Loyal Lithium (ASX: LLI) shares jumped 62% this morning on their relisting on the ASX. They’d been suspended for 4 months given their breach of Chapter 1 and 2 conditions. So, that’s all sorted out, the necessary incentive structures are in place, money has been raised and so attention now shifts to, well, are they going to find economic amounts of lithium? That is, everything else that can go wrong with a junior miner has now been dealt with. At least for the moment that is. Valuations therefore depend near exclusively on the lithium content of the prospective property.
Things are looking good at this stage for Loyal Lithium: “Exploration underway at Loyal Lithium’s advanced, high-grade Hidden Lake Lithium Project near Yellowknife, Northwest Territories, Canada. Acquisition of high-resolution satellite imagery has identified numerous
unsampled pegmatites confirming the underexplored nature of the Project. Newly identified pegmatite targets are in addition to the existing four spodumene rich dykes that were drilled in 2018 to a limited depth of 30-50 metres, with all drill holes intercepting high-grade spodumene of up to 1.81% Li2O.” At this stage of course we don’t know whether that’s just a few nice rocks or an indication of an economic deposit. That’s what this next stage of exploration is all about. The results so far are definitely interesting which is why it’s worth spending the extra money on doing that further exploration.
Loyal Lithium share price from Google Finance
Finding an economic resource would indeed boost the current market capitalisation of $35 million or so - in those bijou Australian dollars. But then that’s what the bet here is - will enough lithium be found to be economic?
Worth noting something that we keep saying about the lithium market. We expect the price to fall substantially over time. Yes, we know, EVs and electrifying the world. On the other hand there’s an awful lot of lithium out there and we expect the scarcity value of economic deposits to fade away. Still money to be made in mining, but not the vast margins current producers are making. Perhaps - at least that’s our analysis. And we can link this into Loyal Lithium. Because why was exploration stopped in 2018? Because that’s the last time the lithium price slumped after the last lithium price boom. Exactly the event that allowed Pilbara Minerals to buy up Altura.
This is why we keep saying that while lithium miners are a very interesting speculative sector they’re simply not investments. None of them are buy and forget stocks or shares - any position needs to be constantly managed.
