Altona Rare Earths (LON: REE) has just arrived on the stock market and the shares are down 12.5% already. The market capitalisation is a couple of £ million and if we were to be really spiteful about it we'd suggest that much of that value is in the ticker - REE.
Being much more considered about it we just don't think this is likely to be a particularly successful adventure. From the information released the deposit being explored looks like something that a year or two back it would have been graded as good enough, possibly even useful. With what we know now about rare earths supply we'd down grade it to quite possibly not economic. Yes, this is us being very aggressive in our valuation but then that's one of the problems with really knowing a metals market. The expert view could be very different indeed from the market view even if the two must meet in the end.
The intention is to explore the Monte Muambe deposit more. Just to avoid dispute yes. This is the right sort of rock, we've no problem with the reported results. We're concerned, however, that this might well not be an economic deposit to mine. Not, not particularly, because there's anything wrong with it. But because we think other deposits are going to be more important.
Altona Rare Earths share price from London Stock Exchange
As we've said before, and no doubt will keep saying, our analysis of the rare earths market is as follows: “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.”
This means that only the really good deposits will ever get mined, let along make a profit: ”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?”
Let's put it this way. We're very unconvinced that a normal hard rock rare earths resource has much if any value. Altona is exploring a normal hard rock rare earths resource, therefore….
