The Sunrise Energy Metals Ltd (ASX: SRL) share price is moving lower on Tuesday following a fresh announcement from the company.
At the time of writing, shares are down 2.23% to $7.44. Despite today’s pullback, the stock remains one of the strongest performers on the ASX, up roughly 2,700% over the past 12 months.
So, what did the company announce, and why are investors taking some money off the table?
New geothermal partnership announced
According to the release, Sunrise has teamed up with US-based I-Pulse and Greenvale Mining to deploy a new drilling method in the Millungera Basin in Queensland.
Under the deal, I-Pulse will run the project and spend an initial US$5 million to earn an 80% stake. Sunrise will keep 15%, while Greenvale will hold the remaining 5%.
The aim is to develop geothermal energy using I-Pulse’s drilling technology, which can reach deep underground more efficiently than traditional methods.
Management said early work suggests the Millungera Basin could be one of the most promising geothermal areas in Australia.
Large-scale energy potential highlighted
One of the main takeaways from the update is just how large the potential resource could be.
Data from the Geological Survey of Queensland suggests the basin may hold more than 611,000 petajoules of stored energy. That is roughly equal to around 600 times Australia’s annual electricity use.
Results from existing wells also show higher-than-average heat levels, which supports the case for a large geothermal system.
From here, the companies plan to carry out more studies and drilling to better understand the resource. The goal is to develop it into a steady, emissions-free power source.
Why the share price is falling
Despite the size of the opportunity, today’s share price drop is not unusual.
After a strong run over the past year, it is common to see some investors take profits. The stock has also eased back in recent weeks, which suggests the upward momentum has slowed.
It is also worth noting that the announcement focuses on long-term potential rather than near-term earnings. Without immediate revenue or cash flow, some investors may be less willing to buy in at current levels.
What to watch next
This update adds to Sunrise’s bigger plans, which already include its battery materials projects in New South Wales.
The geothermal deal opens up a new growth opportunity, but it is still early and will take time to develop. More testing, drilling, and funding will likely be needed before it moves further ahead.
In the near term, attention will turn to further updates on exploration work, drilling results, and the project’s commercial development.
The post This ASX stock is up 2,700% in a year. Here’s what’s driving the dip today appeared first on The Motley Fool Australia.
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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.