Ionic Rare Earths: Developing a Magnet Recycling Plant Backed by Robust Economics and Government Support

• Ionic Rare Earths is building a 1,200 ton per annum magnet recycling facility in Belfast to extract high value magnet rare earths like neodymium, praseodymium, dysprosium and terbium.
• The project has a capex of $109M, will generate $2.1B in revenue over 20 years, with a 44% post-tax IRR and NPV over $500M.
• The company is in discussions with the UK government for potential grant funding to cornerstone the investment.
• Ionic is engaging with partners across the magnet supply chain, including offshore wind operators and automotive OEMs, to secure feedstock and offtake agreements.
• The modular plant design allows Ionic to potentially replicate the facility in other markets closer to feedstock sources and customers to further optimize economics.

Australian-listed company Ionic Rare Earths is progressing an innovative magnet recycling business that could play a key role in securing critical rare earth supply chains for the UK and Europe. With the completion of a positive feasibility study, Ionic is now engaging with the UK government and industry partners to finance and develop a commercial scale plant in Belfast.

Feasibility Study Highlights

The recently completed feasibility study outlines the business case for Ionic's proposed magnet recycling facility. Key highlights include:

• 1,200 ton per annum plant in Belfast producing 400 tons of separated magnet rare earth oxides
  • 350 tpa of neodymium-praseodymium (NdPr) oxide
  • 37 tpa of high-value dysprosium oxide
  • 13 tpa of terbium oxide
• Capital cost of $109M with a 20-year operating life
• Post-tax NPV of over $500M and IRR of 44%
• Projected to generate $2.1B in revenue and $1.8B in EBITDA over 20 years

Interview with Managing Director Tim Harrison

Strategic Significance

Establishing a domestic source of recycled magnet rare earths in the UK would mark a major strategic development, supporting key industries and regional employment. Potential benefits include:

• Securing supply of critical magnet materials for the UK's automotive sector, which the government aims to transition from ICE to EV drivetrain production to protect ~1 million jobs
• Supporting the UK offshore wind industry by recycling rare earths from decommissioned turbines back into the magnet supply chain
• Enabling the UK to meet targets under the European Critical Raw Materials Act without relying solely on new primary production

According to Harrison:

"The UK government has been very targeted in looking at rare earths and looking at how it can help facilitate the development of a domestic magnet rare earth supply chain."

UK Government Backing

Ionic has been closely engaging with the UK government, which has established the Advanced Propulsion Centre to help prioritize and finance projects aimed at transitioning auto sector jobs into EV motor production.

The company is in active discussions around a potential grant to cornerstone the investment, which would significantly enhance overall project economics. Ionic ticks many boxes for the type of project the UK government is looking to support, including establishing a domestic source of critical raw materials, promoting energy transition and regional economic growth, and the company's relatively low capex requirement compared to a new primary mine.

Next Steps and Upside Potential

With the feasibility study in hand, Ionic is now moving to optimize the project design and secure funding. Next steps include:

• FEED study to identify opportunities to further reduce capex and opex
• Finalizing grant funding amount and terms with the UK government
• Securing project finance with strategic investors and government-backed lenders
• Advancing offtake agreements with key magnet supply chain partners

Beyond the UK, Ionic sees significant potential to replicate its modular plant design in other markets close to feedstock sources and customers. This could drive costs even lower through reduced logistics and economies of scale.

The Investment Thesis for Ionic Rare Earths

• Exposure to rapidly growing magnet rare earths market driven by EV and offshore wind demand
• Low capex, high margin recycling operation with 44% post-tax IRR and rapid payback
• Shovel-ready project with UK government funding support and strategic industry partnerships
• Proof of concept for a modular, scalable business model that can be replicated globally
• Downside protection from diversified feedstock sources spanning swarf, production scrap and end-of-life magnets
• Experienced management team with track record of developing new energy materials projects

Macro Thematic Analysis

The global transition to electric vehicles and renewable energy is driving unprecedented demand growth for rare earth permanent magnets. Neodymium iron boron (NdFeB) magnets containing neodymium, praseodymium, dysprosium and terbium are essential for lightweight, high efficiency traction motors and direct drive wind turbines.

However, supply of these critical elements is constrained due to China's dominance of the rare earths value chain and ESG concerns around new primary mines in the West. Recycling provides an attractive alternative, but until now has been uneconomic due to inefficiencies in collection and processing.

Ionic Rare Earths' magnet recycling technology aims to finally crack this nut, providing an environmentally friendly, low-cost source of magnet rare earths that can scale rapidly to meet burgeoning demand from the EV and wind sectors. As MD Tim Harrison points out:

"We do see a combination of companies coming together to provide that sovereign capability in the UK to support those jobs and so we'll be working with the government on a potential grant which would cornerstone the investment along with strategic partners and banks that we're dealing with."

With the right partnerships spanning industry and government, magnet recycling projects like Ionic's have the potential to revolutionize rare earth supply chains, enabling the massive buildout of EVs and offshore wind needed to achieve global climate goals.

Key Takeaways

With its proposed Belfast magnet recycling facility, Ionic Rare Earths offers investors an attractive opportunity to gain exposure to the high growth market for neodymium, praseodymium, dysprosium and terbium. The project boasts robust economics, government backing and a ready market, with potential to scale up in the UK and replicate the model globally. As electrification of transport and buildout of offshore wind accelerates, Ionic is well positioned to become a leading supplier of sustainable rare earth materials critical to the energy transition.