Guess which ASX lithium share just rocketed 27% on a $1 billion US Government loan

This lithium company might now have its project construction funding all laid out…

| More on:
a man sits on a rocket propelled office chair and flies high above a city

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The Ioneer share price is flying 27% higher to 58 cents after a US$700 million loan was offered by the United States Department of Energy
  • The conditional commitment could help Ioneer supply lithium for around 370,000 EVs each year in the US
  • Ioneer still needs to jump a few hurdles before unlocking the loan

The Ioneer Ltd (ASX: INR) share price is shooting 27% higher on Monday morning. Moments after the opening bell, the ASX lithium share is fetching 58 cents apiece.

Ioneer was revealed as the recipient of a colossal funding agreement from the United States Department of Energy (DOE) Friday night.

A monumental US$700 million (A$1 billion) conditional commitment has been offered to the company by the DOE to assist in funding the development of its Rhyolite Ridge lithium-boron project in Nevada.

Shareholders of the lithium project developer will be watching intently today to see if the company can extend its 20% rally year-to-date. The benchmark-beating performance is a breath of fresh air for shareholders considering Ioneer shares were among the worst-performing ASX-listed lithium names in 2022.

Bringing new supply to the growing demand

On Friday, the Loan Programs Office of the DOE announced its latest funding proposal to help address supply for the domestic electric vehicle (EV) battery supply chain.

According to the release, the loan would finance the on-site processing of lithium carbonate which could potentially support the production of approximately 370,000 EVs annually. For context, 588,000 EVs and plug-in hybrid EVs were produced in the United States in 2021, the majority of which were made by Tesla Inc (NASDAQ: TSLA), as shown below.

Chart showing EV production in U.S. by brand

The billion-dollar US government deal is the largest achieved by any Australian company. Other notable mentions include Novonix Ltd (ASX: NVX) with its US$150 million grant and Lynas Rare Earths Ltd (ASX: LYC) US$120 million department of defence contract — but Ioneer takes the cake.

In the announcement, the LPO highlights the criticality of adding in a new lithium supply, noting:

The urgency to secure critical materials for batteries is expected to rapidly increase in the coming years as demand for lithium is projected to exceed current global production by 2030. This is subsequently causing U.S. auto manufacturers to seek a robust domestic supply of critical materials to keep pace with the increased demand.

The ASX lithium share already has offtake agreements in place with Ford Motor Company (NYSE: F) and Toyota.

What's next for this ASX lithium share?

While a billion-dollar loan is a cause for celebration, Ioneer still needs to meet some conditions before basking in glory. Before the company can commence construction of its Esmeralda County plant, it must complete engineering and feasibility studies.

If Ioneer successfully progresses to plant construction, the loan will go a long way to covering the expected US$785 million in construction costs. Furthermore, if Ioneer can get up and running, it would join Esmeralda Country neighbour, Albemarle Corporation (NYSE: ALB), which is currently the only operating lithium plant in the US.

The current Ioneer share price of 46 cents values this ASX lithium share at a market capitalisation of $955 million. In comparison, lithium giant Albemarle towers over the Aussie competition with a US$28.4 billion market cap.

Motley Fool contributor Mitchell Lawler has positions in Albemarle, Lynas Rare Earths, and Tesla. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Materials Shares

A mining employee in a white hard hat cheers with fists pumped as the Hot Chili share price rises higher today
Materials Shares

ASX mining in April 2024: The best stock to buy right now

Analysts at Bell Potter think this mining stock could offer big returns.

Read more »

a mine worker holds his phone in one hand and a tablet in the other as he stands in front of heavy machinery at a mine site.
Materials Shares

The Core Lithium share is down 27% in March: What's next?

Times have been hard for this lithium miner's shareholders. Will things improve?

Read more »

A female worker in a hard hat smiles in an oil field.
Materials Shares

Why it's a great day to own BHP shares

The Big Australian's shareholders have reason to smile on Thursday.

Read more »

a business man in a suit holds his hand over his eyes as he bows his head in a defeated post suggesting regret and remorse.
Materials Shares

Why did this ASX All Ords stock just crash 36%?

Investors have been hitting the sell button on Tuesday.

Read more »

A miner in a hardhat makes a sale on his tablet in the field.
Materials Shares

Lake Resources share price surges on sustainable lithium news

Lake Resources shares are enjoying a welcome lift today.

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Materials Shares

Mineral Resources shares fall despite 'exceptional results'

This mining and mining services company has provided an update on its energy business.

Read more »

A man looking at his laptop and thinking.
Materials Shares

Are Pilbara Minerals shares in the buy zone or overvalued?

Here's what Bell Potter is saying about the lithium giant.

Read more »

Three guys in shirts and ties give the thumbs down.
Materials Shares

3 reasons to sell Core Lithium shares

This lithium miner's decline may not be over according to Goldman Sachs.

Read more »