ioneer (INR) - +$500M Growth Investment by a Major Says Everything

Ioneer is a lithium boron supplier. The company's Rhyolite Ridge Lithium-Boron Project provides a substantial foundation for the company to become a responsible and profitable producer of materials necessary for a sustainable future. The Rhyolite Ridge Project is based in Nevada, the United States. It is the most advanced greenfield lithium development project in the country. The company plans to enter production by late 2024 or early 2025. 

Matt Gordon caught up with Bernard Rowe, Managing Director, Ioneer Ltd. Bernard has held the Managing Director position since 2007.

Rowe has over 25 years of international experience in mineral exploration and mine development. His diverse mineral industry experience includes gold, copper, zinc, diamond, lithium, and boron exploration across Australia, Europe, North America, and South America. Bernard realized the potential of the Rhyolite Ridge Project and secured a 12-month option enabling the company to fully assess and evaluate the deposit. He is a member of the Australian Institute of Geoscientists, the Society of Economic Geologists, and the Geological Society of Nevada. 

Company Overview

Ioneer Ltd. is a lithium and boron supplier listed on the Australian Stock Exchange (ASX: INR). The company was founded in 2001 and is headquartered in Sydney, New South Wales, Australia. The company's flagship asset is the 100%-owned Rhyolite Ridge Project, a large, shallow lithium-boron deposit located close to existing infrastructure in southern Nevada. 

The Sibanye Stillwater Deal

Ioneer Ltd. entered a deal with Sibanye Stillwater on a 50-50 JV (Joint Venture) for its Rhyolite Ridge Project. Sibanye will be a contributor to the equity component for the construction of the project. This deal was carried out in an orderly and systematic manner with the help of Goldman Sachs. The deal was put in motion shortly after Ioneer completed its DFS (Definitive Feasibility Study) in May-June 2020. This deal effectively handles the financing for the Rhyolite Ridge Project.

Working towards a deal, the company had discussions with 80 different parties. The company was looking to bring a partner on board that would be interested in securing lithium as a massive low-cost, long-term supply in the US. This would help drive the investment decision for the project. Ioneer seeks to become a major player in the lithium supply market within the country. 

Although Ioneer received a lot of interest from Chinese companies, the company's board wanted lithium production to cater to the US domestic market. Although the US has limited cathode manufacturing within the country, it's expected to grow in the near future based on growing market demand. 

Ioneer originally intended to sell a minority stake in the project. As Sibanye entered discussions with the company, it was keen on becoming an equal partner on the project. This led to the negotiations for a 50-50 JV with Ioneer maintaining operatorship of the project. This was due to the fact that Ioneer had put together a talented team which had helped gain a deeper understanding of the project. The company has spent AUD$100M on the Rhyolite Ridge project so far. 

The company has advanced the project systematically from the perspective of building and operating it in the future. The company's board consists of experienced developers and operators from the mining and chemical processing space including lithium and boron. 

Following the announcement of the Sibanye JV, Ioneer has received increased interest from off-take parties. This led to a significant de-risking of the Rhyolite Ridge Lithium-Boron Project while providing a higher degree of certainty around product delivery. The company has built a team from the ground up with the intention to fund, build and operate the project. 

Cash Position

Ioneer Ltd. has a current market cap of AUD$500M. The company raised AUD$80M by way of a placement deal in March 2021. During this time, the company was still in discussions with multiple parties and the board wanted to enter negotiations backed by a strong balance sheet. Back then, lithium carbonate was being sold at a sub-$5,000/t price. 

Ioneer has worked over the years towards maintaining a strong momentum throughout the project's life cycle. The company plans its capital raises during favorable market conditions. 

The Rhyolite Ridge Lithium-Boron Project has a CapEx (Capital Expenditure) of AUD$800M. Sibanye Stillwater will invest $500M in the project. Ioneer plans to have a $100M cash flow by the time an FID (Final Investment Decision) is made. The company currently has $160M in the bank. The $490M invested by Sibanye will be a part of the project's JV, covering over 50% of the funding requirements. The remaining amount will be debt-funded, while the equity component will be covered by Sibanye. 

Ioneer plans to raise $400M in debt. The debt along with the $500M investment from Sibanye will bring the total capital to $900M with $500M in equity and $400M in debt. This will provide the working capital for the JV company. The additional capital will enable the company to include value-add options to the project such as the early introduction of hydroxide production based on market demands. 

The company has a strong team of technical process engineers that were previously involved with Ora Cobra, SQM, and Albemarle.  This technical expertise enables Ioneer to navigate the complexities of developing high-purity lithium carbonate and hydroxide. 

Lithium Hydroxide Production

Ioneer has an off-take agreement with EcoPro, a battery manufacturer based out of South Korea. In this agreement, the company converts Ioneer's high-purity carbonate into hydroxide as per the required specifications beside its cathode plant. This removes any possibility of contamination during the conversion process. 

The deal with EcoPro consists of Ioneer selling technical-grade lithium carbonate at a battery-grade hydroxide price minus the conversion cost. Although the material pricing is lower than anticipated in the market, there's a strong demand for lithium carbonate due to the growth in cheaper, lower energy density batteries which are becoming common for entry-level electric vehicles. 

EcoPro currently has multiple 3-year deals with Australian companies for a 7,000t/year lithium carbonate supply. This timeline provides Ioneer the flexibility to enter production and become a supplier once these deals expire. It is important to note that following the FID, Sibanye will be involved in the decision-making process for the project. 

Ioneer is currently in advanced discussions with multiple parties for potential lithium carbonate and hydroxide supply. The company has already initiated engineering work for the hydroxide conversion. The main challenge for this conversion is a complete elimination of contamination during the conversion process. 

Listing Considerations

Ioneer is working on an IDR-style NASDAQ listing for the past 3-4 months. The company had originally planned to get listed by the end of 2021. However, due to the changes in compliance that came into effect on 1st July, the company will need to redo its resource and reserve estimates to meet the US compliance requirements. The company expects to get listed on ADR and NASDAQ in 2022. 

Targets 2021 and Beyond

Ioneer Ltd. has already awarded multiple engineering contracts for the project. This is part of the company's strategy to maintain the ongoing momentum. The AUD$80M raise earlier this year was targeted towards funding the engineering work. Veolia bagged the tender for the supply of evaporators and crystallizers. Currently, Veolia is working on detailed engineering work. 

Ioneer is looking to get the final detail design engineering completed before it commences construction. This has enabled the company to place limited notice on the engineering contracts with Veolia, FL Schmidt, and Dupont. Once the company makes an FID, these contracts will enter full notice and proceed as per the agreements.

The JV partnership with Sibanye enables Ioneer to develop a 22,000t lithium carbonate/hydroxide and 174,000t boric acid supply annually. This supply equates to AUD$420M in yearly revenue with modest estimations. 

The company has taken care of the majority of the AUD$800 project funding. The Rhyolite Ridge Lithium-Boron Project has a 146Mt resource with a 60Mt reserve. The mine plan and project NPV (Net Present Value) is based on a 63Mt supply over 26 years of production. This project offers a tremendous upside and has strong future expansion possibilities. 

The 50% partnership provides the company funding for phase 1 of the project, a 20,000t lithium supply. The resource features open mineralization and the company plans to carry out drill operations in mid-2022 to further expand the resource. 

To find out more, go to the ioneer Website