ioneer Ltd (ASX:INR) (OTCMKTS:GSCCF) has received a positive definitive feasibility study (DFS) and delivered a 280% increase to the ore reserve estimate for its 100%-owned Rhyolite Ridge Lithium-Boron Project in Nevada, USA.
The company says that these two milestones confirm that Rhyolite Ridge is a world-class lithium and boron project.
Investors responded positively in early trade with shares up as much as 16% to 15 cents. The company has a market cap of approximately A$218.4 million.
The ore reserve has increased by 44.2 million tonnes and is now estimated to contain 60 million tonnes at 1,800 parts per million (ppm) lithium (equivalent to 1.0% lithium carbonate) and 15,400ppm boron (equivalent to 8.8% boric acid).
This is within a total mineral resource of 146.5 million tonnes containing a total of 1.2 million tonnes of lithium carbonate and 11.9 million tonnes of boric acid.
“Foundation for very long mine life”
ioneer managing director Bernard Rowe said: “The 60 million tonne ore reserve provides the foundation for a very long mine life at the Rhyolite Ridge Project, with clear potential for expansion and extension underpinned by the 146.5-million-tonne mineral resource.
“Importantly, the planned stage-one quarry is exclusively proved reserves with higher-than-average lithium grades, which will provide higher cash flow in the early years of the project.
“The lithium-boron mineralisation remains open, particularly to the south where it continues to shallow and is generally higher in grade, and we expect further increases to resources and reserves with additional drilling.”
Upgrade underpins the DFS
The reserve and resource upgrade was the basis for the Rhyolite Ridge DFS which confirms the project as a large, long-life, low-cost operation, producing lithium carbonate, boric acid and then battery-grade lithium hydroxide.
Rowe said: “The DFS confirms our long-standing belief that Rhyolite Ridge is a world-class asset that will be transformational for ioneer and its shareholders.
“Rhyolite Ridge will be the single most attractive resource to economically produce lithium carbonate, lithium hydroxide and boric acid globally.
“The co-production of boric acid enables us to produce lithium, net of boric acid credits, at the lowest possible cost.”
The average life of mine (LOM) production is 20,600 tonnes per annum of lithium carbonate, converting in year four to 22,000 tonnes per annum of battery-grade lithium hydroxide, and 174,400 tonnes per annum of boric acid.
Proposed plant design
The financial modelling delivered compelling economics with a net present value (NPV) of US$1.265 billion and unlevered after-tax internal rate of return (IRR) of 20.8%.
It also included an average LOM EBITDA of US$288 million, an after-tax LOM free cash flow of US$193 million and average annual LOM revenue of US$422 million.
The stable boric acid revenue helps ensure EBITDA margin of 68.1% based on average production over LOM.
Results produced in the financial modelling are based on a total initial capital expenditure estimate of US$785 million and sustaining capital of US$274 million, which includes US$74 million of additional capital for the construction of an on-site lithium hydroxide facility in year three, and US$25 million for a heat recovery system to increase electricity generation.
“Bottom of lithium cost curve”
The DFS confirms that the project not only has the lowest all-in sustaining cash cost of lithium projects globally (US$2,510 per metric tonne lithium carbonate equivalent), but also the most stable overall operating cost structure for the production of lithium carbonate and battery-grade lithium hydroxide due to the scale and reliability of its boric acid credit.
Rowe said: “Rhyolite Ridge’s projected position at the very bottom of the global lithium industry cost curve will enable us to achieve industry-leading EBITDA margins, an excellent return on investment, and a quick payback across a range of commodity price environments.
“On top of strong fundamentals, we expect the long-term demand for lithium to continue to increase when the Rhyolite Ridge production comes fully on-stream.”
Rhyolite Ridge project location.
Well placed to meet demand
Benchmark Mineral Intelligence predicts that US demand for lithium carbonate and lithium hydroxide could exceed 344,000 tonnes by 2025 with nearly no domestic supply.
Rowe said: “We are located in Nevada, a mining-friendly jurisdiction in the US, where lithium is recognised as a strategically important mineral, critical to a sustainable future.
“With the recent focus by the US Government on ensuring the supply of critical minerals, ioneer is well placed to become the first major domestic supplier of lithium to the American electric vehicle industry.”
The project is also located just 203 miles away from Tesla’s Gigafactory.
ioneer has developed a clear path to project completion and is in discussions with strategic funding and offtake partners.
The construction phase of the project is set to commence early in the third quarter of 2021 with first commercial product anticipated to be produced and shipped by 2023.
ioneer also has sufficient cash on hand of A$53.2 million to advance the project through final investment decision.
Rowe said: “We are now one important step closer to becoming a leading low-cost, long-life producer of lithium.”