Australian Vanadium’s PFS reveals ‘world class’ project as vanadium market fundamentals remain tight

Australian Vanadium’s (ASX: AVL) pre-feasibility study (PFS) at its flagship Gabanintha project has revealed healthy margins and a “world class” project, with Roskill director Jack Bedder claiming the long-term vanadium market fundamentals remain tight.

As part of the PFS, Australian Vanadium debuted a maiden reserve for Gabanintha, which sits at 18.24 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.

Meanwhile, the PFS study estimates an 900,000 tonne per annum open pit operation to generate a 1.40% vanadium pentoxide magnetite concentrate, with an average 60% yield.

According to the company, the 60% average mass yield is “exceptionally high” compared to other operating vanadium mines and facilitates a compact and effective crushing and milling operation.

Australian Vanadium plans to construct a vanadium pentoxide refinery at the project, which would produce about 22.5 million pounds of vanadium pentoxide flake annually for 17 years.

“By completing this PFS on Gabanintha, we have taken a major step towards bringing our world-class project into production,” Australian Vanadium managing director Vincent Algar said.

“Announcing a maiden ore reserve is a key milestone and further embeds the project’s low risk mineral resource and strong economic potential.”

“The PFS includes details that allows us to understand and design a long-life, low cost vanadium pentoxide and cobalt concentrate production facility,” Mr Algar noted.

Healthy margins in a downturn

As part of Australian Vanadium’s strategy to shore up a long-term operation that is profitable even at the bottom of the cycle, the company has slashed its operating expenses to US$4.15/lb of 98% vanadium pentoxide, putting it in line with the world’s lowest cost producers.

At the US$20/lb pricing scenario, this would give Gabanintha post-tax net present value of $1.4 billion, with the US$20/lb below the current vanadium price of US$23.90/lb.

“Given the cyclical nature of the vanadium markets, it’s essential that all technical aspects are well understood, and the capital and operating costs minimised,” Mr Algar explained.

Using an US$8.67/lb operating scenario, Gabanintha is expected to have a post-tax net present value of $125 million.

However, this price is down more than 60% on current 98% vanadium pentoxide flake prices and a 70% lower than last month’s price of just under US$35/lb.

Roskill director Jack Bedder recently pointed out that although the vanadium price has dipped over the past month, market fundamentals remain tight due to a number of factors on both the supply and demand sides.

Mr Bedder noted that there have been multiple operation shutdowns reducing the amount vanadium feedstock flowing to global markets.

He added that demand for vanadium has remained “pretty solid” over the past few years, with China’s new rebar standards anticipated to contribute to increased vanadium consumption by about 10,000t of extra vanadium a year.

“The market has moved into a structural deficit now and we’re expecting some tightness for some time.”

Mr Bedder explained that to meet demand in the longer-term, the vanadium market would need to see capacity expansion of existing operations and development of new projects.

Vanadium’s strong growth has been driven by the strengthening steel sector and the emerging vanadium redox flow battery.

Mr Bedder said both markets are predicted to continue expanding, resulting in rising vanadium demand.

Proven processes

Australian Vanadium plans to use commercially proven processes for its Gabanintha ore.

The world’s major primary vanadium producers use the salt roasting and water leaching processing route and Australian Vanadium technical manager Todd Richardson told Small Caps Gabanintha ore was amenable to this method.

Mr Richardson also pointed out that when evaluating a vanadium deposit, much more than grade came into consideration.

He said the deposit’s geology and magnetite content were also key factors.