Alvo Minerals (ASX: ALV) shares are down 22% today. ALV shares dropped on the announcement of the rare earth numbers at Bluebush. This could be considered more than a little odd. As the results are perfectly fine, even edging over towards being good. Certainly, if we compare the results here to the usual hard rock findings then they’re excellent. But that’s not good enough really, because we’ve all found out something new in this past couple of years. Even, in these past few months. Ionic clay deposits of rare earths are simply not rare. Therefore each of them is worth less given how common they’re turning out to be. We’ve seen this with OD6, Heavy Rare Earths and a total of near a dozen announcements in just the past 6 months.
The background here is that we used to think ionic clays were specific to South China and the Burma border. We now find out that’s not true - they’re common among granites that have weathered in subtropical climes. Therefore the value of each deposit is lower - there are more of them. Yes, it’s entirely true that they’re preferable, the ionic clays, to hard rock deposits. They’re higher in the magnet metals and especially the magnet heavies, dysprosium and terbium. But the more common they are then still the less each one is worth.
So, these are good results but not really good enough: “Exceptional magnet rare earth (MREO) and heavy rare earth (HREO) ratios, averaging 26% MREO (peak
35%) and 26% HREO (peak 76%) in line with the neighbouring Serra Verde deposit,” Nothing wrong with those at all. It’s just that by comparison with other ionic clays they’re not exceptional either.
Alvo Minerals share price from Google Finance
We’ve talked before about Alvo Minerals: “Alvo Minerals up 186% on yet another ionic clays rare earths deal. The more of these rare earth ionic clays are found the less each one is worth” As you can tell, this idea that the more of them there are the less each one is worth is not exactly new to us.
“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.”
As it happens Alvo Minerals is now back down to about where it was at that first announcement of the ionic clay deal. As we say, the scarcity value of the mineralisation seems to have disappeared.
