Hi
@thisfool369 thanks for the kind words, I'm glad you used to get value in what I contributed. To be honest, I don't really follow CXO in detail anymore so take what I say with a grain of salt.
The share price looks horrendous at the moment and from a purely technical stand point I wouldn't even consider re-entering until the chart looks a lot better. Generally speaking - the chart tells the story of a company without needing to investigate it in detail, but not always, so I took a look at the recent quarterly and full year results to balance my view.
It looks like things are definitely improving since I last looked at CXO. They have increased recoveries and brought down their C1 costs, but IMO both are still way higher than what I expect, especially considering they have royalty payments.
If we compare CXO to PLS (which I appreciate isn't fair, but they are selling into the same market, and this is who CXO need to compete with). PLS is doing far better than CXO, despite doing poorly recently.
On a side note - I see that the most recent presentation makes the claim of improved recoveries to 59%, but only at 4.6% grade. I don't like it when companies make bold claims with tiny disclaimers that are easy to miss - it's misleading.
So where to from here?
Well, the plus side is that despite the lithium market coming way off the boil, CXO has been able to realise some very good pricing, which minimises the damage, but they have all the same issues as when I exited the company.
1 - They still don't have a big resource, and despite allocating a hefty budget to exploration, I remain unconvinced that a major resource exists in Finnis area.
2 - The resources that they do have come with a big capex spend to access them (something PLS and others do not have to worry about). Each resource will come with it's own challenges to extract too, which will likely keep recovery rates lower than they would like.
3 - Grants was supposed to be the quick and easy win for the company. It was high grade and easy to access, yet they have struggled to maximise it.
4 - BP33 is big and appears to have good continuity of grade, but I struggle to see CXO being able to mine it any more efficiently than Grants, particularly when it will end up underground.
What I'm trying to say is that I don't see any reason for a major re-rate or for me to enter. CXO will IMO continue to be at the higher end of the cost curve and while lithium pricing today allows them to make a return, as the market matures and more large scale deposits come online, CXO looks to be the one that becomes the marginal producer. Hard rock is already more expensive than brines to operate, and CXO can't operate at the scale of most of the other hard rock players, thus they will be unlikely to ever realise the benefits of scale.
The only major catalysts for CXO to increase in value that I can see is
1- A left field discovery
2 - Lithium prices turning around in a big way
3 - A takeover offer
IMO - None of these things are likely, and even if they were, it no longer meets the criteria for me to invest.
Sorry that it's not a more rosy view of the company. I will continue to watch CXO from afar into the future though.
