Infinity Lithium (ASX: INF) is an early stage lithium miner - quite the fashionable thing to be these days. Being early stage there's a large leverage on the share price. Everything depends upon opinions about revenues off into the future. So, gaining a key permit in Spain adds value - without the permit there's little to no value in that project, with it there might be. We can also think of it as the issuance of their permit reducing to zero the uncertainty of the permit being issued or not - a reduction in uncertainty is value addition.
Infinity's 59% jump could be seen as excessive, then again it might continue. But the argument for it being excessive is that this is just an exploration permit. This is not the licence required to go mining. This is the licence necessary to be allowed to go look to see if mining would be a good idea. Lithium geology is simply enough that it's likely that exploitation will follow this exploration, but it's still no certainty. Nor is the issuance, in due time, of an exploitation licence ensured. Again, it's likely, for if exploration is to be allowed in an area it's likely that exploitation of what is found will also be.
Infinity Lithium share price from ASX
It's worth looking at that share price chart before this latest soaring. It follows, as it logically should do, the lithium price over the same period. Which is, despite all this electric vehicle revolution, falling - it's about 40% down off recent highs. The reason for this is one of those things we've all got to know about mining and minor metals. The Earth's a big place, there're lots and lots of each and every type of mineral in it. The shortage is always of people actually mining it, not of places where it's possible to go mining.
So, when demand rises and prices do the two together create a flood of people looking to open new mines for that mineral. Often enough to the point where new supply becomes greater than new demand - prices this crash again. We've seen this before in lithium itself, there was a run up in 2013 in the Li price, news mines got funded and by 2020 or so some of them were already going bust in the face of now lower prices.
Mining, especially of minor metals, is a hugely cyclical industry. There are very few invest and forget stocks and shares out there, all positions must be constantly monitored. Simply because the high prices which make current profits so vast are exactly what calls into existence the competition that will then crash prices in the fulness of time.
