Eco Investor May 2016

Pre-Revenue Securities

Vanadium Another Battery Storage Option

With energy storage expected to take off it is worthwhile not to forget that there are other technologies in the market apart from lithium and zinc-bromide flow batteries. One of these is vanadium, another technology in which for many years Australia was a world leader. The angle for investors is local miner, Australian Vanadium Ltd.

Australian Vanadium is developing the Gabanintha Vanadium Project near Meekatharra in WA, which it says is among the highest grade vanadium projects in the world. The company aims to participate in the growth of the emerging battery storage market and grid-scale technology in particular.

The strategy is to supply high-grade product to battery makers around the world and grow with the increase in renewable energy generation. Meanwhile, the current biggest market for vanadium is the steel sector, where demand is growing as adding 0.2 per cent vanadium can double steel strength and so reduce weight up to 30 per cent.

Australian Vanadium's focus is Vanadium Redox Flow Batteries, which it says are becoming a preferred choice for suppliers and there are a number of companies worldwide commercializing the technology.

Vanadium Redox Flow Batteries are scalable to potentially unlimited sized and are suitable for grid connection, can discharge to 100 per cent with no damage, retain their charge for up to one year, and have a lifespan of 20 years.

A vanadium battery system.

On the technical side they use only one element in the electrolyte, vanadium(V) oxide (vanadia) or more commonly vanadium pentoxide (V2O5), and utilize vanadium ions in different oxidation states to store chemical potential energy. Their energy storage capacity comes from the size of the electrolyte tank, and when there is no power they can be recharged just by changing the electrolyte.

Australian Vanadium says Redox Flow Batteries are expected to take up about 30 per cent of battery storage capacity growth and if that happens the increase in demand for vanadium would be 300,000 tonnes.

An early stage company, Australian Vanadium has made recent progress. Last month it entered two agreements - with Gildemeister energy storage GmbH that allows Australian Vanadium to sell the CellCube range of Vanadium Redox Flow Batteries (VRFB) in Australia through its battery focused subsidiary, VSUN Pty Ltd; and a memorandum of understanding with UK technology company C-Tech Innovation Ltd to collaborate on the development of a vanadium electrolyte plant in Australia.

It sounds promising but first Australian Vanadium has to produce vanadium. Its Gabanintha Vanadium Project consists of eight exploration licenses and one exploration license application. The has a high grade measured resource of 7 million tonnes at 1.09 per cent vanadium pentoxide plus other minerals. The indicated and infered resources bring the high grade resource to 56.8 million tonnes. Lower indicated and infered grades bring the total resource to 91.4 million tonnes at an average of 0.82 per cent vanadium pentoxide.

Proximity to the surface mean that an inexpensive mining operation can be developed, and the company believes with further drilling there is "enormous potential" to expand the resource to a target of between 500 to 800 million tonnes at grades similar to the current estimate.

The next steps for the project are an updated scoping study with economic parameters and to develop key investor and strategic customer relationships. The two recent agreements fall into the latter category.

The agreement with Gildemeister to sell the CellCube range of Vanadium Redox Flow Batteries in Australia follows a February memorandum of understanding to collaborate on future Vanadium Redox Flow Battery installations and electrolyte production in Australia. The sales agreement increases the vertical integration strategy with Gildemeister.

The partners say the CellCube is the world's most commercially advanced Vanadium Flow Battery. It is based on 15 years of development and in seven years over 100 units have been sold worldwide. VSUN can sell the CellCube range for an initial five-year period.

Australian Vanadium chief executive Vincent Algar said the dealership agreement allows its subsidiary VSUN to ramp-up its activity in commercial target markets and utility related storage opportunities. The companies will jointly market vanadium flow battery technologies and CellCube products as the preferred solution to large-scale grid-energy storage.

The agreement with C-Tech is for the companies to collaborate on the development of vanadium electrolyte production capability in Australia through stand-alone and mine-attached facilities. C-Tech is leading UK research and technology company focused on the preparation of vanadium electrolyte for Redox Flow Batteries (VRB). A Test Plant capable of mixing and producing battery-ready electrolyte will be established in WA, and C-Tech will also collaborate on a commercial-scale electrolyte plant. The vanadium electrolyte products will be used in third party vanadium flow battery products to be sold in Australia, New Zealand, the Pacific and South East Asia.

The direct electrolyte capacity will be part of the Gabanintha Project feasibility studies and plant design, and C-Tech will assist to optimize metal recovery.

C-Tech Innovation's electrochemical processes include energy and environmental applications such as metal recovery, water treatment, chemical synthesis, fuel cells and batteries. Its product solutions for the electrochemical production of vanadium electrolyte was a strong attraction for Australian Vanadium.

C-Tech's managing director Ged Barlow said the potential in Australia is huge. "AVL's plans to vertically integrate vanadium mining with electrolyte production and flow battery commercialisation is an important step in creating a low cost and sustainable infrastructure for VRB energy storage. Our involvement in this partnership is hugely exciting for us from both a technological and a commercial standpoint."

The global vanadium inventory and the price for vanadium pentoxide (V2O5).

However, Australian Vanadium is not a pure vanadium play. The company was listed on the ASX in 2007 and only changed its name from Yellow Rock Resources last December to highlight its new focus on vanadium. As Yellow Rock it was an explorer for vanadium, titanium, uranium, copper and gold and it retains assets with these.

The Gabanintha Copper-Gold Project is on surrounding and adjacent areas to the Gabanintha Vanadium Project. The project is said to be highly prospective and there was significant mining in the area from 1987 to 1991 by the former Dominion Mining NL which is now owned by Monument Mining Ltd. There are remnants of the historic mining towns of Gabanintha and Porlell from small scale mining activity that occurred in the early 1900s and earlier. Drilling by Australian Vanadium in 2013 discovered significant new copper and gold mineralization, and a review is underway of the entire tenement to assist with follow up drilling.

Perhaps of more interest to environmental investors is the Nowthanna Hill Uranium Project also near Meekatharra in WA. The company says the predominant minerals developed from extensive weathering and leaching of uranium-bearing domes and nearby rocks that are high in vanadium.

In the 1990s Acclaim Uranium NL explored the area and drilled and defined an historic resource that was confirmed by Australian Vanadium in 2012. This JORC compliant indicated resource is 3,059,000 tonnes at 0.437 kilogram per tonne of U3O8. The company considers the exploration potential to find further uranium is high.

There is a significant uranium resource contiguous with the Nowthanna Hill Resource and owned by uranium development company Toro Energy Ltd.

Australian Vanadium is a pre-revenue business. At 31 December last year it had net assets of $15 million and last month it raised another $3 million at 2 cents per share. So it has some cash. But its share price is now around 1.1 cents. It has been around that level for the last three years. (ASX: AVL)





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