Delta Lithium (ASX: DLI) is quite the darling of the Australian stock exchange at present. A market valuation of $300 million and change (in AUD, not real ones) and up 23% on the day. The thing is there's no real direct news to support this latest rise. It's implication from what others are finding which isn't quite the same thing. Delta does have its advantages, it looks likely to actually gain revenue by the end of the year. Well, maybe, obviously, but there's a good chance it will. But that's almost certainly not enough to support this current valuation. So, what is?
The latest announcement from the company itself is that some options have been exercised. But that's brought in $1.2 million and change which, at the current exploration spending rate covers about a week of expenses. So that's, while something large enough to have to be reported to the ASX, not really a greatly material issue.
The other thing going on is that other exploration companies - Reach for example - are finding reasonable lithium levels at Gascoyne. Which is near where Delta is also exploring. Well, OK, geology does sometimes work that way, the other side of the hill can be much the same as this one. But that's a bit of s stretch to insist that it always works out that way. Does rather depend upon which mineral is being looked for and all that.
Another way of putting this is that Delta seems to be riding a wave of enthusiasm about lithium finds. Whether that will turn into actual revenues is a little more hazy.
Delta Lithium share price from ASX
Delta is slightly more complex than the average lithium explorer. By taking over an old gold mine - which already has licences to exploit - they might well be able to produce some direct shipping lithium ore found on the same property and export some before the end of the year. But DSO is pretty low value (a recent shipment went for something in the $900 a tonne range from another Australian miner, Core Lithium) and volumes are not going to be large from that source. It's the exploration properties that will produce any long term value. Which is exactly the thing that we're assuming is there because others found something interesting on the other side of the hill. Well, it might be true, sure, but the proof will be in the drilling results.
We'd also point out that we're irredeemable cynics about junior mining stocks. The more articles we see about them in the investing press the less we think of the prospect. Sorry, that's just the way we roll. Because significant marketing to retail investors just does strike us that way.