Showing "robust economics" and "significant upside opportunities" was how AIM-listed Bushveld Minerals described the results of the scoping study for its 52-million-tonne Bushveld Vanadium Project on 21 July.

The eight-month study revealed that at 10,370 tonnes a year with a modest capital expenditure of $261.5m the project would be one of the world’s largest low-cost vanadium producers.

Working off a 2017 price of $7.50 / lb ($16.53 / kg) of V2O5 flakes (95% purity) the company said the project also has favourable post-tax economics as the study, conducted by independent analysts, did not assume any tax incentives in South Africa that may exist in support of in-country beneficiation.

The study has also identified a preferred processing route, as well as further opportunities to improve the project’s economics. Bushveld Minerals CEO Fortune Mojapelo discusses the development of the project, maintaining cost-effectiveness and the strength of the vanadium market.

Heidi Vella: Now you have announced the scoping study results, what is next for the project?

Fortune Mojapelo: We have already started with components of the pre-feasibility study. We want to try and get the pre-feasibility study done and completed as quickly as possible.

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On the metallurgy side, a lot of the testing we have done already is to a pre-feasibility standard. The capital expenditure [CAPEX] estimations have been based on vendor quotes, which is to a level of pre-feasibility requirements.

Reduced commodity prices, labour wage wars and shaking investor confidence have all left South Africa’s mining industry in jeopardy.

Based not just on the financials and numbers we have got today, but also because there are three operations in South Africa that are using the same technology, operating on the same type of mineralisation rate, we feel very confident we can move through those key stages fairly quickly.

HV: Why did you decide to go for the salt roast processing method over the pig iron smelting process?

FM: The key criteria for us in deciding which route to go down is that we always want to be in the lower quarter of the cost curve. We were looking for a process route with a more modest CAPEX requirement and a relatively near-term production profile, while still retaining all the optionality for scale and economic credit for the other components of the project.

If you look at the two main process routes, one is the pig iron route; to put a pig iron plant at the level that produces about 10,000 tons of vanadium as a by-product you are talking about approximately a million ton pig iron production plant. That plant will cost you significantly northward of $1bn. Even if the economics work out we just don’t believe in the market conditions today you can raise $1bn-plus easily. And you can’t exactly bring that into production on a near-term basis.

So we opted for a route which produces a primary vanadium product and a titano-magnetite by-product that you can monetise and potentially process further into pig iron at a later stage. So you have got that flexibility and optionality. Most of all you can do all of that for only $250m, which we see as achievable.

HV: Do you see demand for vanadium remaining strong?

FM: We do. We think the drivers for vanadium are robust from the steel industry, which accounts for 90% of the current vanadium consumption. With China moving away from low-grade reaper and trying to phase out vanadium containing low-strength reaper, and introducing and insisting on standards for higher strength reaper in construction; that alone we see as having a significant impact on vanadium demand in the skills space. We think that the emerging economies of BRICS (Brazil, Russia, India, China, and South Africa), as well as Africa, present interesting opportunities. Infrastructure build programmes are one of the key drivers and that has a very strong correlation with steel demand, particularly high-strength steel demand.

"The plan we have got at the moment uses only about 50% of the 53 million tonnes we have declared."

Another area on the demand side is the energy storage business, which is picking up significantly. Vanadium, in our view, is quite unrivalled in terms of its performance as a high-capacity energy storage solution, which is particularly useful for grid solutions for utilities looking to include renewable energy in the power mix. This requires significant energy storage solutions because of the intermittent nature of power supply coming from solar and wind. Vanaduim batteries are very well placed to fill that particular need.

We reckon even in conventional power generation it provides very useful solutions for better management of power supply, such as peak shaving and making sure that in low-demand periods power is being stored, which can be used in peak periods. Vanadium batteries are well-suited from a capacity point of view and they can be scaled up and have a very long lifespan in excess of 20 years.

HV: And in terms of supply, what is Bushveld’s strategy?

FM: On the supply front, supply is largely concentrated between China, Russia and South Africa. Our view on the supply side is that you just need to make sure you can supply at the lowest cost possible. We do not see a glut in the market per se from a supply point of view, so we think the price outlook in the medium to long term is a very positive one, and different analysts would agree with that view.

HV: Do you have any agreements for supply in the pipeline?

FM: We don’t have any agreements for supply yet. But it is certainly something we will be looking to and developing as we go forward because, obviously, if you can secure some particular agreements for your product it puts you in a very good position. In terms of financing a project it makes it more financeable so we are interested in that and we will be looking into that. We’re comfortable that will come through.

HV: What further opportunities do you have to make the vanadium project more cost-effective?

FM: The plan we have got at the moment uses only about 50% of the 53 million tonnes we have declared, mining down to only 80 metres, so we could mine to further depths because it is open ended at depth. Also, the upper burden in this open pit mining consists of quite a huge chunk of what we call a MML hanging wall, which has grades of 1.5/ 1.7 % in-magnetite V2O5 of concentrate that is already one of the best vanadium grading resources in the world. We are looking to stockpile that for potential future processing.

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Also we have not taken into account in our financial model any revenue or credit deriving from the iron-rich calcine dumps which is a Fe-rich material with about 54/55% Fe and 12% TiO2 [titanium dioxide]. The work we have done has indicated we could place this in the market and our ability to sell this into the market will provide additional credit and will enhance our economics. We also retain the option to process it into a pig iron process-type product with a titanium by-product.

The CAPEX numbers are based on vendor quotes which are actually quite specific, and yet we still have to apply the scoping study level contingencies which are in the order of 25-35%. We believe that we will be able to tighten that a lot more and reduce the CAPEX number and that will also improve the economics significantly. A lot of scoping studies that we see are based on 8% real discount rate. We have gone conservatively with the 10% discount rate. To increase this level we will be able to take that down to 8%, and especially once we start getting in some potential off takers we can reduce that further. So all of that will have a significant upside affect on the economics.

HV: What are the challenges you face going forward?

FM: I think the key thing for us is we are not infrastructure-constrained, so we don’t have to worry about the infrastructure, water, power and rail. I think in terms of regulatory, in terms of securing and process the mining licence in time, that is going to be an issue for us that we will pay close attention to. We will do everything we can to make sure it is going to be done quickly, but generally speaking we have observed that mining licenses take time to come through.

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