VR8 (ASX) Ann: DFS delivers A$1.9BN NPV confirming World Class Project

Originally posted by dbd25: ↑

In a VR8 company presentation last May, there were 2 slides (#15 & #16) that featured "peer comparison" tables that showed the key mining and financial metrics for VR8 and several other Vanadium producers/developers (see immediately below). In VR8's recent DFS, they give updated costs for Opex (US$3.24/lb) & Capex (US$211m) that have not increased significantly, and its clear that even now in 2022, these costs remain lower than either Bushveld or Largo. Whilst this is clearly very good news, I emailed the company to ask them to comment on these relative costings. I've paraphrased the reply from the company (Eugene Nel) below. This reply has certainly filled-in some gaps in my understanding of the how the costs have been determined. Note too that the DFS has a detailed summary of these Capex/Opex costs on pages 42-43.

********************
All the comments below have been made during previous interviews and are in the public domain.

1) Bushveld's processing facilities are aging and these older processing plants require more maintenance and are more expensive to operate. Some of these are up to 20 years old already. They are currently in a drive to modernize their plants and installing more cost efficient units.
2) Bushveld has also been spending quite significantly on developing their battery business unit which in turn increased their corporate costs impacting short term profitability while trying to improve long term prospects.
3) Stripping ratios (ie ratio of waste to be mined for each ton of ore) is one of, if not the, major difference between VR8 and others. VR8's strip ratio is up to 4-5 times lower than any other mine which means the amount of mining equipment (and the associated Opex for running these) are about 4-5 times lower.
4) In terms of Capex the above point is main difference between Bushveld Capex and VR8's. One additional Capex saving VR8 has been able to implement is due to the quality of the ore itself (which can be seen in concentrate grades between us and Bushveld) we could target a coarse grind size reducing mill equipment costs and also allowing us to do dry tailings stacking which significantly reduces the cost of our tailings storage facility. This has also assisted in reducing Salt Roast equipment sizing compared to Bushveld and more in line with Largo at similar concentrate grades.
5) Finally both Largo and Bushveld incorporated an additional processing step to produce Ferro-Vanadium as well. This does allow them to sell a range of products and unlock some downstream value add on products however it does increase both Capex and Opex. VR8's philosophy has been to keep it as simple as possible to start with and allowance has been made at technical level (not costed) for potential future additions to the process either to also make Ferro-Vanadium or a battery electrolyte depending on market requirements in future. The biggest mistake a new entrant can make in my view is to try and go too big and complicated too quickly. Once settled into production we have more than enough room due to the resource size to expand horizontally (higher production) or vertically (range of products).

*********************All IMHO, DYOR

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Excellent post, appreciate your work, thank you.

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Excellent post, appreciate your work, thank you.

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