Australian Vanadium Ltd (ASX:AVL) has inked its third letter of intent (LOI) with a steelmaking company to offtake iron titanium co-product from its namesake vanadium project in WA.
Rizhao Steel Holding Group Co. hopes to use the iron titanium co-product for its blast furnace application — it’s the world’s 26th and China’s 15th largest integrated steel producer and generates 15 million tonnes of steel every year.
AVL plans to produce around 900,000 tonnes of iron titanium co-product from the Australian Vanadium Project every year, in addition to roughly 11,200 tonnes of vanadium pentoxide per annum from its proposed mine and processing facility in WA’s Mid West.
This third letter of intent comes soon after the first two agreements, further validating AVL’s strategic processing plant location near major infrastructure like the Geraldton Port.
More LOIs in the works
Australian Vanadium managing director Vincent Algar said of the deal: “Our consultant in China continues to help AVL to build relationships with some of the country’s top steel producers.
“We look forward to working with Rizhao Steel to supply this unique product, which can cost-effectively improve operational efficiency.
“Work continues on additional LOIs and binding agreements. 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.”
What’s iron titanium used for?
AVL’s iron titanium 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 minimise the maintenance costs associated with furnace relines.
In the future, AVL’s iron titanium co-product will enter the market as a stable alternative to existing reliable and unreliable sources of similar material.
In turn, the company hopes to reduce its overall project risk by selling the vanadium coproduct.
This is because the iron ore and vanadium prices have not moved together historically, meaning the company can mitigate vanadium price risk and provide a secondary revenue source for the project.
The fine print
The price of AVL’s iron titanium co-product will be tied to the Platts62 Fines Index price.
This third letter of intent is non-binding, but AVL hopes Rizhao Steel’s interest supports the project’s development and eventually leads to a binding sales contract.
As a result, negotiations will commence at a mutually agreed timeframe, subject to the Australian Vanadium Project’s progress.
The parties intend to finalise the ore sale contract in 2022, at a yearly tonnage that’s yet to be determined.
Under this agreement, the price of the iron titanium co-product will be referenced to the 62% Fe Platts Iron Ore Index or other agreed price index.
Both parties must come to an agreement on any price adjustments based on the market situation at that time.
Moving ahead, AVL will provide Rizhao with a quarterly update on the project’s progress and supply samples for testing at regular intervals for the buyer’s feedback.
Site visits and meetings will be undertaken when travel permits.
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