Azure Minerals (ASX: AZS) is up 34% today on very preliminary news of a lithium find. Actually, it's so preliminary that the board has had to release a second information sheet pointing out how preliminary it is. They've got the right mineral but aren't sure how much lithium there is in it. This is value additive, the information so far, but those pesky little details do matter as to how valuable it actually is.
The first announcement is: “EXCEPTIONAL LITHIUM DRILL INTERSECTIONS FROM ANDOVER 105.0m @ 1.26% Li20 in ANDD0208 including 22.8m @ 3.57% Li20” and so on. All of which is nice, except they then also have to make the second release: “The Company wishes to provide clarification that visual observations contained in the announcement issued on 13 June 2023 should not be considered a proxy or substitute for laboratory analysis which is required to determine the widths and grade of any mineralisation
identified in primary geological logging.
The Company also wishes to clarify that the presence of spodumene does not necessarily equate to lithium mineralisation until confirmed by chemical analysis. Furthermore, it is not possible to visually estimate the percentage of lithium mineralisation, and this will be determined by laboratory results reported in full once received, expected in the next two to four weeks.”
That original release was being a little confusing. They've found lots of spodumene, which is good, that's the normal host mineral for lithium. They've also found some spodumene with high lithium contents. That's also good. But it was possible to take away the impression from the first release that they'd found lots of spodumene of high Li content - which isn't the case, at least not yet. More testing needs to be done to see the Li content of the lots they've found. It's all very preliminary that is.
Azure Minerals share price from ASX
Of course, this could - could - on further inspection become a viable and economic lithium deposit. That's probably the way we'd bet on this news too. The next decision point is going to be when those analyses of these samples come back. Anything better than an average of 1.2, perhaps 1.4% Li would likely drive the stock higher again.
However, there is always the thing that keeps concerning us about this market. There are a lot of lithium finds being made. The truth being that there's no actually shortage of the right minerals, only of people currently mining them. Off into that middle distance of a few years in the future we therefore expect the lithium price to return to something like historic norms. That would mean something more like normal profits, not excess, at lithium miners.
Actually, we're entirely certain that this will happen - it's just the timescale that is a bit hazy about this prediction. Lithium miners are therefore things to trade, not to invest in for the long term to our mind.
