The Core Lithium Ltd (ASX: CXO) share price is racing higher on Wednesday morning.

At the time of writing, the lithium miner's shares are up 19% to 8.7 cents.

Why is the Core Lithium share price racing higher?

Investors have been scrambling to buy the company's shares this morning after it revealed that it could soon restart mining activities at the Finniss Lithium Project in the Northern Territory.

According to the release, Core Lithium's restart study confirms the potential for an attractive 20-year mine life. This includes a high confidence production plan with 94% of the first 10 years backed by ore reserves.

The key to the restart will be underground mining. Management advised that it capitalises on the high-grade, continuous and steeply dipping orebodies that are open at depth.

This is expected to lead to a 40% reduction in mining costs to $63 to $72 per tonne from $120 per tonne previously. Whereas processing costs will be cut by 33% to $40 to $46 per tonne from $69 per tonne.

This is ultimately expected to lead to unit operating costs of $690 to $785 per tonne (FOB, SC6 equivalent ex-royalties), which management notes places Finniss among the most competitive global spodumene operations.

What else?

Another positive from the study is that concentrate production is expected to be lifted by 7% to ~205,000 tonnes per annum.

Importantly, to achieve all this, its pre-production capex has been reduced by 29% to $175 million to $200 million. And with free cash flow estimated to be $1.2 billion, management believes it highlights the strength of the reconfigured operation. Though, this is based on an spodumene 6% price of US$1,300 per tonne, which is notably higher than the current spot price of US$735 per tonne.

A restart is still subject to its final investment decision (FID), which requires board approval. It is also contingent on market conditions and securing a suitable funding pathway. Core Lithium reported a cash balance of $30 million at the end of March.

Management commentary

Commenting on the news, Core Lithium's CEO, Paul Brown, said:

The plan we've outlined capitalises on the Project's strengths, including established infrastructure, high-grade ore bodies well-suited to low-cost underground mining and a process plant with proven recoveries and further scope for optimisation. We've undertaken a rigorous, bottom-up review of every aspect of the operation. The Study brings together our operating experience to deliver a plan that is more robust, more efficient and built for the long term.

The Study outlines a lower-cost, longer-life, and scalable operating plan that generates free cash flow of $1.2 billion, representing a six-fold return on pre-production capital. Core has identified a range of opportunities and is considering multiple funding pathways. Our focus is to secure an option that minimises dilution and maximises value for shareholders.

Overall, very positive news for the company. But a significant recovery in spot spodumene prices is likely to be required before an FID will be made.