Mark Smith speaks to Natalie Daniels about vanadium mining and why greater use of existing technology is needed in the mining sector.
Tell me about your background and career to date.
I have 35 years’ experience in mining. I am an engineer by education, gaining a BSc in engineering at Colorado State University, USA. I am also registered as a professional engineer and trained as a Juris Doctor (Hons) in law at Western State University College of Law, USA. I have been involved in executive projects in mining companies for around 16 years.
What have been your biggest career achievements?
Becoming the President and CEO of Chevron Mining Inc in 2005 was one of my memorable moments. I was very proud of my position and what we accomplished. After my time there, I became President and CEO of MOLYCORP. I was asked to come in and run the company in 2008. Between 2010–2012, we did an IPO and raised more than US$2.5bln in the capital markets and accomplished more than US$1.5bln in acquisitions. We created what was considered at the time the largest rare earth company outside of China. Currently I am running two companies. One is Niocorp, located in Nebraska, USA, supplying niobium, scandium and titanium. Then, in April 2015, I became President and CEO of Largo Resources, a mining company in Toronto, Canada, operating a vanadium mine in Brazil. Previously, they had been struggling with the operational ramp-up process of the mine. I was asked to come in and increase production and capacity as well as provide additional strategic direction for the company. We are now considered a reliable, high-quality, worldwide producer of vanadium. I hope that as we expand this only gets better and we exceed our current production rate of 800 tonnes/m. I think vanadium mining is going to become more important as the requirements for aerospace alloys, catalysts and vanadium battery business increases.
Why is the vanadium market expanding and do you see it continuing?
We do and there are two ways to look at it. One is based on the GDP rate of growth, which will see vanadium’s typical uses in the past 20–30 years follow GDP growth. The other explosive demand hitting the vanadium industry very quickly is in batteries.
These batteries are going to be a huge part of the overall push for the use of renewable energy sources. They are wonderful to use – you don't burn hydrocarbons to achieve production of electricity, but there is a limitation to renewables. When you couple those renewable sources with a vanadium battery, you now have something that can be used regardless of whether the sun is shining or the wind is blowing. The battery makes sure energy powers lights and electronics instantaneously. The number of requests for battery proposals is increasing and the market for vanadium for these batteries is already showing tremendous growth. The vanadium battery industry has used more vanadium in 2016 than its total use in all prior years. We are really starting to see a shift now. The manufacturers of these batteries predict they could require 25–35,000 tonnes of vanadium per year by 2020–21. Today, roughly 90% of the production is used in steel industries and 10% is used in the speciality, high-end applications. If the vanadium battery market comes on as strong as expected then it will create a lot of tension in the sector, our industry will need more material to meet these demands.
How has the drop in iron ore affected vanadium mining?
There are two parts of the steel industry that are important when you analyse the vanadium industry. More than 60% of vanadium produced in the world today comes from China by a co-product production system – when you use Chinese domestic iron sources to produce steel, they contain a small amount of vanadium in the ore bodies. As a result, when you produce steel from it you end up with a black slag material on top of the steel. Once you chip that away, vanadium can be recovered from the black slag. China continues to talk about rationalising their steel industry, and will produce less slag, which means less vanadium production. It enhances the supply and demand problem that we are going to see through early 2017.
China will be importing more iron ore from Brazil and Australia, because it is higher in quality and less expensive. But the Brazilian and Australian iron ore has zero vanadium in it. By virtue, we will be seeing more iron ore imports into China but less and less co-product of vanadium.
Have you seen a positive response off the back of this?
I think we are starting to see it now. Following the continued decline in price in 2015, there were a couple of vanadium producers that went into liquidation. That has caused a huge disruption on the supply side – around 12–15,000 tonnes of supply distribution has occurred as a result of these bankruptcies. It wasn't felt too strongly until recently but the prices of vanadium hit a 12-year historic low in December 2015. Since then, prices have increased by around 60%. We are starting to see a supply and demand reaction but I think it will be amplified when the contracts for 2017 are finalised. As people wake up to this lack of supply, we should hopefully see a market reaction.
How do you see mining technology developing in the future?
We need to make the most of existing technology in the mining industry – we tend to be a bit slower to adopt these things than we should be. Looking at the company Caterpillar, in terms of their monitoring and loading of trucks while they are in the field operating, they can send you a text message letting the driver know that something needs replacing. These are the things that will help us become more reliable producers and not have emergency shutdowns, which the mining industry is used to. Surveying is so much simpler than it used to be because the technology has been enhanced. We have to go through change in our industry to adopt it. We want to make sure we don't become complacent because technology is advancing every day and if it makes your job easier, why not use it.
Where are the best places to mine at the moment?
There are very limited sources of vanadium feedstock at the moment. The next highest producer, after China, is Russia, using the same slag-based process as China, as the domestic iron ore contains vanadium in it. The third area is South Africa. But, of course, production has reduced by 65% because producers are being liquidated. The next level is Brazil – we are the only Brazilian vanadium mine – and the fifth area is Venezuela, because the oil it produces has a high level of vanadium. However, the oil production in Venezuela is down by 50% and isn't an important source of vanadium any more. That is pretty much it for where vanadium starts in the ground and turns into a product. A lot of junior companies would like to enter the business but their ore grades just aren't high enough. Our ore grade is 1.17% on average. If you take a look at the others, their ore grades are between 0.1 and 0.2%, meaning they have to mine 5–10 times as much material as us to produce the same pound of vanadium.
How does vanadium compare with lithium in terms of potential, price and availability?
Vanadium batteries need to be competitive with lithium ion batteries and so the vanadium price needs to be set at a point that makes the battery performance equivalent from an economic standpoint, and we know where those price points are. I am watching the price of lithium very closely, which is growing quite dramatically at the moment because the demand for lithium has exceeded supply. As lithium increases in price, the better chance vanadium will have. I don't think one or the other is better or controls the other – both are needed. For example, a vanadium battery will never be used in the automotive industry or watches, but when you couple them with large surface areas that would be associated with wind or solar farms, vanadium batteries are probably the best source of battery because they can absorb and discharge energy faster than any other battery. We also know from testing that these batteries are extremely safe – you have no combustion problems. Lithium ion will still have its place in the market and I see very successful applications going forward for both batteries.