Xstrata closes mothballed Windimurra

Despite current high vanadium prices, London-listed diversified miner Xstrata has confirmed the permanent closure of the Windimurra vanadium pentoxide operation, 500 km northeast of Perth, Australia.

On care and maintenance since February 2003, the plant would have required a significant investment to return to production, according to a company study. Xstrata says the operation would require an equipment redesign to bring magnetite recoveries up to feasibility levels; a re-configuration of the power plant designed to lower operating costs; and introduction of an emissions management program to meet current environmental standards.

Says Xstrata Alloys’ chief executive Peet Nienaber, “The current vanadium spot price is unlikely to be sustainable and cannot be used as a realistic long-run average price, particularly as Windimurra’s return to production would itself be likely to impact the vanadium price negatively.”

In its first full year of production in 2002, Windimurra produced more than 12 million lbs. of vanadium pentoxide, representing about 10% of the worldwide production. Before being suspended in February of this year the operation spat 614,000 lbs. The operation has an annual capacity of 16.4 million lbs.

Also working against Windimurra are a stronger Australian dollar and the steel industry’s shift to ferrovanadium from vanadium pentoxide. Vanadium is used to strengthen steel.

Xstrata says it spent about A$180 million on the project before its suspension. The company says the costs have already been expensed and that the permanent shutdown will not result in a writedown of assets on its balance sheet.

The company figures to spend around US$8 million on cleanup and decommissioning; the costs will be expensed in 2004.

Australian-listed Precious Metals Australia retains a 15% net profit interest in Windimurra. The royalty includes a minimum payment of A$500,000 per year until the site is completely rehabilitated. If Xstrata ever decides to resume production PMA will revert to it’s 15% net profit interest.

In January, Xstrata suspended production at its Vantech vanadium operation in South Africa, as the current ore body became depleted. Development of the project’s Steelpoortdrift ore body has been deferred owing mostly to the strength of the South African rand. The plant annually produced around 13.5 million lbs. of vanadium pentoxide.

Elsewhere in South Africa, Xstrata recently expanded its Rhovan operation. In 2003, Rhovan produced 18.2 million lbs. of vanadium pentoxide and 6.3 million tonnes of ferrovanadium.

Vanadium pentoxide prices currently hover around the US$5.50-US$6.00 per lb. level, up from around US$1.80 per lb. a year ago. So far this year, prices for ferrovanadium have rise 125% to around US$12.88 per lb.