Energizer Resources adds to resource at Green Giant

As demand for vanadium increases with new battery technologies, London-based Objective Capital Research believes Energizer Resources (EGZ-V) and its Green Giant vanadium project in Madagascar is undervalued.

Objective Capital, which clearly states in its forty-page report on Energizer released on Dec. 9 that its research is sponsored by the companies it covers and that it is “unconflicted by corporate finance or PR/IR agendas,” says it values the stock at 52¢ per share “with significant potential for appreciation with development success.”

Shares of Energizer closed in Toronto at 40¢ on Dec. 10. Over the last year the junior has traded in a range of 15¢ to 53¢ per share.

“Continued development suggests valuations as high as $2.65 per share in the post-permitting environment the stock under more optimistic scenarios,” Objective’s analysts Will Purcell and Richard Thompson write.

Energizer, known as Uranium Star Corp. until Dec. 2009, holds a 100% interest in the 3,600 sq km Green Giant property in southern Madagascar, about 145 km southeast of the port of Toliara.

In late November Energizer released an updated NI 43-101 resource estimate on Green Giant that outlined an indicated resource of 49.5 million tonnes at an average grade of 0.693% vanadium pentoxide (V2O5) for 756.3 million pounds of V205 and inferred resources of 9.7 million tonnes at an average grade of 0.632% V205 for 134.5 million pounds of V205.

The company said in a press release that its new resource “now places the Green Giant deposit as one of the largest known vanadium deposits in the world.”

Vanadium has been traced over a strike length of 21 kilometres.

The size of the Green Giant deposit “appears to be ideal for low-cost mining and processing,” the report notes, which will put the company low on the vanadium cost curve and give it strong leverage in future vanadium markets.

One of the key reasons for Objective Capital’s positive outlook on the company is that the redox storage battery — entirely dependent on vanadium – shows enormous potential as an energy storage solution. “With the expected commercialization of vanadium redox energy storage systems,” the analysts write, “vanadium industry experts predict a shortage of the high purity vanadium supply required for VRBs.”

Vanadium redox batteries can be used to store large amounts of electricity. They are being employed at wind farms and small hydropower installations and in solar panels and are being tested for there use in conventional power grid systems.

Vanadium is also used as a cathode material in rechargeable lithium batters that are made for automotive applications. Other uses include an alloy with titanium and aluminium to make strong and lightweight metals for the aviation, defence and space industries, Objective Capital states.

As proof of the potential the technology holds they point to the acquisition earlier this year of Cellstrom GmbH, a vanadium redox battery manufacturer based in Austria, by a subsidiary of Germany-based conglomerate Gildemeister GmbH. Gildemeister makes a range of redox batteries that are used in power grid storage and applications for emergency supply during power cuts and Cellstrom has been selling vanadium redox batteries since 2008 throughout Europe and most recently into India under the product name CellCube^TM.

“Demand [for redox batteries] is expected to rise quickly from industrial and private users in areas with unreliable power supply systems as the advantages of Redox power storage become more well known,” the Objective Capital research report outlines.

According to Energizer, the Green Giant project can also “be easily adapted to supply another form of vanadium, called ferrovanadium, to the steel market where vanadium demand is growing at 7% year-over-year and is well-established as a strengthening agent for steel.”

Production of vanadium in 2007 reached 60,000 tonnes, according to figures from Objective Capital, most of that from China, South Africa and Russia. It forecasts demand for vanadium steel, automotive batteries and redox batteries will increase at an average rate of 11.9% a year from 2010 to 2015.