Wildcat Resources (ASX: WC8) shares are now up 1,200% on the year. More than anything else the company was a shell until May and the announcement of the Tabba Tabba deal. Since when we’ve had this soaring share price. The reason for that is that there seems to be a good chance of a decent lithium find at Tabba Tabba. Perhaps we should correct that slightly - we know there’s lithium there because there always is. What matters is whether there’s lithium at Tabba Tabba in economic quantity. Enough to make it worthwhile going mining and all that.
From the two weeks back quarterly report we get: “On the 17th May 20231 the Company announced it had entered into a binding agreement to acquire the Tabba Tabba Lithum-Tantalum Project from Global Advanced Metals (GAM). Tabba Tabba represents a transformational opportunity for Wildcat, with potential for a major lithium discovery, proximal to port, and most significantly, located on granted mining tenements.” Note how conditional that all is. The deal’s done but that’s the only certain thing there. Everything else is that hope value, the hopium that there’s considerable lithium there.
The latest announcement is: “Wildcat Resources Limited (ASX: WC8) (“Wildcat” or the “Company”) is pleased to announce that RC drilling is progressing well at the Tabba Tabba Lithium Tantalum Project near Port Hedland, WA 1. The phase one drill program has been
significantly expanded, a second RC drill rig has been contracted and will be
mobilised to site to commence drilling in mid-August” That alone has put the share price up 18%. It’s possible to think that this is a little too much hopium being added to not quite enough information. Wildcat Resources is currently worth $170 million and change - admittedly in those bijou Australian dollars but still.
It is of course possible that there is some vast lithium field to be discovered at Tabba Tabba. But we do run with our earlier view of Wildcat Resources: “The point here being that we've a lot of people shouting that there's not enough lithium around to feed the electric battery revolution. That's why the lithium price is up 10x on three years back. But we do need to try to grasp whether there really is a lithium shortage - or just a shortage of people currently digging it up. There's definitely a shortage of current supply, yes. But is there a long term shortage of deposits rich enough to be worth digging up at current or likely future prices? That's the question which will determine the economic rent, the mineral value, applied to minerals still in the ground that contain lithium.
“The point here, for non-mining specialists, is that we've got a deposit which is known to contain lithium - this sort of rock just does - but which no one has bothered to check before. At which point we'll have to assume that there's more of it out there too. That is, there's no long term shortage of lithium. We need to adjust our valuations of lithium explorers by that fact.”
We think there’s an awful lot more lithium out there than the market generally and currently thinks. We expect the scarcity value of lithium finds to decline therefore - yes, even though usage is to grow by leaps and bounds.