Ionize (IONR -0.40%) (GSCC.F -0.84%)a development-stage mining company, announced on Friday that the US Department of Energy (DOE) will provide $700 million to build its Rhyolite Ridge lithium mining project in Nevada.
The Australian company’s depositary receipts (ADRs) trading on the Nasdaq Stock Market under the symbol IONR rose more than 20% on volume weighted on news of the loan by the DOE. They gave back some of their gains, but as of Wednesday they were still more than 6% higher than they were before this news was published.
Ioneer shares are also listed on the Australian Securities Exchange (ASX) under the symbol INR, and its ordinary shares trade over the counter (OTC) under the GSCC code.F.
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Develop a US EV supply chain
The $700 million loan earmarked for lithium mining at Ioneer’s Nevada mine reflects the Biden administration’s desire to develop a domestic supply chain. for electric car (EV) battery. This goal is part of the administration’s main priority of moving the country towards self-sufficiency and combating climate change.
There is only one operating lithium mine in the United States — the Silver Peak brine mine in Nevada, owned by North Carolina. Albemarle. It is estimated to produce less than 2% of the world’s lithium. Most of the world’s lithium is mined in South America (my drink) and Australia (hard rock mining), while China dominates the refining of lithium and EV production.
The price of lithium has increased in the last year because the supply is limited according to the demand. Automakers are concerned about being able to source enough material to meet their EV production goals.
The DOE loan and Ioneer’s Rhyolite Ridge project
The 10-year DOE loan is subject to project meeting conditions related to environmental, permitting, and financial reviews. The interest rate on the loan will be determined from the date of each advance at the US Treasury rate.
Ioneer is a development company and does not generate revenue from sales. So, getting a loan of up to $700 million at a low interest rate from a regular lender is highly unlikely.
Along with mining, Ioneer’s project involves the refining of lithium minerals into lithium carbonate, which the company originally hoped to start producing in 2025. (It seems to me that this series of time may be more uncertain, as is common with new mining projects. .) The project has the capacity to produce lithium carbonate to support the production of approximately 370,000 EVs annually, which according to the DOE.
Like Albemarle’s US lithium mine, Ioneer’s Rhyolite Ridge is located in the Silver Peak Range in Esmeralda County, Nevada. However, Ioneer’s project will be a shale mining operation – the lithium-boron deposits – not a water-use operation like Albemarle.
Ioneer says its Nevada project could be one of the lowest-cost lithium producers. The reasons are said to be related to its strategic plans and the fact that it will also generate income from its boric acid sales, which plans to produce it from the boron it mines.
It appears to be Ioneer’s business partner on the project and its agreements
In September 2021, Ioneer reached an agreement with several miners from South Africa Sibanye Stillwater to establish a 50%-50% joint venture (JV) in the Rhyolite Ridge Project, with Ioneer managing the operation. The company expects to receive Sibanye Stillwater’s equity contribution after all conditions for the establishment of the JV have been met or waived.
Ioneer has more buyers lined up for its lithium carbonate production at Rhyolite Ridge. There are agreements with terms of three to five years in place and Ford Motor CompanyPrime Planet Energy & Solutions (a battery manufacturing joint venture between Toyota and Panasonic), and South Korea’s EcoPro Innovation, a major manufacturer and exporter of battery cathode materials.
It is promising, but still speculative
Certainly, it’s a good thing that the Department of Energy spent almost a year evaluating Ioneer’s loan application and confirming that its Rhyolite Ridge project was promising enough for the company’s loan to come through. more than $700 million.
That said, this does not mean that the lithium and boron mining project is a sure thing. Ioneer’s stock is still highly speculative and could suffer losses due to its small size and relatively small US trading volume.
Most long-term investors who want exposure to lithium should stick with one of the established lithium producers on a major US exchange: Albemarle, Mining and Chemical Society (SQM), and Alive.
Pete McKenna he has no position in any of the shares mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has the notification system.