Junior explorer Tando Resources (ASX: TNO) has completed its acquisition of the SPD vanadium discovery in the Limpopo province of South Africa, locking in the right to earn a 73.95% stake of the high-grade project and paving the way for a series of pre-development milestones.
Under the acquisition agreement, Tando will establish a JORC-compliant measured resource, and complete scoping, pre-feasibility and definitive feasibility studies at the project before moving towards operations.
The first milestone is underway, with the company recently launching a $1.4 million maiden drilling campaign focused on converting the existing resource to JORC status.
Phase 1 of the campaign has been fast-tracked for completion by month end, with a third diamond-core rig mobilised to drill out the “foreign resource” of 513 million tonnes grading 0.78% vanadium pentoxide.
Tando said it plans to commence the “highly anticipated” drilling of high-grade vanadium pipes surrounding the SPD deposit in mid-October.
Samples taken from the pipes, which start from surface, have returned “extremely high grades” of vanadium, highlighting the project’s potential to underpin a low-cost direct shipping ore operation which could generate early cashflow for the junior.
Tando managing director Bill Oliver said the company’s strategy at SPD was proceeding to plan.
“We are delighted with the rapid progress we are making on the ground,” he said.
“The vanadium price has trebled in the past 18 months [and] we see an opportunity to create substantial value for our shareholders.”
In March, Tando announced it had entered into a binding Heads of Agreement to acquire its stake in the SPD vanadium project on a staged, scrip basis.
Robust at current prices
Earlier this month, a RAAS research paper commissioned by Xcel Capital, supported the development of the SPD project as “very robust” at current vanadium prices.
RAAS values Tando at 38c per share, or $63 million – which is more than two and a half times its current share price.
“The most critical factor in determining and delivering the value of the SPD project is, in our view, the prevailing vanadium pentoxide price,” the paper said.
“Our preliminary modelling suggests [the project] would be NPV positive at vanadium prices above US$5 per pound, based on similar operating assumptions to the feasibility study on the nearby Bushveld Mineral’s Mokopane vanadium development.”
RAAS’s paper further confirmed the project’s promise due to its location in a proven vanadium province surrounded by mining majors such as Glencore and International Resources, and with established infrastructure.
“We are confident in the producibility of the deposit given its location in a broad and geologically-consistent province,” it said.
“Due to its proximity to major operations, SPD also has access to an extensive and modern infrastructure network with an experienced and skilled workforce.”
Assuming success from current drilling campaigns, RAAS’s development scenario would see an SPD project start-up in the 2022 financial year, with a full year contribution in 2023.