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November 5, 2018 8

Is Vanadium the Perfect Storm for Investors?

vanadium-a-perfect-storm

Ask any long term investor and they’ll tell you that when minerals go on a crazy ride up, they’ll usually plummet just as fast.

While many investors fear that’s also likely for vanadium we think it may be the perfect storm..

I caught the bug for new energy minerals back in 2014. After all, it is “new energy” and the momentum had really just begun. I was feeling a little bored with our private company which had moved to developing advanced and problematic RFID systems. I invested in ASX.PLS at 3.8c and ASX.AJM at 1.4c, (both lithium stocks). With a strong background in China, new energy just made sense at the time, and so began what has been a remarkable journey.

Since then we’ve averaged well over three to six hours a day of research and now have others involved. As we watched the Lithium story unfold, we started asking, “what’s next”. We looked at cobalt and although we liked it, (and still do), it looked like a one trick mineral to me and totally reliant on battery technology development. It had to be more than that for a longer-term investment.

Early Indicators & Steel Usage.
I first looked at vanadium around 2015. There were a few early pointers that could push this little-known mineral into the spotlight, and yet I recognised it was unloved by investors. Those indicators are now mostly well known and investors that are interested in vanadium now know it’s about steel and batteries. Back then we took our China background, along with thousands of hours of new energy research and looked much deeper.

From my time living in China I knew there were big issues with building safety. The Chinese build fast, though they were also known for cutting corners. From low grade or missing reinforcing to adding more sand to substitute cement, it was mostly about fast and cheap. However, there were also plenty of signs that regulations would change as China matured. With each deadly earthquake the outcry over poor building standards increased.

Vanadium Flow Batteries.
So here I had a mineral that seemed to have a big future with steel reinforcing and that gave us the basics. Then of course we looked at vanadium flow batteries and although then relatively unknown, they just made sense. We knew from lithium research that these batteries were perfectly suited for electric vehicles and shorter bursts of energy from stationary power. What was obvious was that vanadium flow batteries promised much more for off-grid base load power and a much longer service life

Once again, we knew from China that production of new wind and solar was happening so fast that much of it was not even connected to the grid. Just as many buildings in China lay empty, much of the new energy being generated was not being utilised. Surely the flow battery offered the best solution, whether alone or within a hybrid system that could offer the best of both worlds.

High-Performance Alloys.
The third pointer was what we call new energy alloys. The majority of these high-performance alloys were made in the U.S and Europe. Our research indicated that China would break the market and break it fast. They were moving into value added markets like aerospace and they would need these high-performance alloys. Sure enough, and with typical Chinese development speed, we now have high performance alloys made in China. They are now pushing the envelope in new and exciting materials suited to high-end markets. We think these high-performance alloys will become an integral part of the vanadium story and are being seriously under-estimated by the investment community.

Investing in Vanadium?

While China spot pricing is more indicative of future direction, recent gains cannot be ignored. Within just two months the indicative China spot high range price has almost doubled as shown below. We expect spot prices to stabilise in the short-term and settle around $30/LB.

China Vanadium spot price increases on China re-bar changes

I believe that while we rarely get it wrong,  we are often too early. I must admit that the swing to vanadium took longer than expected. What I see is that it’s here now, and it seems it’s here for the foreseeable future. It’s the best performing mineral this year and prices have hit incredible heights. While I can’t say that V205 will ever hit $40/LB, I do believe that prices will be elevated for years to come.

We now hope to now see more stability in the spot price and expect to see prices stabilise and retrace back to $30/LB. What we’re looking for is high pricing that is ‘sustainable’ to support higher long term contract rates.

The three points that pushed us to vanadium in the first place will likely be the same ones that drive the future of this remarkable mineral. The fact that it’s escaped the hype of lithium indicates to me that there remain excellent opportunities for investment in vanadium. The only question is who will capitalise on that future, and who are the pretenders.

Summary.
Vanadium is not a one trick mineral. There is a future right now in three different and expanding markets. Add to that the possibility of new markets in window films, nanotechnology and even electric vehicles. Vanadium quite simply has everything going for it. It’s remarkable to me that it’s escaped the attention of most investors.

Articles by Mastermines are general opinions for discussion only and not investment advice in any form. Please seek independent advice from qualified financial advisers in your country. Mastermines or its staff and affiliates may hold investments or consult to listed entities that have exposure to markets, minerals or entities mentioned in articles. Readers should consider that there could always be a conflict of interest in any and all articles by Mastermines.
Every effort is made to provide reliable and accurate information to the market. However, we recommend that readers consider information and opinions from a variety of sources.

Please note that Mastermines’ articles are our own opinions and not subject to payment or input from others. Currently, we do not intend to introduce paid subscriptions. In addition, we write articles as conversational pieces. Our aim is to discuss information, ideas, theories and opinions of battery technology and battery minerals to retail holders. ‘New Energy’ is an unfolding story, the market will shift along the way and so may our opinions and investments. Please read the disclosure of both our investments and consultancy, which are updated on a monthly basis.

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