Arizona Lithium (ASX: AZL) shares have jumped 28% today on what we regard as less than exciting news. It is, of course, markets that are right, not us. But still a 28% jump in AZL: shares looks to us to be overdoing things. For the essential message here is that the company has deployed a known to work technology. And, umm, yes? Where’s the news in that?
And yes, that is what the issue is: “As announced on 3 November 2023, AZL received the third party Direct Lithium Extraction (DLE) pilot plant at its facility in Saskatchewan, Canada, with successful commissioning being completed in under 7 days. The Company has previously produced high purity lithium using this DLE technology, and anticipates producing
larger quantities of high purity lithium as a result of the pilot. As announced, AZL has been undertaking ongoing development of the Company’s Direct Lithium Extraction (DLE) technology at the LRC, with testing also ongoing for AZL’s proprietary DLE technology with third party technologies.”
Now, being able to produce lithium from brines is interesting. We tend to thing that it’s the part of the business that will still survive if - as we expect to happen - the spodumene market becomes oversupplied. It’s also true that using the traditional bine methods of evaporation aren’t going to work so well in Canada - so DLE is a good alternative.
Arizona Lithium share price from Google Finance
But this is also the deployment - in pilot plant only form at present - of an already known to work technology. In this sense it’s about as exciting noting that they’ve sent a few trucks up there. Sure, we know, trucks work, and?
Now yes, that’s us being a bit grumpy about this but there is a real point here. DLE extraction from brines is known to work. So using DLE on brines should not be thought of as price moving information. If it does move prices then we should go on to suspect that there’s a bit too much hope value being built into the AZL share price. If a share price moves when, arguably, it objectively shouldn’t then we might suspect an excess of trading hope that is.
Actually going into production would indeed be value additive. But this specific news we tend to think is having too much weight put on it.