Special Report: Emerging lithium-boron producer ioneer has not just added more tonnes to its resource inventory, it has also significantly increased the grade – which is good for potential early cash flow.

ioneer (ASX:INR) has boosted the resource of its Rhyolite Ridge project in Nevada by 27 per cent to 154 million tonnes (Mt), which contains 1.3Mt of lithium carbonate and 12.4Mt of boric acid.

That is an increase of 200,000 tonnes of lithium carbonate and 3.8Mt of boric acid compared to the previous lithium-boron resource estimate.

The larger inventory includes a maiden “measured” resource of 41mt, which contains a higher-grade measured resource of 27.5mt for the Upper Zone.

Mineral resources are categorised in order of increasing geological confidence, from inferred to indicated to measured.

A measured resource represents the highest level of geologic knowledge and confidence and allows a company to start work to convert the resource to a reserve — discoveries that are commercially mineable.

The high-grade Upper Zone measured resource has 15 per cent higher lithium and 26 per cent higher boron grades than the total resource.

The higher grades are great news for the economics of the Rhyolite Ridge project.

“The higher confidence measured resource relates to the planned starter pit and due to the significantly higher grades, we can expect to see a material increase in the projected early operating cash flows,” managing director Bernard Rowe said.

“This upgraded mineral resource is exactly what we were aiming to achieve with the 2018/2019 drill program at Rhyolite Ridge.

“The lithium-boron mineralisation remains open to the south where it continues to be shallow and we expect further increases to the resource with additional drilling.”

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US supply chain dilemma a win for emerging producers

Rhyolite Ridge is the most advanced lithium development project in the US and likely to become the first sizable lithium producer in the country.

The US’ intense focus on its domestic battery supply chain has led to early positives and promises of other benefits for junior players like ioneer.

One senator wants to introduce legislation that protects not just the US’ mineral resources but also the supply chains that refine the raw materials into speciality, engineered materials for lithium-ion batteries and electric vehicles.

“With the recent focus by the US government on ensuring the supply of critical minerals, ioneer is well placed to become the first major domestic supplier of lithium to the American electric vehicle industry,” Rowe said.

At full capacity the Rhyolite Ridge project will produce 20,200 tonnes of lithium carbonate and 173,000 tonnes of boric acid annually.

ioneer’s goal is to be in production by mid-2021. 

Two is always better than one

Having two payable products is always a benefit for a new producer, particularly when they are co-products of roughly equal value.

And ioneer will have that advantage with a second revenue stream from the boron “co-product” it will produce.

The increased boron grade of the resource should enable the company to produce 10 tonnes of boric acid (previously 8 tonnes) with every tonne of lithium carbonate it produces, ioneer will be able to produce its lithium carbonate for less than $1,000 a tonne.

Boric acid fetches around $700 a tonne, with pricing remaining relatively steady because there are just two major players in the market.

This means the 10 tonnes of boric acid looks likely to contribute about $7000 to ioneer’s bottom line, reducing its total production cost of $7,400 to just $400 per tonne of lithium carbonate. With lithium carbonate currently selling for around $10,000 per tonne, that low production cost would provide a very healthy margin indeed.

This story was developed in collaboration with ioneer, a Stockhead advertiser at the time of publishing.
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