Larvotto Resources drill results radically change the global...

Larvotto Resources drill results radically change the global rare earths industry

Larvotto Resources, LRV, is up 77% on drilling results, that ionic clay deposit is going to change the global rare earths business

Larvotto Resources (ASX: LRV) shares are up some 77% today on the back of their drilling results from the Merivale South property. These results are undoubtedly good news for Larvotto but the real way we should read this is as a harbinger of a coming change to the entire global rare earths industry. We're discovering something new about geology here, discovering it in real time. That new thing being that we don't have to depend upon the traditional ores and therefore the rare earth industry economics are about to be overturned. This is somewhere between could be and will be good news for those with the new deposits and it's definitely bad news for those with the old style ones. 
In terms of the Larvotto find, well, it's definitely a microcap - $16 million market capitalisation and that's in AUD. So, finding anything useful is going to boost a company of that size. The actual find is that the ionic clay deposit at Merivale South is rich in the magnetic rare earths. More, it's light in the, umm, light rare earths, cerium and lanthanum - well, compared to deposits of the more traditional rare earth minerals that is. That matters for the economics of the project. But the biggest issue here for us as investors is that this is the third confirmation of the same point in just the last month from Australia alone. The economics of the entire global rare earths industry are changing.



Larvotto Resources share price from ASX


The point is that the old miners - Lynas and MP Materials, for example - are, along with many of the would be miners, looking at some combination of bastnaesite, xenotime and monazite as the sources of rare earths. These can have thorium contamination issues but more than that, such deposits are always high (up to 50% of the material) in lanthanum and cerium. The industry is such that for La and Ce a miner loses $19 to $20 a kg on those two. The profit is made from the magnet metals (Nd, Pr, Dy and Tb) which have prices in the $hundreds to $thousands per kg. It's the income from the basket that matters that is. You lose on some, make on others and it's the total cost/income relationship that matters.


Larvotto has an ionic clay deposit here. Which is, by its very nature, higher in those magnet metals than it is in the lights like La and Ce. And here's the thing, we used to think - even a couple of years back - that such ionic clays were restricted to South China and the Burma border. But here we've a find in Australia. And OD6 found another, Australian Rare Earths another. That's three, in just the one country, in only a month. We know of at least one other in Argentina - it turns out that ionic clays are in fact something of a commonplace where granites weathered in subtropical climes.


It's always been true that rare earths are not rare and are not earths. But we're finding out something entirely new and different - that ionic clays are common. We might well end up with a situation where this new source entirely wipes out that old source, those more traditional sources. That's what the importance of the Larvotto find is - it confirms that there's an entirely new and useful source of rare earths out there. That has the potential to entirely overturn the global rare earths industry.

Larvotto Resources