Why Critical Metals Stock Dropped Today

Critical Metals (NASDAQ: CRML) stock, a start-up miner of rare-earth elements, tumbled 9.8% through 1:35 p.m. ET this morning despite reporting some apparently good news for shareholders.

Drilling at its exploratory Tanbreez Rare Earth Project in Greenland, Critical Metals has found evidence of minable quantities of yttrium, cerium, gallium, and hafnium, as well as zirconium, niobium, and tantalum.

What this means for investors

The company says these results "will enable the Company to prepare a revised Mineral Resource Estimate and advance subsequent mine planning studies." It believes the location of the deposits, in southern Greenland, in an area described as the Fjord, represents "a world-class critical minerals deposit."

The company's press release reads more like a chemistry experiment full of parts-per-million data, however, than anything of clear use to an investor. Notably absent is any information about how much it might cost Critical Minerals to develop the deposits, in terms of capital spending, how long it would take to get a mine operational, or how much volume of rare-earth elements, revenue, or free cash it might expect to produce.

All this is left to the investor's imagination.

Is Critical Metals stock a sell?

What we do know about Critical Minerals is that it's a stock with less than $1 million in annual revenue (and no profit), but trading close to $1 billion in market capitalization -- a company with only about $7.3 million in the bank, burning twice that amount in negative free cash flow annually.

While the company has potential, as an investment, it's both hard to value and likely to remain extremely volatile, and dominated by momentum traders. Serious investors should probably stay away.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.