ION Energy (ION) - Cash to Drill & $11M of Warrants

ION Energy is a Lithium exploration company based out of Toronto, Canada. It is listed on the Toronto Stock Exchange (TSX-V: ION) and the OTC Markets (OTC: IONGF). The company is Mongolia's first Lithium brine explorer and developer. The company's major sites include the Baavhai Uul Lithium Brine Project and the Urgakh Naran Lithium Brine Project. 

We met with Ali Haji, CEO Co-founder, and Director at ION Energy, who joined us from Toronto. Ali previously met us in March to discuss the company's business plan, strategy, team, and history. You can follow up on the conversation here.

Ali is also the Director at Antler Hill Mining Ltd. and Banner II Capital Corp. He has over 13 years of international experience in risk analysis, asset management, and program governance. He serves as an advisor for ATMA Capital Markets Ltd. and Steppe Gold Ltd. Ali, along with the board members collectively own 25% of the company.

Company overview

ION Energy has claims in Mongolia that spread across 110,000 hectares, featuring highly prospective Lithium brine licenses. This exploration is the largest-ever granted in Mongolia.

Equipped with a seasoned leadership team, ION Energy is known for creating a strong value proposition. The company's key focus is on Lithium salar exploration in Mongolia. Transparency with the shareholders is of utmost importance at ION Energy. 

The Baavhai Uul Lithium Brine Project

The Baavhai Uul Lithium Brine Project is the company's flagship site. This site is spread across a land area of 80,000 hectares and is located within close vicinity to the largest market in the world. Since the exploration commenced, the company has discovered highly prospective deposits with grades ranging up to 811 ppm.

The Urgakh Naran Lithium Brine Project

Located 150 km from the Baavhai Uul site, the Urgakh Naran Lithium Brine Project is spread across 20,000 hectares of prospective lithium brine. Past work carried out at this site has identified shallow lithium deposits in brine.

Capital Raised

Since March the company was able to raise USD $2.7 M from the market at a unit price of $0.30. This was during a time where Mongolia was simultaneously going through a bull run in the lithium marketplace and a lockdown.

The company announced a $3 M 'bought deal' in March, which was targeted towards financing the company's operations. Following this announcement, there was a market demand of $10M within an 8-hour window. To avoid diluting the company, they retained $5M and upsized the company to $5 M by over-allotment. This development has made the company fully funded for the next 2 years.

The company also raised an additional $11 M through warrants gained through the previous rounds of financing. Based on the company's value over the last 3 years, the warrants were issued at a $0.70 unit price. The conversion of warrants will be carried out based on the results of the ongoing exploration. ION Energy is looking to further expand its exploration efforts with the capital raised along with doubling their team on the ground. 

In a scenario where the warrants don't convert successfully, the company already has a healthy cash flow which would enable uninterrupted exploration and operations for the next two years. The company is mindful of not exceeding that timeline, however, upon conversion of the warrants, the company will double-down on its exploration pursuits while also identifying new acquisition targets within Mongolia.

Lithium salar Exploration

ION Energy recently started exploration and drilling 21 holes across the 2 licenses. Since this is a massive land package, the company is approaching the process through a microseismic program which was concluded in early 2021 along with the analysis of geophysics. This led to the generation of specified drilling targets which the company plans to explore for the coming years. 

The company hasn't faced any challenges so far drilling for Lithium salar. Even though this is a first-of-its-kind drilling operation in Mongolia, the model holds key similarities with oil and gas exploration, which is quite common in the country. As there are several oil and gas exploration experts across the region, this has benefitted the overall exploration process for the company. 

Looking towards a Greener Future

Given the state of air pollution in Mongolia's capital due to the numerous oil and gas exploration projects, Ulan Bator is slowly moving towards cleaner energy. This has garnered support from the local community and the government towards ION Energy's pursuits for greener energy through Lithium-ion battery technology, a sustainable replacement for fossil fuels.

Matthew Wood, Chairman, ION Energy has led multiple initiatives in the past 12 years towards raising awareness around green energy in Mongolia. Matthew is also the Chairman at Steppe Gold. He served as a founding Chairman at Avanco Resources, which was sold in March 2018 for AUD $440, and Hunnu Coal, which was acquired in 2012 for AUD $500M. 

Hiring Locally

ION Energy sees itself as a Mongolian company listed on the Canadian Stock Exchange as all the ground staff are local hires and the company is paying taxes in Mongolia. The company has employed local Mongolians and trained them as a part of their team. Additionally, they have garnered increased support from the local, federal and municipal governments towards Lithium salar exploration in the region. This support has been evident through various approvals by the administration along with proposals to join the team's effort. 

The Role of Geopolitics

Mongolia is a strategic location bordering Russia and China. It's close to major battery manufacturers in Korea, Japan, Taiwan, and India, providing a unique growth opportunity.

China is the major supplier, manufacturer, and consumer of Lithium-ion batteries, however, the countries surrounding the Mongolian region are looking to ramp up their own production and supply of battery materials and ION Energy finds itself in a favorable position to bridge that supply-demand gap. 

Given the current geopolitical scenario surrounding the US and China, and the trade sanctions in the lasting months of the outgoing US president, however, through this regional turmoil, the company is looking to be a continental supply chain provider in Mongolia due to increasing demands. ION Energy looks to bridge this gap while simultaneously reducing greenhouse emissions by shipping locally.

Additionally, The European Battery Metals Alliance has a strong alliance with the Republic of Mongolia and as a result, the government has facilitated the advancement of ongoing projects. 

Resource Allocation

ION Energy has claims over the entire Endorheic Basin, an area spread across 81,000 hectares. The company is allocating $5 M towards exploration through 21 holes being drilled within 20 m - 70 m depth across the Urgakh Naran site and the Baavhai Uul site. This will provide an in-depth view of the land's stratigraphy. 

A diamond core rig has been deployed to the Baavhai Uul site which will later be moved to Urgakh Naran. The time duration between the drills, assays, and bringing the supply to the market is 3-6 weeks. The close proximity to the ALS, SRS, and Khan labs makes the analysis of core samples significantly quicker.

To ensure profitability, a grade of 250 ppm brine is a minimum requirement. The company has discovered grades ranging between 411 ppm and 811 ppm. The higher-grade brine is close to the surface and it's expected that the grade will rise as the deeper exploration is carried out. 

Targets 2021 and Beyond

Currently, ION Energy is focusing on two targets, namely Li-11 and Li-8 where drilling is being carried out. These sites are 70 km apart and are located on the Baavhai Uul site. This site is being developed and supervised by Don Hains, Advisory Board Member, ION Energy. Don is a geologist with over three decades of experience in industrial minerals exploration, and economic development. He has a work history of developing and designing numerous lithium exploration programs around the world.

Once the drilling is concluded over the course of 8 months, the company is looking to bring a strategic investor on board. The company's efforts to further raise capital and convert the $11 M warrants will be directed towards understanding the geology and structure of the projects and carrying out detailed studies as the company moves closer to the production stage. Once the production stage is in motion, the company is looking for either a ROFR (Rights of First Refusal) for full acquisition or a majority stake in the company.

To find out more, go to the ION Energy website.