Date: Mar 18, 2019
Special Report: Some of the heat has come out of the vanadium space this year, but the positive fundamentals have not changed.
We still need those new mines to come online to cater for increasing demand.
In November last year, new Chinese rebar standards – which required more vanadium — had just come in and the price ran up to over $US37/lb, exacerbated by the traditional end of year inventory build-up.
Just as quickly, it pulled back down to around $US15/lb as Chinese steel mills curtailed or dramatically reduced production over the winter period, due to environmentally motivated quotas and the production disruption over Chinese New Year.
But now vanadium demand is swinging back in as rebar standards are being more strictly enforced, and steel mills ramp up production again.
Of the 40 or so ASX listed stocks that offer exposure to vanadium, Technology Metals is one of the closest to production.
Technology Metals (ASX:TMT) wants to have its Gabanintha mine near Meekatharra in Western Australia up and running in 2021.
The company is confident its definitive feasibility study – due to be completed in mid 2019 — can improve on its already excellent base case pre-feasibility study.
The 2018 pre-feasibility study estimated that Gabanintha would generate $3.1 billion of total earnings before interest tax, depreciation and amortisation.
It would only take 2.5 years to pay back its initial construction costs of $380 million.
This is all based on operating costs of just above $US4/lb and a long term V2O5 price of about $US13/ lb – still lower than the current spot price of around $US17/lb.
But the fact that prices stabilised in the mid to high teens is a very good outcome — that’s still a 40 per cent increase on the start of 2018.
“The vanadium price pulled back to a level which is historically very high,” Technology Metals managing director Ian Prentice told Stockhead.
Mr Prentice says all the signs point to a structural change in the market.
“This latest price movement is different to what we have seen previously (in 2008),” he says.
“This time, we’ve had a nice slow build-up over a couple of years, we had that spike, but then it pulled back to the trendline of that nice steady increase.
With the Technology Metals pre-feasibility study based on a $US13/lb price, anything above this delivers some pretty special numbers.
“Around $US15/lb is certainly supportive of new project development, the sort of price you need to attract capital to develop projects,” Mr Prentice says.
“More importantly, the steel industry is more likely to continue consuming and increasing the consumption of vanadium.”
“When we listed back in 2016 the price was around $US4.50/lb.
“By the end of 2017 it was around $10/lb, and by the beginning of 2019 we are at between $US15 to $US18/lb.”
