Vanadium may prove to be an element of surprise
Fabrice Taylor
Published on Monday, Nov. 16, 2009 12:00AM EST Last updated on Monday, Nov. 16, 2009 7:35AM EST
Fabarice Taylor is a chartered financial analyst.
Nestled between titanium and chromium on the periodic table of the elements lies a little known metal that could make investors a lot of money if the stars continue to align.
The element is vanadium, which you've probably never heard of, even though it surrounds you. It strengthens the steel in your office building, hardens the tools used to build that tower and, perhaps, will play a big role in the electrification of the automobile you may one day drive to get to work.
Vanadium has long been used in steel and that represents the vast majority of demand for the metal. Demand for steel is on the upswing. Averaging out the demand forecasts I've seen pegs growth at between 5 and 6 per cent starting around next year if the recovery is intact.
That's good news for vanadium. Better news is that China and Japan are raising standards for rebar strength, meaning more vanadium demand over and above what comes from higher steel demand.
There's no market quote for vanadium; like iron ore, it's traded by contract between producers - of which there are relatively few - and consumers.
Indications are that the price per tonne was about $50 (U.S.) in mid-2005. It blasted to more than $80 in early 2008 then collapsed like everything else. Today, a tonne changes hands for about $30. It's probably heading higher. But how much?
“ There are, in fact, strong signs that vanadium is about to make its grand debut in battery technology. China's BYD, which is backed by Warren Buffett, is among the leading-edge battery makers looking at vanadium and is building a plant in the vanadium-producing region of China. ”
To answer you have to ask yourself how much you believe in electric cars. It appears that they will be one of the policy answers to greening the planet. I suspect that mandating tougher greenhouse gas regulations is also part of the plan to expand the economies of the world.
It's not a fad, in other words.
If electric cars are to catch on - and I mean purely electric ones, not hybrids - the auto industry has to solve the battery problem. Batteries have improved but are still slow to charge and provide limited driving distance compared with a tank of gas.
Lithium was a big breakthrough but it also has drawbacks as used now. Some battery makers are experimenting with adding vanadium into the battery ingredient. Using vanadium, in theory, adds power among other things. It's more expensive than some alternatives but the performance appears to compensate for the added cost.
There are, in fact, strong signs that vanadium is about to make its grand debut in battery technology. China's BYD, which is backed by Warren Buffett, is among the leading-edge battery makers looking at vanadium and is building a plant in the vanadium-producing region of China.
Subaru, meanwhile, has a prototype, the G4e, which will use a lithium-vanadium-phosphate battery. It has twice the range of a prior prototype.
Finally, there's the prospect for what's known as vanadium reduction-oxidation batteries, also known as redox batteries. This is a very promising existing technology that works at the grid level and allows for the storage of a lot of power, which can be drawn for long periods of time. They're ideal, among other things, for wind and solar farms, which produce power when it's not necessarily needed.
Although usually mined as a byproduct, vanadium is pretty rare; there are few quality deposits in the world. That suggests that if demand rises, prices could move up quickly too, making deposits economical in a hurry.
So how to profit if this argument makes sense to you? There are no big pure play producers. But there are smaller companies trying to develop their plays.
One is Apella Resources, which I know a little because they've hired me to do some valuation work for them. Apella says it has a lock on pretty much all of the decent vanadium resources in North America. It certainly appears to have a lot of it underground, and all in safe jurisdictions. Management is solid and aligned. If vanadium really takes off - that is, if everything falls into place perfectly - there will likely be a bidding war for this one some day.
Uranium Star has a big play in Madagascar and, as the name implies, other interests besides vanadium, including some in Canada. The CEO came from Sherritt International and Inco before that.
Another is Syno Vanadium. I know nothing about its management but the properties are in China and the plan is consolidation.
These are all speculations, obviously. There's no knowing for sure if and, as important, when vanadium demand might take off. The upside is potentially huge but the risks are not to be trifled with.
