"They are fine and are still dating," the spy told the outlet. "Miley has been resting from her vocal surgery but has been in touch and seen Cody recently.
"Miley always made it clear to Cody that she likes to have freedom and he always understood the dynamic of the relationship. They have been friends for years and will always be, and are currently fine and on great terms."
The former Disney star's hectic work schedule and need to rest after undergoing vocal surgery has also kept the couple apart.
"She has a busy schedule and a lot of work commitments that have kept them apart," the source said. "But when they are together there's no doubt they are crazy about each other."
Speculation Miley had called time on her whirlwind romance with Cody also went into overdrive when news broke that she was ready to sit down with Liam and talk things through. A source friendly with the pop sensation and Australian actor revealed they're finally meeting to settle their "messy" divorce.
While it will no doubt be an emotionally charged reunion, Liam is said to have request requested a third party be involved during the process amid speculation Miley "turned into a green-eyed monster" when he confirmed his romance with Maddison Brown.
“They’ve both calmed down now and Liam just wants this chapter done with, so he can move on. Liam was angry and bitter in the beginning, but his family calmed him down and he started to heal— especially when he realised he was falling in love again."
While Miley has "promised to play nice" Liam is said to be fearful the "Slide Away" singer will spiral out of control, with rumours swirling she's been drunk calling Liam every chance she gets.
"Regardless of whether or not they can be friends and act civilly towards each other, at the end of the day, they want to be done with each other with as little drama as possible. And this meeting is the only way to make that happen."
As we know, it's been a trying time for Miley who hit "rock bottom" when she realised her ex-partner of over a decade had unfollowed her on Instagram, just days after he filed for divorce.
According to a well-placed insider who spoke to Radar Online, the Black Mirror actress was "devastated" Liam had totally removed her from his life, with the pal adding "after all that's been happening with her, she had been distracting herself from it all but now she is really feeling it."
“She thought somehow they would find their way back to each other and she was holding on to that, but then Liam unfollowed her and that was his way of saying it’s really done,” they dished. “Yeah, Liam is not turning back. It's quite sad."
While Liam has risen above Miley's petty attempts to make him jealous by flaunting her romance with Cody, it's been revealed he's secretly fuming about the drama that's followed the breakdown of their marriage.
In an unearthed status that was posted to his private Facebook account under the pseudonym Li Hemsworth, he tore into Miley's new beau for trying to befriend him on social media, claiming "this sh*t is hilarious", according to NW.