A Deep Value Vanadium Play You Need To Know About

Palisade Research May 28, 2018
Category: Research

In the most comprehensive update on resources since the 1973 Oil Crisis, the United States listed 23 materials recognized as critical to “national economy and national security”.

The report was followed by a Presidential Executive Order for developing a federal strategy to reduce foreign dependence of critical minerals.

And among the minerals listed was the unheard-of element – vanadium. . .

So, why vanadium?

Because it’s critical to the steel industry.

It’s used in the production of steel – providing high temperature while lowering weight – making it one of the strongest alloy metals on Earth.

Thus, the steel alloy is used in car frames, pipelines, rebar, and even jet engines. . .

According to the report, the “…use of vanadium generally requires less energy consumption during production than does niobium to give equivalent steel properties. Therefore, substitution for vanadium is normally not considered for short-term changes in market conditions because of the considerable effort involved in implementing the change.”

The main producers of vanadium are located in China, Russia, and South Africa – there are no U.S. producers.

There are currently significant supply pressures, with mine shutdowns in both China and South Africa. This coupled by Chinese and US policy changes in rebar strengthening, fuel efficiencies in the transportation sector, and overall protectionism, vanadium prices have been on a tear.

 

More importantly, vanadium plays a key-role in the current green revolution, with 10% of current production earmarked for green technology – more specifically – large-scale electricity storage.

Vanadium redox-flow batteries (VRB’s) will be a major use of vanadium.

VRB’s have nearly unlimited capacity; the ability to be left completely discharged for long periods of time; and the ease of recharging by simply replacing the electrolyte if no power source is available to charge it.

Because of their largescale storage capacity, development of VRBs could prompt increases in the use of renewable power sources.

For instance, lithium-vanadium-phosphate batteries produce high voltages, and their high energy-to-weight ratios make them ideal for use in electric cars.

The green revolution will take the demand for vanadium to the next level, and prices will respond accordingly.

So, how can you play the boom in vanadium?

Cornerstone Metals Inc. (CVE:CCC  OTC: CCCCF) – Developing North America’s Largest, Richest Vanadium Deposit

Share Price: C$0.58

Shares Outstanding: 32.2M

Market Capitalization: C$18.7M

Cash: C$2.6M

Total Liabilities: C$0.3M

 

Cornerstone Metals has US$4.4 billion worth of vanadium in the ground.

That’s 289 million pounds of V2O5 or 28.0 million tonnes averaging 0.515% of V2O5.



Cornerstone’s Carlin project is the largest resource among its peers in the United States – and the highest grade.

Largo Resources’ Vanadio de Maracas Menchen is 1.1 billion pounds and is the largest on the TSX and TSX Venture – but is located in Brazil, in production and thus largely de-risked.

The Carlin Vanadium project is located in Elko county, just 22 kilometers away from Carlin, Nevada. The project was discovered by Union Carbide Corp. in the 1960s, which completed surface mapping, trenching and 152 rotary drill holes in 11,133 meters of drilling.

In 1967, Union Carbide completed a resource estimate – which was then updated to 43-101-compliant standards in April 2010 by SRK Consulting.

However, we emphasize that the while the resource is robust – it will greatly be expanded upon.

For example, Cornerstone’s first drilling campaign confirmed and improved the continuity of grade and thickness of the high-grade near-surface vanadium unit. The program was highlighted by 47.56 meters of 1.08% V2O5. . .

 

 

As shown above, there are certainly many areas where Carlin’s current resource can significantly grow.

Based upon the results of this drill program, and with the review of historic data, Cornerstone Metals is now planning a phase-2 drill program, which will see between 50 to 70 ‘RC’ holes with the goal towards expanding the dimensions of the deposit before completing an updated resource estimate.

Moving Forward – All the Makings For At Least a Double

Cornerstone’s phase-2 drill program will begin in Q3 of 2018.

Speaking to management, Carlin will be fast-tracked right to a Prefeasibility Study (PFS), which will be completed in 2019.

Drill results from the coming drill program will act as significant catalysts, and we see Cornerstone’s value at least doubling as the market begins to realize how prolific Carlin truly is.

Cornerstone’s closest peer, Prophecy Development Corp. has almost an identical market cap – yet has a smaller, lower grade resource. . .

Making things more dramatic for vanadium – China recently revised the standard tensile strength of rebar products, which will see an increase in vanadium metal consumption by 30% – or 10,000 tonnes per year.

This will greatly exaggerate the United State’s need for a domestic supply – and the mining infrastructure doesn’t get any better than what’s in Nevada.

But most importantly – we need to mention the preliminary metallurgical tests results released this morning – what they showed are monumental metal recovery rates.

What the average retail investor needs to know that is many institutional investors, or the smart money, will wait for metallurgical test results before any sort of investment decision.

This is because recovery rates are often the stumbling block for any promising project. . .

But initial pressure leaching tests have achieved vanadium extraction levels between 80.2% and 83.6% – extremely strong numbers. These levels are already very impressive, but what’s important to note is that these rates will only get better.

The management is extremely excited about these results – stating it’s a major a breakthrough for their world-class vanadium project. 

 

To summarize – here are some highlights. . .

Attractive future vanadium supply/demand fundamentals

In a safe mining location

Enormous high-quality asset

Extremely cheap relative to intrinsic value

Attractive Recovery Rates

Quality Managerial Team

And significant resource expansion upside

All this and more makes Cornerstone Metals an asymmetric (low risk – high reward) opportunity on the improving Vanadium market. Since Cornerstone is the new entrant and they’re dirt cheap relative to their proven vanadium value – now is the perfect time for investors looking to build a position in vanadium.

 

Palisade Global Investments Limited holds shares of Cornerstone Metals. We receive either monetary or securities compensation for our services. We stand to benefit from any volume this write-up may generate. The information contained in such write-ups is not intended as individual investment advice and is not designed to meet your personal financial situation. Information contained in this report’s from sources we believe to be reliable, but its accuracy cannot be guaranteed. The opinions expressed in this report are those of Palisade Global Investments and are subject to change without notice. The information in this report may become outdated and there is no obligation to update any such information. Do your own due diligence.

 

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