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Australian Vanadium signs strategic offtake MOU with key US vanadium specialty chemical producer

Last updated: 11:33 02 Dec 2020 AEDT, First published: 10:48 02 Dec 2020 AEDT

Australian Vanadium Ltd - Australian Vanadium signs strategic offtake Memorandum of Understanding with U.S. Vanadium
AVL is promoting a global sales focus for its future production

Australian Vanadium Ltd (ASX:AVL) (OTCMKTS:ATVVF) (FRA:JT71) has signed a non-binding Memorandum of Understanding (MOU) with US Vanadium LLC (USV) in relation to offtake from the Australian Vanadium Project in Western Australia. 

USV has deep ties across the North American vanadium end-user market and the capacity to act as a sales agent for future AVL high-purity vanadium products. 

The US critical metals markets are actively seeking supply security and AVL is promoting a global sales focus for its future production.

Validates strong technical capability

AVL managing director Vincent Algar said: “One of AVL’s unique attributes is its strong relationships throughout the vanadium market.

“AVL’s technical director Daniel Harris, who is also a director of USV and a US national residing in the United States, has deep vanadium experience within the USA and internationally.

“Working with the highly experienced team at USV will give AVL the ability to negotiate at the highest level within the vanadium market and leverage the critical mineral narrative with end-users.

“There is an increased emphasis on security and provenance of supply chains globally and AVL has been fielding significant investor interest from Europe and the US.

“The relationship with USV also validates AVL’s strong technical capability and the company’s considered approach to its feasibility studies.

“We are delighted to be aligned with a company of USV’s calibre.”

Shares have been as much as 24% higher to A$0.016 intra-day.

Commercial agreements to be negotiated

The MOU sets a framework for progression to a possible formal and binding agreement before AVL’s project final investment decision (FID).

It outlines an offtake proposal for USV to acquire 2,000 tonnes of vanadium pentoxide per annum, representing 20 per cent of AVL’s planned annual production.

Key terms of the agreement are:

➢ The MOU is non-binding.

➢ A formal and binding agreement may be finalised by the one-year anniversary of the MOU’s execution on December 1, 2020;

➢ The MOU can be terminated or extended by either party with written notice if the binding agreement has not been finalised within one year;

➢ The parties agree to use commercially reasonable efforts to negotiate in good faith to enter into an offtake agreement for 2,000 metric tonnes of vanadium pentoxide; and

➢ Each party must pay its own costs in relation to the MOU and any offtake agreements contemplated by the MOU.

Offtake strategy

AVL’s offtake strategy is globally diversified.

The company recognises China’s dominant role in vanadium production and consumption, as well as the increasing need for supply chain certainty by non-Chinese consumers of critical metals such as vanadium.

USV manufacturing facility

USV produces and sells a range of specialty vanadium chemicals, including the world’s highest-purity vanadium pentoxide at 99.6%, which is produced at its Hot Springs, Arkansas facility.

The facility provides vanadium products as part of the US Defense Industrial Base, contributing to the national security of the US.

Mark A Smith, who is the chief executive officer and chairman of USV, is the former chief executive officer of vanadium producer Largo Resources Ltd (TSE:LGO) (OTCMKTS:LGORF) (FRA:LR81).

Daniel Harris has more than 40 years of experience in the vanadium industry while Terry Perles, a USV director, is a well-respected global vanadium market expert with over 30 years in the industry.

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