Investors have clearly demonstrated their support for QEM and ongoing development of its Julia Creek vanadium and oil project in Queensland by oversubscribing for its $2.7m placement.

Proceeds from the placement priced at $0.17 per share, which was supported by new and existing sophisticated and professional investors, will fully fund the company’s pilot plant program that follows on the successful second round of bench-scale testing which delivered a significant improvement in vanadium extraction rates and oil yields.

Notably, non-executive director and major shareholder David Fitch will subscribe for about $765,000 worth of shares to maintain his 28% stake in the company.

In parallel with the pilot plant work, QEM Limited (ASX:QEM) will also undertake beneficiation and mineral characterisation work with the University of Queensland to further optimise the processing plan while funds have been allocated to update the mining scoping study and JORC report.

Managing director Gavin Loyden said demand exceeding the intended raise amount despite the slim discount to the closing share price of 18c validated the company’s vision of developing the critical minerals project that incidentally offers quick commercialisation through its shale oil content.

“The ability for us to price this raise without the typical size of discounts seen elsewhere truly validates QEM’s valuation upside and although market volatility has increased in recent months, it is clear that investors will continue to be attracted to high quality critical mineral developments in tier-1 jurisdictions,” he added.

“Following the recent success in pilot plant operations, we look forward to delivering further progress at QEM.”

Unique critical minerals project

The 249.6km2 Julia Creek project in Queensland’s North West Minerals Province is unique in having both a resource of 2,850Mt grading 0.31% vanadium pentoxide, with 360Mt in the higher confidence Indicated category as well as a best estimate (2C) Contingent Resource of 79 million barrels of oil contained within its shales.

Vanadium is classed as a critical mineral – with priority for development and investment – by the Australian Government due to its use in vanadium redox flow batteries (VRFBs) that are expected to play a significant role in the transition to renewable energy.

VRFBs use vanadium-ions in the electrolyte solutions and are considered safer, more scalable, and longer lasting than their lithium-ion counterparts with a lifespan of more than 20 years.

It is also used in steel to improve tensile strength, reduce weight and improve weather resistance.

The vanadium market is forecast to grow at a compound annual growth rate of 10.2% to $2.36bn in 2025 due to demand growth for VFRBs, which are expected to account for about 23% of the market by 2030 compared to the current 4%.

With 31% of the world’s undeveloped vanadium resources but no domestic production as yet, Australia has the opportunity – like it does with many other mineral commodities – to be a significant player in this space.

A role that QEM is keen to help play with its Julia Creek project.

To top it off, the project’s oil resources could help play an admittedly small role in securing Australia’s energy requirements.

Successful pilot testing

QEM has already proven that its proprietary process can extract both vanadium and oil from Julia Creek shales.

Testing has achieved greater than 98% vanadium oxide extraction using acid leaching and a still impressive plus 92% extraction with alkali leaching.

Likewise, bench-scale testing of its process has yielded better than 180% oil extraction yield compared to the use of a Modified Fischer Assay.

Petrology studies are currently underway to understand potential product suite.

Lowering project risk

The company has also benefited from Queensland’s decision earlier this year to buy and upgrade the CopperString 2.0 project, which will connect the North West Minerals Province with the national energy grid near Townsville.

This electricity transmission line will allow the company to tap into what the Australian Energy Market Operator (AEMO) calls the “best co-located wind and solar resources in Eastern Australia”.

That is without considering the potential for effectively on-site renewable power generation with QEM having received several expressions of interest for the development, ownership and operation of a plant capable of producing up to 1GW of energy from a hybrid wind and solar farm.

Monitoring equipment set up by the company has already proven that the site at Julia Creek receives sufficient wind and sunlight for such a plant to be viable.

Queensland has also substantially increased its support for the construction of the Queensland Resources Common User Facility (QR-CUF), which will house a vanadium extraction demonstration plant, up from $10m to $75m.

This facility is intended to trial production processes for commercialisation, enabling prospective miners to begin producing mineral samples at scale, with QEM having been involved in the design inputs for the project since its inception.

Separately, the company has secured a vanadium-rich waste stream that when combined with the QR-CUF, will allow it to demonstrate its ability to upcycle Queensland industrial waste to battery grade vanadium pentoxide.

This article was developed in collaboration with QEM Limited, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.