Tando completes vanadium project buy as price hits 13-year record

Special report: Tando Resources has ticked another box in its plan to become a major vanadium producer with the completion of the acquisition of the SPD project in South Africa.

And what better time to pick up a vanadium project than when the price of the vanadium project hits a 13-year high.

Vanadium prices are now at their highest point since 2005, pushing through the magical $US20/lb ($27.56) mark last week amid ongoing supply concerns, according to Metal Bulletin data.

And with only three large scale primary vanadium producers globally – Bushveld Minerals, Glencore, and Largo Resources – this supply squeeze looks set to continue in the near term, even with planned expansions designed to increase annual production.

Managing director Bill Oliver said Tando’s (ASX:TNO) strategy at SPD was proceeding exactly to plan.

“We are delighted with the rapid progress we are making on the ground,” he said.

“And with the vanadium price trebling in the past 18 months, we see an opportunity to create substantial value for shareholders.”

Under the acquisition agreements, Tando can acquire up to 73.95 per cent of the SPD project by defining a JORC-compliant measured resource, and completing scoping, pre-feasibility and definitive feasibility studies.

JORC refers to the mining industry’s official code for reporting exploration results, mineral resources and ore reserves, managed by the Australasian Joint Ore Reserves Committee.

Mineral resources are categorised in order of increasing geological confidence as inferred, indicated or measured.

SPD already has a “foreign” resource of 513 million tonnes at 0.78 per cent vanadium pentoxide.

Tando is well advanced in its strategy to deliver a resource.

The maiden drilling program is underway, with the company hitting the target zone in the very first two holes.

The mineralised unit comprises a series of magnetite layers, which is well established as the host rock for the vanadium mineralisation at SPD.

Phase one is expected to be completed within a fortnight and Tando is fast-tracking drilling with three rigs now operational.

The highly anticipated drilling of the high-grade vanadium pipes surrounding the SPD
deposit will start in mid-October.

Samples taken from these pipes, which start from the surface, have returned extremely high grades of vanadium, highlighting their potential to underpin a low-cost direct shipping ore (DSO) operation.

DSO refers to minerals that require only simple crushing before they are exported, which keeps costs low.

This could generate early cashflow for Tando.

Strong potential

As further evidence of Tando’s potential, the company was the subject of a research note last week by the RAAS Group. (The note was commissioned by Xcel Capital)

RAAS values Tando at 38c per share, or $63 million – which is more than 2.5 times its current market value.

The research firm estimates the SPD project to be worth $46 million, or 29c per share, based on a vanadium price of just $US10/lb.

The vanadium price at the moment, however, is double that.

RAAS predicts the SPD project will have a positive net present value (NPV) at a vanadium price of just $US5/lb.

NPV is a metric used to assess the profitability of a project. The higher the NPV, the more profitable a project will be.

RAAS says that if Tando brings the SPD project into development there will be “roll-forward NPV upside, with the ungeared potential being a near tripling of the SPD project value through FY21”.

This special report is brought to you by Tando Resources.

This advice has been prepared without taking into account your objectives, financial situation or needs. You should, therefore, consider the appropriateness of the advice, in light of your own objectives, financial situation or needs, before acting on the advice.

If this advice relates to the acquisition, or possible acquisition, of a particular financial product, the recipient should obtain a disclosure document, a Product Disclosure Statement or an offer document (PDS) relating to the product and consider the PDS before making any decision about whether to acquire the product.