First
Vanadium Corp. (FVAN:TSX.V; FVANF:OTCQB) has been under pressure, along
with hundreds of battery metal juniors and the underlying metals, including
vanadium, cobalt and lithium. Even vanadium giant Largo Resources Ltd.
(LGO:TSX) is down 61% from its 52-week high. Yet, if one believes in
vanadium, it's hard to ignore First Vanadium’s shares at CA$0.44, down 78%!
The pro forma enterprise value (market cap + debt – cash) is just US$12.8M.
The company has CA$1.9M in cash.
Yet, even at current vanadium pentoxide (V2O5) prices, the in-situ value
of the Indicated-only portion (303 million pounds) of the company's estimated
resource is ~US$2.5 billion. Management believes it has the largest
high-grade primary vanadium resource in North America.
There has been a lot of weeping and gnashing of teeth over the V2O5
(China) price falling from a 2019 high of US$17.6 to its current US$8.2 per
pound. But, as the saying goes, the cure to low prices is. . .low prices. Few
new projects make sense at today's levels. I believe that V2O5 (China)
between US$10–US$15 per pound might be a sweet spot, good for both producers
and end users.
Steel companies can afford to pay higher prices for V2O5, but grid-scale,
vanadium redox flow battery (VRB) energy storage Systems (outside of China)
might need prices below US$10/lb. to go mainstream. Importantly though, VRB
plant costs are coming down. Vincent Sprenkle, a lead researcher at the U.S.
Department of Energy’s Pacific Northwest National Laboratory (PNNL) recently
said, "VRB costs could be lowered by another 50%."That would be
very bullish for vanadium prices, it would allow for widespread adoption of
VRBs even with V2O5 prices above US$10/lb.
First Vanadium has a sizable resource, a good grade, in a great
jurisdiction. A preliminary economic assessment (PEA) is expected by year
end. The following interview of Paul Cowley, P.Geo., president, CEO and
director of First Vanadium, was conducted by phone and e-mail between June 24
and July 2.
Peter Epstein: Please tell us about yourself and your team.
Paul Cowley: I'm an exploration geologist with 40 years' experience
in the discovery and evaluation of mineral deposits around the world. About
half of my career was with a major, BHP Minerals. I was involved in leading
the team in the Canadian Arctic that made four gold deposit discoveries that
generated about 6 million ounces of gold. I also worked at Escondida and
BHP’s Ekati diamond mineduring their exploration days.
I'm a senior guy, but I'm the youngest of our group. The others have even
more years of experience. We have two mining engineers that held mine general
manager positions of very significant mines at majors. We have four
metallurgists that have worked for majors in senior roles. We have a
construction engineer who's built 20 mines in North and South America; he's
currently building Lundin Gold Inc.'s (LUG:TSX) mine in Ecuador.
Peter Epstein: What do you make of the recent volatility in the
vanadium price?
Paul Cowley: Since early March 2019 the vanadium price has taken an
unexpected turn lower. Prices are not responding to the bigger picture demand
and supply imbalance. Chinese steel plants did not recharge their vanadium
inventories in this period, as many expected they would, putting pressure on
traders to liquidate at undercutting prices, but they will have to restock.
The U.S.-China trade wars, and some shortfall of enforcement of new Chinese
rebar standards, appear to have exacerbated the situation in the short term.
It's our view that the fundamentals of demand in global steel applications
will outstrip supply and should push vanadium prices higher again in the
second half of the year, and beyond. Adding to the demand side is the
exciting boom in solar and wind projects, all of which require battery
storage. This is happening on so many levels around the world that we expect
to see the vanadium battery carve out a healthy market share in this
expanding renewable space. Some are calling the 2020s the Solar Decade.
Peter Epstein: Please explain the significance of the historical
data you recently received, which extended the strike length by 300 meters to
the south.
Paul Cowley: It means more potential than we had expected. From our
drilling, the deposit appears to be open to expansion in several areas, but
we did not expect the deposit to be open to the south. The newly acquired
data demonstrates a 15% strike length increase to the south and it's still
open in that direction. This is exciting news as this data was not included
in the resource estimate we put out in February.
Peter Epstein: You already have a 303 million pound vanadium
resource (in situ value of ~US$2.5 billion) in the Indicated category alone.
Does the resource need to get any bigger?
Paul Cowley: That's a good question. But it needs to be answered
through an economic study. In our view, the resource is sizable. It's
currently the largest, highest-grade primary vanadium resource in North
America. Our immediate priority is to demonstrate potential economic
viability with what we have, knowing that we believe we could always make it
bigger if and when we need to.
Peter Epstein: Some readers may assume that First Vanadium will
need an expensive roaster in its operating flow sheet. What are your latest
thoughts?
Paul Cowley: Not true. The path we are on with our metallurgical
flow sheet does not include, or require, a roaster.
Peter Epstein: Although Nevada is the #1 global mining jurisdiction
in the latest Fraser Institute Mining Survey, some complain that it takes a
long time to get permits. What does your team expect in this regard?
Paul Cowley: In general, in the U.S. that is true, but not in
Nevada. Nevada has a responsible review and process, but it's a mining
state—and even more so for us, now that vanadium is on the critical minerals
list. The U.S. has unveiled its strategy in an effort to rebuild struggling
domestic supply chains for metals and minerals it deems "critical"
to the country's manufacturing and defense sectors. Recently this was
reiterated when President Trump and Prime Minister Trudeau announced a plan
for the U.S. and Canada to collaborate on critical minerals.
Peter Epstein: What are the latest developments on the
metallurgical front?
Paul Cowley: We continue to make strides on the metallurgical
front. In April we announced an average of 95% vanadium extraction from the
rock across the deposit, into solution. We do not know what ultimate
recoveries will look like just yet, but we are making good progress. And
we're making strides in the area of pre-concentration, with the aim to reduce
the plant size, which would lower the capital intensity of the project.
Peter Epstein: What are First Vanadium's plans for a preliminary
economic assessment (PEA)? Might that be a 1H 2020 event?
Paul Cowley: No, we think that we can move faster. Our aim is to
initiate a PEA in the third quarter, with results to be reported before the
end of the year.
Peter Epstein: Why should readers consider buying shares of First Vanadium?
Paul Cowley: I see very good value and upside; an exceptional
senior technical team, a good share structure and a great project. We now
have CA$1.9 million in cash with the recent private placement closing, and
42.4 million shares. Our share price now is where it was at the beginning of
2018! Yet, we have delivered two successful drill campaigns, a mineral
resource with considerably higher grades, and more metal in the ground than
our historical resource, and 80% (303 million pounds) of it is in the
Indicated category.
That, plus positive metallurgical test work and environmental baseline
studies to advance permitting. If one is bullish on the vanadium price,
currently at US$8.20/lb., then First Vanadium's project in the
first-of-84-ranked global jurisdiction of Nevada should be high on the list
of projects to consider investing in.
Peter Epstein: Thank you Paul, very interesting and timely
commentary on the vanadium market and on First Vanadium. I look forward to
seeing a PEA later this year!
Peter Epstein is the founder of Epstein Research. His
background is in company and financial analysis. He holds an MBA degree in
financial analysis from New York University's Stern School of Business.
[NLINSERT]
Disclosures: The content of this interview is for information only.
Readers fully understand and agree that nothing contained herein, written by
Peter Epstein of Epstein Research [ER], (together, [ER]) about First Vanadium
Corp., including, but not limited to, commentary, opinions, views,
assumptions, reported facts, calculations, etc. is not to be considered
implicit or explicit investment advice. Nothing contained herein is a
recommendation or solicitation to buy or sell any security. [ER] is not
responsible under any circumstances for investment actions taken by the
reader. [ER] has never been, and is not currently, a registered or licensed
financial advisor or broker/dealer, investment advisor, stockbroker, trader,
money manager, compliance or legal officer, and does not perform market
making activities. [ER] is not directly employed by any company, group,
organization, party or person. The shares of First Vanadium Corp. are highly
speculative, not suitable for all investors. Readers understand and agree
that investments in small cap stocks can result in a 100% loss of invested
funds. It is assumed and agreed upon by readers that they will consult with
their own licensed or registered financial advisors before making any
investment decisions. At the time this article was posted, Peter Epstein
owned no shares of First Vanadium Corp. and the company was an advertiser on
[ER]. Readers understand and agree that they must conduct their own due
diligence above and beyond reading this article. While the author believes
he’s diligent in screening out companies that, for any reasons, are
unattractive investment opportunities, he cannot guarantee that his efforts
will (or have been) successful. [ER] is not responsible for any perceived, or
actual, errors including, but not limited to, commentary, opinions, views,
assumptions, reported facts, financial calculations, etc., or for the
completeness of this interview or future content. [ER] is not expected or
required to subsequently follow or cover events & news, or write about
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or investment topic.
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