BAT Vanadium Potential

BAT are starting to place some renewed focus on the potential of Vanadium in their deposits. The presence of Vanadium as V₂O₅ at Montepuez and Balama was recognised in early resource statements in 2015 and 2016, however it has not had focus in scoping / feasibility studies.

I queried the company by e-mail Monday last week (26/3) and requested the company update the market. Today's announcement (4 April 2018), contained the following update:



The resource statements mentioned above for Montepuez (15 February 2017) and Balama (29 March 2018) did not contain details of contained V₂O₅ in the tabular resource data. Perhaps oversight in those announcements? The company subsequently identified today that 0.28Mt (or 280kt) of  V₂O₅ resource is present.

We need to go back to the resource updates from 2015 and 2016 respectively for formal reporting of Vanadium resource estimates:

• 16 November 2015 - Maiden JORC Graphite Resource at Montepuez Central Project
• 21 March 2016 - Maiden JORC Graphite Resource at Balama Central Project - Mozambique

In-situ (unextracted) value of In-ground Vanadium Resource

Edison Investment Research published the following industry metrics for average in-situ valuations of Vanadium resources:



Applying these metrics to the formally reported resources for Montepuez and Balama, we can calculate a total in-situ Vanadium resource value of AUD $8.6M or $0.011 / share ( although we've been told 280kt is now present so can perhaps adjust this to AUD $12.2M or $0.016 / share ).


Vanadium Revenue Estimates

Battery Minerals have not yet formalised a Vanadium Strategy. Additional test work has been planned but scoping or feasibility studies have not been completed. Hence we do not have figures for recoveries, OPEX or CAPEX. My estimates of revenues below should be read with this context.​

Vanadium reached an 8-year high of USD $12.80 / pound or USD $28,220 per tonne in January. See https://www.valuewalk.com/2018/01/vanadium-price-8-year-high/ .

Applying firstly to the formally reported resources totalling 197kt contained V₂O₅ estimated total revenue is AUD $6.5B. If we use the 280kt advised today then total revenue potential is $9.9B. Assuming a 10 year life of mine then we have Vanadium annual revenues of around AUD $987M from Montepuez and Balama combined (indicated + inferred resources).

Annual demand is currently at 80 kt per annum ( source ) . From Montepuez alone, BAT could satisfy 29% of current world demand forV₂O₅ .





Syrah's Vanadium Scoping Study in 2014 determined that 3.8kt could be produced annually from their project based on a CAPEX of USD $80M. That study assumed a baseline of USD $12,000 per tonne for annual total sales of USD $125M. OPEX is at approximately USD $8,250 / tonne.

Assuming OPEX is escalated to USD $9,000 / tonne ( adjusting for inflation ) then based on pricing of USD $28,220 we have a margin at approximately USD $19,220 per tonne.

Realistic Production Scenario

Applying a realistic 7.6 kt of production per annum (my assumption based on 10 year life of mine and indicated resources 76kt combined at Montepuez and Balama), then by my calculations we'd have annual EBITA 23.2kt x USD $19,220 = EBITA USD $146.1 M or AUD $182.6M.

As noted above, BAT have not yet conducted scoping / feasibility studies so treat these figures as rough / indicative.

Vanadium Future Demand

Perhaps best covered by the following article:

https://investingnews.com/daily/res...nvesting/vanadium-investing/vanadium-outlook/

Key points:

• Changes in steel market dynamics impacting supply
• Vanadium prices on the rise
• Steel:
  • Chinese policy to ban import of all types of slag containing Vanadium, this will cut China's production of Vanadium by 4,500 to 5,500 tonnes annually
• Batteries:
  • Revolution in demand for Vanadium Reflux Flow Batteries (VRFBs)
  • Chinese policy to develop 100-megawatt scale Vanadium Batteries by 2020
    • The goal is to have larger-scale deployment over the ensuing five years. Friedland said the policy, “will result in vanadium flow batteries revolutionizing modern electricity grids in the way that lithium-ion batteries are enabling the global transition to electric vehicles.”
  • In terms of how quickly VFRBs may gain more of the spotlight, Bushveld Minerals (LSE:BMN) notes in a December presentation that VRFBs could account for up to 20 percent of vanadium consumption by 2030.