Wildcat Resources (ASX: WC8) was down 17% today. WC8 shares are also well down off their recent peak - as we said was likely to happen. Wildcat has something, something potentially of value. So, the current value is the future value of it being true times the probability of it being true. The “true” here being an economic deposit of lithium at Tabba Tabba.There’s no specific news driving this share price movement, not from or concerning the company at least. The issue is, we think, a combination of hope and news about the wider lithium market.
As we’ve said before about Wildcat Resources: “ The specific deal that WC8 did looks very good from the point of view of Wildcat shareholders. They took over the Tabba Tabba prospect in return for a share issue. Well, OK, Tabba Tabba might turn out to be a lovely lithium deposit and it might not. The odds are looking good that it will be decent but those are, still, odds. There's a great deal of proof that is still required before anyone can say with any certainty.” Previous exploration in the area did not even test for lithium - so out of fashion was lithium at that time. So, none of us know how much there might be there, whether there will prove to be an economic deposit or not.
Wildcat Resources share price from Google Finance
That hope value of whether there is something worthwhile there is obviously going to vary with the strength of the hope. How much is there there? But there’s another issue as well, as we’ve been saying about WC8: “It is of course possible that there is some vast lithium field to be discovered at Tabba Tabba. But we do run with our earlier view of Wildcat Resources: “The point here being that we've a lot of people shouting that there's not enough lithium around to feed the electric battery revolution. That's why the lithium price is up 10x on three years back. But we do need to try to grasp whether there really is a lithium shortage - or just a shortage of people currently digging it up. There's definitely a shortage of current supply, yes. But is there a long term shortage of deposits rich enough to be worth digging up at current or likely future prices? That's the question which will determine the economic rent, the mineral value, applied to minerals still in the ground that contain lithium.”
And, well, we think the market view is turning here. From the weekend press: “Sky-high prices for lithium carbonate, the key element for batteries that last year surged to $80,000 a tonne when fears over a supply crunch peaked, also played a role. Miners and refiners greenlit projects or maxed out capacity to cash in on the boom, pushing production up and prices down. Lithium carbonate last week traded at $21,000, a 75 per cent fall.” People are noticing what we’ve long been predicting - lithium is likely to move into oversupply.
That does mean that the value of a lithium find is falling. And so might, therefore, the share prices of those who might have a lithium find.
