AMERICAN VANADIUM CORP. (“AVC”) Bill Radvak’s AVC has made a few adjustments as of late to make sure his company survives the market’s current challenges. It appears the company has, much like a Chameleon, the ability to transform according to its surroundings and environment. Over the years we have seen American Vanadium transform itself from explorer, to almost a miner and now to a marketer of energy storage devices. We refer to this as survival instinct in the junior market space. Often those that place their company and themselves in a square hole, although they are round, do not survive. Will AVC ever get the Gibellini Vanadium Project in Nevada into production? The company has been touting this project for about ten years now and the previous owners before them, and the project hasn’t really gone anywhere. The technical study to date wasn’t exactly compelling from our perspective. The deposit is quite small, with production not lasting that many years after payback. Then why would one go to the expense of placing the hill in the desert into production? In the past while the company has undertaken a few small private placements we surmise to survive long enough so it can pull the company’s next ambitious plan out of the hat. This is quite evident in AVC’s news release wherein it says it is issuing 200,000 for services. We are also curious if there might be a problem attracting investors to buy into the company’s $150,000 private placement, the topic of AVC’s August 31, 2015 news release, as we can’t see any indication that the funds were ever raised or the private placement was completed and approved by the TSX.V.
On January 11, 2016 American Vanadium announced it entered into a Letter of Intent with DMG Mori to acquire its wholly owned subsidiary Guidemeister Energy Storage GmbH the manufacturer of the CellCube vanadium flow energy storage system. Think of this as long form for vanadium flow batteries. Note – Letters of Intent, and even more so, Memorandums of Understanding have a way of going poof. Our guess is that Radvak’s outlined plan of vertical integration may not fly. Vertical integration involving the building and operation of a mine, processing of your own vanadium electrolyte, the manufacturing of flow batteries and the marketing and sales of the batteries involves four or five specific and technically different industries. Is this not a little too far-fetched of an undertaking? We certainly would like to see Radvak pull it off, but even some of the world’s largest diversified industrials haven’t succeeded at that.
The most important pivot point for the entire vertical integration concept outlined by AVC will be hinging on the successful and profitable mining and processing of the Gibellini Vanadium Deposit in Nevada. Unfortunately the foundation for the plan has some concerning cracks in it. When the most recent Study was prepared and followed up with the 2011 Technical Study Amec mentioned using V2O5 prices of $12.59 per pound. Today V2O5 is trading at about $2.50 per pound. In their technical report it states the following:
“Based on the sensitivity work, the Project is most sensitive to V2O5 price and recovery (Figure 16-2), which is typical for most projects. With a 30 percent reduction in V2O5 price to $4.55 per pound, the Project NPV@7% decreases by 71 percent. Conversely, with a 30 percent increase in V2O5 price to $8.45 per pound, the Project NPV@7% increases by 74 percent. .”
“American Vanadium set the initial commodity price of $6.5 per pound V2O5 and project milestones based on an early internal assessment of the vanadium market and permitting requirements. “
“The pit by pit graph shown in Figure 16-1 was used to select an optimization surface to guide pit design. Pit 21, the revenue factor 1 pit formed at the base V2O5 price of $6.50 per pound of V2O5, is the breakeven pit and was selected to guide mine designs.”
This would indicate to that at $2.50 per pound the Gibellini deposit is no longer feasible to place into production. This would perhaps explain why AVC’s share price is so low and why management is having problems obtaining traction from their story.
Although the effort put in by AVC’s Radvak over the past 10 years has been laudable it appears the dream is rather inconceivable and perhaps undeliverable. But we are cheering AVC on any way as this company does find ways to move their share price around and may prove to be a good trade again soon.