Alba Minerals Up 11%, Back To 4% Down – Why?

Alba Mineral Resources (LON: ALBA) shares were up 11% at one point this morning and are now back to being 4% down. Why is this? What prompted the rise and then the fall back? Or, to put this another way, what is required to get that ALBA share price motoring? For the news announced this morning does, on the face of it, look good. For a small and junior miner to be making a presentation with VOX is good news – getting the word out. Also, they've now closed out the Clogau acquisition. Aren't these supposed to be value generative activities?

The answer is that the market just doesn't quite see it that way. That's also a statement of the obvious for it is share price moves which determine whether something is value additive or not. So, our task is to try and work out whether we think the market reaction here is wrong or not. Is the news, are the fundamentals, such that the price should be moving the other way, or faster, or what?

There the answer is complex. Alba Minerals has some thumbs in interesting pies, that's certainly true. Alba has a significant position in Greenroc (LON: GROC) which seems to have indications of graphite in Greenland. There's also the buying out of the JV partner in Clogau, the Welsh gold mine. Which we'll come to for it's one of those stock market lessons.

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The Vox news is interesting but not really material. The Clogau news is material – but we've known about it for some time. It's long been true that as new extraction technologies are developed the best place to go prospecting is in the waste piles of the last attempts at mining. We were told Alba would be doing this back in March. The results looked promising and there was a share price bump then.

Then a week back Alba Minerals announced it would be buying out the JV partner and also two thirds of the royalty over-ride. OK, that concentrated more of the benefits of the project into the one set of hands. It's possible to ponder whether the price paid was entirely appropriate and all that but it's not obviously a bad idea.

So, why the weakness in the Alba share price as the news of the deal completion comes true? Well, there is that stock market adage, buy the rumour, sell the fact. Stock prices include all the information we already have. So, the tale that the JV would be bought out was already accounted for. That it has happened, well, that's olds now.

It's also possible that the completion of the deal has concentrated minds upon the details of it. As above, remining old spoil piles has long been a profitable enterprise as technology marches on. But that does also depend upon the size of the spoil piles. Clogau – Wales as a whole in fact – has long been a gold producer but it's not been one in any vast volume. So while the deal may well work it's not obvious that it will be large.