The Core Lithium Ltd (ASX: CXO) share price is down more than 7% after the ASX lithium share announced it was pausing its mining operations.
Over the last year, the lithium price has sunk, which is making it hard for lithium miners to make a profit. Instead of mining some of its precious commodity at a very weak price, Core Lithium has decided to take some drastic action.
Mining suspended
Core Lithium has decided to continue processing established ore stockpiles and temporarily suspend mining operations in the Grants Open Put.
Why? The company said the approach would reduce the cash cost of the Finniss operations and generate revenue from stockpiles. It plans to recommence mining when market conditions improve.
The current mine plan will be preserved, resulting in “improved economics of future mining activities.”
The Grants pit will be maintained to allow an orderly ramp-up when market conditions improve. Better lithium prices could also help the Core Lithium share price.
At 31 December 2023, approximately 280,000 tonnes of ore stockpiles were available for processing, allowing for sufficient stocks to feed the concentrator until mid-2024, without further mining.
The company will release revised operating costs, exploration, studies and capital expenditure guidance for FY24 in January along with its December quarterly report.
What about the BP33 project?
The BP33 site will be placed in care and maintenance and all construction and infrastructure material delivered to the site will be secured until a decision is made to recommence the early works at BP33.
Final thoughts on the Core Lithium share price
It’s a difficult situation for ASX lithium shares, but it’s decisions like this which may well help boost the lithium price in the future with less supply going into the market. I think it’s a good long-term decision to make, even if it’s tough in the short-term.
There is only so much lithium in the ground at the mine, it’s better to hold onto it and sell it at a higher price.
It’s not my preferred ASX lithium share, though its huge decline could be an opportunity if lithium prices start recovering in 2024. I think it’s a good idea to look at cyclical industries like miners when they’re suffering, so it may well be the right time to think about this.
