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Whitman Howard Mining Sector Update

Vanadium

Price discovery for vanadium is a little difficult, but major producer Largo Resources (LGO-TSX) reports that as of 31st March 2018, the vanadium price has increased nearly 60% so far this year. Apparently, underlying growth has overwhelmed a market, where production has been constrained over the last few years by low prices, while speculation over demand from China to meet a new
rebar standard and hopes for vanadium reflux batteries have driven prices higher. China represents around 50% of global demand, while over 90% of demand comes from the steel industry as a strengthening alloy. With the new Chinese reinforcing bar standard potentially adding 15% to world demand, it is no wonder the elastic has snapped.

Vanadium has offered potential for vanadium redox batteries for large scale electricity storage for some time, but it is only in recent months that genuine progress towards acceptance been seen. A recent report claims that German demands for large scale electricity storage batteries will increase by around 80% this year and it appears to be no coincidence that major Chemical group BASF has made a significant investment in one of the many vanadium redox flow battery hopefuls ESS.

With supply likely to remain constrained, vanadium demand and prices are likely
to remain firm all year. The recent strength of the South African Rand is no incentive for new local vanadium projects to get off the ground, so one may have to look at some of the more esoteric projects under evaluation in the US and Australia in order to see expansions in supply. With Largo Resources turning into profit, further growth here should also be anticipated.

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Disclaimer: Statements in this article should not be considered investment advice, which is best sought directly from a qualified professional.