- Vanadium Resources’ shares are up over 7% on the news of increased ownership interest.
- VR8 now owns a 73.95% interest in the Steelpoortdrift Vanadium Project following regulatory S11 approval, and gains control of the Tier 1 asset.
- The increase in ownership by 23.95% comes at no cost to the Company, given all consideration for the acquisition of the asset was already paid in 2019.
- The increased ownership bolsters the NPV by ~48%, making the already low CAPEX of $200m quoted in the PFS look even more positive.
- The ongoing DFS on the project is expected to conclude by the third quarter of 2022.
Kicking off 2022 on a bright note, Vanadium Resources Limited (ASX:VR8) has dropped an upbeat market update regarding its flagship Steelpoortdrift Vanadium Project. VR8 has received approval from the South African Government to bolster its stake in the project from 50% to 73.95%.
One of the largest and highest-grade vanadium projects in the world, the Steelpoortdrift Vanadium Project lies in Bushveld Complex, a well-known geological complex that houses several major mining projects.
Related read: Is VR8 a potential Tier 1 Vanadium producer?
Notably, VR8’s increase in ownership comes at no extra cost to the Company, given all consideration for the acquisition of the asset was already paid in 2019. VR8 now effectively controls the Tier 1 Steelpoortdrift Project. The move has strategic significance as VR8 now has the opportunity to become one of the world’s largest and highest-grade vanadium producers.
VR8 is optimistic that the increased stake in the project is likely to make the Company more attractive to its stakeholders and potential financial partners.
Data source: Company update, 19 January 2022
Increase in ownership significantly increases the NPV
The Pre-feasibility Study report released last year incorporated the data for the financial metrics for a base case of 73.95% ownership. The data table shows that the net present value (NPV) at 8% rate will be US$884 million for 73.95% ownership. This is nearly 48% higher than the NPV in case of 50% ownership, demonstrating just how significant the approval is for the Company.
The PFS indicates that the project would require a Pre-production CAPEX of US$200 million. The increased value of the NPV makes this low CAPEX look even more positive.
Study outcomes of PFS (Image source: Company update, 19 January 2022)
VanRes to become subsidiary of VR8
The mining rights to the Steelpoortdrift Project is owned by Vanadium Resources (Proprietary) Limited (VanRes). The Minister of the Department of Mineral Resources and Energy has granted the ministerial approval to VR8 to take control of the mining rights.
As per the approval received, VR8 will receive the remaining 23.95% of the issued shares in VanRes already conditionally acquired by the Company. As a result, VanRes will become a subsidiary of VR8.
DFS moving in full swing on the project
VR8 is undertaking a Definitive Feasibility Study (DFS) on the Steelpoortdrift Project. The DFS is focused on mining operations and the construction of the concentrator and salt roast plant on the project. The DFS is being carried out keeping an initial production target of 12,500tpa of V2O5 flake.
VR8 estimates that the DFS will be finished by the third quarter of 2022. Once DFS is wrapped up, VR8 will be in a position to raise the requisite construction finance. Also, the raised funds will allow the Company to carry out mining and processing operations soon afterwards.
Share price movement
Shares of VR8 closed 7.692% up at AU$0.084 on 4.4m shares traded, with a market cap of AU$36.9 million as of 19 January 2022.