Market watchers suggest vanadium mining companies provide a...

Market watchers suggest vanadium mining companies provide a greatlong-term investment opportunity.

Whatis vanadium?

Most vanadium is used in steel-making. Over90 per cent of the commodity is added to steel to make it stronger.

Vanadium was initially discovered in 1801by Spanish scientist Andres Manuel del Rio — who called it “erythronium” at thetime.

The commodity was forgotten about untilSwedish chemist, Nils Gabriel Sefström, happened across the mineral in 1830 andit finally got the name vanadium — the Scandinavian goddess of beauty — becauseof the beautiful colours of its compounds in solution.

It wasn’t until the early 20th century thatvanadium’s considerable strength was discovered.

That made it the material of choice forthings like planes, cars and buildings.

Vanadium started to be used industriallyover a century ago, with its first application being in the vanadium-steelalloy chassis of the Ford Model T car.

But it hasn’t been until the last few yearsthat the excitement around vanadium has really taken off.

The reason for that is its application as abattery metal. Vanadium is the key commodity in what is known as a “flow”battery.

Vanadium redox flow batteries (or VRFBs)are better suited to large scale applications (stationary storage), such asnetwork support for electricity grid operators and telcos looking to poweroff-grid communications towers and utility scale installations.

Vanadium batteries are safer thanlithium-ion batteries, cheaper than other types of “flow” batteries, and have thelongest life spans, lasting more than 20 years or up to 25,000 cycles.

They require little maintenance and can befully discharged without damage to their storage capacity.

They use two tanks of vanadium pentoxide(V2O5) solution that have been processed into a liquid electrolyte.

When the electrolyte is pumped throughelectro-chemical cells past a proton-exchange membrane, ions are swappedbetween the negatively and positively charged electrolyte, creating anelectrical charge.

The VRFB is inherently more stable thanlithium-ion because the electrolytes are just positively and negatively chargedversion of the same chemical and the process of charging and discharging doesnot generate excess heat.

The vanadium battery technology is anAustralian invention and the first prototype was built by Maria Skyllas-Kazacosat the University of New South Wales in the 1980s.

Now these big batteries are a reality inJapan, China, and Australia and soon to be in Germany.

In China, Rongke Power in Dalian provinceis building the largest battery in the world, an 800 MWh VRFB, while in Hebeiprovince Pu Neng Energy is building a 500 MWh version.

Germany is looking at building a VRFB thatcan store enough energy to power Berlin for an hour, which would be a big stepforward from the Tesla lithium-ion battery built in Australia which only has thecapacity to provide 2 per cent of Adelaide’s power requirements at any time.

In August, small cap vanadium playerProtean Energy (ASX: POW) successfully hooked up a 25kW/100kWh vanadium batterywith Western Australian electricity operator Western Power.

Protean has been developing its V-KOR VRFBfor about 10 years with Korean partner KORID Energy.

VSUN(Part of AVL) Energy, meanwhile, launched WA’s firstVRFB in 2016.

Miningand production

Vanadium is largely a by-product of a bunchother minerals. It rarely occurs in nature by itself.

There are only three large-scale primaryvanadium producers globally – Bushveld Minerals, Glencore, and Largo Resources.

The world’s largest vanadium mines arefound in the Bushveld region of South Africa, the Ural Mountains of Russia andin China’s Sichuan province. Even with planned expansions by existingproducers designed to increase annual production, the supply shortfall isexpected to widen further as demand for vanadium continues to rise. When it comes to vanadium it is not just as simple as looking at the grade of theore.  The keys to determining a good deposit comedown to the overall magnetite recovery and the grade of the vanadium you getfrom that magnetic concentrate.

Canada’s Largo produces the highest-gradeV2O5 in the world of 3-3.2 per cent from its Brazilian mine.

But it does that from a typical magnetiterecovery of 30-35 per cent, which is considered pretty good.

The Rhovan mine in South Africa’s BushveldComplex also has a 30-35 per cent magnetite recovery and it produces 1.6-1.8per cent V2O5.

Traditionally,vanadium is used in:

Steel – 92 per cent of vanadium is used insteel. It takes only a small amount of vanadium to double the strength of steeland reduce its weight by 30 per cent.

Titanium – vanadium is also used to maketitanium alloys. This is where titanium is mixed with other chemical elementsto make it stronger. Titanium alloys are used in military applications,aircraft, spacecraft, bicycles, medical devices and jewellery.

Chemicals – V2O5 is used in ceramics and asa catalyst for the production of sulfuric acid.

Growing demand for steel, particularly inChina, has driven a shortfall in the commodity.

China also recently introduced stricterstandards to double the amount of vanadium used in its rebar, reinforcing steelused in concrete, following recent earthquakes.

But all the excitement in recent years hasfocused on vanadium’s use in batteries for stationary energy storage.

China is leaning towards VRFBsas its best option for grid-scale energy storage.

Vanadium’s future in batteries. There are a couple of battery technologiesvying for top spot, but the spotlight is largely on VRFBs.

Benchmark predicts that by 2028, 50 percent of the burgeoning stationary storage market will be lithium-ion, and 25per cent will be VRFBs.

For stationary storage, vanadium flow isvery interesting because of the life-cycle advantages and the fact that theinput raw materials can be reused.

Price: The rise of vanadium and ASXvanadium stocks. The price of V205 has hit its highest pointin 13 years, reaching $US32.50 in October. Only a handful of ASX vanadium stocks havefollowed a similar trajectory in 2018.

AustralianVanadium (ASX: AVL),
Technology Metals Australia (ASX TMT)
King River Resources (ASX: KRR)

Vanadiumoutlook

Vanadium demand for VRFBs is growing atsuch a rapid rate. The forecast compound annual growth rate for vanadium to beused in VRFBs is 60 percent.

Current demand is about 100,000 tonnes perannum, but that is tipped to triple over the next five to six years.

Benchmark boss Simon Moores says vanadium could have its “Elon Musk moment” as it advances towards powering 25 percent of stationary battery storage by 2028.

Lux Research forecasts that vanadium flowbatteries will be at the very least a $190 million market opportunity by 2024and on an “optimistic” basis will be well over $400 million.

Steeldemand is also on the rise.

In China in the first half of 2018, steelproduction increased 6 per cent year-over-year – representing about 450 milliontonnes of steel.

Railway construction is also now becoming asignificant factor in steel demand as China ramps up its One Belt, One Roadpolicies.

China’s One Belt, One Road ismulti-trillion-dollar initiative to build efficient trade corridors betweenChina, Asia, the Middle East and Europe. It involves new rail, road andmaritime infrastructure in some 70 countries.

The expectation is that this year railwaysin China alone will consume 32 per cent of the country’s total steel demand –around $US26 billion worth of steel. And that doesn’t take into account therailways China is building outside of the country.

Demand will also increase with China’s new rebarstandards. Estimates put this requirement at about an extra 170,000 tonnes — or21 per cent of global vanadium production — starting in November 2018.