Australian Vanadium’s (ASX: AVL) cash reserves have been boosted to a healthy $9.68 million after an option conversion late last month added millions to the company’s coffers – placing it in a strong financial position to advance the flagship Gabanintha vanadium asset.
Investor confidence in the vanadium stock was clear after 264 holders converted more than 204 million options in December, prior to the 31 December 2018 expiry date, expanding Australian Vanadium’s cash reserves by $6.16 million.
Additionally, Westar Capital underwrote 62.75 million options, giving the company a further $1.255 million in cash.
The option conversion had the added benefit of circumventing any requirement for Australian Vanadium to raise capital in a weaker market.
“Starting 2019 with a healthy cash balance enables us to move swiftly forward with our plans for the Australian Vanadium Gabanintha vanadium project,” Australian Vanadium managing director Vincent Algar said.
“The option conversion gives the excellent Australian Vanadium team welcome support for the work they are undertaking to take this world-class vanadium deposit into production,” he added.
Gabanintha vanadium project
A definitive feasibility study has been kicked off at Australian Vanadium’s Gabanintha project with a pilot scale metallurgical program underway.
Additionally, diamond drill sample collection is scheduled to begin mid-month.
The DFS builds on a comprehensive pre-feasibility study that was published in December and revealed Gabanintha’s “world class” potential for a 900,000 tonne per annum open pit operation to generate a 1.40% vanadium pentoxide magnetite concentrate, with an average 60% yield.
According to Australian Vanadium, the 60% yield is “exceptionally high” compared to other operating vanadium mines.
De-risking the project is a maiden reserve which currently sits at 8.24 million tonnes grading 1.04% vanadium pentoxide, with 9.82Mt at 1.07% vanadium pentoxide classified as proven and 8.42Mt at 1.01% vanadium pentoxide identified as probable.
Although the vanadium price has been knocked in recent months after surging to almost US$35 per pound of 98% vanadium pentoxide flake in November 2018, the current price of US$16.30/lb is a far cry from its 2016 lows where it hovered under US$5/lb.
Australian Vanadium’s pre-feasibility study estimates Gabanintha is capable of generating profits at the bottom of the cycle, with operating expenses pared back to US$4.15/lb of 98% vanadium pentoxide.
The company’s strategy is to shore up a robust, long-term operation that is profitable at all points within the commodity price cycle.
“The Australian Vanadium Gabanintha vanadium project fundamentals remain strong for the development of new production with its consistent, high-grade deposit and indicated low-cost, proven processing route,” the company stated.
“Vanadium supply remains tight throughout the world and demand continues to rise.”
Mr Algar told Small Caps the company remained “bullish” on the demand situation for vanadium in both the steel alloy and new energy technology sectors.
He added with the additional funding the option conversion has provided, Australian Vanadium could accelerate its DFS timelines.