Future Battery Minerals (ASX: FBM) shares are down 13% on the announcement of more lithium discoveries. This isn't how we normally think hot markets will work but is, in fact, how they do work in the end. It's entirely possible for people, the market, to get caught up in some grand excitement. But reality will eventually out and a sorting process happen.
We all know that the lithium market is terribly sexy right now. All those projections that the entire world will be in battery powered cars real soon now and we need much, much, more lithium to make this happen. Well, OK, maybe. We have our suspicions that efuels are coming up fast on he inside but that's another matter. The result in mining has been that some few currently producing lithium mines are making fortunes out of the current high price. That's OK - but it has also meant that even the sniff of lithium in an exploration project had made the share of that junior (ie, non-producing) miner soar. Well, OK. But at some point there's going to be that necessary sorting process. How many lithium mines do we actually need? How many of all of these exciting exploration projects are actually going to get into production and what will the lithium price be when they do?
The end result of this sorting process will be as always - the truly high grade deposits will be fine, the marginal ones will lose money or perhaps not even go into development at all.
Future Battery Minerals share price from ASX
So Future Battery has found lithium - great, that explains the soaring price. But today we get a further clarification: “New assay results from the Big Red Prospect highlight the potential of the recent discovery with new fresh rock intercepts including: • 23m @ 1.03% Li2O from 53m (KHRC031); • 15m @ 1.03% Li2O from 39m (KHRC029); and • 13m @ 1.23% Li2O from 41m (KHRC030);” Ah, no, that's not so good, d'ye see?
We like to see higher lithium concentrations than that. Not for some objective reason that there's some proper Li amount to have in rock. But rather that many other spodumene finds are in fact higher in Li than that. And quite possibly enough other higher Li contents to be able to entirely supply future demand too.
It's important to grasp this. At current lithium prices that would be just fine to mine - profitable too. But what we're being told is that this isn't in the very first rank of really rich lithium deposits. So, if we do think that there's more than enough lithium out there - that there's no basic scarcity - then the Future Battery story is less appealing.
It is still much too early to be definitive about this but there will be a sorting process in lithium mines. The richer, richest, deposits will do fine, the marginal ones will fall by the wayside.
