Transcript: ION Energy (ION) - Cash to Drill & $11M of Warrants
Interview with Ali Haji, CEO of ION Energy. Ion Energy is Mongolia’s first Lithium Brine explorer and developer and is focused on exploring the Lithium salars in the country. Ion Energy currently holds about 110ha of highly prospective Lithium Brine licenses in Mongolia and has the largest land package ever granted in the country which is Baavhai Uul and is the flagship project for Ion Energy.
Ion Energy is keen to become a significant player in Asia’s booming Lithium market and exploration efforts are now underway on their assets which are highly prospective showing high grades, with the max at 811 ppm.
- 1:27 - Company Overview
- 2:18 - Raise of $5.75M & Warrants
- 4:09 - Exploration Commenced: Plan, Targets, & Financing it All
- 5:25 - Drilling in Mongolia: ESG Considerations & Relations with Locals
- 7:52 - Geopolitics & Moving Towards a Continental Supply Chain
- 12:34 - Money Allocation & Expectations for the Drill Program
- 17:01 - Timing the Market & Next Steps for ION Energy
Matthew Gordon: Ali, how are you doing, sir?
Ali Haji: Very well, glad to be back.
Matthew Gordon: Yeah, we spoke to you in March. You've been busy I noticed, thought we’d take a chance to speak to you, little updates. So where are you first of all?
Ali Haji: In Toronto. Obviously, we're in the midst of continuous lockdown, Ontario has been a bit slow to the ballgame as you can tell my hair is pretty wild, if you will.
Matthew Gordon: To a man like me, Ali, it looks great.
Ali Haji: I appreciate that. So in Toronto, at head office here, ready to get things going and we're about to open up. Vaccines are flowing and work is starting on the ground so a lot of exciting things to share with the group.
Matthew Gordon: Perfect. Why don’t you kick off that 1-minute overview as usual, and I'll pick it up from there.
Ali Haji: Ion energy, for those of you that are joining us for the first time, is focused on exploring the Lithium salars in Mongolia. We currently hold about 110,000ha of highly prospective Lithium brine licences in the country, the largest land exploration licence ever granted in country, Baavhai Uul is our flagship. We have since commenced exploration on those assets and they are highly prospective with grades in and around the max grade of 811ppm. So a really formidable sort of grade to have in the vicinity that is extremely close to the largest market in the world.
Matthew Gordon: Yeah, we caught up back in March, I think I’ll refer people back to the link for that conversation, we talked about business plan, strategy, team, history, etc. So people, please click on the link below for that one. Today I want to talk about a couple of press releases. You've raised some money.
Ali Haji: We have. So the last time we spoke we had been off of the back of our RTO, where we raised $2.7M at $0.30 a unit. Since then, we were forced to essentially determine how we would best fare through the pandemic given that the locality that we operate in Mongolia was under lockdown. And so we used that time during the sort of bull run in the Lithium market to look at potential financing for our organisation and the company. We announced a $3M ‘bought deal’ in March, we then had demand for about $10M in 8-hours so really rapidly. And of course, as a company, you don't want to dilute or over dilute your shareholders and so we opted to take $5M, we upsized to $5M. We took in the over-allotment option as you do as a result of having to pay lawyers and auditors in the junior mining space. But the focus for that $5M keeps us fully funded for the next 2-years. We also have an upside to bring in an additional $11M on the back of the warrants that have been issued over the course of the last few financings, so there is no financing overhang for the company. We're planning on doubling down on our exploration efforts. So we'll have twice as many people on the ground, essentially performing exploration as we continue to progress.
Matthew Gordon: Okay Ali with this money, obviously, I like the fact that you've not taken everything that was on offer. But the warrants, tell me more about the timing on the warrants, so you need to remind me about that.
Ali Haji: The value for 3-years on the last deal, so they were issued at $0.70 a piece, if you were to look at the Black Scholes model, they would have been in the money for quite some time. And we've now come to recover and are trading at about the unit price that we issued the units at to begin with. So $0.70 over 3-years, we expect them to start to convert as we start to put out news flow. And that's obviously dependent on exploration, which we have since commenced as of last weekend.
Matthew Gordon: Okay, well, maybe we get onto that. So talk to me about this, you just started, what are you going to be doing?
Ali Haji: On the back of the exploration that we've just commenced, we start to do about 21 holes across our 2 licences, obviously 110,000ha for junior miners is a significant land package. We have to be quite calculated with respect to where the drill goes down and that calculative approach was determined by the microseismic programme that we completed earlier this year along with the geophysics. So we have our specific targets and as of 2-weeks ago, we put out a press release to market indicating where exactly we would put the drills down into the ground and that's our focus for the next few years.
Matthew Gordon: Right, but what happens if the warrants don't come good, what are the options there?
Ali Haji: So if the warrants were not to convert, we're not too concerned about that fact. Some of what we raised and were able to put into the coffers, the Treasury is quite healthy at this stage. We have enough run rate for the next 2-years, we will not exceed that. The warrants converting would ultimately allow us to triple down or quadruple down on our efforts on the ground, but also look at additional acquisition targets in country. So we have no need for those warrants to convert, if you will, but we would be very happy if they were to.
Matthew Gordon: Right and obviously, this is the first drilling on Lithium salar in Mongolia, have you experienced any issues, are there any concerns?
Ali Haji: Yes, you're absolutely right. This is a first mover, as far as Lithium salars are concerned. So it's the first time Mongolia has ever been drilled for Lithium salars. Thankfully, the salar drilling model is very similar to that of oil and gas, and Mongolia has a thriving oil and gas industry. And so the expertise is quite prominent in country and we're not facing any issues per se.
Matthew Gordon: Right, because we've seen a lot of unrest in various places around the world with so many companies on here talking about issues with locals and their concerns over damaging the environment, etc. I've seen a lot of that in Canada and South America so you're saying they're encouraged by what you're doing, they are getting involved, I mean, how would you describe it?
Ali Haji: It’s a combination of the two. I think, when you're moving away from fossil fuels, for anybody that's been out to Mongolia. Ulan Bator is one of the most polluted capital cities on the planet. It sits within a bowl, essentially, that's a valley and because of their thermal coal power stations, the soot in the air during the wintertime, you can actually taste it in your teeth, you feel the gritting of your teeth. And so they see, I know it's quite unpleasant, but they are moving towards a greener, cleaner future much like the rest of the world. And so they see along with us and our management team foray into cleaner, greener energy, and the way to provide that is through battery technology and so it's quite supported. The government's been extremely supportive of everything we're doing in country for Ion as well as some of the other initiatives that my chairman has had over the course of the last 12-years in country. And we've seen nothing but support on that and from a local community perspective, you know, ESG is a is a bigger and bigger topic as we progress through the next decade or so. We've found that for the local environment for us, you have to get approval not only from the federal government, but from the provincial government and then the municipal government. And the municipalities are so supportive of what we're doing because as a group, we've always employed local Mongolians, trained them to be part of the team and therefore bring up the skilled labour sort of segment in country. So they continue to approve our exploration efforts and not only approve but also look to join us as an organisation as we move forward.
Matthew Gordon: So what are you making sorry to get geopolitical on you here, but we've seen comments from Biden, which shows up pushing back on Chinese, we've seen before that we saw trade wars went with Trump's in the last few months in government. How are you seeing this Canadian company with an asset in Mongolia, tapping into the Chinese market, which is obviously not insignificant, they’ve really embraced this EV thematic, how do you play that? What are the relationships that you've got and what are the relationships you need to build to actually move this thing forward?
Ali Haji: Geopolitics is a big factor in everything everyone does around the world. For us, we see ourselves as a Mongolian company listed on the Canadian Stock Exchange. Our staff on the ground are 100% Mongolian, we execute with Mongolian staff, we pay Mongolian taxes, we have an incorporation in country that manages all in country relationships. And on the back of that we continue to explore for Lithium and we recognise that yes, China has some geopolitical issues with the Western world today and the Biden administration has made it quite clear in the last little while with respect to sanctions and the rest of that stuff. But we see ourselves as sort of servicing what we like to think of as a continental supply chain. We've seen over the course of the last 3, 4-years that North America with Thacker Pass in Nevada, and a number of other projects that are deemed unconventional start to come online. In Europe, the European Battery Metals Alliance has now looked at Serbia and Portugal for Hardrock assets, because they want that continental supply chain. And in very similar fashion in the Asian market, China today imports the vast majority of their Lithium from Australia and the Lithium Triangle. So not only are we servicing that local sort of supply chain, but in terms of the overall impact on greenhouse gas emissions for instance, having shipped those products from one end of the world to the other. I think we're servicing that continental supply chain that will be required. Now, China may look to do things a little more aggressively, but that's for them to decide. But ultimately allowing them to get something from their nearest neighbour as opposed to from across the world, I think hopefully bodes well for the International geopolitical environment.
Matthew Gordon: It makes sense and that's what I'm inquiring about. We spoke previously about what it is that you've got there, like I say, I will refer people back to the previous conversation, because together it’ll make a much more interesting research document for them, but you have to almost pick a side, don't you? Because you can't say I'm going to supply on to continental Europe or the US and be that close to one of the largest consumers in the world. How would the West view you, if you were talking to them about supplying into Europe and how the Chinese view you for doing that. So, there's only this, it's a real interesting mixt politically, how you position yourself, because you can't be all things to all men.
Ali Haji: Of course, I will tell you that the European Battery Metals Alliance and primarily Germany are leading the way, in that regard, it has a fantastic relationship with the Mongolian Republic, our country, and their government works hand in hand with them to help advance multiple projects. They've also shown interest as far as battery metal is, the US during the last administration sent their Secretary of State over to help forge a trade deal for these battery metals. And so you know, Mongolia sits in a very strategic location given it’s bordered by Russia and China. The Western world has an interest to ensure that those resources end up in sort of a usable manner or a friendly manner, if you will. But let's not forget that Korea, Japan and Taiwan are all producing a number of batteries. Beyond that the Indian government is about 10-years behind the Chinese technology machine, if you will so they're trying to play catch up. China might be at this point in time, the largest consumer of Lithium on the planet, they might produce the vast majority of batteries that are consumed today. And they might refine the majority of Lithium that's used in batteries worldwide, but the number of countries in that region are playing catch up and they're playing catch up pretty quickly. So it might not be the Chinese, sort of entities that we end up supplying to. It's a natural fit, given our proximity but Korea, Japan, Taiwan and India are all racing ahead, ready to consume additional Lithium.
Matthew Gordon: Well, let's get back to the project. Thanks for that. I think it's interesting how companies need to think about these things really early on to position themselves because of one misstep, etc. Back on the project, it's just over $5M, right? How much of that is actually going in the ground and how much drilling are you going to be doing in dollar terms and related terms.
Ali Haji: So in total, about 21 holes are being drilled anywhere between 20m and 70m in depth across 2 licences. So the Urgakh Naran and the Baavhai Uul, the early work that was conducted on those projects tells us that the aquifers are about 20m to 25m below surface, so not very deep relative to what you might find in the Lithium Triangle. This drilling will include a number of different holes to allow us to determine the average grade of the brine that's sitting beneath the surface. Once we have the average grade of this brine as a result of doing the microseismic that we've already completed, it's essentially a volume times average grade calculation that gives you an early resource indication. So this work will be done over the course of the summer. We've also deployed a diamond core rig to Baavhai Uul that will then move on to Urgakh Naran our second licence. That gives us a sense of the stratigraphy. It's important to understand that so we know exactly what those layers are beneath the surface. The drilling commenced as of last weekend so we'll start to see results come in due course. And the general sort of timeframe to get results from drill to assay to market is about 3 to 6-weeks.
Matthew Gordon: Wow. Explain that to me, how do you do it so quickly?
Ali Haji: So we do it quickly as a result of the labs in the country. ALS is one lab provided in the country, SRS is also there, we have Khan labs, which is an independent local lab as well. We're only about 4 to 6-hours from the capital, which is where the labs are located. So we'll start to drill, obtain our core sample for the stratigraphy and send them over to the labs in the capital. They will then process in about 3-weeks thereafter. So they're not really backlogged as far as we know for now, that may change as we've seen in the global environment. But we're encouraged with the early results that we've been hearing about.
Matthew Gordon: Right so what sort of grade are we aiming for here? What sort of range should we be looking at?
Ali Haji: You look at the Lithium Triangle and if you were to speak with some of the industry experts, including some that are on our advisory board, they will tell you that 250ppm today in brine can be profitable. And as a result of what we've seen, our lowest grade was about 411ppm, our max grade was 811ppm. So we have a max grade very close to surface that we're quite encouraged by as we start to go deeper, we expect that grade to increase.
Matthew Gordon: Right, and then you've got things like impurities and trying to understand exactly what you can extract and what the economics are. That's a long way down the path, but just again, with the money that you've got available for 21 holes, what are you hoping at the end of that to be able to say to the market?
Ali Haji: We're hoping to say that we have an early resource implication for something that's quite significant given the Endorheic Basin that we operate in is about 81,000ha. So when you look at the size of that basin, relative to what you might find in the Lithium Triangle, you might have a number of companies sharing that one basin, including Albemarle, SQM, and some of the other smaller junior miners. In our case, we control that entire basin. So having control of that entire basin and understanding that the Endorheic nature of that basin traverses the entire basin, as a whole tells us that beneath that we're about to find something that might be world scale, if you will and this drilling will allow us to prove that.
Matthew Gordon: Okay, so that is a lot, for a lot of money but my point is, I'm trying to understand the extent and reach so how do you show that scale? Do you just do large step-outs, and just repeat what you found on the previous hole, is it as simple as that?
Ali Haji: Spot on. So we have 2 targets, we identified Li-11 and Li-8, and that's where we're focusing our drilling exercises. They're about 70km apart on Baavhai Uul, we start with 400m apart in a grid fashion. We then move it closer to about 200m apart, thereby really getting to the depth in the centre of that aquifer in terms of thickness. So it is quite a focused approach, it's being led and developed by Don Hains, one of our technical advisors that sits on our board. He's worked on projects around the world, and he helped develop and design our exploration programme that is currently underway.
Matthew Gordon: Okay, right, you're able to come back to markets, after the drill programme is finished you're going to need to raise more capital again. Do you step it up, I mean, because you got to work out in the market, we talked about it last time in terms of timing the market, hitting the market, right, and we understand the demand side of the story, but likewise, you've got a few steps to go through so you can know where you fit in, then you're gonna have to bring strategic partners in and off takes and however you want to structure that thing. But where do you go after these 21 holes get done in terms of capital?
Ali Haji: After the drill programme over the course of the next 8-months or so, the intention is that we bring in a strategic investor. The strategic investor would be the likes of, it could be Tesla, it could be Ganfeng, CATL, it could be Tianjin, who's to say at this point.
Matthew Gordon: But it's going to be too early for those guys. You're going to need to do a lot of work in terms of understanding the recoveries, and so for the impurities, and so forth, you're not going to have done that, with this batch of mine, in this batch of drilling, right?
Ali Haji: We will have indeed, and I'll tell you why. We've already determined what the impurities are today, on the back of the 2-holes that were drilled for us to go out and acquire this licence. As we continue to do the assaying, we will get a better sense of the impurity of the magnesium, the calcium, the sodium and the potassium ratios. We understand today that one of our holes has a rather low sort of impurity ratio to Lithium, the other one is not so great, but it's still within the means of the refiners around the world today. So this early resource indication that we would obtain on the back of this drilling would ultimately be non 43-101 compliant or non JORC compliant say, this is how much Lithium we have in the ground based on the drilling that we've done. Now, these strategic investors that are coming in at earlier stages of projects today, because they want to ensure that they have that supply chain in the future, are coming on board as strategic advisors or investors and that's the only way we would take them on. And I say that quite prominently and we would do that so that we will give up 10% of our equity in the company today at a higher valuation. But more importantly, it's not so much an injection of capital, because as I mentioned, as we strive to produce results, we'll have access to about $11M in warrants. But this injection of capital will be strategic in the sense that it provides us with the intellectual capital to better understand our projects, our initiatives, and thus the projection to take them to production. At which point we would provide that strategy with a ROFR for full on acquisition or a majority stake in the organisation, or ultimately have them come in with an additional strategy in the future to help take these assets to production.
Matthew Gordon: Okay, you better get on with it then, get some drilling down and come back and tell us a little about it.
Ali Haji: If we weren't facing the pandemic, which we are around the world today, we would have had this work done in and around this time. But our shareholders that have been with us since the start are quite understanding of this. They know that as management and insiders, we hold 25% of the company as well. So our skin is in the game, we're waiting this out purely like the rest of our shareholders. We're not too focused on what's happening in the market in terms of liquidity and share price because we know we're executing. We know we're doing what we said we’d do, and we continue to be transparent with our shareholders.
Matthew Gordon: Okay, Ali, great to catch up and it was a quick one but I just wanted to catch you before you went off to the drill programme. Let us know how you get on.
Ali Haji: Absolutely, thank you Matt.
Matthew Gordon: Thank you for listening. If you've enjoyed the interview, why not subscribe to cruxcasts, or our website cruxinvestor.com and of course, our YouTube channel crux investor. Plus, you can catch us most days on Twitter and LinkedIn. We really love getting your feedback, so please keep it coming and we'll speak to you again soon.
To find out more, go to the Ion Energy Website