing production in response to weak lithium prices.

Management highlights that the price of spodumene concentrate has declined more than 80% year to date and by more than 40% since the end of October.

In response, the company has been investigating a range of options to lower costs and increase productivity.

The options that are being considered include changes to the mining strategy and plan, such as prioritising ore mining and possible temporary curtailment of mining operations, commercial solutions, and reductions in exploration and other discretionary expenditures.

While the above is still under consideration, one decision that has been taken has been the suspension of the BP33 underground mine early works. Management made the move in order to preserve business value, but also due to the difficulties associated with mining and construction in the wet season.

One positive is that Core Lithium hinted that it will still generate meaningful revenue this quarter despite the above. It has made a number of shipments in October and November and another shipment of spodumene concentrate is due to be made in December.

What's next?

The company notes that the cost reductions and productivity improvements being targeted are expected to reduce expenditures and operating costs. However, discussions with contractors and suppliers are not yet complete, so the amount of potential cost savings is unknown.

It plans to provide an update on the cost-saving initiatives with its quarterly report next year.

Commenting on the strategic review, Core Lithium's CEO, Gareth Manderson, said:

The team at Core are working at pace on all options to optimise our business and position it as well as possible in the current lithium pricing environment. While we are experiencing market volatility today, our focus is on the continued safe and efficient operation of the Finniss project while preserving the value of our operating asset, projects and exploration potential.

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 Scott Phillips.

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