Mine closure and stricter China regulations are doing wonders for vanadium
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Special report: China’s push for stronger building materials and the shutdown of a mine in South Africa have seen vanadium prices hit a 10-year peak and remain high.
The European ferro-vanadium price reached $US73/kg ($98.72) in June – a 461.5 per cent increase over a low of $US13/kg in late 2015.
For the first-half of 2018 the price averaged $US65/kg.
The vanadium price has remained at 10-year highs due to several factors including the closure of Evraz’s Highveld Steel and Vanadium’s Mapochs mine in South Africa in 2015, and stricter environmental regulations in China, reports resources analyst Roskill.
It took some time for the effects of the Evraz Highveld shutdown to hit the market, but the subsequent drawdown of reasonably high global stock levels has had a “significant price impact”, according to Roskill.
Meanwhile, China’s vanadium production is declining due to shutdowns because of environmental inspections.
At the same time, the Asian powerhouse has introduced new waste import regulations banning the import of vanadium-bearing slags into the country and is getting tougher with its standards for rebar – a reinforcing steel used in concrete.
“The standard eliminates low strength Grade 2 rebar and sets out specifications for three different high strength standards, which will require more vanadium,” Roskill said.
Key market drivers
While the vanadium redox flow battery market has been in the spotlight for some time now due to the anticipated big growth, the key driver for vanadium demand is still steel and alloys.
Market watchers predict a 20 to 30 per cent increase in vanadium demand in the fourth quarter of this year alone.
And interest in vanadium players is not in short supply.
Robert Friedland-backed VRB Energy recently inked a deal with one of the world’s largest producers of vanadium oxide, China’s Pangang Group Vanadium and Titanium Resources Co.
The agreement includes a long-term vanadium supply commitment, cooperation on electrolyte leasing which has the potential to dramatically reduce the upfront cost of deploying vanadium redox flow batteries, and collaboration on VRB Energy’s vanadium redox battery.
All of this paints a good picture for emerging vanadium producers like Technology Metals Australia (ASX:TMT).
Ahead of the pack
The company is one of the first to have completed a full pre-feasibility study (PFS) on an Australian vanadium project, placing it ahead of the majority of its peers.
Technology Metals only listed on the ASX in December 2016 and in the space of 18 months has completed a major drilling program, delivered a “globally significant” resource, completed a full PFS and is starting a definitive feasibility study.
The PFS showed that Technology Metals’ Gabanintha mine is worth $1.3 billion – significantly higher than the company’s current market cap of just $31.5 million.
The company has already proven it can produce a high purity vanadium pentoxide product of over 99 per cent using low-cost conventional processing methods.
Benchmark vanadium pentoxide pricing is based on a 98 per cent purity product. The high purity of Technology Metals’ product means it could potentially receive premium pricing.
And the company is not resting on its laurels, with several busy months ahead of it as it works towards its goal of first production in less than three years.
Drilling is set to resume at Gabanintha in a matter of weeks and metallurgical testwork is continuing as part of the transition to the definitive feasibility study.
A key part of the ongoing metallurgical testwork currently underway is processing of a bulk sample designed to provide a large volume of high purity vanadium pentoxide product that can be provided to potential offtake partners for assessment of the Gabanintha vanadium product.
China wants Australian vanadium
Managing director Ian Prentice was recently in China in talks with a number of potential customers.
“We have now had meetings with all of the major players in the Chinese vanadium industry, ranging from battery manufacturers through to steel producers, building relationships with these industry participants but also giving us a really good understanding of what is happening in the Chinese vanadium industry,” Mr Prentice said.
“These developing relationships are providing us with an understanding of where opportunities lie for potential partnerships in the future.”
The increased Chinese interest in Australian vanadium players was recently demonstrated with Australian Vanadium (ASX:AVL) shaking hands with a private Chinese steel and alloy producer that could pave the way for a potential financing and sales deal.
This special report is brought to you by Technology Metals Australia.
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