Alvo Minerals (ASX: ALV) shares are up 186% in Australia on Wednesday. This is off the back of a deal to take over an ionic clays rare earths prospect in Brazil. As it happens we know more about rare earths than most - more than most analysts of the rare earths business in fact. And we agree that ionic clays - subject to the usual caveats - are a likely profitable source of the most desired of the rare earths, the magnet metals. The ionic clays also have a number of desirable properties which make them a better source than the more traditional ores mined by the likes of Lynas and MP Materials.
No, this does not mean that Alvo Minerals is definitely going to make a fortune here. All those usual caveats come into play. Is the area really the right type of ionic clay? Yes, there are different types. Is the deposit of large enough size to make it worth mining? Will Alvo's management do all of this efficiently and so on - all the usual problems. But the base idea, that ionic clays are a useful and potentially profitable source of the magnet metals? Yes, we're fully signed on to that - because that's where the majority of supply has been coming from for dysprosium and terbium for decades - the ionic clays of South China and the Burma border area.
Alvo Minerals share price from ASX
The announcement is: “Alvo Minerals Limited has entered into a binding agreement for the purchase of the highly prospective Bluebush Rare Earth Element (“REE”) Project in Central Brazil, adjacent to Alvo's existing Palmeiropolis exploration base.” We should note that this is all highly, highly, prospective. The real proof here is some old drilling plus the idea that it's right next door to another ionic clay deposit. Much more testing will be required to prove the economic value here.
However, the basic contention here, that ionic clays are a decent source of those magnet rare earths, is true. This is where most of the supply has been coming from, the Chinese deposits of this clay. The thing that has changed is that humanity has found out that there are many such deposits outside China. Aclara, for example, in Chile. Ionic Rare Earths in Uganda. There have been at least - by our not complete count - 8 such announcements in the last couple of months on the Australian exchange alone - like OD6.
The point here being that this mineralisation is common enough that finding or owning it doesn't prove value creation any more. It's the skill with which it is exploited that really matters. So, that will be what produces long lasting value at Alvo as well - or not, as the case may be.
