Australian Vanadium Ltd (ASX:AVL) has signed a new Letter of Intent (LOI) with Wingsing International Ltd, the trading arm of Tianzhu Steel, for the removal of co-product iron-titanium (FeTi) to be produced from its namesake vanadium project in Western Australia.
The company expects to produce approximately 900,000 tonnes per annum (tpa) of FeTi co-product from the Australian vanadium project, in addition to approximately 11,000 tpa of vanadium pentoxide from its proposed mine and processing facility.
AVL’s strategic location for a vanadium processing facility near Geraldton enables the sale of the co-product FeTi, improving the economic resilience of the project through the addition of a secondary revenue stream.
Shares rose on the news and, looking ahead, both parties intend to finalize the ore sales contract in 2023, with an order for 100,000 tpa of titanium iron co-product.
AVL Managing Director Vincent Algar said, “Thanks to the tireless work of our consultant in China, we are building brand awareness for the FeTi co-product that AVL will produce with its vanadium products.
“We are building relationships directly with some of the major steel producers in the country.
“We look forward to working with Tianzhu Steel to provide this unique product that can cost-effectively improve the plant’s operational efficiency.
“These agreements further validate AVL’s strategic decision to locate its vanadium processing plant close to the Port of Geraldton, further strengthening AVL’s path to project financing and development.”
This letter of intent had an additional positive effect on AVL shares. Today, stocks rose 16.33% to reach AU$0.057, a new high in more than 3.5 years.
This follows yesterday’s 43% increase thanks to a competitive $49 million grant from the Australian Federal Government under the Modern Manufacturing Initiative’s Collaborative Stream.
Summary of the letter of intent
This letter of intent is non-binding and is intended to register the buyer’s interest in supporting the development of the project and for the parties to negotiate and agree to a binding ore sales contract.
The price of the FeTi co-product will be referenced to the Fe Platts Iron Ore Index at 62%, with a mutually acceptable price adjustment reflecting the market situation at that time and based on an amicable consultation.
AVL will provide Buyer with a quarterly update on project progress and provide samples for testing at regular intervals for Buyer’s comments.
Encouragingly, the second letter of intent with a direct end user follows the first letter of intent, further validating the strategic location of AVL’s vanadium processing plant, close to the port of Geraldton
The FeTi co-product is ideally suited for use in iron sintering feeds, providing a low cost source of titanium and low cost additional iron units to steel producers.
Blast furnace operators often add titanium to sintering mixes to improve furnace refractory protection and minimize maintenance costs associated with furnace relining.
Notably, AVL’s FeTi co-product will enter the market as a stable alternative to existing reliable and unreliable sources of similar material.
Additionally, iron ore and vanadium prices have never moved together, providing unique opportunities for AVL to mitigate vanadium price risk and provide a secondary revenue stream for the project.
Tianzhu Steel has an annual steel production of 5 million tonnes per annum (mtpa) from its plant in Hebei Province, People’s Republic of China.
The company is also one of the leading H-section steel producers in China, with an annual capacity of 1.2 mtpy.
Tianzhu Steel is innovative in using various kinds of raw materials for ironmaking and is currently undergoing a relocation and expansion project to increase steel capacity to around 7 mtpa.