Tag: Motley Fool

Australia’s top brokers have been busy adjusting their estimates and recommendations once again. This has led to the release of a number of broker notes.

Three broker buy ratings that have caught my eye are summarised below. Here’s why brokers think these ASX shares are in the buy zone:

A2 Milk Company Ltd (ASX: A2M)

According to a note out of UBS, its analysts have retained their buy rating and NZ$16.00 (A$14.86) on this fresh milk and infant formula company’s shares. The broker acknowledges that the short term could be difficult and its earnings are at risk from weakness in the daigou channel. However, it believes longer term things are more positive thanks to a recovery in indirect infant formula sales and market share gains in the Chinese offline retail channel. The a2 Milk share price is fetching $7.39 on Friday.

Audinate Group Ltd (ASX: AD8)

Analysts at Morgan Stanley have retained their overweight rating and $10.00 price target on this audio networking solutions provider’s shares. This follows the release of Audinate’s solid third quarter update this week. According to the note, the broker was pleased with the company’s performance during the quarter. It notes that Audinate’s revenue of US$7 million was another quarterly record. Looking ahead, the broker believes the company is well-placed to benefit from a rebound in demand from the higher education and corporate markets. The Audinate share price is trading at $8.15 today.

Australia and New Zealand Banking GrpLtd (ASX: ANZ)

A note out of Morgans reveals that its analysts have retained their add rating and lifted their price target on this banking giant’s shares to $33.50. According to the note, the broker believes that the upcoming updates out of the banks have the potential to surprise to the upside. It feels this could lead to increasing confidence in the sector, potentially driving the shares of the big four higher. Furthermore, ANZ is now the broker’s top pick in the sector. This follows upgrades to its earnings estimates to account for lower credit impairment charges. The ANZ share price is trading at $28.61 this morning.

More reading

• These are the latest ASX shares to be downgraded by brokers today
• Top brokers name 3 ASX shares to sell today
• Why the A2 Milk (ASX:A2M) share price hit a multi-year low today
• Audinate (ASX:AD8) share price climbs on Q3 update
• 2 highly rated ASX dividend shares with generous yields

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AUDINATEGL FPO. The Motley Fool Australia owns shares of and has recommended A2 Milk. The Motley Fool Australia has recommended AUDINATEGL FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Many ASX shares have reported quarterly updates this week. Broadly speaking, an initial read of these results might tick all the boxes with solid growth across key performance metrics.

However, the market response has appeared very critical of slight headwinds contained in the updates. As a result, some of these beloved ASX growth shares have experienced sharp selloffs this week. 

Let’s take a look at 3 of them.

ASX shares sent into free-fall this week

Redbubble Ltd (ASX: RBL) 

The Redbubble share price took a 23% tumble to $4.24 on Thursday after a seemingly positive third-quarter update. 

The update represents a classic case of a richly valued growth story delivering a reasonable result with a slight tweak of plans. The company said that its earnings before interest, tax, depreciation, and amortisation (EBITDA) margins were going to take a small hit from 9.5% to mid-single digits. It was also going to ramp up marketing and headcount to drive customer acquisition and awareness. 

The increase in costs and lower margins will likely mean a reduction in earnings forecasts, and we all know what happens to growth stories when earnings recede. 

In an attempt to restore near-term confidence, the update highlighted an aspiration goal to more than double revenues and improve EBITDA margins to 10-15% by CY24. Despite a strong aspiration goal, the market was near-sighted and concerned with the potential damage short term earnings might take. 

Lynas Rare Earths Ltd (ASX: LYC) 

The Lynas share price has taken a similar downturn, diving 16% in the past three trading sessions. Again, the company delivered a seemingly positive March quarter update with stronger operational and financial metrics across the board. 

However, the update also observed that Chinese rare earth producers were planning to increase production in response to robust demand. And among them was Northern Rare Earth, a mining giant that accounts for some 60% of China’s total rare earth production and plans to double production within the next three years. 

China accounts for more than half the world’s rare earth output, so for a company of that size to double production within three years, it could have a significant negative impact on rare earth prices. 

From what looked like blue skies ahead, the market now has to digest a potential influx of Chinese material in the near term. 

Splitit Ltd (ASX: SPT) 

The Splitit share price has dropped 10% this week, down to a 16-month low of 79.5 cents. The company delivered a positive first-quarter update that revealed classic triple-digit buy now pay, later growth (on the prior corresponding period) across key metrics such as revenue and merchant sales volume. However, from a quarter-on-quarter perspective, growth was actually slowing down. 

While seasonality could be a contributing factor, BNPL majors Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P) both reported continued momentum across key metrics. 

More reading

• ASX 200 recovers, Redbubble sinks, Megaport jumps
• 2 exciting e-commerce ASX shares growing rapidly
• Redbubble (ASX:RBL) share price crashes 20% on increased investments
• Why AMP, Challenger, Pilbara Minerals, & Redbubble shares are tumbling lower
• Splitit (ASX:SPT) share price edges higher on new product launch

Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. 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 Bruce Jackson.

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The Antisense Therapeutics Limited (ASX: ANP) share price is surging today after the company released a positive report regarding Phase II trials for one of its drugs with the United States Food and Drug Administration (FDA).

The Antisense share price is up 7.5% at the time of writing, trading at 21.5 cents per share.

Antisense is an Australian publicly listed biotechnology company and drug manufacturer, developing and commercialising antisense pharmaceuticals for large unmet markets in rare diseases. 

Its products are in-licensed from a US-listed company, Ionis Pharmaceuticals, an established leader in antisense drug development. 

In medical parlance, antisense refers to drugs that inhibit the RNA strand of human DNA, preventing human genes from undertaking the purpose that they are genetically programmed to perform.

This is a particularly effective way of combatting serious genetic disorders, and in Antisense Therapeutics’ case, it’s currently tackling muscular dystrophy.

Antisense’s FDA update

Today, Antisense advised that its guidance meeting with the FDA was held to discuss the further development of the company’s trial drug, called ATL1102, in preventing Duchenne muscular dystrophy (DMD), in the US.

Antisense expects to provide further details about the meeting to its investors, after it receives the official minutes of the meeting from the FDA in late May 2021.

Antisense said the meeting was constructive and provided clarification on a path towards initiating a Phase IIb/III study in the US. Non-clinical requirements for trialling its drug is to be “further reviewed and agreed with the FDA to assess if and how they may impact on the timing of clinical study initiation”.

The feedback will be reviewed by Antisense’s internal team and incorporated into its global clinical development and commercialisation plans.

What management said

Antisense Therapeutics CEO Mark Diamond said Antisense was already acting on the meeting.

Based on the guidance meeting with the FDA, together with prior feedback from EMA and world-leading DMD experts, we are reassured that the data from our Phase II study is encouraging and that it is reasonable and appropriate to advance the program towards potentially pivotal clinical studies.

It is our goal to bring this medication to as many DMD patients worldwide as possible.

Antisense share price snapshot

The Antisense share price has been rising across the board, up 65% so far in 2021 and 347% higher over the past 12 months.

More reading

• Pentanet (ASX:5GG) share price jumps after news of 5G deal
• Why the Douugh (ASX:DOU) share price will be in the spotlight
• What Biden’s capital gains tax changes could mean for the ASX 200
• Oil Search (ASX:OSH) share price lower on first quarter update
• AMP (ASX:AMP) share price charges higher on demerger plans

Motley Fool contributor Lucas Radbourne-Pugh 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 Bruce Jackson.

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Pentanet Ltd (ASX: 5GG) shares are on the move today following news the company has secured an exclusive licence to provide high band 5G services. In early trade, the Pentanet share price jumped almost 6% to 93 cents before partially retreating. At the time of writing, the company’s shares are trading at 90 cents, up 2.27% on yesterday’s close.

According to the company, for the next 15 years, Pentanet can exclusively offer its Western Australian customers access to high-performance transmission “at the forefront of the delivery of millimetre wave fifth generation (5G) wireless broadband services”.

Let’s take a closer look at what’s soon to be Pentanet’s newest offering.

A “once in a generation” opportunity for Pentanet

The Pentanet share price is responding positively after the Perth-based telco announced it has been awarded an exclusive license to transmit 5G services on the 26 GHz range. It says the licence will allow it to provide multi-gigabit broadband to any customer in its service area.

Pentanet’s managing director Stephen Cornish said securing the exclusive licence is a “once in a generation” opportunity. 

According to Pentanet’s release, the 26GHz band is the best way to transmit 5G.

The company can now provide broadband to customers within 5 kilometres of any 5G tower, rather than the 250 metres it was previously banking on. Customers will be able to access Pentanet’s 5G service in Perth, Mandurah, Bunbury and Margaret River.

For 15 years of exclusive use of the technology, Pentanet will pay $8 million dollars. It will do so in annual instalments over 5 years. $1.6 million will be paid this financial year out of the company’s existing cash reserves.

The telco won the licence to use the high-band spectrum in an auction conducted by the Australian Communications and Media Authority.

Commentary from management

Cornish commented that the 5G spectrum will speed up the deployment of its Terragraph service and extend its network coverage. He said:

Having access to our own 5G licensed spectrum elevates us to a new height as a telecommunications carrier. We went into the auction unsure if we would be able to compete with the larger players, but our team was able to strategically secure a meaningful allocation at a price point that made sense for our use-case.

Pentanet share price snapshot

Pentanet floated on the ASX in January of this year and, since then, its share price has been performing well.

Currently, the Pentanet share price is trading around 50% higher than the day of its initial public offering.

Pentanet has a market capitalisation of around $154 million, with approximately 263 million shares outstanding.

More reading

• Why this ASX share bull market could run for longer
• What’s happening with the Pentanet (ASX:5GG) share price today?
• 3 top ASX small cap shares that delivered for this fund’s portfolio

Motley Fool contributor Brooke Cooper 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 Bruce Jackson.

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The Douugh Ltd (ASX: DOU) share price will be in the spotlight during morning trade. This comes after the fintech company launched another feature on its wellness app.

At yesterday’s market close, the Douugh shares ended the day at 16.5 cents.

Let’s take a closer look at what the company announced.

Douugh enhances app offering

Douugh shares will be on the radar today after the company launched another feature to reduce customer wait times.

According to its release, Douugh advised it has rolled out an ‘instant bank account’ funding feature in partnership with Stripe.

Founded in 2010, Stripe is an Irish-American financial service and Software-as-a-Service (SaaS) company. The group specialises in online payment processing platforms, allowing businesses to send and receive payments online.

The new feature enables customers to connect their pre-existing bank Mastercard and Visa debit cards to the Douugh platform. In turn, customers can access and top up their Douugh bank account instantly. This is opposed to waiting for 3 days for the funds to settle. To access this feature, however, Douugh is charging a 3% fee to customers for the convivence.

It’s no secret the company is making strides to encourage customers to pay their salary into their Douugh bank account. It believes by making continuous improvements to its app, customers will make the switch, unlocking the full benefits.

Management commentary

Stripe head of Americas, revenue and growth, Jeanne DeWitt Grosser commented:

We are delighted to be partnering with Douugh, helping them fulfill their mission to foster financial wellness. This partnership allows Douugh customers to more quickly begin their journey of better managing and growing their finances by cutting unnecessary wait times.

Douugh founder and CEO, Andy Taylor went on to add:

This initiative, alongside the recent release of instant push provisioning of the virtual Douugh Mastercard debit card straight into Apple Wallet, ensures we can minimise the time it takes a customer to become setup on the platform and extract the benefits.

About the Douugh share price

Since its listing in early October, the Douugh share price has exploded to almost 900% higher. The company’s shares reached a high of 49 cents in November, before falling back down after some profit-taking.

On valuation grounds, Douugh commands a market capitalisation of around $60 million, with 367 million shares on issue.

More reading

• Why the Douugh (ASX:DOU) share price is up 6% today
• Zip (ASX:Z1P) eyes potential stock and crypto trading services
• Douugh (ASX:DOU) share price races 6% on performance update
• The Douugh (ASX:DOU) share price is up 12% this morning. Here’s why
• Douugh (ASX:DOU) share price dips on remedial action completion

Motley Fool contributor Aaron Teboneras 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 Bruce Jackson.

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What could Joe Biden’s latest proposal mean for the S&P/ASX 200 Index (ASX: XJO)? Bloomberg is reporting US President Joe Biden wants to practically double the top capital gains tax rate in the country from its current rate of 20% to 39.6%. With an additional 3.8% Obamacare surcharge, the top rate would be 43.4%.

New York and California residents who earn over US$1 million in capital gains could see rates as high as 52.2% and 56.7%, respectively.

The news sent US stocks tumbling overnight, Australian time. The S&P 500 Index (SP: .INX) ended the day 0.9% lower. The index was relatively stable in morning trade before seeing a precipitous fall in the afternoon after the tax news became public.

Many are sceptical the changes can pass the US Congress, even though Joe Biden’s Democrats control both chambers. A hedge fund manager told Reuters the index would have fallen 2,000 points if investors believed it could pass.

For owners of ASX 200 shares, capital gains are treated as taxable income in Australia. The exception to this is that for any shares owned for at least a year, the net gain is discounted by half for individuals and a third for self-managed super funds. There is no discount for companies. As well, shareholders may be entitled to a franking credit refund if they were paid any fully franked dividends, depending on individual circumstances.

What, if anything, does The President’s latest proposal, and the reaction to it from US investors, mean for the ASX 200?

Tax changes in the US and the ASX 200

Motley Fool Australia’s own chief investment officer, Scott Phillips, says there may be some pain for shareholders in the short term.

“I think it’s common for the ASX to follow US markets, almost slavishly,” Phillips said. “The old saying is when America sneezes, Australia catches a cold.”

Phillips also pointed out there are a few ASX 200 companies that have operations and investments in the US. As well, he says large US investors hold shares in Australia and may offload them with their US stock. When there are more shares being sold than bought, it brings down prices. In economics, this is called the law of supply and demand.

In the long-term, however, Scott Phillips says ASX shareholders should have little to worry about over last night’s US market sell-off.

“There is no real fundamental basis [for the capital gains tax changes] to impact Australian equity markets.”

“There is little chance of these changes having a long-term impact [on ASX 200 shares],” he added.

Mr Phillips did add that any changes to the corporate tax rate in the US could be “more impactful” to Australian shareholders than possible changes to US capital gains tax.

President Biden and Senate Democrats have raised the idea of increasing the corporate tax rate from its current 21%. The floated tax rate of anywhere between 25-28% would still be lower than the 35% corporate rate that was in place in 2017.

More generally, Phillip’s believes any changes to capital gains taxes shouldn’t be a hindrance to investing in shares.

“[Capital gains] is taxed on profits after they’re realised. You’re still going to make a profit. You may not like paying the tax, but it’s not going to stop people from investing.”

More reading

• 2 strong ASX 200 shares offering good income
• 5 things to watch on the ASX 200 on Friday
• ASX 200 recovers, Redbubble sinks, Megaport jumps
• Wesfarmers’ (ASX:WES) Bunnings open to hosting COVID vaccine hubs
• ASX 200 up 0.2%: AMP sinks, Redbubble crashes, Megaport jumps

Motley Fool contributor Marc Sidarous 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 Bruce Jackson.

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The Oil Search Ltd (ASX: OSH) share price is on the move today following the release of its first quarter update.

In early trade, the energy producer’s shares are down 1.5% to $3.72.

How did Oil Search perform during the first quarter?

For the three months ended 31 March, Oil Search’s total net production came in at 6.9 mmboe.

This was down 2.7% from the fourth quarter and 6.8% from the prior corresponding period. Management advised that production was impacted by an unplanned Hides shutdown.

However, thanks to a sharp rise in realised prices during the quarter, Oil Search recorded first quarter operating revenue of US$301.5 million.

This was up 16% from the fourth quarter. However, with LNG and gas prices still down meaningfully from a year earlier, operating revenue dropped 16% on the prior corresponding period.

Nevertheless, the company finished the period with an improved liquidity position. At the end of March, Oil Search had US$1.57 billion of total liquidity.

What about the rest of FY 2021?

Pleasingly, despite its weak first quarter, Oil Search’s production guidance for FY 2021 remains unchanged.

Another positive is that its investment expenditure guidance has been reduced by between US$75 million and US$95 million. This is being driven by cost savings and the effects of travel restrictions in PNG.

Also remaining unchanged is its unit production costs guidance of US$10.50 to US$11.50 boe.

Though, one item that has been revised higher is its other operating costs guidance. Oil Search now expects these costs to be US$20 million higher than its previous guidance at between US$145 million to US$165 million in FY 2021.

This change has been made to reflect the cost of its hedging program announced in February and for higher royalties and levies resulting from higher realised prices.

Management commentary

Oil Search’s Managing Director Dr. Keiran Wulff said “Oil Search has maintained stable operating performance during the quarter amid challenging logistical conditions imposed by COVID-19 in PNG in particular. With escalating cases in PNG, Oil Search continues to deploy stringent mitigation and protective measures such as strict quarantining of our staff and segregation of our field activities from local communities. Notwithstanding this, Oil Search continues to offer support to the PNG and Australian governments in helping to combat the outbreak.”

“Our operated assets at Moran and Agogo significantly outperformed our budget expectations and helped offset lower PNG LNG production, which was impacted by a short shutdown at Hides. Despite the short shutdown, PNG LNG continued to deliver all long-term contracted cargos.”

More reading

• 5 things to watch on the ASX 200 on Thursday
• Why ASX mining shares are likely to jump this morning
• ASX 200 energy shares outlook boosted by mega African oil project
• ASX energy companies drained value as Suez Canal reopened
• The ASX sector set to outperform this morning thanks to Suez

Motley Fool contributor James Mickleboro 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 Bruce Jackson.

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The AMP Ltd (ASX: AMP) share price is pushing higher on Friday morning.

At the time of writing, the financial services company’s shares are up 3% to $1.16.

Why is the AMP share price pushing higher?

Investors have been buying AMP shares after it followed in the footsteps of AGL Energy Limited (ASX: AGL) and Telstra Corporation Ltd (ASX: TLS) by announcing demerger plans.

According to the release, the company intends to pursue a demerger of AMP Capital’s Private Markets business of infrastructure equity, infrastructure debt and real estate.

Management explained that the proposed demerger follows a decision by the AMP Board to conclude discussions with Ares Management Corporation regarding a potential sale of Private Markets.

What will the demerger look like?

The release explains that the demerger would create two focused businesses, better equipped to pursue and allocate capital to distinct growth opportunities and realise efficiencies.

AMP Limited will be a retail-focused, wealth management, investment and banking group with scale and market-leading positions in the Australian and New Zealand markets and strategic investments in key international partnerships.

It will also retain a minority stake in Private Markets of up to 20% to participate in the future growth of the business.

Furthermore, it will retain AMP Capital’s Global Equity and Fixed Income (GEFI) business for at least the time being. AMP is currently exploring sale or partnership options for this business.

Similarly, it will be home to AMP Capital’s Multi-Asset Group, which is in the process of being transferred to the AMP Australia business

Whereas the new Private Markets business will be a leading global private markets investment manager with a strong performance track record in differentiated asset classes of infrastructure equity, infrastructure debt and real estate, and capabilities to expand into attractive growth adjacencies.

In addition, management believes the proposed demerger would unlock further value in the Private Markets business by simplifying its structure, providing operational independence and enabling it to establish a new brand. Private Markets will also put in place a new management equity plan, to attract and retain talented investment professionals and management.

“Significantly benefit both business units”

AMP’s Chair, Debra Hazelton, commented: “Our portfolio review confirmed that AMP has two distinct businesses in retail wealth and institutional private markets, with different client bases and growth opportunities. From the extensive work that has been done we believe that operational and structural separation will significantly benefit both business units. The Private Markets business operates in growing, global markets in which investment management talent and strong client relationships are critical. While AMP Australia and New Zealand Wealth Management share the same commitment to clients, they are predominantly domestic businesses focused on wealth, banking and investment solutions for retail customers.”

“Through our review, we assessed the alternatives of a sale or separation for Private Markets and found both options would support the acceleration of growth in the business. We have had substantial and constructive discussions with Ares regarding a sale, however, we have not been able to reach an agreement that would deliver appropriate value for our shareholders. The Board has therefore concluded a demerger provides investors with the strongest value outcome, creating two more focused entities, with the agility to pursue new growth opportunities in their respective markets. We will now accelerate our demerger planning, building on the preliminary work already undertaken.”

More reading

• Why AMP, Challenger, Pilbara Minerals, & Redbubble shares are tumbling lower
• ASX 200 up 0.2%: AMP sinks, Redbubble crashes, Megaport jumps
• AMP (ASX:AMP) share price on watch after Q1 update
• AMP (ASX:AMP) share price hits new 52-week low
• ASX 200 Weekly Wrap: ASX sees 7,000 points once more

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Kogan.com Ltd (ASX: KGN) share price has plummeted in early trade today, dropping 10.4% in the opening moments. That comes after the Aussie online retailer’s latest business update highlighting “strong growth” in multiple metrics.

At the time of writing, the Kogan share price is trading at $11.17 apiece. 

What’s driving the Kogan share price?

Kogan this morning provided an update for the quarter ended 31 March 2021 (Q3 2021).

The Aussie conglomerate reported a more than 47% increase in group gross sales, comprising both Kogan.com and Mighty Ape. Kogan is integrating Mighty Ape after acquiring the Kiwi online retailer for $122 million in December 2020. 

Kogan Group grew by more than 65% during the quarter with gross profit up more than 54% after another strong quarter.

Kogan.com revenue grew by more than 41% with growth across the board. That includes Exclusive Brands growth of 63% and Marketplace revenue up more than 100%. Third Party Brands and Kogan Mobile revenue grew by more than 13% and 23%, respectively.

Kogan reported fluctuating customer demand during the quarter as the company increased its inventory levels. That saw the retail group incur higher storage and demurrage fees for the quarter which could have investors watching the Kogan share price closely.

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) declined by more than 24% during the quarter. That was thanks to increased operating costs and significant investments in marketing and people. There were also increased costs arising from the Mighty Ape acquisition and equity-based compensation expenses.

The Kogan share price is one to watch this morning following the update on its business and customer numbers. Active customers grew by more than 77% to 3,215,000 for Kogan.com with a further 742,000 active customers for Mighty Ape.

Shares in the Aussie retailer performed strongly in 2020 as online retail boomed during the coronavirus pandemic. The Kogan share price is up 78.1% in the last 12 months prior to this morning’s open.

However, the company has seen a 42.5% decline in its valuation since 25 January and is currently trading with a $1.3 billion market capitalisation.

More reading

• 2 dirt cheap ASX shares to buy next week
• 3 stellar ASX growth shares to buy
• Why Kogan (ASX:KGN) should be on your watchlist at this share price
• 3 top ASX shares to buy this week
• This could be boosting the Kogan (ASX:KGN) share price today

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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In morning trade, the Core Lithium Ltd (ASX: CXO) share price is shooting higher.

At the time of writing, the Northern Territory-based lithium developer’s shares are up 8% to 27.5 cents.

Why is the Core Lithium share price shooting higher?

Investors have been buying Core Lithium’s shares this morning following the release of a very positive announcement.

According to the release, new geophysical surveys have successfully shown a strong correlation with lithium pegmatite distribution within its wholly owned Finniss Lithium Project.

The company notes that gravity geophysics is now considered an important tool for mapping lithium rich pegmatites within the Finnis pegmatite field.

The Finniss Gravity survey, which was co-funded by the Northern Territory Government, has identified a major NNE-trending gravity high and potential lithium-pegmatite corridor.

Management believes there is no reason to believe that these known lithium pegmatite groups are unique clusters. Rather, it believes it is far more likely that the currently defined distribution of pegmatites identified to date in this belt are due to large tracts of prospective ground which are covered by laterite or soil cover that have not been effectively explored yet.

What’s next?

Core Lithium will now commence with follow-up detailed gravity surveys during the current quarter over key target areas. The company notes that these areas have the potential to directly identify pegmatite drill targets and focus its upcoming exploration and drilling campaigns.

Core Lithium’s Managing Director, Stephen Biggins, said: “This new gravity survey, cooperatively co-funded with the NT Government, has shown to be a real gamechanger for lithium exploration in the NT. The Finniss Gravity Survey has identified new key target areas and we planning follow-up gravity surveys alongside our huge lithium exploration and resource drilling push starting in May.”

“In parallel with anticipated resource growth from the Project, Core is finalising key commercial and financial Project milestones to enable the Company to reach FID [final investment decision] next Quarter,” he concluded.

More reading

• ASX lithium shares are surging across the board. Here’s why
• Here’s why the Core Lithium (ASX:CXO) share price is charging higher

Motley Fool contributor James Mickleboro 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 Bruce Jackson.

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