Iron Ore & Vanadium in Quebec: Who’s Driving BOTH Markets?

One of the world’s least known metals also happens to be of immense importance and is likely to become even more so as renewable energies catch up with and, eventually, eclipse fossil fuels. If you don’t know much about vanadium, you’re not alone.

About six months ago, a Canadian mineral exploration Company published a Preliminary Economic Assessment outlining annual production of approximately five million tonnes of high-grade, low-impurity, iron concentrate…grading roughly 65 percent iron along with 0.6 percent vanadium penta-oxide per tonne of concentrate from its Mont Sorcier Iron and Vanadium Projects…located in the historic mining jurisdiction near Chibougamau Québec.

Vanadium One Iron Corp. (TSX-V: VONEOTC: VDMRFForum) started its 2020 drill program at Mont Sorcier targeting to expand the current resource base and deliver a new Mineral Resource Estimate (MRE) by Q1 2021. This drill program aims to increase the current resources to a minimum of between 900 million to 1.1 billion tonnes at grades of between 24 to 34 percent magnetite. Additionally, these results are intended to enhance the value presented in the PEA.

In this intriguing podcast, Stockhouse Media’s Dave Jackson was joined by Company President and CEO, Cliff Hale-Sanders, to discuss Vanadium One’s latest drill program at Mont Sorcier in Quebec, vanadium’s key attributes and markets, and the Company’s unique dual resource business model.

Podcast interview transcription below:

SH: To start off with Cliff, can you tell us a bit about the history of the company and your role since you since you came onboard?

CHS: On the history fund, let’s just step back a bit and, in the sense that there have been a few incarnations of the story. But the real current vanadium one iron story kicked off in 2016, when the previous management team was able to get the package of claim groups for the most associate project near Chibougamau Québec. As you pointed out, this project had been worked extensively back in the sixties and seventies by Campbell mines, having outlined a resource at that time and had completed a full feasibility study. So, the group prior to my coming on in October of 2019, really went back, looked at historical work, reverified the data, and came up with the first initial maiden resource in 43-101-compliance in late 2018, early 2019. And that’s set about the building blocks for completing a full PDA of the project in the early part of this year on the history side.

Again, we currently have 630 million tons in the resource at Mont Sorcier. So as I said, that was the building. This PA that came out in April of 2020. Now those numbers were extremely impressive. The project had an after-tax 8% net present value of $1.7 billion and an IRR of over 41%. And what we do is very reasonable long-term metal prices, capital costs for the project were sub-$460 million Canadian, which while large is still a very modest capital cost capital project for the iron ore business. So these numbers are very compelling to move the project forward and things continued to look positive as a backdrop to that. Obviously the iron war market continues to be extremely firm despite all the noise that we’ve had this year from COVID and the shutdowns and what have you, which really bodes well for the outlook going forward that demand continues to be robust for the iron ore business going forward. So, we’re very excited to be moving the project forward to the next level.

SH: Can you also update us on the latest drill program at Mont Sorcier and tell us a bit about the results from September?’

CHS: On the latest program that we’ve started up, we’ve commenced the 2020 drilling program, which is roughly 3,500 meters, which we’re currently drilling the drilling. We’ll probably wrap up in the next week or so as we then work getting the assays and Davis tube work back over the next month, month and a half. The drill results today have been very encouraging. Uh, we continue to hit the magnetite ore body in these zones where we expect them to be. So we expect to be very successful in trying to delineate our expanded resource of between 900 to 1.1 billion tons. And some people might ask, why are we were working on building the resource? We already have 633 million tons and a mine life embedded in the PEA of 37 years. Clearly there’s going to be room for future expansion. And part of the strategy of Vanadium One going forward is to entice strategic partners and obviously the bigger, the project biggest potential, the bigger the opportunity that we all see going forward. So that’s a big part of the program that we’re drilling off here is really to continue to add value to an already robust story

SH: For our investor audience that might not be that familiar with the metal vanadium, what are its uses and benefits…especially in high-tech applications and the New Green Economy?

CHS: Perfect. That’s a great question. One of the key uses of vanadium today is really as an outgoing agent into steel. It’s a strengthening agent into steel and rebar and things of that nature. That is where the bulk of the material is used today. And the bulk of vanadium is produced out of China about 52% of the world’s vanadium is produced out of China from mines, just like ours. And again, that is being driven more from your basic steel applications, at this point in time. That said going forward, there is a big push on what is called vanadium redox batteries. And these are large scale industrial batteries for energy storage, and they would be used for things like solar power or tidal power or wind power to absorb and store the energy that is produced that can’t be directly sold into the grid at a particular time, or it’s more advantageous to hold it in storage until prices are better into the market.

So, these are not going to be new high-tech batteries for your car. These are going to be industrial largescale batteries for the industrial market and largescale storage opportunities going forward. So that will be a new and emerging source of demand. At the same time, we have a very robust base load of demand that we’re seeing coming out of China, India, and the rest of the world that we look to reinvigorate infrastructure rebuilds going forward. So the outlook for demand for both iron ore and, as a subset of vanadium, it looks very good just as is basic use of the steel market. And then you add on the opportunity coming from vanadium batteries. Clearly there’s a strong growth profile going forward.

SH: What are some of the key advantages and challenges to mining in north-central Quebec?

CHS: There are similar advantages and challenges as you would expect in anywhere when you’re looking to bring a new mine on. And let’s look at some of the advantages of Quebec particular to Vanadium One and the Chibougamau area. First of all, we are in what is called Plan Nord – where the Quebec government is being very supportive. We’re pretty much all industries that continues to look to invest in the Northern part of Quebec, which again is going to be very supportive when we’re looking for formal permits and other requirements from the government to move the project forward. But very specifically to Vanadium One, there’s currently 370 kilometers of railway from Chibougamau to the port at Saguenay in Southern Quebec, which is a year-round, 365 day-a-year port facility that is already built. Those two facilities have significant excess capacity, which we would be able to leverage off of going forward.

Now, in many cases, you’ll hear about iron ore deposits and projects that are very much infrastructure-constrained. So they have to build the railway. They have to build the port, and this can add hundreds of millions, if not billions of dollars, to the capital requirement. Also being in Quebec, we have access to low-cost hydro power, which again, given energy consumption is a key part of the processing technology that is used in magnetic separation to separate the iron work material. This is again, is going to be a great saver of the OPEX going forward. Some of the challenges really focusing on, on the weather, obviously it’s going to be cold. It’s going to have a lot of snow. We do have to manage our relationship with the various socioeconomic groups in the area. I would point out to date they’ve all been extremely supportive going forward. We obviously continue to work and negotiate with the various groups who would have an interest in the area, but today we’re very comfortable with going forward. So I think Quebec is one of the key leading areas in the world if you’re looking to build a new mining. Obviously, you have to dot your I’s and cross your T’s and make sure you do it right. But they’re very supportive generically going forward. And we think that’s going to be a key driving factor to bring this project to fruition.

SH: Iron ore is still the primary mineral commodity that drives economies. The price of iron remains strong, hitting a one-year high of US$128 per tonne in mid-September. How has the Company positioned itself to ride the wave?

CHS: In a couple of ways. I guess a couple of things I’ll just point out just for your listeners here. Iron ore, despite not being getting as much care time as gold has actually performed better than gold year to date. So again, just really underscoring the strong fundamentals to the iron war business as demand remains firm and demand for iron ore remains very robust going forward. I would also point out since your price dynamic here, prices for the product that Vanadium One will be selling, which is the high-grade premium, 65% grade or better iron or product actually hit a high price of $138 per ton. Later in September, it’s come back a little bit now still trading at about $130 per ton. Again, this is extremely robust and it’s probably a good 35 to 40% higher than the number we use within our PEA.

So then again, we think our PEA numbers and the value presented there are very much conservative in light of where the market is heading right now. And especially for the outlook going forward. How are we positioned to ride the curve? I think it’s the quality of the project more than anything else, which will continue to garner attention as we get the story out there and to get a little bit more market recognition. Unfortunately for us, as a company now, the PEA results came out in a time of great uncertainty in the global market with COVID coming to the table and the shutdowns and the retrenchment in activity at the junior end of the mining market. I think that it started to clear up and we’re very well positioned now to continue to grow this resource base and really highlight the world-class nature of the Mont Sorcier project.

SH: A critical or strategic metal is defined as “one whose lack of availability during a national emergency would affect the economic and defensive capabilities of that country.” Today, 77 percent of vanadium raw material supply comes from China, Russia, and South Africa. Can Canada become a world-class supplier of this critical metal and, if so, how?

CHS: Excellent question. I think just stepping back there, one point you’ve indicated is that this is a strategic metal. The U.S. government in 2018 did stipulate that vanadium was now viewed as a strategic metal within the North American context. There is no material supply. There is some modest supply from uranium producers and what have you. Most of the vanadium in North America is produced from reprocessing flag material that is imported or just recycling of previously consumed steel. So going forward, the desire to have a Canadian or North American supplier of vanadium I think would be very attractive, especially in the current geopolitical context of the U.S. and Europe and other parts of the world, what is to have less dependence on China for supply. As I noted before, China represents 52% of the world’s vanadium supply. But what makes Mont Sorcier, and obviously Canada, is a subset of that so readily positioned is supply that is our mind and the technology and the processes that we plan to use — which is your basic magnetic separation for direct feed into a blast furnace — makes us the exact same process that is being used to produce the bulk of the world’s vanadium today. So I think that’s a very, very easy way for us to become a significant supplier to Canada and obviously the global market as a whole without having to sit here and rely on a brand new technology to bring that process forward. The actual processing of the iron ore material through the blast furnace is relatively straightforward. The vanadium is extracted from the slag material at the top of the blast furnace, and then as reprocessed through, again, standard technologies to extract vanadium from the slag material. So again, we’re quite comfortable with the technology being employed here, the risk level is quite low. It really is just moving the project as fast as we can, so that we’re actually delivering metal.

SH: Value and opportunity are industry catchphrases that really get the attention of small cap metals & mining investors? What can you tell them that makes your business model so intriguing and attractive?

CHS: I think simply put, the value is clearly evident in the Mont Sorcier projects. The PEA number is underscoring that, even if you excluded vanadium because a lot of people, as you mentioned, do not understand the metal, this project would still be worth well in excess of a billion dollars. So it’s very, very attractive. The vanadium just makes the opportunity that much more attractive than yet another iron ore story. And we have numerous iron ore products around the world. Some of them are good, some of them are mediocre, but what they don’t have is the extra sweetener of that second revenue line, which is the vanadium. Which really pushes the economics to the next level. And so I think that is what really makes this an intriguing opportunity for investors to look at. You’re getting great exposure to the long-term iron ore business. You’re getting good exposure to the vanadium sector and obviously the new and potential demand curve that will be coming from vanadium going forward.

The value opportunities, unfortunately as I pointed out before, our timing for when the PEA was completed was unfortunate for us. And I think now fortunate for investors who are circling back and having a look that the price levels are still extremely attractive to get into this story. We’re well-funded to deliver our next round of drilling. And I think as we continue to move forward, I think you’ll continue to see that opportunity be daylighted through various strategic initiatives that we have underway. And as we pointed out in all our presentation material, a key focus for Vanadium One is to attract a strategic partner as we move forward to, again, help accelerate this project and deliver on the value that we see inherent in the project for all shareholders.

SH: And lastly, Cliff, if there’s anything else that I’ve overlooked, and you’d like to add, please feel free to elaborate.

CHS: I think I’ll just circle back and really underscore the value that we see in Mont Sorcier and Vanadium One as a company. We did complete the PEA with a $1.7 billion NPV. So it’s very robust. We think the numbers behind that are very, very defensible, especially when you look at some of the iron ore projects within Canada, and look at our numbers, I think they’ll find them very attractive. We think the embedded price level / price deck that we’ve used in the PEA is very, very defendable and conservative in light of the current market. If anything else, it just underscores the value potential here. So I think this is a unique time to get involved in this story as we’re undertaking the drill program, looking for that strategic partner, which I think will be a game changer to the story as we continue to unlock the value that is inherent in Mont Sorcier.

In summary, I don’t think there could be a better place to be building an iron ore mine, or pretty much any mine in these days. It is by far one of the best jurisdictions in terms of streamlining of your permitting and acceptance of the project going forward. Overall, that allows you to build and unlock that value.