OD6 Metals: pulling the market into its powerful magnetic field at Splinter Rock

This article is a sponsored feature from Mining.com.au partner OD6 Metals Ltd. It is not financial advice. Talk to a registered financial expert before making investment decisions.

The world has an insatiable appetite for rare earths. It is projected that at least 10 mines will need to be developed over the next decade and a half to meet ever-growing demand.

Adamas Intelligence data indicates heading towards 2035, global demand for neodymium magnets (also known as NdFeB magnets) in particular will increase at a compound annual growth rate (CAGR) of 8.6%. This is being bolstered by double-digit growth from the electric vehicle (EV) and wind power sectors. 

Adamas Intelligence reports global consumption of neodymium magnets increased 18.1% in 2021. This surge was the materialisation of latent demand from 2020 and coincided with burgeoning EV sales.

Neodymium rare earth magnets, sometimes referred to as super magnets, are the most powerful permanent magnets on Earth. They are renowned for their powerful magnetic field, great bonding strength, as well as high coercivity. As an example, a neodymium magnet used in a wind turbine or electric vehicle motor is 18 times stronger than a standard ferrite magnet significantly increasing energy use efficiency.

OD6 Metals (ASX:OD6) is one rare earths company starting to generate its own magnetic field within the sector, pulling in interest far and wide as the junior explorer develops its flagship Splinter Rock Project, northeast of Esperance in Western Australia.

As Managing Director Brett Hazelden explains to Mining.com.au, OD6 has a substantial 4,828km-square tenement package of clay hosted rare earth projects located close to an existing port, sealed roads, as well as essential infrastructure.

He says the company is receiving excellent concentrations of neodymium (Nd) and praseodymium (Pr), which are essential elements needed for the green economy.

“Splinter Rock is a new discovery and it’s probably a globally significant discovery, both in terms of grade and thickness, but also metallurgy recovery. It’s not just that we have hit a few good results, it’s that we’ve been hitting good results across kilometres now, and we’ve actually also achieved really good metallurgy results across 4 of these different prospects as well. Each of the prospects alone are probably a project in themselves.”

Sculpturing the future with clay

Drilling and geological analysis at its flagship project has shown widespread, thick, ‘high-grade’ clay hosted REE deposits that extend over hundreds of square kilometres. Metallurgical testing using hydrochloric acid to leach the rare earths have resulted in positive recoveries with optimisation ongoing.

A recent 83-hole 200m spaced drill program was recently designed in conjunction with an Airborne Electromagnetic Survey (AEM) to test the localised consistency of clay type, thickness, and grade at OD6’s main prospects – Prop, Flanker, Centre, and Scrum. 

Grades of up to 6,605 ppm Total Rare Element Oxides (TREO) with averages over 1,000ppm TREO have so far been returned, with clay thickness of up to 80m. Of the 83 holes drilled, 74 returned significant grades and thickness. 

On the back of this, OD6 Metals will launch a phase three 188-hole 10,000m drill program in Q2 2023. While the company understands the width of each prospect, additional drilling will seek to determine the continuity of grade and thickness of the extensions. 

Hazelden adds, it should be noted that Magnetic Rare Earth Oxides (MREO) make up an average of over 22% of the TREO.

“And based on the electromagnetic survey that we’ve done, the Centre prospect for example, is nearly 27 kilometres in length by the looks of things, so we just need to test that. We might not have found the best area yet in terms of grade and metallurgy recovery. That’s really what we’re focusing on plus we’re looking to put out a hopefully really big first JORC resource and then continue to follow it up with further increases over the next 6 to 12 months.”

Metallurgical testing using hydrochloric acid to leach the rare earths have resulted in positive REE recoveries with optimisation ongoing. Metallurgical samples are being selected for further work at the Australian Nuclear Science and Technology Organisation (ANSTO).

The MD says it is working with several agencies to investigate the best strategy to develop its clay hosted rare earths exposure in Australia.

“We are using ANSTO and CSIRO as well, so we’re using some of the smartest people in the room”

Clay REE deposits are mostly economically extracted in China, which is the dominant global producer of rare earths. OD6 is collaborating with the ANSTO and CSIRO on techniques to improve exploration and extraction of its clay deposits in order to become one of the 10 operational mines needed to come online in the next 10 to 15 years.  

As the MD notes: “We are using ANSTO and CSIRO as well, so we’re using some of the smartest people in the room. They’re helping us through this journey, of both discovery, but also how to extract it and then develop it. So, it’s important to have 2 large government science organisations helping with the development and discovery of Splinter Rock.”

Options remain open for OD6

The MD says that in terms of its growth strategy to achieve that goal of developing one or more of the needed REEs mines to come online in the next 10 to 15 years., all options for  potential development plans at Splinter Rock remain open. 

“We always work on the scenario that we’re going to take this all the way through to production and that will take 5 years as a minimum. It will take 3 years just to get through the environmental approval stages nowadays. 

So those things we need to work through. But if there’s a larger partner that comes through with deep pockets or a joint venture or even a takeover offer, there’s lots of scenarios that can play out over that time.

I think the main focus at the moment is to get a large resource out there and continue to drill and follow up that with bigger and bigger resources over the next 12 months. But equally, we need to optimise the metallurgical process so that we try and get the best for metal recovered.”

The MD says the objective remains like that of any mining company – generate the highest revenue and profits for the lowest cost structure. At this early stage, it looks promising for OD6 given its ‘high-grade’ intersections and recoveries. 

Recoveries readying OD6 for an upswing

OD6 Metals has to date returned ‘very high’ metallurgical recoveries up to 96% magnet rare earth elements following a sampling program at its multiple prospect areas within Splinter Rock. At the time of the initial announcement on 3 April, OD6’s share price had soared about 60%.

Using 4-acid soluble digestion (meaning it does not assay for resistate non-acid soluble REE minerals commonly known as refractory minerals) all assays have returned positive results. At the Prop prospect, initial metallurgical acid leach tests achieved up to 96% recovery of MagREE (average 71%), while Centre, Scrum and Flanker, all achieved 60-70% recoveries of MagREE on average.

The MD says in addition to these amazing recoveries, it seems the wider market is being pulled towards OD6’s magnetic field as a leader in clay hosted rare earths in Australia.

“It’s new to Australia, but it’s been done in China for 20 to 30 years, so for decades. There’s a lot of noise around in terms of people finding rare earths but are they actually in a readily acid leachable form or is the metal in what we’ll call a refractory non-recoverable form. If it is not in a readily recoverable form with a simple process like leaching then the project is unlikely to be economic.

“The fact that we’ve been able to use a simple acid leach to achieve those 60% to 70% of recoveries on average, up to 96%, that’s a real big tick in the box”

The fact that we’ve been able to use a simple acid leach to achieve those 60% to 70% of recoveries on average, up to 96%, that’s a real big tick in the box. Plus it is all done at ambient pressures and temperature. I think a lot of people were questioning whether this was achievable which we have now been able to demonstrate. 

What we will do next is try and optimise the process to determine where the optimal point is on metal recovered, revenue, profit, recovery and acid requirements, which may be achieved by lowering acid usage and recovery. This will take a bit of time to optimise plus there still might be better areas out there that we have not drilled yet.”

In rare company

While demand for rare earths grows exponentially there have only been limited ASX-listed companies with exposure to the market over many years. As the Western world seeks access to REEs outside of China which dominates the global market, OD6 is well positioned compared to many of its peers.

As mentioned earlier, the move towards net zero carbon emissions is a major driver of global demand, which is the catalyst to OD6’s aggressive exploration program at Splinter Rock.

The MD says: “If you go back 10 to 15 years ago, the only company really focused on rare earths that got up back then was Lynas (ASX:LYC). They’re a bit of a unicorn in terms of really high grades, but they had the Japanese government effectively help finance them, so that’s why they got up and running at that time. 

I think the key change that we’ve seen now is electric vehicle demand. Rare earths don’t go into the battery, it goes into the motor to make it more efficient so it can use the power from the battery to make it go further. Instead of getting 300km, you’ll get 500km. the demand has therefore changed and there’s obviously big demand to decarbonise.”

Additionally, the MD says the push towards decarbonisation has led to a growing number of wind turbines being built, which use a significant amount or magnetic rare earths in motors in order to achieve the highest efficiencies. Other applications for REEs include air conditioning units and fighter jets, he adds.

“China’s got 90% control of the bulk of the supply chain. They were smart 10 to 20 years ago and saw this coming, so the Western world has only just woken up and now you’re seeing all the AUKUS, Europe, Japan, South Korea, now responding to trying to diversify the market so that we’re not relying on China.

There’s a threefold demand increase expected, so you need about 10 mines to be developed to meet that forecast for the next 10 to 15 years. The demand is going to be high. The question is, are you going to sell it to China, which is where 90% of it goes at the moment? Or is the rest of the world actually going to prioritise getting downstream processing with a focus on magnets and then into a car or whatever else it is used for?

That’s probably the next focus for the bigger market. But in terms of OD6, it’s a big discovery there (Splinter Rock). There’s probably billions of tonnes there, so I think we’ll hopefully have a fair few suitors coming our way.”

OD6 on track

OD6 Metals is on track for a major phase three drill program following ‘bumper’ results at Splinter Rock. The 188-hole, 10,000m drill program starting in Q2 2023 to further investigate potential of the prospects.

The Centre prospect is one focus. It extends for some 5km along a northwest-southeast drill line and is yet to be constrained to the northeast and southwest (although AEM modelling suggests it may extend as far as 27km beyond the current drill line). Clay hosted rare earths are located in thick areas of the prospect and vary between 10m to 70m with TREO intersections up to 2,029ppm at a 300ppm cut-off grade. 

The Centre prospect target area is defined by basins that lie between granites and is a large clay basin that sits within a tableland area at higher elevations

The prospect contains a shallow amount of transported cover and saprolitic clays of about 5m to 15m thickness above the rare earth clay hosts as detailed in the following cross section. The strongest intersections returned from the current program include 27m @ 1,792ppm TREO (23.2% magnet REO) from 18m (SRAC0265), and 36m @ 1,615ppm TREO (21% magnet REO) from 21m (SRAC0217).

The Centre prospect target area is defined by basins that lie between granites and is a large clay basin that sits within a tableland area at higher elevations. The target area identified by the AEM covers 136 million square metres (136km-square) and extends about 27km along axis and between 5km and 10km wide.

Meanwhile, the Prop prospect extends 3km to the northwest-southeast and 5km along the northeast-southwest drill lines. Clay hosted rare earths are located in thick areas of the prospect and vary between up to 80m with TREO assay intersections up to 1,907ppm at a 300ppm cut-off grade. 

The Scrum prospect extends for some 5km along a northwest-southeast drill line and is yet to be constrained to the northeast and southwest. Clay hosted rare earths are located in thick areas of the prospect and vary between 10m to 48m with TREO assay values up to 1,882ppm at a 300ppm cut-off grade. The prospect is partly covered by sand with thickness varying between 15m to 35m above the clay hosted rare earth areas.

At the Flanker prospect, which extends for 4km along a northwest-southeast drill line, clay hosted rare earths are located in thick areas varying between 10m to 30m with TREO assay values up to 2,059ppm at a 300ppm cut-off grade. The prospect contains a shallow amount of transported cover (3-15m) and saprolitic clays above the clay hosted rare earth areas.

With just under $5 million in the bank, Hazelden reiterates that OD6 is on track and is poised to be a magnet for the market to keep an eye on its progression.

“We’ve got plenty of funding for at least the next 4 quarters. We don’t need to go back to the market any time soon. That said, we’ll consider our options and look to broaden our investor base when the market conditions are right.”

As the OD6 story unfolds, undoubtedly institutional investors may be pulled into its magnetic field.

Write to Adam Orlando at Mining.com.au

Images: OD6 Metals Ltd
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Written By Adam Orlando
Mining.com.au Editor-in-Chief Adam Orlando has more than 20 years’ experience in the media having held senior roles at various publications, including as Asia-Pacific Sector Head (Mining) at global newswire Acuris (formerly Mergermarket). Orlando has worked in newsrooms around the world including Hong Kong, Singapore, London, and Sydney.