Lithium is an incredibly useful metal. It's used to manufacture aircraft, it's a common treatment for bipolar disorder, and it's the main component in the batteries powering electric vehicles.
As renewable energy and electric vehicles take off, so has the world's demand for lithium. Although there was a price drop before the onset of the Covid-19 pandemic (caused by significant investment in new mines), lithium prices are back up and once again demand is expected to overtake supply.
Most of the world's lithium supply comes from only two countries (Australia and Chile) and most demand comes from China's growing battery and electric vehicle industry, including Tesla's ever-expanding Giga Shanghai factory. This means lithium supply chains are long, expensive and unwieldy – the perfect target for disruption.
Enter ION Energy, Mongolia's first lithium brine explorer. The company (listed on Canada's TSX Venture Exchange) has a license to explore lithium reserves in Sukhbaatar aimag and aims to export high-quality lithium into the burgeoning battery metals Asian market, which would put Mongolia at the forefront of the electric transport revolution.
The ION story
According to CEO Ali Haji, the capabilities of lithium-ion batteries and the ever-increasing demand for electric vehicles around the world have recently put Mongolian deposits on the map.
"In the early 2000s, lithium batteries began to have a higher adoption rate," Haji explains. "At that time the Chinese, as well as other jurisdictions, were already in South America mining for potash, which is a fertilizer. With all those entities already there, the discovery was soon made that lithium was in those brines too. But at that point in time, Mongolia had yet to focus on lithium as a mining potential in-country."
That changed when Haji visited Mongolia in 2017 with chairman Matthew Wood and director Aneel Waraich.
"I saw a lot of value in Mongolia in 2017," Haji says. "We co-founded ION Energy in August that year on the back of our belief that lithium prices had bottomed out. It was an opportunity.
"Mongolia is a vast and underexplored nation."
ION started looking at data from the Ministry of Mining and Heavy Industry and found that 12 months prior, a group from the Mongolian University of Science and Technology had found lithium brine in Sukhbaatar aimag.
"That data set showed a max grade of 811 parts per million (ppm) lithium and 426 ppm average grade lithium across two holes 70 kilometers apart," Haji explains. "That prompted us to recognize the long-term potential for Mongolia to play a key global role, particularly in the Asian market, for the pending green revolution, and we visited the archives to explore this prospect further."
The team has come to understand that given recent geopolitical pressures, the continental supply chain of lithium has to expand to offset the region’s reliance on supply routes from South America and Australia.
"China is producing lithium in Qinghai province, but the brines there contain impurities that are deemed higher than commercially acceptable," Haji says. "It becomes expensive to extract and refine lithium for electric vehicle purposes."
The ION team also found more historical data on the presence of lithium underneath the Gobi Desert.
"We found that in the 1990s the Russians and Mongolians did some joint exercises in that region and found the brine aquifer, and as far back as the 1950s the Russian government did some drilling and pulled a saline aquifer from the same region," Haji says. "That was enough for us to bid for the license, which we were granted in 2019 for Baavhai Uul – our flagship license for 81,000 hectares."
The Mongolian advantage
The Baavhai Uul site in Sukhbaatar aimag is set amidst the flat grass-spotted expanse of the Gobi Desert. The company is now drilling holes in the license sites to gather data and prepare for the next stage of development.
"We're at an early stage of exploration and de-risking," Haji explains. "We’re currently drilling in excess of 20 holes, which will allow us to better understand what we have in the ground in order to get a better idea of the resource."
Critically, the site is just 24 kilometers from the Chinese border – the entrance to one of the largest battery markets in the world.
"China as a critical consumer of battery metals means that proximity gives us an extreme strategic advantage over producers in Australia and South America," Haji says.
A second geographic advantage is the Gobi itself, with high winds and sunshine that make evaporation extraction methods possible.
"We have good grades, low impurities, and massive land packages situated on arid land in the Gobi with 250 days of sunshine and high winds. Evaporation is a possibility for lithium extraction." Haji says.
Mongolia also brings geopolitical advantages for ION Energy. First, Chinese relations with Australia have dipped to a historic low and Beijing has blocked imports of Australian products, notably coal. Second, China is attempting to reduce its reliance on seaborne supply chains for strategically important items as tensions with the US heat up.
"Looking at the geopolitical situation we're in today, nations are looking to form continental supply routes for battery metals," Haji explains. "The world is moving towards less conventional sources of lithium to supply local markets and reduce geopolitical risk. The US is building a continental supply chain and under the previous administration, metals including lithium were touted as metals of strategic importance."
Haji argues that similar tailwinds globally will help drive Mongolian lithium exports.
"In Europe, $20 billion euros of a Covid-recovery fund is allocated towards electric vehicle incentivization and Gigafactory subsidies," Haji says. "We're also looking at the One Belt One Road initiative, noting that Mongolia lies between Beijing and the Northvolt factory in Norway. Mongolia is uniquely positioned, given its good relations with Russia, China and the western world.
"Finally, South Korea, Taiwan and India would also serve as consumers for the lithium that comes out of Ion Energy."
ION Energy's ambitions, however, don't end there. With a significant Mongolian presence on the company's board and staff, as well as plans to list on the Mongolian stock exchange, Haji says ION Energy would be able to provide the platform to allow for a wider manufacturing presence in Mongolia.
"Mongolia has lithium assets, Mongolia is building manufacturing facilities, the University of Science and Technology is well-versed in hydrogeology – a joint venture between the public and private sectors could put this manufacturing capability in Mongolia," Haji says - envisioning a greater role for the country in the global battery supply chain.
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