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Ionic Rare Earths courts political interests eyeing Makuutu as strategic project

Ionic Rare Earths Ltd. has fielded interest from entities representing government interests around the world for the critical and heavy rare earths that could be produced from its Makuutu project in Uganda within two years.

SNL Image
Ionic Rare Earths CEO
Tim Harrison.
Source: Ionic Rare Earths

Tim Harrison, who was elevated to company CEO on June 26 after having served as Makuutu's project manager since January, revealed the global interest during an interview with S&P Global Market Intelligence. The company entered into an agreement in July 2019 to acquire up to a 60% interest in the project and changed its name to Ionic Rare Earths from Oro Verde in March.

Harrison said a number of groups in Europe, North America and Asia were attracted by the low estimate for capital expenditure and the high-margin rare earths targeted at Makuutu. About 25% of the product will be yttrium, a critical rare earth for defense applications. Rare earths are also used in electric vehicles and wind turbines and for 5G cellular technology.

The U.S. Department of Defense held talks with various companies in mid-2019 to secure minerals the U.S. government listed as critical for strategic economic and defense purposes. This included Mkango Resources Ltd., which is developing the Songwe Hill project in Malawi, and Rainbow Rare Earths Ltd., which operates the Gakara mine in Burundi.

Lynas Corp. Ltd. won a tender from the Defense Department in April for a phase-one contract for a planned separation facility for heavy rare earth in the U.S.

Makuutu's geology is similar to the ionic adsorption clay deposits in southern China, which are the cheapest and most readily accessible source of heavy rare earth oxides. Ionic is looking at less than US$50 million to build a plant to produce at least 2,000 tonnes of rare earth oxide equivalent annually, with over 45% heavy rare earths and greater than 50% critical rare earths.

The resource estimate for the project was recently upgraded to 78.6 million tonnes of ore grading 840 parts per million total rare earth oxides, or TREO, at a reduced cutoff grade of 300 ppm TREO-cerium oxide. Harrison said another upgrade is expected, given only a small part in the central exploration tenements has been tested.

Harrison said the strategic value of ionic clay is well known as it produces the bulk heavy and critical rare earths. He noted that China, which produces 95% of the world's rare earths, has been depleting its own ionic clay reserves.

SNL Image
The first drillhole at Ionic Rare Earths' Makuutu rare earths project.
Source: Ionic Rare Earths

Environmental footprint

While sources said China considers its ionic clay reserves a state secret, a 2012 Chinese white paper on the country's rare earth elements industry forecast that it would run out within 15 years without intervention after more than 50 years of "excessive mining."

The document reported that in Baotou, Inner Mongolia, where the BBC revealed a "horrifying, dystopian" environmental legacy from the industry in 2015, only a third of the original volume of rare earth resources were available in the main mining areas in 2012. This was because most of the southern ion-adsorption rare earth mines were in remote mountainous areas where illegal mining had "severely depleted" local resources.

Harrison said this will only accelerate supply chain risks and leave capital-intensive heavy and critical rare earths as the only choice for industry, which is why Makuutu is so highly sought after, particularly given its much higher environmental standards.

The Uganda project will also be free from the environmental issues that have plagued Lynas. The company is facing A$500 million in costs to increase production and build a cracking and leaching plant near its Mount Weld mine in Western Australia, which blocked the potential import of radioactive waste from Lynas' Gebeng plant in Malaysia.

"In ionic clays, we're not cracking any minerals or producing or releasing radionuclides in the process, so we don't end up with a legacy issue," Harrison said. Radionuclides are atoms with excess nuclear energy, making them unstable.

"Our residues are relatively benign as the trace amounts of uranium and thorium in our potential ore are very low, and that uranium and thorium stays with the residue, so we're not changing its chemical form," Harrison said. "The nature of the process is any residues we generate via the simple process is likely to be washed then returned back to the mining pits for rehabilitation."

Makuutu's scoping study is due in the fourth quarter, after which feasibility work will progress alongside an assessment of site-based demonstration plant field trials to further de-risk the project. This will incorporate producing a significant amount of low-cost rare earth product, which Harrison said will "crystallize the potential valuation of the business."

Ionic expects to be ready submit a mining lease application toward the latter half of 2022, though Harrison said Makuutu could be in production sooner given the simplicity of the process and the low capex, depending on the strategic investment partner. The company is also undertaking a placement and share purchase plan to raise up to A$3 million. The placement is scheduled to close in early July, and the share purchase plan will close July 22.

While Ionic has not decided whether it will refine to a high-purity independent rare earths product, Harrison said Makuutu's economics lend themselves to a mixed rare earth carbonate or oxide to be produced within Uganda, which will be "highly sought after by any downstream processor from around the world."