Prospech (ASX: PRS) has jumped 180% on the announcement of a rare earths and hafnium find in Finland. It's possible to think of this as being a bit of an over-reaction to what isn't, possibly, quite that exciting a piece of news. That the market capitalisation is still only $6 million or so means that some move, having found anything at all, is valid. But there are reasons to think that this isn't quite the striking of some honey pot or significant deposit.
Prospech is an offshoot of Atalya Mining, they picked up the Slovak licences when demerged. They've clearly expanded their operations into Finland. They're a very early stage company, this find in Finland is more about re-examination of past drilling results than it is anything else. No harm in that of course, early stage exploration must be done. It's also true that metals desires change, extraction technologies advance, so going over past results is an entirely valid technique.
Prospech share price from ASX
What slightly worries us about this find is that it's being touted as a hafnium source. Which isn't how the mining world works. Hafnium is sourced from the production of nuclear grade zirconium, not from the mining of an ore. Maybe it's the journalists talking about hafnium, not the company. What does worry us more about this find is that it's not obvious that the rare earths find has any current value. It's reported as being heavy in the light rare earths. The lights (La and Ce specifically) are the ones that lose money currently. It's the value of the basket that matters, current prices require a Pr/Nd percentage of 20% and up for the basket to have any value at all. So, without being told what that ratio is it's not possible to suggest any valuation.
Prospech has found something, yes, and for a company of this size that means a change in the market capitalisation and corporate valuation. But whether that valuation will stick is another matter. Those rare earths could be worth nothing at all, especially if the thorium content is at the high end of what they report. And it does worry us when people think they're going to go hafnium mining. That really isn't something that is done so we hope it's not the company suggesting that they will be doing that. For that would be a significant negative.
