American Vanadium set to deliver first vanadium mine in the US
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Seeking Alpha Analyst Since 2009
American Vanadium (TSX-V:AVC) is currently developing the Gibellini Vanadium Project, in Nevada, to produce 14 million pounds of vanadium per year for a mine life of 7 years NI 43-101 This equates to 5% of world supply, and with production costs of US$2.96 per pound of vanadium, will potentially be the world’s lowest cost primary producer. Four partially developed resources that lie along strike have potential to drematically increase resources.
Gibellini will be an open pit operation that delivers bulk tonnage ore to a heap leach and recovery circuit. Processing of the recovered leachate from the heap produces vanadium pentoxide and vanadium electrolyte. Vanadium is utilized as an alloying metal used to strengthen steel and can also be deployed for the mass storage of green energy for grid level applications using Vanadium Redox batteries.
AMEC of Reno, Nevada, completed a Scoping Study and NI 43-101 Compliant Report in 2008, confirming that Gibellini is a robust project with positive economics. Capital costs were estimated at US$90 million, with cash production costs of US$2.96 per pound of vanadium, producing a very high pre-tax Internal Rate of Return of 40%. Low operating costs are enhanced by a low stripping ratio and soft ore that requires little crushing, and reduced energy inputs.
Recent growth in the demand for high strength, low alloy steel, has resulted in the price of vanadium pentoxide increasing from around $7.00 per pound in 2010, to $7.50 per pound today, with JP Morgan projecting an increase to $8.00 by the end of 2012. This upward price movement will improve the positive economics of the estimated Internal Rate of Return of 40%, which used a price of $6.00 per pound of vanadium. Global vanadium consumption is predicted to double by 2020, due to consumption rates in Brazil, Russia, India and China that are expected to harmonize with the rest of the world as the bric countries increase the quality of their domestic steel.
Gibellini is located in Eureka County, Nevada, about 27.5 miles south of the town of Eureka, and encompasses an area of approximately 2,624 acres. The Mt Wheeler Power line runs 7 miles north of the site and State route 379, an improved gravel road, runs within three miles of the property.
The vanadium deposits at Gibellini occur within organic-rich siliceous mudstone, siltstone, and chert of the Devonian Woodruff Formation. The black shale unit that hosts the main deposit is called Vanadium Hill, where the mineral resource is from 175 to over 300 feet thick, and overlies grey mudstone. This black shale has been oxidized down to a depth of approximately 100 feet, where it enters into a transition zone before turning to sulfide. The vanadium mineralization is remarkably continuous in grade and thickness, where it has been drilled consistently to a depth of approximately 200 feet, and over a strike length of 2,500 feet that will form the outline of the proposed open pit.
The project hosts an Indicated Resource of 18.010 million tonnes at a grade of 0.34% V2O5, containing 122.236 million pounds of V2O5, and an Inferred Resource of 2.839 million tonnes at 0.28% of V2O5 for 16.006 million pounds. The oxide zone hosts 6.487 million tonnes, transition zone 8.679 million tonnes, and sulfide zone 2.844 million tonnes. The unique disseminated, sedimentary deposit at the Gibellini Project allows for simple sulfuric acid heap leach processing, with a recovery of 72%, presents an opportunity for the development of one of the lowest cost primary vanadium operations in the world.
A Feasibility Study is expected to be completed in the middle of this year with the start of production projected for 2013. An updated NI 43-101 is also expected to be completed approximately one month after the completion of the Feasibility Study. This will be the only vanadium mine in the United States, and should be strategically well positioned to become the only domestic producer of vanadium electrolyte in the US.
American Vanadium is now focusing on increasing the resource through an aggressive exploration program on the five other vanadium occurrences on its 6,600 acre property. The first target is the Louie Hill Project, which is adjacent to the current resource. The Company recently acquired the records of over 60 historic holes drilled by Atlas and Noranda, which indicate economic grades at surface and potential for resource expansion at depth and along strike. Louie Hill offers an attractive low cost, open pit target, along the top of a hill. Recent exploration at the nearby Del Rio Project identified large surface vanadium anomalies with values over 1% vanadium pentoxide that have yet to be closed off.
Additional surface sampling and over 10,000 feet of drilling on both Del Rio and Louie Hill is now underway, with a goal to significantly expand the NI43-101 resource by the end of the current year. An additional 360 acres has also been acquired at Hot Creek, which is along trend from Gibellini and covers 1 kilometer of mineralized strike, with vanadium surface values of up to 0.5% in oxidized shale. The Company estimates that the resource potential of its claims may go as high as 366 million pounds of vanadium.
American Vanadium has already appointed a new senior manager to direct mining planning, construction management, environmental permitting and resource expansion programs at Gibellini.
The company has launched an aggressive program to sign contracts for sale of vanadium product with the steel industry, as well as establish global partnerships with corporations in the renewable energy space. Strategic relationships with key US agencies have begun, as well as discussions with several leading companies' involved in the commercialization of vanadium redox batteries for renewable energy storage. All world production of vanadium currently comes from China, South Africa and Russia, with Gibellini set to break that stranglehold. American Vanadium Corp recently changed its name from Rocky Mountain Resource Corp to better reflect this focus.
Adding 0.09% of vanadium to steel increases its strength by 100%, and decreases weight and energy consumption by 30%, making steel lighter, and corrosion resistant. This type of steel is used for buildings, bridges, cranes, trucks, pipelines, ships and engines. Titanium alloys representing 5% of the vanadium market is used in tools, air frames and jet engines, and is also used as a catalyst in production of sulfuric acid. .
Vanadium Redox batteries are a technology that can handle storage capability for off-peak usage to manage base load power balancing for wind and solar production, where power surges can be large and uneven as well as genral grid applications to reduce infrastructure costs. Currently they are already deployed in UPS applications handling up to 1.5 MW, but are certainly scalable to almost any size and the demand as investment into grid storage ramps up over the next 10 years.
High performance Lithium vanadium batteries compare favorably against other lithium ion batteries which can be used in electric car batteries. At this stage of development they are still in the lab, but a battery that could offer a life of 35,000 cycles or 30 to 50 years, as opposed to lithium cobalt that run for 300 cycles or 3 to 5 years, and where charging takes minutes not hours It reasonable to expected that this is the future of the performance battery industry.
American Vanadium is lightly capitalized at $32 million, and recently closed a placement raising $3.7 million for development of Gibellini and ongoing drilling programs that will substantially boost resources, and allow for production upgrades in the future.
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