OD6 Metals: Australia v Brazil in the clay hosted rare earths match

Rare earths can be a confusing topic, with 15 different elements and multiple geological settings. Brazil is a dominant player in the space, but Australia is emerging as a potential global contender with a number of advantages over the Latin American country.

The highly promoted style of rare earth deposit is ionic clay hosted because of the ability to produce rare earths from these types of deposits at a lower cost.

China is the dominant player in ionic clay hosted rare earths space, but Brazil has been in the spotlight lately as an emerging star with Serra Verde claiming the title of the only ionic clay hosted rare earths producing mine outside of China.

However, there are several factors that can impact the profitability of these mines in Brazil, according to Brett Hazelden, Managing Director of Western Australia-focused OD6 Metals (ASX:OD6), which is advancing its Splinter Rock Project located about 150km northeast of the port town of Esperance.

In May, OD6 announced it had doubled the tonnage and increased the confidence of the resource at Splinter Rock.

The resource increased to 682 million tonnes @ 1,338 parts per million total rare earths oxides (TREO) for 910,000 tonnes of contained TREO, compared to the 344 million tonnes @ 1,308ppm TREO defined in the maiden inferred resource in mid-July last year.

“That’s the biggest in Australia by a long way, by a couple of magnitudes, and it’s also the highest grade in Australia from a clay hosted rare earth perspective,” Hazelden tells Mining.com.au.

“I think there’s still some doubt about it when people compare it to the likes of Brazil, which has been the flavour of the year.”

The Australia advantage  

The key difference between the two deposits in reaching a final rare earths product is that clay hosted deposits require more acid.

Hazelden says the main process is the same for both deposits – dig it out of the ground, leach it, separate the solids from the liquids which host the rare earths, precipitate out the rare earths and then you have the final product.

“The only difference on that whole value chain is what reagents are used,” he says.

“So we’ll use a hydrochloric acid with a sodium hydroxide to neutralise it … whereas in the ionic process they use a slightly weaker acid.

“They’ll also use ammonium sulphate, which is a fertiliser, to leach it out and then they’ll use a carbonate or a sodium hydroxide to precipitate out the final product. So a very similar process, but just slightly different chemicals and slightly different consumption rates as well.”

Although the use of more acid increases the costs to extract the rare earths from clay hosted deposits, Hazelden says there are several other cost and access factors that Brazil mines face that Australian mines do not. 

“We’re not working on farmland, a lot of them in Brazil are, we don’t have private royalties on top of government royalties,” he explains. 

“People tend to promote ionic clays as being the best and only thing that can ever work, but the reality is a project like ours with the size and scale we’ve got and the recoveries that we’re seeing should be competitive with all those guys regardless, and our grades, except for one, are probably higher than most of them.”

The Esperance region of Western Australia is emerging as a bit of a hotbed of rare earths activity, with others in the area like Mount Ridley Mines (ASX:MRD), West Cobar Metals (ASX:WC1) and Heavy Rare Earths (ASX:HRE) also advancing projects.

The goal scoring metals

OD6 has completed three phases of metallurgical testwork so far on Splinter Rock rare earths. This work has shown that magnet rare earths make up about 23% of the grade.

Hazelden says the metallurgical recoveries demonstrate that OD6 can recover very similar amounts of everything across the whole 15 elements. 

“From a magnetic rare earths point of view – that’s where the money comes from, that’s where 90% of the value comes from – and we’re getting consistent recovery across neodymium, praseodymium, dysprosium and terbium, which are the four main ones,” he says.

The initial goal for OD6 is to get to a mixed rare earth carbonate. But that’s not necessarily the endgame, with the company reviewing its options around potentially converting the mixed rare earth carbonate to a rare earth oxide.

Hazelden says rare earth carbonates only get around 70% of the payability of the rare earth oxide price, whereas rare earth oxides realise the full value.

“With the recent budget announcements from the federal government – there’s all the ‘Made in Australia’ and downstream processing, so if we can go one step further with some of the Australian government support, it’s something that we should be looking at,” he explains.

While rare earths prices are not looking too flash at the moment, with even the major producers like Lynas Rare Earths (ASX:LYC) hanging onto their neodymium-praseodymium (NdPr) inventory until prices pick up, the longer term outlook is much better.

Demand growth for NdPr is forecast to accelerate between 2025 and 2035, growing at a compound annual rate of 7.1%. This will be underpinned by demand for electric vehicles, wind turbines and consumer electronics.

However, production will not maintain the same pace, with 10-20 new mines needed by 2035 to grow supply 80% to meet forecast demand.

“The fundamentals say we actually need higher prices. Some people are forecasting prices to be US$100 ($150) or US$200 ($300) a kilo for NdPr, which is the main reference price people talk about,” Hazelden says. 

The fundamentals say we actually need higher prices. Some people are forecasting prices to be US$100 ($150) or US$200 ($300) a kilo for NdPr, which is the main reference price people talk about.

“We think that’s probably a little bit optimistic given the current price is about US$50 to US$55 dollars a kilo. We think something sustainable between US$75 and US$100 a kilo is probably where the market needs to sit long term.

“Everyone makes a bit of money, no one’s really making too much money, but it’s enough to pay back capital costs and obviously drive more mines to be built to meet the demand.”

The plan for the rest of 2024 for OD6 is to focus on input works for a Scoping Study, with the Australian Nuclear Science & Technology Organisation currently working on impurity removal, reagent consumption, usages and a flow sheet for the high-grade Inside Centre discovery.

Hazelden says the company will also consider doing additional drilling to improve the confidence of the resource from indicated to measured, as well as identify possible extensions to the resource.

“We already know that it’s open in multiple directions and we did get some money from the Western Australian government’s Exploration Incentive Scheme to go and look at two new areas, which are called Tighthead and Loosehead,” he says.

“So that’s also a focus for probably the end of the year or early next year.”

Images: OD6 Metals
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Written By Angela East
Managing Editor Angela East is an experienced business journalist and editor with over 15 years spent covering the resources and construction sectors and more recently working as a communications specialist handling media relations for junior resources companies.