My scrapmetal yard welcomes rusty metal.
He even said "Don't worry if it looks like rusty dirt, don't bash it off, theres still metal in it".



(He was talking about old rusty machinery dug up from underground where they were buried about 30 or 40 years ago)

Rust is oxidised iron. Thats Iron with a few oxygen atoms attached to it.
During the metal smelting process they have to add Oxygen to the molten metal to get the process working.

My observation is that, as the rust is iron with oxygen stuck to it, they won't have to add as much oxygen to the molten metal to get it 'go'.
My theory is that if you had enough time & metal, you could get it to rust into a 'almost powder' state & sell it like that.

Any ideas?