Exclusive: Ioneer’s green light for Nevada lithium project

Assuming all went to expectations, Ioneer (ASX: INR) will have received a piece of paper in the early hours of this morning that clears the way for it to get cracking at its Rhyolite Ridge lithium-boron project in Nevada.

The piece of paper, in the form of Record of Decision (ROD) from the Bureau of Land Management, will cap off a remarkable journey for the company.

The issuance of the ROD this morning AEDT (Pacific Daylight Time in Reno) means the company has cleared the US permitting process only six years after it began the process. Normally it is a 15 year process in the US, on average.

So today is a big news day for Ioneer and for the US around the subject of critical minerals, and the country’s intent to build a domestic supply chain on security grounds in the face of Chinese domination across much of the sector.

There has been suggestions that the Biden-Harris administration could be ready to juice up the tax credits available under the Inflation Reduction Act supply chain stimulus to include concessions for the production costs of new domestic operations on top of the original processing costs inducement.

It is a wait and see on that one but given Ioneer now has the only permit issued for a new lithium project during the administration’s time in office, and as it came ahead of the US election, maybe any ceremony involving the issue of Ioneer’s permit could double up for an announcement on refinements of the IRA.

There should be no surprise that Ioneer was to get its ROD about now as it follows on from the issue by the government of the final environmental impact study (EIS) on September 20. There is a statutory 30-day wait period after that, and here we are.

Importantly for Ioneer, the EIS contained a sign-off by the US Fish and Wildlife Service that the endangered Tiehm’s buckwheat would not be jeopardised by the Rhyolite Ridge development under a modified mining plan, and Ioneer’s comprehensive management plan for the humble plant.

Investors have been alert to Ioneer getting the all clear, with buying of the stock since the EIS release driving the share price from 17.5c to 28c in Thursday’s market. The 60% gain is against the weaker trend of ASX lithium stocks in the same period, even with the fillip provided by Rio Tinto’s $10 billion takeover of Arcadium, announced on October 9.

At its last price, Ioneer is being valued at $640 million. The little junior that could has come a long way since listing on the ASX as a US gold/copper explorer junior in 2007.

Based on previous studies that are being updated, Rhyolite Ridge is capable of producing 22,000t of lithium carbonate and an average of 170,000t of boric acid annually for decades to come.

For each tonne of lithium produced, 7 to 8t of boric acid is produced. Assume $US1,000/t for the boric acid and treat it as a by-product, and the production cost of the lithium carbonate comes out at a super-competitive $US2,500t, again subject to revision in updated study work.

That compares with the current depressed price of around $US10,000/t and forecasts by leading consultant Benchmark that prices could reach $US29,000/t by 2028 as the market re-enters a supply deficit.

That looming supply deficit was the key factor prompting Rio to make its bid for Arcadium.

Talking about Rio, there is a lot of chatter about whether it needs to add a North American project to its newly expanded lithium interests.

Given Rio is also a big producer of boron in California in a duopoly in the commodity it shares with Turkey, and given it is struggling to get approvals for its Jadar lithium-boron project in Serbia, it has got to be curious about Rhyolite Ridge, particularly now it has its permitting completed.

Completing the financing for Rhyolite Ridge (capex as estimated $1.2 billion in earlier studies and is set to be a higher number in updated study work) is Ioneer’s next challenge to get the project in to production by 2028 and capture the higher prices being forecast on the emergence of a supply deficit.

The big blocks of the financing are already in place (subject to some conditions precedent). The blocks are a $US700 million loan from the Department of Energy and a $US490 million equity contribution from South Africa’s Sibanye-Stillwater in return for a 50% project interest.

Palladium prices have not been kind to Sibanye-Stillwater so there are questions about whether it will step up to plate when it comes to Ioneer reaching a final investment decision on the project in first quarter of 2025.

Ioneer no doubt hopes it does step up. But if it doesn’t Ioneer now has a highly marketable project thanks to its permitting breakthrough and the on-going support of the DOE. It seems ready made for the likes of Rio, among others, to fill the void if the opportunity arises.

SUNSTONE:

It is a good time for ASX juniors to bring forward their copper and gold projects with some scale to them for consideration by mid-tier and major companies for a strategic alliance and/or a joint venture arrangement.

There is a shortage of quality projects with scale to them out there and the mid-tiers and majors know that they need to be fleet of foot to secure what could be their next big mine because of record gold prices and near record copper prices.

For the junior, the arrival of a partner with deeper pockets means the pathway to confirming a project is a sizeable development candidate is overcome because the biggest hurdle – a lack of funding – is removed.

It is against that backdrop that Ecuador specialist Sunstone (ASX:STM) has opened a data room with a view to securing a strategic partner(s) at one or both of its advanced projects in the north and south of the country, El Palmar and Bramaderos/Limon in the south.

Sunstone has a serious amount of burley in the water with both projects. Only this week it announced an initial resource estimate of 1.2Moz of gold equivalent at El Palmar and an additional exploration target of 15M-45Moz of gold equivalent.

Exploration targets can’t be made up. In the case of El Palmar there are three holes that point to the potential upside, with the interpretation coming from a geological brains trust that has found big copper-gold systems in the past, including the giant Cascabel discovery by the London-listed Solgold on the same geological trend.

Down south at Bramaderos, one of the cluster of porphyries there (Brama-Alba) has a resource estimate of 2.7Moz of gold equivalent and an exploration target of 3.3-8.6Moz of gold equivalent while a maiden resource estimate for the Limon epithermal discovery is expected next year.

From that rundown it can be seen that the north and south projects will appeal to different types. In the north, it would be likely be major mining companies banking on finding the next Cascabel.

Down south, mid-cap gold players would likely be attracted to the potential for a development of Limon as a 100,000-150,0000 low-cost producer to fund more exploration on the cluster of gold-copper porphyries.

Sunstone last traded at 0.6c for a market cap of $31.

So it can be suggested that if the opening of the data room does lead to a value enhancing deal (or a takeover), there is nothing in the current share price to reflect the potential upside from a deal being struck.

Fair enough, there is no deal yet. But given the scale of the opportunity demonstrated by the existing resources estimates, and what could come from the exploration targets, it has got to be thought there is a lot of industry interest.

No word yet on who is in the data room. What is known is that El Palmar is in the same neck of the woods as projects being advanced by Gina Rinehart’s Hancock prospecting and Chile’s copper king Codelco. As for down south, think cashed up gold companies looking to stretch their wings.