Lithium Ionic: First Mover Strategy Targets Lithium Production Before Deficits Emerge

• Lithium ionic is developing a hard rock lithium project in Brazil with strong economics - $1.6B NPV, 121% IRR
• Focus is on fast-tracking to production by 2025/2026 to be a first mover in lithium supply
• Learning from Sigma Lithium's success developing a mine next door
• Plan to expand resource and production capacity over time to meet growing lithium demand
• Current lithium prices are healthy for strong margin projects like theirs

Lithium Ionic CEO Blake Hylands recently provided an overview of the company’s major hard rock lithium project in Brazil and his perspective on capitalizing on rising lithium demand driven by the electric vehicle revolution. The TSX Venture-listed company is focused on expediting its high-grade lithium deposit in Minas Gerais state into production by 2025/2026 in hopes of securing first-mover advantage.

“Lithium demand is poised for massive growth in the coming years, and new projects need to come online to bridge the supply gap,” Hylands explained. “We believe being among the first to reach production with a low-cost lithium mine will give us a tremendous competitive edge.”

Lithium Ionic’s core project is located in the prolific Araçuaí lithium pegmatite belt, home to major producers like Sigma Lithium. The region provides key advantages like access to infrastructure, an experienced local workforce, and proven lithium geology. Just months after going public, Lithium Ionic published a Preliminary Economic Assessment (PEA) in August 2022 demonstrating robust financial returns. The study outlined a 1.3 million tonne per year spodumene operation with an after-tax NPV of $1.6 billion and IRR of 121% using a conservative lithium price of $1,250 per tonne. With an estimated capital cost of just $191 million, the project could theoretically pay back capital in under 1.5 years.

“The economics are amazing compared to gold. These lithium projects can pay themselves back within hours,” Hylands marveled. “The small footprint, low capex and quick payback make them highly investable even if lithium prices moderate.”

With over $28 million raised, Lithium Ionic is fully funded through a Feasibility Study and into early construction. The company aims to reach commercial production at its pilot plant in under 3 years.

Hylands stressed that the PEA numbers represent just a starting point given the extensive exploration potential remaining across Lithium Ionic’s 37,000+ hectare land package. The company anticipates it can substantially grow resources and scale up capacity over time.

“We know this belt can support the development of multiple lithium mines,” Hylands said. “Our goal is establishing the first phase of production, then expanding to double or triple capacity to feed accelerating demand.”

First Mover Strategy

The rapid timeline is central to Lithium Ionic’s strategy. Hylands explained that the company is focused on fast-tracking its initial project to capitalize on a projected supply shortfall in the mid-2020s. Many lithium projects being touted as the solution to the shortage are likely to face delays.

“In our view, we will be standing alone ready to deliver lithium when demand spikes post-2025,” Hylands predicted. “Being an early supplier will be a massive differentiator for us.”

Hylands acknowledged lithium markets have weakened over the past year as prices retreated from all-time highs. However, he believes current pricing still allows for highly profitable production, while a lack of investment during the downturn will leave the market undersupplied when demand accelerates. The company’s close proximity to Sigma Lithium provides a blueprint for success in the region. After delivering its first production in 2022, Sigma achieved a valuation of over $3 billion -- a value target Hylands hopes Lithium Ionic can also reach by executing on its expansion plans after achieving initial production.

“We have learned a lot from Sigma in terms of plant design, development, startup challenges - their blueprint gives us confidence we can replicate their success,” he said.

Partnership Discussions

With first production targeted for 2025/2026, Lithium Ionic has begun initial discussions with potential partners and customers interested in securing future lithium supply.

“The holy war over who will control this revolution has begun,” Hylands stated in reference to escalating competition between China, Europe and North America to dominate the electric vehicle supply chain. “We are positioning ourselves to best capitalize on what is sure to be strong demand from multiple regions.”

While the company maintains a global outlook, Hylands highlighted the United States as a strategic priority given government initiatives aimed at strengthening domestic mineral supply chains for materials deemed critical to economic and national security.

“We anticipate adding to our team to provide expertise in lithium marketing and sales,” Hylands noted. “Understanding the evolving dynamics around where lithium is converted, which companies require supply, and which markets represent the best strategic fit will be crucial.”

Outlook for Lithium Markets

Looking ahead, Hylands remains adamantly bullish on lithium’s future despite recent volatility. “The secular shift to electric transportation and renewable energy storage is real - lithium demand will experience exponential growth over the next decade,” he reiterated.

With few new projects ready to deliver additional supply, Hylands believes Lithium Ionic can distinguish itself by moving rapidly to production. “We give up some short-term upside by not drilling out a massive resource first, but we'll gain enormously by being one of the only companies supplying the market when lithium is in deficit,” he argued. “First mover advantage will create tremendous value for early shareholders.”

Hylands conceded that weak sentiment has impacted the company’s share price despite strong project fundamentals. “The market pain is temporary. World-class assets in tier one jurisdictions with defined paths to production will stand out when the sector stabilizes,” he contended.

The CEO also acknowledged the challenges posed by inflation and potential economic headwinds. “We are closely monitoring costs and adjusting plans where needed to maintain our goals,” he said. “While not without risks, we have an achievable strategy to become a key lithium supplier just as demand takes off.”

Hylands expressed conviction that Lithium Ionic’s Brazilian hard rock lithium project can deliver outsized returns for investors positioned to benefit from surging lithium demand over the next five years. The company aims to capitalize on its head start toward production to supply increasingly undersupplied markets. If executed successfully, being a first mover could enable Lithium Ionic to become a multi-billion dollar producer as one of the few lithium mines in operation when supply falters relative to exponential growth in lithium-ion battery and EV manufacturing.

The Investment Thesis for Lithium Ionic

• Hard rock lithium deposit in prolific mining region provides low technical risk
• Flagship project permitted to advance quickly with robust economics per PEA
• Goal to reach production by 2025/26 ahead of forecast supply deficit
• Plan to expand capacity over time to grow with lithium demand
• First mover status could drive competitive advantages and premium pricing
• Similar geology and location to $3B producer Sigma Lithium offers proven development model
• Strong leadership with financing secured through feasibility study
• Lithium demand growth almost certain from EV and battery mega-trends
• Current valuation disconnect provides opportunity for substantial re-rating as milestones achieved

In summary, Lithium Ionic aims to establish itself as a major lithium supplier poised to capitalize on the global energy transition through disciplined execution. Its accelerated strategy offers investors leveraged exposure to surging lithium demand over the next five years. While risks remain, the upside potential appears significant given management’s goal to achieve first-mover status just as supply tightens markedly versus demand.