The Ionic Rare Earths Ltd (ASX: IXR) share price is diving today after the company released the results of a completed scoping study.
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During late afternoon trade, the mineral exploration company’s shares are going for 3.8 cents, down 19%.
What did Ionic Rare Earths announce?
Investors are heading for the hills, sending Ionic Rare Earths shares south after digest the company’s latest update.
According to its release, Ionic Rare Earths advised it has received positive results from its Makuutu scoping study. The results obtained showed the potential to develop a sustainable, long-life, critical rare earth supply to international markets.
The study looked at an open-pit mine running a modular heap leach operation to create a mixed rare earth carbonate product. The base case scoping study considered running the mine over an initial period of 11 years.
Within the first year, production output could achieve 800 tonnes of rare earth oxide equivalent product. However, as more modules are added, the study assumes production could reach up to 3,800 tonnes in year 11.
The life of the mine is expected to deliver earnings before interest, tax, depreciation and amortisation (EBITDA) of $1.71 billion. In addition, post tax free cash flow would total $1.02 billion, with a net present value of $428 million.
Pre-production capital expenditure is projected to cost approximately US$89 million for the first module. Expanding operations to cater for the second module is forecasted to be about US$40 million. Thereafter, adding modules from 2 to 5 would amount to US$172 million funded by the company’s project cash flow.
Ionic Rare Earths declared a strong cash position of more than $12 million for the end of March.
More on the Makuutu Rare Earths project
Located 120 kilometres east of Kampala in Uganda, the Makuutu Rare Earths project is an ionic adsorption clay-hosted rare earth element deposit. The project is 100% owned by Rwenzori Rare Metals Ltd., a private Ugandan company. However, Ionic Rare Earths has acquired a 51% shareholding in Rwenzori Rare Metals.
The Makuutu project consists of 5 licences and is serviced by infrastructure such as roads, rail, power, and cell communications.
Words from the managing director
Ionic Rare Earths managing director, Tim Harrison commented on the result, saying:
The completion of this study with its positive project economics represents a critical milestone for the company. Combining the long life potential, with the low-cost modular capital development and high margin basket potential at Makuutu, confirms the project as one of the best potential new sources of critical and heavy rare earths in the near term.
We see this project as technically and financially robust and eminently financeable, and the company has received strong expressions of interest from strategic parties interested in accessing Makuutu’s unique basket composition that contains approximately 70—75% critical and heavy rare earths.
Looking ahead, Mr Harrison further commented on the company’s strategic direction, adding:
…We now move formally towards the BFS (Bankable Feasibility Study) which we plan to complete by Q3 2022, prior to submitting the Mining Licence in October 2022 that will allow us to make a Final Investment Decision with a low capital development threshold, and capable of generating strong shareholder returns over a long-life operation at Makuutu.
About the Ionic Rare Earths share price
Over the past 12 months, the Ionic Rare Earths share price has gained over 560%, with year-to-date performance sitting above 130%. The company’s shares reached a multi-year high of 6.5 cents earlier this month before profit-taking swooped in.
At today’s price, Ionic Rare Earths commands a market capitalisation of roughly $127 million, with 3.1 billion shares on issue.
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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.