AVL PFS promising

AUSTRALIAN Vanadium is set to kick off the definitive feasibility study for its Gabanintha project near Meekatharra Western Australia next year after delivering a promising prefeasibility study and maiden reserves statement this morning.
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Plans for the envisaged Gabanintha project.

Haydn Black


The company says the project has 18.24Mt at 1.04% vanadium pentoxide comprised of a proved 9.82Mt at 1.07% V2O5 and a probable 8.42Mt at 1.01% V2O5 within its 7660sq.km at Gabanintha.
It has already applied for a mining lease that covers around 70% of resources in the proposed 3.5km-long pit area. 
At a planned production rate of 900,000 tonnes per annum of 1.40% V2O5 magnetite concentrate at an average yield of 60%, the company expects to produce 22.5 million pounds V2O5 per annum over an initial mine life of 17 years, plus there is plenty of scope to expand with exploration along strike.
A base metals circuit will extract an estimated 1775tpa of mixed sulphide concentrate containing cobalt, nickel, and copper between years 3-16, however that will generate just 1% of revenues and is not critical to the project advancing.
The project has estimated capital costs around US$345 million, and average C1 operating costs of $4.15/lb V2O5 equivalent that AVL says would make it competitive with the world's lowest quartile producers.
Ungeared post-tax NPV8% ranges between $125-$1.41 billion, depending on the pricing assumption. The company has used a long-term average V2O5 product pricing assumption of $8.67/lb for its modelling, which is around one third the current price of $22. Its medium-term assumptions range between $13-20/lb, based on expected shortfalls that should last until 2025.
The internal rate of return ranges between 12.4-47.5% with 27.2% based on $13/lb.
Its next step is to move into a diamond drill program to provide feed for pilot scale flowsheet validation testwork and other DFS work packages.
AVL has around A$5 million cash to begin the DFS, and expects to raise up to $5.5 million by the exercise of 2c options that are in the money. 
The company will continue to engage with strategic partners as it brings the DFS to fruition. 
It has a non-binding memorandum of understanding with China's Win-Win Development Group, which requires 7000-8000tpa of 98% V2O5 to feed its 5000tpa vanadium carbon nitride plant, which will come online in 2019. 
The current project development timeline estimates Gabanintha construction will begin in 2021 and production would follow in 2022.
AVL's Gabanintha is adjacent to the slightly more advanced Technology Metals Australia Gabanintha project, which is already in DFS and which has been able to deliver a premium V2O5 product with a purity in excess of 99.7%.
TMA's project would cost A$380 million project based on June's PFS and is based around 13,000tpa of production generating $3 billion over 10 years with on a post-tax IRR of 43% and a NPV of $850 million. 
Operating costs would be US$4.27 per pound compared to an expected price of $13/lb. Payback would be three years.
AVL shares were off 3.5% in morning trade to A2.7c, valuing the company at $46.5 million.