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Windimurra Vanadium sweats on future
Metal Prices for 19-feb-2009 Ferro-vanadium V 50%

107000 - 112000 Rmb/mt Ferro-vanadium V 78-82% dp

23.5 - 24.8 $/kg V Vanadium Pentoxide fused flake 98% min

5.8 - 6 $/lb V2O5
Vanadium pentoxide V2O5 98%

LONDON (Metal-Pages) 19-Feb-08. The future of Windimurra Vanadium is clouded by uncertainty, amid analysts’ forecasts that in the face of the global financial crisis the Western Australia vanadium mine may only be bought by a cash-rich buyer or lie dormant until the market recovers.

Administrators Ferrer Hodgson told Metal-Pages they are waiting to see whether receivers KordaMentha will suspend or continue mining operations at Windimurra, after the company announced on Wednesday it was going into receivership.

"No action can be taken until debts are settled and receivers have completed their job," said Ferrer Hodgson's Lauren McCann. "It will be up to the receivers to decide whether to continue running the mine or to suspend operations. When they retire we will come in to work out what is the best option for restructuring small claims."

KordaMentha receiver Brian McMaster told reporters that construction is suspended as the mine is being put on care and maintenance, while several parties apparently approached the receivers about the restructuring of debt and possible sale of Windimurra.

Windimurra was targeting vanadium production in the second quarter of 2009 but instead the company’s 50 employees were left to digest details of a letter from the administrator outlining their entitlements while its future is decided.

The decision to put the Midwest Vanadium, the subsidiary of Windimurra Vanadium, which runs the mine into administration, after it failed to secure $ 81 million financing is also said to have implications for around 400 contractors.

In December, Perth-based Windimurra put back vanadium production at its mine near Mt Magnet until the second quarter of 2009, blaming the late arrival of equipment and materials, as well as delays in regulatory approvals.

Construction delays had already pushed the operational date back to the first quarter of 2009.

Production was due to be marketed by Hong Kong based commodities trader Noble Group, one of the investors in the project.

The mine's owners have spent years and millions trying to bring it back into production after it was shut by former majority owner Xstrata in 2004.

After Xstrata returned the stake back to Precious Metals Australia (PMA, later renamed Windimurra Vanadium), PMA relaunched the project, with the backing of Noble. It had expected to build the mine into an integrated operation with its own smelting capacity, ultimately producing 6,500-7,000 annual tonnes of ferro-vanadium.

To buy or not to buy?

Though a number of parties have reportedly contacted the company and asked to be considered in any recapitalisation or sale of Windimurra, given the poor health of the world’s major economies, the global financial crisis, recent and past events in the mining industry, there appears to be a narrow field of candidates to buy Windimurra.

Since mid-September vanadium pentoxide prices have fallen by almost two-thirds to reach $ 5.80-$6/lb.

“It’s not the best time to be looking to buy somebody, although in one sense you might get them cheap,” one analyst said.

“The whole steel and steel alloys industry is in a right old state at the moment, so I wouldn’t imagine they will be queuing round the block,” the analyst added.

Another analyst is not ruling prospect of future production at Windimurra, but the question is in whose hands?

“I think it’s safe to say either a major or the Chinese would have to take it up at the moment because if you are out looking for money to do the rest of the construction you are in trouble,” the analyst said.

“Unless someone with the funds in place in seeking to operate the mine, production could be deferred for another three years,” the analyst continued.

Russia’s Evraz is an unlikely candidate given it would most probably face competition issues, apart from the fact that it has already cut its vanadium production in response to poor markets and might not want to invest in more.

In September, Evraz completed the sale of vanadium assets of Highveld Steel and Vanadium Corp to a subsidiary of Switzerland's Duferco Investment Partners for $ 160 million.

The sale of the assets was a condition of the anti-trust clearance for the acquisition by Evraz of the South African company last year.

Apart from its vanadium assets in Russia (where is owns or markets pretty much all of the country's output) and South Africa, Evraz owns US vanadium processor Stratcor and Czech ferro-vanadium smelter Nikom.

Windimurra has been in and out of legal disputes, since former owner Xstrata did not make any friends after it bought a 40% stake from PMA and then shut down production in 2004, citing global oversupply.

"This just shows that Xstrata may have been right after all," another analyst commented on Windimurra's latest troubles.

In any case, even if Xstrata bosses were interested in getting their hands on Windimurra again, the company has no spare cash and has also already cut back on vanadium production in South Africa.

Australia’s Rio Tinto, which may have been mentioned as a contender in normal times, has embarked on a major cost-cutting exercise, and has just agreed to bring in Chinese major Chinalco as an investor to help it raise cash.

In December, Rio Tinto revealed details of its plan to cut net debt from $ 38.9 billion, including moves to shed 14,000 jobs worldwide and slash net capital expenditure for 2009 from over $ 9 billion to $ 4 billion.