Perth's Aurox Resources Ltd has clinched a deal potentially worth hundreds of millions of dollars to the aspiring Pilbara vanadium producer with one of Europe’s biggest companies.
Perth's Aurox Resources Ltd has clinched a deal potentially worth hundreds of millions of dollars to the aspiring Pilbara vanadium producer with one of Europe’s biggest companies.
As previously mooted in WA Business News, the deal with the giant German steel, automotive and technology ThyssenKrupp group, is for all the ferro vanadium Aurox can produce from its $200 million Balla Balla project, between Karratha and Port Hedland, over five years.
The mine is scheduled to go into production at the end of next year.
The coup comes hard on the heels of a new ore reserve for the project – 54 million tonnes at a high 0.73 per cent vanadium pentoxide – making it the biggest, richest, cheapest vanadium ore reserve in Australia, and probably the world.
The non-binding letter of intent from ThyssenKrupp Metallurgie GmbH (TKMet) is for Aurox’s entire output, about 5,000 tonnes a year, for an initial five years.
At the current vanadium price of about $53 a kilogram, that makes Aurox’ annual 4,100t of contained metal worth about $213 million before expenses.
All of which bodes well for the company’s net after tax profit forecasts of $38 million from first year production, $45 million from the second, $48 million from the third, $25 million from the fourth, then six years of around $20m a year.
About 85 per cent of the world’s 60,000t/year vanadium production is used to harden and strengthen low alloy steel. Another 10 per cent is used by the aerospace industry.
In terms of contained metal, the Balla Balla ore reserve is larger and nearly 50 per cent richer than Australia’s next biggest vanadium reserve, Precious Metals Australia Ltd’s $100 million recommissioned Windimurra project, near Mt Magnet. Windimurra is scheduled to go into production, also at around 5,000 t/year, in mid-2007.
Aurox managing director Charles Schaus told WA Business News Balla Balla’s current reserves would support a 30-year mine life.
A bankable feasibility is expected to be completed in April this year. However, it is understood Aurox is already negotiating the $200 million development cost with two banks, one Australian, one German.
A couple of things that will help the BFS are that the ThyssenKrupp deal is a “take and pay” arrangement based on monthly deliveries of up to 420t of ferro vanadium “free on board” at Fremantle. That means that, when it is loaded onto the ship, Aurox gets paid.
Another plus is one of ThyssenKrupps’ six divisions includes one heavily involved in the construction of large capital plant operations like Balla Balla. That division is a world leader in kiln design, an integral part of the ferro vanadium process.
“We expect to cement that relationship,” Mr Schaus said.
The ThyssenKrupp group has annual sales in excess of $66 billion and employs 184,000 people across 70 countries.
Mr Schaus said a formal ferro vanadium off-take agreement was expected to be concluded before the end of next month.
Aurox’ research shows global vanadium supply is currently matching demand, but by 2010 demand is forecast to reach 80,000t/year and supply 75,000t/year.
Balla Balla is a simple open cut mining, crushing, magnetic separation and roasting operation, based on proven technology.
• Balla Balla project, WA
($200 million)
• Reserves of 54 Mt @
0.73 per cent
• Production of 5,000t/year
• Start up late 2007
• Vanadium price $53/kg
