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As the battery metals market continues to skyrocket – and lithium in particular – new, reliable sources of this critical metal are in extremely high demand.
Enter
ION Energy Ltd. (
TSX-V. ION,
OTCMKTS: IONGF,
FF:5YB) – an exploration-stage, junior lithium company offering exposure to lithium exploration and development in the newly-emerging
Baavhai Uul Lithium Brine Project in Mongolia.
ION owns one of the
largest lithium exploration licenses in Mongolia and is now poised to become a significant player in Asia's booming lithium market.
Stockhouse Media’s Dave Jackson was recently joined by Ali Haji, ION’s CEO and Director, to talk about his company, the booming lithium market, and investment opportunities in the space.
TRANSCRIPT BELOW:
SH: So, to start off, can you tell us a bit about yourself and the history of the company?
AH: Sure. I've had over 13 years of international asset management experience, I moved back to Toronto from London, England about three and a half years ago as an advisor to a mining company by the name of Steppe Gold, which is a Mongolian gold producer. During one of my visits to Mongolia [in 2017] advising Steppe, my Chair and I co-founded ION. We co-founded it at a time when lithium prices were fairly close to bottom - or at least we thought they were close to bottom, and we turned out to be quite wrong - but ultimately founded the company on the belief that lithium much like any other mineral is cyclical in nature and will recover. Thus, Mongolia is a vast country - one and a half times the size of Ontario, but three and a half million people - of which only 3% is explored, we thought this would be an ideal place to look for lithium.
So, we started our journey back in 2017, looked at some data from the Ministry of Mining in the country. We then approached the government to bring up a license for tender in 2018. We were granted the license in January 2019, at ~ 81,000 hectares - a very large land package, the largest that the government has ever granted a public or private company. We were very pleased to have got that; being just 24 kilometers from the Chinese border, [that is] an extremely valuable asset that to have our hands on.
SH: Can you update our investor audience and your ION Energy shareholders on how the last 12 months been for you and ION?
AH: Absolutely. The last 12 months have been quite busy, to say the least, and I'm sure our current shareholders would attest to that. In March of last year, we had PDAC followed by the pandemic globally. Ultimately, we would have loved to have been public by PDAC, but we received our conditional approval from the TSX Venture Exchange in April of last year when much of the world was locked down. It was quite difficult going for most of us. I think the vast majority of us didn't know what side of the planet we were on, let alone whether we were up or down. But over the course of that very summer, governments around the world started to incentivize or stimulate their economies through recovery funds.
These recovery funds involved multi-billion dollars being allocated to a clean green energy revolution. There was a battery manufacturer in China that then had an offtake agreement with a producer in Australia. This vertical integration spawned last summer, which I think a lot of us that are watching or listening today may be aware of, really precipitated the growth of multiple lithium companies coming online. It started to increase the demand for electric vehicles. Beyond that, it started driving up the lithium prices internationally. With the adoption of all these electric vehicles being backed by government spending around the world, including the US with Biden's administration now, the EU, the UK, and the Asian markets that are subsidizing EVs, we found it to be an opportune moment, if you will, to go public. In August of last year, we commenced our RTO - our “go public” transaction. We raised $2.7 million for RTO, and we went public on August 31. I believe most thought we were crazy, but I think we timed it quite right.
We had been trading for just a matter of weeks or days, I would say before we added some very strong technical individuals to our team. Shortly after being public, we added Paul Fornazzari. He was the original Chair of Lithium Americas [Corp.], an industry name and in the lithium brine space. He was a director at Neo Lithium [Corp.] and instrumental in bringing in [investments] from Magna [International], Mitsubishi, and Ganfeng [Lithium] into Lithium Americas, but also worked on the CATL financing for Neo Lithium, which came later in January of this year.
We also added Don Hains, who is a Ph.D. geologist. He has spent a considerable amount of time around the world, looking for lithium. He's worked in the Attacama, the geology is very similar to that, of our license in Mongolia. He ultimately helps drive our exploration program from Canada using our localized resources, Mongolia being very rich in mining, has the necessary skilled labour.
Once we added those individuals, we recognized that we need to start putting dollars into the ground. Come October, we commenced our exploration program, the exploration program commenced using geophysics, the CSAMT program. One of our targets - as you can imagine, + 80,000 hectares is a massive life for a junior miner. I know you have to be quite focused - As a result, we focused on two of our targets, we completed our geophysics CSAMT, we're beginning our micro-seismic program, but ultimately the pandemic struck Mongolia as well, and they were led to lockdown. As a result, the teams moved back to the Capital. We were unable to complete that work.
So, we sort of used the period between October and December while the lockdown was ongoing to re-evaluate the company, re-evaluate our strategic objectives, which had always been the same from day one. Let's use this downtime to evaluate assets in-country for acquisition, let's further, refine, and define our exploration program for when we can get back out there, and let's look to see how we can market further beyond the borders of Canada. In November of last year, because we couldn't explore, we started to evaluate trading on the OTC, the market in the US. We started that process in November. In January, we were trading on the OTCQB now approaching our US investor base. Shortly thereafter, we acquired a new license, which is a 29,000-hectare license in the Dornogovi province, adjacent to the Sükhbaatar Province that we have today. The grand total of just over 110,000 hectares held by the company for exploration and a program for that is being planned as we speak.
Beyond that, we added a local lithium expert to have some in-country expertise. That gentleman is Dr. Khashbat Dashteseren. He's a Ph.D. lithium hydrogeologist, and he has worked at the Mongolian University of Science and Technology for a number of years. He spent a considerable amount of time looking for lithium in the country. Importantly, he's been over to Japan where he spent some time at Akita University studying the extraction methodologies for the various lithium resources in the country of Mongolia. Irrespective of the pandemic, I think we're very well aligned with a very strong team in the country, massive support on the backend. The government gave us a second license shortly after going public and ultimately, we can execute with all equipment that is currently on-site, in the ground, or on the ground overseen by a team that resides in Toronto today. It's been a busy 12 months.
SH: What are the key opportunities for ION that sets it apart from other emerging explorers?
AH: Sure. I think, yeah, one of the key opportunities would be the fact that we are extremely close to the largest market in the world. China today produces over 70% of the world's batteries. They refine about 80% of all of the lithium that ends up in batteries worldwide, and they consume them for local purposes. 53% of the world's lithium looking at the likes of NIO, the car manufacturer, looking at CATL being the largest battery manufacturer in the world today. Tesla's Gigafactory is going up in China as well. But let's not forget Korea, Taiwan, Japan - all within what I like to say is “earshot,” or “our
earshot” away from Mongolia. Our advantage relative to the rest of the world is quite prudent. If you look at China today, they're importing the vast majority of everything from Australia or the Lithium Triangle.
Well, “if you have it on your doorstep, why would you bother to go that far
?”, is our first advantage. Our second advantage is we've been in-country for over 12 years. We've worked in-country through various cycles. We've had one massive exit back in 2011 when our Chairman sold Hunnu Coal to Banpu of Thailand for half a billion dollars in 18 months but beyond that, I think as a team, you'll find that this is not a team that is quite typical of the junior mining space. I think the number is only 3% of mines internationally go into production and that the majority end up in this exploratory phase for quite some time. Whereas we, in our group, took Steppe Gold from its acquisition from Centerra to production 22 months after going public, which is a massive accolade to be very proud of, having completed that with almost a hundred percent Mongolian staff.
So, you're working with a team of seasoned industry professionals that have had experience internationally close to the largest market in the world where we know that we can be as competitive or more competitive than any producer on the planet today.
SH: The Company looks set for strong growth in 2021. How are you placed to expand operations to meet this demand?
AH: The timing couldn't be better for that question, Dave, and I'm not sure when this will air, but as of April 13th this morning, we closed our bought deal. It was led by PI Financial Corp. and Stifel GMP. We initially announced a $3 million bought deal about three weeks ago. That was upsized very quickly to $5 million on the back of interest. You know, we could have taken a fair bit more, but dilution is an important factor for us and our shareholders. Therefore, we capped it at 5 million, and we took the over-allotment option bringing in the grand total of $5.75 million - around 50 cents today.
On the back of that, we're very well-funded to ensure that our operations for both exploration as well as acquisition in-country are funded for the next two years. So, we have no requirement to go back to the market for the next two years. Having this much capital in the bank at this early stage of our company's “story,” if you will, makes us a lot better positioned than the vast majority of junior miners that would have to go back to the market to obtain capital, having seen this sort of decline in the resource sector over the last month, month and a half.
SH: In a sentence, what makes your company such a compelling investment?
AH: Yeah, that's always a great question, Dave, I would say ION Energy is well-poised to take advantage of the growing demand for lithium in Asia, led by a seasoned team of mining executives with a proven track record of success.
SH: Can you discuss the long-term strategy for the company moving forward, and what retail and institutional investors should be looking out for in the future?
AH: In terms of 2021, 2022, you can expect the company to spend a fair bit of money in the ground where it matters, and also expect us to spend a fair bit on marketing, being a new story. It's important that we do tell our story, but as far as the ground is concerned, we will be completing our exploration program on Baavhai Uul as planned. This will include the completion of the micro-seismic, which will ultimately give us a sense of the depth, the thickness, and the width of the aquifers. We will then deploy, our company-owned truck-mounted auger rig to pull up the brine to surface, have it sampled, and ultimately brings us closer to an early resource estimation. By the end of the summer, we'll also be deploying Diamond core rigs. Those will allow us to gauge the porosity and ultimately understand how much lithium we can bring out.
Now, as we start to do this work and further, de-risk our assets. When we have a sense of the average rate across the resource base, we will then start to look at bringing in a strategic investor, an investor that has experience bringing a mine like this to production somewhere else in the world. It could be the Lithium Triangle, it could very well be across the border in China, but that strategic capital would allow these strategics to take a toe hold in the organization at a higher currency, but also give them a ROFR for ultimately acquiring these assets from us in the future. But more importantly, they would give us the intellectual capital that will be otherwise expensive to obtain, to understand how to bring these things to production. That's our plan as we start to carry on for the rest of 2021; 2022 is when we start to look at pilot plants that would allow us to bring the purity to nine nine point nine, but ultimately have the conversations with the strategics that we're slowly building relationships with to have them engage with us for either a 100% buyout or a majority JV position in which they would look to take these assets to production.
SH: And finally, Ali, if there’s anything I’ve overlooked please feel free to elaborate.
AH: I would just like to add, and I think it's always important to note is the fact that as management and insiders, we own over 38% of the company. That number was around the 36% mark prior to this bought deal; we continue to buy on market. We are fully escrowed for two years, so we cannot sell, assign, or transfer a single share for two years. We did that by design. I beg your pardon - you can buy, and we have been buying one market, but we cannot sell, assign, or transfer. We did that by design because we believe in the company, we believe in our strategic objective, which is to look for an exit or JV partner in 24-36 months. We have this in a country that most folks don't quite understand, and we'd like to encourage individuals to be willing to better educate themselves as far as the opportunity that exists today.
For regular updates, visit
www.ionenergy.ca.
FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.