-- adds detail, broker comment --
Bushveld Minerals (LON:BMN) has had a value of more than US$400mln slapped on its Mokopane vanadium project in South Africa.
A pre-feasibility study (PFS) carried by a group of consultants estimated Mokopane’s reserves of 28.6mln tonnes would support a minimum of thirty years mining, running at annual production of about 1mln tonnes annually.
From that, Bushveld can produce 9,525 tonnes of high purity vanadium pentoxide flakes a year, the PFS estimates.
Fortune Mojapelo, chief executive, said at an estimated US$3.28 per lb cash costs were in the lowest quartile of current vanadium producers.
As the PFS had been put together using conservative parameters, including a 9% real discount rate, the economics of the project will only get better as the global economy improves, he added.
Upfront costs to get the mine running would be US$298mln, with sustaining capital thereafter of US$121mln.
At an assumed price of US$7.50 per lb for vanadium, the pre-tax net present value is US$418mln, US$259mln after tax, with a 25% rate of return.
Mojapelo added that at current prices a significant proportion of the current global vanadium production is unsustainable.
“Significant reductions in vanadium supply during the past 6-12 months, coupled with a robust demand outlook, present a compelling argument for sustainable vanadium price recovery
in the medium to long term.”
Vanadium is a steel additive but is gaining increasing attention as a potential source of power in batteries and a two prong strategy was key to Bushveld’s plans, Mojapelo said.
For batteries to take off it needs a secure source of supply and confidence over pricing, he said, both of which 64% -owned Mokopane can deliver, he said.
Today’s PFS was based only on a tenth of the potential resource at the deposit, he added, though he acknowledges it needs to find a partner to take it through to the next stage of a bankable feasibility study.
Downstream, Mojapelo says the plan is to focus its recently formed Bushveld Energy subsidiary to develop the market for vanadium use in batteries.
Broker Investec added that while justifying US$300m capex could be difficult in current conditions for juniors, a first quartile cost curve project is worth some consideration.
“Particularly if there are some supply/demand fundamentals that should deliver a strong recovery in commodity prices within a reasonable time frame,” said the broker.
Shares were flat at 3.24p, valuing Bushveld at £15.5mln.
