American West Metals (ASX: AW1) (OTCQB: AWMLF) shares are down 22%. AW1 shares are down on what looks, objectively, like a pretty good announcement about their recent copper find. But the thing is that a share price includes not just objective reality but also all the hopes and reams about what might be there as well. So, if objective facts come out and they don’t meet the dreams then the share price can still fall. Of course, this is just another way of retelling that old stock market saying, buy the rumour, sell the facts.
The announcement itself: “Initial assay results from the summer drilling program at the 2750N and 4100N Zones have returned outstanding near-surface high-grade copper intervals including: Drill hole SM23-02 (4100N Zone) has intersected 46m @ 2.2% Cu from 64m, including,15.6m @ 4.2% Cu from 65m, including,0.3m @ 42.8% Cu from 67m” There are also indications of a further deposit at Lightning Ridge.
There’s nothing objectively wrong with any of those results. In fact they’re rather good. So, we might wonder, why has the AW1 share price declined, not risen, on this news? The answer is in the past American West share price rise.
American West Metals share price from Google Finance
That past price rise already included results being as good as this - and better. As we’ve said before about American West Metals: “However, it’s also worth making a slightly more cautious note. This find is very preliminary. It’s most certainly not to be taken as any form of proof. They’ve drilled a few holes, found certain types of rock. But they don’t actually “know” what they’ve found, they’re running by look and little handheld instruments. They’re still waiting for the laboratory to confirm the mineral contents: “ Visual estimates of mineral abundance should never be considered a proxy or substitute for laboratory analyses where concentrations or grades are the factor of principal economic interest. Laboratory assays are required to determine the presence and grade of any contained mineralisation within the reported visual intersections of copper sulphides. Portable XRF is used as an aid in the determination of mineral type and abundance during the geological logging process.” That’s more than just a legal reminder. On the other hand, as we say, copper ores are well known and are pretty easy to test for.”
OK, so now we’ve got more proof of what is there. Which is great. It’s just the share price was already assuming all that new information. And further, assuming more.
As we say, there’s a great deal of truth to that old stock market saying, buy the rumour and sell the facts. For the rumour often will include rather more hope value than is actually justified.
