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ioneer Ltd

Initiation: Boron Game changer

We initiate research coverage on ioneer Ltd (‘INR’) with a Speculative Buy Last Price
recommendation and a A$0.45/sh target price. We view INR’s Rhyolite
Ridge Lithium/Boron development project as globally unique with highly
attractive economics due to Boron co product credits offsetting ~80% of Target Price
the operating costs. With a large resource endowment, simple mining A$0.45
/processing and scale potential we see INR materially undervalued relative Recommendation
to its fundamentals. Next catalysts include the DFS release (1Q 2020) Speculative Buy
followed by offtake MOU’s, and possible minority sale to a strategic partner.
Key risks include our LT commodity prices, project funding ($600m) and
permitting. Higher
Boron Game Changer Metals and Mining
▪ INR’s 100% owned Rhyolite Ridge project in Nevada is a greenfield ASX Code INR
Lithium/Boron project with a relatively simple mining and process method 52 Week Range ($) -
(vat acid leach), producing 21kt LCE, 218ktpa Boric Acid over +30 years. Market Cap ($m) 250.7
Shares Outstanding (m) 1,475.0
▪ Rhyolite Ridge economics are highly compelling due to 10 tonnes of Boric
Av Daily Turnover ($m)
Acid (~$700/t) being produced alongside a tonne of lithium ($8k/t). The
3 Month Total Return (%) -5.6
significant boron ‘Co-product’ revenue (~50%) has several profound 12 Month Total Return (%) -33.3
implications, most critically that it 1) boron credits offset ~80% of operating Benchmark 12 Month Return (%) 11.9
costs to ~$2k/t of LCE. 2) this enables it tdo become the lowest possible Net Cash FY20E ($m) 71.5
cost lithium producer on the cost curve (vs 1st quartile at ~$4k/t).
Relative Price Performance
▪ Central to understanding RR’s project economics is the Boron/Boric Acid
market. To assist, Ords has commissioned former Rio Tinto Marketing
Executive of Industrial Minerals, Michael Le Page to write the
accompanying report: Boron 101: A Technical Primer (link). 100

Scalability / Rio Takeout 90

▪ RR has a significant resource endowment that is relatively simple to mine 80
and process. In our view, the project can be scaled up well beyond the 70
current 2.7mtpa with additional sulphuric acid plants. 60
▪ Project capex benefits with economies of scale, and we note for a mere
+US$73m in capex, throughput could be lifted by a third (from 2.7 to Oct-18 Jan-19 Apr-19 Jul-19 Oct-19
3.6mtpa ROM), which lifts our DCF ~70% to US$800m (A$0.80/sh). INR S&P/ASX 200
▪ We see Rio Tinto as potential owner in the long term as we see it could be Source: FactSet
attractive for several strategic reasons (preferable to Jadar, eliminate
competition, maintain Oligopoly, regain market share, sustain existing Consensus Earnings
Boron Mine). FY20E FY21E
Initiate with Speculative Buy TP $0.45/sh NPAT (C) ($m) - -
NPAT (OM) ($m) (2.5) (12.4)
▪ We initiate coverage on INR with a Speculative Buy and A$0.45/sh target
EPS (C) (c) - -
price which is based on a 1 year forward DCF using a WACC of 11%, AUD
EPS (OM) (c) (17.0) (65.1)
0.70, Lithium Carbonate $8k/t (99%) and Boric Acid $630/t.
Dylan Kelly
▪ Key risks include permitting, project funding (US$600m). Our valuation is
Senior Research Analyst
highly sensitive assumptions behind grade, recovery as well as forecasts
02 8216 6417
for Lithium/Boron and AUD.
▪ Upcoming catalysts include DFS (due 1Q 2020) which will likely be
followed by customer offtake/MOU’s, minority sale to a strategic partner.
Key Financials
Year-end June ($) FY18A FY19A FY20E FY21E FY22E
Revenue ($m) - - - - -
EBITDA ($m) (3.5) (5.4) (3.0) (3.0) (3.0)
EBIT ($m) (3.5) (5.4) (3.0) (3.0) (3.0)
Reported NPAT ($m) (2.5) (0.9) (2.5) (12.4) (31.5)
Reported EPS (c) (16.3) (6.2) (16.5) (63.5) (161.7)
Normalised NPAT ($m)
Source: OML, Iress, ioneer Ltd (2.5) (0.9) (2.5) (12.4) (31.5)
Normalised EPS (c) (17.0) (6.4) (17.0) (65.1) (165.9)
Dividend (c) - - - - -
Net Yield (%) - - - - -
1 Normalised ROE (%) - - - - - 21 October 2019
ioneer Ltd Ord Minnett Research

Investment Thesis ................................................................. 4
Company Overview ........................................................... 4
Valuation ........................................................................... 4
Capital Structure ................................................................ 5
Thesis Key Point 1: Boron game changer ......................... 6
Thesis Key Point 2: Scalability .......................................... 7
Thesis Key Point 3: Rio Takeout? ..................................... 9
Risks & Catalysts ................................................................ 12
Key Risks ........................................................................ 12
Valuation Sensitivity ........................................................ 12
Capex Hurdle .................................................................. 13
How to fund: Mixture equity, debt and finance ................. 13
Next Catalysts ................................................................. 13
Appendix A: Company Summary ........................................ 15
Company History ............................................................. 15
Timeline ........................................................................... 15
Location ........................................................................... 15
Geology ........................................................................... 16
Board & Management Bio’s ............................................. 18
Appendix B: Commodity Price Forecast.............................. 20
Lithium ............................................................................. 20
Boron – Boric Acid Market ............................................... 21
Appendix C: Processing Flow Sheet ................................... 22

ioneer Ltd Ord Minnett Research

Production & Valuation Metrics Base Case Spot Scenario

Key financial metrics 18A 19A 20F 21F 22F Valuation A$m A$/sh
P&L NPV (1 Yr Fwd)
Revenue A$m Rhyolite Ridge (100%) 797 0.52 0.39
EBITDA A$m (4) (5) (3) (3) (3) Corporate/Exploration (74) (0.05) (0.05)
NPAT A$m (2) (1) (3) (12) (31) Net Cash/(Debt) 72 0.05 0.05
EPS - (Diluted) A¢/sh (0.2) (0.1) (0.2) (0.7) (1.7) Tax Cash (109) (0.07) (0.06)
Cash flow Total 685 0.45 0.33
Operating Cash Flow A$m (2) (5) (3) (15) (39) Target Price A$ 0.45 0.33
Capex A$m (7) (32) (44) (270) (517) TSR (%) 172
Free Cash Flow A$m (9) (5) (47) (285) (556) Recommendation Speculative Buy
FCF Yield % (4) (1) (19) (91) (178)
Balance Sheet Discount Rate
Cash Balance A$m 81 49 72 93 54 WACC (Real) 11.2%
Net Cash/(Debt) A$m 81 49 72 (121) (608) WACC (Nominal) 12.8%
Gearing (ND/E) % 86 51 44 (81) (322)
Debt Facility Drawn Project Sensitivity - NPV A$/sh (100% )
Debt Facility A$m 214 500
Lithium Carb 99% US$k/t
Equipment Finance A$m 162

Boric Acid
US$/t 6.0 7.0 8.0 10.0
Total Debt Drawn A$m 214 662
600 0.06 0.22 0.38 0.69
Shares on Issue
700 0.23 0.38 0.54 0.86
Shares on issue m 1,469 1,475 1,475 1,898 1,898
800 0.39 0.55 0.71 1.02
Options m 60 49 49 49 49
Fully Diluted Shares m 1,529 1,524 1,524 1,947 1,947 NPV Summary

Assumptions (Real) 21F 22F 23F 24F 25F Long Term Corporat
AUD x 0.70 0.70 0.70 0.70 0.70 0.70 e/Explor
ation Rhyolite
LiCarb Industrial Grade US$k/t 6.5 5.9 6.0 7.5 8.0 8.0 Ridge
LiCarb Battery Grade US$k/t 7.9 7.3 7.4 8.9 9.4 9.4 (100%)
Boric Acid US$/t 630 630 630 630 630 688

Operational Summary 21F 22F 23F 24F 25F LOM Share Register mn
Production Shares on issue 1,475
Strip Ratio x:x 10 5.8 5.8 5.8 5.8 7.3 Options/Rights 48.8
Waste Mined Mt 10 12 16 16 16 19 Fully Diluted Share Count 1,524
Ore Mined Mt 1.0 2.0 2.7 2.7 2.7 2.6
Ore Processed Mt 1.0 1.4 2.7 2.7 2.6 Mineral Inventory Ore Grade
Lithium Lithium Boric Acid
Grade % 1.1 1.1 1.1 1.0 (mt) Li2CO3 H3BO3
Recovery % 70.0 75.0 81.8 81.8 80.8 Resource Upper M+I (Jun19') 71.5 1.01% 10.2%
Lithium Carbonate inc kt 5.7 24.1 24.1 20.6 Reserve (Feb19') 15.8 1.00% 7.0%
Industrial Grade kt 5.7 24.1 22.9 11.8 Ords Mine Plan 73 0.98% 10.0%
Battery Grade kt 1.2 8.8 Ords Mine Life (Years) 28
Boron/Boric Acid
Grade % 9.0 9.0 9.0 9.0 10.0 NPV Sensitivity ±1% %
Recovery % 70.0 70.0 75.0 83.5 83.5 82.3 Grade/Recovery 3.2
Boric Acid Produced kt 63 91 203 203 218 Opex 2.0
Opex Lithium Carbonate (99%) 1.9
Mining US$/t 2.70 2.7 2.5 2.1 2.1 2.1 Boric Acid 1.7
Processing US$/t 37 37 30 30 25 AUD 0.8
Transport US$/t 160 160 160 160 160 160
Royatly Rate % 5.0 5.0 5.0 5.0 5.0 5 Key Events
Cash COGS DFS Release 1Q 2020
Mining US$mn 30 37 46 39 39 46
Processing US$mn 37 50 81 81 65
G&A US$mn 8 16 16 16 16 Revenue Split by Product (LOM)
Transport+Royalties US$mn 12 20 52 54 50
Total Cash Cogs US$mn 94 132 187 189 178 LiCarb Tech
Unit Margin Boric Grade
Acid 27%
Opex US$k/t Li 23.1 7.8 7.9 8.9 47%
Boron Credits US$k/t Li (10.0) (5.3) (5.3) (7.5)
COGS less credits US$k/t Li 13.0 2.5 2.5 1.4 LiCarb Batt Grade
Revenue US$k/t Li 6.0 7.5 8.1 8.6 26%
Margin US$k/t Li (7.0) 5.0 5.5 7.2

Sales by product type (Lithium Equivalent) Operating Cost Waterfall

50 10,000 US$/t
Kt LCE 700 9000
45 -7200
40.1 40.1 40.7 1900
40 LiCarb99.5% 38.7
1.2 4.3
LiCarb99% 7,500
35 8.8 800
30 Boric Acid (LCE) 3300
24.1 22.9 18.7
25 11.2 5,000
Boric Acid
15 12.9 2300
offsets 80% of
10 5.7 17.8 18.8 unit costs
5.0 16.0 16.0
5 ​ @ $630/t
5.0 7.2
FY22 FY23 FY24 FY25 FY26 LOM ​
Mining Processing G&A Transport Royalties Total Cost Boric Acid Cost inc
Credits Credits

ioneer Ltd Ord Minnett Research

Investment Thesis
We initiate research coverage on ioneer Ltd (‘INR’) with a Speculative Buy
recommendation and a A$0.45/sh target price. INR’s 100% owned Rhyolite Ridge
(‘RR’) project in Nevada, hosts a greenfield Lithium/Boron deposit development with
highly compelling economics. With a large resource endowment, simple mining and
extraction and scale potential, we see INR materially undervalued relative to its
fundamentals. Our investment thesis is based on:
1. Boron Co-Product: 10 tonnes of Boric Acid ($700/t) are produced
alongside tonne of lithium carbonate ($8,000/t). The significant boron
‘Co-product’ revenue has several profound implications, most critically:
1) Boron offsets ~80% of operating costs to ~$2k/t
2) RR becomes the lowest possible cost lithium producer on the
cost curve.
2. Scalability: RR has a significant resource endowment that is relatively
simple to mine and process. In our view the project can be scaled up
well beyond the current 2.7mtpa with additional acid plants. Project
capex benefits with economies of scale, and we note for a mere
+US$73m in capex, throughput could be lifted by a third from 2.7 to
3.6mtpa ROM, which lifts our DCF ~70% to US$800m (A$0.80/sh).
Beyond this level, (7-11mtpa) capex hit >$1,000m and beyond INR’s
balance sheet. Alternatively, we see the potential scale to be highly
attractive for a potential acquirer.
3. Rio Takeout? We see Rio Tinto as the natural owner of RR and believe
it could acquire INR for several strategic reasons (eliminiate
competition, maintain oligopoly, regain lost market share, sustain
existing mine, preferable to Jadar). We think Rio could add
considerable value in acquiring the business via trucking a simple
chemical solution from RR to be processed at their existing Boron
operation. RR is probably not big enough for Rio just yet, but it could
be if the high grade resource size was doubled, and the throughput
scaled up 3-4x to ~10mtpa.

Key risks include permitting, project funding (US$600m). Our valuation is highly
sensitive assumptions behind grade, recovery as well as forecasts for Lithium/Boron
and AUD. Upcoming catalysts include release of the DFS in 1Q 2020, which will likely
be followed by customer offtake/MOU’s and a potential minority stake sale to a
strategic partner.

Company Overview
ioneer Ltd (‘INR’) is a mining development company that owns 100% of the Rhyolite
Ridge (‘RR’) Lithium/Boron project, located in Nevada, United Sates. RR hosts a
world class lithium/boron orebody that is close to surface (7:1 strip ratio) and a
relatively simple process method of vat leaching.

With high grade mineralisation open to the south, north and east, we believe the
project has the potential to achieve a Tier 1 project status due to its large scale
potential, long life and highly competitive cost position.

Ords expects the ~US$600m project to commence commercial production in 2023

producing ~21ktpa Lithium Carbonate and ~218ktpa of Boron Acid over a +30 year
mine life.

We value INR on a sum of the parts one year forward DCF of ~A$797m or
A$0.45/sh which utilise a WACC of 11.2% (real) that assumes a CoE of 11.2%,
RFR of 4.0%, Equity Beta of 1.2, ERP of 6% and Cost of Debt of 5% (pre tax). The
DCF consists of
▪ RR project: on a pre-tax 100% basis at US$540m converted at spot AUD of
0.68 and assumes:
- Lithium Carbonate Industrial Grade (99%) US$8k/t

ioneer Ltd Ord Minnett Research

- Boric Acid price of US$700/t, discounted by 10% for the 1 st five

years to $630/t
- AUD of 0.70.
▪ Tax we model as a separate DCF line item worth -A$103m, which utilises some
carried forward tax losses with 1st cash tax payable in 2025.
▪ We also include a provision for corporate items including overheads, admin at
A$74m, as well as a FY20 Cash position of A$72m.
Figure 1: INR DCF Valuation

Valuation A$m A$/sh

NPV (1 Yr Fwd)
Rhyolite Ridge (100%) 797 0.52
Corporate/Exploration (74) (0.05)
Net Cash/(Debt) 72 0.05
Tax Cash (109) (0.07)
Total 685 0.45
Target Price A$ 0.45
Source: Ord Minnett Limited estimates

Figure 2: RR NPV Sensitivity (100%) (A$/sh)

Lithium Carb 99% US$k/t

Boric Acid

US$/t 6.0 7.0 8.0 10.0

600 0.06 0.22 0.38 0.69
700 0.23 0.38 0.54 0.86
800 0.39 0.55 0.71 1.02
Source: Ords estimates, pre tax, overheads, excludes cash & debt, spot AUD 0.68.

Capital Structure
As at 30 June 2019 INR had A$48.6m in cash and no debt. There were 1475m
shares on issue with another 49m Options/Performance Rights for a total of 1524m
shares fully diluted basis.
There are no registered substantial shareholders of INR, but
Management/Directors collectively own ~8%. The register is largely held by retail
shareholders and is relatively concentrated with the top 20 holding 60%. The
largest shareholder appears to be Craig Mathieson with 4.5%.
Prior to construction commencing and debt being financed we expect at least one
capital raising of A$75m which increases the share count by 423m shares (as at
the last close).

ioneer Ltd Ord Minnett Research

Thesis Key Point 1: Boron game changer

RR is a unique and globally significant lithium project due to its Boron coproduct
credits which offsets 80% of its operating cost base, which enables it to become the
lowest cost lithium producer on the cost curve.
1) Boron credits offsets 80% of operating costs
As a standalone Lithium project, RR is too high cost to be economic, with unit costs
of $9,000/t of lithium carbonate. However, RR produces 10 units of Boric Acid
(~$700/t) alongside every unit of lithium carbonate (~$8,000/t), effectively making
both commodities a ‘co-product’ with roughly an even revenue contribution. Co-
product influence on RR project economics has several profound implications, most
critically, Boric Acid credits offsets ~80% of unit costs by -$7,000/t to ~$2,000/t.
Figure 3: RR Unit Cost breakdown (Life of mine Avg) Figure 4: China Domestic Boric Acid Price History (2002-2019)
10,000 US$/t 700 9000 1500
-7200 US$/t
1400 2012 high $1,400
7,500 1300
800 Sulphuric Acid supply
1200 disruption
5,000 1000 17yr average $740/t

Boric Acid 900

2300 offsets 80% of 800
2,500 1800
unit costs 700
​ @ $630/t 600
Spot $636/t
2002 low $550/t

Mining Processing G&A Transport Royalties Total Cost Boric Acid Cost inc 2002 2004 2006 2008 2010 2012 2014 2016 2018
Credits Credits

Source: Ords Estimates, Company Filings, Source: China Petroleum and Chemical Industry Federation via CEIC, IRESS

2) Boron enables lowest cost curve position

The second key implication of Boron credits is that RR’s position on the lithium cost
curve catapults from one of the highest, to firmly the lowest. The degree to how cost
competitive RR’s is largely driven by the Boric Acid price, which we note:
▪ At US$630/t Boron, operating costs $1,800/t could be a mere half the 1st
quartile of the cost curve (~$4,000/t).
▪ Operating costs go to zero/negative at ~$890/t
▪ Prices would need to fall to ~$400/t to bring RR in line with the 1st Quartile.
(which we see as highly unlikely as at these levels the entire boron market is
making and the 17 year price low was ~US$550/t in 2003).

The central concept to understanding RR’s project economics is the Boron/Boric

Acid market. To assist, Ords has commissioned former Rio Tinto Marketing
Executive of Industrial Minerals, Michael Le Page to write the accompanying report:
Boron 101: Technical Primer.
Figure 5: Lithium Cost Curve 2025 (Real)
9 US$k/tonne
No Boron Credits = $8k/t
Li Unit Cost Sensitivity to Boron Credit
8 Boron Price US$/t Li = 0
800 700 600 400 888
US$k/t LCE 0.8 1.7 2.7 4.5 0

​ Boron @ 630$/t = $2k/t

1 ​
0​ 100 200 300 400 500 600 700 800 900 1,000

Source: Ord Minnett Estimates, Company Filings, Benchmark Minerals, Roskill, (^Cost include Conversion
Cost to Li2Co3, Royalties, Freight CFR China, Assumes spot FX for RMB,AUD,ARS,CLP)

ioneer Ltd Ord Minnett Research

Thesis Key Point 2: Scalability

RR has a significant resource endowment that is relatively simple to mine and
process. In our view the project can be scaled up well beyond the current 2.7mtpa Project capable of far
with additional acid plants. Project capex benefits with economies of scale, and we
higher throughput
note for a mere +US$73m in capex, throughput could be lifted by a third from 2.7 to
3.6mtpa ROM, which lifts our DCF ~70% to US$800m (A$0.80/sh). Beyond this level, than currently planned
(7-11mtpa) capex breaches >US$1,000m and beyond INR’s capacity, but they could
stagger it and self fund after FY26. Alternatively, we see the potential scale to be
highly attractive for a potential acquirer.

Large orebody – resource remains open

Ore body is already
Ords visited RR site in September 2019, and we were struck by the size and scale
of the resource potential. This is important to understand in the context that the South
large, but will likely
Basin Resource still remains open to the south, east and north. Further a resource grow
for the north basin has not yet been estimated.

We note that the PFS resource of lithium only ore was a whopping 475mt, but recent
studies have focused on combined lithium-boron mineralisation due to improved
economics from a higher Boron content. We note the Jun 2019 Resource update
stands at 154mt Resource with an 8:1 ratio of Boric Acid to Lithium Carbonate with
Ords base case assuming only the higher grade Upper Zone of 71mt utilising a ratio
of 10.2:1.
Figure 6: RR Deposit Overview Figure 7: South Basin Resource Outline

Source: Company PFS with Ords Edits, Source: Authors Photos

Simple Surface Mining / Outcrops

The deposit is large, tabular and moderately dipping making mining particularly
Extraction is simple,
straight forward. The location of the starter pit the ore zone is outcropping, requiring but very acid intensive
no pre-stripping before mining commences. The two ore zone are ~20 meters in
thickness and close to surface with a strip ratio of 7:1, but the initial starter quarry
likely to be ~5.8:1.

Simple Vat Acid leaching

The key to RR is that it’s the Lithium/Boron mineralisation can be extracted from the
host ore (Searlesite) via acid leach. As per the details in Appendix C, Crushed ore is Needs 0.5 tonne
simply conveyed into several large concrete (or steel) vats, where is it mixed with a sulphuric acid per
sulphuric acid solution for 4 days. Acid leaching is relatively common place extraction tonne of ore.
method, particularly for low grade copper operations across Chile and North America.

This process whilst simple, consumes a considerable volume of acid with roughly 0.5 Sulphuric Acid plant
tonne of acid required for 1 tonne of ore. Our base case assumes a 2.7mpta plant cost US$113-200mn
requiring a 3,500 tonnes per day (‘tpd’) Sulphuric Acid plant worth ~US$113m which
represents a which represents around 26% of the total initial capex cost.

ioneer Ltd Ord Minnett Research

Scale constrained by Acid Plant

The PFS states the RR Resource can support larger throughputs, but capacity is
constrained by the size of the Sulphuric Acid plant. Beyond a 3.6Mtpa ROM (which Higher throughputs
needs a 4,500tpd plant worth US$200m), an entire new plant needs to be needs new acid plants
constructed. This somewhat limits additional scale into increments matching the size
of a new acid plant.

We note that the worlds largest sulphuric acid plant is 5,000tpd at Ma’aden in Saudi
Arabia (here) built by SNC Lavalin (same company to build RR plant), but we note
that other plants have been built in duplication before.

Valuation upside with scale

What makes INR a particularly compelling investment proposition is the upside RR capex benefits
potential from increased scale beyond its current plans of 2.7mtpa. We note that the from economies of
project capex benefits from economies of scale depending upon the acid plant size. scale
We have modelled three scenarios based upon duplicating and triplicate of the
4,500tpd acid plants (~$200m each).
+$73m lifts throughput
A 3.6mtpa operation (+33% vs our base case) requires a single 4,500tpd Acid Plant, +33% and DCF +70%
for an capex increment of only US$73m, but lifts our DCF ~70% to US$800m

We see multiples of a 4,500tpd Acid Plant enables an increment of production to 7.2 Next increment
and 10.8mtpa. As per the scenario analysis below, whilst the valuation upside is duplicates 4,500tpd
material (multiples of our current valuation), the >US$1,000mn capital cost beyond
acid plant for 7.2-
INR’s current capacity. INR could potentially stagger growth in phases and self-fund
it, as we expect by FY26 it to hit nameplate and be generating ~US$200m in Ebitda 10.8mtpa ROM.
under our current 2.7mtpa base case.
Cost >$1bn
Beyond 3.6mtpa, the projects Lithium and Boric Acid output becomes material in size
to both markets and risks oversupply. To avoid this, it will need to diversify across a
number product verticals/segments.
Scale risks flooding
Alternatively, we see that such scale and potential would be highly attractive to an

Figure 8: RR Project Scenario Analysis

Project Scenario Ords Base Case Scenario 1: Scenario 2: Scenario 3:
ROM Mtpa 2.7 3.6 7.2 10.8
Initial Capex US$m 600 674 1,033 1,491
Acid Plant Size tpd 1x 3500 1x 4500 2x 4500 3x 4500
NPV (100%) Pre Tax US$m 476 813 1,612 1,871
NPV A$/sh 0.46 0.79 1.56 1.81
IRR % 21% 23% 30% 29%

Ebitda US$m 178 221 389 572

Boric Acid ktpa 218 244 437 618
Lithium Carbonate ktpa 20.0 24 49 70
Boric Acid/LCE ratio : 10.9 10.0 9.0 8.9
% of Boron market % 6% 7% 12% 17%
Source: Ords Estimates

ioneer Ltd Ord Minnett Research

Thesis Key Point 3: Rio Takeout?

We see Rio Tinto as the natural owner of RR and believe it could be acquired for a
number of strategic reasons (eliminate competition, preferable to Jadar, maintain
We see Rio as the
oligopoly, regain market share, sustain Boron Mine). We think Rio could add natural owner of RR
considerable value processing a RR chemical solution at its existing Boron operation.
We also flag to investors INR’s board/management team depth of experience
previously in Rio’s Industrial Minerals division.

In our view, Rio is the natural owner of RR due to:

▪ Rio’s Backyard: Rio’s existing mine in Boron California is 330km south of RR.
▪ Intellectual Property/Infrastructure: Rio and its predecessors have been
operating here for ~90 years and has significant IP across all facets of the
industry be it operational, metallurgy, geology, marketing, distribution.
Strategic Acquisition target
We think RR could be an attractive acquisition for Rio Tinto due to several strategic It makes strategic
and operational reasons including: sense for Rio to
1. Eliminate Competition/ Protect market share: Our base case estimate acquire RR
for RR Boric Acid production is ~218ktpa, which implies roughly ~10%
market share by 2023. We ponder if this could be an uncomfortable enough
level for Rio to simple acquire it?

2. Maintain Boron Oligopoly: Rio currently has 30% market share of world
Boron supply and roughly the same for Boric Acid (See accompanying
Boron 101). The oligopoly shared with Turkish Eti enables both price
stability and has limited competition.

3. Sustain Boron Asset: Rio’s existing operations are rapidly maturing with
around 22 years (2043) reserve life remaining. Rio is therefore unable to
expand production (except via increasing utilisation), or it would
significantly reduce the mine life.
4. Significant synergies: with existing mine infrastructure, intellectual
property, marketing and distribution.

How could Rio add value to RR?

Ords visited Rio’s Boron mine in California in September 2019, and were impressed
Rio could truck RR
with the endowment of processing and transport infrastructure. We roughly
envisaged Rio could add value to RR in the following hypothetical scenario: solution to its existing
Boron mine
▪ Upstream Only: At RR, Rio could build the infrastructure for just the upstream
processing stages 1 and 2 (see appendix C). This consists of Crushing ore
and leaching in acid vats. The lithium/Boron would be dissolved into a raw
pregnant liquor solution ‘PLS’ (acid solution).
▪ Truck Solution to Boron: PLS could then be trucked 330km south to Boron’s
existing processing plant for further treatment as well as build additional lithium
plant requirements (Stage 3-8: Appendix C)
Under such a scenario, Rio could add considerable value via a drastically lower
capex, opex, as well as utilise/upgrade existing capacity/IP to handle more material.
Figure 9: Rio Tinto Boron Processing Plant/Train Load Out

Source: Authors own photos

ioneer Ltd Ord Minnett Research

Probably not big enough – just yet

In our view, RR is probably not a ‘Rio sized’ business just yet in terms of mine life or RR may not be big
earnings materiality. We roughly envisage RR needs to be ‘enhanced’ optically for
enough just yet for Rio
both a higher throughput as well as further explored to justify an acquisition:

1. Earnings Materiality ~10mtpa: For RR to be material enough for Rio to

acquire, we roughly estimate it would need to be able to contribute >5% of
RR needs to be
group Ebitda. Using our long term price assumptions we estimate at least a
10mtpa plant, roughly 4x the size of the current 2.7mtpa plans would be
~10mtpa to be material
able to contribute ~US$650m. When combined with the $200m of Ebitda
from its existing Boron mine, the business would contribute $850m, which Resource needs to
is 5% of Rio’s consensus for FY21 at ~US$17bn. double to be ‘Rio sized’
2. Resource needs to double: With a 154mt of resource this implies a 15
year mine life of RR at a ‘material’ throughput rate of 10mpta. For a resource
to be arguably ‘big’ enough for Rio at >30 years we roughly estimate the
resource needs to more than double to >360mt. In our view such an
increase appears plausible in term of volume considering PFS has 475mt
Resource, but the unknown is at what grade Boron grade.

Jadar Killer? – RR far preferable

We’ve taken a detailed look at Rio’s Jadar project which is somewhat comparable to
RR. In our view, Jadar appears to be a potentially large, long life asset that could be Rio’s Jadar mine
worthy of replacing its existing Boron mine. However, based on the current publicly economics struggle
available information, we struggle to see how the project economics stack up. We with low recoveries,
estimate a paltry IRR of c.10% for the US$1.5bn project, which includes some
$1.5bn capex and no
generous assumptions around grade and recoveries. Considering the significant
capital cost, low recoveries, unknown jurisdiction (Serbia) and no real synergies with
synergies with
its existing Boron operations, we don’t believe the project should proceed. We believe
RR to be a far more attractive option than Jadar as:

▪ Higher Margin: Due to the high recoveries, low strip ratio and cheap
processing method, we estimate RR has a cash margin per tonne of
US$37/ore roughly double that of Jadar at $19/t. At an Ebitda level this rises
considerably over the life of mine with RR at 41% vs Jadar at 6%.
▪ Metallurgical complexity: Jadar consists of a complex 26 stage hot acid
leach process with low recoveries of c.60%. RR on the other hand is relatively
simple with an 8 stage process utilising acid leaching in vats with an ~80%
▪ Mining Complexity: Jadar’s ore body is 400 meters deep and requires a
significant underground infrastructure and lead time to extract. RR on the other
hand ore is shallow and outcropping with a low strip of 7:1.

ioneer Ltd Ord Minnett Research

Figure 10: Rio Tinto Boron/Lithium Project comparison to RR

Project Boron Jadar RR
Location California Serbia Nevada
Stake % 100% 100% 100% RR is highly preferable
Owner x RIO RIO INR to Jadar due to
Status Operational DFS DFS
reduced mining and
Mine Life Years years 23 +60 +30
metallurgy complexity
Project Capex US$mn 1500 600
IRR % 10% 21%
NPV @ 10% DR US$m 1199 143 560
Ebitda Margin % 33% 6% 41%

Mining Method Opencut Underground Opencut

Ore Depth meters 200 400 Shallow/Outcrop
Strip Ratio waste:Ore 19.6:1 na 7:1
RR low strip ratio and
ROM Mtpa 3.0 1.65 2.7
Lithium Carbonate ktpa na 50 20.0
Boric Oxide ktpa 512 318 123
LiCarbEqu ktpa 25.2 65.7 26.0

Boric Acid Production ktpa 330 318 218

Process Method Water Leach Hot Acid Leach Simple Acid Leach
Processing stages # 5 26 8
Recoveries % 80% 60% 83%

Revenue US$/t Ore 215 336 105

Cost US$/t Ore 144 317 69
Cash Margin US$/t Ore 71 19 37
RR high Boric Acid to
Lithium Ratio
Resource (M+I+I) Mt 113 135 154 materially lifts
Grade – Lithium Carbonate % Li2CO3 4.6% 0.9%
Grade - Boric Acid % H3B03 48.0% 27.3% 8.0%
Boric Acid/LiCarb ratio : na 5.9 8.9
Source: Company Filings, Ords Estimates

ioneer Ltd Ord Minnett Research

Risks & Catalysts

As a late stage greenfield project development, the risks for INR span several
categories including: metallurgy verification, permitting and offtake. We see the key
risk as financing the US$600m project, which we believe can be done via a mix of
equity, debt and equipment finance. Our valuation is most sensitive to our commodity
price assumptions as well as ramp up timing, head grades and metallurgical recovery.
The next key de risking event is the completion of the DFS in 1Q2020 followed by
offtake MOU’s/contracts as well as a potential minority stake sell down to a strategic

Key Risks
RR is a late stage greenfield project which faces a vast range of risks over a number
of years before generating shareholders returns. Rather than provide an exhaustive
list, we’ve highlighted what we see as the critical path items to overcome over the
next 1-2 years.

▪ Metallurgy Verification: the process flow sheet needs to be tested and

validated at lab scale. To date RR has undergone extensive test work
confirming the flow sheet and achieved the majority of the key processing
milestones. Most recently, it has produced 3 commercial product samples
which have all been sent to potential customers (see appendix C).
▪ Project Financing: RR has a large US$600m (A$890m) capex hurdle to fund
which appears daunting relative INR’s market capitalisation of A$260m. Key
project funding concerns also include:
- Tough Lithium Market: with the current Lithium price pressure
and oversupply concerns persisting until project start up (FY23),
we are cautious of the equity and debt market reception for a
greenfield lithium development.
- No Boron futures: to our knowledge there is no Boron futures
market, potentially warding off debt facilities unable to hedge
commodity price risk.
▪ Permitting/Regulatory Approval: Securing relevant permits for production
from the various regulatory authorities could take 12-18months and any delay
could impact our cash flow forecasts. Although we note the 2018 Frazer
institute survey (here), Nevada ranks as the #1 jurisdiction for mining &
exploration investment across a range of factors including, policy perception,
low onerous regulations, low taxation levels, the quality of infrastructure.
▪ Offtake: commercial contracts to be signed with customers for future
production sales, necessary for Debt funding.

Valuation Sensitivity
Our valuation is highly sensitive to certain operational assumptions as well as our
commodity price outlook. Of highest influence is:

▪ Head grade & recovery rates: ±1% change in either factor moves our NPV
by ~3%.
▪ Commodity Price forecast: our valuation is highly sensitive to the long term
Lithium Carbonate and Boric Acid price. We roughly estimate a ±1% change
moves our NPV by ~2%.
▪ Operational: Our valuation is also sensitive toward our project completion and
ramp up assumptions. A 12 month delay adjust our NPV by -12% or A$0.07/sh.

ioneer Ltd Ord Minnett Research

Figure 11: RR Project Valuation Sensitivity

Sensitivity ±1% % Change
Head Grade (10%B/1%Li) 3.2
Recovery (83%) 3.2
Opex 2.0
Lithium ($8k/t) 1.9
Boric Acid ($700/t) 1.7
AUD (0.68) 0.8
Source: Ords Estimates

Capex Hurdle
The PFS pre-production capex for the project is ~US$600m including a 12%
contingency. We note that $113m or ~27% of the direct capex cost relates to the
construction of the 3,500tpd sulphuric acid plant, which we believe can be funded via
equipment finance at commercial rate of ~6%pa.

We note that from Year 3 there are a number of capital projects requiring
~US$130m including power generator, mining fleet and a Battery Grade Lithium
Circuit. The largest expense is the new mining fleet in year 4 for ~US$50m, which
we assume will also be funded via equipment finance.

How to fund: Mixture equity, debt and finance

We believe INR can fund the US$600m from a mixture of sources, but we envisage
selling a minority stake providing the bulk with a remaining mixture of equity, debt,
equipment finance (Fleet, Acid Plant). We note that the project can readily handle
debt, but in our view conventional lending may be constrained (see above):
▪ Project sell down: INR has previously indicated a potential willingness to sell
down a minority stake in the asset to a strategic partner. As per the scenario
analysis in the table below, by selling between 10-30% of the project could
broadly offset US$110-340m (20-60%) of the capital cost.

Figure 12: Project Sell Down Scenario Analysis

Project Stake % 10% 20% 30%
RR Equity Value US$m 54 108 162
Capex Reduction US$m 60 120 180
Total Cost Offset US$m 114 228 342
% of Project Capex % 19% 38% 57%
Source: Ords Estimates

▪ Debt Facility of US$250-300m

▪ Equipment finance US$114m for the Acid Plant
▪ Capital Raising 2x for US$50m each in FY20 and FY22

Strategic Partner Sale - alternative source idea

In relation to selling a stake in the project to a strategic partner, we note that in
September 2019 Apple announced (here) it had awarded Corning Inc (GLW US –
Not Rated) US$250m from its Advanced Manufacturing Fund to upgrade US supply
chain. Since 2007, Corning has supplied Apple its ‘Gorilla glass’ for its iPhone and
iPad from Corning’s Harrodsburg, Kentucky, plant. We note the Boric Acid is a key
ingredient for glass manufacturing. We ponder if RR could be a supplier of Corning
under such an arrangement.

Next Catalysts
The next de-risking event is the release of the Definitive Feasibility Study (‘DFS’) due
for 1Q 2020. As per the recent October 2019 update (here) which saw a 3-6 month
delay the majority of key milestones have been achieved including:

ioneer Ltd Ord Minnett Research

▪ Pilot Plant produced test samples of Boric Acid and Lithium which were sent
to over 30 potential customers as part of multiple off-take negotiations
▪ 20 Potential customers and financers have toured the pilot plant.
▪ Project flow sheet undergoing further optimisation.
The company expects to notify the market of developments before reporting the
overall DFS results in 1Q 2020 which we believe could include and or be followed by:

▪ Mine plan to be based on the June 2019 Mineral Resource with Improved
Boron Grades (Ords estimates 71mt at 9.8% Boric Acid and 0.96% Lithium
▪ Announcement of customer MOU/offtake contracts and supply agreements.
▪ Announcement of project stake sell down to a strategic partner.

ioneer Ltd Ord Minnett Research

Appendix A: Company Summary

From INR Website and PFS.

Company History
Global Geoscience listed on the ASX in 2007 and one of the founders was current
INR Managing Director Bernard Rowe. The focus of Global Geoscience was to apply
geological science and theory towards making a major greenfield mineral discovery.

The Company's strong reputation led to prospectors bringing a little-known lithium-

boron project in southern Nevada to Mr Rowe in early 2016. Since securing
ownership of RR Lithium-Boron Project and fully committing the company to its
development, the name Global Geoscience was changed In November 2018, to
ioneer Ltd.

Project History
From the 1850’s through the 1890’s, boron was extracted from several small mines
in the district. Small-scale historical mining for boron took place in the South Basin
with an adit and shaft still present to this day.

In 1966, Albemarle’s Silver Peak Mine began extracting lithium from brines in Clayton
Valley. Located approximately 25km east of RR, Silver Peak is currently the only
producing lithium mine in the USA.

Two campaigns of modern mineral exploration are known to have been undertaken
within INR’s RR claims:

▪ 1980's - US Borax (subsidiary of Rio Tinto Group) explored primarily for boron
over both the South and North Basins. At the time, Rio acknowledged that RR
was likely the second largest Boron deposit in the US after its existing mine.
However, Rio relinquished the project due to ore not being soluble in water,
nor was the lithium of interest.
▪ 2010 to 2011 - American Lithium Minerals Inc and Japan Oil, Gas and Metals
National Corporation (“JOGMEC”) explored for lithium in the South Basin.
An option over RR was acquired by INR in June 2016 and the purchase of a 100%
interest in the project was completed in July 2017.

▪ 2007 - Global Geoscience listed on the ASX
▪ Jun 2016 –Global secures 12 month option to acquire RR (here)
▪ Oct 2016 – RR Maiden Resource, 393mt @ 0.9% Li, 2.9% Boric Acid (here)
▪ May 2017 – exercises option to acquire 100% of RR project (here)
▪ Oct 2018 - PFS released (here)
▪ Nov 2018 - “Global Geoscience” named changed to “ioneer Ltd”
▪ DFS Due 1Q 2020

RR is located on the western slope of the Silver Peak of Esmeralda County, near the
town of Dyer, Nevada, United States. Project is at an altitude of 1,800meters in a
semi-arid desert with annual rainfall averaging 10mm. Other points of note:

▪ 25km west of Albemarle’s Silver Peak lithium mine (the only lithium mine in the
▪ 530km North of Los Angeles
▪ 330km southeast of Tesla’s Gigafactory in Reno, Nevada
▪ 330km north of Rio’s Boron mine in California
▪ Esmeralda County is the most sparsely populated county in Nevada.

ioneer Ltd Ord Minnett Research

Figure 13: Regional Location Map

Source: Company PFS, Website

The RR Lithium-Boron Project covers two separate lithium-boron deposits (North
Basin and South Basin) located 4km apart. The Mineral Resource area extends over
a north-south strike length of 2,450m has a maximum width of 1,250m and includes
the 420m vertical interval from 1,920mRL to 1,500 mRL

In the South Basin, the lithium-boron mineralisation occurs in flat lying sedimentary
rocks as two or more stacked layers. The sedimentary rocks are up to 300m thick
and the mineralised layers within are 20-70m thick. Separate layers host lithium-
boron (Searlesite) mineralisation and lithium-only (clay-rich) mineralisation.

The Silver Peak Range hosts a metamorphic core complex consisting of upper
Precambrian phyllite, schist and marbles, which are intensely folded. The second
major geological feature of the Silver Peak Range is a Tertiary volcanic complex of
late Miocene age known as the Silver Peak Caldera, which is represented in this area
as the Coyote Hole Group.

The PFS Resource in October 2018 (here) defined a 475m resource at 0.9% lithium
carbonate and 2.3% Boric Acid. This includes bboth the lithium-boron and lithium only
clay mineralisation. The Maiden Reserve from December 2018 (here) defined a
15.8mt at 1% lithium carbonate and 7% Boric Acid.

At the latest Resource update in June 2019 (here), RR has defined a 154mt JORC
Resource grading at 0.9% Lithium and 8% Boric Acid focused on the lithium boron
mineralisation. We note the update states that the resource “remains open and has
significant potential to expand with further drilling of the South Basin”. We expect the
high grade upper zone of the resource defined at Measured and Indicated for 71.5mt
at 1% Li and 9.9% Boric Acid is mined in the initial starter pit/quarry at a low strip ratio
of 5.8:1 before reverting to 7:1 over the remaining LOM.

ioneer Ltd Ord Minnett Research

Figure 14: RR Basin Overview Figure 15: South Basin Outcrop

Source: Company PFS with Ords Edits, Source: Authors Photos

ioneer Ltd Ord Minnett Research

Board & Management Bio’s

James Calaway: Non-Executive Chairman
Mr. Calaway is a respected business and civic leader residing in Houston, Texas,
with considerable experience and success in building junior companies into
successful commercial enterprises. He has played major roles in the development of
both public and private companies engaged in lithium operations, oil and gas
exploration and production, enterprise software and solar farm development.

Until his retirement in July 2016, Mr. Calaway served for eight years as non-executive
Chairman of the Board of Orocobre Ltd, (ASX:ORE; TSX:ORL), helping lead the
company from its earliest development to becoming a significant producer of lithium
carbonate. With Orocobre being the only other lithium company with a significant
exposure to boron, his Orocobre experience ideally suits him to help lead ioneer to
become a leader in the lithium and borates businesses.
Bernard Rowe, Managing Director
Bernard Rowe is a geologist, manager and company director with more than 25
years’ international experience in mineral exploration and mine development. His
diverse mineral industry experience includes gold, copper, zinc, diamond, lithium and
boron exploration in Australia, Europe, Africa, North America and South America.

A founding shareholder of ioneer, Bernard has been Managing Director since the
Company listed on the ASX in 2007 with the objective of making a major greenfield
mineral discovery.
Alan Davies, Non-Executive Director
Alan Davies is a well-known natural resources and industrial executive with a 20-year
career with Rio Tinto culminating in being CEO responsible for Energy and Industrial
Minerals, that includes the industry leading borax division and the Jadar
lithium/borates development in Serbia. Prior to that position, Alan was CEO of Rio
Tinto’s Diamonds and Minerals Product Group that included the borax, diamonds,
iron and titanium, uranium and salt divisions.

From 2012 until 2016, Alan served as a member of Rio Tinto’s Executive Committee.
Alan has led and run mining operations and development projects across the globe,
including USA, Canada, South America, India, Africa, China, Europe and Australia,
and across commodities, including in iron ore and energy, and a full suite of industrial
Patrick J. D. Elliott, Non-Executive Director
Patrick Elliott is a company director specialising in the resources sector with over 40
years’ experience in investment and corporate management.

Patrick’s early career was at Consolidated Gold Fields Australia Limited and covered
investment analysis and minerals marketing. In 1979 he went into investment
banking and became Head of Corporate Finance for Morgan Grenfell Australia
Limited in 1982.

John Hofmeister, Non-Executive Director

John Hofmeister brings to ioneer many years of executive experience at General
Electric, Northern Telecom, AlliedSignal/Honeywell International and Royal Dutch
Shell, where he retired as Shell Oil President in 2008. Shell Oil Company is the US-
based wholly owned subsidiary of Royal Dutch Shell.

Since 2008 he has served on the boards of Lufkin Industries, Hunting, plc., Applus
Services, Inc., and Chairman of Erin Energy Corporation. John has a Bachelor’s and
Master’s Degrees from Kansas State University. John has also served as the
Chairman of the National Urban League in the US and was formerly Chairman of the
Greater Houston Partnership

ioneer Ltd Ord Minnett Research

Ian Bucknell, Chief Financial Officer

Ian has more than 20 years of international resource experience including being CFO
of AWE Limited and Drillsearch Energy Limited. During this time, he has worked in
several high-growth organisations and financed projects from discovery to

Matt Weaver, VP - Engineering &Operations

Matt manages all engineering and operational aspects of the RR Project. He has
more than 30 years‘ international mining experience working on both small and large-
scale development projects at BHP, Rio Tinto and Newmont, as well as for several
junior mining companies.

Ken Coon VP - Human Resources

Ken has more than 30 years of human resources experience holding international
and regional leadership roles with Royal Dutch Shell’s downstream refining and
chemicals organisation and Entergy, a US Gulf Coast utility company.

Yoshio Nagai, VP - Sales & Marketing

Yoshio has more than 20 years chemical and mining industry sales and marketing
experience, most recently as Sales Vice President at the Rio Tinto Group
accountable for borates, salt and talc products in Asia and the USA. He is a highly
experienced senior sales and marketing executive with a strong focus on customer

ioneer Ltd Ord Minnett Research

Appendix B: Commodity Price Forecast

Our lithium outlook is broadly consistent with consensus as we expect annual market
supply growth of 14% over the next 5 years to 850kt in 2024 despite the recent supply
discipline. We expect supply will significantly outpace demand over the same period
which we expect to grow at 12%pa to 720kt in FY24. We expect the oversupply to
peak in 2023 at ~200kt LCE, which coincides with the key demand inflection point.

We anticipate prices to continue to slide in line with rising surplus over the next 3
years, and we expect price to fall from spot (October 2019 US$7,300/t) to
~US$5,800/t by 2023. Over the long term (2025), we expect the swing producers to
be domestic China hard rock at ~ $8,000/t and the marginal producers to remain the
smaller scale LATAM brine operations at ~$7000-8000/t. We set our long term price
at $8,000/t for Industrial Grade carbonate and Battery Grade for a $1,400/t premium.
Figure 16: Lithium Cost Curve 2025^
9 US$k/tonne
No Boron Credits = $8k/t
Li Unit Cost Sensitivity to Boron Credit
8 Boron Price US$/t Li = 0
800 700 600 400 888
US$k/t LCE 0.8 1.7 2.7 4.5 0

​ Boron @ 630$/t = $2k/t

1 ​
0​ 100 200 300 400 500 600 700 800 900 1,000
Source: Ord Minnett Limited estimates

Figure 17: Ords Lithium Market Balance & Price Forecast

250 Kt LCE 20
207 18

150 130

100 88 9.4 10

56 8.0 8
22 6
1 4
Surplus/(deficit) (LHS)
-9 LiCarb Industrial Grade (99%) RHS 2
LiCarb Battery Grade (99.5%) RHS
-50 0
17A 18A 19F 20F 21F 22F 23F 24F LT
Source: Ords Estimates

Figure 18: Lithium Market Balance & Price Forecast

LCE Market Balance 17A 18A 19F 20F 21F 22F 23F 24F LT
Supply kt 236 294 391 496 591 751 825 850
Demand kt 244 293 369 440 502 556 618 720
Surplus/(deficit) kt -9 1 22 56 88 196 207 130
Ords Price Actuals/Forecast
Carbonate Industrial Grade US$k/t 15.5 13.3 7.3 6.5 5.9 6.0 7.5 8.0 8.0
Carbonate Battery Grade US$k/t 17.5 14.9 8.7 7.9 7.3 7.4 8.9 9.4 9.4
Source: Ord Minnett Limited estimates,

ioneer Ltd Ord Minnett Research

Boron – Boric Acid Market

See accompanying Boron 101 Report.

Figure 19: Ords Boron Market Balance & Price Forecast

17A 18A 19F 20F 21F 22F 23F 24F
Supply @85% utilisation ktpa 1156 1156 1156 1156 1156 1156 1301 1301
Demand ktpa 1055 1108 1158 1210 1264 1321 1381 1443
Utilisation rate % 78% 81% 85% 89% 93% 97% 90% 94%
Surplus / (deficit) at 85% utilisation ktpa 101 48 -2 -54 -108 -165 -80 -142
Surplus / (deficit) at 100% utilisation ktpa 305 252 202 150 96 39 149 87
Price Forecast US$/t 703 700 715 700 710 720 700 720
Source: Ords Estimates
Figure 20: China Domestic Boric Acid & Sulphuric Acid Price 2002-2019
1500 US$/t US$/t 250
Boric Acid (LHS) Sulfuric Acid (RHS)
2012 high of $1400
1300 200
High correlation to
1200 Sulphuric Acid (key input)
1100 150
1000 17yr average $740/t

900 100
700 50
2002 low $550/t Spot $636/t
500 0
2002 2004 2006 2008 2010 2012 2014 2016 2018
Source: China Petroleum and Chemical Industry Federation via CEIC

Figure 21: Boric Acid Cost Curve -2018, Quality and Freight adjusted Asia
US$/t Boron Unit Cost Sensitivity to Lithium Credit RR - No Li
Lithium Price US$k/t B=0
9.0 8.0 7.0 6.0 8.95 China 2
US$/t (5) 90 185 280 0 Incentive Price $750-820/t
China 1
700 ORE
Eti Quiborax
600 Bor



200 RR - w Li

100 ​

0 ​
0​ 200 400 600 800 1,000 Kt
Source: Ords Estimates, Maia Research, company filings, Trade Map, World Freight Rates, International
Trade Centre

ioneer Ltd Ord Minnett Research

Appendix C: Processing Flow Sheet

RR has undergone extensive metallurgical test work to validate the process flow
sheet for both the Lithium and Boron products:

▪ Industrial grade lithium carbonate (here).

▪ Boric acid: produced prior to the PFS in Aug 2018 (here) and confirmed by the
pilot plant again in July 2019 (here).
▪ Battery Grade Lithium Hydroxide was created from Industrial Grade carbonate
in Jun 2019 (here).
To minimise start-up risk, the plant will produce technical-grade lithium carbonate for
the first three years and then produce battery-grade lithium carbonate. Ord’s
assumes that 50% of the product will be upgraded to Battery grade after a 3 year
ramp up. The Key processing stages are as follows:
1. Crushing: The ore will be crushed to 25 mm using two-stage mineral sizers
and a tertiary cone crusher. The crushed ore will be loaded via conveyor
into a series of seven large concrete or steel vats (32.5 m wide x 32.5 m
long and 7.4 m high).
2. Vat Leaching: As the ore is being loaded, the vats will be flooded with an
acid-water mix. After four days in the vat, the lithium and boron will be
leached from the rock into the acid solution (pregnant leach solution “PLS”)
which will then be piped to the boric acid plant.
3. Cooling: the PLS is cooled with approximately 50% of the boric acid
recovered in this step.
4. Evaporation / Crystallisation: Evaporation and concentration of the PLS
results in the crystallisation of additional boric acid together with mixed
(calcium, magnesium and sodium) sulphate salts. The boric acid is
recovered from the salts by simple flotation (boric acid is hydrophobic).
5. Removal of impurities: Lime is added to the concentrated PLS and
impurities including aluminium, iron, boron, fluorine and magnesium are
precipitated and removed.
6. Softening: to further reduce impurities, sodium carbonate and caustic soda
are added to the PLS to precipitate calcium carbonate and magnesium
7. Ion Exchange: further removal of impurities through ion exchange.
8. Lithium Precipitation: The purified brine will then undergo further
evaporation to concentrate the lithium to the point that it can be precipitated
through the addition of Sodium Carbonate to precipitate a Technical-grade
lithium carbonate (99%).
Figure 22: RR Flowsheet

Source: Company

ioneer Ltd Ord Minnett Research

ioneer Ltd Speculative Buy

PROFIT & LOSS (A$m) 2018A 2019A 2020E 2021E 2022E DIVISIONS 2018A 2019A 2020E 2021E 2022E
Revenue - - - - -
Operating EBITDA (3.5) (5.4) (3.0) (3.0) (3.0)
KEY METRICS (%) 2018A 2019A 2020E 2021E 2022E
EBIT (3.5) (5.4) (3.0) (3.0) (3.0)
EBITDA growth - - - - -
Net interest 1.0 4.4 0.5 (12.6) (36.9)
EBIT growth - - - - -
Net tax (expense) / benefit - - - 3.3 8.4
Significant items/Adj. - - - - -
Associate NPAT (2.5) (0.9) (2.5) (12.4) (31.5) VALUATION RATIOS (x) 2018A 2019A 2020E 2021E 2022E
Normalised NPAT (2.5) (0.9) (2.5) (12.4) (31.5) Reported P/E - - - - -
Reported NPAT (2.5) (0.9) (2.5) (12.4) (31.5) Price To Free Cash Flow - - - - -
Normalised dil. EPS (cps) (17.0) (6.4) (17.0) (65.1) (165.9) EV / EBIT - - - - -
Reported EPS (cps) (16.3) (6.2) (16.5) (63.5) (161.7)

LEVERAGE 2018A 2019A 2020E 2021E 2022E

Effective tax rate (%) 21.0 21.0 21.0 21.0 21.0
ND / (ND + Equity) (%) (597.7) (103.3) (78.2) 44.6 76.3
DPS (cps) - - - - -
Net Debt / EBITDA (%) 2,301.1 904.9 2,384.1 (4,047.5) (20,263.5)
DPS (cps) - - - - -
EBIT Interest Cover (x) 3.5 1.2 6.2 - -
Dividend yield (%) - - - - -
EBITDA Interest Cover (x) 3.5 1.2 6.2 - -
Payout ratio (%) - - - - -
Diluted # of shares (m) 1,529.1 1,523.8 1,523.8 1,946.8 1,946.8
CASH FLOW (A$m) 2018A 2019A 2020E 2021E 2022E Board/Management 118.0 8.0%
Craig Mathieson 64.2 4.5%
EBITDA incl. adjustments (3.5) (5.4) (3.0) (3.0) (3.0)
Change in working capital - - - - -
Net Interest (paid)/received 1.0 4.4 0.5 (12.6) (36.9) VALUATION
Income tax paid - - - - - Cost of Equity (%) 11.2
Other operating items 0.7 (3.9) - 0.5 0.5 Cost of debt (after tax) (%) 2.5
Operating Cash Flow (1.8) (4.9) (2.5) (15.1) (39.4) WACC (%) 11.2
Other investing items (7.0) (30.4) (44.4) (269.6) (516.9)
Investing Cash Flow (7.0) (30.4) (44.4) (269.6) (516.9) Forecast cash flow ($m) 684.8
Other financing items 82.0 0.4 69.8 306.1 517.4 Equity NPV ($m) -
Financing Cash Flow 82.0 0.4 69.8 306.1 517.4 Equity NPV Per Share ($) -
FX adjustment - - - - -
Net Inc/(Dec) in Cash 73.2 (34.9) 22.9 21.3 (38.9)
Target Price Method NPV
Target Price ($) 0.45
BALANCE SHEET (A$m) 2018A 2019A 2020E 2021E 2022E
Valuation disc. / (prem.) to share price (%) 164.3
Cash 80.6 48.6 71.5 92.9 54.0
Receivables 0.1 - - - -
Inventory - - - - -
PP & E 14.9 49.4 93.7 363.4 880.3
Other non-current assets - - - - -
Total Assets 95.6 98.3 165.3 456.2 934.3
Short term debt - - - 42.9 132.4
Payables 1.4 2.7 - - -
Long term debt - - - 171.4 529.5
Other non-current liabilities (0.1) (0.2) 2.2 91.2 83.3
Total Liabilities 1.4 2.7 2.3 305.7 745.4
Total Equity 94.1 95.7 162.9 150.6 188.9
Net debt (cash) (80.6) (48.6) (71.5) 121.4 607.9

ioneer Ltd Ord Minnett Research

Institutional Research
Nicholas McGarrigle Head of Institutional Research +61 2 8216 6345

Dylan Kelly Senior Research Analyst +61 2 8216 6417

Jules Cooper Senior Research Analyst +61 3 9608 4117

John O'Shea Senior Research Analyst +61 3 9608 4146

Phillip Chippindale Senior Research Analyst +61 2 8216 6346

William MacDiarmid Research Analyst +61 2 8216 6514

Jason Korchinski Research Associate +61 2 8216 6348

Joshua Goodwill Research Associate +61 3 9608 4121

Institutional Sales (Australia)

Nick Burmester Head of Institutional Equities +61 2 8216 6363

Chris McDermott Institutional Equities Sales +61 2 8216 6335

Frida Bohlenius Institutional Equities Sales +61 2 8216 6365

Jim Bromley Institutional Equities Sales +61 2 8216 6343

Matt White Institutional Equities Sales +61 3 9608 4133

Richard Wolff Institutional Equities Sales +61 2 8216 6429

Stephen Jolly Institutional Equities Sales +61 2 8216 6424

Zac Whitehead Institutional Equities Sales Support +61 2 8216 6350

Brendan Sweeney Operator +61 2 8216 6781

Institutional Sales (Hong Kong)

+852 2912 8988
Timothy Last Institutional Equities Sales
+61 8 8203 2526
Chris Moore Institutional Equities Sales +61 2 8216 6362

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Fax: +852 2813 7212

ioneer Ltd Ord Minnett Research

Guide to Ord Minnett Recommendations

SPECULATIVE BUY We expect the stock’s total return (nominal yield plus capital appreciation) to exceed 20% over 12 months.
The investment may have a strong capital appreciation but also has high degree of risk and there is a
significant risk of capital loss.
BUY The stock’s total return (nominal dividend yield plus capital appreciation) is expected to exceed 15% over the
next 12 months.
ACCUMULATE We expect a total return of between 5% and 15%. Investors should consider adding to holdings or taking a
position in the stock on share price weakness.
HOLD We expect the stock to return between 0% and 5%, and believe the stock is fairly priced.
LIGHTEN We expect the stock’s return to be between 0% and negative 15%. Investors should consider decreasing their
SELL We expect the total return to lose 15% or more.
RISK ASSESSMENT Classified as Lower, Medium or Higher, the risk assessment denotes the relative assessment of an individual
stock’s risk based on an appraisal of its disclosed financial information, historic volatility of its share price,
nature of its operations and other relevant quantitative and qualitative criteria. Risk is assessed by
comparison with other Australian stocks, not across other asset classes such as Cash or Fixed Interest.

Disclosure: Ord Minnett is the trading brand of Ord Minnett Limited ABN 86 002 733 048, holder of AFS Licence Number 237121, and an ASX Market Participant.
Ord Minnett Limited and/or its associated entities, directors and/or its employees may have a material interest in, and may earn brokerage from, any securities
referred to in this document, or may provide services to the company referred to in this report. This document is not available for distribution outside Australia, New
Zealand and Hong Kong and may not be passed on to any third party or person without the prior written consent of Ord Minnett Limited. Further, Ord Minnett and/or
its affiliated companies may have acted as manager or co-manager of a public offering of any such securities in the past three years. Ord Minnett and/or its affiliated
companies may provide or may have provided corporate finance to the companies referred to in the report.

Ord Minnett and associated persons (including persons from whom information in this report is sourced) may do business or seek to do business with companies
covered in its research reports. As a result, investors should be aware that the firm or other such persons may have a conflict of interest that could affect the
objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

This document is current as at the date of the issue but may be superseded by future publications. You can confirm the currency of this document by checking Ord
Minnett’s internet site.

Disclaimer: Ord Minnett Limited believes that the information contained in this document has been obtained from sources that are accurate, but has not checked or
verified this information. Except to the extent that liability cannot be excluded, Ord Minnett Limited and its associated entities accept no liability for any loss or
damage caused by any error in, or omission from, this document. This document is intended to provide general financial product advice only, and has been prepared
without taking account of your objectives, financial situation or needs, and therefore before acting on advice contained in this document, you should consider its
appropriateness having regard to your objectives, financial situation and needs. If any advice in this document relates to the acquisition or possible acquisition of a
particular financial product, you should obtain a copy of and consider the Product Disclosure Statement prospectus or other disclosure material for that product
before making any decision. Investments can go up and down. Past performance is not necessarily indicative of future performance.

Analyst Certification: The analyst certifies that: (1) all of the views expressed in this research accurately reflect their personal views about any and all of the subject
securities or issuers; (2) no part of their compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed herein.

Ord Minnett Hong Kong: This document is issued in Hong Kong by Ord Minnett Hong Kong Limited, CR Number 1792608, which is licensed by the Securities and
Futures Commission (CE number BAI183) for Dealing in Securities (Type 1 Regulated Activity) and Advising on Securities (Type 4 Regulated Activity) in Hong Kong.
Ord Minnett Hong Kong Limited believes that the information contained in this document has been obtained from sources that are accurate, but has not checked or
verified this information. Except to the extent that liability cannot be excluded, Ord Minnett Hong Kong Limited and its associated entities accept no liability for any
loss or damage caused by any error in, or omission from, this document. This document is directed at Professional Investors (as defined under the Securities and
Futures Ordinance of Hong Kong) and is not intended for, and should not be used by, persons who are not Professional Investors. This document is provided for
information purposes only and does not constitute an offer to sell (or solicitation of an offer to purchase) the securities mentioned or to participate in any particular
trading strategy. The investments described have not been, and will not be, authorized by the Hong Kong Securities and Futures Commission.

For summary information about the qualifications and experience of the Ord Minnett Limited research service, please visit

For information regarding Ord Minnett Research’s coverage criteria, methodology and spread of ratings, please visit

For information regarding any potential conflicts of interest and analyst holdings, please visit

The analyst has certified that they were not in receipt of inside information when preparing this report; whether or not it contains company recommendations. This
report has been authorised for distribution by Nicholas McGarrigle, Head of Institutional Research at Ord Minnett Limited.