Is Core Lithium back on track to become a producer?

It's been a very long time since you've heard any good news come out of Core Lithium (ASX: CXO). However, a 35% one-day rally on the highest daily volume since 2016 suggests Core Lithium might be on to something.

The company released the results of 'The Restart Study' for its Finniss operations in the Northern Territory on Wednesday, which repositions it as a lean, long-life project with attractive economics.

Key Highlights from the Restart Study

The study outlines significant improvements in operational efficiency and project economics:

• Processing Costs Slashed: Reduced by 33–42% to A$40–46/t from A$69/t

• Unit Operating Costs Lowered: Now A$690–785/t (FOB, SC6 equivalent, excluding royalties)

• Increased Production: Concentrate production boosted by 7% to ~205 ktpa (SC6 equivalent)

• Extended Mine Life: A robust 20-year mine life, with 94% of the first 10 years backed by ore reserves

• Reduced Capital Expenditure: Pre-production CapEx cut by 29–38% to A$175–200m from A$282m

• Strong Cash Flow Potential: Projected free cash flow of A$1.15bn over the project’s life

• Updated Ore Reserves: Total reserves increased by 15.9% to 10.73 million tonnes, underpinning the 20-year mine life

Note: Percentage changes are relative to the company’s 2024 lithium ore reserve update.

The market has welcomed these results, as they highlight significant cost reductions and a pathway to a more resilient operation in a challenging lithium market. However, the final investment decision (FID) remains subject to board approval.

The Lithium Price Caveat

One of the most important metrics to consider about economic studies is the commodity price assumption – any project can appear attractive if you assume a high enough commodity price.

In this case, the economic evaluation assumed a long-term spodumene (SC6) price of US$1,330/t (CIF). For context, current spot prices, as reported by the Shanghai Metals Market, are at US$687/t — a steep decline from Pilbara Minerals’ March quarter average of US$851/t for SC6.

For the study’s economics to hold, spodumene prices would need to more than double from current levels.

This isn't an outrageous forecast given the longer-term demand and supply dynamics for lithium and thematic drivers like electric vehicles and decarbonisation. However, it goes to show that if the project were to kick off today – current market conditions suggest its economics would be far less compelling.

Funding the Future

With pre-production Capex estimated at $175–200 million and Core holding $29.8 million in cash at the end of the March 2025 quarter, funding remains a key challenge. CEO Paul Brown emphasised the company’s commitment to minimising shareholder dilution while maximizing value, stating: “Core has identified a range of opportunities and is considering multiple funding pathways.”

Given the stock’s 95% decline from its 2022 highs and 2.1 billion shares outstanding, a capital raise is likely undesirable. Instead, Core may explore options such as debt financing, a joint venture, asset divestitures or offtake agreements.

The Bottom Line

The Restart Study marks a significant step forward for Core Lithium, presenting a leaner, more competitive Finniss project with long-term potential. But at the end of the day, the only thing that matters is the lithium price, which has continued to dwindle year-to-date.