East Star Resources (LON: EST) shares are up 33% today. This is on the announcement of explorations results in Kazakhstan. We would expect perhaps more of a movement in EST shares as a result of these findings. For East Star is a microcap, even a nanocap. So while 33% is a decent enough percentage rise it’s actually only about £600,000. And that doesn’t seem right if we are to believe these exploration results.
No, that doesn’t mean that we must all therefore buy the shares for they will soar. What it does mean is having to work through why the reaction is muted so as to understand. Only then is it possible to come to an objective valuation of where EST shares should be priced.
The announcement: “East Star Resources Plc (LSE:EST), which is defining mineral resources in Kazakhstan for the energy revolution, is very pleased to announce the results from sampling at the Talovskoye prospect on the Rudny Altai Volcanic Massive Sulphide ("VMS") belt in Kazakhstan. The Talovskoye prospect sits on licence RA1, which is 100% owned by East Star and appears to have many geological similarities to the high-grade current and past producing VMS deposits on the belt. Mapping identifies high-grade Cu/Ag mineralisation only 17km from the Nikolovskoye processing plant. Samples include: 6.30% Cu, 5.19% Pb, 0.81 g/t Au and >100g/t Ag 8.44% Cu, >20% Pb, 1.1 g/t Au and > 100 g/t Ag 2.58% Cu, 11.35% Pb, 3.84 g/t Au and >100 g/t Ag”
Those are nice results. As they go on to point out there’s been considerable small scale mining there before - meaning that the environmental problems are not going to be large. It’s already a disrupted habitat.
East Star Resources share price from Google Finance
We’ve looked before at East Star Resources: “East Star Resources (LON: EST) shares are down 10% today on the announcement of their extraction tests for rare earths. The basic problem here is that the chemistry of rare earths is tricky. This is something that we need to keep in mind when we consider all those other companies claiming ionic clay RE deposits like OD6 and Heavy Rare Earths.
The actual announcement is: “The mineralogy and total rare earth elements (TREE) concentrations of the Talairyk samples are comparable to ion adsorption deposits globally with a kaolinite-dominated mineralogy and 815-5,185 ppm TREE. Single phase leach results from ammonium sulphate have lower recovery with peak results (pH4) demonstrating ~7.5% recovery of NdPr meaning the leachability of the tested samples is not representative of proven ion adsorption clay deposits” and then if they go on to multiple leaches in different styles then they're able to collect the vast majority of the rare earths contained.”
That is, they’ve found interesting deposits in Kazakhstan before and then found, upon further testing, that they’re not quite as wondrous as they first seem. Which might be why the Soviets didn’t dig them up when they had a chance of course. Which is where we think the problem might be. Mr. Market now wants to see extraction results from East Star, not mere exploration results.
