Not technically one of the rare earth elements (REEs), the vanadium market shares many of their characteristics, including its extensive use in steel and alloy production, as well as a growing niche in the renewable energy sector.
Most exciting of these developments, is the growing use of vanadium redox batteries (VRB); flow batteries designed to store large amounts of energy, and lose no capacity no matter how many times they are charged and discharged. With this new area of demand for vanadium offering a lot of growth potential in the coming years, and with an already firm outlook in the ‘bedrock’ market demand for steel, vanadium and vanadium producers look set for a lot of additional value coming their way.
Vanadium is a soft, silvery-grey mineral that can be produced as a by-product of steel smelter slag, or mined in two different types of deposit: disseminated in carbon rich deposits and shales, or in magnetite (iron oxide,) alongside titanium. Historically, around 85% of vanadium production is used as an alloy to harden steel, 7-8% is used to make specialty alloys such as those used in jet engines, and around 7% has been used in industrial sulphuric acid production. As of yet the VRB market represent only a limited use of vanadium globally, but the market is growing as awareness for the batteries themselves, becomes more widespread.
The benefits these vanadium redox batteries offer over other similar batteries (although it is fair to say there are currently no other batteries quite like these), are massive.
Unlike lithium ion batteries, which lose capacity over time as they are charged and discharged, VRB suffer no such problem; they maintain almost all of their original capacity no matter how many times they are charged and discharged. This comes about because of the nature of the battery. There is no chemical reaction taking place in the battery to store or discharge power, so in effect they do not degrade and do not consume the chemicals over time.
Although the specifics are relatively secret, the general premise of the battery is that charging causes electrons to pass into a liquid within the battery, which can then be held there indefinitely without degradation. When it is time to discharge the battery, these electrons (and so the power itself) can be released very rapidly, and again in no way impacts the capacity of the battery itself as no chemicals are used up or degraded.
These batteries are very scalable; the size effectively has no limit due to the nature of their construction. It is fair to say at this stage however that at larger sizes weight could become a factor, as the larger they become, the more of the necessary liquid will be required for their capacity.
Compared to lithium ion batteries, which can take hours to charge and discharge, VRB are very fast, taking only minutes comparatively. Also, unlike lithium ion batteries, they produce next to no heat, due to the nature of the charging process, and so offer a lot of advantages over other batteries in cases where heat could be an issue.
Compared with lithium ion batteries, which tend to last around 3 to 5 years, or approximately 300 ‘life cycles’, VRB’s can last to over 35,000 life cycles; or around 30 – 50 years. One thing to consider however, is that while lithium ion batteries have a lot of small scale applications, VRB’s will be for large scale industrial uses, where much greater levels of power are required, with the need for rapid charging and discharging; you will not for example, be finding VRB’s in your cell phone or laptop anytime soon.
While looking at this new potential for vanadium, it is also worth considering that the outlook for its underlying market, steel production, is also fundamentally strong - China has in place the five year production plan that should see steel demand from the Asian giant continuing to increase.
Not only will an appreciating steel price bring about an appreciation in vanadium prices, it is likely that vanadium will be able to outperform steel in the coming years. Both China and Japan have begun a new mandate to increase the quality of the steel used in production - which means higher levels of steel enhancing additives, including vanadium.
So how do you gain exposure to Vanadium? There are a number of mineral exploration companies looking to develop vanadium mines.
Rocky Mountain Resources (TSX-V: RKY) is one such company. For vanadium producers, having low costs is key to their success, allowing them to make a decent margin on production. The vanadium at Rocky Mountain’s Gibellini property is hosted in a sedimentary shale deposit, and is already at surface. The rock is extremely fractured already, heavily oxidised and broken up, and will require only sulphuric acid heap leaching in order to process it – a much cheaper process than that required to extract vanadium from iron ore. In addition, the project has a very low strip ratio – 0.2:1– and as such, comparatively little of the resource will be waste. Rocky Mountain is currently evaluating if they will be able to remove crushing entirely from the process, which if it does turn out to be the case, would likely reduce both capital and operational costs even further.
Apella Resources (TSX-V:APA) is also focused on vanadium with a number of key assets in Quebec. The jewel in the crown of these projects is the flagship Iron-T Vanadium-Iron-Titanium Project located near the mining centre of Matagami. Although the project is still in a relatively early stage of development, but up to 250 million tonnes of resource have already been estimated at the site and there is potential for significantly more. The project consists of 134 claims covering the Bell River Complex, with mineralization identified over a 20km area.
Reed Resources (ASX: RDR) key vanadium project is Barrambie, located in Western Australia. In 2009 a definitive feasibility study (DFS) was conducted on the property, and showed some very strong numbers. This included an average EBITDA per annum of A$105 million, with operating costs estimated at less than US$20/kg of vanadium, and an initial mining reserve of 39.7 million tonnes grading 0.82% vanadium pentoxide. The report showed the project has a minimum of a 12 year mine life with throughput at 3.2 million tonnes per annum, and estimated total capital costs of A$628.9 million.
Another play on the vanadium market is via Speewah Metals (ASX: SPM) with two key targets in their tenements located in Western Australia: a copper-gold-silver-lead target, which to date has shown strong mineralization across metals, and a vanadium zone where an updated resource estimate in March of this year, quadrupled the resource form the maiden estimate in January 2009 – now standing at combined Measured, Indicated and Inferred Resource, totalling 3.17 billion tonnes grading 0.3% vanadium pentoxide (considering a 0.23% lower cut off grade).