Ewoyaa Stands out From the Lithium Crowd

Proactive Published 01/02/2021

Share X in f @

IronRidge Resources (LON:IRR) has completed its scoping study on the Ewoyaa Lithium Project, located in Ghana. This study returned robust economics with a post-tax net present value using an 8% discount rate (NPV8) of US$345mln and a post-tax internal rate of return (IRR) of 125%, assuming a conservative spodumene concentrate price of US$650 per tonne (t). Compared to its peer group developing spodumene concentrate operations, Ewoyaa is a high-volume project with low capital expenditure (capex) intensity and a low operating expenditure (opex) requirement.

Over the eight-year mine life, the project is expected to generate US$1.55bn of revenue with underlying earnings (EBITDA) of US$854mln. The operation will be a conventional operation with a series of seven proximal open pits (Figure 1) with simple processing flow sheet using dense media separation.

Figure 1 - Proposed Open Pits

Source: IronRidge Resources

The economics could be further improved with the sale of a feldspar bi-product, and by extending the life-of-mine using material from the historic Egyasimanku Hill deposit (1.5mln tonnes at a grade of 1.66% Li2O) and other regional targets that have recently been identified. Additional drilling is underway at these regional targets and is already returning intersections of spodumene-bearing pegmatite.

In addition to the developments at Ewoyaa, drilling at the Zaranou Gold Project, has returned multiple high-grade gold-bearing intersections, confirming three new targets. The current 50,000 metres drilling programme at the project was completed at the end of January 2021. The company also finalised the acquisition of the Bodite and Bianouan Gold licences consolidating ownership of the licences that complement the Zaranou Project. Earlier in the month, IronRidge completed the divestment of the May Queen Gold Project. The project was non-core to IronRidge and the sale allows the company to focus its efforts and finances on its higher-priority African projects, while maintaining exposure to the May Queen Project through its equity interest, 32.3%, of Australasian Gold Limited (private). In other developments, the company announced the fully underwritten call, for the exercise of 31,608,492 warrants, exercisable at 12 p per warrant. This removes a large proportion of the dilutive instruments within the share register and also raises £3,793,019 in new capital (before costs) to assist IronRidge's ongoing exploration and development efforts within Ghana, Cote d'Ivoire and Chad.

Ewoyaa Lithium Project

The completion of the scoping study (SS) at the Ewoyaa Lithium Project, located in Ghana (Figure 2), is a major milestone for IronRidge Resources and marks a shift in the company's operations from pure explorer to explorer-developer.

Figure 2 - Ewoyaa Project Location

Source: IronRidge Resources

Figure 3 - Concentrate Prices Used in Economic Studies

Source: Mining and Metals Research Corp.

The number in the bubble is the percentage above or below the average price used by the peer group.

Figure 4 - Production Targets of Concentrate Projects

Source: Mining and Metals Research Corp.

Figure 5 - Capex Intensity Vs Opex

Source: Mining and Metals Research Corp.

Figure 6 - Regional Targets at Ewoyaa

Source: IronRidge Resources

The SS returned a post-tax NPV8 of US$345mln and a post-tax IRR of 125%, demonstrating attractive economics that will give the company a firm basis to advance the project to the next stage.

In the economic study a spodumene concentrate price of US$650/t was assumed, which is at the lower-end of prices used in economic studies by a peer group of other juniors developing spodumene concentrate operations (Figure 3).

In terms of production levels, Ewoyaa is one of the larger development projects (Figure 4) aiming to produce an average of 295,000 t of spodumene concentrate per annum over an initial mine life of eight years.

Two of the key metrics to look at when comparing any mining development project are the operational cost per tonne of production (opex/t) and the capital cost intensity per tonne of product produced over the life of mine (capex intensity/t).

Metrics such as NPV and IRR can be biased by the use of higher metal prices and lower discount rates, whereas capex intensity and opex are not dependent on metal prices or discount rates and as a result can be used to compare the relative economic returns of a number of projects without undue influence.

The lower the opex, the higher the profitability of an operation (all things being equal). The lower the capex intensity, the higher the return on investment will be over the life of the operation.

IronRidge's Ewoyaa compares favourably to its peer group of concentrate development projects as one of the lowest capital intensive projects and also has a low opex compared to its peer group (Figure 5), so its economics should be favourable compared to its peer group on a like-for-like basis.

Ewoyaa is projected to generate life-of-mine revenue of US$1.55bn with a life-of-mine EBITDA of US$854mln but there are many ways that these economics could be improved with further work.

Initial gravity tests have highlighted the potential to produce a saleable feldspar bi-product. The feldspar product could be sold for local use in the Ghanaian ceramics industry and further afield in the European ceramics industry.

This could add additional revenue ranging from US$5mln to US$20mln per annum at a relatively minor cost. The production of feldspar product will be examined in more detail in the next study phase.

IronRidge is also investigating the potential to extend the life of mine using material from the historic Egyasimanku Hill deposit, which has a non-compliant mineral resource estimate of 1.5mln tonnes at a grade of 1.66% Li2O.

In addition to Egyasimanku Hill, IronRidge has recently defined seven new pegmatite targets from a 2,446 metres auger drill hole programme (12,896 metres) (Figure 6).

These pegmatites are up to 460 metres long and 30 metres wide and are within 500 metres to 1.5 kilometres (km) of the current resource footprint. These newly defined pegmatite targets have similar strike and widths to the Ewoyaa North-East deposit, which hosts 2.5mln tonnes at Li2O in the inferred category.

IronRidge is wasting no time in advancing these targets and has already commenced a follow up 12,500 metre reverse circulation drill programme, the first drill hole (GRC0199) of which intersected visible spodumene over 13 metres.

Figure 7 - Zaranou Drill Results

Source: IronRidge Resources

Figure 8 - Bodite and Bianouan Gold Licenses

Source: IronRidge Resources

Zaranou Gold Project

At the Zaranou Gold Project, IronRidge has just received high-grade gold assay results from reverse circulation and air-core drilling at the Ehuasso target and the previously untested Coffee Bean, Mbasso and Yakassé targets. These results now confirm the presence of gold mineralisation in multiple targets along the 47 km long structure related to gold mineralisation at Zaranou (Figure 7). These results include:

Ehuasso

16 metres (m) at a grade of 6.68 grams per tonne (g/t) gold (Au) from 100 m, including 4m at a grade of 10.3 g/t Au, 4 m at a grade of 10 g/t Au and 4 m at a grade of 6g/t Au (ZARC0102)
68 m at a grade of 1.4g/t Au from 20 m, including 4 m at a grade of 11.7 g/t Au and 4 m at a grade of 5.6 g/t Au (ZARC0101)
64 m at a grade of 1.41 g/t Au from 100 m, including 4 m at a grade of 1.6 g/t Au, 4 m at a grade of 4.4 g/t Au, 4 m at a grade of 3.5 g/t Au, 4 m at a grade of 5.5 g/t Au and 4 m at a grade of 2.2 g/t Au (ZARC0104)
20 m at a grade of 2.13 g/t Au from 96 m, including 4 m at a grade of 9.9 g/t Au (ZARC0099)
4 m at a grade of 6.85 g/t Au from 60 m (ZARC0097)

Coffee Bean

8 m at a grade of 14.01 g/t Au from 4 m, including 4 m at a grade of 27.9 g/t Au (ZAAC0763)
8 m at a grade of 9.32 g/t Au from 32 m, including 4 m at a grade of 18.3 g/t Au (ZAAC0757)
28 m at a grade of 1.85 g/t Au from 8 m, including 4 m at a grade of 7.2 g/t Au and 4 m at a grade of 5.1 g/t Au (ZAAC0682)
13 m at a grade of 3 g/t Au from 56 m, including 4 m at a grade of 9.5 g/t Au (ZAAC0676)

Mbasso

40 m at a grade of 0.9 g/t Au from 16 m, including 4 m at a grade of 1.2 g/t Au, 4 m at a grade of 1.5 g/t Au and 4 m at a grade of 2.1 g/t Au (ZAAC0904)
40 m at a grade of 0.69 g/t Au from the surface, including 4 m at a grade of 1.3 g/t Au, 4 m at a grade of 1.6 g/t Au and 4 m at a grade of 1.3 g/t Au (ZAAC0842)
14 m at a grade of 1.31 g/t Au from 40 m, including 4 m at a grade of 3 g/t Au (ZAAC0818)

Yakassé

28 m at a grade of 4.07 g/t Au from 124 m, including 4 m at a grade of 2 g/t Au, 4 m at a grade of 3.4 g/t Au and 4 m at a grade of 21.2 g/t Au (ZARC0100)
4 m at a grade of 2.69 g/t Au from 192 m (ZARC0098)
24 m at a grade of 0.38 g/t Au from 100 m, including 4 m at a grade of 1.2 g/t Au (ZARC0096)

The current50,000 m reverse circulation and air-core drilling programme at Zaranou was completed at the end of January 2021. This drilling focused on IronRidge's ‘early ounces’ strategy, which targets the weathered oxide zones bearing gold mineralisation, c. 50 m to 90 m deep, as these areas should allow simple mining and processing at low operational and capital costs.

In mid-December 2020, IronRidge cemented its ownership of two licences that complement the Zaranou Gold Project, completing the acquisition of 100% of the Bodite and Bianouan licences (Figure 8). The cost of the acquisition was 1,550,388 shares in IronRidge at a price of 18 pence per share, which was a significant premium to IronRidge’s share price at the time. The shares are subject to a 12-month lock-in.

Chadian Gold Projects

During November 2020, IronRidge was granted four-year licence renewals, with corresponding area reductions, by the Ministry of Petroleum and Mines for the Dorothe, Echbara and Am Ouchar licences (446.25 km2 ) in Chad. The company's remaining holding of 300 km2, which does not form part of this renewal, is for the Nabagay and Kalaka licences; these are due for renewal in March 2022. IronRidge's total landholding in Chad currently covers an area of 746.25 km2.

In Chad IronRidge has commenced planning its field programme with the intention to focus on a maiden 7,000 m reverse circulation drilling programme to test the Dorothe target prior to the onset of the wet season in July 2021.

Dorothe is an intrusion-related gold target where trenching has returned multiple high-grade gold intersections over a 3 km long by 1 km area, including:

84 m at a grade of 1.66 g/t
4 m at a grade of 18.77 g/t
32 m at a grade of 2.02 g/t
24 m at a grade of 2.53 g/t
4 m at a grade of 14.12 g/t
2 m at a grade of34.1 g/t
1 m at a grade of 63.2 g/t

Financing

Earlier this month IronRidge exercised its call notice over 31,608,492 warrants that were issued to participants in the company's capital raising announced on 11 May 2020. Each warrant is exercisable at a price of 12p. This is expected to raise £3,793,019 in new capital (before costs).

IronRidge was able to exercise its call option as its ordinary shares traded at a volume-weighted average price at or above 16p per share for a period of five consecutive business days. This was achieved on 12 August 2020.

The exercising of the fundraising warrants is fully underwritten by Open Source Capital Limited (50%), Alberona Pty Ltd (a company controlled by Vincent Mascolo, the chief executive officer of IronRidge), and Neil Herbert (the chairman of IronRidge). Any warrants not exercised will be issued to Open Source Capital Limited, Alberona Pty Ltd and Neil Herbert, in the proportion of 50%, 25% and 25% respectively, at a price of 12p per ordinary share.

An underwriter's fee will be payable to each of the three underwriters at the rate of 6% of the value of the ordinary shares subject of the fundraising warrant exercising process, with no fees attributable to warrants held by entities associated with Vincent Mascolo and Neil Herbert, or Assore Limited.

Divestment of May Queen Gold Project

As part of its process for prioritising its African Projects, Ironridge completed the divestment of the May Queen Gold Project, located in Australia in January this year.

In return for the sale, IronRidge will receive 4.5mln shares representing 28.1% of the enlarged share capital of Australasian Gold Limited. IronRidge will also invest A$100,000 in Australasian Gold at a price of 10 cents per share, giving IronRidge a total holding of 32.3% of Australasian Gold on completion of the transaction.

This transaction allows IronRidge to focus on its African projects while maintaining exposure to the May Queen Gold Project and upside that results from the project being advanced without any additional financial liability. IronRidge maintains both top-up rights, and the option of a future seat on Australasian Gold's Board.