The Windimurra vanadium project carries a legacy of missed milestones, lengthy litigation and ownership changes. But new owner Atlantic is adamant success is on the horizon.
The Windimurra vanadium project carries a legacy of missed milestones, lengthy litigation and ownership changes. But new owner Atlantic is adamant success is on the horizon.
Situated 80 kilometers from Mount Magnet in Western Australia’s Mid West region, Atlantic’s Windimurra project is slowly but surely stepping up its output of vanadium.
Different segments of the plant are turning over, doing their bit to convert the red-tinged rock and ore into the intensely glowing molten substance being poured from the furnace at the final stage.
This vanadium will go on to either be added to steel as a strengthening agent, used as part of titanium alloys or to make industrial batteries.
The first batch of Windimurra vanadium was produced in January and the company is focused on ramping the plant up to full production by the end of the year.
But even the fact the plant is operating is a small success for Atlantic and its managing director, Michael Minosora.
The company inherited part of the plant infrastructure when it acquired Windimurra in late 2010, and it’s that ageing infrastructure which Mr Minosora says is why first production was only reached in January, as opposed to initial plans for production in 2011.
“That right there,” Mr Minosora says, pointing out the high-pressure grinding roll section of the plant from a vantage point eight storeys above ground level, “that’s been the root of all our problems.”
“And that fine dust coming off the stockpile,” he says, shifting attention to the right about 200 metres, “that’s why.”
Mr Minosora, on a site tour last week, says the fine clay dust creating a haze around the raw material coming straight from the mine has been “lodging” in the grinding roll, which slowed production and is still causing the plant to run at reduced capacity.
But that’s expected to change next month when a $10 million investment in equipment to fix the problem is completed and handed over to Atlantic.
“Once that’s finished, it will all be gangbusters,” Mr Minosora says.
Atlantic’s delayed progress is just the latest in a string of hurdles proponents of the Windimurra project have had to overcome.
Precious Metals Australia initially owned the resource and entered into a joint venture with Xstrata in 1997 to commission the mine and plant project.
Three years later, in May 2000, the plant officially opened and in October of the same year PMA executive chairman Roderick Smith announced vanadium was being produced at 75 per cent of the plant’s capacity.
The state government even got on board, with Main Roads turning what was a dusty 40-km track from Mount Magnet, into the sealed, albeit bumpy, road it is today.
Mr Smith also announced PMA had sold out its share of the operation to Xstrata for $29 million.
Little did he know Xstrata would later shut down the operation as vanadium prices continued to fall.
What followed was an 18-month legal battle between the two companies and ended in Xstrata agreeing to a $10 million settlement payout to PMA in April 2005.
The payout was Xstrata’s official exit from the project and PMA then spent another $500,000 buying back plant equipment, which Xstrata had removed, intending to restart the project.
But little progress was made before the company, which had changed its name to Windimurra Vanadium, was forced into administration in 2009 as a result of the GFC.
Atlantic acquired the entire resource and what was left of the plant infrastructure for $55.5 million in 2010. Holding company Mid-West Vanadium became a fully owned subsidiary.
Atlantic has subsequently been forced to raise additional capital to fund improvements and alterations.
In February 2011 it issued $US335 million of secured notes to pay off Mid-West Vanadium’s debt and to use as working capital. In December it raised $25 million through the issue of shares at $1.20 a share, well below their peak in April 2010 of $2.45.
It also announced a funding package worth $41.7 million in March, which included $30 million raised through convertible bonds and Mr Minosora investing $10 million in newly issued company shares, which have continued to decline to a current price of 47 cents a share.
Overall investment during the history of the Windimurra operation has now topped $800 million.
But Mr Minosora is adamant it’s going to pay off in the near future.
He revealed to WA Business News he expects the project to ultimately produce 12 to 17 per cent more vanadium than the 6,300 tonnes per annum previously announced, without requiring additional capital.
“It’s not a question of whether the project will make this much, it’s a question of when,” he said.
Current world vanadium demand is sitting at 80,000 tonnes per annum but Atlantic anticipates it increasing to more than 120,000 tonnes in the next 10 years, with shortfalls of about 5,000 tonnes predicted.
Windimurra will employ about 140 Mount Magnet workers to meet about 7 per cent of that demand, mainly selling into North America.
It’s fair to say it’s not only investors keen for Windimurra to succeed but also the town of Mount Magnet – there’s little employment for locals aside from Atlantic’s project and Ramelius Resources’ nearby gold mine.
Australian vanadium is cheaper than vanadium produced in other countries because of a free trade agreement – producers from China, South Africa and Russia have to pay anti-dumping duties.
The current price for US-produced vanadium is around $US35.20 per kilogram, while Atlantic says it’s cash costs for producing the mineral at steady, full capacity is around $17/kg.
It all sounds like positive news but Atlantic still has a battle on its hands convincing investors.
An “upside” is the stockpile of deep black fines, which is the first evidence of an operating project as visitors enter the site. That is iron ore fines which Atlantic expects to be able to produce at a rate of about one million tonnes a year, a by-product of the vanadium production process and which it hopes will add to Atlantic’s turnover, if suitable buyers are found.
The high Australian dollar and lower than expected iron ore prices have hampered success in sales but Atlantic says it has “firm interest” and bids on the current stockpile.
