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The owner of a Nevada lithium mining project is confident of finding a new investor despite a slump in the price of the metal, as it eyes a role in the push to build a domestic critical minerals industry in the US.
Australia-based Ioneer is seeking a new partner to replace South Africa’s Sibanye-Stillwater, which pulled out of a deal to buy a 50 per cent stake in the Rhyolite Ridge project for just under $500mn.
The Nevada mine, which has received government approval and been granted a loan of almost $1bn, is part of the US’s efforts to break its dependence on China for critical minerals crucial to the energy transition.
But the lithium industry faces challenges after prices recently fell to their lowest level since 2021, while Ioneer expects the capital spending required for the project to roughly double from a previous forecast of $785mn. The project is also facing a legal challenge from environmental activists.
Ioneer managing director Bernard Rowe said he was “very confident that in the near term we’ll have that equity in place” and that the company wanted to sell about 40 per cent of the project to one or two investors.
Rowe told the Financial Times that Ioneer was looking for a higher valuation for the project than the $1.27bn estimate from 2020 because it was now fully permitted and the deposit was larger than forecast. Ioneer had also secured “very low cost debt” from the US government, he said.
Lithium is an important ingredient in rechargeable batteries, including those for electric vehicles.
Investors who are bullish on its prospects expect a long-term shortage of the metal to boost prices, even after a recent frenzy of investing in new projects led to supply exceeding demand.
Rhyolite Ridge aims to produce enough lithium for more than 370,000 electric vehicles per year, with production expected to begin around 2028. Ioneer also plans to build a processing facility alongside the mine, part of efforts to break China’s dominance in lithium processing.
About 80 per cent of the lithium carbonate produced in the project’s first phase will go to companies that have agreed in advance to buy the metal, including US carmaker Ford and Korea’s EcoPro Innovation, which makes battery materials, according to Ioneer.
Securing an equity partner and getting additional project funding will be crucial to the success of Ioneer’s project and was among the conditions of the $966mn US government loan the company announced in January.
Sibanye-Stillwater — which has reported two consecutive annual losses — abandoned the project in February, saying it did not meet its “investment hurdle rates at prudent pricing assumptions”.
Andy Leyland, managing director of battery supply chain consultancy SC Insights, said investments were being curtailed because of the “low-price environment”, while Bank of America analysts said in a note this month that lithium “needs more supply cuts.”
Longer term, however, analysts expected lithium prices to rebound, with data group Benchmark Mineral Intelligence forecasting a global supply gap of 1.4mn tonnes by 2040.
Federico Gay, a lithium analyst at Benchmark, said Rhyolite Ridge would be expensive to build, but would be competitive compared with other lithium mines once operational.
https://www.ft.com/content/e736b734-3d01-4229-ba7a-abe45cc4c204
