Alvo Minerals (ASX: ALV) shares have dropped 25%. The cause of this decline in ALV shares seems to be the release of the full investor report on what needs to happen with the company’s ionic clay rare earth deposit. It’s not that the project is a bad one, or that the economics of it are bad. But as with everything concerning rare earths it’s complex. It’s also capital intensive. That clearly leaves less room for investor profit.
We’ve talked before of Alvo Minerals: “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.”
It is a good prospect. ALV shares have bounced around a bit on valuations: “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.” If lots of people have the same thing then the value of each and any one of them tends to decline. Obviously.
Alvo Minerals share price from Google Finance
The difficulty today for Alvo is that they’ve released the full investor presentation. There’s nothing wrong with any of it. The problem is just that it spells out quite how much capital is going to be needed to bring it into production. Which, obviously enough, reduces the capital value of the bare project as it is. Rare earths just do cost substantial money to develop.
