After a big surge last week, it seems Lithium Australia NL [ASX:LIT] isn’t done yet.
In case you missed it, this tiny lithium miner was roaring higher last Thursday. Rising on the back of news that Galan Lithium has joined them in evaluating their Greenbushes project in WA.
You can read all about that, right here.
Today though, the LIT share price is on the up again, with shares trading 31.31% higher at time of writing. And the reason for this increase may surprise you…
Getting out of Germany
This morning LIT released an announcement titled: ‘Lithium Australia lessens exposure to European exploration expenditure’.
A roundabout way of saying they’re giving up on some existing rights in Europe. Namely, three mining sites in the middle of Saxony, Germany.
As LIT explains, COVID-19 has brought any work at these sites to a standstill. All while the company continues to pay out money to maintain them.
Therefore, these European sites are just haemorrhaging money for no gain.
LIT has decided to put up with this no longer. Electing not to renew the licence for one site and relinquishing the rights to another. A course of action for the third is still yet to be decided upon. Don’t be surprised if they give up on it as well, though.
Here is what Managing Director Adrian Griffin had to say on the matter:
‘Rationalising the company’s exposure to direct exploration expenditure in Europe is in line with our corporate policy, which has seen a marked reduction in our global exploration footprint and the farm-out of many assets.
‘Our preference is to maintain leverage to battery materials in Europe by applying our proprietary technologies, including lithium extraction, cathode power production and battery recycling, to emerging opportunities.’
Clearly the market was receptive to this change in direction. A decision that should free up some much-needed capital and allow LIT to pursue returns from more promising areas.
What’s next for the LIT share price?
At the very least, we can certainly state that LIT has been decisive with this action.
They clearly have an agenda and a strategy that they aim to deliver upon. One that the market seems to believe will be beneficial for shareholders — at least in the short term.
The challenge for them now is to put this freed up capital and resources to good use. Finding a more immediate way to capitalise upon the lithium boom.
Whether or not they manage that, will only be revealed in due course.
And for investors that aren’t current shareholders, it is telling too. Highlighting once more just how infatuated the market is with the lithium sector right now.
That’s why we’ve put together an entire report on the topic. Explaining precisely why the market for lithium so hot right is now, and how to make the most of it. Including three stock picks to get you started.
Find out more in the full report, right here.
For Money Morning