Solis Minerals (ASX: SLM) (OTCQB: SLMFF) shares are down 43% today. SLM shares seem to have fallen simply on disappointment - which is a fairly harsh verdict if we're honest about it. Solis is conducting an earn in on the Jaguar claims in Brazil. Spending enough of that exploration will earn them 100% of the deposit, which is a fair enough deal. However, that actually having a value does rather depend on their being an economic spodumene (for that's the lithium mineral they're chasing) deposit there.
The first drilling results are in from Solis: “Diamond drilling at the Jaguar project is ongoing with three drillholes now completed. As the orientation dip and plunge of the mineralised portion of the first pegmatite target was unclear from outcropping mineralisation, drilling was planned from both the hanging wall and footwall locations North and South of the pit. Drillhole JADDH00001 did not intercept the core of the pegmatite due to incorrect drill orientation. JADDH00002 and JADDH00003 both successfully intersected broad intervals of shallow dipping pegmatite below the existing artisanal workings at Jaguar.” getting the direction of one of the drills wrong is not a good look but everyone's allowed the occasional mistake. And they have actually found spodumene. Although they're careful to point out that until they've got the full analysis of the samples back it's not possible to know how lithium bearing that spodumene is.
Solis Minerals share price from ASXAs we can see Solis shares have given up more than 50% of their peak value in the last few days. As we've said before about SLM shares: “We have indicated before (as with Coolabah, Leo Lithium) that we're not quite sure how long this lithium boom is going to last. Yes, we know, the world is going to use a lot more of it. But the world seems to be finding ever more of it. We know of hundreds - no, hundreds - of lithium exploration companies and many are finding deposits economic at current price levels. That means we think that supply will, in time, expand to more than cover the increased demand and that the price will therefore drop in that medium term future.” We're unsure about the direction of the whole sector that is.
We were also confused about Solis: “Solis Minerals (ASX: SLM) shares are up another 35% this morning on the announcement that they have issued more shares to raise $8.15 million. This is something of an oddity. For when there are more shares in issue there is a greater supply - therefore the price usually goes down. Sometimes, only sometimes, we see the opposite as here at Solis. The share price rising on the issuance of more of them.”
The way we read this is that - as with that SLM share price rising on the issuance of more of them - the Solis price simply got away from itself, far too much excitement generally. So, when the news of the drill results came in a rethink. Those aren't bad drill results, they're fine for this stage. But they're also not immediately excellent which is what would be needed to support the former valuation.