Iris Metals (ASX: IR1) shares are up 48% today. IR1 shares rose on the report of the finds they’re making at that potential lithium deposit in South Dakota. A first glance would tell us that after the recent relisting Iris is doing all the right things.
The report is that: “Assays from the first 6 drillholes of a 38-hole RC program confirm the potential for economic lithium at the Beecher Project. Results from an additional 32 holes are
pending assay results and are expected to be received in the coming weeks.” There’s more to it than that. The particular area being drilled was, formerly, a lithium producing area back in the 1940s. That there’s material there now is not hugely a surprise. The question really becomes one of whether changes in price and mining technology make it all economic. This is something that may be true but is what is being tested at present.
Our reaction to this is perhaps a little odd but it’s the reaction we’ve got on offer. So many people are finding lithium that perhaps the scarcity value of having a lithium deposit is going to fade. Back to almost nothing is possible. No, this doesn’t then mean that all lithium deposits are then valueless - it’s only that scarcity value we’re talking about fading away. What it would mean would be that other aspects of valuation come into play.#
Iris Metals share price from Google Finance
We’ve talked about this in passing before. For example, with Atlantic Lithium: “ ALL shares are also down 25% on the two days - the base problem being that the government of Ghana seems to be getting greedy. And who could have guessed that that sort of thing might happen?” Mining in an area where government doesn’t keep to consistent rules might not be a good idea. Perpetual Resources is in Brazil, which at least at present seems a reasonable jurisdiction. On the other hand Sayona Mining is actually shipping concentrate and that share price is very boring indeed.
So, if lithium deposits are entirely common, what will change valuations? Location, jurisdiction, licences and so on perhaps? Here Iris Metals has an advantage: “Iris Metals has prospecting rights over quite large areas. But there are those two specific claims where they've already got actual exploitation licences. This means that they can't be tied down for decades by those opposing such mining - they've already got the licences. Given the litigiousness of the American environmentalists this could be important.”
Now, we still don’t know whether the Beecher property is economic or not. But if it is - as with so many others - then Iris does have an advantage in already being licenced to go and also being in the US where mining law is stable.
