re: Ann: ATLANTIC JOINS MRL TO REVAMP WINDIMU... article from...

re: Ann: ATLANTIC JOINS MRL TO REVAMP WINDIMU... article from Nov 2006 regarding the project and a little of its history.

RODERICK Smith was in Prague this week doing what he has been doing for two decades: talking up vanadium. He called it a 21st century miracle metal, but wasnt referring to last years incredible price spikes for vanadium pentoxide and ferrovanadium. He also talked about his miracle project Windimurra in Western Australia.

Windimurra didnt just touch down three years ago after its shortlived production journey, it crashed and almost disappeared without a trace.

Initial lift-off was in 1999 when Smiths Precious Metals Australia Ltd (PMA) and its partner Glencore (later Xstrata) spent $A275 million bringing into production the worlds most technically advanced vanadium operation. However, persistent low vanadium prices forced Xstrata to first put Windimurra on care and maintenance then opt to permanently shut it down. PMA, then with a 15% net profits interest, won a subsequent legal battle with Xstrata over the controversial closure and regained control of the project before site facilities were completely disassembled and sold off.

Analysts have highlighted an $A100 million replacement value for the plant left on site, which cost $A60 million to build originally, including a roasting kiln which might also have taken two years to reinstate.

This and a range of other factors have helped give Windimurra a second crack at a long-term operation life at a time when the surrounding Mid West region in WA is charging toward an investment boom. Construction is due to get underway at the site this month after a re-engineered operating plan and favourable seven-year marketing agreement with new PMA major shareholder, Hong Kong-based trader Noble Group Ltd and of course higher metal prices paved the way for the new beginning.

Addressing the 22nd International Ferro-alloys Conference in the Czech Republic capital, Smith said the rebirth of Windimurra would bring much needed vanadium supply onto the world market from 2008.

Vanadium is indeed a 21st century miracle metal, he said.

As society strives to make products stronger, lighter, safer and more fuel efficient, there will be ever increasing demand for the metal and the need for gradual increases in sustainable, cost-effective vanadium production.

Smith said as well as the metals principal use as a strengthening additive to carbon steel and high-strength steels, there was growing demand for titanium-vanadium alloys for aircraft components, air frames and gas turbines. The market remains in a tight supply situation at present due to continued strong demand and limited short-term ability to increase supply, he said. Demand is forecast to grow 5-7% a year over 2006-2015 due to steel production growth, increasing intensity of use in steel and a buoyant aerospace market.

Demand may again outstrip supply, causing short-term shortages and price hikes.

Vanadium price turbulence, as illustrated by fluctuations in the past two years, has driven PMA to develop a more robust design and operating plan for Windimurra Mark II.

The total capital cost of the reconstruction and restart is put at $A175 million, while operating costs are pegged at about $US3.80/lb of ferrovanadium (FeV80), or $US2.80/lb of vanadium pentoxide (V2O5). In a recent research report Patersons analyst Alex Passmore said these costs were highly competitive and in the lowest quartile of world operating costs.

Another significant feature of the revised process flowsheet is the substitution of High Pressure Grinding Rolls (HPGR) for the SAG mill used originally for fine grinding of intermediate material.

Windimurras cash costs for mining, beneficiation and conversion to vanadium trioxide powder, on a V2O5 equivalent basis, are projected to be at similar levels as before with cost increases due to inflation offset by improved plant efficiencies.

Under PMAs deal with Noble the latter will pay prevailing market prices for 100% of Windimurras output for the first seven years of operation, or at least a minimum price equal to the projects cash costs of production. Noble is also exclusively marketing and handling all distribution logistics for Windimurra output. Passmore, and other PMA watchers, said the Noble deal significantly de-risks the project.

Among several key changes to the original plant design, PMA is spending about $A10 million on a conversion circuit to enable it to produce 6200 tonnes per annum of FeV80.

In September, the London-based broker Mirabaud Securities said at an overall cash cost of $US3.78/lb for FeV80 about 20% of it for the conversion from V2O3 PMA would get a net benefit from the FeV80 circuit of about $A50 million a year with the price at $US9.75/lb.

The payback period on this basis is a matter of months rather than years, the broker said.

Another significant feature of the revised process flowsheet is the substitution of High Pressure Grinding Rolls (HPGR) for the SAG mill used originally for fine grinding of intermediate material transferred in the new circuit from jaw and cone crushers. PMA says the SAG mill tended to over-grind and slime the ore, leading to generally unsatisfactory classification of product in screens and hydro-cyclones.

The new HPGR crusher will reduce intermediate material to less than 5mm but more importantly will use the highly weathered nature of Windimurra ore to advantage. According to PMA, testwork showed the HPGR rollers fractured ore particles along grain and crystal boundaries, releasing clean, coarse particles of magnetite containing most of the vanadium. Ensuing magnetic separation recovered 80% of the vanadium in 45% of the original feed mass compared with 46% of the vanadium in 20% of the original feed mass before.

PMA also expects to cut previously high kiln gas usage by 20-25% and increase kiln capacity as a result of modifications to the original unit. While recovery of vanadium via the kiln is anticipated to remain constant at about 80%, at lower cost, HPGR is tipped to boost grinding circuit recovery to 72.5% compared with only 46% previously, giving an overall recovery rate of about 58% compared with the original 37%.

When Windimurra was previously in operation under Xstrata the V2O5 produced was mainly shipped to Xstratas two other vanadium operations in South Africa for conversion to ferrovanadium and these operations gained the economic benefits of this additional stage of beneficiation, Mirabauds report said.

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Precious Metals Australia managing director Roderick Smith Windimurra a unique deposit.
PMAs Smith said in Prague the pain of the initial experience at Windimurra had produced longer term gain, with a seven-million tonne trial mine providing unique insights for re-engineering the project. There was also plenty of proof in the market of the quality of vanadium Windimurra could deliver.

At a mining rate of 3.4 million tonnes per annum the project has a 15.5-year mine life on current reserves and much more on outlined resources. Smith said the 149Mt resource was derived from exploration over less than a quarter of the known strike length (under PMA tenure), with the area having a one billion tonne scope.

It hosts a significant and unique, world-class vanadium deposit and will support, at sustainable cost, a processing operation that will produce the high-quality vanadium products needed for the long-term, he said.

Vanadium consumption will continue to grow strongly.

Because of the cost and resource constraints of existing supply sources, I believe we will see a significant and growing supply shortfall emerge over the coming years.

Shortages have in the past been met by growth in high cost co-production, substitution by other metals and a plethora of environmentally unsustainable, high cost producers in China. Of the possible new mines, Windimurra is the only one already under construction.

Smith said the recent emergence from behind the iron and bamboo curtains of South African and American steel producers, and Chinese vanadium producers, of more accurate vanadium production and supply data had allowed PMA to form a clearer picture of future supply and demand. At 6200tpa of FeV80, Windimurra is forecast to produce about 8% of world vanadium output. PMA believes world production last year was about 48,000t of contained vanadium, equal to 86,000t of V2O5. Even at the more conservative forecast growth rate of 3-4%pa published in the companys 2006 annual report, vanadium demand is tipped to reach 126,000t by 2015.

If the demand continues to support stronger prices, Windimurra will fly a lot higher the second time around.