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\nChina\u2019s metamorphic rise to developed nation status has resulted in hundreds of policy changes. One little noticed change was a mandate to construction companies to use higher tensile strength steel rebar. The policy change has sent the vanadium market into a tailspin.
\nAs a result, steelmakers have gobbled up all existing inventories, meaning the only vanadium you can buy is currently underground. That was the reason why John Lee, a seasoned mining entrepreneur, discarded opportunities in Mongolia and Bolivia and decided to place all bets on a rich vanadium deposit in the hills of Nevada through Vancouver-based Prophecy Development Corp. (TSX: PCY | OTCQX: PRPCF).
\nThe China steel rebar mandate is not the only reason why Lee is optimistic. Scientists believe vanadium redox flow batteries (VRB) may be a better way of storing grid energy than lithium-ion. Robert Friedland, the legendary mining investor, is investing in vanadium flow batteries through his Beijing-based investment firm Pu Neng.
\n\u201cThe big takeaway is that we have acquired the best vanadium project in North America,\u201d Lee said. \u201cThe price has already gone bananas.\u201d
\nVanadium is already showing the streakiness of the electrical metals, outpacing gains in lithium and cobalt to shoot up to $14 a pound currently, from $4\/lb in 2017 and $2.50 in in 2016. Demand is such that finding off-takers for Prophecy\u2019s vanadium \u201cis the least of our concerns\u201d Lee said.
\nVanadium is quite a small market with annual production of 75,000 tons to 80,000 tons. Adding 0.5% vanadium to steel doubles its strength, and that\u2019s where 85% of vanadium goes. Like lithium, the expected choice of vanadium as the metal of choice as grid storage batteries would require an exponential increase in supply.
\nSumitomo Electric Industries (SEI) installed a 60 megawatt VRB system on the Japanese island of Hokkaido in 2016 and plans to increase that capacity fivefold by 2020. The world\u2019s largest VRB battery, with a whopping 200 megawatts of capacity, is currently being built in China.
\nPower storage is the key to allowing jurisdictions around the world to go 100% renewable, by resolving the issue of the intermittency of wind and solar power at different times of day. At present, VRB seems like the most viable option for states such as California, Hawaii and Massachusetts to go 100% renewable by 2040.
\nSteel demand will also continue to be strong. China\u2019s steel rebar decision in the aftermath of damaging earthquakes in the west of the country means that Chinese steelmakers must now add 36 grams of vanadium to 1,000 tons of rebar steel. That still falls short of 73g\/t in Europe and 95g\/t in the United States, according to Metal Bulletin.
\nMore than half of vanadium supply comes from China, and there is zero production in the US. Prophecy\u2019s Gibellini project is located in the Battle region of Nevada, home to more half of the US gold mining production capacity.
\nLee, who has invested more than $3 million in Prophecy in personal funds, acquired the project from the previous ownership with a completed feasibility study completed by AMEC Plc. Prophecy plans to update the feasibility study and resume permitting in 2018. Gibellini\u2019s oxide ore is suitable to produce vanadium pentoxide, featuring a low iron content, that has a high suitability for future storage batteries.
\n\u201cWe are getting the project to the last quarter of a mile in terms of permitting,\u201d Lee said.
\nEDITOR: MATT CRAZE
\nMatt Craze has covered commodity markets for more than 20 years, working as a researcher at CRU International, and for over 10 years as a Bloomberg News journalist where he was responsible for initiating Bloomberg\u2019s coverage of the London Metal Exchange in 2004 and agricultural commodities coverage from South America in 2006. Matt has recently completed an MBA at Cornell University and has set up a UK-based consultancy, Spheric Research, that provides research for biotech innovation in food, and next generation material markets including lithium and cobalt, among others.
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