Can Core Lithium shares really live up to the hype surrounding them?

All eyes have been on up-and-coming lithium share Core Lithium Ltd (ASX: CXO) this year.

Such popularity has likely helped bolster the company’s valuation. The Core Lithium share price has rocketed 68% year to date to trade at $1.06 as of Friday’s close.

Of course, the $1.9 billion lithium hopeful still has a long way to go before it can catch up to the likes of $12 billion soon-to-be S&P/ASX 50 Index (ASX: XFL) lithium producer Pilbara Minerals Ltd (ASX: PLS).

Still, Core Lithium was trading as superannuation platform Superhero’s most traded ASX share of 2022 – edging ahead of giants Pilbara Minerals, Fortescue Metals Group Limited (ASX: FMG), and BHP Group Ltd (ASX: BHP).

But can the company behind the Northern Territory’s Finniss Lithium Project live up to the hype that’s surrounded it this year? Let’s take a look at what the future holds for Core Lithium shares.

Can Core Lithium shares live up to the hype?

The new year looks like it could be a big one for Core Lithium and its shares.

The company recently announced the official opening of its flagship Finniss Lithium Project. Excitingly, the next major news of the project is expected in just a few short months.

The company has tipped the project’s first spodumene concentrate production to occur in the first half of 2023.

Beyond that, Finniss is said to be one of the most capital efficient lithium productions. Its definitive feasibility study (DFS) estimated it would demand just $89 million of start-up capital expenditure.

It also could have the best logistics chain to market of any Aussie lithium project – being mere kilometres from a power station, gas and rail infrastructure, and an hour’s drive from the Darwin Port.

Additionally, the company has avoided using debt to fund the construction of the project. Thus, its breakeven point could come sooner than other lithium hopefuls’.

Not to mention, around 80% of the project’s expected production over its first four years is already under off-take contracts.

That’s a lot of positives if I do say so myself. However, there’s one potential snag in the company’s seemingly bright prospects.

As with nearly all materials shares, Core Lithium’s future profits will be dependent on the battery-making commodity’s price over the coming years. Thus, whether the ASX 200 lithium favourite can live up to the market’s hype might be out of its hands.

The post Can Core Lithium shares really live up to the hype surrounding them? appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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