Australian Vanadium Ltd (ASX:AVL) is in discussions with a private Chinese steel and alloy producer regarding project finance and offtake of vanadium oxides from the Gabanintha project in Western Australia.
The company has signed a non-binding MOU with Win-Win Development Group which could lead to the purchase of vanadium for steel strengthening.
This development resulted in AVL’s shares increasing almost 8% in early trade to 4.4 cents.
Managing director Vincent Algar said, “The Win-Win team are fully in-tune with the needs of the vanadium alloy market in China.”
Win-Win building VCN plant
Win-Win is building a 5,000 tonnes per annum vanadium carbon nitride (VCN) production line which annually requires 7,000-8,000 tonnes of 98% vanadium pentoxide.
The first stage will require 2,000-3,000 tonnes annually and be operational in 2019 and the second stage is planned for 2020.
Win-Win has a shareholding in an operating production line that annually produces 2,400 tonnes of VCN products for existing steel companies.
Synergies with Gabanintha development
The timing of the Win-Win development and full production has strong synergies with the planned development of AVL’s Gabanintha Vanadium Project.
Algar said: “Their development plans will set them up as a significant supplier of VCN to feed the rising demand for this feedstock as the new rebar standards are implemented.
“Win-Win has undertaken due diligence and identified AVL’s Gabanintha project as the one most likely to be able to provide the grade and quantity of product they require for the future.
“The addition of a substantial agreement with a steel and alloy producer creates a firm foundation with which Gabanintha can participate in the most established market for vanadium.
“We look forward to continuing discussions around the financing and development of the Gabanintha project.”
AVL visit to China
During a recent visit to China by AVL, the two companies finalised the wording of the MOU.
The trip to Chengdu included visits to the Win-Win offices and a site visit to the operating VCN plant at Win-Win’s sister company.
Win-Win’s management team with AVL at the Win-Win head office in Chengdu.
Initial contact with the group was undertaken by AVL’s China consultancy Mastermines, which has developed the relationship to this stage.
VCN often preferred
VCN is an alloy prepared by the reaction of vanadium oxides, graphite and nitrogen.
The reaction creates a VCN product that is sold to steelmaking plants for the manufacture of micro-alloy steels, specifically in the major consumer of vanadium - steel rebar.
In China, VCN is often preferred over FerroVanadium in steelmaking as it requires less vanadium to achieve the same strength characteristics but produces a finer steel product.
Gabanintha, which is near Meekatharra, hosts a mineral resource comprising 179.6 million tonnes at 0.75% vanadium pentoxide.
The resource base and positive metallurgical test results provide strong support for the pre-feasibility study, which is underway.