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Vanadium Resources (ASX:VR8) appoints global expert to lead scoping study
  • A positive scoping study has confirmed the potential viability of Vanadium Resources' (VR8) Steelpoortdrift project in South Africa
  • The project has a net present value (NPV) of US$401 million (around A$562 million) based on the current vanadium price of US$6.95 per pound (roughly A$9.74/lb)
  • The project would require US$161.5 million (about A$226.4 million) in pre-production capital outlay
  • The company estimates the project would pay for itself within two to three years
  • VR8 will immediately start work on a pre-feasibility study (PFS), aimed for completion by March 2021
  • The company will continue to source external funding to get the project off the ground
  • Vanadium Resources closed Wednesday's session 10.71 per cent higher at 3.1 cents

A positive scoping study has confirmed the potential viability of Vanadium Resources' (VR8) Steelpoortdrift project in South Africa.

The bottom line

While the scoping study is by no means a definitive document, the Steelpoortdrift project appears to have robust operating and capital expenditure metrics.

The project has a net present value (NPV) of US$401 million (around A$562 million) based on the current vanadium price of US$6.95 per pound (roughly A$9.74/lb).

With a forecast operating expenditure of US$3.07/lb (about A$4.30/lb), the project has profitability wiggle room even with potential falls in vanadium prices.

Even if operating expenditures increase 10 per cent, the NPV stands at US$359 million (approximately A$503 million).

The project would require US$161.5 million (around A$226.4 million) in pre-production capital outlay. The company posits a 26 to 28 per cent internal rate of return on a 100 per cent equity basis, and an impressive 41 to 45 per cent on a projected 50:50 debt to equity gearing.

Essentially, this means investors will have a much better return if alf the capital expenditure outlay is raised through a mix of loans and capital raising, rather than through dilutive cap raising alone.

The company also estimates the project will pay for itself within two to three years.

The scoping study is based on a proposed 1.6 million tonnes per annum standalone mining, beneficiation and processing operation producing between 8500 and 9400 tonnes of high purity vanadium flake each year.

Next steps

Based on the encouraging numbers in the scoping study, VR8 will immediately start work on a pre-feasibility study (PFS), slated for completion by March 2021.

It's expected the PFS will cost around $300,000. VR8 believes the compelling case made for Steelpoortdrift in the scoping study will aid in raising the necessary finances for the development of the project.

The company will continue to source external funding in the form of a mix of debt, offtake funding, joint venture interest, direct project investment and capital raising.

The company estimates building the proposed processing plant, once funding is secured, will take 2 years.

Vanadium Resources closed Wednesday's session 10.71 per cent higher at 3.1 cents.


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