IN January this year, Atlantic Limited became Australia’s sole vanadium producer when it completed commissioning and achieved first production at its wholly-owned Windimurra vanadium project near Mt Magnet, 600km north of Perth.
According to Atlantic managing director Michael Minosora, the company was incorporated two years ago, and acquired the Windimurra project and associated infrastructure from the administrators of
Windimurra Vanadium, previously known as Precious Metals Australia. Prior to that, the mine was operated under a joint venture between Xstrata and Precious Metals Australia. After Xstrata withdrew from the project, Precious Metals Australia fell prey to the GFC and was unable to complete construction and restart the operation.
When Mr Minosora joined Atlantic in 2009, it was struggling to remain afloat – although listed, the company was not involved in any projects. “[Atlantic] was essentially a moribund listed entity. It had no funding and no assets to speak of, and the concept of getting involved with Atlantic was to look for projects such as Windimurra to acquire, bring into production and move on to other assets,” Mr Minosora said.
“The actual acquisition of Windimurra took place in September 2010. The acquisition cost is slightly complex, but essentially, what [Atlantic] did was bought out control of the project by buying or settling the debts that had been owed on it by that company [Windimurra Vanadium] at that time.”
Atlantic outlaid about $110 million in total for ownership of the Windimurra project and spent a further $80 million to complete construction and make the mine and plant operational again.
“In 2010, we successfully acquired a project out of administration and to do that we raised $55 million. We then raised a further $335 million in a bond issue in February 2011. Underlying all that, we
did whatever work that was necessary to prepare the project for completion and bring it into operation,” Mr Minosora said.
“Construction completion was achieved in October 2011, and since then we’ve been going through commissioning, with first commercial shipments happening in May.”
Windimurra is Australia’s only operating vanadium project and, at full production, it is expected to produce about 6300t of contained vanadium annually, with more than 1 million tonnes of iron ore fines anticipated as a by-product of the mining process.
The operation, in WA’s Murchison region, includes a processing plant that turns vanadium-bearing magnetite ore into ferrovanadium and iron ore. Once extracted from the ground, the ore undergoes several stages to produce the final saleable ferrovanadium product.
First the ore is crushed and milled and it then goes through magnetic separation and roasting in the largest gas-fired kiln in the southern hemisphere before undergoing desilication, precipitation, leaching and reduction. The processing concludes with a ferrovanadium pour before the final product is crushed and loaded onto trucks and transported through the Port of Fremantle and shipped to international
Atlantic delivered its maiden 7t consignment of ferrovanadium from Windimurra to its offtake partner’s warehouse in Perth in early May. Under the sales and marketing agreement between Atlantic and its offtake partner Wengfu, Atlantic received a majority market value payment for the ferrovanadium once it reached the warehouse. The balance of the payment is anticipated once the ferrovanadium has been received by the international market.
At the time of writing, the first commercial shipments of vanadium from the mine were awaiting departure from the warehouse in Perth to Atlantic’s first key buyers in North America.
Atlantic had forecast that it would produce up to 5300t of contained vanadium at full production, but the company now expects to produce 6300 tonnes per annum nameplate capacity, a run rate that it
stated would be reached by the end of the 2012 calendar year.
Including Atlantic and previous owner contributions, the Windimurra project has a replacement cost of more than $800 million, including what has been spent on developing the mine plus sourcing and commissioning the associated infrastructure.
Windimurra project: vanadium and iron ore
At the end of May, Windimurra had 127.6mt of vanadium-bearing ore reserves with 334,200t of contained vanadium. Atlantic recently explored a further 21km of strike at the Windimurra vanadium ore body, and reported that it believed it hosted one of the world’s largest knownvanadium reserves. As previously mentioned, Atlantic is anticipating about 1mt grading 55 per cent iron ore annually as a by-product of vanadium mining.
Despite not having yet sold any iron ore, Mr Minosora said that the company had received bids from potential customers and had an existing logistics solution in place. There was also an existing stockpile of 1.8mt grading 52 per cent iron ore at Windimurra and Atlantic has already received bids for the ore from interested buyers. The company is currently assessing its iron ore business and seeking to streamline the existing logistics solution to reduce costs and increase its profit margins before committing to any sale contracts.
Once commercial shipments of iron ore begin from Windimurra, the ore will be trucked to Geraldton and shipped from Geraldton Port.
Once fully ramped up, Windimurra is expected to produce about 7 per cent of the world’s vanadium demand in 2012. Vanadium is often added during steelmaking to create a high-strength metal. Vanadium is also added to other metals and titanium, which strengthens the final product and improves its high temperature performance.
Industries that use vanadium include construction, aerospace and automotive. The commodity is also used in the new generation of rechargeable batteries.
About 81 per cent of the world’s vanadium supply comes from vanadium-bearing ores, with the remaining 19 per cent extracted as a by-product from oil production and power station fly ash. Of the 81 per cent sourced from vanadium-bearing ores, only about 30 per cent is actually derived from primaryvanadium mining. The remaining 70 per cent comes from vanadium-bearing slag, which is a by-product of the steel industry.
Most of the vanadium-bearing slag comes from steel mills in China, Russia and South Africa. However, it still requires further processing to produce the final ferrovanadium product that Atlantic will
sell from Windimurra.
Commodities market research, consulting and asset management organisation CPM Group has published a report on the 2012 market outlook for vanadium which anticipates that demand will continue to rise and supply will keep pace.
Mr Minosora said that Atlantic would target buyers in the North American market due to the free trade agreement between Australia and the US and the US market’s high prices.
At the end of May 2012, the Ryan’s Notes US free market spot price for ferrovanadium was US$35.20 per kilogram, while the Metal Bulletin ferrovanadium EU major European destinations spot price
was US$26.15/kg. Ferrovanadium is primarily used in crude steel production, which is expected to maintain a steady 5 per cent annual growth during the next few years. The rising demand for ferrovanadium can be partially attributed to a recent directive from the Chinese Government stipulating that steel in all new buildings is required to be grade 3 rebar (which contains vanadium).
According to Atlantic, upgrading about 90mt of grade 2 rebar (which does not contain vanadium) to grade 3 rebar would add an extra 27,000t of vanadium per annum to global demand.
Vanadium is also used as an alloying agent in titanium, which accounts for 9 per cent of global vanadium consumption. Global demand is expected to increase, with more titanium alloys being used in the manufacture of aircraft. Redox batteries,which are suited to large power storage applications with extremely rapid discharge capability, including wind and solar, also contain vanadium. When added to lithium batteries, vanadium produces higher voltages and improved energy efficiency.
At the time of writing, Atlantic had a market capitalisation of $61 million. Mr Minosora said that with its first commercial vanadium shipments from Windimurra, Atlantic was anticipating positive cash flow by the end of July, with payback for capital expenditure estimated to take three years.
Taking into account any iron ore upside, cash costs for the 2013 financial year are expected to sit between US$17 and $18.90/kg of ferrovanadium. After 2013, cash costs are expected to hover between
US$15 and $20.50/kg.
Atlantic’s cost projections are based on a price range of between US$26.15 and $35.20/kg of ferrovanadium. The estimate takes into account the lower end of European price forecasts, and the higher end of North American price forecasts.
The company anticipates receiving up to US$40.80/kg of ferrovanadium after the 2013 financial year and beyond. “We are focussed on becoming a low-cost producer and that is what will guarantee
our future rather than having a view on the vanadium price,” Mr Minosora said. He added that Windimurra’s production costs were far lower than the current North American and European vanadium
spot market prices.
“We’ll continue to focus on reviewing those costs, with a view to reducing them,” he said.