ION Energy (ION) - Lithium Exploration on China Doorstep Fully Funded

ION Energy Ltd. is a lithium exploration company that was founded in 2017 and is 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. Its major assets include the Baavhai Uul Lithium Brine Project and the Urgakh Naran Lithium Brine Project.

Matt Gordon caught up with Ali Haji, CEO, Co-founder, and Director at ION Energy. Ali is 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 are spread across 110,000 hectares, featuring highly prospective lithium brine licenses. This exploration is the largest-ever license 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 for the company. 

The Lithium Market

Lithium has observed a 500% price jump since December. Lithium carbonate prices are now ranging between $16,000/t-$18,000/t. This price appreciation has brought a large number of ongoing lithium projects into economic viability, leading to increased interest from the investor community. 

These developments in the market have also led to a spike in M&A (Mergers and Acquisitions) activity. Lithium America recently put a bid for Millennial Lithium for $400M, and Neo-Lithium was sold to Zijin for $960M. 

The market is also observing the entry of private funds in the lithium space. Cork Investments placed $500M across multiple lithium companies in the past 3-4 weeks.

Another factor responsible for the positive lithium market is the clean green energy revolution which is pushing countries and EV (Electric Vehicle) manufacturers to source a sustainable lithium supply. Given the substantial growth in demand, there has been a lack of supply in the lithium market. 

ION Energy has received significant interest from potential investors and buyers. At the Mines and Money conference in London, the company has 28 meetings scheduled within a span of 2 days. 

The Mongolian Jurisdiction 

ION Energy has been operating in Mongolia since 2010. A major portion of the company's shareholders are Mongolian nationals. ION Energy was originally a company with 99% local staff along with an expat hire. A local workforce helped the company forge strong relations with the government and the local population. 

It identifies itself as a Mongolian company that is listed on the Toronto Stock Exchange. The company's CEO has had meetings with the Ministry of Mining, and the Prime Minister from both political parties, gaining assurance and support for its mining operations. In fact, ION Energy was offered the permits for Baavhai Uul, the largest exploration license in the history of Mongolia.

Mongolia is an investment-friendly jurisdiction that encourages mining operations within the country. 

Proximity to China

ION Energy's operations are located 24km away from China's border. The company considers it as an opportunity as China consumes 53% of the world's lithium supply. This close proximity can lead to lithium supply deals with Chinese companies, potential off-take agreements, and even a future acquisition. 

The distance from China significantly cuts down the logistics cost for supplying lithium. China is a significant lithium consumer and a major refiner as it produces over 75% of all battery-grade lithium.

The recent infrastructure developments, such as the Belt and Road Initiative (BRI) that will run from Beijing through Ulaanbaatar to St.Petersburg can serve as an opportunity for ION Energy to cater to the European market as well. 

Recent Developments

ION Energy recently closed a bought deal that assisted in refinancing the company. It has hired additional team members including industry professionals, to develop a more robust exploration program along with strategic development. 

In the previous year, the industry faced a lot of supply chain issues as a result of various factors, leading to unforeseen delays. ION Energy had announced a drill program for May 2020 which was concluded in July. However, the assay results for the same are still pending. The company is working towards building better relationships with suppliers, and assay labs to improve the timelines and deliverables. Through relationship building over the past year, the company was successful in attaining soft commitments from the suppliers to adhere to certain timelines. 

The company announced the expansion of the Urgakh Naran exploration program back in September, which was delayed due to the ongoing pandemic and the rising number of covid cases in Mongolia. 

The company is presently focused on optimizing the aspects of the project which are directly under its control. It has the funding to carry out operations for the next 2 years. 

The Baavhai Uul Lithium Brine Project

The 2016 data on the Baavhai Uul project led to the co-founding of ION Energy. This data showed a maximum grade of 811ppm (parts per million) with an average grade of 426ppm. Over the years, the company has carried out RC drilling, leading to the discovery of underlying aquifers. Based on this discovery, the company has plans to expand its exploration program. 

A recently published press release highlighted the company's exploration program. According to the press release, the company identified a maximum grade of 1,502ppm, which is almost twice the 2016 numbers. The company has identified the White Wolf prospect that is under planning for a rigorous and dynamic exploration program over the course of the next 6 months. 

ION Energy has drilled over 250 holes at the deposit, out of which 21 holes are RC drilled at a depth of 80m-120m. The drilled holes feature a shallow basement with wide aquifers. 

The company initially drilled 222 holes at a depth of 6m and collected samples every 50cm. Out of the 2,000 samples collected, the company has received assay results for about 12.5% so far. 

The company's strategy is to identify lithium hotspots and build a heat map around the area. This will help the company devise an extensive exploration program that would enable hydrogeological sampling. This sampling will allow the company to test out the flow rates of the aquifers along with testing the contents of the surrounding sediment or clay. 

The company has reached out to various DLE (Direct Lithium Extraction) providers including Lilac Solutions, Axiom (Russia), and Summit Nanotech (Alberta). ION Energy is sharing data and samples with the companies to carry out various pilot plants in different lab environments to determine lithium recovery rates. This process will help the company in off-take negotiations and provide an assessment of requirements that would help in bringing the project closer to production. Based on the assay results obtained from the Baavhai Uul project, the company will determine a future strategy. 

Cash Position 

ION Energy has a current market cap of $20M. The company is in talks with Cormark Securities, Stiefel GMP, and PI Financial for an evaluation. The company previously raised $11M in capital through incoming warrants. 

As the company is preparing for an extensive program for Baavhai Uul and Urgakh Naran next year, it is looking to spend between $1.5M-$2M on the former to further develop the asset. Due to lower operational costs in Mongolia, the company would still have a buffer amount for running costs and maintenance.

In September, the company had $5M in cash flow. The previous $0.40c warrants are organically converting, and have the potential to generate up to $3.6M in capital. Upon conversion of the $0.70c warrants, the company would bring an additional $7.5M in funds. 

Partnership Considerations

ION Energy is looking to bring in a strategic partner with a potential of 9.99% board seats along with a ROFR (Right of First Refusal) on acquisition and development. The company has entered introductory discussions with a number of potential partners in the past 3 weeks. It anticipates that major announcements will be made regarding a partnership by Q2 2022. 

The company is focusing on bringing a partner that provides access to intellectual capital to help gain a better understanding of the asset. The requirement for funds isn't immediate but would be needed in the future for project expansion. 

The company has a strong advisory team that includes Paul Fornazzari, who previously worked with Lithium Americas and Neo Lithium. Don Hains is the company's technical advisor with extensive experience within the mining industry.

‍To find out more, go to the ION Energy Website