ION Energy is poised to be a player in Asia’s booming lithium market with its expanding Mongolia projects

On track to be Mongolia's first lithium brine miner Strategic location in Mongolia with proximity to China and Russia Strong management team with proven track record What ION Energy does: ION Energy Ltd (CVE:ION) (OTCQB:IONGF) is a lithium exploration company with its sights set on Mongolia. The Canadian company has won the first lithium brine mining license ever awarded by the Central Asian country. The company’s Baavhai Uul lithium brine project is spread over nearly 81,000 hectares, and is strategically located in southeast Mongolia, 24 kilometers (km) away from the Chinese border. ION also holds the Urgakh Naran lithium brine project in Mongolia’s Dorngovi province, which covers an area of more than 19,000 hectares of what the company calls “highly prospective lithium terrain.” Armed with one of the largest exploration licenses in Mongolia, ION Energy is poised to become a significant player in Asia’s booming lithium market. Lithium-ion batteries have become the battery of choice in consumer electronics such as laptops and cell phones. China is now in the driving seat with a number of lithium battery factories and five new planned gigafactories. That bodes well for ION Energy, given the exploding demand for lithium in the region. Over two-thirds of the world’s lithium reserves are suspended in “brines” of highly concentrated salt-water. Traditional methods rely on the sun evaporating away the water content and waiting for the salts to precipitate out one by one. As lithium is one of the lightest elements in the periodic table, it is the last to come out of the brine mix, and a lot is lost along the way. Fortunately, the Baavhai Uul project is located in the arid Gobi Desert with high evaporation rates and low precipitation rates that are considered optimal for lithium brine extraction. How is it doing: ION Energy is fully funded to follow an aggressive growth strategy. In May, Ion talked about an expanded exploration program at its flagship Baavhai Uul project in Mongolia starting in the coming quarter. It comes after a seismic survey has been completed with 'encouraging' early results and the exploration is fully funded after a C$5.75 million placing was successfully completed in April. The work will include drilling 21 holes through prospective basins, while sampling of sediments and aquifers will be completed during the drilling phase. ION earlier told investors that it had started its geophysics study at the Baavhai Uul project. The work is aimed at identifying and mapping brine aquifers as potential targets for a series of drill tests. Previous programs conducted included surface brine sampling in 2016, which saw extremely encouraging results. Early results showed that all holes drilled contained significant levels of lithium. Target L8 returned values from 212 milligrams per litre (mg/L) lithium to 811 mg/L lithium, while Target L-11 returned sample values from between 311 mg/L lithium and 434 mg/L lithium from shallow samples. The project’s geographic location works heavily in favour of the company as it allows for a low-cost and year-round operating environment and low transportation costs to the Chinese and Russian battery markets.     As drilling is the name of the game in brine exploration, the company owns a truck-mounted auger rig with the capacity to drill down to 20 meters, allowing the sampling of shallow lithium brine. On February 10, the company acquired the Urgakh Naran lithium brine project in Mongolia’s Dorngovi Province. The company noted that the Urgakh Naran project, located 150 kilometres (km) west-northwest of its flagship Baavhai Uul lithium brine property, will increase its land holdings in Mongolia’s prospective lithium salars to over 100,000 hectares. ION said it was able to acquire Urgakh Naran, which is Mongolian for “Rising Sun,” by paying US$310,000 in consulting, admin and transfer tax costs following a successful tender bid submitted to Mongolia’s Mineral Resource Authority. ION noted that previous work conducted at Urgakh Naran included a “substantial” hydro-chemical sampling program of identified shallow lithium in brines. The company said exploration will begin at Urgakh Naran with drilling and geophysics planned. The work will cover five salars located in the central part of the Urgakh Naran basin. The basin is centered on an area that is six km wide and more than 20 km long. Meanwhile, ION Energy CEO Ali Haji has made solid additions to the company’s bench strength and developed a strong team in Mongolia. At the start of February, ION announced that geologist and scholar Dr Khashbat Dashteseren had been hired as the company's special advisor. Based in the Mongolian capital, he has extensive experience exploring various minerals in Mongolia and has served with the Urban Development for the Department of Urban Development and Investment in Mongolia. Dr Dashteseren was also chief geologist at Geolink LLC before moving on to become chief executive officer. Last year Mongolian mineral exploration veteran Enkhtuvshin Khishigsuren joined the company’s board. He has over three decades of mineral exploration experience in Mongolia and is credited with identifying targets that have resulted in the discovery of prospective gold and copper deposits in Mongolia. The company now has a five-member board with CEO Ali Haji, Aneel Waraich, Matthew Wood, Bataa Tumur-Ochir and Khishigsuren. The company has also tapped lithium industry experts Paul Fornazzari and Don Hains as the company’s special advisers. Inflection points: Expanded exploration program at Baavhai Uul project starting this year More news on Urgakh Naran project with drilling and geophysics planned What the broker says: Analysts at Couloir Capital noted that ION has returned almost 40% since going public, reflecting “strong interest” in lithium exploration companies in the wake of “burgeoning conviction in the electric vehicle megatrend.” “We believe these conditions could be conducive to a favorable environment for future equity financings, should ION uncover significant lithium brine resources at Baavhai Uul,” said Couloir Capital. “Based on our analysis and valuation models, we are initiating coverage with a BUY rating and a fair value per share estimate of C$0.88 per share.” Ion Energy stock is currently trading at C$0.61 on the Canadian Venture Exchange.  In February, analysts at Fundamental Research Corp also had a C$0.96 fair value price and BUY rating on ION Energy.   “We believe ION offers an attractive speculative opportunity in the lithium space, considering management’s track record, and the fact that Mongolia is severely under explored for lithium brine,” said Sid Rajeev, head of research at Fundamental Research. What the boss says: "On the back of the recently completed private placement, the company has no financing overhang and with a successful start to early exploration efforts, expects to deploy more than double the earlier anticipated resources to aggressively explore its highly prospective Mongolian lithium salar projects," ION Energy CEO Ali Haji said in a statement. “Ion Energy is a leader in Mongolia’s lithium exploration and development. It also solidifies Ion Energy’s long-term commitment to support our world’s green revolution by playing a key role in the supply chain." Contact the author Uttara Choudhury at uttara@proactiveinvestors.com Follow her on Twitter: @UttaraProactive