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Arrowhead published an Equity Research Report on Vanadium Resources Limited
January 23, 2024


Vanadium Resources Limited (ASX: VR8) Research Initiation


  • Arrowhead is initiating its coverage on Vanadium Resources Limited (Vanadium Resources, VR8 or the company) with a fair value bracket of AUD 0.16 per share to AUD 0.46 per share (Share Price on January 22, 2024: AUD 0.047) based on Relative valuation methodology.
  • Vanadium Resources is an Australian company based in South Africa and Australia, specializing in the production and processing of vanadium. The company is currently focused on developing its flagship project – the Steelpoortdrift Project (Steelpoortdrift) and the Tweefontein Project (Tweefontein), located 15 km apart within the Eastern Bushveld Igneous Complex, Limpopo Province, South Africa.
  • Steelpoortdrift is a Tier 1 project that is 86.49% owned by Vanadium Resources (Pty) Limited, a wholly owned subsidiary of Vanadium Resources. It is located in the Eastern Limb Bushveld Igneous Complex, Limpopo Province, South Africa, which is rich in advanced titaniferous magnetite deposits. Most of the technical work related to the project such as drilling, metallurgy, hydrogeology, and plant design has been completed and necessary development permits have already been secured.
  • In April 2022, the Project’s mineral resource estimate (MRE) was updated to 680 million tonnes (Mt) at an average in-situ grade of 0.70% V2O5 at a cut-off grade of 0.45% V2O5, including measured mineral resources of 145 Mt, at an average of 0.72% V2O5. Additionally, the indicated and inferred resource amount to 327 Mt, averaging 0.70% V2O5, and 207Mt, averaging 0.68% V2O5 respectively.
  • The ore reserves for Steelpoortdrift stand at 77Mt at an average grade of 0.72% V2O5. Of this, 30Mt are proved ore reserves at an average grade of 0.70% V2O5 and 47Mt are probable ore reserves at an average grade of 0.72% V2O5. The project will be executed in two phases:
    • Phase-1 (Years 1-4): It will be operational for the first four years at a mining rate of 1.6Mt of vanadium ore per year at an average in situ grade of 0.83% V2O5 which will be processed in the concentrator and SRL plant to produce c. 12ktpa of V2O5 flake. Pre-production capex will be around USD 211 mn.
    • Phase-2 (Years 5-25): It will include expansion and increment of mining rate 3.5Mtpa of ore at an average grade of 0.71% V2O5, increasing production to 3.5Mtpa of ore by an additional USD 188 mn, funded through a combination of free cash flows and available cash.
  • The project is expected to produce a vanadium concentrate of 2.1% V2O5, which is one of the highest-grade vanadium available globally. The project’s definitive feasibility study (DFS), conducted in October 2022, showed strong economic results with Net Present Value (NPV) of USD 1.05 bn (at 86.49%) at a 7.5% rate, an Internal Rate of Return (IRR) of 42%, the life of mine (LOM) EBITDA of USD 5.2 bn, 27-month payback and an initial 25-year mine life.
  • VR8 aims to become one of the world’s leading producers of vanadium pentoxide. It is targeting annual production of 10,700-21,000 tons of V2O5 flake per annum. The company is in discussions with several potential offtake parties and strategic equity investors for the project. Moreover, the company has also received several non-binding indicative term sheets from commercial banks, export credit agencies (ECAs), development banks, and non-bank financiers.
  • The company is focusing on Steelpoortdrift development activities intending to commence production in H2 2026. The aim is to develop the project till the final investment decision (FID) (with an H2 CY2024 target) on the construction of a mine and concentrator facility at Steelpoortdrift and an SRL facility at Tweefontein.
  • In May 2023, VR8 completed an AUD 5.91 mn strategic placement and agreement with Matrix Resources (Zhejiang) Co., Ltd (Matrix), allowing Matrix to negotiate an offtake, aimed at the Asian markets, of 40% of vanadium products produced from the Phase 1 operations of the Steelpoortdrift Project over a 10-year term.
  • The company is listed on the Australian Securities Exchange (ASX) under the ticker VR8 and on the Frankfurt Stock Exchange under the ticker TR3.
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