QEM’s (ASX:QEM) flagship Julia Creek Project in Queensland is projected to generate billions in revenue including $11.5 billion from vanadium oxide (V2O5) sales and $10.1 billion from the sale of transport fuel over its 30-year mine life.
In releasing the results of the Scoping Study today (27 August 2024), the critical minerals explorer and developer reports Julia Creek demonstrates a post-tax net present value (NPV) (8%) of $1.106 billion and 16.3% internal rate of return (IRR).
The project is expected to require $20 million for studies and evaluation, and further capital expenditure funding to the order of $744 million. This excludes contingency and indirect costs, such as owner’s costs and those related to engineering, procurement, and construction management (EPCM). Inclusive of these elements, pre-production capex is $1.095 billion.
Payback period is just five years from the start of mining.
QEM Chair Tim Wall says the multi-commodity nature of QEM’s Julia Creek Project demonstrates strong revenue potential, and the technical solutions presented enable capital efficient mining, on-site processing, and refining to produce high purity vanadium with a compelling investment proposition.
Given the scale of the pre-production capex required, QEM will consider accessing multiple streams of funding and/or partnering opportunities.
There are various potential funding options available to QEM, which will pursue a mix that de-risks development.
In this regard, QEM says it has held preliminary discussions with two ASX200 companies, two investment funds (one Australia-based), and two non ASX-listed overseas companies in the energy and heavy industry sector.
QEM says it has a supportive shareholder base and has previously raised capital to progress development in the past. It has also actively taken steps to open up additional potential sources of revenue or saleable assets — the Julia Creek Renewables Project, for example — to assist in funding the continued development of the project.
Accordingly, QEM is confident in its ability to attract appropriate funding to progress this project to the next stage and believes that it has reasonable grounds for its assumptions in respect of funding sources.
Over the 30-year mine schedule, a production target of about 10,571 tonnes (23.3Mlbs) of vanadium pentoxide (99.5% pure) and 313 million litres of transport fuel per annum is projected from Julia Creek.
Mineralisation will likely be sourced from one shallow open-cut pit with an average steady state annual mining schedule target of about 5.1 million tonnes (dry basis) at 0.27% V2O5 and 54.1 litres per tonne in-situ of oil equivalent.
Managing Director Gavin Loyden says as QEM strives to become a global supplier of high-purity vanadium pentoxide for the emerging energy storage sector, the study represents a significant milestone for the company.
“For the first time, we have detailed initial financial analysis to complement the technical and exploration achievements we’ve made to date,” Loyden says.
“We are seeking to develop a major, long-term project at Julia Creek and this study clearly articulates the potential that exists at our flagship project and reaffirms our ambition to become a key player in the long duration vanadium battery storage market.
“The study highlights the culmination of a lot of hard work and our dedicated team continues to work diligently toward the delivery of that goal.”
Meanwhile, David Fitch is resigning as a non-executive Director of QEM, effective today. Over the past 10 years, Fitch has been instrumental in providing necessary financial backing, with the company labelling his contribution to QEM’s growth and success to date “pivotal“.
Critical mineral, significant resource
The Julia Creek Project comprises four granted exploration permits for minerals (EPMs) covering a total area of some 250km2. The tenements form part of the vast Toolebuc Formation, which is recognised as one of the largest deposits of vanadium and oil shale globally.
The project is a unique resource with the potential to produce vanadium pentoxide and transport fuel.
Julia Creek has a JORC (2012) mineral resource of 2.87 billion tonnes @ 0.31% V2O5 and is touted as one of the single largest vanadium resources for an ASX-listed company.
The resource comprises 461 million tonnes @ 0.28% V2O5 in the indicated category and 2.406 billion tonnes @ 0.31% V2O5 inferred, with a contingent (SPE-PRMS 2018) in-situ oil resource of 6.3 million barrels of oil (MMBBls) of oil equivalent in the 1C category, 94MMBBls in 2C, and 654MMBBLs in the 3C category, contained within the same orebody.
Once a discovery has been made, prospective resources are reclassified as contingent resources. These are accumulations or fields not yet considered mature enough for commercial development, where development is contingent on one or more conditions changing. The uncertainty for recoverable oil and gas volumes is expressed in a probability distribution and sub-classified based on asset maturity and/or economic status in the form of 1C, 2C, and 3C.
The Scoping Study is a preliminary technical and economic study of the potential viability of the Julia Creek Project. The study is based on low level technical and economic assessments (+/- 40% accuracy) and is not sufficient on its own to support the estimation of ore reserves, or to provide assurance of an economic development case with further feasibility studies needed.
In 2022, the Australian Government designated vanadium as a critical mineral – a mineral essential to modern technologies, economies, and national security, with supply chains that are vulnerable to disruption.
According to United States Geological Survey, in 2023 about 70% of the global vanadium supply came from China and Russia, and the balance from South Africa, Brazil, US, India, and Vietnam.
Some 90% of global vanadium consumption is in the making of steel for products I the industrial and automobile sectors. In 2023, only 4% of demand came from vanadium flow battery electrolyte.
However, as power grids globally continue to replace fossil fuel power plants with large-scale renewable energy assets, long-duration energy storage (such as vanadium batteries) is critical to ensuring reliable grid operation.
Write to Adam Orlando at Mining.com.au
Images: QEM
