Vanadium stocks guide: Here’s everything you need to know
Vanadium is a battery metals firecracker right now, with the price continuing on a rapid upwards trajectory. Here’s a look a how vanadium stocks have become so popular, what’s driving the demand and key ASX-listed companies to know.
Of all the so-called “battery metals” needed in modern energy storage devices, vanadium has attracted perhaps the most attention from ASX small cap investors in recent times. Vanadium stories have been among the most popular among Stockhead readers in 2018.
There are 40-odd ASX listed stocks that offer exposure to vanadium. (See below for a full list).
While the price of vanadium has been rocketing, more than 60 per cent of vanadium stocks lost ground in the year to October 2018.
The stocks fell especially in the three months leading up to the October stockmarket correction. About 37 of the 39 vanadium stocks in our table below lost between 3 and 65 per cent of their value.
That may be good news for investors though, because market watchers suggest vanadium mining companies provide a great long-term investment opportunity.
In this guide, Stockhead explains the factors that have been driving vanadium stocks, and what will spur demand — and stock prices — into the future.
Most vanadium is used in steel-making. Over 90 per cent of the commodity is added to steel to make it stronger.
Vanadium was initially discovered in 1801 by Spanish scientist Andres Manuel del Rio — who called it “erythronium” at the time.
The commodity was forgotten about until Swedish chemist, Nils Gabriel Sefström, happened across the mineral in 1830 and it finally got the name vanadium — the Scandinavian goddess of beauty — because of the beautiful colours of its compounds in solution.
It wasn’t until the early 20th century that vanadium’s considerable strength was discovered.
That made it the material of choice for things like planes, cars and buildings.
Vanadium started to be used industrially over a century ago, with its first application being in the vanadium-steel alloy chassis of the Ford Model T car.
But it hasn’t been until the last few years that the excitement around vanadium has really taken off.
The reason for that is its application as a battery metal. Vanadium is the key commodity in what is known as a “flow” battery.
Vanadium redox flow batteries (or VRFBs) are better suited to large scale applications (stationary storage), such as network support for electricity grid operators and telcos looking to power off-grid communications towers and utility scale installations.
Vanadium batteries are safer than lithium-ion batteries, cheaper than other types of “flow” batteries, and have the longest life spans, lasting more than 20 years or up to 25,000 cycles.
They require little maintenance and can be fully discharged without damage to their storage capacity.
They use two tanks of vanadium pentoxide (V2O5) solution that have been processed into a liquid electrolyte.
When the electrolyte is pumped through electro-chemical cells past a proton-exchange membrane, ions are swapped between the negatively and positively charged electrolyte, creating an electrical charge.
The VRFB is inherently more stable than lithium-ion because the electrolytes are just positively and negatively charged version of the same chemical and the process of charging and discharging does not generate excess heat.
The vanadium battery technology is an Australian invention and the first prototype was built by Maria Skyllas-Kazacos at the University of New South Wales in the 1980s.
But it wasn’t until about three years ago when the commercial roll out of these vanadium batteries started to ramp up and investors began to sit up and take notice.
Now these big batteries are a reality in Japan, China, Australia and soon to be in Germany.
In China, Rongke Power in Dalian province is building the largest battery in the world, an 800MWh VRFB, while in Hebei province Pu Neng Energy is building a 500MWh version.
Germany is looking at building a VRFB that can store enough energy to power Berlin for an hour, which would be a big step forward from the Tesla lithium-ion battery built in Australia which only has the capacity to provide 2 per cent of Adelaide’s power requirements at any time.
In August, small cap vanadium player Protean Energy (ASX:POW) successfully hooked up a 25kW/100kWh vanadium battery with Western Australian electricity operator Western Power.
Protean has been developing its V-KOR VRFB for about 10 years with Korean partner KORID Energy.
VSUN Energy, meanwhile, launched WA’s first VRFB in 2016.
Vanadium is largely a by-product of a bunch other minerals. It rarely occurs in nature by itself.
There are only three large-scale primary vanadium producers globally – Bushveld Minerals, Glencore, and Largo Resources.
The world’s largest vanadium mines are found in the Bushveld region of South Africa, the Ural Mountains of Russia and in China’s Sichuan province.
Even with planned expansions by existing producers designed to increase annual production, the supply shortfall is expected to widen further as demand for vanadium continues to rise.
When it comes to vanadium it is not just as simple as looking at the grade of the ore.
The keys to determining a good deposit come down to the overall magnetite recovery and the grade of the vanadium you get from that magnetic concentrate.
Canada’s Largo produces the highest-grade V2O5 in the world of 3-3.2 per cent from its Brazilian mine.
But it does that from a typical magnetite recovery of 30-35 per cent, which is considered pretty good.
The Rhovan mine in South Africa’s Bushveld Complex also has a 30-35 per cent magnetite recovery and it produces 1.6-1.8 per cent V2O5.
There are four main uses of vanadium.
Traditionally, vanadium is used in:
Steel – 92 per cent of vanadium is used in steel. It takes only a small amount of vanadium to double the strength of steel and reduce its weight by 30 per cent.
Titanium – vanadium is also used to make titanium alloys. This is where titanium is mixed with other chemical elements to make it stronger. Titanium alloys are used in military applications, aircraft, spacecraft, bicycles, medical devices and jewellery.
Chemicals – V2O5 is used in ceramics and as a catalyst for the production of sulfuric acid.
Growing demand for steel, particularly in China, has driven a shortfall in the commodity.
China also recently introduced stricter standards to double the amount of vanadium used in its rebar, a reinforcing steel used in concrete, following recent earthquakes.
But all the excitement in recent years has focused on vanadium’s use in batteries for stationary energy storage.
While lithium-ion is now the favoured technology in China, it appears the Asian powerhouse is leaning towards VRFBs as its best option for grid-scale energy storage.
While the electric vehicle space is firmly dominated by lithium-ion for the moment, stationary storage is more diverse.
There are a couple of battery technologies vying for top spot, but the spotlight is largely on VRFBs.
Benchmark predicts that by 2028, 50 per cent of the burgeoning stationary storage market will be lithium-ion, and 25 per cent will be VRFBs.
“The area where you are likely to see far more variation in battery technologies is stationary storage applications where you don’t need the light-weight benefits of a lithium-based technology,” Benchmark senior analyst Andrew Miller told Stockhead.
“While we still expect lithium-ion to play a big role in this market there will be several other technologies that compete for market share in this space.
“For stationary storage, vanadium flow is very interesting because of the life-cycle advantages and the fact that the input raw materials can be reused.”
The price of V205 has hit its highest point in 13 years, reaching $US32.50 in October.
The price came off an all-time high in 2005 before going for a run again in 2008. It levelled out to trade pretty well flat between 2009 and 2015 before taking off again in 2016.
The price is up over 300 per cent just this year:
Only a handful of ASX vanadium stocks have followed a similar trajectory in 2018.
WA-focused small cap King River Copper (ASX:KRC) has been the standout performer this year – spiking as much as 1166 per cent to a 52-week high of 19c in March.
Australian Vanadium (ASX:AVL), which also has a project in WA, gained as much as 268 per cent since the start of 2018 to reach a new 52-week peak of 7c.
Energy Metals (ASX:EME), meanwhile, jumped to a new 52-week high of 20c in mid-June.
Vanadium demand for VRFBs is growing at such a rapid rate. The forecast compound annual growth rate for vanadium to be used in VRFBs is 60 per cent.
Current demand is about 100,000 tonnes per annum, but that is tipped to triple over the next five to six years.
Benchmark boss Simon Moores says vanadium could have its “Elon Musk moment” as it advances towards powering 25 per cent of stationary battery storage by 2028.
“The potential for vanadium flow is absolutely significant,” Mr Moores told delegates at an industry event earlier this year.
“If the vanadium market gets a number of key [mines] up and running quickly, vanadium flow could have its ‘lithium-ion battery moment’ — its Elon Musk moment.”
The man himself, Mr Musk, said at a shareholder meeting earlier this year that “the rate of stationary storage is going to grow exponentially”.
“For many years to come each incremental year will be about as much as all of the preceding years, which is a crazy, crazy growth rate,” he said.
Lux Research forecasts that vanadium flow batteries will be at the very least a $190 million market opportunity by 2024 and on an “optimistic” basis will be well over $400 million.
Steel demand is also on the rise.
In China in the first half of 2018, steel production increased 6 per cent year-over-year – representing about 450 million tonnes of steel.
Railway construction is also now becoming a significant factor in steel demand as China ramps up its One Belt, One Road policies.
China’s One Belt, One Road is multi-trillion-dollar initiative to build efficient trade corridors between China, Asia, the Middle East and Europe. It involves new rail, road and maritime infrastructure in some 70 countries.
The expectation is that this year railways in China alone will consume 32 per cent of the country’s total steel demand – around $US26 billion worth of steel.
And that doesn’t take into account the railways China is building outside of the country.
Demand will also increase with China’s new rebar standards. Estimates put this requirement at about an extra 170,000 tonnes — or 21 per cent of global vanadium production — starting in November 2018.
There are about 40 ASX stocks with exposure to vanadium.
Below we profile the biggest vanadium stocks by market cap. But here’s a full list courtesy of leading ASX data provider MakCorp:
Swipe or scroll to reveal full table. Click headings to sort
Here are the top 10 by market cap:
Syrah Resources (ASX:SYR)
Syrah is the largest player by market cap, but it is primarily a graphite producer.
The $486 million company, however, is investigating the possibility of also producing vanadium from its Balama operation in Mozambique.
Syrah is currently reviewing a 2014 vanadium scoping study and undertaking work to reach a vanadium processing investment decision within the next two to three years.
Neometals is roughly about a quarter the size of Syrah in terms of market value at $125 million, but it too is already in production.
Its primary focus though is its already producing Mount Marion lithium mine and it is in the process of demerging its Barrambie titanium and vanadium project.
Neometals owns a 13.8 per cent stake in Mount Marion, which is located near Kalgoorlie in Western Australia.
Mayur Resources (ASX:MRL)
Brisbane-based Mayur Resources is developing an industrial and mineral sands project in southern Papua New Guinea.
Earlier this year, the $104 million company said it had shortlisted contractors to build a small-scale bulk sample plant at its Orokolo Bay project that would provide “commercial-scale” shipments of vanadium titanomagnetite to Asia-based end users for testing.
Mayur hopes this will lead to it securing binding off-take deals.
The $97 million TNG is working to bring its $850 million Mount Peake vanadium, titanium and iron project in the Northern Territory into production.
The company recently inked a native title agreement for the project which brings it closer to the completion of the complex permitting process. The next step is the granting of a mining lease.
Mount Peake has a JORC-compliant resource of 160 million tonnes at 0.28 per cent V205, 5.3 per cent titanium and 23 per cent iron — 118 million tonnes of which is in the highest confidence “measured” resource category.
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 from inferred to indicated to measured.
King River Copper (ASX:KRC)
King River Copper has a market cap of $66 million.
Right now the company is finalising a scoping study for its Speewah vanadium, titanium and Iron project in the East Kimberley region of Western Australia.
King River says Speewah is the largest vanadium-in-magnetite deposit in Australia with a total measured, indicated and inferred resource of 4.7 billion tonnes at 0.3 per cent V2O5, 2 per cent titanium and 14.7 per cent iron.
The company has demonstrated it can produce a 2.1 per cent V2O5 magnetite-ilmenite concentrate during test work at the project.
Australian Vanadium is developing its Gabanintha project in WA.
The company is aiming to eventually produce about 10,000 tonnes of V2O5 each year over an initial 17 years, with potential to extend the mine life.
Australian Vanadium is in the process of completing a pre-feasibility study (PFS) for the Gabanintha project – which the company says is one of the world’s largest undeveloped vanadium resources.
At the moment, the project has a total resource of 175.5 million tonnes at 0.77 per cent V2O5, including a high-grade zone of 93.6 million tonnes at 1 per cent V2O5.
Australian Vanadium has a market cap of about $62 million.
While Lithium Australia plans to be the first Australian company to do everything from mining lithium to making batteries, the junior recently struck a deal that gives it the option to acquire a lithium project that has also shown evidence of vanadium.
Though it looks more likely that Lithium Australia, which has a market value of $43 million, will only be focusing on the lithium, which it says will be an ideal feed source for its pilot plant utilising the company’s SiLeach technology.
“The Youanmi lithium project has many of the attributes of WA’s other emerging lithium centres,” managing director Adrian Griffin said when the deal was announced in early October.
“The area has been a focus of past multi-metal exploration. Its lithium potential has largely been ignored, but there has been a significant amount of drilling of the vanadium horizons.”
Arafura Resources, which has a market cap of about $42 million, is focused on becoming a rare earths producer, but it has a joint venture project that features vanadium.
The company owns a 60 per cent stake in the Bonya base and precious metals, tungsten, iron and vanadium project located 280km northeast of Alice Springs in the Northern Territory.
Joint venture partner Rox Resources (ASX:RXL) is in the process of selling its 40 per cent share in the Bonya project to Thor Mining (ASX:THR).
Arafura’s main goal is to bring its Nolans neodymium and praseodymium (NdPr) project into production.
NdPr is used to make magnets needed in the automotive industry for electric components such as seats, mirrors, wipers, steering and braking, as well as the actual motor.
Triton Minerals (ASX:TON)
The $40 million Triton Minerals is another emerging graphite producer that also has a vanadium project in Mozambique.
The company is fast tracking studies on the vanadium at its Nicanda Hill project following an independent review by CSA Global.
Triton says Nicanda Hill is a “globally significant” deposit with a resource of 1.44 billion tonnes at 0.29 per cent V2O5.
The company is undertaking more targeted test work and metallurgical studies to define the most prospective areas of the deposit.
Chalice Gold Mines (ASX:CHN)
Chalice Gold Mines’ entry into vanadium is only very recent. The company, which is valued at about $39 million, revealed in May it had applied for exploration licences prospective for vanadium and nickel in Queensland and Western Australia.
Chalice is looking for vanadium hosted in shale rather than the more common magnetite-hosted vanadium because it is much easier to mine.
The company’s Flinders River vanadium project in Queensland surrounds the 2.6 billion tonne shale-hosted Richmond vanadium project owned by Intermin Resources (ASX:IRC).
Names keep popping up when it comes to stocks to watch.
Technology Metals Australia
Technology Metals is aiming to produce 13,000 tonnes each year from its wholly owned Gabanintha vanadium project, which is more than Largo will be producing at its expanded capacity of 12,000 tonnes per annum.
Technology Metals’ PFS indicates the project will have a pre-tax net present value (NPV) of $1.3 billion at an assumed vanadium price of $US13 per pound.
NPV is used to assess the profitability of a project. The higher the NPV, the more profitable a project will be.
The total cost to build the operation is forecast to be around $380 million – much less than the $625 million Neometals indicated in 2015 it would need to build its nearby Barrambie titanium and vanadium project, which is slated to produce 2,000 tonnes per annum of vanadium and 98,000 tonnes per annum of titanium.
TNG’s Mount Peake project and King River Copper’s Speewah project both also require a much bigger capital outlay than the Gabanintha project.
Australian Vanadium has already signed a memorandum of understanding with private Chinese steel and alloy producer Win-Win Development Group that has ignited talks for a potential financing and sales deal for the Gabanintha project.
Win-Win is building a 5000 tonne-per-annum vanadium carbon nitride production line, which requires about 7000 to 8000 tonnes per annum of 98 per cent V2O5.
An initial production scenario indicates Australian Vanadium’s Gabanintha project will have an NPV of $US1.1 billion at an assumed price of $US13 per pound and $US2.4 billion at $US20 per pound.
While TNG’s Mount Peake does have an initial higher outlay than other operations, the financial upside is higher too — especially given the very conservative vanadium price of just $US10 per pound used in the November 2017 updated PFS.
Mount Peake has been tipped to have a pre-tax NPV of $4.7 billion for a 17-year project commencing production at 3 million tonnes per annum before expanding to 6 million tonnes per annum after four years.
TNG already has a binding off-take deal in place with South Korean ferro alloy seller Woojin Metals for 60 per cent of its vanadium output.
The company says its estimated cost of production, of about $US2.50 per pound, will be among the lowest 15 percent of vanadium operations globally.
Early in 2018 explorer Pursuit Minerals (ASX:PUR) picked up projects in northern Finland and Sweden.
The Finnish government has ramped up its push to be at the forefront of battery technology and wants to re-establish itself as a substantial vanadium producer. The country, which once produced about 10 per cent of the world’s vanadium, wants to do everything from mining to refining to making batteries.
Investment advisor Matt Bohlsen also suggests Tando Resources (ASX:TNO), Aura Energy (ASX:AEE) and Battery Minerals (ASX:BAT) have “appeal” for investors interested in some “cheap vanadium speculative plays”.
Tando is advancing its SPD project in South Africa towards a maiden JORC resource.
The latest drilling results show high grades of up to 1.72 per cent V2O5 near surface — which is even better than the highest initial grades of up to 1.61 per cent reported by Tando earlier in October.
These results are whole-rock, or pre-concentrate grades. Historical drilling at SPD has returned magnetic concentrate grades above 2.2 per cent V2O5.