Tuesday, May 28, 2024


Dhaka Tribune

Atlantic Lithium up 15% - valid or dead cat bounce?

The Wall Street tale is that even a dead cat will bounce if you drop it from high enough. Is this the cause of Atlantic Lithium’s 15% rise this morning? 

Update : 21 Mar 2023, 03:47 PM

Atlantic Lithium (LON: ALL) shares are up 15% but then they've also fallen near 50% in recent days to leave the price down overall. The cause of this is a short selling report from Blue Orca. Their particular interest is not in Atlantic Lithium but in Piedmont Lithium, a major shareholder and hopeful business partner. Piedmont wants the putative output from Atlantic's Ghana lithium mine to feed its processing plant in the US. If the mine doesn't open then Piedmont is both out of luck and some chunk of money.

Blur Orca's claim is that the mining licences in Ghana were obtained by the illegal deployment of cash and brown envelope payments. They are therefore unlikely to stand and Atlantic, and therefore Piedmont, are out of luck. Of course, the idea of bribery in West Africa brings to mind Captain Renault, we're all shocked, shocked

Atlantic Lithium share price from London Stock Exchange

Now, whether this is all true is another matter. Blue Orca seem pretty firm in their statements, but there is that large hole in there. Not only do the allegations have to be true the mining licences also need to be at risk as a result of that being true. It's not obvious that it is true and further, not obvious that the licences would be at risk if it were. West Africa is, after all, West Africa. 

It's possible to assume that this is all storm in teacup. Little to nothing is going to threaten those licences and therefore the Atlantic price will rise back to its previous levels. That 15% rise is probably based upon that very idea. 

However, it's not obvious that lithium is quite as attractive as we all thought it was a couple of months back. For example, talking about Piedmont itself, there are now thoughts that the lithium price is going to come crashing back down. Not because the EV revolution isn't going to happen (although it's possible to have doubts about how much it will happen) but because of the basic structure of metals markets. There's an awful lot more out there of any and every metal or mineral than people usually assume. We never do nor can have an absolute shortage. We can only have a shortage of mines and processing plants. So, the lithium price is indeed falling - down a good 30% so far this year - as more and more future production is announced. Thus stock prices - like Piedmont, Atlantic - based upon future high lithium prices will start to fade.

Whatever we think of the Blue Orca allegations we should be wary of assuming that Atlantic Lithium will jump back to its previous highs. It was always, given the falling lithium price, looking a bit rich anyway.

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