A promising update from Australian Vanadium has advanced its namesake project in Western Australia closer to the starting line, judging by what it called a bankable feasibility study (or BFS) for the project.
While the BFS is upbeat, the economics of the project have also been supported by a $49.5 million grant from the federal government’s Modern Manufacturing Initiative.
That grant has given the project extra credibility but there are several more hurdles to mount before work starts in the 4th quarter of 2023.
The report, released yesterday to the ASX suggests very strongly that at current prices for the metal, the project has legs with a mine life of at least 25 years and a payback period of just over 7 years.
Based on a price of $US10.50 ($A13.90) a pound of vanadium pentoxide (V2O5), the BFS demonstrated the project to have a pre-tax net present value (NPV) of $833 million and an equity internal rate of return (IRR) of 20.6%.
Australia Vanadium’s report updated the size of project’s ore reserve to 30.9 million tonnes (Mt) at 1.09% V2O5 , comprising a proved reserve of 10.5Mt at 1.11% V2O5 and a probable reserve of 20.4Mt at 1.07% V2O5.
The project’s pre-feasibility study (PFS), released in December 2020, had indicated a reserve of 32.1Mt at 1.05% V2O5.
Australian Vanadium says it expects the project to produce 24.7 million pounds of V2O5 a year as a 99.5% high purity flake, and 900,000 dry tonnes per annum of iron-titanium (FeTi) by-product.
With an expected mine life of 25 years, Australian Vanadium will generate an estimated $175 million in annual EBITDA (earnings before interest, taxes, depreciation and amortisation) for a total EBITDA of $4.4 billion. The project payback period following first production is estimated to be 7.3 years.
Australian Vanadium CEO Vincent Algar said in the ASX filing that it was the perfect time to bring a vanadium project onstream.
“We are in a period of growing demand for vanadium from both steel and energy storage markets,” he said. “The robust designs and financials presented in this work firm the pathway to new vanadium production and sets the project apart as the most advanced new primary vanadium project globally.
“The thorough study process has reduced risks and therefore increased confidence for parties looking to invest in the future of vanadium from a stable mining region.”
To support a final investment decision (FID) expected in the final quarter of this year, Australian Vanadium is working with financial advisors on the structure and nature of debt financing, along with an equity strategy is also being finalised.
An equity raising is going to have to be structured very carefully for a project whose cost will be more than the market value of the company which was just under $330 million at yesterday’s close of 9 cents.
Following the FID, the company will select engineering, procurement and construction management, contractors, and complete the front-end engineering design (FEED). All to be completed in time for the start towards the end of next year on construction of the $400 million plus project.
Australian Vanadium shares fell more than 8% yesterday after the release of the BFS – investors clearly love the promise (more speculative) than the reality of many miners which involves hard work, nose to the grindstone and stringent oversight of costs, staff and markets – and a lot of money.
