In mining, as in almost everything, it is a matter of timing. In times of depressed confidence, exploration and development often get put on the backburner, only for companies to be caught flat-footed when the cycle suddenly begins to turn upward. We saw a dramatic illustration of this a decade ago: the doldrums years of the 1990s left many players well behind the eight-ball; when the prices began to turn up around 2004 and 2005, and go into full speed in 2007-8 (until the GFC struck), only then did exploration speed up. Many missed the big profits.
It is foolhardy to try and predict when the next uptick will happen; the relentless pressure on metal prices in recent years has confounded many forecasts of rising prices. That said, Largo Resources Ltd (TSXV: LGO | OTCQB: LGORF) will be hoping its timing might prove to be fortuitous and that it heading to being a miner of Brazilian vanadium just as there are suggestions the metal’s price should begin to recover. This week Largo announced a 40% increase in the minerals reserves at the Campbell pit within the company’s Maracás Menchen vanadium project in Brazil (the full announcement being posted here on InvestorIntel). Maracás Menchen is the world’s highest grade vanadium project.
The 40% increases brings the proven probable reserves to 18.4 million tonnes at an average grade of 1.17% vanadium pentoxide. The mine life is projected to be 15 years and the new mine plans call for producing vanadium pentoxide flakes rather than ferro-vanadium to improve project economics and also to allow faster ramp up of production.
Now, vanadium has had a tough time. The latest vanadium report by the U.S. Geological Service reminds us that vanadium pentoxide and ferro-vanadium prices continued to decrease through 2015, triggered by the slowdown in China.
However, the British metals analyst firm Roskill has said in its most recent report on vanadium that they expect the price of the metal to peak in 2019-20. Its report points out that 91% of vanadium goes into steel applications. High-strength, low-alloy steel is by far the largest market for vanadium, accounting for 46% of the use of the metal. Roskill points out that increasingly stringent building requirements, particularly in China, are seeing increased demand for vanadium-bearing rebar. Vanadium in steel improves steel’s performance when it comes to welding, stretching, elongation and casting.
A recent Largo presentation outlines the growing demand for lightweight steel in vehicles and aerospace. In the case of the former, as fuel efficiency and emissions regulations continue to tighten, high-strength, low-weight steels will drive demand for vanadium — as will aircraft; the aircraft manufacturers now account for 7% of the vanadium market and this sector’s vanadium demand is growing rapidly. Plane makers are using higher volumes of titanium-vanadium alloy in new models. As Largo points out, Boeing’s 787 Dreamliner and Airbus’s A350 and A380 airliners are comprised of significantly more vanadium, titanium and aluminium alloys (between 75 and 100 tonnes per aircraft) than their predecessors.
Vanadium also goes into high-speed tools. Vanadium, in its pure form, is soft but when it is alloyed with other metals it significantly hardens and strengthens them. (Henry Ford was the first to use vanadium-bearing steel on an industrial scale for his Model T chassis.)
For the United States, having a vanadium source across the border might be welcome, given that the leading producers have been China, South Africa, and Russia.