OD6 Metals (ASX: OD6) (OTC: ODSMF) has just jumped 66% on the ASX. But the real lesson for us all is probably about the wider rare earths market. They're not as rare as most seem to think. But then of course the two things you need to know about rare earths are that they're not rare and they're not earths. The third thing to know is that the real costs in the rare earths business are in the separation of the individual elements, not the mining of the concentrate in the first place. It's this factor which is what makes the OD6 find important. But the larger importance is for all the other rare earths producers.
The specific OD6 Metals announcement is that their processing method appears to be working. They're able to extract, from their target mining site, a concentrate rich in the heavy - or magnet - rare earths. This matters because it's those separation costs which are the centre of the rare earths business. You go mining, yes, and produce a concentrate, great. But that concentrate then must be separated. That process costs some $15 to $20 a kg material. But if you produce a traditional concentrate - this is a problem Pensana has, for example - then you will lose $14 to $19 a kg on the light rare earths, the cerium and lanthanum, in your concentrate. Sadly, in those traditional concentrates this might be 50% of the material. You then hope to make that back on the much higher prices for the magnet metals. What OD6 has just done is show that an entirely different type of deposit has much higher magnet metals, much less of the lights, in the concentrate produced.
OD6 Metals share price from ASXThis is known as an “ionic clay” deposit. It was once - well, until very recently in fact - thought that such deposits were confined to Southern China and the Burma border areas. But we're not finding out that they're a common enough happenstance with weathered granite in subtropical climes. This in turn means two things, that the Chinese stranglehold might be easier to break, but also that there could be many such miners set up in the future.
The implication of this is that maybe - maybe as yet, no one really knows - the traditional form of rare earth mining - Lynas, MP Materials - might end up facing significant price competition. That's the real lesson from OD6 Metals here. Sure, it's good for the corporation itself, but the more common this method, this type of deposit, is, the worse it is for the older methods and producers out there.
