Australian Vanadium Ltd (ASX:AVL) recently identified a high-grade vanadium-rich zone grading over 1% vanadium at depths below previous drilling in the planned open pit area of its Australian Vanadium Project (AVP) in WA, demonstrating that the high-grade resource is open at depth.
These recent drilling results will be included in a JORC-compliant resource upgrade planned for Q4 2019, which will feed into the DFS mine plan.
Eden Capital Markets believes there are opportunities for AVL to deliver significant upside to the AVP projected returns as the project configuration is optimised over the course of the DFS process.
Following is an extract from Eden’s research report on AVL:
Key Investment Highlights
- Unique geological attributes of the Australian Vanadium Project (“AVP” or “Project”), including a large high-grade vanadium resource within coarse grained high-grade massive magnetite ore, continuity and shallow oxidation of the ore deposit results in high mass recovery of vanadium to concentrate which differentiates the Project from existing global operations.
- Robust economics at conservative long-term prices. At AVL’s mid point PFS assumptions of US$13.00/lb years 1-5 and US$8.67/lb years 6-17 the AVP posttax NPV8% is US$280m with an IRR of 19.7%. With the V2O5 price at its three year average of US$11.74/lb and a current AU$:US$ rate of 0.67, our model generates a NPV10% of A$763m and IRR of 35.1%.
- Low risk upside potential exists to significantly extend mine life. The AVP is open at depth and along strike. AVL has a total strike of 11.5km of known mineralisation and an initial ~3.5km open pit strike area. A JORC-compliant Inferred Resource of 75Mt is excluded from AVL’s initial 17 year mine plan, which would potentially add + 50 years of mine life with minimal capital outlay.
- Near-term Project enhancement and PFS optimisation opportunities include increased mine life, increased recovery rates in vanadium roast leach extraction, reduced start-up capital costs, earlier mining of transitional and fresh ore to reduce the strip ratio and lower operating costs.
- Favourable Project location with supporting infrastructure in place. AVL is advancing the permitting of the AVP with no major issues identified to date. The AVP is close to road, rail, natural gas, export ports and the region has a long history of over 100 years of mining operations.
- Vanadium market poised to benefit from favourable fundamentals. Limited supply of primary vanadium production coupled with increased demand for vanadium in the Chinese rebar steel market due to new standards in production and the emerging energy storage application uses should be positive for V2O5 prices in the long-term.
- Recent drill results will be included in a Resource upgrade planned for Q4 2019, which is likely to deliver a significant conversion of current Resource tonnes into Reserves.
- Program focused on development area in northern 2km of total 11.5km of AVL held deposit strike illustrating further near-term upside potential.
- Pilot scale metallurgical test program underway to confirm details of processing circuit for final DFS design.
- Hydrology drilling, DFS engineering and environmental approval support work is ongoing.
- Financing discussions and strategic agreements are progressing.