Zacks Small-Cap Research has started covering ION Energy Ltd - the largest lithium exploration license holder in Mongolia - as the fundamentals of the market remain strong driven by electric vehicles (EVs).
"Not only has the lithium mining industry consolidated through mergers and acquisition, but also corporate consumers of lithium have bought upstream assets in order to secure supply," noted Zacks analysts, adding that the pool of "quality, prospective lithium projects" was dwindling.
This year alone, Zijin Mining Group has acquired Neo Lithium Corp (TSX-V:NLC) for around C$960 million in cash and plans to bring the Argentinian Tres Quebradas Salar Lithium project into production by the end of 2023.
Also, Lithium Americas completed the acquisition of Millennial Lithium (TSX-V:ML) for about C$491 million so it could acquire the advanced-stage Pastos Grandes project. Both deals were completed in late January, noted the analysts.
Zacks values the early stage explorer ION Energy such that it has a target price of US$0.48 per share (current price: US$0.39) on the company.
READ: ION Energy strengthens its team with strategic director appointment
ION Energy controls more than 100,000 hectares (Ha) of prospective lithium properties via two licenses, namely the Baavhai Uul asset (81,758 hectares) and the Urgakh Naran property (20,000 hectares).
In February this year, the company announced a joint venture (JV) with Aranjin Resources - the largest copper exploration license holder in Mongolia, whereby they will grant each other a reciprocal right to explore one another's properties.
ION can explore Aranjin's properties (specifically the Sharga, Bayan Under and Baruun Tal Projects) for lithium, while Aranjin will be granted a right to explore ION's properties (specifically the Baavhai Uul and Urgakh Naran projects) for base metals (primarily copper, but also lead, zinc, nickel, cobalt and associated metals).
"The synergistic joint venture represents a significant exploration endeavor for battery metals in Mongolia. The exploring party will earn an 80% interest in any discoveries of its respective battery metal(s) on the other party’s properties, subject to existing royalties," said Zacks analysts.
In terms of expected upcoming milestones for ION Energy, it expects to perform hydrogeological sampling at its Baavhai Uul asset in April this year.
At Urgakh Naran, management plans to begin its maiden exploration program in the first half of 2022, expected to include near-surface drilling of 73 shallow auger holes at the Urgakh Naran salar, along with geochemical sampling and hydrogeological sampling of any intersected brines.
"Financially, management’s anticipated exploration and acquisition initiatives are funded for approximately the next two years, primarily through an upsized bought deal that closed in April 2021," the analysts added.
Contact the writer at giles@proactiveinvestors.com