ioneer Ltd (INR) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the ioneer Ltd. Investor Call. [Operator Instructions] I would now like to hand the conference over to Mr. Bernard Rowe, Managing Director. Please go ahead.

Thank you very much, Rachel. And thank you, everyone, for listening in on this call. What I will do on the call is run through a quick update briefing around the placement that we announced today and also touch on the updated mineral resource estimate. I'll run for about 15 minutes, and then we'll happily take questions. So let me start by saying how pleased we are with the results of the placement that we announced today, raising a total of USD 25 million, which is equivalent to approximately AUD 38 million at a price of $0.18 per share, which represents the closing price of last Friday and again, to be able to complete a placement like this at market price, I think, speaks a lot to the quality of the asset, the Rhyolite Ridge Lithium-Boron project located in the state of Nevada in the United States. And it also speaks to and is supported by 2 U.S. high net worth cornerstone investors who covered approximately 70% of the funds that we raised. We're delighted by that support and not only from those 2 cornerstones, but also from the very limited number of other existing and new shareholders who helped to fill out the placement. Ioneer with this raised is now in a very enviable position, well-funded, strong and well capitalized to take us through to a final investment decision on the Rhyolite Ridge project, which we expect to be making towards the end of 2024. As many of you already know, we're in the final stages of permitting on the project. We're of the understanding from information provided by the federal government that we're expecting the third and final of our permits later this year around October, and we would then shortly move to an FID decision after that. So the funds raised are very much about putting us in that strong and well-capitalized position as we move from where we are today through to FID at the end of the year. More specifically, where are the funds going to be used? Well, the -- clearly relate to the Rhyolite Ridge project, advancing the detailed engineering, which is, at the moment, about 70% complete. So we're going to continue working on that, particularly focused on detailed vendor engineering. That's the engineering that the supplies of particular equipment provide. And that puts us in a very good position then to issue a full notice to proceed to those vendors as we receive the FID decision. So that's a large portion of the funds for that advancement of engineering in preparation for FID and commencement of construction. They will also be used to assist in the funding of the continued permitting process. The process referred to as NEPA. Our draft EIS is in the public comment period. Right now, that closes on the 2nd of June. And shortly after that, the permitting process moves back to the government following a fairly set process and procedure, and that will culminate in a final EIS around September and then a record of decision in October is what we are anticipating. Now there's also some financing costs that we'll use the funds for. That relates specifically to the DOE loan that we have. So that's a USD 700 million conditional commitment that we will work on through the duration of this year to ensure that all those conditions have been met and that we can close out that loan shortly after the ROD and FID decision. And then finally, there's some funds that will also be used for working capital purposes and Ioneer's costs and general corporate costs. So this is really all about focusing on the final stage of getting the Rhyolite Ridge project to construction and that's where the funds will be used. I also would like to just touch on the resource update that came out at the same time today and discuss that and also obviously take some questions on that once I finish. So the Rhyolite Ridge project deposit is a sedimentary type of deposit. It's formed in an ancient lake and the layers of soft sentiment will lay down in the bottom of that lake. And over time, that lake filled up, and those layers were then turned into hard rock. And some of those layers have lithium and boron in them and some of them don't, and some of them have just lithium in them. And those layers are about 300 meters thick and they're covered up by gravel. So you can't really see much of it on the surface other than on the western side. And as we've been progressing and doing detailed geophysics, particularly gravity and magnetics, we have been -- and drilling. We have identified a very exciting part of the basin that you just simply cannot see from the surface because again, it's all covered by this shallow gravel. And this is the zone that we're referring to as the shelf sign. So just like a shelf in the ocean where you have a shallower and generally flatter area, hence, the terminology shelf. We have discovered that in the southeastern portion of the South Basin at Rhyolite Ridge, there is a zone that's a shelf. And the lithium and boron mineralization in that area is notably shallower than elsewhere in the basin. It's notably flatter. The lithium grades significantly higher as we move into that southern area more broadly. Something that we've noted in the past. But more recently, with the drilling that we've continued to do in that area, that has been something that we've consistently noted that higher, particularly lithium grade. The layers in this area are particularly flat. Other parts of the deposit, particularly the Western margin, there is areas where because of faulting and subsequent movement of the rocks over time, the layers can be tilted somewhat, and that's what we see on the Western side. But in this shelf area then in the Southeast, they tend to be much flatter. And why that is important? Is it because it makes it geotechnical characteristics when you're designing an open pit to be much more simple and favorable. Very importantly, we've made a note of this and is shown on some of the diagrams and maps that I would recommend that you take a look at in the announcement. But importantly, their shelf zone is entirely outside of critical habitat. And yet it sits in the permitted footprint that is currently in our mine plan of operation that's going through the NEPA process. So the bulk of this shelf area will be included in that picture. Now why the importance of being outside the critical habitat. We've already said previously with the work that we've done in the past that we plan to start mining outside of critical habitat. And as time progresses, we will gradually move into critical habitat and that's what is proposed in the mine plan of operation as being assessed. And that has the support of both the BLM and the [ efficient wild life ] with all of the consultation and work that we've done on conservation of teams buckwheat with them. So having more area outside of the critical habitat just allows us to start and stay outside longer and be more measured and gradual in -- as we advance the mining inside the critical habitat. And of course, importantly, once we've mined inside critical habitat, we'll also be backfilling this pit and reclaiming it. So the area of critical habitat is something of the order of 900 acres. And once we've finished mining and reclaimed and rehabilitated and replanted and receded, then really we're looking at only a disturbance of around about 10% of the critical habitat. I would also just point out the other items in the -- that are outlined in the resource update that we're now quoting our resources in terms of 3 streams. Stream 1 being what the project was based on up until now, including the pre-feasibility and the 2020 feasibility. We were only looking at the high-boron lithium mineralization, and that was because it had very low clay content and it also had all this boron to add to the value, the economic value of the material. That stream 1 currently sits at 153 million tonnes of rock in the resource and contains about 1.3 million tonnes of lithium carbonate equivalent, and 11 million tonnes of boric acid equivalent. Stream 2 is a really interesting thing, and we've been working on this over the last couple of years, and providing updates as we've gone along, that this low boron lithium mineralization also has low clay. So whereas we were primarily focused in the early years just on the high boron because of the ease of processing, we found the more test work we did that as long as the low -- as long as the clay content was low, then the lithium mineralization could be leached in exactly the same Vat flow sheet that we've developed for the Rhyolite Ridge deposit. So that material, of course, becomes a much more of interest and of economic interest to it. Again, all of these are inside the same footprint. So there's no expansion of footprint. We go a little deeper to capture some of it. But otherwise, the footprint is the same. And there's 142 million tonnes of the Stream 2 containing 1.2 million tonnes of lithium carbonate equivalent and about 1 million tonnes of boric acid. So it's not as if it doesn't have any boron in it, it's just low-boron relative to Stream 1. And then Stream 3 is the only layer in these sedimentary layers that I mentioned 300 meter stick. There's really only one that's high in play, and that's our M5 unit. So that constitutes Stream 3, which is 56 million tonnes, containing about 0.7 million tonnes of LCE. And again, 0.4 million tonnes of boric acid. So again, there's a small amount of boron in it, but very little compared to Stream 1. The fact that we have these 3 streams, and they're a bit different, but really Stream 1 and 2 can be processed with the same flow sheet obviously, has the potential to add very significantly to the tonnages that can be processed through the Rhyolite Ridge design plant that is part of our Stage 1 of the project. So it's certainly something that has the potential to add to the mine plan and the ore reserves and the next step here with this work is that we will finish the updated mine plan in the coming months, and we will be updating that ore reserve to include this material. Now Stream 3, we won't be processing that through the Vat leach. And so we will continue to work with our partner, EcoPro on a research project that will look at extracting the lithium from the clay. The clay is a material that's just much harder to filter relative to the Stream 1 and 2 material. So from a processing ease and cost and efficiency, the Stream 1 and Stream 2 material are very similar and far more attractive, and hence, that's our focus. So you'll see those estimates or reserve estimate over the next couple of months. We'll also be doing a further update on the mineral resource because there's still about a dozen holes outside of the resource footprint that we were waiting on results for -- before calculating this resource update. The overall tonnage of the resource, which sits at around 350 million tonnes hasn't really changed much. And the reason for that is we did an adjustment on the density of the rock. So when you calculate these tonnages of these deposits really what you first calculate are volumes and then multiply those volumes by density to get a tonnage where we found that we were using 3 different density data sets, and one of them was dated back to the 2010/'11 drilling that was conducted before [indiscernible] was working on the project. And whilst we had been using that data set in the past, the recent information that we have collected with this current drilling correlated very well with the 2018 and '19 measurements, but not so well with the older data. So we made the decision with our consultants and competent person for the resource estimate that we should in the future going forward only use the more recent density measurements. And so that's the reason why that, that overall resource tonnage doesn't change much. However, this shelf area, it's around about 30 million tonnes, plus or minus 10 million or 15 million tonnes is sort of what we're talking about as a resource that we've added in the area of the shelf that hadn't been drilled previously. So with that, I'm going to throw it open for questions and happy to answer questions on both the capital raise and the resource update.

[Operator Instructions] The first question comes from Sam Catalano with Wilsons Advisory.

Congrats on the cap raise. I just wanted to sort of question you a bit about the intentions with the updated capital and economics and project economics. You said that obviously they're going to be very different to the 4-year old feasibility study, which makes sense. But I just wonder why you're delaying releasing those to market until the ROD and final investment decision? Because obviously, makes it very difficult for us as analysts to assess the value proposition here given the sort of -- have a lack of clarity on how the project is going to look?

Thank you for that question. I wouldn't -- we're not delaying release of it. We're still doing the work. So we -- things, of course, have taken longer around the permitting. And earlier, we were -- if you go back to last year, we were expecting that around the middle of this year, around June, July was when we were expecting ROD. Now that got pushed out and the NEPA process didn't start and -- sorry, the draft EIS had not been finalized until the end of 2023, which then meant that in early part of '24, it was under agency review before they made it public. So the long and short of that is that instead of June, July for release of the -- for a ROD that we're now talking about September, October. And we -- there are very good reasons why we want these estimates as we're doing them the updates, the Class II estimate, which is -- requires a very high level of engineering completion, a very high level of estimation accuracy that, that is done as close as possible to when you're making your FID because if you do it early, then you may find yourself requiring -- needing to go back and up refresh those numbers if you're taking them to our own Board, the Board of Sibanye and also the Department of Energy who are providing that loan to the project. So it's timed to coincide with completion of the permitting process. So that's a big major part of it. And then the second part of it is that, obviously, we have had to drill holes in the south and change plans a bit and do more geotechnical drilling, et cetera, which is exactly what we were doing last year, and this resource update is one step in that process. And as I mentioned, there's going to be another update and there's going to be a new ore reserve and a new mine plan. So that work is still all ongoing. And we need to finish that work in order to then come up with a refreshed estimate, which previous estimate was a Class III back in the 2020 time based on 30% engineering. We're talking about now a Class II, which -- with 70% engineering and a much higher level of accuracy based on quantities. So that's the simple answer is that the work is still ongoing, and it makes sense that it gets wrapped up later in the year, not right now as we're still completing the work.

And just a follow-up then. You've also [ sit ] into that in the presentation that the ultimate CapEx numbers are likely to be in excess of the current funding with $490 million and $700 million, and we will explore other outages. What would be your preferred avenues of funding any gap if there is one?

No. Well, again, firstly, what we're saying is that, well, we don't have that estimate. So we can't say what the gap is. We're just acknowledging that until the work is finished, it's not possible to actually put our finger on it and say, well, this is what a gap might be. But we're acknowledging that prices of many materials have risen significantly and labor has risen significantly over the last certainly 4 years since the feasibility study, but even over the last 2 years. I would like to stress that there has been no scope change of any significance on this project. So as we've advanced from 30% through to 70% engineering, the flow sheet is essentially the same. I mean there's a few minor modifications here and there, and some of them are adding things and some of them are taking things away. But net-net, there's a negligible change in the flow sheet. So that is important, I think, now what -- if there is a funding gap, what would we look at? We will consider all the logical alternatives at the time, but we're not doing that at the moment because we don't know yet what even if there is going to be a gap. And so we need to do the work, finish the work, and then we will address that. But obviously, we have a loan commitment from the DOE. We have an equity commitment from Sibanye, and we're obviously focused on closing those out. And then we will look to address if there is any gap, then we will look at all options that has made sense to us to address that.

[Operator Instructions] There are no further questions at this time. I'll now hand it back to Mr. Rowe for closing remarks.

Thank you very much, Rachel. Thank you, everyone, for listening in. I would like just to close out by thanking the investors for the strong show of support in doing this, being -- again, being able to quickly complete a placement like this at market. I'm not aware of any other companies in this sector that have been able to do that in recent times. So thank you for the support from the investors and particularly our 2 U.S.-based high net worth cornerstones that really drove this whole process, that was wonderful to have their support, and we thank them for that. And I would also just like to thank my team, our Board, our Chairman, James Calaway, and the rest of the Board, the team who worked on this financing, lots of hours go into these things, even though they happen pretty quickly when they do. And so thank you to everyone for that. And particularly Ian Bucknell, our CFO, who's on the call, for all the hours -- that his long hours he's put in here with me, we're both in Reno at the moment. And so I'm very grateful for that and just generally to the rest of the team as well. So thank you very much, everyone.