Down 80%, are Core Lithium shares finally worth buying in April?

I'm running the ruler over this beleaguered lithium company to see if it might present an opportunity.

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Two miners standing together.

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It's been a hellacious past year for Core Lithium Ltd (ASX: CXO) shares. Despite reaching production in early 2023, the lithium miner's share price has fallen 82% over the past 12-month period.

The performance is incredibly disappointing when given context. Over this time, the S&P/ASX 200 Index (ASX: XJO) has gone from strength to strength, rising 9.2% to set fresh all-time highs, as depicted in the comparison below.

Now at 15.5 cents a pop, could Core Lithium shares be a glaring opportunity? After all, lithium prices have been holding above recent lows for around a month.

Mo lithium mo problems

Few considerations are more important to a mining company's viability than the supply and demand dynamics for its mined material.

Some argue lithium's fall from grace stemmed from an oversupply, others point the finger at inadequate demand. Either way, the last year was marred by more lithium than needed — sending the battery commodity into freefall.

The important question for investors is: has the situation changed for Core Lithium shares?

Interest rates are still elevated, dissuading new electric vehicle purchases. Some miners have dialled down production, yet other lithium majors are determined to ramp up capacity.

According to Bloomberg, Tianqi Lithium and Ganfeng Lithium Group have both indicated they will look to acquire additional reserves and grow lithium production capacity. This could spell trouble for lithium companies that cannot achieve similarly low production costs.

To buy, or not to buy Core Lithium shares

Last month provided a glimpse into how Core Lithium is faring lately. The company disclosed revenue of $134.8 million and a loss after tax of $167.6 million in its half-year results on 12 March.

It can be said rather objectively that those are some ugly numbers. Put another way, the Finniss Lithium Project operator lost $1.24 for every $1 product sold. Such figures are simply not sustainable in the long run.

I believe something must change for Core Lithium shares to be investable. Either lithium prices find equilibrium at a higher price, or the company begins monetising its other projects in gold, uranium, and base metals.

It would appear short sellers think the same. As shared yesterday, short interest in Core Lithium shares is around 8.3%, ranking in the top 10 most shorted companies on the ASX this week.

Motley Fool contributor Mitchell Lawler 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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