Ozaurum Resources (ASX: OZM) shares are down 22% today. OZM shares are down not because of any announcement, nor some newly revealed problem. Rather, the weekend has produced a chance to have a think about the value of their Brazilian lithium deal. And the answer seems to be that yes, while that’s good it’s perhaps not quite that good. As we’ve been known to note the shares of exploration miners can be a bit too reactive to the announcements of deals and news. Initial surges can often enough unwind at least in part upon more mature consideration.
As to what’s been happening at Ozaurum Resources: “Ozaurum Resources (ASX: OZM) shares are up 1190% on Friday. OZM shares are up on the basis that a gold miner has now bought into a lithium operation in Brazil. That’s the way that fashion works in mining. Demand for a mineral rises, so everyone starts looking for that specific mineral. Here’s it’s spodumene, from which you can make lithium concentrate which is then made into EV batteries. Then territories become fashionable. Here it’s perhaps not so much fashion as someone makes a find and then the area around that then gets looked at. So Azure Minerals has found lithium at Andover, Sabre Minerals has the next bit over, maybe they’ve got lithium too?
There’s excitement about what might be available in Brazil, thus Friday’s announcement: “The Linopolis Jaime Project is located on a strategically held area of over 20 Lithium – Cesium - Tantalum (LCT) bearing pegmatites that have been mined intermittently for tantalite, beryl, tourmaline, brazilianite and feldspar intermittently by the Pacheco family and other artisanal miners for over 50 years. Linopolis Jaime Project spodumene grades of up to 7.36% LiO2 with an average spodumene grade of 6.94% LiO2 confirmed within a +7m wide spodumene zone consisting of at least 20% volume coarse spodumene crystals up to 1m in length mapped over +7m in true width at the Sito do Estevinho underground mine workings.”
Ozaurum Resources share price from Google Finance
There’s no doubt that the deal is value additive. Having access to a prospective lithium deposit is worth more than not having such access. Given the surrounding issues concerning the deposit itself it’s highly likely that there is lithium there too - the question is really how much? Enough to make it worth mining?
But is that deal really worth 190% on the share price? Well, apparently not, it’s worth 140% - which means that decline from the levels reached by people perhaps getting a little overexcited. As we say, this isn’t an unusual share price reaction to a deal in an exploration miner. Something we should keep in mind going forward as we look at other miners than Ozaurum.