Veni, Vidi, Vanadium: The Key To Steel

May 26, 2009


The Windimurra vanadium mine northeast of Perth in Western Australia was actively operated by Xstrata until, in early-2003, the company placed it on a care-and-maintenance basis and, subsequently, sold it to Windimurra Vanadium Limited.

Whilst a pure vanadium play, unfortunately, the company fell into receivership (with administrators and managers having been appointed) in February this year, before any of its plans to get the mine back up and running came to fruition. There may, however, be hope for the mine yet, as, in early May, Reed Resources was said to be considering a bid for the collapsed company. Any such hope should, however, be weighed against the words of Marc Gonsalves, executive general manager of Corporate Affairs at Xstrata, in his opening statement at a public hearing held by the Economics and Industry Standing Committee of the Legislative Assembly of Western Australia on August 24, 2004, when he said: "It has cost our shareholders over AUD186 million to find out ‘with the benefit of hindsight' that Windimurra is not profitable going forward." If Xstrata, with its size and experience, couldn't make it work then, one must consider carefully the ability of anybody else to make it work now, especially in these economic conditions.

In Canada, McKenzie Bay International Ltd was, for a time, enthusiastic about developing its Lac Dore vanadium deposit, rumored, after Highveld in South Africa, to be the world's second-largest vanadium deposit. In the end, the company's wholly owned subsidiary, Lac Dore Mining, Inc., announced the sale of its mining claim to the uninspiringly named 6945295 Canada Inc on September 9 last year.

Unfortunately, too, even in the exciting (and expanding) sector for recycling spent catalysts to recover V2O5 (many millions of pounds of such catalysts are now coming into the U.S. from Canadian tar sand operations), there are no pure vanadium plays. All the major operators are subsidiaries of larger concerns. Bear Metallurgical is owned by Gulf Chemical & Metallurgical Corporation, which is, itself, owned by the French Eramet Group (Bloomberg Ticker - ERA:FP). Metallurg Vanadium, in its turn, is owned by AMG Metallurgical Group NV (Bloomberg Ticker - AMG:NA). And, Stratcor is, of course, owned by Evraz.

Since vanadium is also often recovered as a co-product by primary uranium producers, a watching brief should also, perhaps, be kept on the likes of the Canadian companies Denison Mines Corp. (Bloomberg Ticker - DML:CN) (owner/operator of the White Mesa facility (the only working uranium mill in the U.S.) near Blanding in Utah) and Energy Fuels Inc. (Bloomberg Ticker - EFR:CN).

While, in addition to uranium, Denison Mines produced some 1.2 million pounds of vanadium pentoxide in 2008, Energy Fuels, having decided to build its own uranium/vanadium mill, is currently in the early stages of trying to license its Pinõn Ridge Mill in southwestern Colorado, not least in an effort to take advantage of the shortage of milling capacity in the area. If, and when, completed, the mill will, in the words of the company, be "the first facility of its kind to be built in the U.S. in over 25 years."

Finally, Canada-based Rocky Mountain Resources Corp (Bloomberg Ticker - RKY:CN), is looking both to exploit the vanadium it has on its Gibellini property located in Eureka County, Nevada, and the vanadium and phosphate it has found on its Paris Hills property located in Bear Lake County, Idaho. If successful, Rocky Mountain will be pretty close to a pure vanadium play.

In conclusion, some exposure to vanadium can be gained indirectly though either the major quoted producers or, even, catalyst recyclers. There are, currently, no pure vanadium plays in either activity. And, even if there were, in current market conditions, the fates of Windimurra and CS Metals (a major player in the catalyst recycling market in the U.S. that closed up business in December 2004 following estimated losses well north of $150 million) should give potential investors in stand-alone operations considerable pause for thought.

That said, the long-term future of the metal might not be so bleak.


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