Rare earths market darling OD6 Metals is on a mission to prove to investors that it can master the extraction-from-clay method of mining rare earths in Western Australia’s picturesque Esperance region.
By any measure, the company has endured a wild share-price ride since its ASX debut last year when it kicked off public life with a market cap of about $20 million. And the rollercoaster journey continued this month when OD6’s share price jumped more than 60 per cent on April 3 following revelations of stellar recovery rates as high as 96 per cent for “magnet” rare earths from multiple prospects at its Splinter Rock project.
Magnet rare earths are generally considered to be the most lucrative as they are a critical ingredient in industrial magnets that are used in electric vehicle engines.
OD6’s share price bubbled again by more than 61 per cent on April 18 on the back of revelations of more bumper assay results and some seriously big mineralised intercepts returned from the company’s 83-hole second-phase drill program at Splinter Rock. Management said it recorded higher grades and bigger thicknesses than those observed in the initial program – and with mineralised widths ranging up to 71m, that is perhaps not too surprising.
In the past year, OD6’s share price has fluctuated between a low of just 13 cents up to an intraday high of 70c on November 11 last year. The previous day, the company tabled a bumper set of assays from a 65-hole drill campaign at Splinter Rock, providing further evidence of a market that seems to have an insatiable appetite for good rare earths news.
With global markets for wind turbines and electric vehicles booming amid the green energy revolution, OD6 is vowing to continue its bid to find neodymium (Nd) and praseodymium (Pr) – two key rare earth elements considered essential in modern electric engine manufacturing – within its 250 square kilometres of clay basins.
“There is huge potential and there is government support there as well,” OD6 Metals managing director Brett Hazelden told Bulls N’ Bears.
Day traders punting the company’s stock up and down appear to have had a dramatic effect on OD6’s journey to date.
But Mr Hazelden, a trained metallurgist who had previous success at the helm of the ASX-listed Kalium Lakes operation, also believed misinformation in the market had added to the robust changes in price. He said some negative commentary had been aimed at whether rare earths testing procedures were rigid enough, but there have also been wider allegations of a more devious propaganda mission.
Global cyber threat intelligence specialist Mandiant last year warned that a social media campaign – known as Dragonbridge – was being waged with negative connotations for rare earths companies. Mandiant said Dragonbridge was comprised of a network of thousands of inauthentic accounts across many social media platforms, websites and forums, promoting various narratives in support of the political interests of the People’s Republic of China – the dominant force in the rare earths market.
The market was choppy when we listed, but we believe the commentary has (unfairly) pushed our price down. So for our clay-based rare earths, we need to show good recoveries and good grades to stop the noise. We’ve got billions of tonnes out there, so what we need to do is focus in on 1500ppm stuff with recoveries of 50 to 80 per cent. OD6 Metals managing director Brett Hazelden
China and Myanmar have been the world’s dominant rare earths producers to this point, with extraction coming from a mix of hard rock and clays. But Australia’s hat has been thrown into the ring through companies such as the WA-based Lynas Rare Earths, which holds a unique position as the only significant producer of separated rare earths outside of China – albeit, Lynas’ focus is mostly on “light” rare earths as opposed to the “heavy” rare earths that are mostly only mined out of China.
Notably, China was mining rare earths in clays well before hard rock was in vogue.
Mr Hazelden, who has also worked at iconic operations including Sons Of Gwalia, Newcrest Mining and Argyle Diamonds, nominates Ionic Rare Earths as the current benchmark for the local industry. Ionic last month revealed a maiden probable ore reserve for the first stage of its Makuutu project in Uganda of 172.9 million tonnes at 848 parts per million (ppm) total rare earth oxide (TREO), for a colossal initial mine life of 35 years.
While OD6’s final resource number is not yet clear, the latest round of drill results that show plenty of uber-thick intersections and grades sitting comfortably between 1200ppm and 1500ppm, give strength to its arm. Remarkably, some of the smaller intersections in the latest campaign were even grading more than 6000ppm.
Mr Hazelden has no doubt the company’s biggest weapon to help home in on its rare earths targets at its Splinter Rock and Grass Patch projects is a $1 million electromagnetic survey completed last December. The resulting maps clearly highlight the company’s clays in “red” among the “blue” granites.
The company’s drill rig has been exquisitely verifying the EM results ever since, setting up the possibility of more significant discoveries now that the methodology is checking out. Mr Hazelden described it as a “milestone step in exploration activities” that allowed the company to better identify and map clay locations, expanse, depth and thicknesses. Poignantly, it also showed the areas to avoid.
“Instead of having to go and do 50,000m of drilling, we can do 5000m of really targeted drilling,” he said.
“We’re trying to be smarter. If we can go to 1000 or 1200ppm we’re already ahead of the game, if we do five million tonnes of ore we’re ahead of the game and if our recoveries are better than 35 per cent then we’re ahead of the game.
“Based on what our drill results are saying and what we can now see in the earths with our pretty colours, things are looking good.”
The beginnings of OD6 make for a classic case study on how to build an ASX-listed company and while it may sound like the start to a joke, the very serious tale starts with a geochemist, a geologist and a database specialist walking into a room.
It was that respective trio - Nigel Brand, Darren Holden and Col Lloyd – who triggered the OD6 journey with some innovative “desktop” exploration that included spending months trawling through old Department of Mines’ drilling result databases for historic information relics relating to Splinter Rock.
The neat thing about rare earths is that they have only recently become a commercial attraction and while their occurrences may have been logged by historical explorers, they were likely not followed up at the time, given the electric vehicle juggernaut and green energy revolution were somewhere over the horizon back then.
While a select few have employed this method of making mineral discoveries in the past, what is quite unusual about OD6’s early desktop exploration play, is the historic CSIRO water samples they managed to get their hands on. Those old water bore results showed faint traces of rare earths across what would later become the company’s tenements.
Ultimately, those tenements and others triggered the company’s sizeable market cap when it hit the ASX boards – a move that would no doubt see public company types waxing lyrical for hours at the neighbourhood BBQ.
“I don’t think there are too many people who do it … and 15 years ago, rare earths weren’t very sexy.” Mr Hazelden said.
“But people are getting smarter about it now and I think Esperance is a good spot to be … there is already wind power down there and we’re trying to position ourselves to become a green rare earths producer.”
Crushing, grinding and heating hard rocks to extract rare earths can be a much more expensive exercise than leaching them from clays. Technology is yet to devise a perfect plan for the latter, but that leaves a genuine “watch- this-space” evolution to come as the Australian Nuclear Science and Technology Organisation continues its research in the sector.
One thing that does seem certain – despite the differing commentaries – is that the demand for rare earths does not look like abating anytime soon given their use in the burgeoning wind turbine and electric vehicle industries.
Mr Hazelden said: “When I started at uni, rare earths weren’t even a thing – it was all copper, gold, lead and zinc. Now you look at these little, strange 15 lots of elements at the bottom of the periodic table … I didn’t even know what they really were once upon a time and I’ve got a chemistry and metallurgy degree.”
OD6 is currently waiting to see if it has been successful in its bid to secure a $5 million grant as part of the Australian Government’s Critical Minerals Development Program, which aims to support early and mid-stage critical minerals projects.
If the government is serious about providing a leg-up for the critical minerals industry, it would do well to take a close look at the ground around Esperance. It just might end up being to rare earths what Texas was to oil way back when – now there’s a thought.
Is your ASX-listed company doing something interesting? Contact: office@bullsnbears.com.au