I'll preface that I've not been a close follower of CXO, though...

I'll preface that I've not been a close follower of CXO, though have been a participating party in the lithium trade through the last few years.

After digging into the recent quarterly result I was left rather alarmed.

The recovery rates from the processing plant are lower than expected resulting largely from finer pegmatite material coming from the Grants pit. Metullurgical work is underway to get a better understanding for the consistency of the fines across the orebody, including for the Shoobridge and BP33 deposits. Now CXO are enaging with customers to see what the interest would be for a fines product (not final spodumene). If there is interest then they will need to invest in a fines processing circuit. This won't be cheap.

Participating in the earnings call also told me a few things
a) The processing plant has only had "a week or two" of consistent run time. Albeit, it is early days however I would like to see this runtime extended to beyond 4 weeks.
b) Discussion and name dropping of infrastructure projects including, but not limited to, a floatation circuit which is a big concern
c) Metallurgical testing is underway on Finnis to develop a better understanding how the orebody is behaving (this includes BP33, which is approaching final investment decision).
d) Fines rates of 20% were assumed in the feasibility studies whereas the Grant orebody is producing between 35-40% fines at present.

My interpretation of this information leaves me concerned. The dense media separation (DMS) circuit constructed at Finnis was presumptively done so on the basis of fines / pegmatite assumptions for the orebody that are proving to be incorrect to date. Fines rates being double expectations is not good.

So, what does it mean for Core?

It's hard to ascertain a conclusion at this early stage, however it appears they do not have a grip on how their orebody is behaving. It may mean that the DMS will need to be replaced (or in conjuction with) with a floatation circuit to deal with the higher fines of lithium pegamatites. This will cost a lot of capital.

It does not fill me confidence to see the directors selling parcels of stock either. Insider selling in the studies/commissioning/ramp-up phase is a big red flag for me when it comes to investing in mining projects.

PSA - I tend to talk stocks on twit > HC. (https://twitter.com/Noicewon11)