Vanadium Resources signs agreement with CPAL to fast-track early cash flow from Steelpoortdrift project

Vanadium Resources (ASX: VR8) is aiming to achieve early cash flow after a subsidiary signed a memorandum of understanding (MoU) with China Precious Asia Limited (CPAL).

The MoU relates to a magnetite ore supply agreement from Vanadium Resources’ world-class Steelpoortdrift vanadium project in South Africa.

The company says its internal assessments and the volumes proposed under the MoU suggest that a DSO operation at Steelpoortdrift has the potential to generate materially positive operating cash flows.

‘Compelling opportunity’

Executive chair Jurie Wessels said the companies are examining the potential supply of vanadium-rich magnetite ore to China.

“Through our ongoing strategic equity and offtake process, it became increasingly apparent that there is a compelling opportunity to potentially transition the company toward near-term production, even at this low point in the vanadium market cycle,” Mr Wessels said.

“This has been made possible by our advanced permitting status and the suite of valuable minerals within Steelpoortdrift’s ore, which contains not only vanadium credits but also iron-rich magnetite.”

Value-accretive agreement

Vanadium Resources believes the deal positions it to become a near-term producer, while retaining full flexibility to scale into full development as vanadium market conditions improve.

“While the MoU is non-binding, the level of engagement and interest from CPAL gives me confidence that we can reach a binding and value-accretive commercial agreement,” Mr Wessels added.

“We believe focusing on the generation of early cash flow is the ideal response to the current realities of both the vanadium and wider commodity markets.”

Terms of the agreement

Vanadium Resources will supply an average quantity of 100,000 metric tonnes of product per calendar month, with the company holding an option to increase or decrease the amount sold by 25% from the average.

The agreement will commence within 20 business days of the fulfilment of a number of conditions precedent, which shall be no later than 30 November 2025.

CPAL is targeting the Asian steel markets and, in recent years, has focused on vanadium-rich magnetite ore to align with China’s desire to supplement domestic supply with secure sources of vanadium in the face of rising demand.