Ioneer - Q3 2024 TU

Transcript

Operator (participant)

Thank you for standing by, and welcome to the Ioneer Ltd investor call. All participants are in the listen only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Bernard Rowe, Managing Director. Please go ahead.

Bernard Rowe (Managing Director)

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 minimum 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 $25 million, which is equivalent to approximately AUD 38 million, at a price of AUD 0.18 per share, which represents the closing price of last Friday.

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 and Boron Project located in the state of Nevada in the United States. It also speaks to, and is supported, by two U.S. high net worth cornerstone investors, who covered approximately 70% of the funds that we raised. You know, we're delighted by that support, and not only from those two cornerstones, but also from the very limited number of other existing and new shareholders who helped 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 a 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, they clearly relate to the Rhyolite Ridge Project, advancing the detailed engineering, which is at the moment about 70% complete. So we're gonna continue working on that, particularly focused on detailed vendor engineering. That's the engineering that the suppliers 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, that's a large portion of the funds for that advancement of engineering and preparation for FID and commencement of construction. They'll 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 second 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. 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 $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.

Then finally, you know, there's some funds that will also be used for working capital purposes and owners 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 sediment were laid 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, 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 Zone.

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. The lithium and boron mineralization in that area is notably shallower than elsewhere in the basin. It's notably flatter. The lithium grades are 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, down 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, and we've made a note of this, and it's shown on some of the diagrams and maps that I would recommend that you take a look at in the announcement, but importantly, this 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 pit shell. Now, why the importance of being outside critical habitat? Well, 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 that's being assessed. And that has the support of both the BLM and the Fish and Wildlife with all of the consultation and work that we've done on conservation of Tiehm's 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 mine 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 reseeded, then really we're looking at only a disturbance of around about 10, 10% of the critical habitat. I would also just point out the other items that are outlined in the resource update, that we're now quoting our resources in terms of three streams.

Stream one 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 one currently sits at 153 million tons of rock in the resource, and contains about 1.3 million tons of lithium carbonate equivalent and 11 million tons of boric acid equivalent. Stream two 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, as the more test work we did, that 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 then much more of interest and of economic interest to us. Again, all of these are inside the same footprint, so there's no expansion of footprints. We go a little deeper to capture some of it, but otherwise, the footprint's the same.

There's 142 million tons of the stream two, containing 1.2 million tons of lithium carbonate equivalent, and about 1 million tons 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 one. Then stream three is the only layer in these sedimentary layers that I mentioned, 300 meters thick. There's really only one that's high in clay, and that's our M5 unit. So that constitutes stream three, which is 56 million tons, containing about 0.7 of a million ton of LCE, and again, 0.4 million tons of boric acid. So again, there's a small amount of boron in it, but very little compared to stream one.

The fact that we have these three streams, and they're a bit different, but really stream one and two 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 vat leach design plant that is a part of our stage one 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 three, 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. You know, the clay is material that's just much harder to filter relative to the stream one and two material. So from a processing ease and cost and efficiency, the stream one and stream two material are very similar and far more attractive, and hence, that's our focus. So you'll see those estimates, ore 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 tons, 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, the tonnages of these deposits, really what you first calculate are volumes and then multiply those volumes by a density to get a tonnage. What we found that we were using three different density data sets, and one of them was dated back to the 2010 and 2011 drilling that was conducted before Ioneer was working on the project.

While 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 2019 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 gravity density measurements. So that's the reason why that overall resource tonnage doesn't change much. However, this shelf area, you know, it's around about 30 million tons ±10 or 15 million tons 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. I'm happy to answer questions on both the capital raise and the resource update.

Operator (participant)

Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. We will just pause momentarily for any questions to enter the queue. The first question comes from Sam Catalano with Wilsons Advisory. Please go ahead.

Sam Catalano (Equity Partner and Head of Natural Resources Analyst)

Oh, hi, Bernard. 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 four-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 it makes it very difficult for us as analysts to assess the value proposition here, given we sort of have a lack of clarity on how the project's gonna look?

Bernard Rowe (Managing Director)

Yeah, sure, Sam. Thank you for that question. I wouldn't—we're not delaying release of it. We're still doing the work. So we, you know, things, of course, have taken longer around the permitting and, you know, earlier we were, if you go back to, you know, last year, we were expecting that around the middle of this year, around June, July, was when we were expecting ROD. Now, you know, that got pushed out, and the NEPA process didn't start, and, and—Sorry, the draft EIS had not been finalized until the end of 2023, which then meant that in early part of 2024, 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, we're now talking about, you know, September, October. And we, you know, there are very good reasons why we want these estimates as we're doing them, the updates, the class two estimate, which is, you know, 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, you know, it's timed to coincide with completion of the permitting process so that, you know, that, that's a big major part of it. And then the second part of it is that, obviously, you know, 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 I'll, as I mentioned, there's gonna be another update, and there's gonna be a new ore reserve and a new mine plan. So that work is still all ongoing.

You know, we need to finish that work in order to then come up with a refreshed estimate, which previous estimate was a Class Three back in the 2020 time. Based on 30% engineering, we're talking about now a Class Two, which will 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, you know, later in the year, not right now, as we're still completing the work.

Sam Catalano (Equity Partner and Head of Natural Resources Analyst)

Yeah. Thank you. And just to follow up then, you've also seemed to hint to that in the presentation, that, you know, the ultimate CapEx numbers are likely to be in excess of, you know, current funding with $490 and $700, and we'll explore other avenues. What would be preferred avenues of funding any gap, if there is one?

Bernard Rowe (Managing Director)

No. Well, first, 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, you know, we're acknowledging that prices of many materials have risen significantly, and labor has risen significantly, you know, over the last certainly four years since the feasibility study, but even, you know, even over the last two years. Well, 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, 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 negligible change in the flow sheet. So you know, that, that is important, I think. Now, you know, what... If there is a funding gap, what would we look at? Well, you know, we will consider all the logical alternatives at the time, but, you know, we're, we're not doing that at the moment because, you know, we don't know yet, what-- even if there is going to be a gap. And so, you know, we need to do the work, finish the work, and then, you know, we will address that. But obviously, you know, we, 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, you know, we will look at all options that just make sense to us to address that.

Sam Catalano (Equity Partner and Head of Natural Resources Analyst)

Okay. Thank you, Ben.

Operator (participant)

Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. There are no further questions at this time. I'll now hand it back to Mr. Rowe for closing remarks.

Bernard Rowe (Managing Director)

Thank you very much, Rachel. Thank you, everyone, for listening in. I would like just to close out by, you know, thanking the investors for the strong show of support in doing this. You know, being, again, 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, you know, thank you for the support from the investors, and particularly our two 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 D. 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. So thank you to everyone for that. And particularly, Ian Bucknell, our CFO, who's on the call, for all the 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.