Alderan Resources (ASX: AL8) shares are up 62% today. AL8 shares have jumped on another one of those deals where a junior miner takes over a prospective lithium territory. Note that this is, as with Errawarra, Sabre and so on, a prospective lithium field. The base geology looks about right, there are certain signals that it might be right but the big issue is that people have found lithium over the next hill or two so why not here? This is, all, prospective, that is. We’ve absolutely no guarantee of an economic lithium deposit here at all. Our own estimation would be that it’s fairly likely that there is, but that’s simply because we think there’s an awful lot of lithium out there.
The announcement: “Alderan Resources Limited (ASX: AL8) (Alderan or the Company) is pleased to announce the execution of a binding share sale agreement to acquire 100% of the issued capital in Parabolic Lithium Pty Ltd (Parabolic) which has the right to acquire a 100% interest in seven lithium exploration projects (together, the Projects) in the mineral resource rich state of Minas Gerais, Brazil (Acquisition). The Projects cover 472km2 and consist of 24 granted exploration licences in seven (7) project areas, Curral de Dentro, Minas Novas, Carai, Catuji, Itaipe, Itambacuri and Governador Valadares. The Projects are all located in and immediately to the south of the area known as ‘Lithium Valley’ in the Eastern Lithium Belt of Eastern Brazil.”
As we say, this is all prospective stuff, largely based on what people are finding in the locality.
Alderan Resources share price from Google Finance
There’s nothing wrong with that as the starting point for where to go prospecting. Further. Alderan’s market capitalisation is only $7.5 million of those small Australian dollars. So a 60% rise is a value of near $4 million. Yes, being able to take on such prospective lithium territory probably is worth that sort of sum. Or at least could be - we’re not confirming the valuation here, just noting that it’s not ridiculous.
Our own long held view is that people are finding so much lithium - including in this Brazilian area - that the scarcity value of lithium deposits is likely to disappear. There will still be value to be applied to the richer deposits but average run of the mill spodumene deposits will, we think, decline in value to where people make normal returns on capital but no excess due to lithium rarity or scarcity.
This means there’s still value to a good lithium find - but it needs to be a good one.
