Alba Minerals Shares Down 5% On GreenRoc – Why?

Tim Worstall
Updated: 17 Mar 2022

Key points:

Alba Mineral Resources (LON: ALBA) shares have fallen 5% in London this morning seemingly on the back of an information release. As the data in that release is reasonably good, why do we now see a price decline in Alba shares? The answer comes in earlier news from Alba Minerals.

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The news itself is that GreenRoc, another AIM-listed company that Alba Minerals owns a 54% majority stake in, has released its annual results. In those results are varied pieces of information about the exploration and drilling activities in Greenland, where the company is operating. Those results are, by the standards of junior miners, pretty good. Their graphite prospect is showing good signs of hosting a substantial resource for example. Graphite is in high demand for all these batteries we are going to be using in our cars.

True, mining in Greenland might have its problems. A uranium and rare earths mine in that country was denied its permit recently. Whether such denials are going to extend to all mining, or only to something like uranium, well, that’s a political question. No doubt we’ll find out the answer at some future date.

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But the likely reason for the price movement in Alba Minerals is probably nothing to do with these GreenRoc results. At which point we need a little lesson in an economic theory.

The efficient markets hypothesis says that markets are efficient at processing the information about what prices should be in a market. There are various levels of this, how strong the insistence is. But the weak form of it is agreed by all. The implication of this is that news which is already known is already in the share prices on the stock market. It’s only new information, new news, which changes prices.

GreenRoc has already released those results to the market. The market knows that Alba owns 54% of GreenRoc. So, the information from GreenRoc is already in Alba’s share price. It’s also true that many of the things said in that annual report have been released as information before – the drilling results at the graphite prospect for example.

It is also possible to fight back against this idea. OK, so markets are generally efficient. But there will still be levels of efficiency. The smaller the company the less likely all available information will be processed to be included in the price. This is why we trade these smaller stocks after all, that it is possible to find situations that the market as a whole has not recognised as yet.

There’s a balance between those two points. Here at Alba Minerals it’s is likely that the results from GreenRoc have been so extensively trailed that they really are already in the Alba Minerals share price. The 5% move today is possibly just one of those random market moves that do happen.

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