Nickelsearch (ASX: NIS) shares are up 100%. NIS share doubled on the back of agreeing to search their nickel prospect for lithium. Not exactly the two metals we’d expect to find in close proximity but then fashion is fashion and it’s worth being a dedicated follower at times.
The issue is that the next property over does indeed have lithium. And since there’s a mine there, with infrastructure and expertise, why not see if that deposit extends? “An update on progress in assessing lithium potential at its Carlingup Nickel Sulphide Project
(Carlingup) near Ravensthorpe in Western Australia. The Company and Allkem Limited (Allkem) have agreed to work in technical collaboration with respect to the lithium prospectivity of Carlingup. In collaboration, Allkem will review the lithium-related data for Carlingup and advise on target generation and prioritisation. The arrangement is not yet at the level of a formal lithium joint venture and there is no guarantee that the technical collaboration will lead to a formal agreement in the future. NickelSearch will provide updates to the market if the nature of the technical collaboration changes in the future, as per continuous reporting obligations.”
That’s the meat of it and we’re not being unkind in our description of it either. It really is that the mine next door has lithium so let’s have a look and see what we got.
Nickelsearch share price from Google Finance
100% on the share price seems a bit much. But then the market capitalisation is of the $6 million sort of level. So, 100% on that near trivial amount? Yes, we can see that being reasonable.
If there is lithium there then we can see it as being simple enough to mine - there is that other mine right next door with all the infrastructure after all. So that’s a positive.
There’s also our long standing issue with the lithium price itself. We think it’s going to go into oversupply soon enough - yes, even with all those EVs crying out for batteries. “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.” We don’t really see anything that’s going to stop that continuing. There are simply so many new lithium projects out there that we can’t quite see that the scarcity value of a lithium deposit is going to remain.
Yes, from a $5 million valuation finding lithium in quantity would be value additive for Nickelsearch. But we are deeply unconvinced about the market as a whole.
