Australian Vanadium (ASX: AVL) has shored up more confidence in its flagship Gabanintha vanadium project in Western Australia, with its latest resource upgrade boosting the indicated mineral resource within the high-grade zone by almost 150%.
The total mineral resource for Gabanintha now sits at 183.6 million tonnes grading 0.76% vanadium pentoxide.
Of that, 10.2Mt at 1.11% vanadium pentoxide is classified as measured, while 40.7Mt at 0.66% vanadium pentoxide is indicated, and 132.7Mt at 0.77% vanadium pentoxide is inferred.
The Gabanintha deposit hosts a distinct high-grade zone with that mineral resource also updated to 96.7Mt at 1% vanadium pentoxide.
Within that high-grade section, 10.2Mt at 1.11% vanadium pentoxide fell into the measured category, while 12.4Mt at 1.05% vanadium pentoxide was indicated and 74.5Mt at 0.97% vanadium pentoxide was inferred.
According to Australian Vanadium, the high conversion from inferred resources underpins Gabanintha’s geological and grade continuity.
In addition to increasing the size, Australian Vanadium’s managing director Vincent Algar said the resource update added confidence and further de-risked Gabanintha.
He said the new results will be incorporated in the final pre-feasibility study and the maiden ore reserve, which are scheduled to be released next month.
Vanadium along strike
Meanwhile, with 11.5km of defined strike at Gabanintha, Australian Vanadium anticipates there is “high potential” to convert the inferred vanadium resources to indicated and measured through targeted low-cost drilling.
“This update indicates our ability to leverage our significant strike length advantage to cheaply add more low risk resource, optionality and mine life to the project,” Mr Algar stated.
“We have confirmed that the deposit extends at depth, but the long-term value lies in further quality along strike.”
Base metal potential
In addition to expanding the vanadium resource, Australian Vanadium has advanced Gabanintha’s cobalt, nickel and copper potential by adding 1.8Mt to the inferred base metal resource.
The by-product resource estimate now totals 14.3Mt grading 208 parts per million cobalt, 666ppm nickel, 217ppm copper.
Australian Vanadium believes the base metal sulphide resource could be recovered economically after previous metallurgical test work on the mineralisation achieved consistent results.
Preliminary pre-feasibility study
Earlier this year, Australian Vanadium revealed a base-case pre-feasibility study, which projected a capital expenditure of US$360 million to produce 10,100 tonnes per annum of vanadium pentoxide over 17 years.
Based on a 98% vanadium pentoxide price of US$13 per pound, which is well below the current price of around US$33/lb, the base-case pre-feasibility study estimated Gabanintha’s net present value was around US$1.1 billion.
Using a US$20/lb vanadium pentoxide price, Gabanintha’s net present value was pushed to $2.4 billion, which, according to the company, indicates a robust project and highlights its upside potential.
It’s not just about grade
Unlike gold where an idea of the project’s value can be gauged by grade and the thickness of mineralised intersection, vanadium expert and Australian Vanadium technical manager Todd Richardson told Small Caps it isn’t just about grade when it comes to vanadium.
“With gold, you can look at different deposits and have an idea of the value from the grade, because the processes are all the same.”
“You know exactly how much it is going to cost to process this gold.”
“Vanadium is totally different. It’s almost the other way around,” he explained.
Mr Richardson said when looking at an economically viable vanadium deposit, investors need to know the process, because it is not standard across the board.
He said in order to de-risk Gabanintha, Australian Vanadium was modelling its proposed processing method on that used by the few primary vanadium mines in the world including TSX-listed Largo’s Maracas Menchen mine in Brazil, as well as AIM-listed Bushveld Minerals and LSE-listed Glencore, which both have vanadium operations in South Africa.
Mr Richardson said these mines use proven economically viable processing methods involving salt roasting and leaching with water.
As a result, Mr Richardson pointed out using proven technology will engender further confidence in Gabanintha.
With the final pre-feasibility study’s release due, initial metallurgical test work using the salt roast least processing method and designs for the processing circuit have been completed.
Mr Algar said the company would continue developing its understanding of Gabanintha as the definitive feasibility study advances next year.
Meanwhile, the mine study and pit optimisation work are progressing, along with the securing regulatory approvals.
Vanadium market dynamics
With a tight supply situation, a strengthening steel industry and emerging vanadium redox flow battery market, vanadium is a hot commodity right now.
The price of 98% vanadium pentoxide is hovering around US$33/lb – up more than 840% in the last two years.
Mr Algar said the company was looking to meet the needs of the steel and vanadium redox flow battery sectors with Gabanintha.
However, he anticipates there will be a price correction at some point and to ensure Gabanintha remains a long-term commercially viable operation, Australian Vanadium hopes to bring Gabanintha into the lowest cost curve so that it generates healthy cash flow even at the bottom of the cycle.
“The lowest cost producers of vanadium around the world will have a high-grade concentrate, a low operating cost, and a high mass yield. We feel we fit comfortably in that space,” Mr Algar said.
Mr Algar pointed out that even if the vanadium price plunged from its current price of more than US$33/lb to US$15/lb, it would still generate “very healthy” margins for Australian Vanadium.