As the vanadium price heads for a new ‘normal’, small caps are feeling the pinch

Like other battery metals, investor interest has waned somewhat in vanadium, especially after the recent steep drop in the price.

The Chinese price for vanadium pentoxide flake peaked at $US33.90 ($47.52) a pound in early November last year but has since slid more than 57 per cent to $US14.40 a pound.

Meanwhile, the Chinese price for ferrovanadium hit a high of $US143.50 a pound in late October before sinking 62 per cent to $US54.50 a pound.

This has impacted the share prices of several junior vanadium hopefuls.

There are 43 ASX stocks with exposure to vanadium, and 30 have lost between 4 and 92 per cent of their value since November last year.

Here’s a full list courtesy of leading ASX data provider MakCorp:

Swipe or scroll to reveal full table. Click headings to sort

But the strong demand outlook hasn’t changed and players in the industry are still reporting increasing interest from buyers.

Most vanadium is used in steel-making. Over 90 per cent of the commodity is added to steel to make it stronger.

89% of surveyed rebar producers in China 🇨🇳 make use of #vanadium in their #steel rebar production. #Vanadium's inherent characteristics have made it the most suitable metal to use in strengthening rebar. Read more on our press release: https://t.co/DcCI6wK6SE pic.twitter.com/yuB2jmejJ0

— Vanitec (@VanitecVanadium) April 5, 2019

In the last few years the excitement around vanadium has really taken off thanks to the commodity making it into the battery metals basket.

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.

Wood Mackenzie predicts the global energy storage market will expand 13-fold by 2024.

>>Read Vanadium stocks guide: Here’s everything you need to know

Several vanadium players gathered in Hong Kong last week for Mines & Money Asia and there are several meetings being held in China this week as well.

After a busy week at @MinesAndMoney in Hong Kong speaking to potential investors, MD @VincentAlgar and Technical Director Daniel Harris are now in Chengdu, China meeting with our MoU partners Win Win Development prior to attending the @VanitecVanadium meeting in Xichang $AVL pic.twitter.com/aLWCDylDZW

— Australian Vanadium (@AusVanadium) April 8, 2019

Vincent Algar, managing director of emerging producer Australian Vanadium (ASX:AVL), said he witnessed strong interest last week in Hong Kong for vanadium use in the stationary storage space.

“People see it as a very viable option and one of the technologies that will be part of the mix for stationary grid level storage,” he told Stockhead.

“That was very clear from a lot of the people we met.”

There is also still strong interest from steelmakers, particularly given only half of Chinese steelmakers have complied with new stricter standards for Chinese rebar – a reinforcing steel used in concrete.

The new rebar standards require Chinese steelmakers to use more vanadium in their rebar to make it stronger.

“We also saw interest in the demand coming out of China for vanadium for steel,” Algar said.

“There is a good understanding that is the core market.”

Algar said so far only just over 50 per cent of Chinese steelmakers had implemented the new rebar standards.

“So there is still room for additional players in the vanadium space to fulfil their obligations under the rules and they have to,” he said.

In China this week, Australian Vanadium met with a private Chinese steel and alloy producer that it struck an MoU with mid-last year.

The MoU with Win-Win Development Group paved the way for talks regarding project finance and V2O5 offtake.

Win-Win was introduced to Australian Vanadium by its China consultant Mastermines.

“If you are going to be serious about vanadium you need a steel producer to be the cornerstone of the offtake and we also knew that alloys were running under the radar,” Mastermines boss David Gillam told Stockhead at the time Australian Vanadium announced the deal.

Win-Win is building a 5000 tonne-per-annum (tpa) vanadium carbon nitride (VCN) production line, which requires about 7000 to 8000tpa of 98 per cent V2O5.

The first stage will require 2000 to 3000tpa and be operational this year. The second stage is planned for next year.

Win-Win also has a stake in an operating production line currently producing 2400tpa of VCN products for existing steel companies.

Australian Vanadium is developing “The Australian Vanadium Project” in WA.

The company aims 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’s share price, however, hasn’t reflected its progress.

The share price hit a 52-week low of 2c just before Christmas and is still only trading at around 2.1c, which is 70 per cent less than the high of 7c it reached in early August last year.

Still full steam ahead

Golden Deeps (ASX:GED) this week secured a deal with Hong Kong-based metals trader Generous Metals Company (GMC) to crush, concentrate, refine and sell vanadium product from Golden Deeps’ Abenab vanadium project in Namibia.

Under the JV, GMC will build a crushing and concentrator plant on-site that will have a capacity of 250,000tpa.

All costs of the operation in both Namibia and China will be paid by GMC, and profits will be divided equally between Golden Deeps and GMC.

But again investors haven’t been responding, with Golden Deeps’ share price now nearly 30 per cent lower than where it was sitting in late October last year. The company was hovering around 4c on Tuesday.

TNG (ASX:TNG) is working to bring its $850m Mount Peake vanadium, titanium and iron project in the Northern Territory into production.

The company has made significant progress with project financing, permitting, off-take, engineering and design but on Monday hit a low of 8c — a nearly 40 per cent drop on the price it was trading at in early November.

In March, the company revealed that it is considering a secondary listing on the AIM market of the London Stock Exchange.

• Subscribe to our daily newsletter
• Join our small cap Facebook group
• Follow us on Facebook or Twitter

Chairman John Elkington said an AIM listing could significantly enhance liquidity and provide TNG with direct access to investors in the London market.

Furniture-assembler-turned-vanadium-explorer ScandiVanadium (ASX:SVD) is working to secure approvals to start a maiden drilling program at its Skåne vanadium project in Sweden.

But the company didn’t pick the best time to return to the ASX, with its debut in late November disappointing.

ScandiVanadium is trading over 50 per cent less than when it relisted.

The new ‘normal’

“The price is coming off a bit, but the demand scenario remains for steel so there’s an understanding the price may have been a little bit on the high side and very peaky, so it’s retracting back to probably what should be normal,” Algar said.

“Between $10 and $15 is a good place for it to be. It services more markets and doesn’t cause panic or speculation. It’s also better for battery market development.”

Algar said the price is still well above its long-term average at this point.

“It was very low for a long time, $8.67 was the long-term average,” he said.

“It’s still trading north of $10 and that makes for very good margins on AVL’s current basis of our PFS [pre-feasibility study].”

Australian Vanadium’s operating costs have been estimated at $US4.15 a pound in its PFS.