No sooner had the celebrations ended after a meeting of U.S. President Donald Trump and Australian Prime Minister, Anthony Albanese, than reality dawned in the form of a question from investment bank UBS: “what are rare earth stocks worth at US$2?”

The US$2 referred to a rare earth price Trump plucked out of the air to make the point that the U.S. and Australia were working on a deal to dramatically increase rare earth production to break China’s stranglehold on critical minerals.

While good news for buyers of rare earths, and the politicians promising to fix a problem they allowed to develop, a flood of supply is not good news for explorers and miners.

In simple terms, what Trump and Albanese want to achieve with their joint venture is a stream of rare earth metals to meet western world demand and punish China for withholding supply.

There’s a long way to go before that objective can be achieved, but the fact that some critics are likening the rare earth deal to a modern-day version of the Manhattan Project which created the atom bomb is a guide to the possible result: a win but at a huge cost.

“In about a year from now we will have so many critical metals and rare earths you won’t know what to do with them,” Trump said.

The reaction from investors was an immediate rush to sell the sector. MP Materials, the top U.S. rare earth stock plunged by US$22.16 (24%) to US$69.80, while Australian rare earth leader Lynas initially fell sharply before clawing back lost ground to end where it started the week.

Other rare earth moves included Australian Strategic Materials, down 15c (11%) to $1.18, Victory Metals, down 19c (14%) to $1.19, and St George Mining, down 2.5c (16%) to 12c.

An exception to the rare earth sell-off was Northern Minerals, which managed a rise of 0.5c to 6.3c.

Gold also hit a wall this week in what’s been described as the biggest sell-off in five years, plunging by more than US$200 an ounce (5%) to around US$4088/oz.

The view of London gold traders, which is where this week’s diary has been written, was summed up by Nicky Shiels from MKS Pamp who told The Financial Times newspaper that the main catalyst for the fall was simply a reaction to “overbought conditions.”

National Australia Bank head of foreign exchange strategy, Ray Attrill, said there was no obvious catalysts for the sell-off except a shift in “marginal buyers” – from central banks and Asian buyers last year, to western buyers who have brought a greater speculative interest.

Gold moves and news this week included:

  • Northern Star, down $2.23 (8%) to $24.29 after reporting solid September quarter production of 381,000 ounces at an all-in cost of US$1639/oz.
  • Bellevue Gold, down $2.46 (24%) to $7.82 after reporting September quarter production of 29,950oz, and
  • Minerals 260, down 5c to 31c despite reporting strong metallurgical test work on its Bullabulling project in WA, followed by a buy tip from Bell Potter with a price target on the stock of 57c.

While rare earths and gold generated most news flow, there were signs that investors are starting to take a fresh look at base metal stocks with copper the top performer as it reclaimed a price above US$11,000 a tonne.

U.S. investment bank Citi, a long-term copper bull, sees copper heading up to US$12,000/t over the next six months, with a chance of the metal reaching US$14,000/t.

“We expect the market to look beyond near-term physical demand headwinds and lingering U.S. growth concerns,” Citi said.

Winner of a poor week on the Australian market was Western Yilgarn which jumped 2.6c higher (57%) to 7.1c thanks to interest in the potential for gallium in its WA exploration assets.

Other news and market moves in this shortened diary note from London included:

  • Aurelia Metals slipping 3c lower to 25c despite reporting a solid September quarter of copper and zinc production, which earned the stock a buy tip from Macquarie and price target of 40c.
  • Antimony explorer Larvotto Resources falling 4c to $1.25 despite receiving a share swap takeover offer from a U.S. company.
  • Locksley Resources, another antimony stock, lost 6c to 46c after announcing it has produced its first antimony ingot at its Mojave project in the U.S, and
  • Broken Hill Mines falling by 20c to 96c after raising $38.5 million to help fund its silver, lead and zinc project in the home of Australian base metal mining, Broken Hill.