Ionic Unveils Positive Makuutu Rare Earths Project Scoping Study

Identifies Potential For Long Life Critical Rare Earth Supply

Ionic Rare Earths Limited (ASX: IXR) has announced positive outcomes from the Scoping Study completed on its 51% owned Makuutu Rare Earths Project, located 120 km east of Kampala, Uganda.

Makuutu is an ionic adsorption clay (IAC) deposit. IAC deposits contain rare earth elements (REE) ionically bonded to the clay rather than existing as primary minerals in the ore. IAC deposits are prevalent in southern China which have been the source of the world’s lowest cost critical and heavy REE production.

The strategic nature of these resources has been highlighted in recent years, with numerous deposits being exhausted and quotas also introduced to prevent over mining. Makuutu represents one of only a handful of such deposits outside of southern China. As such its strategic importance is becoming increasingly clear.

The Scoping Study outcomes demonstrate the potential for Makuutu to become a sustainable, long- life, relative low capital development cost supplying critical rare earth oxide (CREO1) and heavy rare earth oxide (HREO2) to global markets, generating strong financial returns while also delivering significant social and economic benefits for the local communities in Uganda.

The Study was completed by Ionic with input from a group of leading independent consultants.

The Base Case Scoping Study considers open pit mining over an initial 11-year mine life, with the IAC run of mine (ROM) feed to a modular heap leach plant where the REO is recovered from the IAC mineralisation via salt desorption to produce a mixed rare earth carbonate (MREC) product.

The Base Case assumes the first module will process 2.5Mtpa ROM and produce approximately 800 tpa rare earth oxide (REO) equivalent product. Additionally, the Base Case then assumes given the low- cost capital modular development approach, additional modules will be added in years 2, 4, 6 and 9 to increase the plant throughput up to 12.5Mtpa by year 10.

Study Highlights
Base Case – 11 Year mine life based on Indicated Mineral Resources

• The Base Case study delivers a Life of Mine (LOM) EBITDA of A$1.71 billion (US$1.28 billion), Post Tax Free Cash Flow totalling ~ A$1.02 billion (US$766 million), Net Present Value (“NPV8”) (post-tax) of A$428 million (US$321 million) and an IRR (post-tax) of 38%,
• Production of mixed rare earth carbonate via a modular heap leach salt desorption processing plant
• First module is 2.5 Mtpa, with additional modules added in years 2, 4, 6 and 9 increasing total ROM throughput to 12.5 Mtpa
• REO anticipated production capacity increases from ~ 800 tpa REO equivalent (Year 1) up to ~ 3800 tpa REO equivalent in year 11

Physical Parameters

• Initial 11-year Production Target of 84.5 Mt @ 810 ppm Total Rare Earths Oxide (TREO) for 68,400t of contained TREO
  • Potential to produce appreciable Scandium Oxide by-product credit (~740 t Sc2O3) over initial 11-year period
  • Uniquely Positioned to be a Long-Term Sustainable CREO / HREO Producer
  • First production is targeted for early 2024, based on current environmental approvals timeline
  • Makuutu Base Case to produce the magnet rare earths (Nd, Pr, Tb and Dy) to enable approximately 35 GW of direct drive gearless offshore wind turbine capacity

Capital Costs and Operating Costs

• Pre-production Capital Expenditure (“CAPEX”) (including contingency) of ~US$89 million for Module 1 including mining fleet
  • Module 2 expansion in Year 2 for ~US$40 million (including contingency) inclusive of mining, process plant plus infrastructure
  • Expansion from 2 to 5 Modules, CAPEX of ~US$172 million funded by project cashflow
  • Initial 11-year AISC cash costs of operations of ~US$12.60/t ROM feed
  • Initial 11-year AISC cash costs of operations of ~US$36.40/kg REO equivalent produced
  • Initial 11-year AISC cash costs of operations of ~US$23.70/kg REO equivalent produced (including Sc2O3 by-product credit)
  • Power for the Project to be delivered from low-cost hydroelectric power accessible from 132 kV power transmission corridor running immediately through project tenement

Financial Returns

• Post‐tax NPV8 of ~US$321 million (~A$428 million)
• Post-tax IRR of ~38%
• Post-tax capital payback of ~five years from first MREC production
• Net Revenue totalling ~US$2.52 billion (~A$3.63 billion)
• Initial 11-year revenue forecast of ~ US$73/kg REO equivalent produced (excluding Scandium) payable
• EBITDA totalling ~US$1.28 billion (~A$1.71 billion)
• Post Tax Free Cash Flow totalling ~ US$766 million (~A$1.02 billion)

Significant Upside Potential

• Base case utilises only 84.5 Mt of the company’s 315 Mt Mineral Resource

• Upside identified considering all Mineral Resource Estimate at Makuutu would deliver a significant extension to the Project’s LOM
• Ionic to shortly commence a drilling programme to convert further Inferred Resources to Indicted Resource status Strong Cash Position

• Strong cash position of over A$12 million on 31 March 2021 and A$1.5 million in-the-money options to drive ongoing drilling in parallel with project development work in 2021 and 2022

Managing Director, Tim Harrison, said the results reinforce not only the significant strategic value of an ionic adsorption clay deposit like Makuutu and the basket it can potentially produce, but the potential long-life free cash flow generating potential achieved with the modular, low capital intensity development plan and simple operation indicated in the Study.

“The completion of this Study with its positive project economics represents a critical milestone for the company,” Mr Harrison said.

“Combining the long life potential, with the low-cost modular capital development and high margin basket potential at Makuutu, confirms the Project as one of the best potential new sources of critical and heavy rare earths in the near term.

“We see this Project as technically and financially robust and eminently financeable, and the Company has received strong expressions of interest from strategic parties interested in accessing Makuutu’s unique basket composition that contains approximately 70-75% critical and heavy rare earths.

“We look forward to advancing this Project expeditiously towards production that will see Ionic transition from an exploration company to a producer.

“The style of the deposit should deliver a high margin asset, driven by the near-surface, efficient open pit mining and simple heap leach processing methods. The low capital requirements and simplicity is a clear attribute of the IAC mineralisation and further defines the highly sought after appeal of IAC deposits.

The impact of the by-product Sc2O3 is substantial, and potential exists in the future stages of the Project to look at generating a higher purity Sc2O3 product to enhance the overall Project economics further.”