Ionic Rare Earths (IXR) - Chinese Group Sign MOU for Large Scale REE
Ionic Rare Earths is a company based in Perth, Australia. The company is focused on responsible exploration to fill in the supply shortages in the market while also minimizing the overall environmental impact. Their flagship Makuutu project in Uganda features 5 licenses that encapsulate an area of 242km2. The site is easily accessible via tier one transport infrastructure which makes commuting convenient regardless of the weather conditions.
We spoke with Tim Harrison, CEO, Managing Director, Ionic Rare Earths. He has also been the Project Manager for the flagship Makuutu Rare Earths Project since 2020. Tim holds a degree in Chemical Engineering has over 2 decades of experience and a strong track record in mineral processing and hydro-metallurgy. He is closely involved with the project's planning, development, testing, construction, and supervision. Tim has been focused on getting the ongoing scoping study published in the market at the earliest.
Ionic Rare Earths is led by a strong team of individuals with decades of expertise in key disciplines including mining, metallurgy, business, and financial management. The company is working on developing a low-cost, high-value rare earth project. Their flagship project is in Makuutu Rare Earths Projects, which is situated in Uganda. On May 5, 2021, Ionic Rare Earths announced the start of phase 4 resources drilling at Makuutu.
An Approach Towards Sustainability
Makuutu's resources offer the lowest cost critical and heavy rare earths in the world. Rare Earths are essential for the development and production of clean energy resources that include wind turbines and electric vehicles. As global warming and sea levels continue to rise, a strong shift towards renewable energy resources is the need of the hour.
Ionic Rare Earths' long-term corporate strategy is focused on becoming a major supplier of critical and heavy rare earths as a way to support the global shift towards green energy. It is projected that the demand for Rare Earth elements (Dy, Nd, Pr, and Tb) will rise between 6-40 times by the year 2050.
The Makuutu Rare Earths Project
Ionic Rare Earths is developing an Ionic Absorption Clay project in Uganda. This project is called the Makuutu Rare Earths Project. This project is a huge 315Mt Ionic Absorption Clay resource which is situated 120km east of Kampala, the capital city of Uganda.
The key advantages of this project are a well-developed infrastructure and shallow deposits. The scoping study for this project has been announced the company is currently working on the bankable feasibility study Makuutu.
The scoping study for this project meets the guidelines laid out by the Australian Securities Exchange (ASX). Their production target is based on indicated resources and the company estimates that this will lead to 11 years of ongoing production. Initially, the project will commence with one module which will be upscaled to 5 modules over time.
The company is producing an annual volume of 4,000t critical and heavy Rare Earth Oxide, which is a rarity given the consistent volume. They plan to further extend this promising project through inferred resources which as per estimates, increase the project duration up to 27 years.
Ionic Rare Earths is looking to commence infill drilling as a way to quickly move from the inferred classification of resources towards indicated resources in 2021. This will further support the bankable feasibility study and help plan the extended project timeline.
A Strategic Approach Towards Investments and Production
Ionic Rare Earths is financially sound as the company was able to raise $12M in early 2021. This gives them the flexibility to execute their program and deliver on schedule.
The company invested $89M towards the development of the first module that consists of the establishment of a mine and a dedicated processing plant. This setup has the capacity to manage up to 2.5Mt of Ionic Absorption Clay and produce up to 800t Rare Earth Oxide annually. The cash flow generated from this phase will be allocated towards funding additional modules. The company plans to ramp up its production every 2 years by adding new modules to scale up production from 2.5Mt to 12.5Mt by 2031.
The company's existing base has an IRR (Internal Rate of Return) at 38%, while the NPV (Net Present Value) sits at $321M. This is projected to generate a free cash flow of $766M post-taxes over an 11 year period.
A Breakthrough Deal with Chinalco Jiangsu
Ionic Rare Earths signed a non-binding MoU (Memorandum of Understanding) with China Rare Earths Jiangsu, a subsidiary of Chinalco. The company ranks among the top six Chinese firms focused on the research, development, manufacturing, and sales of rare earths. The company plans to integrate Chinalco/China Rare Earths' 40-year experience and technology in heap leaching Ionic absorption clays. The ionic absorption clay is crucial for the production of heavy and critical rare earths.
This agreement will further expand Ionic Rare Earth's capabilities to accelerate the Makuutu project as a development partner. This will further de-risk the first module while simultaneously opening up possibilities for investment.
As the extraction of ionic absorption clay has observed a decline in China, causing a gap between the processing and production of rare earths. The Makuutu project can help bridge this gap as the extracted supply can be directly in China's existing supply chains that are backed by strong infrastructure.
Ionic Rare Earths is working towards a binding agreement with Chinalco and its subsidiary, China Rare Earths Jiangsu in 2022. They plan to drill additional samples and send them to China for further testing and analysis which will also support the ongoing banking feasibility study.
Given the cost-effectiveness of rare earth extraction in Makuutu, paired with a long-term strategy and a sizable annual production capacity makes Ionic Rare Earths a promising venture. The strong market for rare earths in the renewable energy sector along with consistent growth in demand in coming years indicates a promising future for the company.
The Scoping Study
The scoping study is the next step in developing the Makuutu project. This study aims to develop Makuutu into an operating asset and bringing it into production by the year 2024. The company is currently focused on acquiring a mining license by Q4/22 along with an 18-month timeline to conclude the Banking Feasibility Study (BFS).
Ionic Rare Earths completed drilling on the existing exploration license (EL00147) situated on the east of the project, ramping up existing production capacity. It consists of 25 RAB holes, each spaced 1km apart. This will further clarify the presence of Ionic Absorption Clay deposits in the East.
On the North end of the site, the company has another 42 holes drilling which will help determine the potential for future expansions. An infill diamond program is also planned in the near future. The company wants to move as much of the Inferred Resource into Indicated Resource in the 12 months.
Rare Earths are becoming extremely fashionable in government critical mineral conversations, Ionic is keeping it simple. Sell to the biggest buyer with the deepest pockets. You've got to admire that.