They say that in the trenches of everyday life, there is no such thing as an atheist. Everyone worships. Everyone believes in something.
So, when I sat down with Brett Hazelden, managing director and chief executive of OD6 Metals Ltd (ASX:OD6), I wanted to know: what does this man — husband, father, sheep farmer, proud Tesla (NASDAQ:TSLA) driver — believe in?
Well, Brett Hazelden believes in two things: the “sexiness” of rare earths and the possibilities inherent in simple, honest hard work.
In this article:
- The problem with rare earths
- China the trailblazer
- The dawn of the electric vehicle
- The time is right for OD6 Metals
- Business is (still) booming
At the start of 2022, Brett was enjoying a life of semi-retirement on his 200-acre property in the relentlessly lush southwest corner of Western Australia. He had left Kalium Lakes — a potash company he established in 2014 and ran for six years — a year and a half earlier and was contemplating the commercial qualities of sheep when OD6 reared its head.
“I looked at it and it looked pretty good — rare earths in Esperance, a sexy commodity, and so I joined the team to list the company as a straight IPO,” Brett said. “I joined in April and then in June, we listed it.”
A year later and things are looking pretty good. OD6 Metals owns the 2,579-square-kilometre Splinter Rock and 2,248-square-kilometre Grass Patch projects north of Esperance in Western Australia, both of which are prospective for rare earth mineralisation.
“It’s actually gone straight to plan really, which is a surprise — well, it shouldn’t be a surprise really, we planned it,” Brett chuckled.
“The drilling has gone to plan, we’ve found good grades across multiple prospects. Discovery is done, so now it’s really about: How big is it?
"We’re not going to be scrounging for tonnes, what we’re going to need to do is really focus on where the best grades are, where the best metallurgical recoveries are, and then obviously optimise a process for economic extraction.”
The problem with rare earths
A metallurgist by trade, Brett is attuned to the complexities of rare earth mining. Though the applications for rare earths are varied and numerous, the commodity itself remains relatively new.
“I think in the 60s, they were just refining how many rare earths there were,” he said.
“From that point of view, I think people hadn’t figured out what the applications were for some of these things. But when they figured out neodymium and praseodymium are really strong magnets — 10 times stronger than a normal magnet — they linked that to motor efficiency, in wind turbines and cars and other things. The timing has just come to be right now.”
That, and the fact that those who specialise in rare earth are as in demand as rare earths themselves.
“I think you’d be struggling to find anyone that’s got rare earth experience other than a couple of guys from Lynas. There’s only one mine in Australia, which is operated by Lynas,” Brett added.
“There’s been Arafura and a couple of others around for 10 years as well, so they’ve been looking at it. But in terms of actually building and operating a rare earth mine, there’s not too many people around.”
China the trailblazer
A sizeable portion of this apparent skills shortage can be attributed to China’s dominance over the rare earth sector. Last year, China accounted for roughly 70% of global rare earth production, compared to the United States in second with 14% and Australia in third at 6%.
“I think they were just smarter 10 or 20 years ago and figured out there was something there,” Brett said. “They got a sort of lead on the rest of the world, effectively, because everyone was really focused on oil.”
The prevailing disparity in global production has left Western lawmakers reeling; concerned that China’s monopoly presents a strategic disadvantage at a time of almost unprecedented geopolitical tension. But that, of course, is starting to change. And the further the world shifts away from its reliance on China, the better the outlook is going to be.
“The impact on us is that we probably want another 10 or 12 new mines to be developed outside of China to actually meet the demand,” Brett said.
“From that point of view there’s massive demand and what I think we’re missing at the moment is almost a coordinated approach from a mine through to the end manufacturing process outside of China.”
In such a scenario, Brett explains, Australia might be the mine, producing rare earth concentrates or oxides for further refinement in America, the UK or Europe. Then comes the manufacturing process, which might take place in Japan or South Korea, before the final product is shipped around the world.
“I don’t think people have quite got their head around how we’re going to build it all and when we’re going to build it all, and how we’re going to make these 2030 deadlines. But the world’s got the right ambition, it’s just going to take a little bit longer.”
The dawn of the electric vehicle
What’s easier to get our heads around is the demand side of things. With the Russian invasion of Ukraine, no small number of countries have felt compelled to beef up their defence capabilities, in which rare earths are a key component. They’re also needed for communications infrastructure and renewable sources of energy.
But from where Brett is sitting, the popularity of electric vehicles remains the most prolific driver of rare earth demand.
“There’s a small portion that’s going into weaponry and planes and those sorts of things, but the largest amount is going into electric vehicles for the motors themselves — not even into the batteries, but into the motors,” he said.
“The Chinese guys are producing a lot more electric vehicles than we are in the Western world, so I think that’s going to continue to grow.”
And the US could be about to follow suit. On May 12, Elon Musk — whom Brett called a “smart man, probably trying to do too much” — appointed former NBCUniversal executive Linda Yaccarino as Twitter’s new chief, ostensibly to take some of the pressure off himself and free up time for Tesla.
“If you look at Elon Musk with Tesla, he’s sort of said, ‘We can’t get enough supply of the NdPr magnets at the moment’, so they’re going to use more inefficient magnets, but that’s probably more of an issue while the supply’s not available,” Brett said.
“Once the supply is there, he’ll flip back to using those because you get 500 kilometres out of a Tesla instead of 300 kilometres.”
The time is right for OD6 Metals
Like so many success stories, OD6 Metals is the lovechild of opportunity and ambition. Before Brett came on board, the company was established by “three really smart geologists”, who got their hands on a database of drilling records going back decades.
“What they did was look at historical drilling within Western Australia, looking for things that weren’t sexy 10, 15 or 20 years ago but which are sexy now. And that’s how OD6 came about,” Brett said.
“They found some good drilling that was done, but no one followed it up. Now we’ve obviously come in and followed it up. The time is right for rare earths and the company has been successful off the back of that.”
Since then, it’s been a matter of finding the right person for the right job. In his capacity as managing director and CEO, Brett is largely taken up with fostering investor engagement, raising money and generally guiding the ship in the right direction. The finer details fall on the shoulders of a dedicated team he knows well.
“I generally like to get smarter people than me around me or people who are really good at their specialty — a good heritage person, a good geologist, a good metallurgist. I always try to find the smartest person in the room in their sector,” he said.
“I have a team that I’ve continued to work with on multiple projects over the last 10 or 15 years and we bring certain guys in as we progress through the various steps. My current team probably consists of five or six guys that have worked for me for 10 or 15 years and one or two new people.”
But even with the right team, rare earth mining is a tricky game to play, with more than its fair share of uncertainties. In Brett’s estimation, less than 5% of the companies that list on the ASX actually make it to the mining stage — many end up shifting their focus, and the covert influence of Lady Luck should never be discounted.
“You’re always dealing with uncertainties. Can you actually sell the product? Who are you going to sell it to? Can you finance it? Financing is the hardest step for any mine. You need an offtake agreement and for us, that’s probably the biggest uncertainty at the moment.”
Business is (still) booming
Though he admits the odds are stacked against anyone looking to get a mine up and running, Brett maintains that it’s “still boom-time” for Australian resources. And while having the right team is key, getting the right investors on board is also critical.
“The security of knowing Western Australia, and Australia in general, is a mining jurisdiction with low political risk — I think that attracts a lot of people, but you still have issues around getting the right investors,” Brett said.
“Investors like risk but they want to make a 10-bagger. If they don’t get the 10-bagger, then they quickly head for the hills and your share price lags very quickly.”
But in the end, a smart team and the right investors mean very little if no one is prepared to follow through and do the work.
“There are a lot of people just looking for the next story to keep the share price momentum going and attract investors, but their ultimate goal is to flog something off and make some money, and not actually build anything. We want to find something, we want to build it,” Brett said.
“I think it’s just about persistence — that’s why people play the game.”
Persistence, and a sexy commodity.