Fin Resources (ASX: FIN) shares are now up 130% since they announced their lithium find in Canada. Except, of course, they’ve not actually announced a lithium find as yet. The sequence runs that first you need to find pegmatites, which FIN has done. Then you need to find spodumene in the pegmatities, which they have done. Then, you need to be able to show that there’s a significant level of lithium in the spodumene in your pegmatites. Which Fin Resources hasn’t done as yet. Finally, you then need to show that there’s enough of this that is rich enough to make it worth going mining. So we’re about halfway through the programme that leads to actual and real value having been discovered.
As we’ve said before about Fin Resources: “Fin Resources (ASX: FIN) shares are up 82% on a lithium find. Although that’s still a bit premature actually, FIN shares are up on finding abundant evidence of spodumene, the mineral that often contains lithium. So to state that there’s a large lithium find here would be a bit premature. They’ve found the right type of rock, within which is the right type of mineral. It remains to be seen whether that mineral contains appreciable lithium. The odds are good, obviously, but it’s not certain as yet.”
In an economic sense we’d probably model FIN shares as an option on there being a substantial lithium deposit worth mining.
Fin Resources share price from Google Finance
As we know - or should know - options are hugely more volatile than straight equity. Yes, we know, this is the straight equity, but we’re comparing in the economic sense. Fin Resources started all of this worth perhaps $8 million. A substantial lithium find would be worth many multiples of that. So, we’re seeing the share price move as if it were an option on there really being that lithium there - or not, of course. Volatility works both ways.
Resolving that volatility and uncertainty requires awaiting the analysis of that spodumene. Until then we’ve got to work by analogy, as is being done here: “Lithium-hunting junior Fin Resources, which made an April entry into the James Bay white gold rush, is one of the better-performing resources stocks on the ASX this morning with a +20% daily gain. We’re looking for fresh news out of James Bay for FIN today, and have come to rest on this fact: it’s right next door to ASX newcomer James Bay Minerals (ASX:JBY), which just announced five large outcropping pegmatites at its Aqua prospect, part of the La Grande project.”
There are grand expectations for James Bay. But that’s what they are, expectations, and this doesn’t resolve the uncertainty.
