A method of treating a water-swellable clay, initially having a Fe.sup.+3 /Fe.sup.+2 ratio of at least 1.0, preferably at least 3.0, and most preferably in the range of about 5.0 to about 15.0, after the clay has been mined and dried. After the common initial drying of the clay to a moisture content of 12% or less, the clay is re-wetted to a moisture content of more than 12% by weight, preferably at least about 15% or more, based on the dry weight of the clay, then re-dried to a moisture content of 12% by weight or less, based on the dry weight of the clay. This re-wetting and re-drying processing of a dried clay unexpectedly improves the water absorbency, and viscosity properties; increases the effectiveness of the clays as binders in sand molds and iron ore pelletizing; unexpectedly increases the rheology properties of the clays for oilwell drilling fluids, and lost circulation fluids, and as a suspending agent in the cosmetics and pharmaceutical industries; improves the binding characteristics of the clays to act as a binder for iron ores, such as taconite, and sand molding (foundry industry); and provides unexpectedly increased water absorption in forming water-swellable clay-based water barriers.