- Atlantic is drilling for lithium prospects in West Africa
- As is usual with junior miners good results produce share price movements
- Such excitement can fade on further consideration by the market
Atlantic Lithium Ltd (LON: ALL) has seen a run-up recently in its share price. We looked at Atlantic here and there’s been a surge of interest since, the price up 30% at one point. That price rise now seems to be fading away. This is not unusual in mining stocks at this stage of development.
The interest was first created by drilling results – reports on what is actually there, in the ground – from their Nigerian prospect. This was then added to by two reports from their Ghana operations. Atlantic Lithium’s share price jumped that 30% over the three weeks and is now sliding back down again. The question is, well, why?
One answer is that this isn’t unusual in junior mining stocks. It is necessary to prove several things, only one of which is what is the actual mineral content of the deposit being prospected? That’s obviously a precondition of anything interesting happening, there must be something there to mine after all. That’s what those drilling and assay results are about, what’s the lithium content and what’s the volume of what is there?
Those results do indeed seem good but that’s not all there is to it. The particular mineral, spodumene, is well enough known. It’s not going to be necessary to develop a new extraction or processing technology, so that’s one potential barrier already surmounted. It’s possible to wonder about whether the company has the financial resources to bring the project to completion but with lithium in the current environment of excitement about EVs and batteries that’s not a great worry. Any necessary further capital is likely to be available given a reasonable pricing structure to likely production.
So there aren’t any great immediate or grand worries and the deposits being examined look increasingly good. Why doesn’t the Atlantic Lithium share price stay elevated then? Largely because there are so many moving parts to a valuation of a junior miner. The last and big one here being the likely state of the lithium market in 5 and 10 years time as and when – if – these deposits are brought to market. Upon which there are far too many possible influences to be able to be certain.
We do have the results of the last lithium boom facing us – several miners who gained finance back in 2013/4 have gone bust even though their deposits of spodumene were entirely sensible, one was even producing.
We also just don’t know what everyone else is going to do. Chilean lithium production from brines has been held back by odd laws over who may open new mines. The new President, just elected, might change that – certainly there has been talk of an entire rewrite of the country’s mining law in the likely constitutional convention.
Atlantic Lithium’s share price is moved, that is, not by just what the company itself is doing but also what is happening elsewhere. This engenders that volatility which makes trading potentially profitable – but it does require being on the right side of any price movement
Should you invest in Atlantic Lithium shares?
Atlantic Lithium shares are traded on the London stock exchange's AIM market (the alternative investment market), which is the submarket specifically for smaller companies. AIM stocks are attractive to investors as they have tax advantages and smaller companies have the potential to benefit from rapid growth. But are Atlantic Lithium shares the best buy? Our stock market analysts regularly review the market and share their picks for high growth companies
