Spotlight on vanadium

Lithium has grabbed much of the headlines over the last few years when the subject of key metals of the future comes up. But more and more investors are paying attention to vanadium for the metal’s unique attribute of fitting in with two future growth stories.
First there is the metal’s application as a steel strengthener. Currently experts estimate that anywhere between 85% and 95% of vanadium demand comes from the steel industry. So if the global economy continues on its comeback trail, vanadium offers a good way to play increased steel production.
But in the near-term, the demand story could begin to shift from steel to the battery.
That’s because vanadium is increasingly being used in new types of batteries that experts expect to be taking a more prominent role in our electrical storage needs.
Currently, the larger size of the vanadium redox batteries makes them less favourable to car applications than lithium ion batteries, but the technology has been proving itself on the larger-scale energy storage front.
With faster recharge times and a significantly longer cycle life, vanadium redox batteries are being used as storage units for power generated by renewable energy sources such as wind and solar.
“On the grid storage front (for large-scale applications) vanadium is making more than a name for itself,” argues Jon Hykawy, head of global research at Byron Capital Markets. “We could see applications such as a sub-station in a downtown area that is augmenting power for a few hours a day in the not so distant future.”
Another application Hykawy is watching is a battery that pairs vanadium with lithium, which would have some advantages for batteries in hybrid cars.
But there are notes of caution around the metal as well – one of which emanates from one of the world’s foremost experts on vanadium batteries.
Maria Skyllas-Kazacos, a professor at the University of New South Wales, was part of the team that invented the vanadium redox battery. Skyllas-Kazacos says, however, that the price of vanadium is critical to its long-term usage in the battery industry.
Because the cost of vanadium currently makes up a large portion of the cost to produce vanadium batteries, she argues, pricing in the US$5 to US$8 per lb. range would be ideal.
Vanadium pentoxide (V2O5) is currently trading in the US$7 per lb. range.
But in order for the battery technology to really take off, greater amounts of secure supply will have to start coming on-stream.
Currently the bulk of supply comesfrom three areas: South Africa, northwestern China, and eastern Russia. In 2007, the three countries mined more than 95% of the 58,600 tonnes of vanadium produced, globally.
Of the three, China is the biggest player as it is both the largest supplier and consumer of the metal, accounting for 50% of global production.
But with much of China’s production going into domestic consumption, Russian steelmaker Evraz has emerged as the key supplier to the Western world.
The company, which is part-owned by Russian billionaire Roman Abramovich, is already one of the largest vanadium producers, and was looking to get even larger with some key vanadium acquisitions before it was deemed to be trying to corner the market and reined in by the European Union trade commission.
Despite being thwarted on some key acquisitions, Evraz is still a dominant player, and holds an especially tight grip on the supply of higher-grade vanadium pentoxide which is used by battery manufacturers.
Given such a scenario, it should come as little surprise that a growing list of Canadian junior miners have stepped in and are looking to develop the world’s next generation of vanadium mines.
Their projects range in geographies from Quebec to South America to Africa.
The Northern Miner takes a closer look at three companies that investors could well be hearing more from in the coming months.
Apella Resources
While Canada is currently a marginal producer of vanadium, that could soon be changing thanks to Quebec’s significant stores of the metal.
Apella Resources (apa-v) has emerged as the key vanadium player in Quebec with its two significant projects in the province.
Ironically, its Lac Dore project, the less developed of the two in terms of compliant resources, has gained more attention.
The deposit was discovered in 1955 and while no compliant resource has been released, it has been labeled as potentially the second-largest vanadium deposit behind Xstrata’s (xta-l) Rhovan mine in South Africa, based on historical drilling.
Despite that prospectiveness, Apella has had to hold off on exploration due to a legal dispute with Quebec crown corporation Soquem.
While Apella currently has nine claims to Soquem’s two, there are another 10 key claims in limbo.
Apella is looking to secure nine of the 10 and hopes that a court ruling on the matter slated in March, will go in its favour.
The claims it already has account for 65% of the prospective area, and the extra nine claims would give it control over 95% of the ground.
If it wins, Apella will have won for itself the rights to a zone that stretches over 10 km and is roughly 100 metres wide. Over that distance there are three key zones, with the P2 zone considered to be the richest.
And while the company waits for a verdict, it is still hustling.
Around the same time that it was meeting with the ministry over the Lac Dore claims, another Quebec project came into management’s focus and in January 2008, it acquired the Bell River project, which it since re-named Iron-T.
Free of legal hassles, Apella has been able to prove up an inferred resource for Bell River of 11.6 million tonnes grading 26.5% iron, 6.33% titanium, 0.40% V2O5 or 0.73% V2O5 equivalent.
Apella’s president and chief executive Patrick O’Brien says one of the key attributes of the deposit is the iron content.
“Chinese steel manufacturers blend vanadium with iron anyway, so to make a ship-ready ore we would only have to separate out the titanium,” he says.
Early cost estimates put production of a ship-ready vanadium-iron product at US$48 a tonne, with a selling value of US$78 per tonne.
And more tonnage could be on the way. The company recently completed geophysics over a western extension anomaly that extended the total strike length of the deposit to 22 km.
As for exploration plans at the site, the company plans to spend $5.7 million on infill drilling and step-out holes that will test targets as far as 3 km from the known deposit.
“From Apella’s perspective, we want to get two projects off the ground and into production.” O’Brien says. “The power and water, the rail is there and we’ll be producing ship-ready ore.”
Largo Resources
Another emerging player in the story is Largo Resources (lgo-v), which is developing the Maracas project in Brazil.
Acquired in 2006, the project has a measured and indicated resource of 23.2 million tonnes grading 1.27% V2O5, and reserves of 13.1 million tonnes at 1.34% V2O5.
The current resource would be enough to run a mine for 22 years at 10 million tonnes of ferro-vanadium production per year, with a capex of $212 million.
And Largo’s president and chief executive Mark Brennan believes those numbers could all be in for a significant shift upwards.
That’s because the deposit has an aeromagnetic strike length of 8 km by 2.5 km and comprises three distinct trends, each of which is roughly 3 km long.
“Our expectation is that we could double the resource with drilling by early in the second quarter,” Brennan says.
His confidence is partly built on the fact that up until recently the company’s objective was not to find a huge resource, but to define a reserve and bring the project into production quickly as one of the lowest-cost vanadium producing mines in the world.
That development story is unfolding nicely as the company has progressed further than any other junior on the financing front.
Last
December Largo announced it had signed a letter of intent with Brazilian-based Vinci Partners that would see Vinci acquire the remaining 20% of Maracas for US$120 million in funding.
The company also has an offtake agreement in place with Glencore that covers 100% of production for six years based on prices from London’s Metal Bulletin.
As for where Brennan sees future production going?
“Largo has not focused on the battery market,” he says. “That’s not to say that we don’t like what we see, we do, and it gives us lots of hope about the future. But our focus is the steel market. Since 95% of vanadium production goes into steel that’s all we’re concerned with.”
Energizer Resources
Farther afield, Energizer Resources (egz-v) is looking to push its Green Giant project in Madagascar into production.
The company released an estimate in January that outlined an indicated resource of 49.5 million tonnes at an average grade of 0.693% V2O5 and an inferred resource of 9.7 million tonnes at an average grade of 0.632% V2O5.
The deposit sits on a 21-km vanadium trend, of which Energizer has only drilled 25%.
Unlike the magnetite deposits at Apella’s Lac Dore, Largo’s Maracas, and Xstrata’s Rhovan, Green Giant is a sediment-hosted vanadium deposit – a fact that has sparked conversation around the project.
Energizer says the deposit gives the company a distinct edge over its rivals because it could easily produce a high-quality end product.
“Our natural end product is a high purity vanadium pentoxide,” Julie Lee Harrs, president and chief operating officer of Energizer, says. “A large deposit like this can provide the security of supply that the battery industry needs to bring new technologies into production.”
Since the kind of high purity vanadium product that Energizer hopes to be producing by 2014 is difficult to come by right now, Energizer could well enjoy a distinct advantage.
Higher purity V2O5 is currently being sold for anywhere between US$10 to US$30 per lb. with the wide range in price due to Evraz controlling the market under the Stratcor banner.
“Right now battery manufacturers are prisoners to high-quality producers and there’s not that many of them,” Lee Harrs says.
Green Giant, however, is not without its detractors. Byron Capital Markets currently has a sell recommendation on the stock because of concerns on the metallurgy side.
Jonathan Lee, a battery material analyst at Byron, isn’t convinced that the company has found a way to separate out non-vanadium materials from the vanadium in a cost-effective way.
With alkaline roasting being the most expensive part of producing vanadium, it is important to have high-grade and easily separable ore, Lee says.
Harrs disputes such conclusions.
“It’s a different metallurgical process than what others are doing,” she says. “People are not comparing apples to apples. They are saying magnetites need a certain process and that sediment-hosted deposits are not following that process so they must be having problems. But it doesn’t mean there’s a problem. It just means it’s a different rock so the process will be different.”
Harrs contends the company has had metallurgical success, with up to an 82% vanadium recovery. The company plans to do additional metallurgical work within the next six months.
And while the three companies mentioned earlier offer an interesting way to play the metal, they are by no means the only interesting stories out there.
Some other companies looking to carve out a name in the vanadium space include: American Vanadium (avc-v), Energy Fuels (efr-t), Stina Resources (sqa-v) and Argex Mining (rgx-v).
American Vanadium is developing the Gibellini project in Nevada.
A scoping study done in late 2008 outlined a heap-leach project that could produce 8.4 million lbs. V2O5 at a cost of US$3.06 per lb.
Such a low cost structure gives the company a good chance of becoming North America’s first and only primary producer of vanadium.
The project currently has an indicated resource of 18.01 million tonnes grading 0.34% V2O5 and an inferred resource of 2.8 million tonnes at 0.28% V2O5.
Energy Fuels is busy consolidating uranium projects in western Colorado’s Uravan mineral belt, but is also targeting vanadium production via its Pinon Ridge project.
The project recently received a key government approval for a mill at the site and is expected to produce 3.7 million lbs. per year of vanadium pentoxide.  
Stina Resources is developing the Bisoni McKay vanadium property in Nevada. The project currently has an indicated resource of 10.6 million tonnes of 0.39% V2O5, but Stina says the area outlined in the resource represents only a portion of the mineralized zone.
The company is pushing ahead on a scoping study at the project, which is due in late March.  
Argex Mining is developing the La Blache property which sits roughly 120 km north of Baie-Comeau in Quebec.
The company is completing a scoping study on the property, which is due before April. La Blache has a historical, non-compliant resource of 800 million tonnes grading 0.2% V2O5, 43% iron and 11% titanium.