Hardey expands global vanadium footprint with new Australian projects
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Special report: Hardey Resources is picking up six highly prospective vanadium projects in Queensland and the Northern Territory close on the heels of its planned acquisition of the Nelly mine in Argentina.
The company (ASX:HDY) has secured a 40-day option to acquire all of the shares in Vanadium Mining.
The four Queensland projects are located near Intermin Resources’ (ASX: IRC) globally significant Richmond project, which hosts an inferred resource of about 2.6 billion tonnes at 0.32 per cent vanadium pentoxide (V2O5).
The two Northern Territory projects adjoin TNG’s (ASX:TNG) Mount Peake project that has a total resource of 160 million tonnes at 0.28 per cent V2O5 and a binding life-of-mine off-take deal with Korea’s Woojin Metals.
“The board has taken the decision to evolve Hardey into an emerging vanadium supplier to the renewable energy sector, which explains the decision to opportunistically acquire six highly-prospective projects across Queensland and Northern Territories,” executive chairman Terence Clee said.
“This complements the Nelly vanadium mine in Argentina and delivers Hardey a solid, yet geographically diversified, global platform to develop moving forward.”’
The company wants to place a greater emphasis on developing its vanadium assets to facilitate its evolution into an emerging supplier to the renewable energy sector.
Early cash flow potential
Hardey Resources has the opportunity to fast-track early cash flow with the re-opening of the Nelly vanadium mine.
It takes around five years or longer to bring a mine into production from initial discovery, but Hardey (ASX:HDY) is picking up a past operating mine that already has stockpiles that can be monetised quite quickly.
Under Argentina’s mining laws, the process to reactivate a mining licence is relatively straight forward and fast, according to Hardey.
“One of the attractive and unique features with the Nelly vanadium mine is the potential to fast track the commencement of mining operations and cash flow,” executive chairman Terence Clee said.
“This is a material comparative advantage over building up a resource from inception, which can take many years.”
This means Hardey could accelerate monetising the legacy stockpiles as a direct shipping ore vanadium product ahead of defining a resource and restarting mining operations.
DSO requires only simple crushing before it is exported, which keeps costs low.
Hardey’s geology team is scheduling meetings with the directors of the mining and environmental departments in San Luis to speed up the reactivation of the mining licence.
The company believes the Nelly mine, which has a high-grade resource averaging 0.82 per cent vanadium pentoxide (V2O5), will be a primary, low-cost producer similar to TSX-listed Largo Resources’ Maracas Menchen mine in Brazil.
The Maracas Menchen mine has the second lowest production costs globally and is expected to produce up to 10,000 tonnes of V2O5 this year at an average grade of 1.15 per cent.
The Nelly mine, which operated between 1949 and 1957, historically produced grades of up to 1.9 per cent V2O5.
With the Nelly mine and the six projects in Australia, Hardey believes it can rapidly build a strong, yet complementary, scalable global platform to meet growing demand for vanadium, especially from the key Chinese market.
Significant vanadium demand growth
With the vanadium market heading towards a forecast deficit, Hardey is in a position to fast-track the development of a new low-cost vanadium supply chain, which could make the company appealing to potential off-take partners.
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.
Hardey has paid Vanadium Mining $75,000 for the option to acquire the company.
If the option is exercised, Hardey will issue 550 million shares and the same number of options, which will be exercisable at 2c each on or before April 30, 2020.
Hardey has also agreed to grant Vanadium Mining a 3 per cent royalty for all of the minerals produced from the six projects.
The company will put the deal to a shareholder vote at an upcoming general meeting.
This special report is brought to you by Hardey Resources.
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