Australian Critical Minerals (ASX: ACM) shares are down 49% today. This is on the return from suspension and the publication of their initial sampling findings. We would hesitate to say that these results are terrible in some objective manner. But the share price movement is because they’re not great either. And that’s what has been driving the ACM share price recently - that the upcoming results will be just great. Obviously they will be. Everyone else is finding lithium in the Pilbara, right? And there are active mines, vast profits being made and if that piece of rock over there is worth money then this piece on our land is also worth money. Right?
Well, no, geology doesn’t quite work that way even as that’s a pretty good guide to how it often does work. Which leads to the announced results: “Australian Critical Minerals (ASX: ACM, “Australian Critical Minerals” or “the Company”) a mineral exploration company focused on the exploration and development of critical mineral projects in Western Australia, advises its initial mapping and sampling program confirms lithium prospectivity at the Cooletha Lithium Project. Trace elements and spectral analysis confirms the LCT pegmatite system and has generated 10 priority targets in the untested goldilocks zone.”
Australian Critical Minerals share price from Google Finance
Well, OK, but that’s not very exciting. The problem is that everyone expected that these results would indeed be exciting. Instead of results saying “an LCT system” the hope was for something that said “2% lithium and in volume!” or some such. As it is the rock chips are showing 100ppm Li which is much less exciting. It is, as they say, an indication of an LCT system, not proof of an economic lithium deposit.
This isn’t the end of the road here and it’s not proof of failure. But lots of hopes and dreams do get built into a share price ahead of the announcement of drilling results. And when the actual results don’t live up to those dreams then that hope value disappears, and quickly. The problem is not, objectively, the results themselves, it’s the excess of speculation before them.
