Monsters of Rock: Could this logical merger finally get Australia’s vanadium sector off the ground?

Two vanadium players who own three parts of effectively the same orebody in WA’s Mid-West will merge
Technology Metals Australia shareholders resoundingly voted up a 14-for-1 deal that will see the company merge with Australian Vanadium via a scheme of arrangement
Miners pulverised in red day on ASX

Over in Perth Technology Metals Australia (ASX:TMT) shareholders have gathered to vote up a merger that will see a single orebody separated by a tenement boundary pulled together in the hope it can spark a new WA industry into life.

They voted up a deal that will see them receive 14 Australian Vanadium (ASX:AVL) shares for every TMT share they hold, a mark-up from an initial 12-for-1 offer that will give TMT investors 42% of the merged company if the WA Supreme Court approves the scheme.

It is, so to speak, a deal that makes sense.

Regardless of the possible financial value for shareholders, whatever that is down the line, it cuts across the illogic of having a single deposit effectively split in half by the vagaries of a tenement boundary.

Located in the Mid-West, the Resource Capital Funds backed firms were each planning to construct their own Gabanintha project.

Here’s what that would have looked like.

Pic: TMT presentation

TMT’s two resources, Gabanintha and Yarrabubba, coming in at a combined 153.8Mt at 0.8% vanadium pentoxide literally sandwich AVL’s own Gabanintha orebody of 239Mt at 0.73% V2O5.

Two plants doing the same thing literally kilometres from one another as well. AVL has some additional benefits, including a $49 million grant from Canberra to support the development of its proposal, awarded back in 2022.

V2O5 prices spiked incredibly from long term lows of around US$2.50/lb to almost US$30/lb in a brief boom in 2018 only to slide back to long term levels aside from a run to more than US$12/lb in the commodity run following Russia’s invasion of Ukraine in March 2022.

They have since fallen back to around US$6/lb. The vast bulk of the end market for vanadium is as a steel additive to create hardy materials like armour plate, axles and tools, but the biggest growth sector is in battery storage applications.

A bankable feasibility study in 2022 put a C1 operating cost of US$4.43/lb on the Australian Vanadium Project, estimating it would cost US$435m ($604m) to construct the project containing a mine, concentrator and separate process plant near Geraldton producing 24.7Mlb of V2O5 and 900,000t of FeTi co-product each year over an initial 25-year mine life.

The second court hearing to approve the deal is due to take place on January 19.

$68m TMT’s shares rose 6% in late trade, while $100m capped AVL was unchanged.

Technology Metals Australia (ASX:TMT) and Australian Vanadium (ASX:AVL) share price today

And on the markets

A decision from China not to cut interest rates to stir up its economy seems to have helped tank the materials sector on a rough day on the bourse.

The big miners fell 1.52% with South32 (ASX:S32), Fortescue (ASX:FMG) and Evolution (ASX:EVN) among the hardest hit, copping 4.21%, 2.17% and 3.35% downgrades respectively.

Mid-tier miners fared little better, with high grade iron ore producer Champion Iron (ASX:CIA) among the biggest laggards at a 4.18% drop, with only some bullishness around Pilbara Minerals (ASX:PLS) and a bizarre 20% lift at do nothing uranium clean up play Energy Resources of Australia (ASX:ERA) lighting up the mining space.