Yesterday we started looking at Byron King’s recent teaser for a graphite/graphene company, part of his new ad campaign for Energy and Scarcity Investor that hypes three “miracle materials” that have the potential to change the world … and today, as promised, we’re staying on this track and getting to his second pick, some sort of vanadium stock.
I don’t think I had ever heard of vanadium in the days before I started reading all these delightful newsletter teasers, and it rarely comes up in casual conversation, but it comes up every once in a while as a hot investment trend. Usually the projected demand is cited as being either due to batteries or fuel cells, though most vanadium is used much more conventionally to strengthen steel, particularly for high speed tools or other high-demand applications like surgical instruments but also, in lower concentrations, for structural steel. It is also used as a catalyst for creating sulfuric acid.
That’s the short story, here’s a bit from King’s ad to tell you why he’s excited about the stuff:
“… what if our laptops and smart phones weren’t powered by batteries – what if they were fueled by mixture of liquid and metal, instead…
“What’s more, what if that liquid-metal solution were contained right inside the processor chip itself…
“I’ll tell you ‘what if’: Cooling, efficiency and computing power would reach undreamed-of performance levels – while allowing the size of computers and their components to drastically shrink.
“In other words, supercomputers would have the potential to become so small they could fit in the palm of your hand.
“What is the key ingredient in this amazing liquid metal mixture? It’s vanadium.
“And what makes vanadium a crucial component in the next revolutionary computer chip breakthrough? Brainpower.
“In the words of Bruno Michel, lead researcher at IBM’s Zurich Research Laboratory, “The human brain is 10,000 times more dense and efficient than any computer today. That’s possible because it uses only one extremely efficient network of capillaries and blood vessels to transport heat and energy, all at the same time.”
“That’s right – by taking their inspiration from the human brain and combining it with the electrical properties of vanadium, Bruno and his team may unleash one of the greatest technological breakthroughs we’ve seen in over 50 years.
“They’ve already proven their fluidic channel design will work. And they expect to have a fully functioning prototype chip within 18 months.
“Once they do, watch out because Bruno believes it could power Watson-like supercomputers the size of smart phones and tablet PCs. We’re talking Star Trek fantasy come to life.
“Combine it with the electrical properties of graphene-based electrodes and the sky’s the limit!”
So, as you might have guessed, King uses that amazing future to project that vanadium will become much more valuable … and to pitch to us a vanadium miner:
“With a resource company poised to become North America’s one and only primary producer of vanadium.
“The vanadium resource they’re sitting on in Nevada is set to become one of the richest, lowest-cost vanadium operations in the world.
“At the moment, shares of the little gem can also be had for less than $1. However, as with our graphene pick, I can assure you that won’t be the case for long…
“Remember, they’re developing the only vanadium mine in the United States – and are on track to become the lowest-cost vanadium producer in the world. The moment Wall Street catches wind of what’s happening, their share price could take off like a rocket.”
This one, sez the Thinkolator, must be American Vanadium (AVC on Canada, AVCVF on the OTCQX pink sheets)
And they do indeed have a deposit in Nevada, with plans to turn it into the “Greenest Mine in America” — which serves them two ways, because their plan to provide the electricity they need from solar and wind is a nice pitch, but, more importantly, the plan is to store the energy in vanadium flow batteries, which are a key part of American Vanadium’s pitch for potential earnings high-value-added vanadium demand over the next decade (vanadium batteries are apparently an attractive grid-scale energy storage option, because they can be scaled up to huge size simply by adding larger tanks). They just filed for a patent for their process for creating vanadium electrolyte for such batteries, which has gotten them some attention and possibly helped the share price jump a bit today … though Byron King’s chatter about them could easily have the same effect, as could someone mentioning vanadium in passing — it’s important to note that this is an absolutely teensy company, with a market cap of only $25 million even after their recent $2 million fundraising and the runup in the shares today.
AVC’s project is the Gibellini Project, where they plan to mine and then process the ore to produce both vanadium pentoxide, which is the “purple flake” that goes into steelmaking (though they say they’ll be producing higher grade vanadium that would go into the pricier chemicals and aerospace markets, where vanadium is used to make sulfuric acid and titanium alloys), and the apparently more valuable vanadium electrolytes which will go into vanadium flow batteries. You can see their presentation here to get an idea of their vision and what they think the market is — the patent filing and their $2 million fundraising postdate that presentation, but otherwise it’s pretty up to date.
And in particular, take a look at slide 16 in their presentation — they show the last decade of vanadium pentoxide pricing, and it’s wild — with hugely dramatic spikes in 2005 and 2008 that came immediately back down to earth, presumably caused by (this is a total guess) spikes in Chinese steel production … but then, after that crazy chart, the projection is that the price will have a nice clean slope up for the next ten years. Which probably means that they’re guessing that the vanadium market becomes much steadier, or that they’re just making something up (the forecasts are from a consultant).
Right now, vanadium is pretty much all going to steel to make it stronger and lighter (90%+) — and the reasonable and somewhat predictable dynamic would be that the BRIC country steelmakers are going to continue improving their steel by using more vanadium, much as the US steelmakers did in the decades before them. US and European steelmakers use about twice as much vanadium in their steel (as a percentage) than do steelmakers in India, Brazil and China — so if tighter standards and higher standards move through those countries for building codes, etc., vanadium demand could clearly climb substantially … that is, after all, where the vast majority of steel demand growth has come from (particularly Chinese infrastructure), and those countries are also host to a lot of the world’s steelmaking capacity now. The Vanadium battery is a next-generation move that might happen, the batteries exist and are being sold, apparently, but I don’t think we can claim that it’s definite that this will be the storage solution for renewable energy … and as far as I can tell the Vanadium-powered chips are a cool, “maybe that will work someday” thing, a technology that seems very promising but a product that will be decades, I would guess, in development.
So again, as with graphene, hypothetical future gee-whiz products might come out of vanadium’s properties … but for the foreseeable future pricing and demand are based on … industrial scale steelmaking and batteries. Just happens to be a different part of the steel business, and a different kind of battery. Vanadium itself, however, is much harder to produce than graphite and is in much lower concentrations in mines — as well as not being found naturally in its metallic form and rarely mined as a primary metal. Vanadium is often produced as a byproduct of uranium mining, as with the small (but larger than AVC) Energy Fuels (EFR in Canada, EFRFF on the pink sheets), which is presumably delighted that the vanadium they can produce on the Colorado plateau is not subject to the same nuclear energy pressures as their uranium production, and most current vanadium mining production comes from China, South Africa and Russia — though a large percentage of global vanadium production (including in the US) also comes from steelmaking slag and extraction from spent catalysts and similar processes.
American Vanadium is not publicly stating when they expect production to begin — they have at least mentioned 2014 as a target in the past, but from my initial perusing I think you’d be hard pressed to find any projected dates in their materials now, which leads the cynic in me to assume that the 2014 target was optimistic. Their feasibility study from last year said the capex would be about $95 million to get the mine going, and that their operating costs would be just over $4 per pound of vanadium pentoxide, compared to what they expect to be pricing of between $7-10 (using those same forecasts from their presentation), with 11 million pounds produced per year and a seven year mine life projected. They haven’t yet identified any environmental challenges with the project, but are apparently in the process of submitting their mine plan to the Bureau of Land Management (as with most Nevada projects, it’s on federal land) and will probably also have to do an environmental assessment.
They’ll need to bring in water and electricity and do some major site preparation work once they have all the permits, though it’s a relatively small open pit mine, so you can put in whatever guess you want about when they might actually be producing vanadium. Prices seem to have been fairly stable since the 2008 spike, so I don’t know whether there’s a particular rush to be first through the gate in starting up new vanadium mines, but American Vanadium will almost certainly not be the next mine to start production — though it may, if all goes according to plan, end up being be the first primary vanadium mine to start production in this country. There are quite a few other “vanadium juniors” who are exploring or developing potential mines around the world, most of them probably at least partially inspired by the 2008 price spike, but presumably — as with the rare earth mania — any developing vanadium mania will result in a few new mines and several dozen failed projects that never really get off the ground. Whether a US supplier ends up being of strategic importance or not depends on whether you think sulfuric acid and titanium-vanadium alloys will be the kind of thing that governments worry about in the future.
That’s about all I know about vanadium and about American Vanadium, so if you’ve got other investments in the area that you think are compelling, or reasons to choose one vanadium junior over another, well, feel free to shout it out with a comment below.