Ionic Rare Earths: Pioneering Sustainable Magnet Recycling in the UK with Government Backing

• Ionic Rare Earths is progressing magnet and heavy rare earths recycling in the UK with government grants likely in Q1 2025.
• The Belfast plant will provide the UK sovereign capability for magnet rare earths to secure its auto sector and jobs.
• The project leverages IP, grants, partnerships, and offtake interest to minimize Ionic's capital needs.
• Ionic is pursuing a licensing model to replicate the plant in the US, Brazil and other markets at lower cost.
• The rare earths recycling opportunity is expected to grow significantly over time as magnet production expands.

As the global transition to electric vehicles and renewable energy accelerates, the need for secure and sustainable sources of rare earth elements is becoming increasingly critical. Australia-listed Ionic Rare Earths Limited (IRE) is at the forefront of this shift, advancing an innovative magnet and heavy rare earths recycling project in Belfast, Northern Ireland with the backing of the UK government.

IRE Managing Director Tim Harrison provided an update on the company's progress and plans in this interview. He highlighted the strategic importance of the Belfast project in providing the UK with sovereign capability for magnet rare earths, which are essential inputs for the electric motors powering EVs and wind turbines.

UK Government Grants Provide Cornerstone Funding

Harrison noted that Ionic Rare Earths has been engaging closely with multiple UK government ministries and expects to receive a substantial commitment in the form of a grant allocation in the first quarter of 2025. This follows the successful completion of a government-funded feasibility study.

We've completed the feasibility study and now we're able to progress the application. We've been having routine discussion with the APC [Advanced Propulsion Centre, via the Automotive Transformation Fund] about the grant, routine discussion with DBT (Department of Business Trade)...We finalized all the documentation, submitted that last week, and we'll be looking forward to what we expect will be a positive outcome in the first quarter of 2025.

While the exact quantum is still to be determined, Harrison indicated the grant would represent a "significant cornerstone commitment" towards the £85 million capital expenditure for the commercial plant in Belfast.

Securing UK's Auto Sector and Jobs

The strategic impetus for the UK government's support lies in the importance of magnet rare earths to the country's automotive industry, which employs ~1,000,000 people.

By providing domestic recycling capability, IRE will enable the development of a UK-based magnet rare earth and permanent magnet supply chain to feed the production of electric vehicle motors.

What we do with the technology and the offering that we're bringing to the UK is we're actually going to be providing the UK with sovereign capability for magnet rare earths, that in itself will provide the inputs for the UK to develop a magnet rare earth, neodymium iron boron magnet supply chain, which will go into helping secure about a million jobs in the UK's auto sector.

The UK government has earmarked £850 million through its Automotive Transformation Fund to support the transition of the sector to EVs, including shoring up domestic supply chains. Accessing this fund is a key objective for IRE.

Leveraging IP and Partnerships to Minimize Capital Needs

IRE's strategy centers on leveraging its intellectual property and process design expertise to partner with industry players and investors, thereby reducing its own capital requirements. The company has already demonstrated its recycling technology at pilot scale, delivering separated rare earth oxides at specification.

In addition to the expected government grant and debt funding from institutions like the National Wealth Fund (formerly UK Infrastructure Bank), IRE is in discussions with strategic investors wanting exposure to rare earths. It also has interest from existing rare earth supply chain participants for offtake of its recycled products, especially the heavy rare earths dysprosium and terbium, for which China dominates supply.

Interview with MD Tim Harrison

Licensing Model to Expand Globally at Lower Cost

Beyond the UK,  Ionic Rare Earths (IRE) sees significant potential to replicate its magnet recycling plants in other markets through a licensing model. This approach allows the company to leverage the expertise and infrastructure of local partners while receiving a royalty on the use of its technology. Key target markets include the US and Brazil.

Our partners will provide local know-how, local infrastructure, local capital, which mean that we can then quickly get up the curve with those joint venture facilities. We don't have to go in there and start with a greenfield facility and start from scratch. We want to leverage off partners who can bring something to the partnership.

In Brazil, IRE has established a joint venture called Viridion with Viridis Mining & Minerals. The JV plans to build rare earths recycling capability as well as a refinery to process mixed rare earth carbonate from its Colossus project. The aim is to create an integrated rare earths ecosystem in Brazil to supply domestically produced permanent magnets for advanced manufacturing and renewable energy applications.

Growing Recycling Opportunity Tied to Magnet Production

A key advantage of IRE's magnet recycling business model compared to traditional mining projects is that the addressable market opportunity is expected to expand significantly over time as rare earth magnet production grows to meet burgeoning demand from EVs and wind power.

While a typical mining reserve depletes over time, the opposite dynamic is at play with magnet recycling due to the increasing volume of scrap and waste material generated as magnet output rises. This means IRE can keep adding incremental capacity and potentially build entirely new plants to process the growing recycling feedstock.

The reality is that this thing's going to run much longer than 20 years. It's also going to have more capacity going through it, because ultimately as the rare earth supply chain builds, there will be more magnets. As that magnet capacity increases, the amount of waste material produced in the production of those magnets also increases. So that swarf component increases, and so you have this compounding effect.

Investment Thesis for Ionic Rare Earths:

• IRE's magnet recycling technology provides a more sustainable and less geopolitically risky alternative to virgin rare earths mining, insulating it from some of the typical challenges faced by junior miners
• The UK government's expected grant allocation substantially de-risks the Belfast project and validates its strategic importance, while follow-on support from the Automotive Transformation Fund offers further upside
• IRE's licensing partnership model enables rapid international expansion and scaling of the opportunity at low capital intensity by leveraging local partners
• Magnet recycling volumes are set to grow strongly in line with rare earth magnet production for EVs and wind turbines, providing a natural tailwind for the business
• Investors can gain unique exposure to heavy rare earths like dysprosium and terbium which are critical for high-temperature magnets and currently dominated by China
• Key upcoming catalysts include the UK government grant award in Q1 2025, finalization of the US and Brazil JVs, and additional offtake agreements

Macro Thematic Analysis:

The outlook for magnet rare earths demand is underpinned by the powerful macro trends of vehicle electrification and the shift to renewable wind energy. Rare earth permanent magnets are a key enabling material for the efficient traction motors used in EVs and the generators in direct-drive wind turbines. As countries and automakers announce increasingly ambitious targets for EV adoption and the rollout of offshore and onshore wind accelerates, magnet rare earth consumption is set to soar.

However, there are concerns about the ability of existing rare earth supply sources to keep pace with this demand, especially for the heavy rare earths like dysprosium and terbium that are essential for high-temperature applications. China currently controls over 70% of global rare earth production and has shown a willingness to restrict exports in the past.

This is driving a global race to develop alternative sources of magnet rare earths outside of China. Recycling offers an attractive solution by recovering rare earths from waste streams in a more sustainable and less geopolitically risky way than mining.

By tapping into end-of-life magnets as well as swarf from magnet production, recyclers like Ionic Rare Earths can help bridge the looming supply gap while reducing reliance on Chinese rare earths. With government support now galvanizing the sector, magnet recycling is poised to come of age as a key part of the rare earth supply mix going forward.