Vital Metals (ASX: VML) is today's example of how the general excitement about rare earths is misplaced. Yes, sure, we're going, as a civilisation, to need lots more of them. Prices are indeed elevated at present, to ridiculous levels for some of them. But it's also true that rare earths are neither rare nor earths. There're a lot of them out there - just one of them, cerium, is more abundant than copper. This means that despite the electric revolution, all those cars and windmills requiring magnets, only the very best rare earth projects are going to succeed.
This is important for us all to grasp. That demand rises for a mineral or element does not mean that all trying to mine it are therefore going to succeed. The world doesn't work like that, it's simply too large, with too many rocks in it, for that to be true. The real determinant of who makes money in the mining world is not resource scarcity, it's how many other people are trying to do the same thing? With rare earths there are hundreds - no, really - of projects on drawing boards. This means that only the very best of them are going to make money. There will be many, like Vital here, who realise that it's not a viable line of business.
Vital Metals share price from ASX
Vital's specific announcement contains this line: “Subsequent review of the economic viability of mining and beneficiating ore at North T has indicated that the scale of operations and associated unit operating costs will not achieve positive cashflow from the project”
There are rare earths in that rock. The technology to mine, extract and process them already exists. It's just not profitable to do so. Not even at today's elevated prices. Which is the very interesting lesson for today. For this is true of all mining, not just rare earths. A place or company might have some very interesting rock with some lively metals in it. As with Vital here. But what matters is the cost of getting it out as compared with the revenues gained by doing so. Those revenues will depend upon what everyone else is doing and the more trying then the lower they will be. There's actually nothing at all wrong with Vital's deposit. It's just that so many other people are doing something similar that there's no money to be made.