Hardey is buying a once operating vanadium mine as global demand takes off

Special report: Hardey Resources is picking up a vanadium project in Argentina at a time when steel and battery makers are desperate for new supply.

Hardey (ASX:HDY) has struck a deal to acquire the Nelly mine in the San Luis province, which historically produced grades of up to 1.9 per cent vanadium pentoxide (V2O5).

Hardey is wasting no time with its plans to re-open the mine and will soon lodge its application to immediately reactivate the mining licence with the regulator.

The company says it is a straight forward process because Argentina’s mining laws enable mining licences to be reactivated relatively quickly.

“Upon finalising the acquisition, the board’s focus will be undertaking exploration activities with the aim of proving up a JORC-compliant resource and moving to re-open the Nelly vanadium mine,” executive chairman Terrence Clee said.

“Furthermore, the board is optimistic demand for vanadium will remain robust over the next few years, as structural changes augur favourably for the continued expansion of the renewable battery sector.”

Everything you want in a mine

The Nelly mine, which operated between 1949 and 1957, is located on a 53-hectare tenement 170km from the capital of San Luis Province in Argentina.

The mine has ready access to mains power and water supplies, while nearby towns can provide supporting services and a skilled labour pool.

There is also good transport infrastructure, including a rail network, from the mine to key ports.

In terms of output, a processing plant on-site produced V2O5 and ammonium metavanadate – a sand-like powder used in dyes, inks, varnishes and paints, and as a photographic developer and reagent.

During the 1950s, Nelly was one of the few operating mines that had an on-site processing plant and accommodation for employees.

The mine was initially developed as an open pit and subsequently underground galleries were progressed.

Since the mine closed in 1957, there have been several studies undertaken by local geology teams that believe the Nelly mine and surrounding areas are significantly underexplored.

Samples taken by the geologists confirmed the presence of high grade V2O5 as well as lead, zinc, copper, gold, silver, molybdenum and bismuth.

When Nelly was operating during the 1950s, only part of the known resource was exploited, leaving most of the untapped mineralisation intact.

Geologists have determined there are several mineralised veins at surface. While some of them have been mapped, the ones trending underground are completely unexplored.

Significant vanadium demand growth

Over the past two to three years, the twin effects of global supply bottlenecks and rising demand have underpinned a six-fold increase in the vanadium price.

On the supply side, China, which supplies around 50 per cent of global vanadium, is using more of its output internally following new rules to double rebar requirements following recent earthquakes.

Rebar is a reinforcing steel used in concrete.

At the same time the Asian heavyweight has shuttered polluting mines, reducing its output by about 10 per cent and igniting a search for new supply chains that includes Australia and Argentina.

Hardey says this makes the economics of re-opening the Nelly mine favourable.

Traditionally the steel industry consumes around 90 per cent of global vanadium, but demand from the renewable battery sector is starting to take-off.

Specifically, demand for scalable energy storage is accelerating, reflecting wider renewable energy adoption.

Vanadium redox batteries (VRBs) are an emerging solution and industry watchers predict VRBs could account for around 30 per cent of the global rechargeable battery sector over the next decade.

Share sale deal

Hardey is being granted a 40-day option to acquire Nelly Vanadium, the owner of the mine, for an initial cash payment of $75,000.

If it chooses to exercise the option, it will issue 737.5 million shares and the same amount of options – exercisable at 2c per share before April 30, 2020.

Hardey has also agreed to pay a 3 per cent royalty to Nelly Vanadium’s founding shareholders.

This special report is brought to you by Hardey Resources.

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