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Fading lithium boom: Core Lithium faces lows as Kali Metals hopes for highs

ASX trading will witness both the lows and highs of the fading lithium boom.

The low point will be another rough session for Core Lithium after it confirmed on Friday that it had suspended mining at its NT lithium mine and would try to ride out the crash in prices by processing and selling stockpiled material.

On the other hand, the high point will be the expected float today on the ASX of lithium hopeful, Kali Metals, and some wealthy Perth-based hopefuls who reckon the company will avoid the current market blahs.

Today’s session will follow Friday night’s inconclusive session in New York, which saw small gains for the Dow, S&P 500, and Nasdaq after early losses in the wake of the better-than-expected jobs report for December.

The small gains left the ASX futures market with a tiny loss for the start of trading this morning.

Kali could end up as a flash in the pan for its backers if the lithium bears, now in the ascendant, hold their ground.

Mineral Resources CEO, Chris Ellison, is a big shareholder in Kali Metals, whose initial public offering opened and closed in less than 20 minutes and was massively oversubscribed. Former MInRes director Tim Roberts was reported to be another backer. He is from the Roberts family of Perth that used to own Multiplex.

Kali owns exploration areas around Kalgoorlie in the WA goldfields, close to where Ellison’s MinRes controls the Mount Marion and Bald Hill lithium mines.

Major shareholders are specs, Kalamazoo Resources with 22.1%, and Karora Resources with 20.2%, which combined to create Kali, raising $15 million in its issue in November at 25 cents a share.

For investors, the question is whether Kali will be a dud because of the collapse in lithium prices or another spec runner like Azure Minerals, which saw a brief takeover battle before SQM of Chile and China and Gina Rinehart’s Hancock prospecting combined to make an unbeatable $1.7 billion offer (that is horribly overpriced).

However, it will be the fortunes of Core that will hold the attention of more thoughtful investors today. The shares ended down 11.5% on Friday.

Core announced in late December that it was considering stopping mining and cutting costs as a way of surviving the lithium price crash (spodumene prices are now just under $US1,000 a tonne compared to around $US8,000 a tonne a year ago).

Core only started mining at its Finiss project in the Northern Territory in mid-2023. That didn’t help the share price, nor did December’s news, which combined to account for a 75% price fall by the end of 2023.

December saw Core pause its BP33 underground development and look at suspending mining in response to the weak lithium price outlook.

On Friday, the company confirmed that it had decided to suspend its mining operations to conserve cash, but it will continue processing established ore stockpiles but temporarily suspend mining operations in the Grants Open Pit.

Core said this will reduce the cash cost of the Finniss operation, generate revenue from stockpiles, and provide an opportunity to recommence mining as market conditions improve.

Core said that it had around 280,000 tonnes of stockpiled ore available for processing, allowing sufficient stocks to feed the concentrator until mid-2024 without any new mining.

The company said that by suspending operations, rather than preferentially mining ore over waste, the current mine plan will be preserved, resulting in improved economics of future mining activities.

Core Lithium said it will have revised operating costs, exploration studies, and capital expenditure guidance in its upcoming quarterly update while, importantly, it expects to record an impairment of the carrying value of the Finniss operation with its half-year results next month.

Core’s impairment won’t be the last from the lithium sector – we will see a lot of red ink flow from the sector in February and later this year.

The Core lithium message will end up being the one that investors concentrate on than the brief flash in fortunes for a spec like Kali Metals.