Down 40% on Tuesday — then up 15% the next day — the Atlantic Lithium (LSE:ALL) share price had a topsy-turvy week. Large price movements always attract my attention, so I’m keen to learn more about this AIM-listed mining company.
Going green
Atlantic Lithium is seeking to develop Ghana’s first lithium mine. The West African country wants to supplement its oil exports with metals used in cleaner forms of technology. In February, Li-Bridge claimed that global demand for lithium batteries will grow five-fold by 2030.
Last week, Atlantic Lithium claimed that a “false and misleading” and “factually untrue” report had been issued by Blue Orca Capital.
The report focuses on the activities of the company itself and, its partner and shareholder, Piedmont Lithium. The document contains serious allegations against Atlantic Lithium. Blue Orca wrote: “We found evidence that mining licences in Ghana were obtained through what appears to be textbook corruption.”
According to Atlantic Lithium, Blue Orca stands to profit from a fall in the Piedmont share price because it was short selling the stock. Shorting involves borrowing shares in the hope that they’ll decrease in value.
One thing not in dispute is that Atlantic Lithium needs Ghana’s parliament to ratify its mining licence. Otherwise it’ll be unable to develop its flagship Ewoyaa Lithium Project. Blue Orca is doubtful that approval will be forthcoming.
Given this uncertainty, I don’t think the company’s shares are a bargain.
Government relationships
It’s not uncommon for mining and oil exploration companies to have difficult relationships with governments. Here are two examples.
GreenX Metals recently sued the Polish government for £737m. The company alleges that Poland breached its obligations under international treaties by blocking the development of Green X’s two coal mining projects. A decision has been reached by a tribunal, but neither party knows what the outcome is. The company has a market cap of just over £100m. A decision in its favour is therefore likely to significantly boost its share price.
Rockhopper Exploration has successfully sued the Italian government after it introduced a ban on offshore oil and gas drilling. The decision meant the company was unable to exploit its oil field in the Mediterranean. The company has been awarded €190m in damages plus interest — this is six times’ more than the company’s initial investment. Not surprisingly, Italy is appealing the ruling.
What do I think?
Making an investment in these companies would be far too speculative for me.
I prefer stocks of companies that are more established, such as those in the FTSE 100. Some investors consider these unexciting and, possibly, boring. But as Warren Buffett once said: “Beware the investment activity that produces applause; the great moves are usually greeted by yawns“.
There are plenty of mining and oil and gas companies in the Footsie. Many have licences and drilling rights that are not subject to legal action, or in dispute. If I had some spare cash, I’d be looking to invest in the stocks of some of these. Especially the ones that are paying a generous dividend.
