The study indicated at a throughput of two million tonnes per annum, Barrambie could produce around 20 million pounds per year over a 12-year mine life, with Reed confident about the long term outlook for the steel hardening agent.
“The vanadium price is linked to steel production levels, so with the Chinese doubling their steel capacity over the next four or five years, I think the market looks pretty strong,” Reed executive director Chris Reed told MiningNews.net.
Reed said project economics were not optimised and may be improved substantially, with the financial model based on a vanadium price of $US6 per pound. The price of vanadium is currently at $US8.50/lb.
“The vanadium price is pretty stable at the moment, the Chinese last year introduced a vanadium requirement into production rebar steel and it knocked the price up to $US26/lb, then they had to repeal that,” Reed said.
“In the last year it has averaged $US15/lb…and China’s just imposed a 17% tax on anyone who’s trying to export it.
“Also this week there has been reports in the press that some of the world’s biggest steel producers are vying to buy Highvelt, which is the world’s biggest vanadium producer.
“They are looking for a captive vanadium market.”
The study estimated a net present value of $A379 million using a 12% discount, an internal rate of return of 40%, and an operating cost of $A2.67 ($US2) per pound.
Reed expected a bankable feasibility study would start around March taking about 12 months to complete. The study is likely to be funded by cashflow from its gold operations, which is expected to start generating around $5 million per annum by mid-year.
In terms of project funding, Reed said the company was looking at a number of options including establishing an arrangement with a steel producer, and a possible float of the asset on the AIM or Toronto Stock Exchange – with a decision likely in March.
“We’re behind Windamurra and Balla Balla, but the vanadium market is growing by about 15% per annum, so it’s growing by one of these projects every year,” Reed said. “And it’s not like the Chinese are going to wind back their steel production.”
Barrambie is located around 80km north of Sandstone in Western Australia and has an indicated and inferred resource of 39.2 million tonnes at 0.49% vanadium. Mining would be via an open pit.
