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Ionic Rare Earths (ASX:IXR) has had a strong couple of months. The company’s crowning achievement was obtaining approval for a large-scale mining license for the Makuutu heavy rare earth project in Uganda. It has also recorded some solid drilling results and has secured a major partnership that could see it play a role in the UK’s development of its own UK supply chain.
These achievements, as good as they may be, raise crucial questions about its future trajectory and its implications for potential investors.
All about Ionic Rare Earths and its Makuutu project
Situated approximately 40 kilometres from Jinja and 120 kilometres from Uganda’s capital, Kampala, the Makuutu project covers a vast area of nearly 300 square kilometres. This geological site possesses an abundance of heavy rare earth oxides (HREO), which can be extracted using straightforward mining and processing methods. The current mineral resource estimates 532 million tonnes, including 640 parts per million total rare earth oxides (TREO), which holds immense potential for Ionic Rare Earths.
Ionic Rare Earths holds a 51% interest in Rwenzori Rare Metals, the entity that successfully secured the mining licence. This partnership is allowing them to leverage local expertise and resources. Rare Earth Elements Africa (REEA) and Ugandan Partners also hold stakes which are adding to the collaborative efforts driving the project forward.
Over the last couple of months, the company has recorded some good drilling results. Triggering the company’s share price rise in early September were Phase 5 results which saw 43 out of 45 holes achieving intersections and top results including 3m at 1,337ppm (parts per million) TREO.
Government Support is another bonus
The project has received substantial backing from the Ugandan government. Barely hours after the first set of drilling results in early September, Ionic Rare Earths told shareholders the Ugandan government had approved and gazetted its updated Mining and Minerals Regulations 2023, an important precursor to the grant of a Mining License Application at its project.
A week later, Energy and Mineral Development minister Ruth Nankabirwa Ssentasmu indicated support from the project, going so far as to make the trip to Perth for the Africa Down Under Mining Conference to meet with the company (amongst other conference attendees).
And finally, just a fortnight ago, Ionic told shareholders its Mining License was approved for granting.
Feasibility and Future Prospects
Ionic Rare Earths has released a positive feasibility study for the Makuutu project to solidify its potential in the rare earth market. Additionally, the approval to construct a demonstration plant on-site will have tangible progress toward actualising their vision.
The Share Price Surge
The share price surge on the days of major news is a vote of confidence from investors. While the project shows immense promise, the rare earth market is currently subject to volatility, influenced by geopolitical tensions as well as technological advancements.
The surge in demand for rare earth elements, particularly in the context of the growing electric vehicle market, bodes well for the company’s future trajectory. Tesla’s forecast of a 16-fold increase in lithium carbonate equivalent (LCE) needs by 2030 has underscored this potential.
Ionic Rare Earths’ position in Australia’s rare earth industry, with a focus on refining spodumene, places them in a favourable position to capitalise on the anticipated growth in the lithium hydroxide market.
The strong support from the Ugandan government and an updated regulatory framework provides a conducive environment for Ionic Rare Earths to operate and grow.
Ionic Rare Earths’ recent success is indeed a valuable opportunity for those looking to enter the rare earth sector. Nonetheless, as a smaller cap stock, there may be more volatility than there would be if it was a more established company such as Lynas (ASX:LYC).
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