05/05/2009 - 13:14

Reed vanadium operation to cost $629m

05/05/2009 - 13:14

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Reed Resources says it is looking closely at the assets of collapsed Windimurra Vanadium as a feasibility study pegs capital costs of its nearby Barrambie vanadium project at $629 million.

Reed Resources says it is looking closely at the assets of collapsed Windimurra Vanadium as a feasibility study pegs capital costs of its nearby Barrambie vanadium project at $629 million.

Windimurra fell into receivership in February after delays in approvals and the supply of equipment forced it to increase capital costs by $81 million, which it could not cover.

Windimurra was due to start production at its namesake mine this quarter.

"We're looking very closely at that [Windimurra's assets], its one possibility," Reed investor relations manager Simon Hicks told WA Business News.

"There's one plant there that's just about completed which would cost us almost $600 million to replicate."

Barrambie is located around 100 kilometres from Windimurra.

Windimurra receiver KordaMentha is currently developing a plan to move the assets.

Reed today released the results of its definitive feasibility study for Barrambie, which pegged capital costs at $629 million.

The project would have a mine life of 12 years with an annual production rate of 7,700 tonnes of vanadium, which is used to make high-grade steel.

Reed says the project has potential to generate earnings before interest, tax, depreciation and amortisation of $105 million each year at a vanadium price of $US30 per kilogram.

Mr Hicks said the five-year average vanadium price is at $US50/kg.

Total operating costs have been estimated at just below $US20/kg.

Mr Hicks said Reed is continuing to investigate financing opportunities for Barrambie, but was not in desperate need of cash and therefore could scout for the best deal possible.

The company generates cash flow from a gold operation in Western Australia.

Should Reed secure project financing immediately, Barrambie could start production late in 2011.

Shares in Reed closed down 1.5 cents to 26 cents today.

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