Low operating costs and a high-purity vanadium product...

Low operating costs and a high-purity vanadium product arefuture-proofing TMT’s Gabanintha

Special Report:Someof the heat has come out of the vanadium space this year, but the positivefundamentals have not changed.

We still need those new mines to come onlineto cater for increasing demand.

In November last year, new Chinese rebarstandards – which required more vanadium — had just come in and the price ranup to over $US37/lb, exacerbated by the traditional end of year inventorybuild-up.

Just as quickly, it pulled back down to around$US15/lb as Chinese steel mills curtailed or dramatically reduced productionover the winter period, due to environmentally motivated quotas and theproduction disruption over Chinese New Year.

But now vanadium demand is swinging back in asrebar standards are being more strictly enforced, and steel mills ramp upproduction again.

Of the 40 or so ASX listed stocks that offerexposure to vanadium, Technology Metals is one of the closest to production.

Technology Metals(ASX:TMT) wants to have its Gabanintha mine near Meekatharra in WesternAustralia up and running in 2021.

The company is confident its definitivefeasibility study – due to be completed in mid 2019 — can improve on itsalready excellent base case pre-feasibility study.

The 2018 pre-feasibility study estimated thatGabanintha would generate $3.1 billion of total earnings before interest tax,depreciation and amortisation.

It would only take 2.5 years to pay back itsinitial construction costs of $380 million.

This is all based on operating costs of justabove $US4/lb and a long term V2O5 price of about $US13/ lb – still lower thanthe current spot price of around $US17/lb.

But the fact that prices stabilised in the midto high teens is a very good outcome — that’s still a 40 per cent increase onthe start of 2018.

“The vanadium price pulled back to a levelwhich is historically very high,” Technology Metals managing director IanPrentice told *.

Mr Prentice says all the signs point to astructural change in the market.

“This latest price movement is different towhat we have seen previously (in 2008),” he says.

“This time, we’ve had a nice slow build-upover a couple of years, we had that spike, but then it pulled back to thetrendline of that nice steady increase.

With the Technology Metals pre-feasibilitystudy based on a $US13/lb price, anything above this delivers some prettyspecial numbers.

“Around $US15/lb is certainly supportive ofnew project development, the sort of price you need to attract capital to developprojects,” Mr Prentice says.

“More importantly, the steel industry is morelikely to continue consuming and increasing the consumption of vanadium.”

“When we listed back in 2016 the price wasaround $US4.50/lb.

“By the end of 2017 it was around $10/lb, andby the beginning of 2019 we are at between $US15 to $US18/lb.”

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Gabanintha:A standout project

The real key for any prospective vanadiumprojects is vanadium head grade and vanadium recovery (or yield) in to amagnetic concentrate. Those two combined will be what drives the economics ofits project, Mr Prentice says.

“Certainly from that point of view, theGabanintha project stands out as one of the top development projects in theworld,” he says.

“That positions us very well to be that nextgreenfields mine development.”

Key ingredients around environmentalpermitting and mining lease approvals are all in train and running in parallelwith the full feasibility study, Mr Prentice says.

“We certainly see ourselves as being the oneof the next most advanced projects as far as timeline to development.”

Highpurity product samples to potential partners

Technology Metals has worked hard over thepast year to build positive relationships with end users and prospectivefinance partners across different regions including China, Japan, Europe andIndia.

“There’s a general acceptance in the vanadiumindustry that there is a lack of new supply, and a willingness to engage inofftake discussions in different jurisdictions,” he says.

In September, it also provided final, veryhigh purity V2O5 product samples to some of those parties.

That has set Technology Metals apart of itspeers.

It is delivering a 99.5 per cent purity VO25product — well above the benchmark 98 per cent product used by the steelindustry.

With low operating costs and a high purity endproduct, it appears Technology Metals is well-positioned for the long term.

“At some point in time there’s going to be anumber of new production centres coming online and the market will come backinto balance,” Mr Prentice says.

“This means we need to be competitive onoperating costs, which I believe we are.

“Butour product is of such a purity that customers will seek that out over some ofthe lower purity producers – these two parts of the equation are reallyimportant long term.

Here is the link to the story: https://unauthorised investment advice/resources/low-operating-costs-and-a-high-purity-vanadium-product-are-future-proofing-tmts-gabanintha/