Makuutu Stage 1 DFS Confirms Technical And Financial Viability For Sustainable, Long-Life Supply Of Magnet And Heavy Rare Earths, Maiden Ore Reserve Estimate

The Board of Ionic Rare Earths Limited (“IonicRE” or “The Company”) (ASX: IXR) is pleased to advise the results of the Definitive Feasibility Study (DFS or Study) for the Stage 1 development of the Makuutu Rare Earths Project (“Makuutu” or “the Project”) which has been conducted and signed off by a series of independent competent persons. Much of the hydrometallurgical flowsheet for the Project has been developed by expert competent persons specifically for Makuutu, being a large near surface ionic adsorption clay deposit. This bespoke Intellectual Property (IP) will remain a valuable asset in optimising financial returns from Makuutu as further activity, including a Demonstration Plant, progresses to unlock further value through providing scale up data to adopt more informed information on grade control, material handling and heap desorption conditions including heap stack height.

STAGE 1 KEY DEFINITIVE FEASIBILITY STUDY (DFS) HIGHLIGHTS

• The Mining Licence Application (MLA) focuses on the Stage 1 DFS and provides for a 35-Year mine life based on the Indicated Mineral Resource over Retention Licence 1693 (Application TN03834);
  
• Stage 1 DFS delivers an EBITDA of A$2.29 billion (US$1.60 billion1), Post Tax Free Cash Flow total ~ A$1.46 billion (US$1.02 billion), Net Present Value (NPV8) (Pre-tax) of A$580 million (US$406 million) and an Internal Rate of Return (IRR) of 32.7%;
  
• Stage 1 production of a value-added product, mixed rare earth carbonate (MREC) (including Scandium), via a modular heap desorption processing plant, amounts to a total Capital Expenditure (CAPEX) of US$120.8 million;
• Stage 1 plant capacity is 5.0 million tonne per annum (Mtpa) Run of Mine (ROM) throughput;
• Stage 1 TREO production of 40,090 tonnes (t) REO equivalent product, with 71% magnet plus heavy REO content;
• Stage 1 Rare Earth Oxide (REO) anticipated production capacity is ~ 1,300 tpa REO over first 10 years, averaging ~1,160 tpa over 35-years of production;
• Maiden Ore Reserve for the Makuutu Stage 1 over RL 1693 of 172.9 Mt at 848 ppm TREO, or 584 ppm TREO – CeO2, and 30 ppm Sc2O3;
• Uniquely positioned to be a long-term sustainable magnet and heavy REO producer, with first MREC production targeted for Q4 2024; and
• Further staged development and expansion options will consider the total mineral resource at Makuutu.

Strong Financial Metrics

• Stage 1 Pre‐tax NPV8 of ~US$406 million (~A$580 million);
  
• Stage 1 Post‐tax NPV8 of ~US$278 million (~A$397 million);
• Stage 1 Post-tax IRR of ~32.7%;
• Stage 1 Post-tax capital payback of ~3 years from first MREC production;
• Stage 1 Net Revenue totalling ~US$3.98 billion (~A$5.69 billion);
• Stage 1 Revenue forecast of ~US$92/kg REO equivalent produced (excluding Sc2O3), payable;
• Stage 1 EBITDA totalling ~US$1.60 billion (~A$2.29 billion); and
• Post Tax Free Cash Flow totalling ~ US$1.02 billion (~A$1.46 billion).

Physical Parameters

• Stage 1, over MLA TN03834, provides an initial 35-year Probable Ore Reserve Estimate of 172.9 Mt @ 848 ppm Total Rare Earths Oxide (TREO) for 146,654 of contained TREO;
• Stage 1 strip ratio of 0.57; and
• Scandium Oxide by-product credit (~511 t Sc2O3) is included as Base Case.

Capital and Operating Costs

• Pre-production CAPEX (including 10% contingency) of ~US$120.8 million, including mining fleet;
• All In Sustaining Cost (AISC) for the operation is ~US$12.40/t ROM feed;
• AISC for the operation is ~US$53/kg REO equivalent produced;
• AISC for the operation is ~US$46/kg REO equivalent produced (including Sc2O3 by-product credit); and
• Power for the Project is to be delivered from low-cost hydroelectric power accessible from 132 kV power transmission corridor running immediately through the Project tenements.

The Makuutu Stage 1 Study has been prepared to support the application for the granting of the Mining Licence over RL 1693, via Mining Licence Application (MLA) TN03834 which RRM initiated in September 2022, and as such covered only the central area of the greater Makuutu resource area. It is anticipated that following the DFS, the Mining Licence over RL 1693 will be granted in Q2 2023. A further staged development approach, including additional MLAs over the other five (5) tenements at Makuutu will progressively be considered which will cover the total Mineral Resource at Makuutu.

IonicRE’s Managing Director Mr Tim Harrison stated;

“The outcome of this study, which focuses solely on the central Makuutu zone, provides the required inputs for Rwenzori Rare Metals Limited to now finalise the Mining Licence Application for RL 1693. These Stage 1 results support what we think is a unique, geopolitically strategic asset to supply magnet and heavy rare earths into western supply chains. Evidence currently shows that countries are motivated to secure sustainable, traceable supplies of these critical raw materials to support their domestic manufacturing ambitions and to support both the energy transition, and increasingly, military and defence requirements to provide sovereign capability and global security.

“Furthermore, this Stage 1 study provides a path to production at Makuutu, which has the potential for significant growth into the future through the conversion of the other tenements at Makuutu towards additional MLAs over the coming decade. The intent is to significantly increase production from the Stage 1 initial focus at Makuutu, and expand into the forecast increase in demand that will far exceed supply for the most readily sought after rare earths, being Dysprosium and Terbium. These rare earths, are critical for the production of the magnets required to drive electric vehicles, offshore wind turbines and support a number of specialised defence applications.

“Makuutu is now advancing towards a Final Investment Decision with the capability to provide more heavy rare earths per annum from our initial Stage 1 Project than existing western light rare earth hard rock mines in production today.

“The next phase of work at Makuutu, is to build the Demonstration Plant to further drive value by proving the potential to achieve high desorption heap stack heights to improve capital efficiency with a view to further increasing production capacity, whilst optimising desorption conditions to explore improved extractions and minimising the dissolution of impurities, to further optimise economics.”

Makuutu Rare Earth Project – Stage 1 Overview

Rwenzori Rare Metals Limited (RRM), a Uganda registered private limited company, is investigating the development of the Makuutu Rare Earths Project located 120 kilometres (km) east of Kampala, Uganda, illustrated in Figure 1. RRM owns 100% of the Makuutu Rare Earths Project.

This DFS has been completed in conjunction with RRM’s major shareholder, Ionic Rare Earths Limited (IonicRE) (51% of RRM moving to 60% upon approval of the DFS as per RRM earn in agreement announced 5 July 2019). IonicRE has collaborated with the other shareholders of RRM plus independent consultants to complete this DFS.

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