ioneer Ltd (INR) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the ioneer conference call with Executive Chairman, James Calaway and Managing Director, Bernard Rowe, regarding the USD 490 million investment and strategic partnership with Sibanye Stillwater that has been announced this morning. [Operator Instructions] I will now hand over to ioneer's Managing Director, Bernard Rowe. Bernard?

Thank you very much, Alex, and thank you, everyone, and welcome to this conference call with myself and James Calaway. Delighted to be here this morning to run through briefly in about 10 minutes, just the highlights of our announcements this morning. I would refer you to our ASX announcements and presentations for full material. We're delighted that this morning we've announced a transitional, transformational rather 50-50 joint venture with global miner, Sibanye Stillwater, to develop ioneer's Rhyolite Ridge Lithium-Boron project in Nevada. Sibanye Stillwater will contribute USD 490 million for a 50% interest in that joint venture. Ioneer will contribute the Rhyolite Ridge South Basin project into the joint venture for that 50-50. Ioneer importantly for us remains the operator of the project. In addition to the investment at the joint venture level, which will be a joint venture structure of the project level, in addition to that, Sibanye Stillwater will make a strategic investment into ioneer via a USD 70 million placement to fund capital development and working capital requirements, that placement will be done at a 10 day VWAP yesterday's closing price. Ioneer has also agreed to provide Sibanye Stillwater with an option on our North Basin project, which is not included in the joint venture. Under that arrangement, Sibanye Stillwater can elect to add the South-North Basin into the joint venture in return for an additional USD 50 million investment. Importantly, in addition to those key investment factors or characteristics, Sibanye and ioneer will work jointly together through the joint venture to secure the debt financing for the project on acceptable terms to ensure the project is adequately funded through to full production. So we're talking about both the solution here for the equity component of the project and then working collaboratively to -- on the debt financing, which will then combine the 2 will cover the full investment required for the CapEx of the Rhyolite Ridge project. But this transaction for ioneer and, I think, also I can say, for Sibanye is more than just a financial investment, far more, in fact. And to explain that, just a few words on who Sibanye Stillwater are and what benefit -- additional benefits they bring other than -- in addition to their financial attributes. So Sibanye Stillwater is a USD 10 billion company. It's listed on the New York Stock Exchange and the Johannesburg Stock Exchange. It's one of the world's largest platinum group metal producers and it's also globally one of the largest gold producers in the world. It has a very strong balance sheet and is well capitalized. From a financial perspective, an ideal partner. It has a proven track record in developing and operating large-scale mining projects. Importantly, for ioneer, that includes within the United States, they have 3 integrated platinum group metal facilities operating in the State of Montana in the U.S. They have deep relationships with the automakers as the world's largest supplier of platinum group metals then they supply to most of the global car companies in various areas, including the catalytic converters. So they've got deep relationships there. 2 years ago now, Sibanye Stillwater announced to the public that they were undertaking global diversification strategy to encompass battery metals and green metals and diversify geographically as well. So ioneer is a great fit on both those fronts. Sibanye Stillwater has first-class ESG credentials and very well aligned with the values that our ioneer and ioneer's Board has put in place as we've developed this young company. So again, full alignment there. And ioneer will draw on the expertise in this area from Sibanye Stillwater as we grow from a small company into a large lithium and boron producer. So these are the attributes combined with the financial strength of Sibanye Stillwater that make them a perfect partner for ioneer. So what does this mean for ioneer going forward? So if we just look at some of the key areas, it's a transformational strategic investment that highlights the quality of the Rhyolite Ridge project, something that we've spent 5 years and in excess of USD 100 million demonstrating that success. So it's a fantastic result to achieve a milestone like this. And what it really does is it underpins ioneer's future as a major lithium and boron producer in the United States. It accounts for all of the equity required to build the project. And as I previously explained, the balance, which will be debt, will be jointly put in place by the 2 partners. And overall, a full funding package solution, is what this transaction means for ioneer and the Rhyolite Ridge project. That, without doubt, makes Rhyolite Ridge the most advanced lithium development project in the United States. So we're very delighted about that key milestone. Sibanye Stillwater adds a very high quality aspect to the team that we've already been putting together, as you would have seen over the -- particularly over the last 6 months, but going back to companies like Fluor, SNC-Lavalin, Veolia, DuPont, FLSmidth, Caterpillar, Golder, leading names in the industry for a Tier 1 global project. And Sibanye Stillwater fits perfectly in there aligning with ioneer and the rest of its team. We're well positioned -- with this transaction, we're very well positioned to commence construction in the second half of 2022, subject to final permitting with construction to start late next year. Two years of build, meaning we would be first production of lithium and boron chemicals in the latter part of 2024. And with that, I'm going to hand over to James Calaway, the Executive Chairman, for a few words.

Thank you, Bernard. I, of course, echo all the things that you've said. I would just add a few things. One, it's a very timely investment for us. We've reached a very high state of maturity in our engineering as we've kept you well informed. This basically checks off as Bernard said, the financing issue. And it really just leaves 1 thing left to be finished, and that is to get the final permit that we need. We've already received the 2 state permits that are very important and very difficult to get. We are working very effectively with the Fish and Wildlife Service and with BLM on addressing the concerns about the plant -- the Tiehms buckwheat, And I think that we've come to some very good understanding to our scientific work and our collaboration. And we have high confidence that we will be able to have an excellent result for the plant as well as for our operations. The idea that they cannot coexist is simply, "would have to defy science" to say that at this point. So we're very, very confident about this, and we're having a good working relationship. I think the other thing I'd say from just back to the financing itself. One of the things that we've worked very hard to do is to keep a simple capital structure. A lot of young companies get tripped up by very sophisticated financial instruments that work fine for the shareholders as long as everything goes perfect, but if there's any hiccups, it goes very badly for the shareholders. And we have refused -- we've had many discussions like that over the last 18 months, but we've refused to engage in those conversations. That's the easy way out. But what we have here is the simplest of all things. It's all common equity at the project level. So when you look at this, you can know what we own and what they own and you can understand the structure -- we can understand the structure, and we can work very effectively with Sibanye to deliver this project under that. We don't have to be geniuses to understand what we've done. And I am very proud about that. It took a lot of time and a lot of effort and patience. And the other thing I'd just say about what we've done is there are a lot of pressure on us last year saying, why aren't you doing this financing? Why aren't you closing your deals? And we kept saying, well, we want to have the right time, we want to have the right deal and we want to continue with our engineering work all through that time, which we've done. And so now what we have is we have a very easy to understand, very simple capital structure that does not require perfection to maintain the value to our company. We are very close to completing our engineering. You can see, in fact, behind Bernard's head there on the screen is that's actually the latest actual engineering rendering from floor of our entire plant operations. We're reaching a very mature state. We have a fantastic team of people around us, and we're determined to deliver for our shareholders as we promised you. So thank you for that opportunity to speak, Bernard.

Thank you, James, and I'll hand back to Alex to take some questions for either James or myself.

Okay. Thanks, and congratulations on what's clearly a transformative deal for the company. Just 1 question. You touched on it, but this -- the time line to development that's -- this, I assume, has probably accelerated that. You're able to really put your foot on the gas now and move forward towards production.

Yes, we are. So the -- so if we look at the sort of the 3 key elements to being ready for construction, there's the engineering, which we're well and truly on track. And as James mentioned, we had a strategy in place to push forward with that with confidence preparing for that. So engineering, we'll tick the box and we'll have the engineering complete, ready for shovel-ready construction. The second is the financing element. So obviously, this announcement today really puts that to bed. And yes, we have still got the debt discussions to close off on at the appropriate time, but we've been working hard in the background with Goldman Sachs, our advisers, on those debt discussions for more than 12 -- well over 12 months. So we're well prepared there. And then the final -- the third thing is obviously the permits, as James said, 2 out of the 3 key permits we've already got. We're expecting the final one, the federal permit in the second half of next year. So yes, all those things are going to come together. And the main one that's obviously key for us is the final permit.

There's a few more questions coming in. From Jackie, when's the expiry of the North Basin auction?

It's an 18-month option.

Okay. Okay. And another question. Any progress on dual listing?

Yes. We've said publicly that we're working on that, and we are progressing it. We'll give an update in due course, but it's on track. We're doing the necessary steps to allow us to do that. I think we gave an indication of the target date was before the end of the year. So we're still working towards that. And we'll give updates as appropriate, but that's still on track.

Okay. And a question here from Tim. What is the expected size of the debt? And if I could just tack on to that, will the deal announced today make it easier to access that debt?

James, do you want to take the debt one?

Yes, I'm happy to do that. Well, we're -- obviously, in Q1, we'll have a final very high detailed estimate of the final cost. That will, of course, inform the amount of debt that's necessary. But what we can say with a very high level of confidence is that the debt equity ratio is going to be conservative because of the scale of the equity that's been put here today. So we're not going to have a highly leveraged project. I might -- I think that the best guidance we would give is it would probably be somewhere between 40% and 50% debt something along those lines. But you have to look at also you want to have enough working capital and other things for the project. So it's -- I think we're well capitalized. I think the debt is going to be very appreciative of the simplicity and the scale of the equity.

Another question on the same theme through here from Peter. He says, how is the price determined? The investment will be USD 490 million or 50% of the JV whilst the market cap of binary is AUD 1.4 billion.

I'll start, but James probably wants to say something here, too, is that what this agreement today funds is a solution for the total funding of the project. It's not just about what the capital markets are doing today based on spot prices of lithium, which without a doubt, have been very, very bullish lately. So that's the important thing here. We're putting in place the key elements that are required to actually build this project when it gets permitted, which we are expecting in the second half of next year. And that's what's important for us. And on top of that, as I outlined before, Sibanye brings a lot more than just the $490 million plus the $70 million placement plus $50 million in potential investment via the North Basin. It brings the synergies that ioneer requires and comes as a great advantage to us to have a partner who brings those synergies to the table, the auto -- the relationships with the auto companies, the ESG development around their ideas and implementation of ESG matters. Their operational experience, which, as I said, includes a number of facilities in the United States. So this package is about solving the total question around how do we finance and build this project.

I don't have anything to add to that, Bernard.

One more question here from Josh regarding offtake agreements. How much interest is there for offtake agreements? And can you discuss anything about you may be -- maybe a potential target here? And if I can tack 1 on to that as well, just you can give general commentary on what you're seeing in the lithium market currently.

You want to do that one? Or do you want me to do it, Bernard?

You do the offtakes.

Okay. So as you all well know, we executed our offtakes for the boron well over a year ago, and those are all just -- we're working on developing strategies with our partners to -- for the delivery of those materials, but that's done. The focus was on lithium. We felt last year was not a great time to be negotiating deals. We were right. We had a lot of ongoing long conversations, but we weren't prepared to negotiate significant offtake agreements in a bad environment. I think that played off well. We've -- as I think everyone knows, we've done our first offtake with EcoPro one of the largest Korean makers of cathodes. And I can say with quite -- we have many discussions underway, many inbound interests in our materials. Our issue at this point, quite frankly, is not can we put all our material away in an offtake. That's not the issue. The real issue is we're wanting to make sure that the people were putting it to our outstanding offtake partners and where they are focused on the development of capacity in the United States. Right now, the United States doesn't have significant cathode or battery material making facilities. But what we're focusing on are doing deals with companies that have the strong intent and plans to do that and so that we can transition our materials into the United States more. So that's where we are. But the issue of getting it done, I suspect we'll have another offtake to announce here in the next quarter or so or 2, and that will probably be most of what we want to put into an offtake anyway. We definitely not want to have full capacity in an offtake. But that's not -- that has really become not such a big concern. There's actually on the markets, there's a -- you can see it in the prices but you can also hear it in the voice of the people that are calling. There's a real sense of a potential shortage looming. And one of the things that's so important about our project and potential economics of it is that we have a chance here, a very good chance of being one of the early new big pieces of production that come on and certainly will be the first one to come on in the United States. So that's an enviable position, and I think people are beginning to wake up and realize that's the case.

You're on mute, Alex.

Do you have time for 1 more?

1 more. Yes I can.

So there's a few here, and we might need to respond to them directly afterwards. But one, the last one. The latest developments in environmental permitting across the U.S., including [Sacapas] any concern over the Rhyolite Ridge development?

Bernard. You're the expert.

Yes. No, no, there's no concerns. We've -- again, we've been working on this project for 5 years and have done $100 million worth of work. The environmental baseline studies were completed a long time ago, 1.5 year ago now. We're very aware of any sensitive matters on the project and obviously, the Tiehms buckwheat that James referred to is the main one there. And we've had a very good strategy around how to manage that, how the 2 can coexist, minimizing impact and mitigating for any impact that we do have. We've done a lot of scientific research, us and others have that support what we're proposing there. So no, we think that this project will go through the permitting process, and we're not concerned about any other issues that relate to other projects that they're not particularly relevant to us.

Okay. Well, we'll leave it there. Thank you so much for your time this morning, Bernard. And James, thank you for the questions. And for those that we haven't had time to respond or look to, e-mail you back directly as soon as possible. So congrats again James and I'll hand over to Bernard for closing remarks.

Yes. Thank you, Alex. I just want to thank everyone for joining the call. Please feel free to reach out to us for further meetings, discussions, et cetera. We're very happy to engage. And finally, I would just like to thank the Executive Chairman, James Calaway, who's been instrumental in getting us to this point of delivering this strategic partner of the support of the Board of ioneer, wonderful Board for a company of our size and rapidly growing. I'm pleased to say. And then finally, the wonderful team primarily based out of our office in Reno. Again, a rapidly growing team who -- it's their hard work that has resulted in us bringing in a strategic partner -- a sophistically strategic partner, a significant investment, and derisking the financing elements of this project. So thanks to all of those involved.

Thank you. Thanks, everyone.

Thank you.