Vanadium Resources: Definitive Feasibility Study And New Resource Estimate!

Vanadium Resources starts the last quarter of the year with two milestones. The Company has completed its highly anticipated Definitive Feasibility Study for its Steelpoortdrift Vanadium Project in South Africa. On the other hand, the Australians were able to further increase the occurrence as part of the updated resource estimate. Now the decision for mine construction should be made.
Vanadium Resources is rapidly approaching construction of the proposed mine at the Steelpoortdrift vanadium project in South Africa. The Australians have now submitted the definitive feasibility study (DFS) for the project. Accordingly, this DFS confirms Steelpoortdrift’s potential to become a low cost vanadium producer. The Net Present Value (NPV) comes to US$1.212 billion for the entire project. Overall, an annual free cash flow of 152 million US dollars is to be generated there for the time being over a period of 25 years. The IRR after tax is therefore a very good 42 percent. The investment costs of 211 million US dollars can thus be earned back within 27 months. These are excellent metrics for the mining industry. In addition, the life of the mine can be significantly extended by an additional 67 years. In addition, once the mine is up and running, a $188 million expansion investment is planned to be completed in years 3-5, which the Company intends to fund from free cash flow.
Vanadium Resources plans to operate the mine with a single concentrator and to use a conventional salt-roast leach process. Test work on the pilot plant resulted in an average overall yield to the final of 82.4 percent. However, other income has not been taken into account in the financial statements of DFS. By-products such as titanium dioxide and other raw materials should enable additional sales. The costs reflect both the technical advantages of the largest vanadium deposit in development in the world. Vanadium Resources is planning an OPEX of $3.24 per pound. The current market price in Europe is significantly higher at 7.20 US dollars. Last but not least, the aim here is to keep the CO2 footprint as small as possible. A solar power plant is said to ensure a 34 percent reduction in harmful emissions.
Vanadium Resources also updated the Steelpoortdrift resource estimate as part of the feasibility study. The mineral resources now total 680 million tonnes, up 2.7 percent from the last study. The deposit averages 0.70 percent vanadium pentoxide (V2O5) at a cut-off grade of 0.45 percent. Ore Reserves total 76.86Mt at an average grade of 0.72% V2O5, with 30.23Mt of Proven Ore Reserves at an average grade of 0.70% V2O5 and 46.62Mt of Probable Ore reserves averaging 0.72 percent V2O5 are included.
It is important that the inflation, which is noticeable in all areas, only has a limited effect on the new feasibility study. Because, according to CEO Eugene Nel: “Since the bulk of the project costs, both operating costs and capital expenditures, are sourced locally, the inflationary impact in these areas has been minimized to around 5 percent compared to the PFS.” Nel and his colleagues on the company’s board now face the crucial weeks and months. For one thing, the company must now make a definitive decision about building the mine. In view of the good key figures from the feasibility study, however, this is tantamount to a formality. On the other hand, the construction still has to be financed. A potential offtake partner could and should play a decisive role. Part of the planned production will be sold in advance to potential industrial customers. In turn, such deals make it easier to finance construction, as upfront payments are common. All possible variants are conceivable here.
In terms of timing, however, things could hardly go well for Vanadium Resources. Projects in countries like South Africa are welcome given the trend in the West towards reducing dependence on Russia and other “non-friendly countries” for raw materials. In the case of vanadium, the challenge is particularly great. According to the US Geogical Survey, 78 percent of global production comes from China and Russia. Today, 85 percent of vanadium is in demand in the steel industry. However, demand is increasing due to the expansion of renewable energies. Here, vanadium can serve as an energy store in so-called vanadium redox batteries. These make it possible to store the energy gained from wind and sun and to call it up when needed. Vanadium Resources currently has a market value of around EUR 34 million. If the mine construction goes ahead as planned, there is a lot of room for improvement in terms of valuation.