Australian Vanadium Ltd (ASX:AVL) has signed a further letter of intent (LOI) with Wingsing International Ltd, the commercial arm of Tianzhu Steel, for offtake of the iron titanium (FeTi) co-product to be produced from its namesake vanadium project in Western Australia.
The company plans to produce about 900,000 tonnes per annum (tpa) of FeTi co-product from the Australian Vanadium Project, in addition to about 11,000 tpa of vanadium pentoxide from its proposed mine and processing facility.
AVL’s strategic location for a vanadium processing facility near Geraldton enables the sale of the FeTi co-product thus enhancing the project’s economic resilience through the addition of a secondary revenue stream.
Shares have risen on the news and, looking ahead, both parties intend to finalise the ore sale contract in 2023, with an order of 100,000 tpa of iron titanium co-product.
“Strategic decision”
AVL managing director Vincent Algar said: “Through our consultant’s tireless work in China we are building brand awareness for the FeTi co-product AVL will produce along with its vanadium products.
“We are establishing relationships directly with some of the country’s top steel producers.
“We look forward to working with Tianzhu Steel to supply this unique product which is able to cost-effectively improve mill operational efficiency.
“These agreements further validate AVL’s strategic decision to locate its vanadium processing plant close to Geraldton’s port, strengthening the AVL pathway to funding and project development.”
This LOI has had a further positive effect on AVL shares. Today securities have been as much as 16.33% higher to A$0.057 a new high of more than 3.5 years.
This follows yesterday’s 43% increase on the back of securing a $49 million competitive grant from the Australian Federal Government under the Modern Manufacturing Initiative Collaboration Stream.
LOI summary
This LOI is non-binding and it intends to record the interest of the buyer to support the development of the project and for the parties to negotiate and agree on a binding ore sale contract.
The price of the FeTi co-product will be referenced to the 62% Fe Platts Iron Ore Index, with a mutually acceptable price adjustment reflecting the market situation at the time and based on amicable consultation.
AVL will provide the buyer with a quarterly update on the project’s progress and will supply samples for testing at regular intervals for the buyer’s feedback.
Encouragingly, the second LOI with a direct end-user follows the first LOI, further validating AVL’s strategic vanadium processing plant location, close to Geraldton Port
FeTi co-product
The FeTi co-product is ideally suited for use in iron sintering feeds, providing a low-cost titanium source and additional low-cost iron units to steel producers.
Blast furnace operators often add titanium to sintering blends to improve furnace refractory protection and to minimise maintenance costs associated with furnace relines.
Notably, AVL’s FeTi co-product will enter the market as a stable alternative to existing reliable and unreliable sources of similar material.
Furthermore, the iron ore and vanadium prices have historically not moved together, offering unique opportunities for AVL to mitigate vanadium price risk and provide a secondary revenue source for the project.
About Tianzhu
Tianzhu Steel has an annual steel production of 5 million tonnes per annum (mtpa) from its mill in Hebei Province, PR China.
The company is also one of the top H section steel producers in China, with an annual capacity of 1.2mtpa.
Tianzhu Steel is innovative in using various types of ironmaking raw materials and is currently under relocation and expansion project to increase the steel capacity to approximately 7mtpa.
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