Viking Mines is betting on a vanadium revival

When spoke to Viking Mines (ASX:VKA) earlier this year, Managing Director Julian Woodcock had one clear lament.

“I think we really don’t get significant recognition for the value of vanadium,” he said at the time. 

“It’s a commodity that’s not well understood.”

Admittedly, not much has changed in the months since. But Viking has nevertheless been betting — and continues to do so — that things won’t stay that way forever.

“I don’t think you’ll speak to anyone that doesn’t recognise the word lithium,” Woodcock says now.

“They may not know much about it, but they know it goes in batteries. It’s commonplace now in people’s vocabulary. And I think vanadium has the potential to move into that space, at which point people will be more aware of the commodity.”

Vanadium, for the most part, is used to make metal alloys for high-strength steel production. Other applications include the production of ceramics, electronics, fertilisers, textile dyes, and synthetic rubber, as well as vanadium redox flow batteries (VRFBs). Compared to the lithium-ion variety, VRFBs offer an alternative considered to be safer, cheaper, and — with proper maintenance — technically capable of lasting forever.

But for vanadium to make a real breakthrough, a shift needs to occur — in awareness, in demand, and of course in pricing. Should that indeed come to fruition, it will be companies like Viking Mines that are best placed to take advantage.

Canegrass Battery Minerals Project

At the core of Viking’s vanadium dreams is the Canegrass Battery Minerals Project south-east of Mt Magnet in Western Australia.

A 7,500m drilling program in 2023 culminated in an updated resource estimate in November, which outlined 146 million tonnes at 0.7% vanadium pentoxide, 31.8% iron, and 6.6% titanium dioxide — representing some 2.2 billion pounds of contained vanadium — across three deposits: Kinks, Kinks South, and Fold Nose. It also included a higher-grade subset measuring 27.5 million tonnes at 0.87% vanadium pentoxide, 37.3% iron, and 8% titanium oxide.

But Woodcock and the Viking team felt they needed to better understand the resource, much of which sits in the inferred category. A pit optimisation study was then launched to determine which portions of the resource might deliver the best returns based on mining, processing, and logistical costs.

“The pit optimisation study was a really critical step,” Woodcock says.

“We don’t need 150 million tonnes of resource, that’s conceptually 100 years of mine life. So really to recognise the value, we wanted to throw some economics at it and see how it looked.”

According to an announcement released in March, the study was a success, with all conceptual scenarios producing economically viable pit shells, based on a vanadium price of US$6 ($8.96) per pound and an iron price of US$101 ($150) per tonne.

“That was run at current market pricing in terms of operating costs and commodity revenues, which is probably a bit of a standout against our peer group,” Woodcock adds.

“A lot of their studies are a bit older, and they’re probably a little bit out of date in terms of their operating cost model and commodity pricing. They’re effectively using higher commodity prices because the value of vanadium has dropped a bit. But from our perspective, it turned out to be very robust. 

“We settled on a base case scenario where we just looked at revenue from vanadium and iron, which from the metallurgical testwork we’ve done to date makes us think that’s a solid foundation to build from.”

All told, Viking delineated a 61-million-tonne resource across the three open pits at Kinks, Kinks South, and Fold Nose. What is particularly compelling is the resource at Fold Nose, which contains some 39 million tonnes and exceeds, in its own right, the 30-million-tonne target the company had been chasing.

“The 30 million tonnes was based on 20 years of life at 1.5 million tonnes a year. So that’s now our focus deposit to carry forward at this stage, because we believe in the one deposit we can effectively produce what could be an economic production schedule.”

But just as critical as the pit optimisation work is the metallurgical testing Viking has undertaken, which delivered two key takeaways.

First, the assumption used in the study was that the overall vanadium recoveries being generated measured some 74.4%. More recent testing, however, shows vanadium recoveries had increased to roughly 86%, which could lift vanadium-specific revenue by more than 10% a year.

The second aspect, Woodcock says, relates to the iron and titanium potential at Canegrass.

“We’ve been attaining good grades in the iron residue after the vanadium has been extracted. The titanium actually stays quite high, which makes it a bit more challenging to market that kind of product. So we’re about to embark on another round of metallurgical testwork to separate the titanium from the iron before we extract the vanadium. And that’ll have a double benefit.”

Not only would it increase the average grade of the iron content, thereby making it a more marketable product, but it might also translate to sales of titanium concentrate.

“Again, that’s not considered in the current pit. So there are really two or three big upsides there in continuing the testwork. There’s the improved vanadium recovery. There’s the improvement of the iron as a saleable concentrate, which could attract a better price than what we’ve assumed in the study so far. And thirdly, we’d be able to get the titanium potentially as a concentrate, which would add another revenue stream,” Woodcock explains.

“These are all big upsides. Our base case that we settled on looked at just the vanadium and the iron. But we’ve also got the opportunity with titanium, and I haven’t gone into the copper, nickel, and cobalt, which requires more test work. We see that as an opportunity as well.”

Canegrass ‘just keeps kicking goals’

Given the Canegrass Project “just keeps kicking goals”, Woodcock is understandably keen to keep things rolling.

From a resource perspective, the next port of call is a modest drilling program — probably between 3,500m and 4,500m — at the Fold Nose deposit, designed to upgrade the resource to the indicated category. The program may also include additional drilling at the Kinks and Kinks South deposits, “just to see if there are sweet spots that would yield a better early-stage operation.”

Viking is also contemplating a Scoping Study for Canegrass. What is particularly compelling, however, is that Woodcock might just skip it entirely.

“Given the way the project has been performing — I’m not going to commit to it — but we may even skip the Scoping Study and go straight to a Prefeasibility Study”

“Given the way the project has been performing — I’m not going to commit to it — but we may even skip the Scoping Study and go straight to a Prefeasibility Study. We’d have a sufficient level of data and confidence, certainly on the resource side of things, to be able to do that,” he says.

“The question will be: do we want to have a lesser margin of error on the estimated pricing for capital and infrastructure and things like that? That’s one of the key distinctions between the Scoping Study and the PFS. But certainly the goal for the remainder of this year is to complete sufficient work to get an economic study done that we can report to market.”

First Hit Lithium and Gold Project

Of course, vanadium isn’t Viking’s only interest. Less advanced than Canegrass is the First Hit Lithium and Gold Project — acquired in November 2020 — in the Eastern Goldfields region of Western Australia.

Spanning almost 500km2, Viking has delineated a strike length of more than 26km within a broader 55km2 area deemed to be the most prospective part.

“We needed to assess that ground as effectively as possible,” Woodcock says.

“To do that, we completed a large auger drilling program, 1,220 holes, just drilling a couple of metres into the surface to get a clean soil sample and analyse it. We defined 19 (lithium) anomalies, eight of those being high-priority.”

Follow-up work is expected to include mapping and rock chip sampling, which — depending on the results — could inform a bedrock drilling program down the track.

On the gold side of things, Viking has identified a number of targets that warrant further testing.

“They were targets we defined at the end of our last main drill campaign, which was in 2022. There are three targets that are high-grade. For example, the Jana’s Reward target, we drilled one fence line, heel-to-toe drilling, and we got two individual intercepts.”

Those intercepts include 1m @ 36.49 grams per tonne (g/t) gold from 17m, and 1m @ 17.82 g/t gold from 16m. Both remain open down-dip and along strike, and no follow-up testing has yet been carried out.

Additional targets exist in the area surrounding a historical mine at First Hit, which — prior to its closure in 2002, when the gold price was at some US$320 ($489) per ounce — produced roughly 30,000 ounces at an average grade of 7.7 g/t gold. Those targets, located 800m north and 400m south of the mines, returned 2m @ 9.67 g/t gold from 26m and 1m @ 7.66 g/t gold from 45m, respectively.

“There’s an opportunity for us to consider a small amount of drilling later in the year to follow up on those targets,” Woodcock says.

“We’re looking at just slowly moving that forward in parallel with the work we’re doing at Canegrass.”

‘It’s a volatile commodity’

For the most part, however, Viking is all-in on vanadium. And though the price might have dropped to around US$5 a pound since the pit optimisation study, a reversal to even slightly higher levels could do wonders for the economics at Canegrass.

“We used about US$6 a pound when we did the study. That was about the pricing at the time,” Woodcock says.

“We haven’t assessed the impact of that drop at the moment. However, when we look at the study in terms of every dollar increase in the vanadium price, it adds substantial additional cash flow.”

The roughest of figures they may be, Woodcock says that every dollar increase in the vanadium price added — according to the most basic of models — some $30 million a year in free cash flow.

“It may sound like a lot, but 12 months ago the vanadium price was US$10 a pound. It’s a volatile commodity, but the long-term outlook is well in excess of US$8. And at US$8, this project looks even more robust than what we assessed using the US$6 price.”

Asked what it would take for the price of vanadium to return to that US$10 level, Woodcock acknowledges there are plenty of moving parts.

“I think, firstly, China is currently deploying a lot of vanadium redox flow batteries, so it’s consuming a lot more vanadium,” he says.

“For that reason, a lot of the vanadium manufacturers that use slags from steel production to produce the vanadium — which is where a lot of annual production comes from — have been just making it and getting it into the market to meet that increased demand, which has probably had an effect of reducing the price.”

Second is the more mainstream appeal of VRFBs generally. A few years ago, Woodcock explains, just 1% of annual vanadium production went into batteries. In 2023, that figure was roughly 10%. Based on recent forecasts by various market research firms, he adds, we could see an increase of between 50% and 100% by the end of the decade.

“There are residential five-kilowatt batteries that are making it to market in the vanadium redox flow space. So again, penetration in that market, more awareness around the opportunities with those batteries, and I think we’ll see vanadium as a more household name, as lithium is at the moment.”

Then there are the apparent safety issues related to household lithium-ion batteries, with more than 1,000 fires caused over the last year, according to the ABC.

“We’ve been hearing all over the radio: ‘If you’ve got one of these batteries, please call. We’ll replace it free of charge, but stop using it. It’s got a risk of bursting into flames’,” Woodcock says.

“There’s a lot of stuff out there at the moment about portable scooters, especially the cheaper models. People are charging them at night, and can catch on fire. I think we’re going to see that’s more commonplace, that there’ll be potential issues with certain lithium batteries. And I’m thinking more around the batteries used at home to store energy off solar, for example. That could be a trigger for people to look to investigate alternatives.”

In any case, Viking seems primed to establish itself in what certainly appears to be a growing vanadium market. How exactly that market ultimately takes shape is, of course, the nature of the game.

“From an investor perspective, we’ve got good cash in the bank. The project is kicking all its goals. It’s moving forward. For us to take it through PFS with the assumptions we have in terms of the cost of that work, we can fully fund our activity through it without needing to do any dilutive raises. That’s where the big opportunity lies to invest in Viking at the moment.”

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Images: Viking Mines
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Written By Oliver Gray
Originally from Perth, Oliver has a keen interest long-form journalism. He has written for a number of publications and was most recently Contributing Editor of The Market Herald’s opinion section, Art of the Essay.