Ioneer has received a conditional commitment loan of US$700M from the DOE to fund the development of the Rhyolite Ridge lithium project in Nevada as the Biden administration looks to develop domestic sources of critical minerals.

The United States Department of Energy (DOE) has offered a conditional commitment to lend Ioneer Rhyolite Ridge LLC (Ioneer) up to US$700M via the department’s Loan Programs Office (LPO) to help finance the construction of its Rhyolite Ridge project.

The Rhyolite Ridge Project is a lithium-boron project aiming to produce refined lithium and boric acid in Nevada. According to a definitive feasibility study (DFS) released in April 2020, the project has a capital cost of US$785M. The Rhyolite Ridge project will mine searlesite, a lithium-boron mineral and, using this as feedstock, aims to produce lithium carbonate for the first three years of production, followed by lithium hydroxide for the remainder of its operational life, along with boric acid. Ioneer claims the boric acid will provide significant by-product credits via revenue, offsetting lithium production costs significantly.

As part of the capital costs for the project, Ioneer will construct a sulphuric acid plant, a power plant, and various processing facilities. These three areas comprise most of the capital costs for the project, accounting for approximately 50% of the US$785M figure estimated in the 2020 DFS.

The United States is a market likely to see significant demand for lithium compounds in the coming decade on the back of burgeoning EV demand. Currently, a small number of advanced domestic lithium projects are in development. But, with the Biden administration seeking to develop the US’ domestic critical minerals supply chains, further loan commitments in EV-adjacent industries are likely to be seen in the coming years.

However, the Rhyolite Ridge project is developing a lithium refining flowsheet, which is unproven at commercial scale, and potentially with unforeseen engineering issues still to be overcome. The project’s favourable cost position also largely depends on boric acid by-product credits.

In recent years, the lithium sector has seen examples of significant increases in initial capital costs at projects with flowsheets looking to process lithium resources that had not yet been proven to be commercial. Additionally, the sector has seen lithium producers processing more mainstream resources, such as spodumene deposits, struggling to achieve target recovery rates during their initial ramp-up phases. On the back of this landscape, investors and governments will need to determine their appetite for capital risk, as demand for lithium grows and more projects are required to meet supply.