This article is a sponsored feature from Mining.com.au partner OD6 Metals Limited. It is not financial advice. Talk to a registered financial expert before making investment decisions.
Lithium has long dominated the commodity investment spotlight, but there’s another string of elements quickly gaining traction as more investors begin to understand their importance to the modern world: rare earths.
Governments across the Western world continue to highlight the importance of rare earths against the backdrop of rising geopolitical unrest and the growing need to secure a steady supply of rare earths from somewhere other than China.
As such, demand for these elements is growing exponentially.
In such a climate, it would sure pay to have one of the largest rare earths resource bases in one of the world’s premier mining jurisdictions.
Which is precisely what ASX-listed OD6 Metals (ASX:OD6) has with its 2,579km-square Splinter Rock Project near Esperance in Western Australia.
The company reported a mineral resource estimate of 344 million tonnes (Mt) @ 1,308 total rare earth oxides (TREO) — using a cut-off grade of 1,000 parts per million (ppm) — in July 2023.
This comes from less than 5% of the targeted clay basin area at the project, and ‘high-value’ magnet rare earth oxides (MagREO) make up roughly 23% of the total TREO grade.
And according to OD6 Managing Director and CEO Brett Hazelden, this resource is only going to expand with the company’s recent phase 3 drilling results released over the past 3 months.
“We expect to have a significant increase,” Hazelden tells Mining.com.au.
“We’re not sure exactly what the number will be, but it’ll probably be a hundred million more tonnes, at least.”
“it’ll probably be a hundred million more tonnes, at least”
Splinter Rock represents the largest and highest-grade clay-hosted rare earths resource in Australia, comprised of its 4 main prospect areas: Centre, Scrum, Flanker, and Prop.
Yet, with the growing interest in rare earths around the world, there come questions around the different types of rare earths deposits and which kind promises the best returns for shareholders.
As with most things in life, the answer’s not that black and white.
The clay versus hard rock ruck
An overly simplified explanation of the 2 main types of rare earths deposits is this: hard rock deposits are typically higher-grade but cost far more to process, while clay-hosted rare earths are both lower-grade and lower-cost.
It all comes down to the way the deposits need to be mined before the valuable rare earths can be extracted from the ore material.
As Hazelden explains it, the costs for hard rock deposits quickly ramp up because of the difficult and delicate mining and extraction process associated with this kind of deposit.
“It’s drill and blast, and you then need to grind it down into bug dust into mills. You then need to stick it into a calciner or a roaster to liberate the rare earths so they can be leached out.
It’s quite an expensive and energy-intensive process.”
To put a number to it, Hazelden says project capital costs for hard rock rare earths deposits typically land between $1 billion and $2 billion.
For clay-hosted rare earths projects like Splinter Rock, however, the mining process is far simpler. There’s no crushing, no milling, no flotation, and no high-temperature or high-pressure cracking and leaching — which dramatically slashes mining costs, according to Hazelden.
“So, effectively, we dig it up, and we’ll screen out the coarse material, then generally treat the fine material in leach tanks, similar to gold.”
He explains that from here, the company can separate the solids from the liquids, and the liquids will hold the rare earths, from which impurities can be removed and the rare earths can then precipitate out.
“It’s a relatively easy cheap quick process compared to hard rocks.”
“It’s a relatively easy cheap quick process compared to hard rocks”
This doesn’t mean clay deposits are innately better than hard rock deposits; while hard rock is more expensive, the higher grades mean it could also generate stronger returns.
“When you come down to a cost-per-final-product, it’s probably very similar in terms of costs.”
Nevertheless, the immense task of securing financing for a mine development project seems less daunting to tackle when development costs aren’t that high.
Hazelden says that even at speculative high-estimate development costs, Australian clay-hosted rare earths deposits could still be developed at a quarter of the price of their hard rock counterparts.
Where OD6’s edge over the competition comes in, then, is the massive scale of clays identified with minimal cover thickness and its strong metallurgy results on samples from Splinter Rock so far.
Mining and metallurgical conversions
Earlier this year, OD6 completed some important airborne electromagnetic (AEM) work across Splinter Rock that was then processed by the Commonwealth Scientific and Industrial Research Organisation (CSIRO).
Hazelden says CSIRO was able to use this data to identify and determine the thicknesses of the clays in the project area and pinpoint how much cover lies above the clays.
This translates to stripping ratios for the clays, allowing OD6 to hone in on targets that lie close to the surface and have low stripping ratios and favourable thicknesses. Essentially, it optimises the mining process for the project.
Thanks to this AEM work, OD6 has mapped roughly 400km-square of clay basins across Splinter Rock to date.
As far as metallurgical recovery goes, OD6 has been leveraging the expertise of the Australian Nuclear Science and Technology Organisation (ANSTO) to work out the acid consumption and rare earths recovery responses in leaching tests on samples from Splinter Rock.
OD6 reported in November 2023 that ANSTO’s tests showcased low hydrochloric acid (HCI) consumption, with an average of 16kg HCI per tonne of ore and multiple zones between 6kg and 10kg HCI per tonne of ore.
This is complemented by ‘impressive’ leach and recovery responses at reduced acid strengths, with an average MagREO recovery of 61% at 20g/l HCI. MagREO recoveries ranged from 43% to 87%.
“A good metallurgical recovery in the world is somewhere between 50 and 70%,” Hazelden explains.
“So for us to be able to achieve 60% leach recoveries, or somewhere between 43 and 83%, is a really good outcome.”
“for us to be able to achieve 60% leach recoveries, or somewhere between 43 and 83%, is a really good outcome”
Effectively, the ANSTO metallurgical testwork has proven that rare earths from OD6’s Splinter Rock project are leachable, with the next set of works now focussed on impurity removal.
A dominant field position
With OD6’s huge landholding in Western Australia, the opportunities presented by its testwork results are enormous.
“If you think 400km-square of clay basins identified to date, if they average 50m thick, for example, suddenly you’ve got tens of billions of tonnes of clay material potentially hosting rare earths out there.
They’re silly numbers.”
Of course, rather than tackle the entire prospective area at once, OD6 is strategically zoning in on a smaller prospective area from which it can realistically siphon rare earths.
“What we’re really trying to do is find the best 150 to 200 million tonnes. In the end, that gives you 5 to 10 million tonnes per annum over a 20-30-year mine life.”
Further to all this, OD6 also owns the nearby Grass Patch Rare Earth Elements (REE) Project, also near Esperance.
While not as far along the development line as Splinter Rock, the company managed to identify high-grade clay REEs at Grass Patch through a 93-hole reconnaissance drilling program in early 2023.
From this region, OD6 struck grades of up to 3,340ppm TREO, with up to 38.5% MagREO encountered.
This means even once Splinter Rock is up and running, the company could still have more value to extract from the ground in Western Australia.
It’s clear that OD6 has a long-term goal and rare earths dream, but it’s just as important to go through the appropriate phases of play to maximise a chance of victory in the sector.
A tap-and-go development approach
Hazelden says over the next 12-18 months, the company will have 3 clear focuses: exploration, metallurgy, and value-chain appraisal.
On the exploration side, OD6 is taking on a 2-pronged approach. The company will continue with its infill drilling program to build up its rare earths resource at Splinter Rock to eventually feed into a scoping study.
The core focus of this infill work will be on the Centre and Prop prospects, but OD6 also plans to swing wide and test some regional targets to scope out other potential resources that it’s yet to identify.
Hazelden says at its current pace of work, OD6 plans to publish a resource upgrade early next year and another towards the end of the year, with a Splinter Rock scoping study slated for the second half of 2024.
On the metallurgy side of things, the name of the game is first and foremost recovery optimisation through ongoing work with ANSTO.
From here, OD6 will begin to work on impurity removal — something Hazelden says “most people aren’t talking about”.
He explains that when leaching, one often recovers other elements like aluminium and iron that need to be removed before producing the final product. In 2024, OD6 will begin to develop this impurity removal process for Splinter Rock.
And speaking of the final product, OD6 will also start looking downfield and determining what kind of final product it wants to produce.
“We’re going to do more than just ship a concentrate, which is what most of the hard rock guys are looking to produce. We’ll look at a mixed rare earth carbonate or mixed rare earth hydroxide.
And we’ll also look at the next step down the value chain, which is converting those into a rare earth oxide or individual rare earth oxides.”
“We’ll also look at the next step down the value chain, which is converting those into a rare earth oxide or individual rare earth oxides”
It’s a long value chain, according to the OD6 captain, but the company says its studies next year will examine a final product anywhere between the carbonate and the oxide.
Steady and strategic
At the end of the day, Hazelden says the huge forecast demand growth for rare earths means beating the competition to market is not really necessary.
He says forecasts suggest the world needs another 10 to 20 mines over the next few decades to match demand, meaning if you’re third to the market, there are still several more mines that need to come online.
“It’s not at a race to be the first to anything. If you’re looking at the forecasts, we need somewhere between another 10 and 20 mines.
So what investors need to start looking at is, given the demand tsunami that’s coming at us, how do we actually respond to that? How do we get enough mines up and running and financed?”
As such, it’s OD6’s astute development approach — and not to mention its stellar tonnes, grades, and metallurgy results — that sets the company up for success.
“We’re in the top handful of clay-hosted rare earth resources in the world.”
“We’re in the top handful of clay-hosted rare earth resources in the world”
For OD6, it seems there’s no need for risky plays or desperate dashes for the try line: the company has maintained a steady enough field position that it will be primed for success when the rare earths whistle blows.
Write to Joshua Smith at Mining.com.au
Images: OD6 Metals
