READ THE FULL IONGF RESEARCH REPORT
Headquartered in Toronto, ION Energy Limited (OTCQB:IONGF) (TSXV:ION) is an early-stage junior exploration & development mining company, which is focused on prospective lithium brine properties in Mongolia. The targeted projects are situated in endorheic basins located in arid areas with high evaporation rates and low precipitation rates, which are highly conducive for the conventional method of lithium extraction via evaporation ponds. Also, the projects are situated in close proximity to China, the major global consumer of lithium minerals.
Currently, ION Energy controls over 100,000 hectares (over 247,000 acres) of prospective lithium properties through two exploration licenses granted by the Mineral Resource Authority of Mongolia (MRAM), namely the Baavhai Uul Lithium Brine Project (81,758 hectares) and the Urgakh Naran Lithium Brine Project (over 20,000 hectares).
Recent exploration programs have revealed management's modus operandi for the advancement of the company's lithium brine projects. After identifying prospective lithium salars in Mongolia, primarily through results from historical chemical sampling, management has acquired the exploration licenses for the associated endorheic basin. Thereafter, a series of developmental exploration programs are planned and completed, consisting of:
• CSAMT geophysical surveys to locate and map the brine aquifers,
• micro-seismic geophysical surveys to identify the structure (depth, thickness and width) of the brine aquifers and
• exploration drilling programs to ascertain the stratigraphy and average grade of the lithium brine
Financial
Financially, management's anticipated exploration and acquisition initiatives are funded for approximately the next two years, primarily through an upsized bought deal that closed in April 2021. ION Energy Limited also benefited from the business combination with Spirit Banner Capital Corp. in August 2020 (see Financial section below). The company does not have any long-term debt.
Baavhai Uul Lithium Brine Project
ION Energy holds an exploration license on the Baavhai Uul Lithium Brine Project, an 81,758-hectare (202,028-acre) prospective property with multiple lithium brine targets. The license was acquired from Golden Hill LLC in August 2020. This early stage exploration project has been explored by geochemical sampling (2016), geophysical surveys (2020) and an auger drilling program (2021). An NI 43-101-compliant mineral resource estimate has yet to be prepared for the property.
Located in Sükhbaatar Province, the Baavhai Uul Lithium Brine Project is approximately 800km southeast of Ulaanbaatar, the capital of Mongolia, and is only 24km north of China. The area has an arid climate and low precipitation with short hot summers and long, dry cold winters.
Furthermore, the property is situated in the Borgoin Gobione Basin, one of the regional endorheic basins of the hydrological Central Asian Internal Drainage Basin. An endorheic basin is a closed drainage basin which retains water and does not allow outflows into external bodies of water. Endorheic watersheds are conducive to the formation of saline lakes that that have high concentrations of minerals from the inflow erosion products through internal drainage systems and the subsequent concentration of minerals through the evaporation process.
Since acquiring the Baavhai Uul exploration license in 2019, management has focused on two target areas of the Baavhai Uul Property:
• Li-8, a 4.5 square km target area in the southeast portion of the property
• Li-11, a 5.5 square km target situated in the northwest portion
ION Energy has completed a CSAMT geophysical survey to locate brine aquifers, a micro-seismic geophysical survey to identify the structure of the brine aquifers and both diamond core and auger drilling programs. In December 2021, the company announced the discovery of the White Wolf Prospect, which delivered a high sample assay of 1,502ppm, which superseded the prior high grade of 860ppm Li obtained during the 2016 geochemical sampling program.
Expected Upcoming Milestone - Baavhai Uul Project
Management expects to perform hydrogeological sampling at Baavhai Uul in April 2022.
Urgakh Naran Lithium Brine Project
In February 2021, ION Energy acquired the Urgakh Naran exploration license at a cost of only US$333,300. Located in Dornogovi Province, the Urgakh Naran Lithium Brine Project is approximately 450km southeast of Ulaanbaatar and 151km WNW of the Baavhai Uul Project. Situated in the South Gobi Desert, the property is in close proximity to Delgerekh, which is 167km by road from Sainshand, the capital of Dornogovi Province. The Urgakh Naran area also has an arid climate and low precipitation with short hot summers and long, dry cold winters.
Expected Upcoming Milestone - Urgakh Naran Project
During the first half of 2022, management plans to commence its maiden exploration program at Urgakh Naran. The program is expected to entail near-surface drilling of 73 shallow auger holes at the Urgakh Naran salar, along with geochemical sampling of the salar's clays and evaporites. The program is expected to include hydrogeological sampling of any intersected brines.
Common Stock Chronicle
ION Energy's shares began trading on the TSXV on August 31, 2020 under the trading symbol ION, following a three-cornered amalgamation with Spirit Banner Capital Corporation on August 26, 2020. Almost five months later (on January 14, 2021), the shares of ION Energy began trading on the OTCQB under the symbol IONGF. ION Energy's shares are also listed on the Frankfurt Stock Exchange (FRA) under the ticker 5YB.
Recent News
On February 1, 2022, ION Energy announced that the company and Aranjin Resources Limited (TSXV:ARJN) have entered into a binding term sheet for an exploration joint venture (JV). Under the JV, both companies will grant the other reciprocal exploration rights within Mongolia, namely ION Energy will be granted a right to explore Aranjin's properties (specifically the Sharga, Bayan Under and Baruun Tal Projects) for lithium and Aranjin will be granted a right to explore ION's properties (specifically the Baavhai Uul and Urgakh Naran Projects) for base metals (primarily copper, but also lead, zinc, nickel, cobalt and associated metals).
ION Energy is the largest lithium exploration license holder in Mongolia, while Aranjin Resources is the largest copper exploration license holder in Mongolia. The synergistic joint venture represents a significant exploration endeavor for battery metals in Mongolia. The exploring Party will earn an 80% interest in any discoveries of its respective battery metal(s) on the other Party's properties, subject to existing royalties.
In addition, the fundamentals of the lithium market remain strong. The high level of investments in electric vehicles (EVs) by the major automobile manufacturers is driving the demand for lithium.
Over the last few years, the level of M&A activity in the lithium space has been elevated. Not only has the lithium mining industry consolidated through mergers and acquisition, but also corporate consumers of lithium have bought upstream assets in order to secure supply. The pool of quality, prospective lithium projects is dwindling. Thus far in 2022, Zijin Mining Group acquired Neo Lithium Corp. for approximately CAD$960 million in cash and plans to bring the Argentinian Tres Quebradas Salar Lithium Project into production by the end of 2023. Also, Lithium Americas completed the acquisition of Millennial Lithium for approximately CAD$491 million in stock in order to acquire the advanced-stage Pastos Grandes Project. Both deals were completed in late-January 2022.
Valuation
Based on comparative analysis of junior lithium companies, a mid-second quartile price-to-book (P/B) ratio of 6.2 indicates a share price target of $0.48 per share.
SUBSCRIBE TO ZACKS SMALL CAP RESEARCH to receive our articles and reports emailed directly to you each morning. Please visit our website for additional information on Zacks SCR.
DISCLOSURE: Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm, engaged by the issuer, for providing research coverage for a period of no less than one year. Research articles, as seen here, are part of the service Zacks SCR provides and Zacks SCR receives quarterly payments totaling a maximum fee of up to $40,000 annually for these services provided to or regarding the issuer. Full Disclaimer HERE.
