Ionic Rare Earths (ASX: IXR) - USA and Europe Competing for Critical Minerals

Ionic Rare Earths Limited is developing the Makuutu Rare Earths Project (Makuutu) to become a globally significant producer of both Heavy and Rare Earths Oxides (HREO), and Critical Rare Earth Oxides (CREO), providing a viable large-scale, low-cost alternative supply chain outside of China. Rare earths will play a critical role in the future of cleaner energy. Rare earths are a key ingredient in the permanent magnets found in wind turbines and electric vehicles.

Matt Gordon caught up with Tim Harrison, Managing Director, Ionic Rare Earths. Mr. Harrison initially joined the company in the role of Project Manager of the Makuutu Rare Earths Project at the start of 2020. Since then, he has been driving development and value creation and was appointed CEO in June 2020 and Managing Director in December 2020. He holds a Bachelor of Chemical Engineering degree and has over 20 years of experience and an extensive and successful track record in the fields of both mineral processing and hydrometallurgy across multiple commodities. Mr. Harrison has been involved in project development, process, and flowsheet development, studies, test work planning and supervision, engineering, construction, commissioning, operations, and project management.

Company Overview

Ionic Rare Earths Limited is focused on developing its flagship Makuutu Rare Earths Project in Uganda into a significant long-life, low-cost supplier of high-value critical, and heavy rare earths. Makuutu is an advanced-stage, ionic adsorption clay-hosted project highlighted by near-surface mineralization, significant exploration upside, excellent metallurgical characteristics, and access to tier-one infrastructure. The project is well-supported by access to major highways, roads, power, water, and a professional workforce. The company was founded in 1998 and is headquartered in Australia. It is listed on the Australian Stock Exchange (ASX: IXR) and the OTC Markets (OTC: IXRRF). Seren Technologies Limited, Ghazal Minerals Limited, Goldcap Resources Limited, Rwenzori Rare Metals Limited, and Green Mining Limited are the company’s subsidiaries.

Ionic Rare Earths is developing a magnet and heavy rare earth supply chain from its mine project in Uganda into a refinery for magnet recycling targeting the US market.

The company’s representatives recently attended the 121 Mining Conference in London, United Kingdom. Over the past 18 months, the company has been in discussions with several groups. This conference provides an opportunity for the company to refresh the market on the project strategy. The company currently has the required cash flow to carry out operations and several catalysts that are in play that are favorable.

Ionic Rare Earths have been working extensively behind the scenes, however, the share price hasn’t reacted to the development. The company intends on publishing regular news flow to maintain interest in the market. It is currently focused on finalizing the mining license application, finalizing the Scoping Study on the refinery, and getting progress delivered in Belfast.

The Makuutu Rare Earths Project is massive in size and holds global significance. The project is 20 miles from end to end, which is comparable in size to the city of Manhattan. The company is looking to develop the project as a long-life, multi-decade asset.

Currently, the company is working on the mining license application, finalizing the economic case with the Ugandan government. The team is looking at a couple of scenarios that could potentially reduce operating costs. It is looking to obtain the mining license application as soon as possible so that the mining license can be approved by the first quarter of the next year. Following this, the company will move on to a proof-of-concept demonstration plant.

The company is currently working on determining whether it can stack the ore to 3m. This is based on data collected from China. The test work suggests that the ore stacking can be done up to 6m. The company is looking to demonstrate this at scale as it can be folded directly into the project, generating an immediate capital opportunity. This way, the company can increase its capacity from day one. It is also looking to produce larger amounts of material and take it downstream. It plans on validating and piloting the refinery and providing samples to potential end-users. This will be carried out through a much larger test work at a scale that will de-risk the project in order to take it forward.

Ionic Rare Earths has an economic case that is being taken forward. It takes into consideration some reasonably conservative assumptions with opportunities for improvement. The company is looking to validate the improvement so that it can be folded into the project going forward, providing significant upside potential.

The company intends on working through the demonstration plant for 6-9 months through next year while simultaneously getting the mineral development agreement with the Uganda government. At this time, the company will be preparing for an FID (Final Investment Decision). There’s an additional process that the company would need to work through in order to acquire financing for the project. This will be run in parallel with the aforementioned steps.

Cash Position

Ionic Rare Earths had $23M in cash flow at the end of the last quarter. The current burn-through rate is about $1M a month. It is important to note that the demonstration plant isn’t very capital-intensive. The company will be digging the material out of the ground and stacking it on heaps. Essentially, it is an earthworks operation that would require pads, drainage, and a kit at the back end. The company would need to spend between $5M-$8M on this process.

Projects around the world are getting held up due to EIA (Environmental Impact Assessment) concerns. Ionic Rare Earths successfully acquired its EIA through a 10-month process.

In Belfast, the company rebranded the technology bit to Titanic Quarter. As part of the process, the company established a new facility that is owned by Ionic Technologies International Limited in Belfast’s Titanic Quarter. The analytical and hydro-metallurgical labs are now operational. The new facility comprises a demonstration plant, a pilot plant, wet labs, and hydro-metallurgical labs. The company is currently awaiting the delivery of equipment. It is looking forward to working on the facility in the coming months.

The company is spending a substantial amount of money to take the technology out of Queen’s University in Belfast. It plans on setting up a dedicated facility, bringing in additional hires, and adding the capability to the team with a view to accelerate the technology while simultaneously supporting the refinery work. The new company is set up specifically for the project and is owned by Ionic Rare Earths.

Ongoing Operations

Currently, the company is facing challenges with hiring additional skilled people. It has been successful in bringing new resources in. Over the last few months, the company had added 4-5 new members to the team. In the last 2 months, the company has started seeing the product.

The company is producing a series of different rare earths products, that fall under magnetic rare earths. Through magnet recycling, the company is producing all the magnetic rare earths including neodymium, praseodymium, dysprosium, and terbium in Belfast. Once the refinery is in operation, it will produce all 15 rare earth metals plus scandium. Apart from the Chinese, no other entity is currently producing all the rare earth metals.

Ionic Rare Earths is in a unique position where it has a lot of engagement with various groups on a global level. According to the company, the groups are desperate for the product to be put into manufacturing. The company is looking to place this unique basket of production into a market where the availability is scarce. This is the reason why it is looking to build a refinery in the US.

It is important to note that the refining of rare earths is an energy-intensive process. The energy requirements for making the reagents that can separate all 15 rare earth elements are massive.  The company is currently zeroing in on a location. It will update the market in the near term once the location is finalized.

The company is looking to complete a study for the refinery by the end of 2022, and it will update the market on the same in the new year. There’s a lot of ongoing work in the background. The company is looking forward to an exciting 2023.

Developing a rare earths supply chain goes beyond building a mine and a refinery. A company would also need to work on the metal-making, alloy-making, and magnet-making processes. The company needs to grow and stimulate the downstream supply chain, which continues to be the main focus. According to the company, the world has the desire to build this new supply chains ex-China. However, there is no point in having a refinery without a dedicated downstream supply chain. Currently, there isn’t any US-based group that is producing all 15 rare earths. Interestingly, in order to make magnets, a company would require both NdPr (Neodymium-Praseodymium) along with DYTV as it isn’t possible to produce magnets without DYTV.

The company anticipates that the Makuutu asset has the potential to support more than 1 refinery. The first refinery would be targeted toward the US supply. Ionic Rare Earths has been actively engaging with end-users for quite some time now. A number of these end-users are starting to realize that in the near future, there is going to be a supply shortage for rare earth metals.

Targets 2022 and Beyond

Ionic Rare Earths has taken a massive undertaking on educating the market. It is engaging several continents to impress upon different end-users. While the market is familiar with the lithium mine battery story, battery metals have only gained traction in the last year.

The company is trying to understand the requirements for these rare earth metals and their use cases across different industries. The company is in discussions with the Board on the process, the engagement, and the number of various metals to be produced in order to fill the market’s needs. The company also needs to determine the selling price for these metals. In order to raise capital, the company is focused on the industry as opposed to institutional funding.

Last week, the company’s representatives were in Detroit, attending a meeting with the leaders of Ford, GM, Silantus, and other automakers, identifying their future strategy and requirements. Notably, the investment made by automakers in the electrification of the automotive sector is massive. All of this is committed capital. Recently, the DoE (Department of Energy) deployed $2.8Nm in the lithium-ion battery space.

The company anticipates that the rare earths sector is going to be a significant investment as it not only requires mining, but also refining, metal-making, alloy-making, and magnet-making in order to develop a fully insulated supply chain that is ex-China. While Australia has a long way to go from a capital deployment perspective, in the US, the level of capital deployment is truly astonishing. Last week, Jim Farley, Ford’s CEO talked about the ongoing transition in the EV (Electric Vehicles) companies. He believes that there is going to be a massive pivot in automotive manufacturing. It is difficult to put into perspective the scale at which it is going to happen. The transition to electric vehicles will be transformational for the industry.

Ionic Rare Earths is working on building a completely new supply chain on rare earths. China has been functioning in the space for over 50 years. The company is cognizant that building the supply chain, and the human capital, metal making, alloy making, and magnet making will take considerable time and effort. The company is trying to grow because there is no point in building a mine or a refinery without having a destination for the product to go into the market.

To find out more, go to the Ionic Rare Earths website