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Stellar PFS projections lift Vanadium Resources’ confidence in Steelpoortdrift Project

Summary

  • Vanadium Resources has delivered the PFS of Steelpoortdrift Project within the stipulated time and budget.
  • The Steelpoortdrift Project has the potential to be a world-class, large-scale and low-cost vanadium producer as the data from the PFS suggests.
  • The PFS has highlighted outstanding financial metrics for the project, including an IRR of 45%, OPEX of US$3.08/lb and an average annual free cash flow of US$139 million (on 100% basis).
  • Steelpoortdrift holds an estimated mineral resource of 662 Mt at an in-situ grade of 0.77% V2O5.
  • VR8 will now undertake the Definitive Feasibility Study of the project and target its completion by March 2022.

In an upbeat market update, South Africa-focused mineral explorer Vanadium Resources Limited (ASX:VR8) has announced spectacular results from its Pre-Feasibility Study (PFS) report for the Steelpoortdrift Project. 

Latest update: Eye on maiden Ore Reserve, Vanadium Resource kicks off early DFS preparations

The Steelpoortdrift or SPD Project lies in the highly prospective Bushveld Complex of the Limpopo Province in South Africa. VR8 holds a 50% interest in the project and can gain additional 23.95% ownership upon approval from the concerned government department. That means, VR8 is not required to fork out additional payments to increase its ownership to 73.95% in the project.

The SPD Project holds one of the world’s largest and highest-grade vanadium deposits.

Project location map (Image source: Company update, 22 June 2021)

Stellar projections from the PFS

After encouraging financial metrics were reported by the Scoping Study of 2020, an Association for the Advancement of Cost Engineering (AACE) class 4 PFS was undertaken on the project. The PFS took into consideration the production of high purity grade (greater than 98%) V2O5 from the primary Run of Mine (ROM) mineralised material.

Read more: Vanadium Resources (ASX:VR8) is in the spotlight as demand of metal is on the rise

VR8 took the assistance of its in-house experts and external industry consultants including Sound Mining Solution Pty Ltd, United Mining Service, Consulmet Pty Ltd, Nurizon Pty Ltd and Red Kite Consulting, to complete the study.

Copyright © 2021 Kalkine Media Data source: Company update, 22 June 2021

The PFS is based on the initial throughput rate of 1.6Mtpa of ROM. The study has also taken into account the capacity expansion up to 3.2Mtpa in next 5-6 years from the commencement of the production. VR8 will produce V2O5 concentrate on-site, then it will be further processed to produce high-purity flake (>98%) through a conventional Roast and Leach process.

Source: Company update, 22 June 2021

Meanwhile, VR8 has also acquired a proprietary technology known as the ESG TCM process, which is economical and can produce a wide range of products from the mineralised material on the project. Notably, the current PFS has not factored in the implications of ESG technology.   

Good read: Vanadium Resources Ltd to acquire a proprietary ESG technology which compliments its World Class Vanadium Project

Financial evaluation

The financial projection was done by assuming contract mining operation with the concentrator and salt roast plant to be operated by VR8. The long-term price for V2O5 is projected to stay around US$9.03/lb or US$19.9/kg. The base case scenario is based on the mine and concentrator construction, concurrent with an SRL plant and followed by expansion in capacity in next 5 years. The PFS has churned out the capital expenditure data for the project as shown in the table below:

Estimated capital expenditure including 15% contingency and 100% project basis (Data source: Company update, 22 June 2021)

Operating cost breakdown (Image source: Company update, 22 June 2021)

Market analysis

Vanadium pentoxide and ferrovandium are the most traded vanadium products in the global market. China is currently the largest producer of vanadium, followed by Russia and South Africa.

Most of the vanadium compounds are produced as a co-product of the steel industry. Hence, if there is an increase in the prices of iron ore or the cost of steel processing, it will also reflect in the price of vanadium.

This presents a unique advantage to the miners who control primary vanadium assets.

Major vanadium producers (Image source: Company update, 22 June 2021)

According to an analysis by VR8,vanadium consumption will soar 3-5% by 2030. Also, a major upside in demand is on the cardsif Vanadium Redox Flow Batteries (VRFB) technology is adopted globally.

In this scenario, the SPD Project provides a unique opportunity for low-cost and highest grade vanadium, positioning VR8 to enjoy significant leverage in the market.

Also read: Why the stocks of Vanadium Resources (ASX:VR8) are flying high?

Shares of VR8 were trading 24.07% up at AU$0.067 at 2:01 PM AEST on June 23, 2021.


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