Australian Vanadium Ltd (ASX:AVL) has its sights set on becoming a major global producer of vanadium, a critical metal used mainly in steel that could also be the next key ingredient in battery storage.
AVL plans to produce about 11,000 tonnes of vanadium pentoxide - V2O5 - per year from its flagship Australian Vanadium Project, which managing director Vincent Algar says could account for about 5% of the world’s supply.
That’s a big number for one company, particularly when you consider that there are zero existing vanadium mines in the US or Europe - China produces the vast majority of the world’s supply at 60%, followed by Russia (17%) and South Africa (7%).
Australia’s finest vanadium producer
And Algar tells Proactive the company is tantalisingly close to production.
“We have spent the past six years developing and strengthening the resource base and we’ve undertaken a number of studies,” he says.
“Our plan is to ship the ore from our high-quality vanadium titanium magnetite deposit near Meekatharra, take it down by road to near Geraldton to a processing plant that can purify it, use local people in the region to reduce our costs and then produce about 11,000 tonnes of V2O5 every year.
“Looking at the current supply environment, and excluding growth areas, that would account for about 4% to 5% of global production.”
The 411 on vanadium
Vanadium is a hard, silvery-grey metal that is relatively rare on its own in nature but occurs naturally in about 65 different minerals, including magnetite.
Currently, the vast majority of vanadium produced is used as an iron alloy or a steel additive; the addition of vanadium to steel significantly increases its strength.
Its use in steel is critical in the aerospace industry, with vanadium-steel and vanadium-titanium alloys used in virtually every jet aircraft, from engine components to high-speed airframes.
Vanadium compounds are used extensively in chemistry as catalysts, and vanadium dioxide is used in glass coatings and ceramics.
It is also being seen as perhaps the next critical battery metal; about 2% of vanadium consumption is currently used in emerging energy storage markets, namely vanadium redox flow batteries, and in the cathode of lithium-ion batteries.
“The vanadium redox flow battery market has the potential for huge growth,” Algar says. “It has much lower degradation rates and also a much higher safety rating.
“This is just one area in which vanadium can have a significant environmental impact; by using vanadium-steel alloys you end up using less cement in construction, which can reduce your carbon footprint.”
Australian Vanadium Project in detail
AVL released a technical and financial update to its pre-feasibility study in December last year, reflecting robust economics, revised layout and location, updated process design and a new extended ore reserve for the project.
The project now has a mine life of 25 years (up 47% on previous estimates), an ore reserve of 32.2 million tonnes at 1.05% V2O5 (up 77%) and a pre-tax net present value of A$909 million (up an astonishing 184%).
The company is now working on a bankable feasibility study, which is one of the final steps in developing a producing mine ahead of a final investment decision.
Other highlights regarding the potential for AVL’s project include:
- Internal rate of return of 17.5%;
- Project payback of 6.6 years;
- Operating cost of US$3.66/lb V2O5, competitive with global primary vanadium producers;
- Annual EBITDA average of A$144 million over 25 years; and
- Forecast vanadium ore recovery to concentrate of 74.8% over 25 years
The forecast vanadium ore recovery is supported by ongoing pilot test-work that is proving exceedingly promising.
Pilot-scale test-work performed on samples designed to be indicative of average early years and life of mine process feed has verified AVL’s process flowsheets and its capability to deliver high-quality vanadium products, as well as an improvement in vanadium recovery at industry competitive low operating cost.
“The phenomenal work by the AVL team and its consultants has outlined a robust processing environment for this exceptional vanadium orebody, able to generate significant cash flows. We have achieved our objective of outlining a low-cost globally competitive operation, able to operate over a long life under all market conditions,” Algar says.
“We have many opportunities to outperform our objectives, as we drive towards funding and project construction, aiming at maximising the value of vanadium in its role as both a critical steel material and a battery metal.”
Algar also told Proactive that the company’s vanadium expertise would insulate it from mistakes made by previous would-be producers.
“We’ve taken great caution around other mistakes with regards to processing,” he says. “This is a common problem that happens disturbingly often in the mining industry, and not just vanadium, when projects and test-work haven’t been properly piloted.
“Our pilot-scale test-work has been focused on representative material from the ground, and average vanadium recovery through the vanadium processing plant is forecast at 88%.
“This is based on demonstrated pilot plant performance through a pelletised alkaline roast and leach circuit and either bench-scale test-work results or experience in similar operations for the downstream unit processes.
“We have designed a very specific and efficient process, and by locating the processing plant closer to a port, human resources and existing gas infrastructure in WA’s Mid-West, we have significantly de-risked the project over several years.”
AVL’s board is also stacked with experts in vanadium, including technical director Daniel Harris and chief operating officer Todd Richardson, who have several decades of vanadium industry experience behind them.
The vanadium outlook
Vanadium comes in three forms - flake, powder and granules. Its value is most often assessed by looking at the rate for 98% vanadium pentoxide flake.
On Tuesday, the price was sitting at US$9.80 per pound, a two-year high.
Worldsteel, an international steel industry association, predicts steel demand to rise by 2.7% in 2022 to more than 1.9 billion tonnes, while respected market analysts GlobalData predict the global energy storage market to reach $11.04 billion in 2025.
“Our timing with the Australian Vanadium Project is good with the prices on a long-term uptrend,” Algar says.
“We plan to cement a spot in the marketplace by first finalising our BFS, securing offtake agreements and funding and engaging a builder to get into production.
“We have an economically robust case, it is low-risk with significant upside.
“On the steel side, there is natural growth there, as is the greening of steel, particularly as the world slowly comes back from the pandemic.
“We’re also working hard on the battery opportunity, which will be a combination of efforts between companies, vendors, government and researchers.
“By combining our supply chains together, we can make the vanadium redox flow battery sector work, and it has huge potential.”
- Daniel Paproth