Yellow Rock Resources (ASX:YRR) is gearing up to leverage market interest in vanadium, having raised $3.36 million to fund work on its flagship Gabanintha high grade project in Western Australia and appointing experienced resources executive Lorry Hughes as its chief executive officer.
Yellow Rock had recently placed the third and final tranche of its rights issue shortfall (243,616,864 shares priced at $0.01 each) bringing the total raised up to $3,362,027.
It had in March offered up to 349,026,205 shares with one free attaching option exercisable at $0.015 each on or before 31 December 2017 for every share subscribed.
This brings its total cash up to about $3 million.
Demand for vanadium is projected to increase given the growing market for its use in rechargeable batteries.
Funds from the company's recent rights issue and shortfall placement will be used to determine the most commercially viable V2O5 (vanadium oxide) production - including evaluation of high purity V2O5 options, ferrovanadium and by-products - from its Gabanintha Vanadium Project.
Gabanintha has one of the highest grade vanadium deposits in the world with an Indicated and Inferred Resource of 60.4 million tonnes grading 0.98% V2O5, 11.4% TiO2 and 42.15% iron.
The company will assess high-grade Vanadium concentrate production including delivery to a third party treatment option as well as updating scoping studies on:
- EIS Baseline; and
- Stakeholder Consultation.
It will also seek industry tie-ups with vanadium end users to assist with development of the Gabanintha.
The wholly-owned Gabanintha Vanadium Project is located in Western Australia's Murchison District about 600 kilometres from the port of Geraldton and 200 kilometres from the Windimurra Vanadium Mine.
It is also located just 40 kilometres form the mining town of Meekatharra.
Besides the basal, massive high grade resource of 60.4Mt at 0.98% V2O5, the project also hosts a separate upper disseminated zone with Indicated and Inferred Resource of 125.8Mt at 0.7% V2O5, 8.64% TiO2 and 32.6% iron.
These are located at surface with open pit potential and there is room to further increase resources.
It also compares well with other projects under development including TNG Limited's (ASX:TNG) Mount Peake project in the Northern Territory, which has a total Resource of 160Mt at 0.28% V2O5, 5.31% TiO2 and 22.81% iron.
Initial magnetic separation test work has been highly encouraging, producing a concentrate with 1.37% V2O5, 58% iron and 12.3% TiO2.
Gabanintha has mineralisation outcrops for over 12 kilometres and up to 100 metres in places and continuous.
Mining costs are expected to be simple and inexpensive with no significant environmental impediments identified for future mining activity.
Yellow Rock is focused on:
- Further targeted metallurgical investigation of specific ore types and specific high grade locations from within the resource to unlock potential;
- Engineering scoping study to evaluate the production of V2O5 for energy storage applications;
- Engineering scoping study to define the most economical start-up mining and product combination that minimises capital expense and maximises value;
- Demonstrate that transport costs as a percentage of revenue per load are minimal for high value vanadium products;
- Engineering scoping study to develop a staged expansion model that extracts value from the large resource whilst minimising risk during the start-up phase.
It has commenced engagement and technical information sharing with potential strategic groups within the vanadium industry including participants from the steel, chemicals and energy storage industries worldwide.
This includes its participation with London-based Vanitec to better assimilate with vanadium consumers and producers.
Vanitec is a technical and scientific committee which brings together representatives of companies and organisations involved in the mining, processing, manufacture, research and use of vanadium and vanadium-containing products.
Vanadium is a ductile transition metal with good structural strength, a natural resistance to corrosion and stability against alkalis, acids and salt water.
It is commonly used as an alloy in steel making due to its high resistance to corrosion.
Vanadium is also used in the chemical industry to make synthetic rubber, polyester, fiberglass and sulphuric acid.
More recent, vanadium has emerged as a vital commodity in the renewable energy spectrum.
It is playing a vital role in battery technology particularly in automotive applications for electric and hybrid vehicles;
Vanadium is also being used in grid-scale stationary energy storage for both renewable and conventional energy making it a valuable component in supporting sustainable energy in the future.
These are drivers that could increase demand by 30% from the current 90,000 tonnes to 120,000 tonnes in 2017 according to Roskill.
Prices are also expected to increase from the current US$14,000 a tonne to US$25,000 to US$30,000 a tonne in the same period.
David 'Lorry' Hughes has over 20 years' experience in Australia and internationally across all aspects of the resources industry including exploration, development, mining and finance.
He was most recently the managing director and chief executive officer of South Boulder Mines (ASX:STB) where he successfully oversaw the discovery and initial development of the Colluli Potash Project in Eritrea.
With the completion of the rights issue shortfall, Yellow Rock Resources is now positioned to advance its Gabanintha Vanadium Project - one of the highest grade vanadium resources in the world. There is also a name change in the offing to Australian Vanadium Resources.
This comes as demand for the strategic metal is growing.
Share price catalysts ahead include:
- Finalise scope and tender process for an updated metallurgical testwork program targeting specific ore types and specific high grade locations within resource to unlock potential - 8th August 2014;
- Finalise scope to complete an updated engineering scoping study to define the most economical start-up mining and product combination that minimises capital expense and maximises value - Q1 2015;
- Commence application process for a Mining Lease over the Gabanintha Resource including EIS Baseline and Stakeholder consultation - Q1 - 2015;
- Complete updated metallurgical testwork program - Q2 - 2015;
- Review results and determine next steps - Q2 - 2015;
- Name change to reflect company focus - Q2- 2015;
- Continue to engage with potential strategic investors from the vanadium industry - ongoing;
- Advance non-core projects toward commercial outcomes - ongoing.
On a peer basis, Yellow Rock appears undervalued:
TNG: Mount Peake: 160Mt at 0.28% V205 5.31 TiO2 and 22.81% Fe
Market Cap: $128.9m
Yellow Rock: Gabanintha 125.8Mt at 0.70% V2O5, 8.64% TiO2 and 32.60% Fe
Market Cap: $8.6m
So although early days for the reincarnated Yellow Rock, Proactive Investors has estimated a near term price target of $0.032 - $0.046.
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