Cobra Resources (LON: COBR) shares are up 8% on further details of their rare earths drill programme. The results are good enough to be fair to them. But to be possibly unfair it's possible to wonder how much rare earth finds are likely to be in this near future. Because there are an awful lot of people announcing rare earth finds. So the value of any specific one does decline. Further, as the usual industrial logic goes, it'll be only the really good ones that even get developed. It's possible to therefore start to think that middling to good rare earth finds just aren't going to be worth anything at all.
Now this is being a bit gloomy, admittedly: “Drilling results demonstrate significant potential for resource extensions in multiple directions, with intervals up to 25m and Total Rare Earth Oxides ("TREO") grades of up to 3,568 ppm. Results will be incorporated in a rare earth mineral resource update,” And, well, yes. If someone were out there looking for rare earths say, three years back, we would all have said that that's a rather good find. Rare earths are not - as we know - in fact rare. But decent concentrations of them were thought to be rare. And that's the thing that we've more recently been finding out isn't quite true.
Cobra Resources share price from London Stock Exchange
Yes, it's entirely true that the world is going to use more rare earths in the coming decades. All those magnets for the EV revolution and so on. But as is near always true of a new mineral use - we have no shortage of minerals that can be used to supply it. We might well have a shortage of current mines, current processors, but that's something that can be solved by adding capital and effort. This is the thing which so often leads to shortages, metal price rises, then vast overwhelming waves of supply that drive prices back down again.
The nett effect of this is that rising metals prices kick off a vast rush of prospecting. But only the very best of those then go through into full production. Because people have seen this all before even if the specific metal under consideration has changed. Or even with the same metal - this did happen with rare earths after 2010. By 2014 prices were back down below the starting point after only two mines had come into production.
With rare earths today we've got any number of ionic clay finds - which are rather better sources of the magnet metals than hard rock finds. Alvo Minerals, Thor Energy, those are just two of the 10 announcements that we know of on the Australian stock exchange alone in the past two months. Our point is that if rare earth deposits are now increasingly common then what's the value of a rare earth deposit? Especially if, as with Cobra, it's a middling grade hard rock one?