Victory Metals (ASX: VTM) shares are down 34% on the release of their exploration results at North Stanmore. This might sound more than a bit unfair as those results are, in fact, pretty good. But they’re not quite as good as people were thinking they might be - therefore some of that hope value of the shares leaks out.
This is something we really much remember when looking at “hope” stocks. Things like development pharma, junior miners and so on. The value in them lies in what they might find out - this drug works, that set of rocks is valuable or not. The funding provided to them by us shareholders is there to go and find out these things. So, all of the value is a hope value. It’s that the drug does work, the rocks are valuable. Sometimes they don’t or they’re not, obviously, that’s rather the point of spending the money to find out.
But it’s also clearly - logically at least - possible for that hope value to get ahead of reality. So, when the results come in and they’re middling to OK to good then the share price falls - because that share price already incorporated the hope that the results were going to be excellent.
Victory Metals share price from Google Finance
Which leads us to the announcement from Victory Metals: “Initial Inferred Mineral Resource of 250Mt at 520ppm Total Rare Earth Oxide (‘TREYO’), containing 130,000t of contained TREYO, estimated at Victory’s North Stanmore Rare Earth Element (‘REE’) Project.
Substantial (33%) heavy rare earth oxide (‘HREO’) to TREYO percentage,
positioning it as one of Australia’s most enriched HREO deposits.” There’s nothing wrong with those results. “High percentage of critical magnet metals Dysprosium (‘Dy’) and Terbium
(‘Tb’) totalling 3.6%, and Neodymium (‘Nd’) and Praseodymium (‘Pr’) combined totalling 21.5% TREYO.” That’s rather good in fact.
The find - of course, still an inferred resource - hits all the right notes for a rare earth deposit. An ionic clay, easy to process. High heavy and magnet metals to loss makers like cerium and lanthanum. What’s not to like about this?
Well, one thing could be that this makes a round dozen of such announcements on the ASX alone by our count - that’s in just the past 6 months. OD6, Heavy Rare Earths and all the others. If people keep finding these ionic clay rare earth deposits then of course the scarcity value of each individual one declines.
The real issue here at Victory though is just that everyone was hoping the results would be even better. That was already built into the price - the results weren’t even better, so a price fall.
