Galileo Resources (LON: GLR) shares are up 11% this morning. GLR shares have risen on the announcement of a lithium find. Or, at least, the confirmation that there’s lithium in the area they’re looking in. Yes, of course, we all know that lithium is the new white gold, the world needs much much more of it and a decent lithium find is worth a fortune.
Well, we have views on that, so much lithium is being found that we’re not sure the scarcity value of it is going to hold up. We can see that current producers will be able to capture the current high prices but we have more than just a feeling in our water that supply is going to catch up with demand and quite possibly surpass it. That’ll crater the lithium price of course. That’s also a longer term supposition of ours even as we are really pretty sure that it’s going to be true. For explorers right now the interest is in being able to ride the wave of interest.
Galileo Resources share price from Google Finance
The announcement from Galileo: “Strongly positive lithium results from assays of core generated from the first angled drillhole KSDD001 completed at Kamativi. Peak values include 4m @ 1% Li2O from 35m downhole depth including an intercept of 1m at 2.04% Li2O within an 18m-wide pegmatite.” Well, and yes, maybe.
The thing is that 2% Li would be a lovely, rich, deposit. But 1% would be not rich at all, in fact on the verges of being economic at all. And we should note that these are peak values.
So, what Galileo is actually announcing is that they’ve got the right sort of rock - pegmatites. Which does contain spodumene. That’s great. But spodumenes do not have to contain lithium in economic quantities. And so far at least we’d put these assay results as being possibly on the wrong side of being an economic deposit. Yes, of course, it’s the one drill hole, it’s the very first set of results. But it isn’t, not by a long way, yet proof of significant value here. The reaction of the Galileo share price might be overdone.