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Yellow Rock Resources resets, drives Gabanintha Vanadium to development

Last updated: 19:21 24 Feb 2015 AEDT, First published: 20:21 24 Feb 2015 AEDT

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Yellow Rock Resources (ASX:YRR) is re-setting and re-branding as it renews a path set to advance its high grade Gabanintha Vanadium Project in Western Australia towards development.

Led by new chief executive officer Vincent Algar, the company is finalising approvals and contracts to carry out 6,000 metres of reverse circulation and diamond drilling.

This is designed to increase the classification of parts of the resource and enable the company to move to more definitive mining studies in the second half of 2015.

The program will include a set of detailed metallurgical tests which will help define process flow and ultimate product specifications. 

Taken together, this will allow the company to make more aggressive approaches to potential offtake and development partners and support the more detailed studies required to reach a definitive economic study.

Gabanintha has one of the highest grade vanadium deposits in the world with a current Indicated and Inferred Resource of 60.4 million tonnes grading 0.98% V2O5, 11.4% TiO2 and 42.15% iron.

The geology of the Vanadium bearing strata and the high grade zones they contain compare extremely well with the other higher grade deposits well known to investors such as Largo (now in production) and Bushveld.


Vanadium Demand

Vanadium demand has been growing particular for use in rebar steel in China and the rapidly developing Vanadium Redox Battery market for use in grid energy storage.

Both of these developing markets have direct implications for the demand for V2O5 flake products, which is the path that Yellow Rock is following at Gabanintha. 

Global consumption increased at an average annual growth rate of 6.7% during the period 2001-2013.


Gabanintha Vanadium Deposit

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.

In August, the company completed a concept engineering study (CES) that indicated the Gabanintha had significant production and competitive costs.

This includes estimated C1 cash operating cost of A$7.26/kg vanadium pentoxide that could position Yellow Rock as a competitive open pit producer.

Other takeaways include:

- Estimated capital cost to first production of A$230 million including A$18.5 million of contingency to direct costs;
- Average vanadium production of 10,000 tonnes per annum from a 2.1 million tonne per annum throughput plant;
- Production of high-purity (+98.5% V2O5 Flake) via open pit mining, feed preparation/beneficiation and a salt roast-leach extraction process is well understood and commonly available technology. Higher purity at >99% V2O5 is also expected to be achievable.

The estimated C1 cash operating cost of A$7.26/kg compares favourably with the average operating cost of vanadium mining producers globally, which is estimated at A$9.72/kg.


Analysis

Yellow Rock Resources has reset itself with new chief executive officer Vincent Algar driving a path to advancing the high grade Gabanintha Vanadium Project towards development.

Already the company is finalising approvals and contracts to carry out 6,000 metres of reverse circulation and diamond drilling to increase the classification of parts of the resource and enable the company to move to more definitive mining studies in the second half of 2015.

Along with detailed metallurgical tests, this will enable more aggressive approaches to potential offtake and development partners and support the more detailed studies required to reach a definitive economic study.

To highlight the company’s attractiveness, one need only measure YRR against TNG Limited (ASX:TNG) and to London listedBushveld Minerals (LON:BMN) with their iron titanium vanadium projects. 

TNG has a market cap of $96.6 million while Bushveld has a market cap £11.5 million (A$22.6 million).

In comparison, YRR has a market cap of circa $7 million yet capex for the Gabanintha Project in Western Australia is similar to Bushveld’s iron titanium vanadium project in South Africa.

This implies, given the market rating of TNG and Bushveld, that Yellow Rock Resources offers investors a tantalisingly cheaper entry into the vanadium-titanium-iron space with its Gabanintha project.

The company had $3.7 million in cash at the end of December, ensuring it is well funded to significantly advance projects.



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