Core Lithium Ltd (ASX: CXO) shares took an absolute beating on Monday.
The lithium miner's shares lost over 17% of their value to close the day at 72 cents.
Unfortunately, the selling looks set to continue on Tuesday based on how lithium shares traded overnight on Wall Street.
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What's going on with Core Lithium shares?
Investors have been hitting the sell button this week after the company released a bitterly disappointing update.
Although the update revealed that Core Lithium had a reasonably solid fourth quarter, its expectations for FY 2024 and FY 2025 shocked investors.
Management advised that it expects spodumene production of 80,000 to 90,000 tonnes in FY 2024. This is notably lower than study estimates (and consensus estimates) due largely to lower recoveries, mine plan adjustments, and mining rates. It also expects its C1 costs to be higher than planned at A$1,165 to A$1,250 per tonne.
But it gets worse. FY 2025 was expected to see a huge jump in production. Goldman Sachs, for example, was forecasting production of 190,000 tonnes of spodumene concentrate. However, management has warned that production will be lower than FY 2024's numbers.
Is this a buying opportunity?
Analysts at Citi are warning investors to stay away from Core Lithium shares. This morning, the broker has reiterated its sell rating and slashed its price target on them to just 50 cents. This implies a potential downside of 30% even after yesterday's horror showing. The broker commented:
Today's guidance reminds us why it's hard to be bearish on supply growth. CXO expects to run at a ~50% recovery rate next year and has flagged potential for a costly flow sheet addition plus will spend A$40-50m on a box cut for a yet-to-be-greenlighted underground. We've cut our NPV materially to 45cps on today's disclosures and round our TP to 50cps, from 80cps. We remain at Sell. While we have confidence in the balance sheet here, it's hard to be more positive with so many moving parts (operational metrics, capex spend of A$145-165m this year, uncertainty and cost of future ore sources).
