Sayona Mining (ASX: SYA) (OTCQB: SYAXF) shares are down another 12% today. SYA shares should be, by one view of how the market works, soaring, Lithium, that white gold, is absolutely the market flavour of the month, the year. Companies like Errawarra note even a hint of it in their fields and their price soars. Sayona not just has actual proven lithium mineralisation, it’s extracting it and shipping the concentrate. It’s actually generating revenue from that very lithium that is so fashionable. Yet the SYA share price is in general and gentle decline. So, what’s going on here?
One aspect of this is just that old market adage, buy the rumour and sell the fact. The excitement of what might be about to come often does drive a share price up over objective value. Meaning that when the news arrives then there’s a reconsideration - well, hmm, so it’s not actually that, that, exciting, is it? - and we see something of a reversion. While that would explain what’s happening here that might not be all of it. There’s a more controversial theory that floats around the mining industry which could be the cause here.
Sayona Mining share price from Google Finance
The thing is that Sayona is now actually shipping lithium concentrate. There’s that offtake contract with Piedmont all settled and working. So, what excitement is there left?
At which point that odd little theory. That there’s a cycle to investors in mining companies. At the exploration stage - with junior miners looking for, but not producing, the metal or mineral - the shareholding register is dominated by speculators. People moving in and out as rumours swirl about what might be found and so on. They’re there for the excitement, for the possible capital gains. Well, OK - and for a mature miner there’s very little of such excitement. The arrival of the definitive feasibility study tells us how much there is to be mined, once production starts there aren’t really any great surprises likely. Which means that the speculators lose interest and move off to the next generation of juniors.
What should then happen is that the long term investors arrive. Those looking for steady share prices and dividends - the earnings from the mining. But, and here’s the theory, the speculators leave before the investors arrive. Thus there’s a cycle here. A low point after production starts in a mine. Once actual profits start to be announced then the investors turn up and the share price rises again.
Now, if we believe that theory then we’ve our explanation for what’s happening at Sayona. But it does depend upon us believing that the investors are late turning up after the speculators have left.
