What’s next for vanadium play Tando as the boom metal soars
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There is no shortage of ASX-listed vanadium stocks for investors wanting exposure to what has been the “boom’’ metal of the last couple of years.
Vanadium’s (spot) price run from as little $US3/lb in 2016 to $US33.90 recently has been nothing short of spectacular.
The adoption of new and higher strength steel “rebar” (reinforced bar) specifications in China to prevent buildings collapsing during earthquakes and floods, and the emerging demand from the vanadium redox flow batteries (VRFBs) sector, have been behind the price rise.
But the metal’s strong performance has not been enough to protect the 40-odd ASX juniors that have vanadium in their portfolio. The best performed in response to vanadium’s price run up this year have given much of their gains back.
It is not that the vanadium thematic of increased use in China, and strong growth in the uptake of VRFBs in the stationary market for storage of renewable energy, has run its course.
It’s just that the vanadium sector got sold off with all other mining sectors in the October stock market rout.
Some caution on vanadium’s price performance is also at play.
The metal has a volatile history. Supporters of the vanadium thematic argue that this time around, things are different thanks to China’s new steel standards, which came in to effect last week, and the rise of VRFBs.
But like the rest of the junior sector, the recovery of buying support for the vanadium stocks is proving elusive, notwithstanding the 13-year highs in the vanadium price.
The best shot the vanadium stocks have in the near-term to get a bit of buzz back in to their stories is to roll out a positive news event and hope that there is a re-rating of their share price in response.
A relatively newcomer to the vanadium space, Tando Resources (ASX:TNO) is one to watch on that score.
It has previously flagged to the market that the completion of a drilling program at its recently acquired SPD project in the heart of South Africa’s vanadium industry – it supplies about 11% of global demand – would lead to the release this month of a maiden ASX-compliant mineral resource estimate.
Based on a previous South African-compliant resource estimate of 513m tonnes grading 0.78% vanadium pentoxide, the SPD project – 74% owned by Tando – is not going to be wanting in terms of scale, or grade.
A new drilling program is underway to enable the maiden ASX-compliant resource estimate to be upgraded to the “indicated’’ category with its grater level of confidence.
The current drilling program will also test the potential of what could be a differentiator for the project – the presence of high-grade “pipes’’ that sit within a 3 km radius of the SPD deposit.
Tando has previously reported high-grade vanadium assays from rock chip samples taken from the surface of the pipes have consistently graded more than 2% vanadium pentoxide.
Such a grade is kind of interesting in the vanadium world.
If the high-grade nature of the pipes is confirmed by drilling, Tando might have a direct shipping ore (DSO) proposition on its hands.
(Ed’s note: DSO — or direct shipping ore — refers to minerals that require only simple crushing before they are exported, which keeps costs low.)
Lithium developers in Western Australia used early DSO shipments of the lithium ore spodumene as a handy cash raising exercise ahead of their full-blown operations producing an upgraded spodumene product starting up.
The South African address of the SPD project is not everyone’s cup of tea.
But as the country is already an important source of current vanadium supplies by Glencore and others, it deserves consideration as the vanadium thematic unfolds.