Pinnacle Minerals (ASX: PIM) shares are up 60% on the very early stage deal they’ve just made at James Bay in Canada. Yes, it’s true that lithium deposits are worth money these days. Yes, it’s also true that James Bay is looking like it might become a whole new lithium province. But the really important points here are that this is a very early stage deal and also that Pinnacle is a tiny, tiny, company. There’s some prospective value in the deal being done, some “hopium” that there’s significant lithium there. But the 60% rise stems from the tiny size of PIM itself.
The deal: “Pinnacle Minerals Ltd (ASX: PIM) (“Pinnacle”, the “Company”) is pleased to announce that it has entered into a conditional agreement with a subsidiary of Waratah’s Electrification and Decarbonization AIE LP fund (Vendor), to acquire a 75% interest in the Adina East Lithium Project in the prolific lithium region of James Bay, Quebec, Canada (“Project”) (the “Acquisition”). The Project claims cover 72.7km2, bordering an interpreted extension of the Trieste Greenstone Belt and is located 24km from Winsome Resources’ (ASX.WR1) Adina Project which recorded 1.34% Li2O over 107.6m1 and grades up to up to 4.89% Li2O2. The Project is also adjacent to the Loyal Lithium (LLI.ASX) Trieste Project and the Winsome Resources (WR1.ASX) Tilly Project.”
It’s possible to go through further details like lithium royalties and so on but not important. For what we’ve got here is the purchase of exploration rights. And that’s all we’ve got here. There’s no actual, direct, evidence that there’s anything worthwhile or valuable here at all. Everything is indirect.
Pinnacle Minerals share price from Google Finance
The evidence is that other people have found lithium at James Bay. There is no even evidence that this area being transferred here contains even spodumene, let alone lithium. The level of exploration to be done is that they’re aerial surveys showing where pegmatites which might be worth testing are. As Fin Resources shows us the possibility has value. But the level of proof really is just those guys over there have found some so maybe there’s some here too?
Gaining such exploration rights does have value, certainly. But the 60% rise is because we’re starting from a market cap for Pinnacle in the low digit millions. The value added is therefore in the low single digit millions. About right.
We’ve looked before at Pinnacle Minerals: “Pinnacle Minerals (ASX: PIM) shares are up 30% on a couple of days, 13% down today, on the announcement of rare earth mineralisation at one of PIM's prospects. The share price is likely to remain volatile too as people try to work out what to make of the find. Matters are very preliminary and it's not entirely obvious exactly what has been found. It's still, thus, far too early to be able to say that this is an economic find, one that will progress to being mined. On the other hand, for a company the size of Pinnacle, to find something that's worth properly investigating is a victory of sorts. “
The same is true of this lithium deal. Sure there’s a value there but the percentage increase is because of the low starting value of Pinnacle itself.
