EDITOR: | July 18th, 2017 | 35 Comments

Vanadium – Heard it on the Grapevine

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In the mining sector if one hangs around long enough, that which was once a subject of excitement and then fell from favour eventually comes around again. In the case of Rare Earths though one had to wait from the 1960s until the early 2000s to see them return as a talking point.

Last decade Vanadium surfaced as a subject of interest primarily tied to the fortunes of the then-booming steel industry. Now Vanadium is coming back with a vengeance for its potential in mass electricity storage devices, namely the Vanadium Redox Battery (or VRB). At the recent Natural Resources Forum event at the London Stock Exchange, which I attended, the guest speaker was Robert Friedland and he was in a Vanadium-induced ecstasy. Never could we have imagined the metal having such a euphoric effect. In any case it gave the Friedland imprimatur to a metal which most metals watchers have rarely paid any attention to due to it (largely) being a by-product of other mining and curiously of the petroleum refining industry.

It was not just Friedland though that has latched onto this bandwagon as we have heard Vanadium name-checked at a number of recent events recently as the next best thing now that Lithium has somewhat done its dash with promoters overcooking the soufflé.

VRB – Go with the Flow

The current end use of the bulk of Vanadium production is well-known with its strict correlation with steel consumption. New uses are potential X factor for the Vanadium space. While aerospace has been growing organically and increasing its share of the usage of the metal the area with the best potential for a quantum leap is in battery applications.

Chief amongst these is the Vanadium Redox (and redox flow) battery (VRB), which is a type of rechargeable flow battery that employs Vanadium ions in different oxidation states to store chemical potential energy. The present form (with sulfuric acid electrolytes) was patented by the University of New South Wales in Australia in 1986 where scientists carried out the first known successful demonstration and commercial development of the all-vanadium redox flow battery employing vanadium in a solution of sulfuric acid in each half in the 1980s. Although the use of vanadium in batteries had been suggested back in the 1970s by a number of scientists including some at NASA.

There are currently a number of suppliers and developers of these battery systems including Ashlawn Energy in the United States, Renewable Energy Dynamics (RED-T) in Ireland, Cellstrom GmbH in Austria, Cellennium in Thailand, and Prudent Energy in the United States and China. The vanadium redox battery results from over 25 years of research, development, testing and evaluation in Australia, Europe, North America and elsewhere.

The image that follows gives a good idea of one of the more practical applications of such batteries. In this case the solar panels collect energy during the day and store it in the battery for release during the period when the solar panels cannot access sunlight.

Source: Cellstrom GMBH

A vanadium redox battery consists of an assembly of power cells in which two vanadium-based electrolytes are separated by a proton exchange membrane. The battery exploits the ability of vanadium to exist in solution in four different oxidation states, and uses this property to make a battery that has just one electroactive element instead of two.

Source: Vanadiumsite.com

The main advantages of the vanadium redox battery are that it can offer almost unlimited capacity simply by using larger and larger storage tanks, it can be left completely discharged for long periods with no ill effects, it can be recharged simply by replacing the electrolyte if no power source is available to charge it, and if the electrolytes are accidentally mixed the battery suffers no permanent damage. The VRB has also been shown to have the least ecological impact of all energy storage technologies.

The main disadvantages with vanadium redox technology are a relatively poor energy-to-volume ratio, and the system complexity in comparison with standard storage batteries.

Another emerging technology is the use of lithium-vanadium phosphate or fluorophosphate cathodes and lithium-vanadium oxide anodes in rechargeable lithium batteries. These batteries exhibit greater safety compared with the more generic lithium-cobalt oxide type cathodes seen in cellular telephone or laptop batteries (which have higher operating voltages and higher rates of energy storage). The vanadium phosphate cathode material can support 20% more energy storage than the conventional cobalt oxide, as much as 26% more than iron phosphate, and 56% more than manganese oxide. However, in order for such a battery to be practical, the cost of the battery is critical.

 

Source: Subaru

Several years ago Subaru developed a prototype of its G4e electric car (pictured above), powered by lithium-vanadium phosphate batteries. This concept car has a 200-km range that is provided by a relatively small vanadium phosphate battery pack, double what their earlier R1e concept car could achieve. However, it would appear that Subaru have done little with the concept of late. Maybe the patents need dusting off in the light of Cobalt’s perilous surge in price.

Largo Resources – the Primary Exposure

The most obvious pure exposure to Vanadium mining (rather just a project is Largo Resources Ltd. (TSX: LGO | OTCQB: LGORF) with its Maracas mine in Brazil. This has been in operation for several years now and has been growing impressively in terms of production (see table below), meanwhile its production costs have been falling (helped by the weakness of the Real against the US dollar) and the Vanadium price has been rising.

The company has given guidance that production in FY17 should be around 9,361 tonnes (equivalent to ~ 20.6 mn lbs). The company expects monthly output of 840 tonnes of V2O5 from May 2017 onwards.

This virtuous circle has replaced a rather vicious cycle that had previously reigned for the company producing some quite eye watering losses (see earnings table below) in the not too distant past. Producing more meant greater losses while now producing more signals that profitability is within shouting distance.

As the table shows the gross loss has shriveled to levels at which it is most likely to turn a profit at that level fairly soon and hopefully at the bottom line by the end of the current fiscal year.

Conclusion

It’s a long while since I (at Hallgarten) wrote my magnum opus on Vanadium back in early 2012. Strangely the field of players has not expanded (nor contracted) too much since then. It is the same hardy group of survivors with the producer being Largo Resources (only a project back then) while others like NextSource (back then called Energizer Resources) with its Green Giant in Madagascar and the perpetual bridesmaid of the space, American Vanadium. Back in those days Neometals (then Reed Resources) was expounding on the Vanadium potential of Barrambie (now refocused as a Titanium project) and we had been talking, as far back as 2010, to Apella Resources (name changed to VanadiumCorp) about its Iron-T deposit that has now moved into the camp of Alix Resources (spoiler alert: I sit on the advisory board of Alix).

With Vanadium Redox being the intelligent chatter of the day (or year) it won’t be long before these players start to reappear on the radar and others join them. Largo definitely has the jump on most of them and has had an expensive learning curve behind it. Not all Vanadium deposits are the same though so some of the lessons learnt by Largo may not translate for all wannabes on the scene. In any case, this opens up the battery metals debate to another realistic alternative. The more the merrier, we would say.


Christopher Ecclestone

Editor:

Christopher Ecclestone is the EU Editor for InvestorIntel and is a Principal and mining strategist at Hallgarten & Company in London. Prior to founding Hallgarten ... <Read more about Christopher Ecclestone>


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Comments

  • James

    for vanadium exposure with great leverage investors need to have a look at Technology Metals Australia Ltd (ASX: TMT). Earlier stage than Largo but huge upside on the back of maiden JORC announcement.

    July 19, 2017 - 6:11 AM

  • Jack Lifton

    Christopher,
    A financier with no skin in the Largo project told me recently that the company’s problem is with “indebtedness.” Yet I notice that in the table you show there is no “interest expense” for debt. The table shows only “interest expense (income)” as if there is only a “lack of earnings” from investments in interest bearing financial instruments. I know for example, because I read it in an announcement in June that a loan made to the company by Largo’s CEO was “rolled over” at a double digit rate. And does Largo have an interest free working capital facility? If the company is headed towards profitability, as you suggest, are then loan facility repayments that will be senior to distribution of profits?
    Largo is NOT a junior. It will succeed or fail based on its ability to be profitable and to raise working capital through debt (bonds, short-term loans, etc.). Do youi have a position on the company’s ability to do that?
    Thanks

    Jack

    July 19, 2017 - 9:23 AM

    • Jack Lifton

      Christopher, in the above comment I meant to write “are “there loan…” not “are then loan…”

      July 19, 2017 - 9:26 AM

  • Kris Vd Cruyce

    thank you for sharing this info with us.

    Although Vanadium is the future of many things, Largo is ‘underperforming’ from the point of view of the small shareholders.
    Their PR and info after the Q1 was very poor. Everybody hoped for black numbers. Why such a huge investment? What does it bring to the company?

    The CEO indeed had/has a double digit loan running. One could thus ask what the CEO his main interest was and is. It should be creating shareholder value for all shareholders: big and small. In Europe anyway.
    Perhaps he does, but communication is poor. The last comment on the website’s homepage says it all – dates from december. That’s 7 months ago. In 2017 not presentations so far.

    I hope that they write the Q2 result in black, bold. If not, the SP will go down down down …

    Perhaps a thorough interview instead of some publicity interview.

    But thanks anyway, it is the only decent information we get as a small shareholder

    July 19, 2017 - 11:16 AM

    • Christopher Ecclestone

      Thanks Kris… glad my table proved useful as a way of visualising what is going on. The company is essentially controlled by a New York mining hedge fund Arias Capital Management. There should have been a moment to mothball this and then revive on better prices and yet they did not. This might be because the hedge fund would have had to write off whole investment as a controlling shareholder rather than just marking to market the shares as a minority holder. Merely hazarding a guess here..

      July 19, 2017 - 11:58 AM

  • Kris Vd Cruyce

    Hope the vanadium price goes up to just above 7USD in September and then remains stable. But even with this pricelevels and a poor communication, the SP won’t move a lot. Next 2 quarters profit will be crucial for Largo.

    Any idea by when the production of Vanadium Redox batteries will start at an Industrial scale. In other words as of when it will have significant impact on the price.
    Can be that an article was already written on this but can’t remember having read an article answering this question.

    July 19, 2017 - 1:22 PM

  • Christopher Ecclestone

    The VRB “wave” is still some way off for massive adoption and consequent price effect will only happen when buying of the metal for actual building of the batteries begins. Too many think that metals markets work like equities markets and companies buy years in advance of a demand. Just not true.

    If large scale adoption is two or three years out then it will be only a few months ahead as stocking happens that prices of Vanadium pentoxide will start to rise.

    July 19, 2017 - 1:39 PM

  • Bobbi

    Prophecy Development Corp (TSX: PCY) purchased American Vanadium Gibellini project and has been adding new vanadium projects. http://www.prophecydev.com

    July 19, 2017 - 2:17 PM

  • tektok

    Flow batteries are great for all the reasons cited but unfortunately, the economics are very sensitive to vanadium prices. The higher the price, the less that will be used, big conundrum for producers. Flow batteries also use a lot of graphite, another mineral waiting for the second coming.

    July 24, 2017 - 5:58 PM

  • Christopher Ecclestone

    Just a tidbit on pricing.. First swallow of Vanadium summer? Metal Bulletin reported that Ferro-vanadium prices surged 20.3% in Europe in the first half of the week, as upstream supply concerns continued to unnerve the market and give momentum to still higher prices.

    Metal Bulletin assessed ferro-vanadium prices in a range of $33-38 per kg, delivered duty-paid in Europe, on Wednesday July 26, soaring 20.3% from July 21’s assessment of $28.50-30.50 per kg. European ferro-vanadium prices are now at their highest level since November 2008. “The market is being driven by the Chinese and immediately the traders elsewhere are running behind,” a consumer source said. Upcoming environmental inspections affecting China’s vanadium producers are set to tighten the local and international market.

    July 28, 2017 - 12:45 PM

  • Mr Cricket

    What about London-listed Bushveld Minerals? Bought an interest in the operating and cash flow Vametco integrated asset in SA. Looks to be in good shape and doing well.

    July 30, 2017 - 11:14 AM

  • Christopher Ecclestone

    Mr Cricket (Jiminy?) – thanks for highlighting Bushveld. The transaction to buy Vametco from Evraz certainly looks interesting. Hard to work out if its actually producing or not….Had sizeable sale sin 2015 but minuscule profits (but profits are good when one compares to the haemorrhaging at Largo in the same timeframe).

    August 1, 2017 - 2:35 PM

    • Alex

      @Mr Ecclesstone With regards to Bushvelds your reference to minuscule profits had me reading through the Bushveld RNSs. A quick review of Bushvelds RNS from 6th April 2017 shows that in 2015 Vametco made $2m gross profit against $17.33 per kg. But then FeV prices averaged just $18.60 Kg that year. As I write they now sit closer to $50 per kg.

      A further look at the same Vametco completion RNS shows that 2016 production was 2,850 mtv. (FeV equivalent). 2017 production has yet to be released but the RNS identifies a path to 3,340 mtv.

      I have no idea how much they have improved this year, but 2,850 mtv at $50 per kg looks very profitable indeed.

      August 1, 2017 - 4:00 PM

  • Christopher Ecclestone

    To quote from the press release on the purchase: “Profitable operations, even in a constrained economic environment with 2015 revenues and operating profits of ZAR629 million and ZAR 26,724 respectively”. Twenty six thousand rand is not much money… I hadn’t seen any more recent numbers..

    August 1, 2017 - 5:57 PM

    • Alexander McBride

      That’s a fair comment but you are being a little selective don’t you think.

      The same RNS quotes the following :
      “One of the cheapest primary producers of vanadium in the world, realising an all-in cash cost of US$17.33/kgV (US$3.57/lb V2O5 equivalent) for the year 2015.”

      Compare that V205 cost to where Largo is right now.

      “Ore Reserves of 27Mt (JORC) with some of the highest in-magnetite vanadium pentoxide (V2O5) grades in the world, averaging of 2.55% vanadium pentoxide in magnetite.”

      Largo are currently declaring 18.4m tons at 1.17%.

      Plus Vametco makes a premium product called Nitrovan, which sells at a premium to FeV, which is itself a premium product to V205, the product Largo makes and sells 100% under contract to Glencore.

      There are more figures on debt and BMNs total vanadium resource beyond Vametco. But that aside we are talking about likely the cheapest highest grade Vanadium pure play producer in the world, so those accounts in my opinion are going to be very good at 2,850 mtv production.

      The accounts need to be updated

      August 2, 2017 - 12:44 AM

  • Alexander McBride

    Sorry I meant to say at the end, but the accounts do of course need to be updated

    August 2, 2017 - 12:49 AM

  • bobbi

    The vanadium bull (500%) and one vanadium stock that few talk about

    http://www.prophecydev.com/the-vanadium-bull-500-and-one-vanadium-stock-that-few-talk-about/

    Highlights:

    1. the price of vanadium pentoxide (V2O5), reached US$12.4/lb, having more than doubled from US$5/lb at the time when I started covering vanadium 8 months ago. The price is up over 500% since January 2016.

    2. Mr. Robert Friedland was seen in a Vanadium-induced ecstasy at the London Resource Conference. Never could we have imagined the metal having such a euphoric effect.

    3. There is no meaningful or declared vanadium inventory. With rising demand, vanadium consumers without pre-existing relationship with a bonafide supplier are at the mercy of a handful of traders.

    4. Fundamentals aside, from a contrarian viewpoint, the lack of vanadium coverage by mainstream media tells me what we have seen so far ain’t nothing yet compared with what’s to come.

    5. Largo and Prophecy (TSE: PCY, OTC: PRPCF) are two vanadium mining and exploration companies worth taking a look

    August 2, 2017 - 11:32 AM

  • KRIS VD CRUYCE

    Thx to mr CRICKET who pointed us towards Bushveld. Need to see what their production status is.

    I surely hope that Largo’s management shines some light on what the effect is of current prices on possible revenues. What could it mean at a price of 8 and 10 USD per lb. Many small shareholders have seen ‘black snow’ (in Dutch we say ‘zwarte sneeuw’), so some encouraging news would be appreciated. Especially when you look at the (likely) current share price manipulation …

    Quite exiting times with climbing prices of graphite, vanadium and rare earths

    August 2, 2017 - 2:11 PM

  • Christopher Ecclestone

    Don’t get me wrong. Vametco looks like a great asset… leaves one wondering why Largo didn’t buy it! I am running my sliderule over Bushveld at this very moment….

    August 3, 2017 - 5:24 AM

    • Mick

      Check out tng ltd an asx listed company with a huge deposit of vanadium with a revolutionary metallurgical process they developed with SMS siemeg that allows them to extract and seperate vanadium, titanium dioxide and pig iron from titanomagnetite ore body’s in once process…. already has a binding offtake for 60 percent of its vanadium with woojin, currently undertaking pre development activities and in the final stages or permitting and finance discussion…. definitive feasibility study concluded the estimated the Net present Value at 5 billion dollars!! Yet the market cap is currently only 120 million! Massive gains to be made!!
      Have a read Christopher

      August 4, 2017 - 2:42 AM

  • Rick Mills

    I’m own Vanadium One TSX.V:VONE. Great property, great management, low os.
    Rick

    August 10, 2017 - 8:35 AM

  • Kris VD Cruyce

    Is Largo a take-over candidate?
    Recent developments in China learn us that ‘China’ will be the driving force for Vanadium, not realy a surprise but it is time line up a few news events:
    https://www.metalbulletin.com/Article/3743869/Search-results/FORECAST-Chinas-scrap-ban-will-cut-4500-5500-tpy-of-domestic-V2O5-production.html
    https://www.metalbulletin.com/Article/3742857/Search-results/FORECAST-Chinas-vanadium-consumption-to-surge-30-on-revised-rebar-standards.html
    http://economictimes.indiatimes.com/news/science/chinese-scientists-make-breakthrough-in-super-steel/articleshow/60216829.cms

    Chinese companies will produce less Vanadium and on the other hand need more Vanadium. We learned in the past that Chinese planners are smart and think 10 years upfront, not driven by short-term profit ideas.

    When rare earths became important they tried to buy Lynas (but got a njet from Australian government).
    When lithium became important -> I believe they bought Talison in Australia
    When cobalt shortage became clear -> a mine in Congo and not the smallest

    Vanadium evolves from an additional product to a strategic metal, and we are not even thinking about batteries. It would make sense that China starts to look overseas … And what is then the best company to buy. Indeed Largo. Top class Vanadium and a life time of an extra 25 years.
    The other mines are for free, so to speak.
    Would be interesting to put a value on the company, using current price levels as a basis.
    Please share your thoughts.

    August 27, 2017 - 6:43 AM

  • John Smith

    More likely to buy a debt free company that is vertically integrated with vandium redox batteries if you ask me-Bbushveld Minerals (BMN.L)

    August 28, 2017 - 4:10 AM

    • TBP Editor

      That would make more sense from the Chinese perspective – Bushveld Minerals, via its subsidiary Bushveld Energy, already has a close relationship with UET, which is one of the only 3 companies that have the license to use the PNNL mixed acids electrolyte for VRFBs (UET was founded by the inventors of that).

      Largo has no such relationship with a VRFB manufacturer, which is why it was so keen to develop the electrolyte leasing model for VRFB batteries – trouble is they are not permitted to make the mixed acids electrolyte so they could lease a product, but it would be an inferior one.

      August 28, 2017 - 4:37 AM

      • Kris VD Cruyce

        You could be right of course but the question is what China wants to achieve.

        Confucius said “If your plan is for one year plant rice. If your plan is for ten years plant trees. If your plan is for one hundred years educate children. ”

        If securing their production flows is the purpose, first for rebar and in 2 years for batteries than having a relationship with a VRFB manufacturer doesn’t play a role today. Who knows China is working on their own VRFB technology. We could read that scientist did some important work for graphene.

        A debt free company is not the first concern if you think like Confucius ( long term), and certainly not if you have very deep pockets. You just deduct the debt from the companies value.

        Buying such a company now is cheaper than to buy it in a few years. Could also be they buy a company having a rich Vanadium property but that takes many years to develop.
        Additionally, looking at the past countries like Australia, USA and Canada are perhaps not so keen in selling to China. Brazil, is perhaps easier.

        Anyway, it are exiting times for Largo shareholders although as a European I hope China doesn’t buy it. The West would become again a bit more dependent on China like we already are/were for rare earths.
        But since we are in it, partially for profit, …

        August 28, 2017 - 6:24 AM

        • pieter

          @ Kris I tend to believe that China will try to monopolise Vanadium if it is strategic for them, same as they did with Cobalt they are main global player in this commodity. And control cobalt as they refine most of the cobalt globally. It would be not surprsing they will just take advantage of their already strong position. If they believe vanadium is what they need Largo is up for a buy out. rgds Pieter

          October 3, 2017 - 7:29 AM

          • Kris VD Cruyce

            IRL bought the Mapochs mine in South Africa – a mine with an output of 11k Ton a year. A first step … Eargerness to take over Largo is perhaps less urgent now.

            October 3, 2017 - 2:37 PM

  • Rod

    @Mr Ecclestone, can I ask how you and your slide rule are getting on at Bushveld? (Your post of 3rd August)

    If you’d like a concise and factual account of what’s happening at BMN I can recommend The Bushveld Perspective (https://www.thebushveldperspective.com/start-here/), a completely independent website created and maintained by several BMN PIs from the LSE site. It’s very useful as it saves the reader the time and effort of wading through countless RNSs and press releases in order to unearth the real Bushveld Minerals story, and I think you and others on this blog will find that it’s well worth a read.

    I’d be interested in hearing your and other people’s opinions. Happy reading!

    August 28, 2017 - 5:52 AM

  • Christopher Ecclestone

    There a lot of people pushing their favorite bandwagons in here. I am a fan of VRB but its too early for it to make any difference to existing miners’ economics. The Vanadium price has gone up not because of VRB but rather because it was it’s “turn” to join the generalised recovery in prices that had left a few laggards behind.

    As for Bushveld I have reached out to them with zero response. The fact that their glitzy website is patchy with regard to progress at Vametco is rather disturbing and the fact that one has to go to fanblogs to find out where they really are says much about the company’s ability to project its story to analysts and investors. As they say in the classics “must try harder”.

    August 28, 2017 - 8:39 AM

    • Bmner

      If you think that website is lacking that key info then take a moment within your research to ask why… Could it be they are busy ramping up towards 10% of the world’s supply, selling at huge profits and aren’t so bothered with their website at the moment… Does need fixing but look deeper.

      August 28, 2017 - 8:48 AM

      • Christopher Ecclestone

        Well, they can’t complain that their share price is languishing or that “investors don’t understand us” if they can’t be bothered to explain themselves properly. “Dig deeper” is rarely a great come-on to investors. Don’t get me wrong I like the story but history has shown over and over again that companies that aren’t particularly open in the good times will be even less so in the bad. My previous experience of a bad South African story (Galane Gold) has reinforced this point to me.

        August 28, 2017 - 9:10 AM

  • Christopher Ecclestone

    BTW, to send Vanadium bulls into even more of a lather. The spot price of vanadium increased on Friday by 40 cent to $9.90/lb. The year to date graph shows vanadium pentoxide is up over 97% in 2017.

    August 28, 2017 - 9:13 AM

  • Kris VD Cruyce

    I assume you include me in the people sitting in a bandwagon.
    Well it is normal that people write these comments as this is a forum in which companies make publicity for their mines. Sometimes accompanied with interviews in which no difficult questions are asked. The website survives on this, I understand. Also in this article Largo is mentioned.
    Thus shouldn’t one not be surprised that readers start to name other companies or like myself ask questions on the impact of some events. And yes, we think about the value of our investments. In my case often driven based on info in articles like yours.

    I only partially agree with your remark that the main and perhaps soul reason of the increasing price for V is a simple recovery. Like for rare earths and iron ore.
    The environment policy changes and higher rebar requirements in China are the important key drivers, for me. The result of both is that China will have to import significantly more Vanadium then it does now. Knowing that Chinese think long term and have money it is not unlikely they buy a mine outside China.

    If they buy an active mine like Largo (independent of who they buy) and they first fulfil their own needs, one could end up in the similar situation we face(d) with rare earts.
    I think that could be a relevant event?

    In a few years, when batteries are taken into account, a secure supply of V is a must. One doesn’t start making a product, if one isn’t re-assured of the products needed to make it. And I think that one needs to think about a secure supply today to start making batteries in 2 or 3 years – given the tonnes such a battery requires.

    But I hope you prefer to have comments on your articles than to have none. Sorry I can’t contribute much on the subject itself. I’m active in other things – ancient coins in the Himalaya by example.

    Don’t get me wrong. I read your articles with great interest and respect. Much appreciated.

    August 28, 2017 - 11:30 AM

  • KRIS VD CRUYCE

    Chinese go to Bahia to invest in mining. Noticed by a reader on a board …

    https://translate.google.ca/translate?hl=en&sl=pt&u=http://portalsbn.com.br/noticia/chineses-chegam-a-bahia-para-investir-em-mineracao&prev=search

    Seems the bandwagon has a good orchestra leader.

    August 29, 2017 - 3:20 AM

  • The vanadium bull (500%) and one vanadium stock that few talk about

    […] July at the Natural Resources Forum event at the London Stock Exchange, Robert Friedland was said to […]

    September 22, 2017 - 3:08 AM

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