Vanadium Developers Undaunted by Price Decline

After a frothy escalation during 2018, vanadium prices have leveled off in 2019, with European prices for vanadium pentoxide settling near $7.00 to $8.00 per pound.  When compared to peak prices near $28.50 in November 2018, it looks like the bottom has fallen out of the vanadium market.  Developers of new vanadium supplies are undaunted. 

It is important to appreciate demand trends to understand how vanadium suppliers could still be enthusiastic in the wake of such dramatic price.  As much as 90% of vanadium production is used in the world steel industry. As goes the steel industry, so goes vanadium demand.

The cooling of prices has been due in part to lower than expected purchases by China steelmakers.  New rebar standards require Chinese steelmakers to use more vanadium in their rebar to make it stronger.  Just two pounds of vanadium added to a metric ton of steel can double its strength.  However, only about half of China’s steelmakers have implemented the new standards, suggesting that while near-term demand may not have met earlier projections, there is still considerable need for vanadium going forward. 

The automotive industry has also grown keen on vanadium-laced steel.  Alloys using vanadium help reduce weight and thus increase fuel efficiency in new cars.  The need to reduce weight by lowering the amount of heavy steel in a car will only intensify as ever more strict emission standards going into effect around the world.   While only about half of cars today roll off the assembly line with any vanadium content, the vanadium penetration rate in the automotive industry is expected to increase to as much as 85% by 2025.  Thus in just six years, the volume demand for vanadium from the automotive industry is expected to nearly double.

There is increased interest in vanadium redox flow batteries for wind and solar energy storage as well as power management on electricity grids.  While a significantly smaller source of demand, adoption of these batteries could also portend new demand for vanadium.  Vanadium flow batteries are a type of rechargeable battery that uses vanadium ions in different oxidation states to store chemical energy.  The battery is composed of a series of electrochemical cells where the energy is provided by these chemical components dissolved in liquid and separated by a membrane.  Adroit Market Research estimates the vanadium redox flow battery market could grow to $1.1 billion by 2025.

Among the developers eyeing the sunny skies above vanadium, is Western Uranium & Vanadium Corp. (WUC:  CSE, WSTRF:  OTCQX).  Mid-June 2019 the company opened its Sunday Mine Vanadium Project in Colorado, turning on the lights and engaging a mining contractor to begin drilling and sampling work.  To support the next development phase the company had raised CA$4.0 million in new capital through a private placement of common stock and warrants in early June 2019.  The Sunday Mine Complex is composed of five permitted and developed mines, but additional work needs to be done to fully define the vanadium deposit.

Western acquired some of its uranium assets from another uranium and vanadium developer Energy Fuels, Inc. (UUUU:  NYSE).  Even after the divestiture, Energy Fuels remains the largest domestic U.S. vanadium producer.  The company is also the owner of the only domestic vanadium processing facility.  The White Mesa Mill in Utah processes vanadium from the company’s La Sal uranium and vanadium mine group.  During the quarter ending March 2019, Energy Fuels reported that 325,000 pounds of high purity vanadium were produced at the White Mesa Mill using materials recovered from waste ponds. 

A newcomer to the vanadium sector is Westwater Resources, Inc. (WWR:  Nasdaq), which just recently determined that vanadium deposits at its natural flake graphite project in Coosa County, Alabama could be economic as a by-product.  In April 2019, Westwater released a Technical Report on Vanadium Mineralization at its Coosa County graphite project in Alabama.  The report describes initial tests of eighteen core samples of potential vanadium deposits and makes recommendations for additional tests and analysis.  Management needs data from additional tests to make a full assessment of the potential value in its vanadium deposits.  The report calls for more exploration work, including additional drilling in areas where core samples have not been already taken.  Density measurements and resource modeling would also help quantify how much vanadium is available and provide clues as to how it could be exploited.

None of these three companies are generating profits from vanadium, but the market opportunity has them moving forward with great anticipation. For investors historic low stock prices for each of the three companies make it possible to go along for the ride.             

 

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.