I have been doing quite a bit of research into Vanadium with Redox batteries recently, that I want to tie back to Aura and how we might position ourselves as a Vanadium play.
How do miners/producers position themselves as a Redox supplier?
Well on hope it seems. It's quite opaque because it all comes down to chemistry and impurities. I’m convinced that most V producers/hopefuls are ignorant (I won't accuse any of being deceptive because I have no proof) of how the Redox manufacturing space works.
1. We know that the electrolyte at this time makes up a significant portion of the cost of a redox battery (depending on where you look it seems to be about 40-50% of the manufacturing cost). The high price of V hurts the manufacturers so they will obviously look to the low cost producers (given some caveats which I will discuss later) so right now slag looks good. Anything that adds to your all-in-costs as a producer is going to put you out of the market.
2. Grades mean nothing when it comes to electrolyte. One problem we have in this space is that people take stated achievable processed grades with a stated purity level that, at the end of the day, mean nothing in the redox space. Magnetite holdings are the worst offenders. They typically have poor in-situ grades and so state what they could achieve after crushing/processing. The higher the processed grades the sillier they look IMO - they are essentially saying "we have holdings that we've spun through circuits so many times that we now have 99.5 percent purity". This seems quite benign on the surface but these producers are operating in a competitive market, and the market is quite closed. Think about that.
What is not clear in the above scenario is at what cost did the extra circuits add to their all in cost, and what impurities are left in the last 0.5 %??
Purity vs Impurity
So we have a lot of Vanadium plays that seem to be marketing themselves as able to adapt from the rebar industry into the Redox battery space. That's just not going to happen.
The VRB manufacturers are looking for a very specific chemical recipe free from impurities. This makes sense right? They are not going spend time and money rejigging their manufacturing processes to adapt to a V source that doesn’t match what they need. They'll just source it elsewhere.
The main issue with VRB manufacturers is keeping the electrolyte costs down.. most of the other components are fixed cost, but the electrolyte mix comes from a traded/contracted commodity prices. So of all the components in the build phase, they are most sensitive to the V source pricing.
How does this relate to purity levels?
Okay, so most Vanadium deposits claim to be redox pure. But are they really? Theoretically yes. In practice, no.
It was recently proven that the presence of Chromium ions in very minute quantities has a significant negative impact on redox batteries (0.005 molarity. Not 0.5...0.005!) There are other metals that hinder redox kinetics, but they are more tolerant of a higher molarity input. So in the last few percent of a stated purity grade you tend to have these ions that a VRB manufacturer cant use. By the way, Bushveld sits on the largest Chromite deposit in the world.
What does this mean exactly?
Well in practice it kills supply in the redox space. The manufacturer is not going to add extra costs to his operation to fix your crappy V when he can get less crappy V elsewhere, and the producer can't keep adding circuits to purify it further. IT gets so expensive, that they cost themselves out of the market.
How do these miners sell to VRB manufacturers?.
They DONT! This is the issue that most people don’t get. There is no market for Vanadium producers in the redox space! Okay let me qualify that. It's not a very open and fluid market. As a producer you don’t start manufacturing a pile of V205 and putting it on the market. With other commodities, if you can do this economically you just produce and eventually someone will buy your stuff on spot or on contract right? Not so in the redox space. In the redox space you HOPE to work with a VRB manufacturer. They call the shots, and within the VRB manufacturing facility, it is really an industrial chemist who calls the shots. HE ALREADY had electrolyte supply, so you’re encroaching into a pretty closed market. You need to work with them directly to see if your holding suit his processing and at the right impurity tolerances. Most will be turned away because it will get too expensive.
Because its so closed, you see some producers starting to build Redox batteries. They may have been rejected because of cost of chemical composition and hope to compete in the end product industry. With a magnetite holding this is extremely challenging.
Magnetite - is this really an issue?
YES! For a number of reasons. One is the higher levels of impurities in the last few percent of their holdings. Because the magnetite deposits have to go through various circuits to refine the holdings, they could more easily cost themselves out of a market that competes with cheaper options. And will they ever get 100% of their holding pure enough to use? OF course, not! They’ll have some holdings that might be economical and large parts of their tenement that will never be used in the redox space. Probably the same with Haggan.
See they could spend so much money processing only for a VRB manufacturer to say..."well, right now I can source what you have at a 15% discount to what your offering me...so no thanks" So its not sediment versus magnetite that manufacturers care about. ITs the all in cost that ends up pricing magnetite holding out of the market. No manufacturer is going to care too much about the geology of your holdings. Sure they know stone coal and sediment hosting will likely be cheaper, but they just want to control electrolyte costs.
Its pretty simple - I buy the good from Joe at $10 and don’t have to do a thing to it or I buy from Bill at $15 because he had to refine the crap out of it and I still have to rejig my entire production process. Each deposit needs to be examined as for suitability and each battery maker will have their own recipe based on the material purity. Once that’s down, its very difficult for a VRB manufacturer to change suppliers. OF course they will if they have to. But they need to be incentivised by market dynamics.
What does this mean for Haggan?
You have to keep in mind, that Vanadium is not new to Aura. Extensive testwork had already been carried out. The mineral was discounted until the economics became favourable. The idea is for Aura to produce high purity vanadium flake. I suggest that they’ll need some acid leaching circuit and then some cost to concentrate the V205 into a particular purity level. What is beneficial about Haggan's deposit is that the extraction method shouldn’t require as many purifying circuits (or all in costs) and of our all in costs we would have easily leached away other metals to on sell. Of course, we need more results form the scoping study and this isn’t the final phase. You then need to take that work and build a model that takes your holding so a recipe can be built. Everyone needs to make a premium and at the end of the day a lot of players in the redox space will be left with recipes that are uneconomical.
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