Australian Vanadium brings in big Chinese steel player to talk finance and sales
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Australian Vanadium has inked an agreement with a private Chinese steel and alloy producer that could pave the way for a potential financing and sales deal for the company’s Gabanintha project.
The memorandum of understanding with Win-Win Development Group will kick off talks regarding project finance and vanadium oxide (V2O5) offtake.
The news pushed shares up over 7 per cent to an intraday high of 4.4c this morning.
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 in 2019. The second stage is planned for the following year.
Win-Win also has a stake in an operating production line currently producing 2400tpa of VCN products for existing steel companies.
The timing of the Win-Win development and full production has strong synergies with the planned development of the Gabanintha vanadium project, Australian Vanadium told investors this morning.
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 [sales] and we also knew that alloys were running under the radar,” Mastermines boss David Gillam told Stockhead.
“The growth in alloys in China has been increasing dramatically as they manage to wrestle that technology away from the west.”
The forecast is for a 20 to 30 per cent increase in V2O5 demand in the fourth quarter of this year.
While the battery market has been in the spotlight for some time now due to the anticipated big growth, the key driver for vanadium demand will still be steel and alloys.
And China’s environmental crackdown has seen the Asian powerhouse introduce stricter standards for Chinese rebar – a reinforcing steel used in concrete.
“Rebar standards are going to be the big one in Q4 and if you do throw 20 per cent more demand on top of the shortages we have now, we are quietly confident that we’re going to see prices go up fairly dramatically,” Mr Gillam said.
Mr Gillam reckons vanadium producers should supply at least 60 per cent of their offtake to steel and alloy producers, 30 per cent to the battery market and 10 per cent to the spot market.
“Even though batteries are looking very good at the moment, in a disruptive market you don’t want to bet your mine on it,” he said.