ioneer Ltd (INR) Earnings Call Transcript & Summary

Good morning, everybody, and thank you for joining us today from wherever you are. I'm delighted to have the MD and CEO of ioneer Limited this morning, Mr. Bernard Rowe to discuss last week's ASX announcement and a significant announcement for ioneer on environmental impact study. I'm going to hand it over to Bernard, and we may have some questions at the end. Over to you.

Thank you very much, Peter, and thank you, everyone, for listening in. Very exciting time for ioneer, the culmination of many years of hard work by our team resulted in the publication not only of a final EIS last week, but also the biological opinion that came from the Fish and Wildlife Service. So a tremendous period for us as we've been working on this, as all of you know, for many years, it's actually 8 years since we first drilled a hole at Rhyolite Ridge, and it's 6 years since we started the permitting process with the baseline studies and early engagement. So a tremendous amount of time, effort on behalf of the ioneer team, but also our consultants in getting to this point. I would just like to quickly point out a couple of things. One is whilst 6 years is certainly a long time to work through a permitting process, it's less than half the average for a mining project in the United States. And the United States, whilst it has its own challenges in terms of time lines for permitting, you could say the same about many other parts of the world. So to get to this stage in 6 years on a greenfield mining project in the United States is a tremendous achievement. And I would like to acknowledge one person in particular, Rebecca Soya, who has led our permitting process. She joined the company in 2019 and has been solely focused on taking this project through to the final permitting and we can all see the light at the end of the tunnel. So thank you, Rebecca Soya for all of the work that you've done over the years to get us to where we are today. There's many other people, consultants, et cetera. I'm not going to mention other names, but it's been a team effort, certainly. I want to quickly share just 2 slides to show you, and then we'll have some questions that -- If I just bring these up -- is that sharing Peter?

Yes, it is -- it's sharing.

Okay. And is it -- I'm not sure that it's on the full screen. But anyway, I won't ...

Yes, for some reason, it's not on the full slide, but it is the permitting NEPA process slide.

Okay. Very well. Anyway, it's not allowing me to maximize it any further than that. I'm not sure why. But anyway, this slide just nicely summarizes the process that we've gone through to get to where we are today. And I'm not going to step through all of it. But suffice to say, there are many elements, that were required to get to where we are today with our publication of that final EIS. We actually started the permitting process really back in 2019. We drilled the first hole almost 8 years ago today, not on this very day, but almost to the date. But it was really in 2019 when we knew we had a project that was going to go through the permitting process, and we commenced that work with the environmental baseline studies. Importantly, though, we also -- and we've already started this impact before 2019, engaging with local community with travel nations with the U.S. Fish and Wildlife Service and with the BLM, all around that same time, 2019 and 2020, in preparation for what was to then come as we submitted a plan of operations and mine plan of operations to the BLM in 2020. We then did major modifications to that during that period from 2020 to 2022. That was in response to a number of concerns around the project, but primarily it was the fact that Tiehm’s buckwheat had been identified and proposed to be listed as an endangered species. So we had to make modifications. And we did that during that 2-year period, re-submitted a revised version in 2022, Tiehm’s buckwheat was listed shortly after that, 6 months later. And then it was really in beginning of 2023 when this NEPA process got underway with the public scoping and then a year later, full year later that the draft EIS was published and a public comment period started. And then obviously, that's culminated in last week's final EIS together with the Section 7 Biological Opinion from the Fish and Wildlife. And significantly, for those who haven't read it, what that Section 7 Biological Opinion says importantly, is the proposed actions of the mining operation and processing at Rhyolite Ridge in the Fish & Wildlife opinion, will not jeopardize the future of Tiehm’s buckwheat nor will it -- nor is it expected to have adverse effect on modifying of the critical habitat. So they are the 2 sort of key hurdles to get over in terms of approval by the Fish and Wildlife Service, and they were incorporated in that EIS last week. What that means from now in terms of permitting, you can see that we're right at the very end of the process now after a final EIS is published, there is a 30-day agency review period. It's not another public comment period. It's just a statutory review period and it's a minimum of 30 days, and we're expecting it will be 30 days. 30 days later, so basically around the last week of October is when we expect to have a record of decision issued by the BLM. And that obviously then allows us to commence construction subject, of course, timing-wise to completion of a number of other things, which I'm now going to move to with the next slide. So 2024 catalysts, we updated our resource. We did that back in April, just briefly on the resource, 350 million tonnes, total resource. That includes high boron ore, low boron ore and clay or now we're not intending on processing the clay material that will be stockpiled. But the Stream 1, Stream 2, which is high-boron, low-boron ore, that we are intending on processing that. And if I look at what that entails in the resource estimate, it's around 214 million tonnes of that 351 million tonnes. There's about 214 million tonnes of measured and indicated resource that Stream 1 and Stream 2, now measured and indicated means that, that material is available to go into the reserve estimate. Not all of it will go in, but it's available. So -- and then of that 214 million tonnes, there's about 69 million tonnes that's high grade what we call B5. It's the highest grade ore at Rhyolite Ridge. It's high in boron, it's high in lithium and it's in a geological unit we call the B5, that makes up about 69 million tonnes of that 214 million tonnes total. So there's a lot of tonnes that are going to be available to move into the reserve category. If you remember, our -- we haven't published a reserve since 2020. And at that time, it was around 60 million tonnes. So we -- given that we've got so many tonnes now in the measured and indicated categories of the total resource, we're expecting a material upgrade in the reserve in the coming months. updated mine plan and reserves. But as I said, they'll be coming over the next few months, alongside updated CapEx and OpEx estimates and the record of decision, which we've already touched on being in late October. These things, the reserves, the mine plan, the updated CapEx, the updated OpEx and the record of decision are all required for us to close 2 critical other streams of our work. One is our $700 million conditional commitment loan from the U.S. government's Department of Energy Loan Programs Office. So that's what -- they are the key things that are required to close that loan. And similarly, the same work streams are required to close the agreement, the joint venture agreement, which we have with Sibanye Stillwater, which involves a $490 million conditional commitment from them. So obviously, we're very much focused on those key elements of the work that it will allow us to close both of those agreements, financing-related agreements over the coming months. And obviously, having a record of decision is a critical part of that. But given last week's publication, we're very, very confident around the receipt of a positive record of decision. All of these things, of course, ultimately relate to the financing of the project, both with the DOE loan and the Sibanye commitment. And that's -- they are all, of course, or those 2 things, in particular, are critical for the timing of our final investment decision. So we're well on track to achieving these things over the coming months. Our aim is to have the DOE loan and the Sibanye deals both closed out by the end of the year. And we are very much focused on that now. So Peter, I'm going to throw it open to questions now.

Terrific. Thank you, Bernard. We've got some very good attendance here today. So we're looking forward to talking to you a bit further about some of these. It was a very significant the announcement, the EIS being delivered is very significant given the Department of Energy's focus on this project getting up. How important to the stay of Nevada is Rhyolite Ridge project?

It's extremely important, not just to the state of Nevada, but also to the United States. So currently, as of today, there is just one operating lithium mine in the United States that produces around about 5,000 tonnes of lithium carbonate a year. It's been in operation since the 1960s. So it's a very old mine that can't expand a lot. So it's a very -- there's a drop in the ocean. When you think about the U.S. needing probably in the order of 1 million tonnes of lithium carbonate equivalent by sometime in the early 2030s is the estimate. About 20% to 30% of the world's production is what's estimated to be consumed by the United States going into the 2030s. So obviously, 5,000 tonnes is a drop in the ocean. Rhyolite Ridge will bring on around about 22,000 tonnes of lithium carbonate a year. So it's a meaningful increase of fourfold increase in Phase 1, Rhyolite Ridge is obviously a very large deposit and has the ability to expand in the future, given those numbers that I was talking about before of -- in the hundreds of millions of tonnes of measured and indicated resource. I should point out, in order to get to 22,000 tonnes of lithium a year plus the boric acid of average from the feasibility study of 170,000 tonnes. We're only mining 2.5 million tonnes a year out of a deposit that is already hundreds of millions of tonnes. So it certainly has a lot of possibility around future growth as well. But yes, it's going to be critical to the United States domestic supply of lithium and it's also going to be very important for the state of Nevada because it's rural jobs. It's domestic development of a domestic supply chain and Nevada is in a fortunate position because it has a number of elements of the downstream as well, including, of course, ultimately, the batteries going into electric cars.

And Bernard, assuming the approvals process from here continues smoothly as it has done to date. What's your anticipated time line from commencement of project development to production?

So we've given any guide of 24 to 36 months, and people might think, well, that's a fairly broad sort of range. And the reason for that is it does depend on when you order your long lead items. And then -- and how long those long-lead items take to manufacture and supply and when in the construction process, you actually need them. So if you need them at the back end of the construction period, well, obviously, it's not -- they're not so critical. But the things you need early on, if there's a long lead on those to actually order them and have them supply, then that pushes out your overall time line. So 24 to 36 months is the guidance we've given, depending on when those long lead items are placed. Obviously, we won't be placing them until we get a record of decision and a final investment decision. But on that basis, we're expecting to commence construction next year in 2025. And assuming up to 36 months of build time with those long -- taken into account those long lead items that would mean early 2028 for first production. Some ramping up possibly in 2027, but primarily is first production in 2028.

And Bernard, the offtake agreements in place, what is the security on those given the time frame as well?

The offtake agreements are secure, they're binding bankable offtake agreements with Ford, Toyota and Panasonic joint venture and EcoPro. Obviously, we've had those agreements in place for quite some time, and we have in the past extended them because of the need to with around finishing the permitting process. So some of them will require some further extensions just around those days. But we have ongoing discussions with all our offtake partners and have very good relationships with them. And I think, again, the standout here is that this is a domestic source within the United States of lithium and boric acid and there's very few projects that we'll be able to supply the quantities that we're talking about in the United States, within the time frame that we're talking about, i.e., before the end of this decade.

And given that scenario, Bernard, with boron being a coproduct from Rhyolite Ridge, how advantageous does that make the Rhyolite Ridge project in terms of peers who are also looking at starting some major lithium projects?

Look, it makes the world a difference actually is as many of the listeners, I'm sure already know, it's the reason why Rhyolite Ridge is a standout project, is the boron and it's sort of -- there's a number of reasons for that. Firstly, the mineralogy of the rock determines how you process any mineral deposit. And having the boron mineralogy of this rock just makes it a whole lot easier to process than most other lithium. It means that you can compare to a spodumene deposit [indiscernible] , you don't need to roast it. You don't need to have high temperature processing. You can actually just bleach it like an oxide copper deposit. And many people sort of confused Rhyolite Ridge with a lithium clay, but the actual rock that's got the boron in it, which is what we're focused on. Actually doesn't have clay and the clay is the Stream 3 that I mentioned earlier that we're actually just stockpiling. So we're not even processing it. So our flow sheet is driven by the boron in the ore. Now on the -- at the other end of this spectrum, the economic input is significant. The boron is -- represents somewhere around 30% to 40%, depending on the pricing of the 2 commodities. And obviously, lithium pricing can be -- has been and will continue to be volatile. But 30% to 40% of our revenue comes from the boric acid and likely even more than that in the early years when we're mining this high-grade B5 because for every 1 tonne of lithium that we produce from that B5 ore, there's about 8 or 9 tonnes of boric acid. So it's really a major economic contributor to the project and the driver behind the whole process flow ship.

very fortunate for Rhyolite Ridge to be a dual product project. We have a few questions coming through regarding potential for any further environmental appeals or holdups. What's your view on the process from here given the Bureau of Land Management announcements on the EIS?

So firstly, I would say we've done 6 years of work. We've engaged heavily with the BLM and the U.S. Fish and Wildlife Service. So we feel we're in a very strong position and have done everything that we've needed to do, and we've worked through problems in an open and transparent way with those government agencies. So we think we're actually in a very strong position if there are any kinds of legal challenges. And in all likelihood, we expect there may be. So we are prepared for that. But -- and the central part, I guess, of our strategy there is we moved everything away from the area of Tiehm’s buckwheat. So we're not actually having any direct impacts. We're minimizing indirect impacts, we're monitoring extensively for any effects that might have come arise as a result of our activity, and we're prepared to then have -- and we have strategies for the mitigation if there are any impacts that are observed. So we think that any kind of legal challenge is likely to be unsuccessful and hopefully resolve very quickly if there is one.

And there are several questions that are similarly similarly structured regarding November's election. Would a change of administration delay or jeopardize the closeout of the DOE loan?

I don't think so. Firstly, I would say, again, given that we've been at this project for quite some time, we've actually -- we've we obviously started under a previous administration. We've already been through one administration change. If there is an administration change, we don't see this project being slowed down at all. And in fact, if you look at the objectives around critical minerals from both sides of politics, there's actually a lot of bipartisan support. So -- and we've had strong support from both sides of politics, particularly from the Nevada delegation. So no, we're not expecting any holdups there. But at the same time, we are also pushing to get everything done by the end of the year. And that's what we are expecting will happen that we will close these things out by the end of this year.

And a few questions around the project funding once the final investment decision has been made and the project has a commencement date, what is the process for a drawdown on the 2 funding partners for the project?

So firstly, with the Sibanye agreement, there's obviously a final investment decision required from Sibanye. And if that is a positive decision, then Sibanye is required to contribute into the joint venture company $490 million in equity in return for a 50% stake in the project, the $490 million stage, but it's $490 million in equity for a 50% stake in the project. And that's USD 490 million. The equity gets drawn down so we have to close the DOE loan, obviously, before we can proceed. But once the DOE loan is closed, then the equity gets strong. First, the DOE debt comes after. So that obviously wouldn't be straight away given that there would be $490 from Sibanye. The way the DOE loan works is it's done in tranches after the equity. And each tranche is as it's cold, and each tranche then attracts its own terms, including the interest rate at the time. So there would be a series of tranches of that $700 million debt that would be drawn down. And each time we do that, it would be a 10-year tenure. And an interest rate that gets fixed at the U.S. 10-year federal treasury rate at the time. So that 10-year tenure and the particular rate apply to each of those tranches.

All right. There's a lot of questions here, and I'm going to encourage some of our some in the audience to send them through individually. So I'm hoping Bernard can get to them, which I know he wants to. But I'm going to close off here with a couple of questions around the product. The outlook for the -- who are the major suppliers of boric acid? How large will your plan be in terms of that supply scenario? And what's your outlook for that pricing on boric acid?

Yes. So the major global suppliers today of boric acid is really only 2, and that is Rio Tinto from one line in California, the Boron line and Turkey. Most of the world's reserves of boron, it's over 73% of the world's reserves of boron is located in Turkey. So Turkey is a large supplier. The U.S. operation of Rio Tinto is one line that's towards -- getting towards the end of its life anyway. The major customers, of course -- or there's a myriad of customers and they are the big users though are in borosilicon glass, fiber glass, insulation, but it gets used in a all other things, particularly in modern -- some modern applications like boron steel is used in chassis in cars, boron carbide is a very hard material, so it gets used in for military applications and rockets and things like that, space rockets. So it's very widely used. And because of the fact that it's used in a whole myriad of applications, they balance each other out of course, and you have a very stable demand. And of course, you've got stable supply because there's only 2 operators and stable supply and stable demand means stable pricing. And that's what boron is known for for many, many decades, it's had very, very stable pricing, one of the lowest volatility measures of any commodity in the world. So it's a great companion to have that producing 30% to 40% of your revenue with something like lithium, which is obviously the supply and demand is -- both of them are very volatile. And when there's mismatch, you get price correction, and that's what we're -- what we have seen and what we're seeing right now.

And the -- given the price correction Bernard, and none of us can predict the future of lithium prices, but I think we're seeing the bottom of the cycle being printed now. And the Boron co-product gives you that security and confidence that Rhyolite Ridge will stand out over time. What is the view on lithium prices and how will -- how does that impact your decision-making going forward for Rhyolite Ridge?

So good question. And obviously, we're not experts in predicting future boron and also future lithium pricing. But what we're seeing is that operations are being shut down, both in the West, but also in China as well. So that does indicate that we're seeing a bottom. And so hopefully, that is the case. I think the longer-term growth is what we're focused on. And we're particularly focused on the longer-term growth of demand in the United States. And so we're comfortable with long-term pricing projections. We use a number of different third parties for information that we then average and use in our own financial models. And obviously, at the moment, most of those third parties are forecasting low prices over the next few years, in response to an oversupply. And as that oversupply reduces down and becomes back into a deficit rather than a surplus, which I think many think -- projected to happen in the early 2030s -- or from '28 onwards really, but particularly in the early 2030s, we're going to see strong pricing recoveries. So we're comfortable around that. And certainly, having a dual stream revenue stream makes it a whole lot easier for us to get comfortable.

Thank you, Bernard. You covered the questions quite well there. There was a number that we managed to get through, and there are still some that have might come through to you directly, and I encourage everybody to send those e-mails through to Peter, at nwrcommunications.com.au and will make sure Bernard gets them. We'd like to thank you for your attendance today. Thank you, Bernard, and we look forward to hearing an update in the very near future.

Great. Thank you, Peter, and thanks, everyone, for listening in. And yes, please feel free to reach out with your questions to Peter.

Thank you.

Thank you.