Give Reason to hold or invest in CXO, page-138

Totally agree

The stock is expensive

Goldman has given to justify its sell rating is the company's valuation. It notes that it still looks expensive at current levels. The broker said:

CXO appears relatively expensive trading at a premium on ~1.1x NAV and an implied LT spodumene price of ~US$1,200/t (peer average ~1.05x & ~US$1,250/t (lithium pure-plays ~US$1,140/t)), with the lowest average operating FCF/t LCE on a more moderated/deferred production restart/ramp up.

CXO appears relatively expensive trading at a premium on ~1.1x NAV and an implied LT spodumene price of ~US$1,200/t (peer average ~1.05x & ~US$1,250/t (lithium pure-plays ~US$1,140/t)), with the lowest average operating FCF/t LCE on a more moderated/deferred production restart/ramp up.


wet season ahead.

A mine restart looks highly unlikely ahead of the next wet season, in our view and, given the Grants open pit has ~12 months of life, likely tied to a development decision on BP33 (with its own funding risks) to support a new processing contract, increasing the risk of a longer gap in production. Following a restart, production risk in a steady state operation remains as the Finniss project moves through ramp ups on project complexity moving between different open pits and underground configurations.

The current prices are as follows

• Lithium carbonate – China: US$13,012 per tonne (January: US$11,867)
• Lithium hydroxide – China: US$9,591 per tonne (January: US$9,899)
• Spodumene 6%: US$1,210 per tonne (January: US$1,000)

It has pencilled in the following for the coming years:

• 2024: US$928 per tonne
• 2025: US$800 per tonne
• 2026: US$978 per tonne
• 2027: US$1,155 per tonne
• Long-term: US$1,150 per tonne

just to compare.


Pilbara's results......."Costs were a mixed bag with unit operation costs excluding freight and royalties (FOB) lifting 7% to US$444 a tonne and unit operating costs (CIF) falling 2% to US$519 a tonne".

According to Pilbara:

March set a new monthly production record with over 80k dmt produced at a unit operating cost (FOB) of less than $625/dmt

March23, new monthly production record with over 80k dmt produced at a unit operating cost (FOB) of less than $625/dmt.

WHAT ARE CXOs operating cost?

Also more supplies are coming on but the demand for Li is not outpacing supply, therefore Li price will be suppressed.