The ASX 200 stocks hit with the biggest broker downgrades last week: Core Lithium, Sayona
Brokers have slashed their target prices for lithium stocks across the board.
Source: iStock
Mentioned
KEY POINTS
- Core Lithium suspended mining and expects asset write-downs due to plummeting spodumene prices, now down more than 80% from peak levels
- Core's situation raises concerns for other lithium miners, as production costs for some may exceed current low prices
- Brokers have slashed lithium miner target prices across the board, including low-cost producers like IGO and Pilbara Minerals
Core Lithium (ASX: CXO) suspended mining operations last week and warned of a significant asset write-down as the collapse in lithium prices takes a massive toll on marginal producers.
Spodumene prices have more than halved since early December, down to US$1,037 a tonne, according to the Shanghai Metals Market. Pricing agency Fastmarkets is quoting spodumene concentrate prices of around the US$950 a tonne level.
A year ago, lithium producers were raking in cash as spodumene prices soared to above US$8,000 a tonne. Now, prices have plummeted, squeezing even some of the biggest producers.
The Biggest Broker Downgrades
Ticker | Company Name | Close Price | 1-Week | Target Price | Prev Target Price | % Dif |
|---|---|---|---|---|---|---|
Core Lithium | $0.23 | -9.8% | $0.30 | $0.39 | -23.1% | |
Sayona Mining | $0.06 | -10.3% | $0.17 | $0.20 | -15.0% | |
Liontown Resources | $1.58 | -3.7% | $1.75 | $1.96 | -10.7% | |
Polynovo | $1.62 | -3.3% | $1.77 | $1.97 | -10.2% | |
IGO | $8.60 | -6.1% | $10.30 | $11.17 | -7.8% | |
Pilbara Minerals | $3.91 | -1.0% | $4.00 | $4.27 | -6.3% | |
Pexa Group | $10.93 | -2.2% | $13.52 | $14.39 | -6.0% | |
Iluka Resources | $6.31 | -5.5% | $7.88 | $8.35 | -5.6% | |
IPH | $6.42 | -0.6% | $9.46 | $9.96 | -5.0% |
'Target price' is an aggregate of Refinitiv broker target prices. % Dif compares target prices between 8 December 2023 and 5 January 2024
A few takeaways and observations from the Core Lithium situation:
Core Lithium shares are down a further 16.5% to 19 cents on Monday. The stock is now 89.7% off its November 2022 peak of $1.87. No offence but the stock looks no different to that of Zip (ASX: ZIP)
The announcement effectively says the project is going into care and maintenance (C&M) without explicitly saying its going into care and maintenance
Lithium prices peaked in November 2022 but Core's 4Q22, 1Q23 and 2Q23 reports noted operating cash inflows of -$8.6m, $8.4m and $94.7m respectively. All that for just one solid quarter
Production costs for Core have been volatile, ranging from A$2,386 to A$1,691 a tonne in the last three quarters vs. current spodumene prices of ~US$1,000 a tonne (A$1,550)
If Core's Finniss Project is unprofitable and going into C&M – What's going to happen to other marginal producers like Sayona Mining (ASX: SYA) and Piedmont Lithium (ASX: PLL) as well names like Liontown (ASX: LTR) and Arcadium Lithium's (ASX: LTM) Mt Cattlin Project
For context, Liontown completed the Kathleen Valley Definitive Feasibility study back in November 2021. The study forecasted 10-year average cash costs of A$651 (~US$430) a tonne. I wonder what the cost profile looks like after two years and a whole lot of inflation
