Ann: BMO Global & Metals Mining Conference Presentation, page-6

Thanks, Redgum. To clarify a little further as to why the vanadium has been made a lower priority, we need only look at the Vanadium Scoping Study, published 30 July 2014.

It's a fairly simple matter to upgrade the vanadium in the tailings to about 3% vanadium, using a combination of magnetic and non-magnetic concentrators. But, at that level, the shipping costs would mean that the project is not worthwhile. As Redgum said, metallurgical testwork shows that this 3% material can be treated chemically, and by solvent extraction, to achieve as high as 99.9% V2O5 (which is a high-purity product).

The economics are attractive, and recent upward movements in the vanadium price make them even more so. Capex was estimated at US$80m, and operating costs at aboutUS$8 per kg (2014). Production rate planned was a conservative 5000 tonnes per annum. The price of V2O5 at that time was around US$12 per kg, and the Scoping Study then showed an IRR of 59% Current price of V2O5 is about US$28 per kg. Do your own sums on that one!

So why isn't it happening right away? The concentration and extraction process is complex (the flow chart includes 19 steps!), and, as Redgum pointed out earlier, energy intensive. The plant may need a higher level of technical skills to operate. It seems reasonable to put it on the back-burner until the graphite cashflow builds up, and low-cost natural gas becomes available from the large reserves now being developed, in the northern part of the country.

Right now, Balama might be dismissed by some as a "one-trick-pony", merely being the largest and richest graphite mine in the world. Looking ahead a couple of years, it's looking less and less likely to stay that way.

Cheers