2019 Scoping Study

2019 Scoping Study

Location: South Africa

In May 2019 the Company released a Scoping Study into a near term low capex production opportunity at the Steelpoortdrift Vanadium Project (Phase 1, refer ASX Announcement 2 May 2019). This low-cost starter operation would seek to produce a high grade vanadium concentrate for sale from the high grade portions of the Mineral Resource via simple beneficiation (using magnetic separation). An updated Scoping Study is currently in progress investigating the production of V2O5 from this concentrate.

In the longer term the high quality concentrate generated by Phase 1 would be used for downstream processing to produce value added specialist products suitable for the steel, renewable energy and industrial minerals markets. The concentrate contains approximately 2.2% V2O5, 12% TiO2 and 55% Fe (refer ASX Announcement 18 March 2019), all commodities consumed by these markets. Studies are underway into various processing options with the purpose of determining the optimum method, or combination of methods of downstream processing, that delivers the highest value for the Company. This includes the current Scoping Study being managed by global vanadium expert Les Ford.

The Scoping Study demonstrated the potential for strong financial metrics for Phase 1 at the Steelpoortdrift Vanadium Project (Table 1). Strong margins of US$17 million per annum (on average) were forecast to be generated with a short payback period of less than 2 years due to the high grade nature of the mineralisation and the low CAPEX requirement of $18 million.

Table 1. Base Case Key Metrics.

Study Outcomes

 

EBITDA LoM (US$, pre-tax)

US$ 234 – 431M

EBITDA per annum (US$, pre-tax)

US$ 9.4 – 17M

NPV (US$, pre-tax)

US$ 68 – 138M

Internal Rate of Return (pre-tax)

48 - 86%

Payback Period

1.9 – 2.8 years

Life of Mine (Phase 1)

25 years

Pre-production CAPEX (US$)

US$ 18.8 – 20.0M

Average Phase 1 cash operating costs (US$/t) 1

US$11.7 /t processed

Annual Concentrate Production (average)

0.79Mt

1 Cash operating costs include all mining, processing, government royalties,
site administration and overhead costs

 

Phase 1 is based on a proposed 2.2Mtpa standalone mining and beneficiation operation to generate a high grade +2% vanadium concentrate for sale at mine gate. The sale price of the concentrate has a significant effect on potential cash flow from the project and was modelled as a range of US$45 to US$55 per tonne of concentrate for the purposes of the Scoping Study. Negotiations around an offtake continue to advance, supported by the recent positive upswing in the vanadium pentoxide pricing environment and low global inventories for both ferrovanadium and 98% V2O5. The Company believes the vanadium market has returned to a sustainable upward trajectory and that a continued stable pricing environment makes Phase 1 more likely to be concluded successfully.


The Scoping Study was completed to an overall +/- 35% accuracy using the key parameters and assumptions set out in Table 2 and as further outlined in the ASX Announcement of 2 May 2019. The Scoping Study was been compiled by the Company with the assistance of a highly experienced and reputable group of independent consultants listed in the ASX Announcement of 2 May 2019. The Company is not aware of any new data that materially changes the information and assumptions contained in that ASX release.

 

Table 2. Key Parameters and Assumptions (refer ASX Announcement 2 May 2019).

Parameter

 

General / Economic

 

Discount Rate

10%

Concentrate Price (US$)

$45 - 55

Exchange Rate (US$:ZAR)

14

Mining / Production

 

Average LoM strip ratio

0.38

Processing Rate

2.2 Mtpa

LoM Production Target

53.6 Mt

Average V2O5 grade mined (resource)

0.82%

Average V2O5 grade mined (diluted)

0.74%

Recovery into concentrate (mass, average LoM after dilution))

37%

Recovery into concentrate (V2O5)

>90%

Concentrate grade (V2O5)

>1.8%

Cost Assumptions

 

LoM average open pit mining costs ($/t ore mined)

$3.31

LoM average beneficiation costs ($/t ore processed)

$6.42

General and admin incl environmental and social ($/t ore mined)

$1.94

Royalty

Max 7%

Tax rate

28%

Following the successful completion of the Scoping Study the Company plans to implement parallel development strategies, rapidly advancing both Phase 1 and Phase 2 of the world class Steelpoortdrift Vanadium Project. Studies are underway into the larger Phase 2 project, which would produce 98% V2O5 flake for the steel industry, along with ferrovanadium and higher purity vanadium pentoxide products suitable for use in vanadium redox flow batteries. The aim is to also produce, if possible, specialist iron and titanium products from the suite of economic elements contained within the Steelpoortdrift mineralisation which will, if so, substantially distinguish Tando from existing competitors.


These studies, and subsequent studies, will compare conventional downstream processing methods for the vanadiferous titanomagnetite at Steelpoortdrift such as the salt roasting method already used in South Africa at Bushveld’s Vametco Operations and Glencore’s Rhovan Operations with established pyro- and hydrometallurgical processes along with possibly other, more innovative, methods. Samples have already been dispatched for testing at various laboratories and process development facilities worldwide.