Core Exploration Ltd (ASX:CXO) has been rated a speculative buy with a price target of 6.5 cents per share by Perth-based RM Research.
The rating is underpinned by Core’s Finniss Lithium Project which is progressing to a development decision by year-end, leveraging off the its proximity to the Darwin Port and the high-grade nature of the deposit.
READ: Core Exploration’s pre-feasibility study delivers robust economics for Grants Lithium Deposit
Core’s recently completed pre-feasibility study (PFS) illustrates a financially robust, albeit small-scale and short-life operation based solely on the Grants deposit.
Based on an assumed average 5% spodumene concentrate price of US$649/tonne, a pre-tax net present value (NPV) of $140 million, internal rate of return of 142% and capital payback of slightly less than 12 months is calculated from the PFS on the currently defined 26-month life of mine.
The capital expenditure estimate for project start-up of $53.5 million is relatively low, with the major components being $20 million for the construction of a dense media separation (DMS) plant and $24.4 million for mining pre-strip.
Action and recommendation
Given that the Finniss Project initial development has a modest capital expenditure requirement, the company has sufficient funds to complete the Definitive Feasibility Study and the PFS was based on what are believed to be realistic product price assumptions, RM Research has estimated that Core should trade in a range of 25%-50% of the NPV derived by the PFS.
This implies a value of $35 million- $69 million, which is 59%-213% higher than Core’s current enterprise value.
RM Research’s price target has been set at 6.5 cents per share (which implies a market capitalisation of $42 million).