ION: Our Critical Minerals Recycling Stock - Targeting First Revenues in the next 24 months

Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 21,953,727 ION Shares at the time of publishing this article. The Company has been engaged by ION to share our commentary on the progress of our Investment in ION over time. This information is general in nature about a speculative investment and does not constitute personal advice. It does not consider your objectives, financial situation, or needs. Any forward-looking statements are uncertain and not a guaranteed outcome.

We think critical minerals recycling tech companies like our Investment Iondrive (ASX:ION) will be some of the biggest winners from the east/west divide in critical minerals markets.

Especially within the US (and allied countries) where prices trade at different levels to the rest of the world.

ION is developing Deep Eutectic Solvents (DES) recycling tech.

It sounds complicated but it's essentially just applying biodegradable, benign solvents to recover metals and critical minerals.

Metals and minerals like rare earths, copper, gold, cobalt, lithium, gallium, silver and antimony from things like e-waste, printed circuit boards and solar panels.

Here is a list of everything ION’s tech could be applied to:

(Source)

Note: this chart shows metals amenable to Deep Eutectic Solvent chemistry in general, and have not necessarily been specifically tested by ION.

On Wednesday, US Secretary of State Marco Rubio hosted a Critical Minerals Ministerial “with partners and allies” centered around a “whole of supply chain” fix for the critical minerals in the west...

Specifically including processing and recycling:

(source)

Last year, the US also put billions behind “minerals recycling tech”:

(source)

(source)

All of this tells us that companies with recycling tech that can be rolled out across a range of different minerals will be big winners in what we think is a coming “everything boom”.

Basically a setup of macro tailwinds blowing in favour of ION.

(hopefully long enough for ION to commercialise its tech and multiply its valuation)

ION is currently most advanced on applying its tech to black mass (waste batteries) - to extract target metals - e.g. lithium, cobalt, nickel, manganese, and graphite.

ION is currently building a pilot plant (mostly with government grants in Aus) that can be shipped anywhere (the US or EU) for production...

(Having a running pilot plant - and a pathway to a bigger demo plant opens the doors to some big US funding opportunities - more on that in a second)

ION is also advanced in the US rare earths space - working with a major North American eWaste recycler whose parent company operates in 20+ countries. (more on this in a second).

Earlier this week ION announced results from its first move into solar panel recycling, showing its tech can recover silver and silicon from scrap solar panels.

In Australia alone, there are ~120M installed solar panels, and by 2030 there are ~100,000 tonnes of panels expected to be considered “end-of-life” - which is estimated will have recoverable materials worth over $1 billion in silver, silicon, aluminium, and glass...

(that estimate was from back in 2022 - silver for example was trading at US$18-26/oz back then, now silver is at US$73 (~3.3x) - so the size of the market could actually be a lot bigger)

(Source)

Everyone knows what the precious metal silver is.

BUT the silicon market is especially interesting and one space we hadn't thought of when thinking of what market ION could tackle.

Silicon (depending on the end market) can sell for astronomical prices:

• Metallurgical-grade material (typically $1,500 - $4,600 per tonne)
• Solar-grade silicon ($15,000 - $46,000 per tonne)
• Electronic-grade silicon used in advanced battery anodes and semiconductor wafers ($77,000 - $308,000 per tonne)

A nice addition to that chart we mentioned earlier:

(Source)

We think there will be plenty of other markets ION can apply its tech to - like silicon - and the way we see it, ION only has to be successful in one metal/mineral, in one industry (processing or recycling) for the company’s market cap to re-rate from where it is today...

ION is also tackling minerals processing

Another reason we are Invested in ION is because it's also applying its tech to minerals processing.

ION is essentially using its tech to solve extraction issues that miners would face (getting a certain mineral out of a certain type of rock).

ION is currently focused on two markets for mineral processing:

• Cobalt - ION recently signed a deal with Latitude 66 to test its tech on concentrates that would be produced from Latitude’s project in the EU (Finland). (Source)
• Nickel - ION has previously said it is testing its tech on US sourced feedstock in the nickel industry... (Source)

Again we think ION’s tech can be applied across other minerals too:

(Source)

Mineral processing tech can be very valuable when it works...

... first because sometimes it makes projects that were not economically viable work from a financing perspective...

... and second because the target market is basically any mining/processing company in the world.

If a large mining producer is able to get a better “recovery rate” on converting its ore into a concentrate, it could mean millions of dollars of extra revenue generated... all from the same mine.

One of ION’s directors Hugo Schumann was the former CFO of Jetti Resources, which developed copper extraction tech.

Jetti went on to raise Series C funding of US$50M and then Series D funding of US$160M which valued the company at US$2.5BN in 2022.

Jetti was backed by top industry investors like Freeport, BHP, Mitsubishi and Blackrock - proof of the maturity of the minerals processing industry relative to the recycling industry.

(Source)

The way we see it, ION only has to be successful in one metal/mineral, in one industry (processing or recycling).

Commercialising its tech in just one part of either industry could be a company maker for ION.

And then ION can use that commercialised tech as a springboard into other markets.

(it should also de-risk ION’s tech from a market/investor facing side - which could mean the business trades at a completely different valuation).

We already know ION’s working on multiple different things at the one time - check out this slide from their most recent investor presentation:

(source)

The question is which one comes to the front and becomes that company maker?

It's hard to tell, but whatever it is it could be the one that opens the door to the big US government funding deals that are accessible for companies like ION...

Will it be rare earths in the US?

We think there is a chance...

Back in October ION announced it would be:

“participating in a fully funded Australian Government-led delegation to the U.S. focused on critical minerals and energy security”

And said that:

“Meetings with US government, defence, investors and innovation leaders are now underway”

Including an:

“invitation-only investment and R&D roundtables in San Francisco with U.S. officials, defence representatives, and innovation leaders”... (source)

All of that happened while the US government was scrambling to do rare earth deals...

All of that happened a few months after ION signed a BINDING agreement for rare earths recycling in the USA...

...with Colt Recycling - one of the USA’s largest and most advanced eWaste recycling companies...

(Source)

As part of the agreement, IF ION could successfully show its tech can recover rare earths commercially, Colt could push ION’s tech into its metals recycling facilities across the US.

ION then did economic studies showing what a rollout across “e-waste hubs” would look from a project economics perspective.

ION showed that each plant could generate the following returns over a 10 year project life:(source)

1. Average annual production: ~115 t of mixed rare-earth oxides
2. Post-tax NPV of ~US$7M
3. Payback period: 2.6 years
4. CAPEX of just ~US$4.6M

That would be from just one small modular plant - IF ION were to install a few of these at each of Colt’s facilities, then the numbers scale pretty quickly.

The big kicker here, is that ION could attract US government funding to get this partnership off the ground, so it could be done with non-dilutive funding...

Interestingly, ION explicitly said in its quarterly that it was engaged “across multiple potential U.S grant pathways”:

(source)

ION is also building its pilot plant - will that open the door to US funding?

ION is also currently commissioning its pilot plant to extract nickel, lithium, cobalt, manganese and graphite from scrap battery waste (black mass).

(ION is building its plant with a ~A$3.9M non-dilutive grant from the Australian government).

ION has previously said it’s looking to have that plant up and running in H1 of this year...

(Source)

Based on the most recent quarterly, it sounds like ION may just hit that deadline:

(source)

We think that the pilot plant, once commissioned, will make ION a stronger candidate for US government funding, more than a lot of the rare earths (mining only) stocks on the ASX.

Like the ~US$500M that was put aside by the US Department of Energy for demo/commercial scale plants:

(Source)

The pilot plant will take ION’s tech out of the lab and to a point where it can run demonstrations for potential financiers who are seeking to fund something on a larger scale.

(Source)

Which is where we think the big US funding could come into play...

4x catalysts that could land for ION over the next 3-6 months:

Over the next 3-6 months, we think one (or multiple) of the below catalysts has the potential to trigger a sustained re-rate in ION’s market cap:

1. US rare earths partnership (possibly the most market topical right now) - ION is testing its tech on e-waste feedstock to see if it can commercially recover rare earths. IF successful, ION’s tech could be rolled out across recycling facilities processing ~40Mlbs of e-waste feedstock annually.
   
2. Pilot plant build for battery recycling tech - as mentioned prior, we think this will be a big inflection point for ION. ION expects to have the plant built and commercially producing by “early 2026” (which could be any day now).
   
3. ION’s mineral processing tech gets de-risked - Any news across the multiple mineral processing testworks ION is doing right now could trigger a re-rate in ION’s share price - especially if it’s in a material that the market is looking for exposure to (ION is testing cobalt and nickel to begin with and then hopefully many more critical minerals).
   
4. Application into new markets - ION is aiming to recover copper, gold, silver, osmium and rare earth elements from e-waste (Printed Circuit Boards). Results from these tests could come at arbitrary times. We could see the market re-rate ION if the results are positive.

Here is a nice slide from ION’s latest presentation that summarises everything that is coming:

(source)

Ultimately, a combination of the above catalysts AND ION switching its pilot plant on and commercialising its tech is what we want to see.

Commercialisation is central to our Big Bet which is as follows:

Our ION Big Bet:

“ION re-rates to a +$150M market cap on successful large-scale production of commercial quantities of battery materials through its recycling process and/or by securing important partnerships in the recycling industry.”

NOTE: our “Big Bet” is what we HOPE the ultimate success scenario looks like for this particular Investment over the long term (3+ years). There is no guarantee that our Big Bet will ever come true. There is a lot of work to be done, many risks involved, including technology risk, scale up risk, regulatory risk and development risk - just some of which we list in our ION Investment Memo.

Success will require a significant amount of luck. Past performance is not an indicator of future performance.

What are the risks?

The main risk for ION in the short term is “Scale up / Technology risk”.

Now that ION is moving into new markets, there is no guarantee ION’s tech is able to produce the recovery rates needed for its tech to be deemed ‘commercially viable’.

There is also no guarantee that ION is able to replicate its bench scale performance in a larger pilot plant setting.

IF the market starts to price in expectations of positive results and ION is unable to deliver it could impact the company’s share price in a negative way.

Scale up / technology risk

There is no guarantee that the Pilot Plant is able to replicate the results from the large lab study. Also “feedstock reliability” both in terms of supply and consistency of material is a big risk for ION to scale up its operations.

Source: “What could go wrong” - ION Investment Memo 03 December 2024

We list more risks to our ION Investment in our ION Investment Memo here.

Other risks

Like any early-stage technology company, ION carries significant risk, here we aim to identify a few more risks.

The company is currently in the process of scaling its technology from the lab to a pilot plant. There is no guarantee that the pilot plant will be able to replicate the high recovery rates achieved in bench-scale trials, or that the process will be cost-effective at a larger scale. This "scale-up" risk is common for new technologies moving out of the R&D phase.

ION’s future revenue is closely linked to the value of the commodities it recovers (Lithium, Nickel, Cobalt, Rare Earths, Silver, Silicon). If commodity prices fall, the economics of recycling these materials may become less attractive, potentially squeezing margins or making operations unviable.

As a pre-revenue company, ION is reliant on capital markets and government grants to fund its development. While the company has secured some non-dilutive funding, building commercial-scale facilities will require significant capital. ION may need to raise further equity, which could dilute existing shareholders, or secure debt financing which brings its own risks.

ION operates in a competitive landscape with other recycling technologies (like pyrometallurgy and traditional hydrometallurgy). There is a risk that competing technologies prove to be cheaper or more efficient, or that larger, well-funded competitors dominate the market before ION can establish a foothold.

Securing consistent feedstock (waste batteries, e-waste, solar panels) is critical for ION’s business model. As the recycling industry grows, competition for high-quality feedstock may increase, potentially driving up costs or limiting supply.

Finally, regulatory changes in key jurisdictions (US, EU, Australia) regarding critical minerals, recycling mandates, or carbon credits could impact ION’s business case either positively or negatively.

Investors should consider these risks carefully and seek professional advice tailored to their personal circumstances before investing.

Our ION Investment Memo

Our Investment Memo provides a short, high-level summary of our reasons for Investing.

We use this memo to track the progress of all our Investments over time.

Click here to read our ION Investment Memo where you will find:

• What does ION do?
• The macro theme for ION
• Our ION Big Bet
• What we want to see ION achieve
• Why we are Invested in ION
• The key risks to our Investment Thesis
• Our Investment Plan