Interview with Vincent Algar, Managing Director of Australian Vanadium (ASX:AVL) Australian Vanadium is an early-stage vanadium developer with a focus on developing Vincent describes the Australian Vanadium Project as a 'globally significant deposit' with 'high-grade Measured, Indicated and Inferred Resources,' in Western Australia. The company aims to go into production within the next "two or three years." We question him on how he converts these 'hopes' in to a reality.
Since we last spoke with Algar in September, Australian Vanadium raised some capital. Australian Vanadium raised A$6.6M, at a discounted price, through a share purchase plan and placement. However, despite this raise, trading volume has been very low, and the market doesn't appear all too interested in the story. Why? Is it just a case of unattractive pricing, or is there something deeper at play here? At surface, some of the boxes look ticked, and the management appears to be effectively going about their business. The company is funded towards the end of its DFS, but not all the way through. So what's going to gets the markets attention. Algar thinks he has the answer.
The total Mineral Resource at the Australian Vanadium Project is 183Mt at 0.76% vanadium pentoxide (V2O5), with Cobalt, Nickel and Copper by-products, 14Mt at 208ppm Co, 666ppm Ni and 217ppm Cu and 0.16% Sulphur. The asset has the scale to be a significant ore body, but Algar says market sentiment isn't on the company's side right now. He does seem to have a point because most vanadium players (e.g. Largo, Bushveld) are struggling in this price environment. However, investors aren't interested in excuses. What is the management team doing to set things right?
What will Australian Vanadium do with the money it has raised to protect the interests of shareholders? Optimising the future operating cost is go to for companies treading water. Australian Vanadium wants to be competitive in all price environments, but that isn't necessarily in their hands, nor what makes investors comfortable. The other side is optimising CAPEX, which current stands around A$350M. The end game is to produce below US$4/lb and maintain a healthy margin. The flowsheet requires a huge amount of gas: 7 tera-joules per day to make vanadium. Moving it closer to source could cut gas costs by c. 62.5% says the company.
Algar then moves into talking about Australian Vanadium's offtake agreement. It signed an off-take deal for Vanadium with Chinese steel and alloy company Win-Win Development Group in 2018. It has recently signed one with Chinese group, Hebei Vanadium. A general point here: Non-binding MOUs, Working, Agreements and off-take get signed all the time. It is incumbent on the company to demonstrate how these actually convert in these 'non-binding conversations / options' in to 'value'. Does it allow them to raise capital? Does it allow them to raise capital more cheaply? This is the sort of clarity that shareholder or new investors want to hear about. How will management get the project built and operational.
Australian Vanadium would prefer to get a partner onboard in a manner that is non-dilutive, but investors might need to prepare to take the hit.
After setting out the deliverables for 2020, and discussing potential M&A. Is management currently purchasing shares on the open market?
What did you make of Vincent Algar? Are you a fan of the Vanadium macro story? What is the outlook for vanadium in 2020 and beyond? Comment below and we will respond.
And a FREE 'Not A Mug' Crux Investor mug to the first person to guess the song name and artist featured in the title of this video! (One mug per person).
1:48 - Company Overview
2:08 - Raise in September: Why Did They Do it?
3:47, 15:52 - Share Price Plateau: Why Does the Market Ignore Australian Vanadium? Is it too Technical of a Project?
8:47 - Financing the DFS
11:07, 32:17 - Optimisation of Capital Costs: Why, How and How Long Will it Take?
14:16 - PFS Update: Timings and Expectations
17:16 - Off-take Partners: What are Their Expectations?
23:42 - At What Point Will They Go Back to Market?
25:35 - Timing it all: Listing in London, The Environmental Component Completion and Other Deliverables
35:35 - M&A and Talks on Partnerships with Other Juniors
37:35 - Buying Shares: When Was the Last Time Management Partook?
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