Battery Metals – A Shocking Introduction (pt2/7: Vanadium)

A fully-labelled cartoon diagram of a vanadium redox flow battery.

Vanadium: Longer Life, Inspired Investment?

A photo of a pile of big chunks of vanadium.

In the last article of this series, we began exploring the battery metals behind the EV economic revolution. Click here to read about the raging ethical debate that will affect every investor’s dealings with cobalt. In this article, it’s time to take a step away from the cultural hurricane of opinions and instead look at the technological tornado surrounding another battery metal.


Vanadium has been a useful industrial metal for many years. It has been used in nuclear reactors, superconducting magnets, catalysts, gears, axles and jet engines. The concept of a vanadium redox battery had been problematic throughout much of the 20th century, with Pissoort, Nasa, and Pellegri and Spaziante all being unsuccessful in their attempts to create one. However, since the first successful all-vanadium redox flow battery in the 1980s, companies have been clamouring to explore the immense possibilities generated by a battery that has a lifespan far longer than current solid batteries.

Higher than expected supply and lower than expected demand has resulted in a downward price trajectory for uranium in 2019 after the record highs and growth of the sector in 2018. However, the vanadium market worldwide is projected to grow by $17.5 Billion. (1) A primary reason is the predicted growth of iron and steel, not the green revolution. Eventually, when the technology standards for VRFB have been agreed, vanadium will find applications for longer-term energy storage in towns and cities to regulate peak-energy surges and provide domestic whole-home use and remote off-grid use. Vanadium will be able to compete in terms of cycle life, safety, and reliability for stationary applications. However, lithium-ion will continue to own the mobile energy market such as automotive (EV) and electronics.

Despite higher upfront costs and lower energy density, VRFBs potentially have a shorter payback time because of capacity retention even after many thousands of cycles. This potential also exists because of their ability to recycle core components more easily than other battery chemistries. Very few VRFBs are in commercial use so investors must take the claims of vanadium companies aligning their success to that of VRFB with a pinch of salt. However, that is the cherry on the cake. Right now, the vanadium producers’ economics are 90% aligned to the steel market.

Lithium-ion batteries will suffer a setback from the emergence of utility-grade flow batteries, which will contribute to easing the pressure on lithium resources that are more needed for electric mobility applications. One final interesting remark is that, with notable exceptions, a sizeable portion of the RFB industry is located in Europe and the US.

A photo of a large yellow vanadium redox battery inside a factory.
A Vanadium Redox Battery

Vanadium Flow is in developmental infancy relative to its older brother, lithium-ion, but is on an upwards trajectory. Wattjoule predicts an increase of 30% for the total Substantial Storage Market by 2025. (2) Vanadium-Flow offers a fully containerised, non-flammable, compact product that doesn’t degrade; therefore, it can be reused. It seems to be an infinite supply! I am attempting to understand if this is a good thing or a bad thing as an investor as scarcity drives prices up and oversupply drives prices down. Investors may also be interested to hear there is significantly more Vanadium in the earth’s crust than lithium; currently, twice as much Vanadium is produced each year.

However, investors so far have been deterred by the economics of vanadium, and commercialisation of the batteries has suffered as a consequence. The benefits are not yet understood by the retail market, so regardless of their promise, they are yet to bear fruit. Vanadium-flow batteries remain less effective than others in terms of energy-to-volume ratio and round-trip efficiency. They are also heavy, which restricts the flexibility of their application to mobile solutions. Lastly, the toxicity of vanadium oxides renders the batteries more dangerous than competitors. The industry needs to assure investors they have a solution for this or they will suffer the same push back that Nuclear energy is getting from some quarters, despite the zero-carbon claims.

Vanadium is produced in a variety of ways for many applications. Vanadium pentoxide (V2O5) always contains 56% vanadium by mass. (3) One of its uses is as a cathode in primary and secondary rechargeable lithium batteries, and in VRFBs, both of which are a key part of the EV revolution. It is also utilised in air treatment, automotive manufacture, paint, flooring materials and as a catalyst or colourant, along with many other uses.

Another popular variant of vanadium is called ferrovanadium (fEv). Ferrovanadium is a master alloy/universal hardener used in ferrous alloy production, such as stainless steel, that is formed by combining vanadium and iron; it has a vanadium content range of 35%-85%. Vanadium is also sold as a nitride that can be used in cutting materials or hard coatings.

57% of vanadium is produced in China and 18% in Russia. India, South Africa and Brazil are also large producers. The USA produces ≅3%. (4)

The spot price of ferrovanadium is ≅$31/kg in China and ≅$21/kg in Europe. The price of vanadium pentoxide flake is ≅$14.55/kg in China and ≅$10.47 in Europe. Historically venadium pentoxide flake has been as low as $2.43/kg in worldwide markets in 2002, and as high as $ in November 2018. Ferrovanadium reached a height of $143.50/kg in October 2018 and a low of $6.20/kg in early 2002. (5)

An arial photo of White Mesa Mill, Utah.
Energy Fuels’ impressive uranium/vanadium asset, White Mesa Mill, Utah.

Crux Investor recently took the opportunity to interview Largo Resources (, Energy Fuels (, Australian Vanadium ( and BlueSky Uranium ( about vanadium. They helped shed light on the expanding market of vanadium and shared useful information for investors. It is important to decipher the difference between what the CEO says versus what is a reality today. They need to paint a picture of a growth story for investors. We must work out what is real and what is wishful thinking.


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If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

A fully-labelled cartoon diagram of a vanadium redox flow battery.

Energy Fuels: I need your clothes, your boots, and your uranium mill.

A picture of the face of the Terminator, Arnold Schwarzenegger, who wears sunglasses and holds a gun up.

If, like me, you are a budding investor, you likely spend hours each night scouring the internet for the latest and best opportunities to make money. From economic revolutions instigated by futuristic technology, to trade embargos plummeting the prices of certain commodities, the world of investment is a complex minefield, which incites fear and excitement in equal measure.

In recent days, a commodity that has captured my focus is uranium; certain American economic news regarding it has intrigued me, in addition to the international surge of attention towards climate change. Following national news coverage in the last few weeks, it has been impossible not to notice seething commuters warring with Extinction Rebellion protestors. What could possibly cause smartly dressed commuters to devolve into a primitive mob? The answer is the increasingly intense climate change debate.

A colour photo of a crowd of colourfully dressed Extinction Rebellion protestors holding a large green banner stating: 'REBEL FOR LIFE.'

This event was one of many occurring in England’s capital in recent months. Additionally, Greta Thunberg’s damning climate change speeches have navigated themselves into the centre of international discourse. An individual wouldn’t be nominated for the Nobel Peace Prize unless their cause was especially relevant.   

One of the key components of the raging debate is nuclear energy. Nuclear-based electricity production avoids carbon dioxide and other greenhouse gas emissions. However, it has been suggested radioactive gas can cause health issues to workers and individuals from communities surrounding power plants. Furthermore, the disposal of nuclear waste is an even more controversial subject, and if one so much as utters the words ‘nuclear weapons’ they can expect a flurry of opinions to be launched at them more explosively than the warheads in question.

One of the primary materials involved in nuclear energy production and military use is uranium. In the wake of a tsunami striking a nuclear power station on the shores of Fukishima, Japan, the energy sector held a review on reactor designs and safety procedures. The resulting financial and psychological tidal wave had a detrimental effect on the industry, one which it is only slowly recovering from. As a consequence, despite offering vastly lower energy costs, uranium seems to have reached a political and environmental impasse and demand has plummeted. When combined with a lingering sense of distrust generated by incidents in Chernobyl, Ukraine (1986) and 3 Mile Island, U.S.A. (1979), and its association with nuclear proliferation throughout much of the 20th century, I was beginning to view uranium as a commodity too contentious to consider investing.

A colour photo of the dilapidated Ferris Wheel in Chernobyl's infamous abandoned playground.

However, after conducting my own research, I have concluded it is an area that can bring big returns to patient investors. The macro story is positive and encouraging. There are billions of USD being spent building new reactors across the world. New technologies mean small, more mobile reactors are being commissioned by countries who previously would have found themselves priced out. High profile individuals are vocal in their support, from Bill Gates to Elon Musk, and the vast scientific community adds additional endorsement to nuclear power being critical to the energy solution. Our current energy sources are not sufficient to cope with a rapidly increasing population and I feel nuclear power can be a green, affordable solution. 

…many of the world’s largest uranium mines are in care-and-maintenance mode.

The Uranium Cycle: I’ll be back.

Uranium is fundamental to the production of nuclear energy. However, current uranium spot prices remain far below what is economically viable to mine and produce ($23.90 as of 31/10/2019). Such market activity has depressed investment. Most of the (≈50) remaining uranium companies are struggling to stay afloat; many of the world’s largest uranium mines are in care-and-maintenance mode (1). These cold, hard facts lead prospective investors to one conclusion: why on earth would I want to invest in uranium? The answer remains the same as any other investment: it can make you money if you play your cards right.

I have studied numerous articles detailing different investment approaches to goods experiencing a low equity price. To me, the most attractive attitude towards uranium investment is the contrarian approach. After recognising where uranium is in its cycle, and the potential for an uptake in the future, this method seems prudent.

However, I can’t exactly go out and buy large quantities of uranium for myself; I wouldn’t want MI5 knocking on my door in the early hours of the morning. A wise investment will require choosing the right companies to invest in.

From an investor’s standpoint, there are 3 crucial elements a company requires to instil confidence in me, or any other investor. If any of these aspects are missing, I think the company is likely to falter and investment should be avoided. 

Investing in uranium: the secret recipe

The three ingredients are as follows:

  1. An experienced management team who have a proven track record for every process: mining, refinement and sale.
  2. Sufficient liquid assets to enable the company to survive until prices take an upturn.
  3. A genuine asset(s), not something purported to be an asset (such as a licence) that in reality is more restrictive to a company than beneficial.

Energy Fuels, the leading U.S. producer of uranium and potential producer of vanadium, has all three, but, perhaps most interestingly of all, it has an ace up its sleeve that is likely to be a real game-changer.

An Experienced Management Team

Uranium is an incredibly complicated commodity to work with. From permits, licences, safety, legislation, regulation, transportation to refinement there are numerous difficulties, not to mention the difficulty of mining itself. The sale of uranium is also far from straightforward, because the buyers are utility companies with long buying cycles and complex purchase criteria. If a management team has not already been through this process from start to finish, they are learning on the job with my money.

A colour photo of Energy Fuels CEO, Mark Chalmers.
Energy Fuels CEO, Mark Chalmers

Energy Fuels has a management team with an impressive résumé. Their CEO/President Mark Chalmers has been involved in the uranium industry since 1976. His vast experience would impart confidence to most investors. As a company, Energy Fuels has been operating since the 70s, and has nearly 40 years of experience mining and refining uranium. I find Energy Fuel’s established industry-related relationships and experience with uranium production/sales impressive.

Sufficient Cash

The brutal nature of the current market has created a tough environment for uranium companies. Murmurs from funds surround the need for price discovery: the spot price for uranium will need to start increasing before they will invest meaningful cash into companies again. It seems clear to me that utility companies have complete control of the timescale of any potential uranium price uptake. In the meantime, if a company lacks the cash to maintain their facilities, they will not be able to survive.

Handily, Energy Fuels has $40-45 million to see them through until uranium prices rise.  In a recent interview with Crux investor, Chalmers expressed a reason for investors to be hopeful of a price increase in the near future.  Energy Fuels and Ur-Energy are hopeful their petition to the United States Government under section 232 and the subsequent announcement of a 90-day Working Group may bear fruit.   

If the group’s report is favourable to the nuclear industry, it is possible President Trump could subsidise U.S. uranium companies via tax breaks and other federal financial boosts, thus allowing prices to rise and profit to be made for investors who climb aboard while prices are still low. However, despite Chalmers stating he would be “shocked” if the government doesn’t rule favourably towards the uranium sector, the judgement currently resides in a realm of definitive uncertainty; the group’s report may not be completed this year as other events take centre stage on the U.S. political platform.

Genuine Assets

A company’s assets are an excellent indicator of if my hard-earned cash will be worthily invested. Energy Fuels have a portfolio they regard as ‘truly unique.’ (2). They have ‘more production capacity, licensed mines and processing facilities, and in-ground uranium resources than any other U.S. producer.’ Energy Fuel’s 100% ownership of numerous promising mines across Arizona, Utah, New Mexico and Wyoming gives them an excellent list of valuable assets.

Furthermore, in an interview with Crux Investor at the WNA, Chalmers explained the versatility of Energy Fuels. The company tries to ‘diversify,’ to ‘keep a strong balance sheet’ and ‘protect shareholders.’(3) The quantity of projects being undertaken by Energy Fuels helps reduce the risk of investment, as if one goes horribly wrong, there are plenty of alternative options to steady the ship.

The diversity of Energy Fuels is further exemplified by their status as the largest U.S vanadium producer. Vanadium has a variety of uses in engineering and redox flow batteries to name but a few. They also provide ‘low-cost environmental cleanup and uranium recycling services, including potential involvement in the EPA clean-up of Cold-War-era uranium mines.’ Investors can find their risk reduced because the company is clearly not a one-trick pony. Energy Fuels is not completely reliant on uranium.

The Game-Changer

When first mined, Uranium isn’t functional for nuclear energy or military use; it needs to be enriched to ≈20% for power and ≈85% for military use. The enrichment process requires the mined uranium ore to be processed in a mill. Energy Fuels own the only ‘fully-licensed and operating conventional uranium mill in the United States.’ (4). This means in the event of a uranium price increase they are the only company ready to go into production immediately. It also means that any competitor will be restricted at their leisure; companies will have to pay Energy Fuels for use of their mill, or face expensive shipping expenses to mills in foreign countries. Energy Fuels will also have control of the timescale of other companies’ uranium production. Chalmers has positioned the company strongly with an undeniable leg-up on the competition.

A photo of three nuclear cooling towers in action against the backdrop of a clear blue sky and a woodland area.

An Option I Could Seriously Consider

Upon conclusion of my research into the world of uranium companies, I have reached the conclusion Energy Fuels would be a potentially sensible investment. I don’t think any other American uranium producer comes close when the management team, business model, cash and bonus mill of Energy Fuels places them in such a commanding position. In the near future, I am likely to invest. I feel my money would be much better served waiting to grow with the sleeping giant of uranium than comatose in a bank account with less interest generated than a taxidermist’s dating profile.

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.


Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. We provide paid for consultancy services for Energy Fuels. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

A picture of the face of the Terminator, Arnold Schwarzenegger, who wears sunglasses and holds a gun up.

Australian Vanadium (ASX: AVL) – Packing a Punch. With a High-Grade Global Scale Resource. Nearing DFS. (Transcript)

We recently interviewed Vincent Algar, the Managing Director of Australian Vanadium (ASX: AVL).

With aspirations to be the next Bushveld along with an experienced Vanadium management team, Vanadium Redox Flow Battery (VRFB) know-how and reach to hedge Vanadium steel swings, there is a lot to like.

He said all the right things. Now we need to see him deliver on those within the strictures of a tight treasury, the swinging Vanadium price, and a market still not back and focused on mining.

Vincent scans well and knows what he is doing. Working towards the Definitive Feasibility Study (DFS) and optimising his options as he goes. A good strategic partner with cash would be welcome signal. We feel he will get there with the vertical integration he strives for, but they are quite small at the moment (with some of the concerns that brings). Australian Vanadium could however be a very cheap addition to ones portfolio, especially when the market sees Chinese rebar regulations kick in and the right type of strategic partner step up. We see some discomfort and uncertainty from retail investors but institutions seem more confident on Vanadium.

Click here to watch the interview.

Matthew Gordon: We always get people to kick off with a two-minute summary on the business. Then we’ll get stuck into some questions.

Vincent Algar: Australian Vanadium is developing a project, just South Meekatharra, in the State of Western Australia, which is a very well known and respected mining state globally. Actually currently number two on the platform of best places to invest in mining projects globally. The project is a Vanadium project. It’s a primary ore Vanadium project, very similar in style to Bushveld and Largo Resources’ projects. And we’re looking to… we’re currently finalising the Pre-Feasibility Study (PFS). We’re in the middle of a pilot study, as part of a Definitive Study (DFS), to aim to go into production producing about 10,000t of V2O5 high-purity material in late 2021.

Matthew Gordon: Thanks for that. So let’s just cover some technical components. You’ve done a PFS. You’ve started a DFS process and you’re also running a pilot process at the moment. What do you think you’ve got at the moment?

Vincent Algar: So we’ve done our Resource work. We’ve actually put out a Maiden Reserve, which is about 17.5Mt, as our main reserve, just over 1% in grade, in head grade. And our deposit is particularly wide for Vanadium deposit. We have a particularly high mass yield to Vanadium concentrate which stands out on a global level by comparison. So those three factors give us quite a unique geology, and we have estimated… Our Resource estimate is currently running at over 90Mt of this high-grade feed material. So given that, we’re going to be mining around 1.4Mt a year that gives us a fairly large long-life Resource there ahead of us.

Matthew Gordon: And the DFS process just started, so when is it due to be completed?

Vincent Algar: The completion date is set for late this year. The way we’re doing this DFS is, we finished the DFS at the end of last year and we broke the DFS into three parts. One was the data collection. So as we went out and we drilled a few thousand meters of core, so we could use that for our pilot study. Actually we collected nearly 30t of our target horizon, which was no mean feat. We collected that so that we can actually really do a pilot properly. Then subsequent to that collection and characterisation, which started in January and finished in April, we have then set up a pilot study. The pilot study is currently underway and breaks the processing down into its three component parts: which is Magnetic separation and beneficiation of the concentrate through to Vanadium high-purity product. And those are the steps that are currently underway. They’ll take us through until September. And then following that we’ll integrate all the results of that pilot work into a Final Definitive Study (DFS) document towards the end of the year, which will set us up to move into a FEED Study and move to a very clear pathway into mid-2020.

Matthew Gordon: It’s a tricky market at the moment. The prices are all over the place. You’ve been as high $17, as low as $3. Have you got the team on board who are capable of getting you through this dip at the moment? You’ve got some cash to take you through the next phase to DFS. But the market’s not very forgiving at the momentWho’s on board that’s been through this before, that will help you get to where you need to be next?

Vincent Algar: We’ve got two people on our team with extensive Vanadium experience. A guy called Daniel Harris, who’s been in the Vanadium business for over 40 years. He ran Vametco, the current operation of Bushveld. He ran it for a couple of years. He was the managing director in South Africa. He came through from the US, while working for Evraz and then he moved on to run Evraz’s Russian business for 3yrs. He’s a process engineer, but he’s been involved with some pretty big corporates and corporate players over the years as well. He’s been an MD of very large portions of Vanadium businesses for a long time. And been involved in process design and running the companies basically. He’s our go-to guy in terms of his knowledge base and network. And our COO,Todd Richardson. He’s been in the Vanadium business for 20 years, since graduation. He’s operated on 3-4 Vanadium operations. He is a process design engineer, heavily focused on building and delivering. Then lastly, our technical team on the consulting side. We’re using a collection of people who know the West Australian environment very well, and we’re using Wood Consulting engineers. And we’ve got a couple of people within the Wood team, that have experience in Vanadium operations and design. They are helping us through this critical period of the process design and testing. We know that this is the key part. If we don’t pilot properly the right material, and have an absolutely thorough honest understanding of the material we’re dealing with. That is the risk that you face of failure. We know we have to be auditable and that is why we believe we’ve got exactly the right team in place. Of course we’ll be adding people to the team as we go along. But our criteria for adding those people to the team will be that they’ve got the Vanadium experience in place. My own experience is a Resource base. I’m a Resource geologist. The geology here is obviously important. The geo-metallurgical side. The scheduling is right within my experience base. And I can add value in that respect. And obviously I’m very interested in all the other aspects of what we have to do here to deliver. But we want to build the right team to get this done. And we believe we’ve got most of it in place.

Matthew Gordon: You’ve got the right technical experience. And you got in position a globally significant Resource. But you are where you are, at the moment. You’ve got a market cap of circa $30M. You got $5M-$6M of cash, the junior mining space is very tricky, because of the amount of risk involved in mining. Vanadium price is being very volatile. Who are the guys on board who keep the show on the road while you are developing the DFS?

Vincent Algar: You mean in terms of the corporate side of things?

Matthew Gordon: Yes. What do you think the challenges are? And what are you doing to meet them?

Vincent Algar: The challenge is clearly to fund the project, absolutely. And I think we totally try to be transparent about needing to do that. We have to, on the technical side, our technical team has to make sure that we understand the costs of the project, and be very clear about what it is we think it’s going to cost. And so therefore our central focus is that moving into that low-cost quartile, making sure we know our operating costs will be able to be delivered at the lowest possible place. But then the capital side, we have match the capital with what the equity markets will offer us, and start to deliver a really deliverable story to the equity markets. And then subsequent to those the debt markets as well.

Matthew Gordon: What do you think that story is? I mean what do they need to hear? What are they going to hear from you?

Vincent Algar: Well I think one of the things they need to hear about is our belief in the market itself. We haven’t really discussed the market. What is the market for this metal? Why is it so interesting to people? Why is it so volatile? How do we knock the volatility out? Having seen and heard the discussions that you had with Bushveld for example. One of the aspects of reducing the volatility of the price is, why battery and the development of the Vanadium Redox Flow Battery (VRFB) market is so important. It’s a large-volume market, that’s disconnected from the Steel market. It offers a huge opportunity to level off this market.

Matthew Gordon: A lot of people listening to this are new to mining, let alone Vanadium. So let’s talk first about the volatility component in the marketplace, because Vanadium has a huge relationship with the Steel market, Rebar etc.. It’s 90% of the market for Vanadium. Do you want to give your view on why the volatility is there? And then we can get into the opportunities.

Vincent Algar: I think much of that market is based on the Chinese Rebar market, which is a very complex beast. It is a complex environment, but it is a growing environment nevertheless. And the application of Vanadium in that environment is a clear benefit to the people who employ it. There is a natural growth curve that we can take advantage of. That natural growth curve needs and requires additional tonnes of Vanadium to come online. Those tonnes have to be relatively cheap, so that those operations can get into play and stay in play for a long period of time. Newcomers to the market, need to be low-cost producers. The other thing that they’re requiring is that those newcomers are responsible from an environmental point of view. If you’re in China and you’re a new producer, well you’re not going to get up and running if you’re going to be a dirty producer. You’re going to have to produce a clean product. The banning of slags in China is a key example of that. You can’t push waste products into China. So high-purity products are going to be ideal. There is definitely a growth market in the Chinese Steel market, not only in Rebar, but in other products as well, which the Vanadium industry hasn’t fully exploited over time.

Matthew Gordon: Such as?

Vincent Algar: Such as high-strength beam steels. It’s a very good market. It’s quite a big market, and it hasn’t really been exploited by the Vanadium producers. It has significant benefits to uses of that steel. Remember the more Vanadium you use in Steel, the less Steel you need to achieve a particular objective. And in the construction industry in China that’s quite relevant. If we can build a strong, earthquake resistant building with less Steel, that’s a great outcome for everybody, in terms of energy use, in terms of Steel use, in terms of cost. More Vanadium in Steel has a lot of downstream benefits for everybody. The fundamental thing is Vanadium is relatively easy to use to apply in the Rebar market and some other markets. And its cost is not that expensive, if its price isn’t too volatile. But we’ve seen recently, whether it be speculation, substitution from Niobium, affect that price and also the non-implementation by some parts of the Chinese Steel industry of the standard that’s been imposed on them. So that volatility, if you knock that out over time, you’ll settle into an environment where more Vanadium is being used in the Chinese Steel market. And even at relatively modest projections, that still means additional tonnes, and additional new mines required, and additional expansions to existing operations. Such as we see being done by Bushveld and Largo.

Matthew Gordon: So in terms of the size of that market, Rebar, Steel market, you still see that growing. I think that’s widely accepted. You’ve talked in your PPT about VRFB, Vanadium Redox Flow Battery. I think everyone in Vanadium is talking about that, because of potential rental component, that seems to be the story of the month at the moment. You’re some ways from that, but you’ve still got to talk to that market, talk to investors about the opportunities there. Right now you’re focused on working out what’s in the ground. How you get it out economically, and at a margin which will allow you to be profitable and successful. Because you’ve got to hire the right skill sets on board to take advantage, and have the right partnerships take advantage of the VRFB space, and that’s probably not something for now, for you guys. Or is it?

Vincent Algar: We’re fairly active in that area. We’ve had a subsidiary similar to Bushveld Energy for the last two and a half years. We’ve been really developing that market in terms of looking for the niches within the Australian market, to place those batteries. We’ve seen the Vanadium battery market grow here in Australia, from 1, which was only installed at the University of New South Wales, by the inventor, to now having 6 batteries online, and one pretty large 1 coming online pretty soon. 3 of those are CellCubes. And there’s a very real opportunity within the Australian market. Should the psyche work. We are very gifted by the amount of renewable energy we can put into the systems here. We have high energy costs, fringe of grid opportunities. The Vanadium Redox Flow Battery (VRFB) fits our market perfectly.

Matthew Gordon: You’re going to have to take a view on how you vertically integrate the business, because you are not of any scale at the moment. I mean how much time and money have you spent on that aspect?

Vincent Algar: We’ve built and installed a pilot electrolyte plant at the University of Western Australia. We understand the production of electrolyte from raw materials. We understand the energy cost of that and how that flows downstream. We know that there’s a step in between, making a product. We also understand the quality issues, through my work at the Energy Storage Committee with the other players in the Vanadium space. We understand the quality parameters around making Vanadium that needs to go into Electrolyte for example. So across the whole chain, we believe that within AVL we already have a very good understanding and set of data that we’ve been working with over a few years and we can take that into the plant design. Coming back to your question, how do we implement this in the plant? We’ve recently announced some work where we’ve produced a 99.4% product as part of our pre-pilot work. That’ll be our standard product. Now the definition of an electrolyte-ready Vanadium product, is around that level sometimes higher, sometimes lower. But most Vanadium battery players will want you to produce something around that level. Now for us to target an electrolyte ready finished product, which is both ready for our Steel customers, and for our battery customers is what we want to achieve. That’ll give us the total leverage to go into Steel and to take a portion of our production into the battery market. And that’ll be built in to our very underlying principles of our design and our economics.

Matthew Gordon: So it’s an important, but not necessarily fundamental, part to the business for the future. You’re investors have seen the price fall in the last year. Sitting around $0.02 at the moment. What’s your message to them in terms of how you deliver a strategy for, much overused phrase, value creation for shareholders, meaning share appreciation?

Vincent Algar: We tell them that we understand what you’re doing. We’ve got a very good asset. And we’ve got to demonstrate the value along the way. So some investors are going to look for the short-term hits on that. But at the same time, when you’re looking at an investor that needs to see the long-term value, you need to demonstrate that. There’s two ways we can demonstrate that. Do we have a project that’s deliverable in production? Will it have a capital cost that is too high for a Junior? So if it is, then where are your partners? We need to find those technical partners that are going to participate with us. That is one of the strongest ways we can demonstrate our ability to deliver is get a partner involved.

Matthew Gordon: So does that mean dilution? Or does that mean an equity partner who will fund at a project level? How does that work?

Vincent Algar: I think you’ve got to take that from the partner that you choose. But ultimately it’s going to be a project partner who you want to work together with. We believe we’ve got a very strong team that can deliver. But we want someone who wants to come in for the ride and can deliver their component. If it’s a corporate, or if it’s a Vanadium player who has got something to offer. We can build it from there. We really have to focus on what we can deliver for the investor. In terms of dilution that concept is quite interesting. The worst form of dilution is running out of money. You have to stay in the business. We’ve got a very robust story to tell. And I’m a 100% confident that as the project gets funded through to its logical conclusion of being built, it will reach the value it needs to reach. And then no one is going to be diluted by that because you’re in production in a stable market. So getting into production is the best result. The hurdles of funding are always there.

Matthew Gordon: Sorry I interrupted you. You’ve mentioned the second thing you need to do?

Vincent Algar: Is to demonstrate that…when we’re operating that we’re going to be in that low-cost quartile. So that’s a technical deliverable that we believe is one of our core objectives. We’re currently at $4.15 in our PFS. We want to get that well below $4 and that we know would give us a sustained operational cost through the life of that initial 17 years.

Matthew Gordon: You talk in your PowerPoint about de-risking and improving project valuations and you just talked about trying to get the operational cost down. Is that marginal or is that going to be meaningful. If so how do you achieve meaningful difference from $4.15 down to…

Vincent Algar: Well I think you’ve got to innovate. We’ve said in our announcement two weeks ago in particular as a typical example of that. We’ve innovated by changing out one of the back-end processes in the standard process and also looking at pelletising the front. Both of which delivered a significant result for us. And implementing those in the final plant are the ways to innovate. The Vanadium industry using standard technology has been fairly bland in terms of that level of innovation. Also looking to produce electrolyte-ready products. Ones that are open for additional investment into other markets for example. A lot of people would just go out and produce a product that’s ready for steel. Australia has a very conducive environment for R&D. We get $0.45 back per dollar of R&D money that we spend. And that is a fantastic opportunity for almost all Junior Resource companies to really push the trigger on their R&D, especially when it comes to process innovation. And we do that. We use it and it’s a great opportunity for us to keep low-cost R&D in the actual design and build of our plant. So we’ll been doing that. But all of that is driven from the fact that we need to get the operating cost to that point. Some are incremental, and some are significant.

Matthew Gordon: And are they going to have a big impact on your IRR. Because I noticed in your presentation you’re using a variety of price points to give an inferred IRR number and enterprise value. I mean that’s very price dependant on the market and not so much about what you’re doing. Or is it?

Vincent Algar: We are sensitive to our operating cost. When we did our PFS we did about eight option studies. And each of those option studies in addition to a series of risk workshops, we looked at where we would be able to add the most in terms of bottom line revenue by changing certain things. And those are the things we focused on and we are focused on throughout our DFS. Where can we add… and those two innovations, I mentioned the modification of the back-end circuits to ABV and the pelletising. Other things we can do is looking at our capital cost. Where can we stage the capital costs so that we don’t have to hit it all at once. There’s a lot of work that we’re doing through the course the DFS. But we’re looking for those big hits as well. But the little ones will add up. We’re taking a systematic approach to the process.

Matthew Gordon: What are investors worried about? What are you doing about it?

Vincent Algar: Well investors are worried about us being able to fund the project. All I can do on that front is to continue adding value to the project, and to continue to work with new investors and existing investors to show that the project value is there and the project is deliverable.

Matthew Gordon: And you’re talking about institutional investors there or strategic investors? Are you talking about the retail? When you say investors, who do you mean?

Vincent Algar: Well my focus will be on attracting institutional investors to the company. Which is why we were in London. While we’re looking at longer-term institutions, both in New York, London, Hong Kong, Singapore. The Australian institutions as well obviously on that list. But then we do have a lot of high net worth and retail investors within the stock as well. So I have to keep telling my story.

Matthew Gordon: What’s resonating with them? You know the Vanadium market extremely well. Investors may not necessarily. What are they buying into, are they buying into the future of energy storage components of Vanadium? Are they buying into your particular story about how you’re going to get into the marketplace?

Vincent Algar: I think there is a two-fold answer. I think for the more sophisticated investor knows the way the Steel markets work and how they grow and how Vanadium fits into that. That’s obviously an education process. But when people have been educated they say ‘I get that, that’s what it’s all about’. I had two responses in London at 121 that said exactly opposite things. Someone will come in and go ‘yep it’s all about the steel. I get it. I’ve been doing this for years, this is what works. You get this right. I see it works. We’re going on the steel side’. That’s the fundamental markets. 90% of the current market are not interested in anything else. Then you get the guys to come and say, ‘this Vanadium battery market is absolutely amazing. It’s got huge volume implications the world needs stationary storage we’re going to switch to renewable’s everything is going on’. And then you get the person who’s going ‘it’s all about the battery’. So there’s a very big swing there but AVL’s had success with both of those investor groups. People will come in as long as we are showing that we will do something in both spaces, which we will do because that’s the perfect hedge for a Vanadium company to be involved with this new sector and the existing sector.

Matthew Gordon: The strategic partners are not on board yet or there are conversations which are happening? What are the catalyst moments for the next 12 months for you? What are you targeting doing? Obviously the DFS. And the results from the pilot plant. What else is happening with the business to ensure its survival, to ensure that it’s able to deliver the things that you think you want to deliver now, like vertical integration? What targets are you setting yourself and what are you measured on?

Vincent Algar: Well we’re measured on the success of the share price. Growing our market capitalisation. And then closing those key deals with interested parties, whether they be investors or whether they be off-take partners. There are people that are interested in Vanadium, because they’re really vested in it. And there’s people that have looked at Largo  and looked at Bushveld’s success. They have looked at the price of Vanadium and the potential returns that it can give when it’s really cranking, and they say, ‘This is not a bad business to be in’. And a lot of it’s actually aligned quite well with other steel businesses and other alloy businesses. There’s a quite a number of natural partners, both in China and outside of China. But anyone making a deal has to go through the diligence process. You have to court each other and work closely with each other and become friends and trust each other. So all of that is an ongoing process which is what I and my team are doing with the confidence that the project at the back-end is solid as a rock.

Matthew Gordon: It’s been a great introduction to the business. I think you’re in a period of discovery with the things that you’re doing. Sounds like you’re having the conversations you need to be having. Give us five reasons for new investors to be looking at your business.

Vincent Algar: The fact that Australian Vanadium’s project can be another Largo or another Bushveld, that’s one reason. 1. Where is Australia Vanadium’s project? It’s in one of the world’s best investable regions for mining projects generally, both the location and the state itself is very pro-mining. 2.The returns on the Vanadium industry are looking like something that people need to be involved in. I think people need to take close heed of what’s happening in the Vanadium industry both from a Steel and an energy storage point of view and also the other applications that may involve Vanadium that can significantly increase its consumption globally. 3. A producer of high-purity material with a significantly long-life. 4. On a technical level, as an investor what is the best Vanadium project in the world to invest in? That’s the one that’s going to have the highest chance of success and is de-risked to the maximum and can come into production for a significantly long time.

Matthew Gordon: 5.  At a good price today?

Vincent Algar: Cheap, cheap, cheap, cheap, cheep. Going cheap today! Not that we like that, but we won’t be going cheap tomorrow.

Matthew Gordon: Thanks very much for your time. I do appreciate it. Keep us up to date with things as they develop. What’s the next bit of big news?

Vincent Algar: We’ve got a fair bit of work around the concentrate production quality that we’re producing from the pilot study. We’ve got some Resource results and drilling results coming out. Some Resource results coming out later probably early next month. And we’ll be working on an updated Resource from those results. Then we’re looking at some of the other… Then there’s this obviously various discussions we’re ticking away on. And them we’re looking at getting the view on the actual, an update to the BFS, We’ve mentioned that in announcement recently. We want to take the new base case with all these changed parameters in, and squeeze it out so we can actually show people what we’ve done so far. Have we brought some stuff? What improvements have we made? So that investors can see we’ve made progress as we lead into end of the DFS itself.

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Bushveld Minerals (AIM: BMN) – Interview with CEO Fortune Mojapelo (Transcript)

Crux Investor had the pleasure of interviewing Fortune Mojapelo, CEO of Bushveld Minerals (AIM: BMN). He tells us about his journey in the mining space as well as telling us about the strategy of the company.

  • Vanadium has excellent fundamentals and a solid outlook.
  • Largest High-Quality primary Vanadium Resource in the World.
  • Brown Field capacity, allowing them to hit targeted production volumes quickly and cheaply.
  • Management team with a depth of technical expertise in Vanadium.
  • Operation with a natural hedge towards a Multi-Billion Dollar Market opportunity.
  • Substantial capital growth ahead, with possibility to start paying a dividend to shareholders.
  • Vanadium Redox Flow Batteries (VRFB).

Click here to watch the interview.

Matthew Gordon: Well why don’t you start off, for some of the people new to the story, by giving us a two-minute overview of the business.

Fortune Mojapelo: Well what we are, we’re a Vanadium focused company. Vanadium is the commodity we focused on. And our vision, our ambition is to build it into one of the most significant lowest-cost, vertically integrated Vanadium company. Bit of a mouthful but basically what it means is, we want to combine our large primary Vanadium Resource base which is high-grade open-cast Resource base, across three deposits. The largest primary Vanadium Resource base of anybody in the world, combined with processing infrastructure that allows us to process this Vanadium into final product. And that processing infrastructure is centred around two key primary plants that we have in South Africa. The Vametco Plant, which we acquired in 2017. And Vanchem which we recently announced. So that gives us a platform to produce low-cost Vanadium at large scale. And the integrated piece of the business is how we take that Vanadium further downstream into the Energy Storage market, where we essentially plan on being one of the largest, one of the more significant Energy Storage companies through Vanadium Redox Flow Batteries (VRFB).

Matthew Gordon: The Vanadium spot price. If you look at it, it’s all over the place. It’s been a crazy ride.

Fortune Mojapelo: Yes.

Matthew Gordon: Tell us a little bit about where Vanadium sits in the market, its uses and applications?

Fortune Mojapelo: Yeah, it’s been a very volatile commodity. And when you look at its price profile it’s quite interesting to see. It can put some people off. But we think that in any commodity, your number one goal should be looking for that project or that production base that is cheap low-cost. If you’re the lowest cost producer, you won’t have much to worry about the volatility in the price.

Matthew Gordon: You’ve got a good margin. You’re one of the lowest quartile producers of Vanadium. But even so in terms of predictability, being able to plan ahead, it must be difficult?

Fortune Mojapelo: Again, I mean it depends how you structure your business.

Matthew Gordon: Tell us about that?

Fortune Mojapelo: For example you structure your business with a lot of debt, which is predicated on Vanadium coming in at a certain price. You got a problem if the price doesn’t realise there. But I think if you have a low-cost producer, and you’ve got a good capital structure, you should be okay. All right. We all want a stable Vanadium price. Make no mistake about it. But we think the first thing is make sure you’re a low-cost producer. And for us, it is one of four key pillars in the projects that we get involved in. Overall though, we think that as a commodity, Vanadium markets’ outlook is actually very good.

Matthew Gordon: Is this coming to your Redox Flow Battery (VRFB) component.

Fortune Mojapelo: But even before that.

Matthew Gordon: Describe Vanadium uses today and we’ll get onto what they could be.

Fortune Mojapelo: About 90% of the world’s Vanadium today is used in steel making. 8.2% of Vanadium to a ton of steel, you double its strength. And so it’s used in construction steel whenever you’re building infrastructure and it’s you know tensile strength in the steel…

Matthew Gordon: The rebar?

Fortune Mojapelo: And rebar. And so that’s been the traditional kind of space for Vanadium applications. And I should add that even if that was all that was to Vanadium consumption. That’s been the bedrock for a century plus. And I think it will continue to be, given its unique place in that space. In countries like China, where you got regulations that are being put in place to regulate the types of rebar that is produced, China is moving away from low-quality grade to rebar, to grade three, grade four rebars.

Matthew Gordon: China resetting the quality of the rebar did have an impact on the Vanadium price. And therefore, the knock on effect. Was that a big impact on you?

Fortune Mojapelo: It has an impact on Vanadium. I think the new standard in China, it’s estimated that if and when fully implemented, just to meet that standard, it should raise the demand for Vanadium in China domestically as much as 30%. Now given the China control about 50% of global Vanadium consumption is taking about a 15% uplift in the demand. That impact hasn’t really come through yet, because we believe that the enforcement of that standard hasn’t been as strong yet, but we believe that there will be… the government will start to implementing the inspections, and that in the second half of this year, we’ll see the enforcement of that standard increase. And therefore that demand upside will start to come through, from then on. And that’s of course just one part of the demand story. There is the Redox Flow Batteries, you talked about earlier on. And timing couldn’t be better, in terms of what’s going on in the world around higher energy electricity generation. The push for cleaner energy et cetera. So the use of Vanadium in Energy Storage, we think is going to substantially increase the demand profile of Vanadium, through these batteries called Vanadium Redox Flow Batteries.

Matthew Gordon: How long you’ve been with the company now?

Fortune Mojapelo: I have founded the company together with partners. Which stretches back to 2008. We enlisted in 2012 on AIM but we started essentially Bushveld Minerals, as an early stage exploration project, which we were developing from as early as 2000.

Matthew Gordon: You’ve gone from junior Explorer into Producer. You’ve obviously done quite well in terms of establishing yourself. So tell us about that journey?

Fortune Mojapelo: It’s been an interesting journey. I think we started our journey in the junior space at an interesting time, because it’s about the time that the global financial crisis was setting in. And as you know when that happened, risk capital becomes scarce because people are less willing to take big risks and the casualty of that is actually endeavours such as junior mining and Exploration. I partnered with three individuals in South Africa, two twins. Identical twins, both Professors of Geology. Maurice and Richard Filion and Anthony Filion is Richard’s son. And essentially, we started life with a view that you know these two gentlemen are doyen of geology in Africa. They know the Bushveld complex inside out. They’ve advised many people to find new deposits. Let’s create a business where we leverage that IP and we do it and we build projects and that’s how we started life and we started looking for Exploration projects that we can build up. And our journey grew from there.

Matthew Gordon: Are you a geologist?

Fortune Mojapelo: I’m not a geologist. I studied actuarial science and I worked in strategy consulting for a little bit.

Matthew Gordon: When you start it’s all about equity. Raising equity to be able to do what you needed to do.

Fortune Mojapelo: Look when we started, my interest was to do principal investments. I was looking for opportunities in Africa where there is scope for scale growth. And I’ll be honest with you, a year before that I didn’t know about anything called Junior mining at all, until I met with the Filions. And I think from there and we gelled. And we started finding projects, we started developing the projects, and were fortunate to get Baccus who backed us early. And you know one project led to another project, until we got Bushveld Minerals listed in 2012, on AIM.

Matthew Gordon: It’s interesting when we talk to a lot of CEOs, it’s not all plain sailing. It’s not smooth lines.

Fortune Mojapelo: It never is.

Matthew Gordon: So what are the important things for you, given you weren’t into junior mining when you first started. What are the things which stand out for you, what are those moments where there was a significant change in your understanding, or indeed the business?

Fortune Mojapelo: You’re always learning as you go. And I think for me starting point was that when you’re working with a technical team, in a technical field, that is exceptional, that it’s distinguished, who know what they’re talking about, is a good starting point. You know they will tell you that everything starts with geology and mining, and I tend to agree with them. And then the second thing is, your early deals there’s a general thing your early deals are always going to be the most expensive. But what’s more important is proving yourself and making money for your investors that give you capital to do what you want to do. And with time as you develop and as you prove successful. You can get a bit more leverage in your conversations with investors. So our very first project, was an expensive project from a financing point of view. But it gave us a platform to develop more. And that’s how we’ve developed ourselves. Even after we listed, we faced what every junior company faced. It was hard to raise money. We had projects that we were comfortable with, that they are solid projects. And we had a guiding philosophy, which we believed in, which I think has stood as very well. And we were fortunate that we had good projects. And from about 2013, after seeing our share price come down, or maybe it can come down since listing, we did what I think was pivotal, which is we decided to focus on Vanadium as a commodity. And it is really there that I think our inflection point started. We were still very small but we got our scoping study on our flagship project that we had done quickly. We did a Pre-Feasibility Study (PFS) and we developed a conviction about this market, that we’ve carried since then. And we believe it’s a market that is really for us to participate in.

Matthew Gordon: How much of the Vanadium market… you’re world number one?

Fortune Mojapelo: Well the largest in terms of the Resource base.

Matthew Gordon: In terms of the Resource base…in terms of production?

Fortune Mojapelo: In terms of production, we not the largest producer. There is at least two primary producers, that produce more than we do. Largo Resources and Glencore Rhovan operation in South Africa. But after their position that we did that we just announced a Vanchem between Vanchem and Vametco, from just a potential point of view, we have the capacity to become the largest primary producer, yes.

Matthew Gordon: What are you supplying in terms of world production now?

Fortune Mojapelo: Currently just under 3%.

Matthew Gordon: Just under 3%. And after?

Fortune Mojapelo: When we’ve gone through the refurbishment of Vanchem and we’ve got Vametco operating at full capacity, we’re targeting just about 10% of the global market.

Matthew Gordon: So significant. You have – Bushveld Minerals, Bushveld Vanadium, Bushveld Energy. Are those eventually going to be three different companies or are those just brands with the overall group?

Fortune Mojapelo: Bushveld Minerals is the listed holding company. Underneath that we got Bushveld Vanadium which essentially houses our mining and processing assets. So, it’s is the Resource platform. Mine it as cheaply as possible. And process it and produce Vanadium units. Bushveld Energy says let’s take it a step further and take a position in the energy storage market.

Matthew Gordon: I want to see if that gives us a clue or sense of where you want to go. Because if you’re creating those brands now, will they be separate entities at some point?

Fortune Mojapelo: I think you want to always retain flexibility around that. So we structure our companies always in a view, in a way that allows us that flexibility. Is it foreseeable that Bushveld Energy could be a standalone company in the future as possible. It’s not something that’s we definitely do. The reason we created it that way however, is that it is focused on a specific sector which is the energy market, and the energy storage market to be specific. If for example, we wanted to attract investors that are particularly interested in the energy market only, we have the ability to do that through Bushveld Energy. So we like that.

Matthew Gordon: But right now they are on the same P&L?

Fortune Mojapelo: Yes.

Matthew Gordon: Different team? Same team? Different skillset that’s for sure.

Fortune Mojapelo: It’s a different skill, especially if you look at the Bushveld Energy team is headed up by Mikhail Nikomarov, who’s got extensive experience in the energy markets. And his team includes people who have been involved in energy project development. So it is, you’re right, a very specific skill set that is required there.

Matthew Gordon: There’s Energy, and then there’s Energy. So again we’ll probably come onto it, but just to finish off with the recent acquisition. You made a recent acquisition! Why did you do it? What you’re thinking and what are you trying to fix?

Fortune Mojapelo: So our strategy that we’ve spelt out, the best route to developing are our projects is through targeting Brownfield assets. In fact if I step back. I mentioned earlier on that there’s a guiding philosophy to our projects. It talks about four key elements. 1. You want a commodity that is good sound fundamentals and good outlook from a price point of view. 2. You want to project all cost proposition will put you in the first or second quartile of the cost curve. 3. You want to have projects that you can reasonably bring into production, in the foreseeable future, without requiring massive CapEx. 4. And then the fourth one is you want scalability.

Matthew Gordon: Or it looks cheap or non-dilutive CapEx?

Fortune Mojapelo: Because if you need billions of dollars, where you gonna raise the money right? Especially if you’re a junior. 4. The fourth point is you want scalability. Vanadium ticks all of those boxes for us in South Africa. It’s a commodity with good fundamentals, as we talked about earlier on, from a demand side, from a supply side. In South Africa we really well located there.

Matthew Gordon: Well you are. But again, there’s a perception in the market in terms of country risk. Because there have been problems at various points in South Africa.

Fortune Mojapelo: I can come to that. But if I may for a second. I think you’ve got a commodity whose supply outlook is concentrated, mainly between three countries; China, South Africa and Russia. With South Africa having the largest high-grade primary Resources. We always say if you want high-grade Vanadium Resources, you’re going have to come to South Africa. Because that’s where we’ve got the combination of scale and grade. But also, the distribution of Vanadium Resources globally, and the distribution of the production Vanadium. It’s such that in our view, if you look forward to see where does new supply come from. If you don’t have grade that allows you to build a primary plant like we have in South Africa. You have to build a steel plant, which requires billions of dollars. Which is why you see most of the production in China and Russia, being of that nature, co-production steel plants which are expensive to build. New supply in our view is not going be dominated by the steel plants or big iron plants. It’s going to come from primary producers. But if you’re going to do primary production. You’re going to find grade.

Matthew Gordon: I think that’s true of a lot of commodities. I agree with you. Where are you’re selling your production?

Fortune Mojapelo: +50% of our production goes to the US.

Matthew Gordon: Goes the USA.

Fortune Mojapelo: But it’s predominantly the steel sector at the moment. And yeah. So you were we were talking about this philosophy and how we go to brownfields. So when we focused on Vanadium, and with our project in Mokopane, we did a scoping study, we did a Pre-Feasibility Study. What that showed us, we’d a project that required $300M. It was a high-grade Vanadium Resource. $300M CapEx to build mine & plant. Gives a good IRR of 25% assuming a Vanadium price, we’ll call it $33Kgs. Very nice project right.

Matthew Gordon: What’s it been averaging the last five years?

Fortune Mojapelo: Look I mean when prices have gone as low as $13.50 and gone as high as $127… So I couldn’t tell you exactly what the average is. But I’ll tell you that at $33, we’re comfortable we have a project that is good. All right. But the point I’m highlighting here is that, if you’re a $20M market cap company, or £20M might be coming market cap company, how are you going to raise $300M? Even though with a project that is solid, it is at that point for us where the epiphany of brownfields here, which is if I can find existing facilities, that I can convert into primary production for Vanadium, that a cheap and I can do it cheaply, then fantastic. And South Africa is unique in some respects in terms of Vanadium, because historically a lot of our industry was built on a vertically integrated basis. They didn’t just have mines, they’d in mines and processing plants. But what happened over like a 30yr globally, a shift upstream. So, your BHP’s, many of these companies they decided to focus only on mining. They saw the Pilbara expand capacity though just mining and ship it to China. Let China process it. It left a number, that kind of migration, left a number of facilities, downstream facilities, underutilised, in some instances not profitable et cetera et cetera. That is for us the opportunity when we talk Brownfield. It is can I acquire a facility that is either not being utilized or underutilized, and combine with my Resource base and produce Vanadium cheaply. The acquisition we did of Vametco was as a result of that of that strategy. We acquired it initially for $16.5M in partnership. It’s a plant which just last year, delivered a $107M in EBITDA. All right. And it’s a low-cost producer. And it’s a plant which we are now scaling up in terms of its production throughput. The same thing when you think of Vanchem. We thought okay. What are the plants out there that we can get our hands on? We’ve got the Resource base to supply them. We’ve got the logistics infrastructure to link our deposits with the plants. So Vanchem was the next one, where we did Vanchem. And between the two of them we create processing capacity that would have cost us many times over to build on a greenfield basis.

Matthew Gordon: I understand the financial logic. But in terms of a strategy for the business. We’ve touched upon briefly, in terms of what your plans are in terms of the energy space as well, but how do you describe your strategy? I mean you’re… logical, methodical about this. Would you describe yourself as aggressively confident about the way you do things?

Fortune Mojapelo: Maybe it’s part of a function of my upbringing and my learning. We tend to be very fact driven. Very analysis driven.

Matthew Gordon: Where does that come from?

Fortune Mojapelo: I studied Actuarial Science. I worked in a firm like McKinsey & Company, and there’s this sort of stuff that we did. And when we decided that Vanadium was a market we’re going to focus on, we bought Vametco at a time when Vanadium prices, this is when we agreed the deal, Vanadium prices were about $13.50. And yet we thought even if we have to subsidize this plant for another two years, it would still be worth it. What gave us the conviction, was a lot of work that we had done around the market structure, to come to the conclusion that this is a market in a structural deficit. A deficit that will continue for a while. A deficit that quite frankly, to close it, is the opportunity of primary producers, who have existing production capacity. And it was hard to convince people, so the deal wasn’t easy.

Matthew Gordon: By people, you mean the then owners?

Fortune Mojapelo: To convince financiers. But in the end, we got it done. And I think we’ve been proven right in respect of that. Another part of our strategy… so the brownfield strategy is a very clear strategy, that says Target Brownfield assets, and make sure that you invest in them. You refurbish them as necessary, and you maximise your throughput through them. Second part of it was that we realised 90% of the Vanadium demand is coming from the steel sector. What other sources of demand are there?

Matthew Gordon: What don’t you tell people about the VRFB which is Vanadium Redox Flow Battery. Start with that. What’s the difference between them and Lithium ion?

Fortune Mojapelo: Both of them are batteries which means that they store energy. And you charge them, and then you discharge them when you need energy. Vanadium Redox Flow Batteries (VRFB) essentially store that energy in Vanadium Electrolyte. Vanadium is one of those… 

Matthew Gordon: So it’s liquid?

Fortune Mojapelo:  It’s liquid. Vanadium can exist in four different oxidation states. It’s quite stable. So the concept of Vanadium Redox Flow Battery really is a reversible oxidation reduction reaction, between Vanadium and different oxidation states. So from two plus to three plus, from four plus to five plus. The charging and discharging, is the movement of ions between the different oxidation states. But what’s good about it is that it’s one element you’re using, so you don’t have the risks of cross contamination. Secondly what’s good is the fact that the way you store the electricity in these tanks, you can scale them up to the amount of energy you store by just increasing the size of the tanks, without duplicating the entire system. So they’re flexible, they’re scalable, they’re intrinsically safe.

Matthew Gordon: So less risk of fire or overheating?

Fortune Mojapelo: Never heard of any Vanadium battery catching fire. They can operate in fairly robust ranges of temperature and they’re long lifespan.

Matthew Gordon: So that’s less degradation?

Fortune Mojapelo: No degradation.

Matthew Gordon: No degradation?

Fortune Mojapelo:  And you can run this for 20 years plus.

Matthew Gordon: So uses for something like this… You’re talking about the much longer life.

Fortune Mojapelo: Yes.

Matthew Gordon: Larger.

Fortune Mojapelo: Yes. Safe.

Matthew Gordon: Safer.

Fortune Mojapelo: And scalable.

Matthew Gordon: Scalable so different applications to Lithium Ion.

Fortune Mojapelo: Lithium advantages are typically, its high energy density. And Lithium is cornered, mainly, the mobility space. You’re not going to put a Vanadium battery in a car. And so mobility, your cellphones, your laptops. That’s typically its space. In the stationary, when you took stationary storage, Lithium still plays in that space, but it’s typically are in the short duration space, like frequency regulation for example. Once you gain long duration, and long lifespan, that’s a space we believe flavors Vanadium Redox Flow Batteries.

Matthew Gordon: So how much of Vanadium Redox Flow Battery would be Vanadium? What’s the potential size of this market, have you done any work?

Fortune Mojapelo: Yeah we’ve done a lot of work. And in fact, on our website, we’ve got a webinar on the ‘Energy storage 101’, which does a deep dive into…

Matthew Gordon: What’s the URL?

Fortune Mojapelo: or Both websites will give you access to it. It’s worthwhile, because it’s quite a deep dive into this, into the applications of stationary energy storage. So maybe just to explain on a very high level. You use, if you’ve got a utility, and your load in a country for energy is not flat. You’ve got peak periods, and you’ve got off-peak periods, and you’ve got another peak periods… in South Africa for example, typically morning and evening peaks, afternoon off-peak. So how do you design your generation to meet that? Typically you go with what is called base load. Which is not designed to be at the peak level and then you supplement during the peak periods, with peaking capacity. And these are typically other gas plants or diesel generator plants et cetera. What energy storage allows you to do, is it can help you to flatten in off-peak periods you can store the excess energy and you can supplement during peak periods. Equally as you introduce more renewable energy to the grid, you need to smooth that entrance of that into the grid. Energy storage can help you with that. Thirdly in some markets like South Africa, you’re generating… peak, your peak generation capacity for solar is during the day, off-peak. If you’re able to store that power you can make it available in a more flexible way during peak periods. And there are few other things like, your transmission CapEx deferral. When you’ve got a transmission infrastructure. Think of it like a highway. If you get a freeway that gets clogged in the morning, and gets clogged in the evening, you got four lanes. You don’t build half a lane. You’re going to build two lanes right. Or three lanes extra lanes. But if that same four lane freeway, during the afternoon, is virtually empty. Building an extra two lanes is not quite efficient. So what if you could distribute that traffic more regularly during the day? The result of that is that you don’t have to build that extra lane. So your CapEx for transmission expansion, you can push it out more. So the world over utilities are recognising the value of stationary energy storage. It’s so big a market. It’s expected by 2027 to be in the order of $50Bn+.

Matthew Gordon: Globally?

Fortune Mojapelo: Yeah. So you’re talking about something like a 100,000 megawatt hours of new energy storage deployments per year. Now there’ll be different technologies to take a share of that market. We estimate that if Vanadium Redox Flow Batteries (VRFB) captures only 10% of that market, you will need about 55,000t of Vanadium to support that. That’s more than 50% of last year’s total production.

Matthew Gordon: But there’s ifs and buts in there? If being gets to that. So that VRFB style of battery is not there yet. Is there… Well you tell me… is there much of a take-up?

Fortune Mojapelo: What do you mean?

Matthew Gordon: I mean Lithium ion everyone’s gearing up Lithium ion and there’s a few other options, that people around that, but where is this design today?

Fortune Mojapelo: So what if I tell you that today, the biggest battery installed with more than +4hours storage capacity in the world is a Vanadium flow battery built by Sumitomo, 60Mw hours, 15Mw for 4hrs in Japan. The biggest battery being constructed in the world today is an 800Mw hours. 200Mw for 4hrs storage. Vanadium Redox Flow Battery is being constructed in China. It’s not a technology that’s in a lab. It is a technology that is in commercial deployment.

Matthew Gordon: Sorry there’s one-off batteries to sort of see what sort of scale they can get to, because they are going to…You mentioned some pretty… Sumitomo- big name, a lot of money. So are they planning to roll this out? Are they going be manufacturers or is this just like you say…

Fortune Mojapelo: There are several companies there are manufacturing Vanadium Redox Flow Batteries today. And the point I’m making that they are in commercial deployment today. They need to scale up of course. But what’s going to drive this scale up is more uptake of the various systems. Right now, we are seeing signs of that growing momentum. So I’ll give you an example, in South Africa our utilities announced that they’re going to be procuring 1,400Mw hours of battery energy storage. Funded already.

Matthew Gordon: Have they decided on the technology for that?

Fortune Mojapelo: It’s batteries. Multiple batteries will bid in that space. It’s long duration type. We believe that Vanadium batteries have a very strong proposition there. Not to mention a strong local content proposition there. The World Bank has announced a program for 17,500Mw Battery energy storage by 2025, in low and middle income countries. And they’ve committed a $1Bn to mobilise another $4Bn towards this. It’s a terrain which will be occupied by multiple technologies. So I’m not saying that this is going to be solely Vanadium’s terrain. But the numbers I told you, I said, if VRFB’s were to capture even 10% of that market. This is what it means. The point about it is that it’s such a big deal for Vanadium, that the entire Vanadium industry, in my view, should be doing everything they can to support the VRFB opportunity: the technology is there, the scale-up is what is required. And what we did in setting up Bushveld Energy is precisely to drive that going forward. 

Matthew Gordon: You’ve adapted your strategy since 2012 to understand what’s coming down the line. But you’re… what you’re saying is, you think there’s a big bet to be made on the Battery technology… 

Fortune Mojapelo: I think there’s a big low-risk bet. Let me tell you why low risk. Because our demand is anchored in steel-making. If Batteries never existed, we still have a fantastic story, anchored in supplying to the steel market with a low production cost basis. Two, it’s low-risk because the capital expenditure required to play in that space is much, much smaller relative to the capital expenditure incurred in building mines and processing infrastructure. I’ll give an example of that. To build a processing… a chemicals electrolyte manufacturing plant, capable of delivering 200Mw hours worth of Electrolyte a year. That will cost us $10M. Debt / Equity included, $10M to build. And that will use about 1,100 metric tons of Vanadium. To build a mine and a plant that supplies 1,100t of Vanadium. If I just do a ratio, simple ratio. You’re talking about a $100M. So the capital intensity down there is very, very low. And if you take that into account, for us as a company, it’s a no brainer to say, let’s do everything we can to support this emerging industry, which is not only attractive for its demand strengthening proposition. Commercially we think it’s potentially x10 as big as the commodity market.

Matthew Gordon: Okay so tell me, we’re going to bring this back to your company right. We’re talking about the market here. So, where’s Bushveld going to sit in this? What precisely are you doing? You’ve got the Vanadium. You’ve got energy division, we’ll call it. What are you going to be actually doing?

Fortune Mojapelo: So, there are two things. The first one is Bushveld Vanadium which is developing a large Resource base. Developing processing capacity. We have two processing plants producing Vanadium, low-cost high-quality. With good margins in case…

Matthew Gordon: For sure, I bought that, big tick.

Fortune Mojapelo: Tick. Second part of it is Bushveld energy. Which is there to promote the Vanadium Redox Flow Battery (VRFB) opportunity for Bushveld minerals. There are three things we do there. One is to manufacture electrolyte for the industry. Two is we engage in market development. It’s project development. What I mean by that is a team of people that understand the energy industry. Those are regulated market. Those are structured in markets. You need to know where the structural levers are to unlock them at large scale. So it’s individuals, who know the energy markets. We go we secure mandates for large-scale energy storage deployments. That’s the second thing we do. So for example bidding into the Escom program, the World Bank program. The third component to the business is partnering with Vanadium Redox Flow Battery companies. And we don’t need to reinvent the wheel there. We partner with the existing players…

Matthew Gordon: So, break that down, because that’s about the future. The future value of your company is inextricably linked to this. If you think the market’s going the way it is. So, I get the bidding bit, that’s a real skill. It’s tough. It’s hard. But in terms of these JV’s, these partnerships and linking with existing Battery technologies and manufacturers. What would that look like for you in real terms?

Fortune Mojapelo: Suffice to say there are several of these companies that have a good product. That have good management teams. That need to solve two things: Security of supply of Vanadium. And the need to solve for the price volatility of Vanadium historically. Two things which we can work on…

Matthew Gordon: Would it work on a contract basis in terms of forward purchase?

Fortune Mojapelo: No.

Matthew Gordon: No, it would be always spot.

Fortune Mojapelo: No, we’ve got a solution for that, which I’ll talk to. And then they need to scale up. For us it’s a case of saying, let’s partner with these guys. And partnership takes many different forms. And whether it means equity partnerships, whether it means JV’s, or whether it means just a simple relationship of supply of Electrolyte into their systems.

Matthew Gordon: Well you need certainty too. What they want is very important. But what you need is important too?

Fortune Mojapelo: But we can do a lot about that. That’s why we’ve got a project development arm so we go secure the mandates. So, I can come to someone and say, “I’ve got a partner”. Let me give an example. We’re doing a mini-grid at our mine. A 4Mw hour battery, 2.5Mw of solar. So for me to go to battery companies and say, I have the opportunity to build batteries, to supply into. I will supply the Vanadium into that. Can you give me a solution? And can we put together a solution which is ‘bankable’, which provides a solid business case to our mine. And in the case of the mini-grid the answer is absolutely. And we’ve had a number of responses from companies, and we’re in negotiations at the moment. And we are going to appoint somebody, and news of that we will publish.

Matthew Gordon: That would be interesting. Well I think there would be a few other miners knocking on your door at that point.

Fortune Mojapelo: At least it will provide a good model that others can… that combination of solar + storage can be a viable source to their energy requirements. I had mentioned that we’ll help them solve for the cost piece, the supply piece. The question is how do we do that? On the supply side, that’s why we’re scaling up our production capacity. I mean you’re talking about more than trebling production from 2,560 last year to about 10,000Mt. On the cost side, what we tried to do is to say, let’s take out the price risk of Vanadium from the CapEx decision that needs to be made about a Vanadium flow battery. And because the Vanadium, as we talked earlier, doesn’t degrade over life. And that at the end of the life, I can take it out of the battery without destroying the battery. And I can use it in another battery or I can convert it into pure Vanadium and sell it into the Steel market. It’s got residual value. And that allows us to actually rent the Vanadium into battery systems. And they’re of such a scale that a single contract can allow me to deliver enough Vanadium and it’s secure. And while it’s sitting in that battery, it’s earning yield and it’s still sitting on the balance sheet. So we think that by combining innovations like this, we’re able to solve for the two main hurdles that Vanadium flow batteries may have faced in the past. And we think that is going to support their deployments globally.

Matthew Gordon: Could you give us five reasons why they should be thinking about your company as an investment proposition.

Fortune Mojapelo: Five! I‘ve got seven. First one is that we have a commodity of Vanadium with excellent fundamentals as I said earlier on it’s in a structural deficit its outlook is really solid. Two, we have high-quality high-grade primary Vanadium Resources. The largest primary Vanadium Resource base of anybody. And three, we have Brownfield processing capacity, which we’ve put together, which we’re going to be scaling up, which allows us to hit the kind of production volumes that we are targeting very quickly and much cheaper than it would cost us on a greenfield basis. The fourth point, I would mention is that through the way we’ve gone about it. We’ve also acquired and inherited management teams with depth of expertise in Vanadium. South Africa has been doing Vanadium for decades. So we understand Vanadium from a technical point of view. The fifth point to highlight is that, the integration we have into energy storage. We have an operation that has got a natural hedge. Well if Vanadium prices come down, energy storage solutions such as Vanadium become a lot more compelling. Right. And also that gives us access into what we see as a multi-billion dollar market opportunity for the company. Then finally, not finally, second but not least, is that we are operating in a South African jurisdiction. The Bushveld complex, which is host to the largest high-grade primary Vanadium Resource base in the world. And with the story that we’ve put together today, with the growth that we have, our proposition then to shareholders is even just on a production growth basis, we’ve got substantial capital growth ahead. When you look at the downstream integration into energy storage that’s significant capital growth proposition. On top of all of that, we believe that being a low-cost producer we’ll be generating sufficient cash to look after our growth. And also, at some point to start paying a dividend to shareholders. So, in a nutshell that the proposition… 

Matthew Gordon: That’s a magical phrase that. We like that. You’re sitting on a little bit of cash at the moment. I think you’re looking at building that up… you seem to know where you’re going with the company. It’s been fascinating listening to you today. Thank you very much for coming in and we look forward to seeing you soon.

Fortune Mojapelo: Thanks for your time.

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