The one thing I would consider is, allowing the player to pick which resource to turn the "junk" into would allow them access to otherwise unavailable resources. This way not having access to, say, rare ore goes from "crap, now I have to restart" to "well I can still get it by turning 100 units of scrap into 1 unit of rare; it's not ideal but at least I can live long enough to relocate" (allowing for a self-imposed challenge run). Whether this is a good thing or not is, of course, your decision; as I said it can salvage an otherwise unwinnable situation, but it gives players the opportunity to game the system.