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Byron Capital Vanadium Report Final Via VanadiumSite.com

Byron Capital Vanadium Report Final Via VanadiumSite.com

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Published by Richard J Mowat
Without doubt, vanadium is growing into one of the most
important metals about which no one has ever heard. Soon, everyone is likely to become a lot more knowledgeable about vanadium, and investors can benefit by staying ahead of the curve and owning companies that can benefit from rapidly increasing vanadium demand.
Without doubt, vanadium is growing into one of the most
important metals about which no one has ever heard. Soon, everyone is likely to become a lot more knowledgeable about vanadium, and investors can benefit by staying ahead of the curve and owning companies that can benefit from rapidly increasing vanadium demand.

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Published by: Richard J Mowat on May 27, 2011
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12/17/2014

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Please see back page for disclaimers.
 
EQUITY
RESEARCH
Please see back page for disclaimers
INDUSTRY REPORT
12121212 NovNovNovNov 09090909
V
ANADIUM
:
 
T
HE
S
UPERCHARGER
 
Limited SupplyLimited SupplyLimited SupplyLimited Supply 
 
Vanadium is a metal that strengthens and hardens alloys likesteel, but that we believe has a bright future in energy storage.Both lithium ion batteries to be used in the automotive industryand redox batteries to be used in grid-level electricity storagebenefit greatly from the use of vanadium, and this use is cost-effective.
 
Vanadium is produced in limited quantity as a by-product of otherprocesses.
 
In 2007, only about 59,100 tonnes of contained vanadium wasproduced globally, with this coming largely from South Africa,China and Russia.
 
There is a threat that Chinese supply may be declared strategicand export curtailed, further constraining global supply.
Rapidly Rising DemandRapidly Rising DemandRapidly Rising DemandRapidly Rising Demand
 
Ferrovanadium is used to strengthen steel. Both China and Japanare mandating stronger rebar in construction, likely increasingvanadium demand.
 
We also foresee at least three new demand channels forvanadium in the alternative energy and clean technology arenas.At least two of these could result in significant vanadiumshortages.
Stable Prices are the CatalystStable Prices are the CatalystStable Prices are the CatalystStable Prices are the Catalyst
 
A major issue in the past has been vanadium price volatility.Prices have oscillated between levels of $11 per kg. for the metalto as high as $50 per kg.
 
While there are some opportunities for substitution in steelproduction, the same is not true for other markets, including ourprojected new markets.
 
In order to make end prices of products predictable, the price of vanadium must stabilize. This provides pull for new producers of vanadium to enter the market.
There Just Isn’t EnoughThere Just Isn’t EnoughThere Just Isn’t EnoughThere Just Isn’t Enough
 
Without doubt, vanadium is growing into one of the mostimportant metals about which no one has ever heard. Soon,everyone is likely to become a lot more knowledgeable aboutvanadium, and investors can benefit by staying ahead of thecurve and owning companies that can benefit from rapidlyincreasing vanadium demand.
 Jon Hykawy, Ph.D., MBA Jon Hykawy, Ph.D., MBA Jon Hykawy, Ph.D., MBA Jon Hykawy, Ph.D., MBAClean Technologies & MaterialsClean Technologies & MaterialsClean Technologies & MaterialsClean Technologies & Materials647.426.1656647.426.1656647.426.1656647.426.1656 jhykawy@byroncapitalmarkets.com jhykawy@byroncapitalmarkets.com jhykawy@byroncapitalmarkets.com jhykawy@byroncapitalmarkets.comArun Thomas, MBAArun Thomas, MBAArun Thomas, MBAArun Thomas, MBAAssociateAssociateAssociateAssociateathomas@byroncapitalmarkets.comathomas@byroncapitalmarkets.comathomas@byroncapitalmarkets.comathomas@byroncapitalmarkets.com
 
 
Equity Research Industry Report 12 November 2009
Jon Hykawy, Ph.D., MBA
647.426.1656
jhykawy@byroncapitalmarkets.com
2
SummarySummarySummarySummary
Vanadium (chemical symbol V) is a relatively rare metal that has one predominant use - astrengthening additive in steel and some forms of iron. According to the US Geological Survey(USGS) (2007), of the approximate 59,100 tonnes of vanadium produced in 2007, about 85% of thismetal is used as a steel additive (Moskalyk and Alfantazi,
Minerals Engineering
, v16, 2003). In their2008 update, the USGS notes that 93% of US consumption of V is metallurgical, including steel, ironand titanium alloys.Of the balance of material, the remainder is largely used in catalysts (in the form of vanadiumpentoxide, V
2
O
5
, in the manufacture of sulfuric acid, or as an oxidizer in the manufacture of maleicanhydride), and ceramics (V
2
O
5
is a widely used material in ceramic production). There are also ahorde of minor uses, as one would typically find for any metal.Both China and Japan have upgraded their requirements for building materials, including thestrength of rebar. In China, the requirement was phased-in commencing 2007, and in Japan variousenhancements to the requirements for building materials has been adding to vanadium demand foryears, and will continue to do so.It is worth noting that for many different types of steels, ferroniobium can be substituted forferrovanadium. However, the substitution is only economic at very high vanadium prices. It shouldalso be noted that the amount of V used in steels is small, therefore the price of V must increasesubstantially to allow for substitution. For example, typical high-carbon steel containing vanadiumas a hardener would have no more than 0.25% V content by weight, while ultra-hard tool steels likethose used in high-speed machining would contain no more than 5% V by weight, and typically muchless (down to perhaps 1%).Vanadium is used in other alloys,as well, including the aerospace industry, where there are no othermetallic substitutes. For example, a common titanium alloy in use in aerospace is Ti 6Al 4V,denoting titanium alloyed with 6% pure aluminum and 4% pure V. V has a peculiar ability to allowtitanium to perform better and at higher temperatures, with no other options available. However,this use is, again, not a high volume driver of V demand.We do believe there are several drivers that could have a significant impact on V demand in comingyears. One is the use of lithium vanadium phosphate or fluorophosphate cathodes and lithiumvanadium oxide anodes in rechargeable lithium batteries. These batteries exhibit much improvedsafety compared to the more generic lithium cobalt oxide-type cathodes seen in cellular telephoneor laptop batteries, which have higher operating voltages and higher rates of energy storage.Another is the use of vanadium in large-scale rechargeable batteries, called vanadium redox cells.The last is the use of vanadium as an anti-corrosion agent in some rare-earth magnets, enabling useof a new set of materials for use in strong magnets.Due to relatively low levels of annual production, we believe that the vanadium market can onlyfollow two possible paths. One is the boom-to-bust price gyrations of the past, assuming newsuppliers do not enter the market, and the other is a much more stable pricing curve assuming newsuppliers do enter the market, helping to stabilize the spread between supply and demand.
Vanadium demand is growing becauseof steel. We will add battery demand, bothsmall and largescale.
 
Equity Research Industry Report 12 November 2009
Jon Hykawy, Ph.D., MBA
647.426.1656
jhykawy@byroncapitalmarkets.com
3
VanadVanadVanadVanadium: Supercharging Steel and Energyium: Supercharging Steel and Energyium: Supercharging Steel and Energyium: Supercharging Steel and Energy
Vanadium (V) is annually produced at levels of approximately 60,000 tonnes (according to the USGeological Survey’s 2007 survey). Production is primarily a by-product of the iron and steel industry.Iron ores containing amounts of V on the order of 1.0%-1.5% are processed in a furnace, creatingslags that may contain as much as 25% (the rough amount of V in South African slag) vanadiumpentoxide. These slags are then treated using a roasting/leaching process, with the slags firstroasted in combination with sodium compounds to make water-soluble sodium vanadates. Thesodium vanadate is washed out using water, and the sodium compounds are then converted toammonium vanadate through the addition of acid and ammonia. The ammonium vanadates arethen carefully roasted to produce the desired vanadium oxides.Currently, approximately 85% of produced vanadium is used in making steel alloys. By adding smallamounts of V, no more than 0.25% by weight to high-carbon steel or less than 5% by weight to steelintended for use in high-speed tools, the hardness and strength of the steel is significantlyenhanced. While there is a substitute available for the ferrovanadium (FeV, an alloy of iron andvanadium that is priced by vanadium content) usually used, in the form of ferroniobium (FeNb), thesubstitution of niobium is uneconomic until V prices reach high levels, and the use of FeNb is not aseffective as the use of FeV.Certain V is also used in speciality alloys, especially alloys of titanium, utilized in the aerospaceindustry. However, the bulk of the remaining 15% of V produced annually that is not used in steel isused in catalysts for the production of sulphuric acid or maleic anhydride.While growth in the use of V as a catalyst is linked to GDP growth, growth in the use of V as ahardening/strengthening agent is expected to accelerate beyond GDP growth as governments suchas Japan and China mandate the use of stronger construction materials, including rebar.We believe that there are two large-scale demands for V that will arise in the next few years, puttingadditional strain on demand and potential strain on pricing. They are to allow V to be used in thecompound making up the cathodes of lithium-ion rechargeable batteries, and in the form of vanadium pentoxide (V
2
O
5
) to be used as the energy storage medium in battery known as avanadium redox flow battery. Finally, V also acts to increase the effectiveness of rare-earthmagnets, including making the magnets much more resistant to corrosion across a broader range of temperature and humidity. We will make projections regarding V demand for each one of thesenew applications.The use of V in electrical energy storage, particularly in the redox battery, is driven by V having fouroxidation states: V
2+
, V
3+
, V
4+
and V
5+
. The ability to take on a variety of oxidation states leads to oneof the most striking properties of vanadium compounds, the wide range of bright colours thecompounds can assume (lilac, green, blue, and yellow as oxidation state moves from 2+ to 5+).
59,100 tonnes of V  produced in 2007,85% of it used tostrengthen steels.

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