Core Lithium Ltd (ASX: CXO) shares have been under significant pressure over the last 12 months.
For example, since this time last year, the lithium miner's shares have lost approximately 80% of their value.
This means that if you had invested $20,000 into the company's shares a year ago, you'd have just $4,000 left today.
Image source: Getty Images
Why have Core Lithium shares crashed?
Investors have been scrambling to the exits largely due to falling lithium prices.
Not only has falling prices of the battery making ingredient put a dent in sentiment, but it is hurting the profitability of miners.
In the case of Core Lithium, prices have fallen to such a level that it is uneconomical for the company to continue mining operations.
Earlier this year, the company suspended its mining operations and will instead process stockpiles. But once those run out, it remains unclear what action Core Lithium will take. Though, given that it terminated arrangements with contractors, it seems unlikely that a return to mining operations is on the horizon until there's a major rebound in lithium prices.
Will lithium prices rebound?
The bad news for Core Lithium and its shares is that Goldman Sachs doesn't believe prices will rebound in the near future. In fact, it warns that the current surplus of lithium will only get worse in 2025, potentially putting further pressure on the price of the white metal.
As I covered here yesterday, the broker said:
Our global team highlights that the recent rally in lithium prices should not be interpreted as the end of the bear market, where further supply rationing is needed to reduce both the 2024E surplus and now larger surplus in 2025E, with the top end of the integrated cash cost curve dominated by Chinese lepidolite (US$8k-12k/t LCE) and integrated African concentrates (US$7k-13k/t LCE).
Core Lithium profit forecast
In light of the above, you won't be surprised to learn that the profit forecast for Core Lithium is looking very bleak.
Goldman Sachs is forecasting revenue of $164 million and underlying EBITDA of $16 million in FY 2024.
After which, it expects revenue to come in at just $13 million in FY 2025 with an EBITDA loss of $7 million.
In FY 2026, the broker is forecasting revenue of $34 million and an EBITDA loss of $17 million.
Things then start to look a bit better for Core Lithium, with Goldman predicting revenue of $138 million and EBITDA of $7 million in FY 2027.
Finally, in FY 2028, revenue is forecast to come in at $259 million, with underling EBITDA at a far healthier $74 million.
In summary:
- FY 2024: Revenue of $164 million and EBITDA of $16 million
- FY 2025: Revenue of $13 million and EBITDA loss of $7 million
- FY 2026: Revenue of $34 million and EBITDA loss of $17 million
- FY 2027: Revenue of $138 million and EBITDA of $7 million
- FY 2028: Revenue of $259 million and EBITDA of $74 million
All in all, it looks set to be a couple of years of struggles before there will be any meaningful improvement in its performance.
