Core Lithium Ltd (ASX: CXO) shares look like today may be the day they finally break out of a lengthy downward spiral.
Shares in the S&P/ASX 200 Index (ASX: XJO) lithium stock are up 4% during the lunch hour on Friday, at 43 cents apiece.
Unless there's a big downward shift in investor sentiment in afternoon trade, today should mark the first day since 2 August that Core Lithium shares finish in the green.
But can it last?
What's going on with Core Lithium shares?
The ASX 200 lithium stock has had a bruising month so far, notching up no less than seven new 52-week lows.
That unwelcome string of lows commenced on 7 August, when Core Lithium shares closed the day trading for 61 cents apiece.
The lithium explorer and producer, which owns the Finnis Lithium Project in the Northern Territory, came under pressure in late July after reporting on its spodumene production forecasts through to FY25. Core advised it expected to produce around 85,000 tonnes of the lithium-bearing mineral at the midpoint of that period, significantly below consensus expectations.
Also likely pressuring shares was the company's increased production cost guidance, which was lifted from $1,165 to $1,250 per tonne.
Then there's been the steadily declining lithium price over the past month.
Today spodumene (6%) is trading for US$3,350 per tonne. That's down from US$3,560 per tonne a month ago.
As for today's much-needed turnaround, that comes on the heels of yesterday's mammoth 24.8% drop in Core Lithium shares. So, there's likely some bargain hunting afoot.
Investors were overheating the sell button yesterday after Core Lithium exited a trading halt to announce the successful completion of a $100 million institutional placement.
While the funds will be welcomed, shareholders were less than thrilled to learn the funds were raised at an issue price of 40 cents per share, some 27% below the prior closing price.
Now what?
While Core Lithium shares look set to break the string of new 52-week lows today, the miner could face ongoing headwinds should the lithium price continue to fall over the coming years, as many analysts forecast.
Adam Martin, analyst at wealth adviser E&P, forecasts spodumene prices will average US$3,475 per tonne in FY 2024 and US$2,200 per tonne in FY 2025. He expects the price of the lithium-bearing mineral will fall to US$1,800 a tonne in FY 2026.
If Martin is right, Core Lithium shares could find some support over the coming year, with his FY 2024 spodumene price forecast some 4% higher than current levels.
The analysts at Goldman Sachs have an even more bearish outlook for the lithium price.
The broker is forecasting spodumene to trade for US$$1,763 per tonne in 2024, US$800 per tonne in 2025, and then edge back up to US$1,126 per tonne in 2026.
For Core Lithium shares to thrive in a period of falling lithium prices, the ASX 200 miner is going to want to bring its production costs down.
And, of course, shareholders will be hoping for some successful exploration results, which will be partly funded by this week's $100 million capital raising.
