Torque Metals (ASX: TOR) shares are up 172% today. The TOR share price leaping this much is the result of a deal announced for an option on a prospective lithium property. It has to be said that the prospects for this package of tenements are good - but they are, still, only prospects. There’s a great deal of proof that still needs to go into showing that this is going to be economic to mine.
The announcement itself: “Torque Metals Limited (ASX: TOR), WA Exploration Company, is pleased to announce the signing of exclusive, binding, conditional option agreements to acquire 100% of an extensive and strategic package of tenements adjacent to the
Company’s Paris Gold Camp, with the expanded aggregate holdings to be renamed the Penzance Project (“Penzance”). Highlights include Option secured to acquire 100% of ‘New Dawn’, an unmined Lithium and Tantalum occurrence, 600m along strike of the established Bald Hill lithium-tantalum operation.”
That the folks on the land next door have a viable lithium mine (Bald Hill is regarded as viable and it was mined for tantalum before) is interesting. That some rock chips from this tenement have been up to 6% LiO2 is also interesting. But neither of those are proofs, in the sense we require, that this is a viable mining site. They’re indications, yes, indications in the right direction, but not proofs.
Torque Metals share price from Google Finance
There’s no doubt that this deal is value additive, as it stands, to Torque. Further, if it turns out to be a viable mining site then that’s another value add - some years down the road when that is proven. However, we do have our usual concern about lithium.
As with Sayona Mining (and Sayona again) there are just so many people reporting lithium prospects and lithium finds that we’re not sure what the scarcity value of lithium is any more.
One little secret about mining is that there’s a lot - really, a lot - of any specific metal or mineral out there. When demand rises then people scramble to go find those new and other instances of it. The usual - not certain, but usual - outcome is that supply rises up above demand. So, the first people into the game make very good profits indeed from the early scarcity. Those late to the game might not even mine or get financed as prices slip back to or below their former levels.
We’d not want to have to prove this, formally, but we do think that lithium is getting to this point. If every current find and prospect were mined then the lithium price would be back to where it was three and four years back. Which means that at least some of the prospects and finds never are going to go into production for they’ll not gain finance.
Lithium miners are, to us, something to be traded on sentiment, not investments to be held for the long term.
