Worth Watching: Australian Vanadium Limited (ASX: AVL)
AVL is primarily a vanadium stock (read more about vanadium here), although it does have cobalt and lithium interests. Its strategy is to be vertically integrated in the vanadium space. There are three legs to this strategy:
- Develop the Gabanintha Vanadium project to produce vanadium pentoxide (V2O5) and possibly ferrovanadium (FeV)
- Produce vanadium electrolyte for sale to vanadium redox flow battery (“VRB”) manufacturers and operators
- Distribute and sell VRBs for commercial and residential use.
The Gabanintha project in Western Australia hosts a resource of 91.4Mt at a good grade of 0.82% V2O5. The deposit has a higher grade core of 57Mt at 1.0% V2O5. The project is at a very early stage of development. A positive conceptual engineering study will be followed by metallurgical testwork and other studies such as water and environmental.
Image courtesy AVL
There are various options being considered for development. The cheapest and easiest would be production of a concentrate to sell as a feedstock for further processing. The preferred option would be production of V2O5 flake, and possible the much more valuable FeV. It is also possible that cobalt can be produced as a by-product.
AVL is selling rights to all minerals at Gabanintha (except vanadium, titanium, cobalt, chromium, uranium, lithium, tantalum, iron ore and manganese) to Bryah Resources Limited in return for shares. Bryah is an IPO that was expected to list at the end of May.
The company has installed and commissioned a vanadium electrolyte pilot plant at the University of Western Australia. The plant was purchased from C-Tech Innovation Ltd, a UK company specialising in electrothermal and electrochemical technologies.
Vanadium electrolyte, used in VRBs, has been successfully produced by the pilot plant, using V2O5 from a range of international suppliers. The intention is to design and build a commercial-scale plant to supply electrolyte to VRB manufacturers.
VRB Distribution and Sales
AVL has an agreement to sell Gildemeister GmbH VRBs in Australia. Gildemeister is a German company that installs large scale photovoltaic systems and manufactures and sells VRBs. This business is being developed by VSUN Energy, a wholly-owned subsidiary of AVL.
The company has already installed its first vanadium redox battery at a rural property in WA, shown below. The property takes power from the VRB, which is charged by PV cells. It is working very successfully and was less expensive than a grid installation. Further, once the system is installed, ongoing running costs are low.
Image courtesy AVL, MD Vincent Algar
Vincent Algar was appointed CEO in November 2014 and then Managing Director in April 2016. He has been largely responsible for the direction the company has taken to successfully expand downstream in the vanadium sector. He is also Chair of Vanitec’s Energy Storage Committee. Vanitec is an international organisation representing, among others, all the world’s major vanadium producers.
Blesberg Lithium Project
The company holds an option to acquire at least 50.3% of the Blesberg lithium-tantalum project in South Africa. Drilling is underway with first results imminent. Blesberg is also prospective for lithium, cesium, tantalum and feldspar.
On 12 June 2017 shareholders will have the opportunity to vote on the issue of performance rights to the board. The main condition for vesting of these rights is the definition of a small (2-6Mt) resource at Blesberg. The resource must be at least 0.8% lithium or “Lithium equivalent in Beryl, Feldspar of [sic] Tantalum.”
AVL has 1.2 billion shares on issue and an undiluted market capitalisation of $18 million at $0.016/share. The shares have traded between $0.011 and $0.027 over the past year. Cash at the end of March 2017 was $2.5 million after expenditure of $0.55 million during the quarter.
AVL’s vertically integrated vanadium strategy is something rarely seen in the junior resource space. However, it is early days and there will be numerous hurdles to achieve full implementation of the strategy.
Nonetheless, it is well worth the attempt. With success, AVL could be one of the more significant companies in the vanadium business.
My “Worth Watching” series is a brief review of companies that appeal to me. They are in no way a recommendation to buy or sell shares. The reader is advised to do their own research and/or consult with their broker.