Neometals says study shows potential for low-cost vanadium slag operation

Neometals’ (ASX: NMT) vanadium recovery scoping study has highlighted a strong case for future development of a Scandinavian processing operation to extract vanadium chemicals from steel making.

The plan to recover vanadium pentoxide (V205) from high-grade vanadium-bearing steel by-product (known as slag) shows robust economics and Neometals has begun preliminary feasibility study metallurgical test work.

V205 is the most important industrial vanadium compound and is used primarily as an alloy with steel and as a catalyst for the production of sulphuric acid.

“Neometals is extremely encouraged by the outcomes of the [scoping] study highlighted by potentially robust economic margins with a first quartile position on the operating cost curve,” the company stated.

Key highlights from the study included annual production of 12.12 million pounds of V205 over 10.5 years.

Initial capital costs are projected at US$159 million, while life of plant revenue of US$1.099 billion is anticipated.

Global vanadium supply in 2019 was 102,365t V (tonnes of vanadium equivalent) and was dominated by China (59%), South Africa (9%) and Russia (8%).

Supply is primarily based on the production of vanadium from slag generated during the production of steel using vanadium titanium magnetite as feedstock. Co-product vanadium slag was produced at 14 steel mills in China, Russia and New Zealand and accounted for 69% of vanadium production in 2019.

Chinese production costs well above market prices

Historically, the world requires between 8,000t to 10,000t V per year in net exports from China to maintain balance in Western markets.

Neometals said that, however, growing consumption in China is having an impact on the availability of Chinese vanadium for export, while Chinese exports at present depend on the continuation of production with cash costs well above current market prices.

“Looking ahead, without new greenfield capacity there is likely to be a shortfall of vanadium supply and a growing supply deficit. New greenfield capacity is required to come to market in the next few years to meet this deficit,” Neometals added.

The Perth-based company earlier entered into an alliance with an unlisted Scandinavian company, Critical Metals, to jointly investigate building a plant to recover and process high-grade vanadium products from steel by-product.

Critical Metals has executed a conditional supply agreement with Stockholm-based SSAB which operates steel mills in Sweden, Finland and the US.

‘One man’s slag is another man’s treasure’

That was the headline on a recent report from metals analysts Hallgarten & Co. of London.

Analyst Christopher Ecclestone pointed out that, when it comes to vanadium, the main sources have been anything but “a hole in the ground”.

Much of Western supply is sourced primarily from steel scrap; mining vanadium is in second place on the supply chart.

Most of the global vanadium supply is produced in China and Russia from steel smelter slag while other countries produce it from either flue dust or heavy crude oil or as a by-product of uranium mining.

It is primarily used to produce specialty steel alloys such as high-speed tool steels.

Mr Ecclestone says that, to meet vanadium demand, there will need to be a substantial increase from the recent levels of production.

“Even by the standards of specialty metals, where wild price gyrations frequently occur, vanadium has been exceptional in recent years.”

Analyst says venture reinforces admiration for Neometals

In 2017-18 the price took off in a frenzied way partly driven by Chinese demand for use in steel alloys combined with the general rush into battery metals that put the vanadium redox battery (VRB) on the radar screens of investors.

That was the third surge in 15 years — but this latest one then went into a steep retreat (assumed to be due to Chinese buyers baulking at the high prices and cutting vanadium levels in their products).

Mr Ecclestone said the Neometals-Critical Metals venture will put a number of vanadium mining wannabes into the development slow lane.

“This joint venture reinforces our long-term admiration for Neometals, a stock we have had in our Model Mining Portfolio since 2009.”