Vanadium miners ready, hoping for green tech boom

TORONTO Thu Nov 10, 2011 9:23am EST

TORONTO (Reuters) - A little-known metal used in steelmaking could emerge as a game-changer for battery technology, raising the prospect of an investment boom like the one that lifted rare earths out of obscurity last year.

Electric cars fueled by vanadium could one day travel hundreds of miles on a six-minute charge, while renewable energy sources like wind and solar could use vanadium batteries to rival coal in terms of reliability. The technology could boost demand for the metal by more than 35 percent in the next two or three years, analysts say.

"The potential to make vanadium into a multi-billion dollar metal resides in the battery business, and in particular in the energy storage business," said Chris Berry, founder of House Mountain Partners, a research firm based in New York.

Vanadium's special attributes have been known for decades. In small quantities it can double the strength of steel, and Henry Ford used it to build his Model T, a car that revolutionized the auto industry.

The metal is also a critical additive for modern construction, and there is no substitute for it in making alloys used by the aerospace industry.

But its potential in energy storage really makes vanadium interesting. Vanadium flow batteries charge in a flash, their capacity expands and they last for decades.

The batteries have been around since the 1980s, but there are only a few examples of the technology in a commercial setting. The battery is bigger than in other mass storage systems, and also more expensive, at least for now.

That may change if the early scramble to secure a stable supply of vanadium gains traction, much like the recent dash to find new sources of rare earths, the 17 metals that go into products as diverse as Apple iPhones and Toyota's Prius cars.

"Vanadium has all that rare earth-type opportunity, yet it has a very stable base on the steel-strengthening side," said American Vanadium Chief Executive Bill Radvak. "It's just about to take off in the next year or two."

That bodes well for the small Canadian miner and the handful of other companies that specialize in mining the metal. American Vanadium, Largo Resources, Apella Resources and Energizer Resources are developing deposits around the world.

The stocks have retreated along with the broader market, but analysts say the group could catch a wave if investors latch on to the growth story that many see in the offing.

"You're seeing dollars flow into this technology, so there is some good promise in it going forward," said Jonathan Lee, an analyst with Byron Capital Markets. "In the long term, the demand will rise."

GOING GREEN

Renewable energy like solar and wind are becoming part of the power mix as nations look to reduce reliance on fossil fuels, but power generation depends on favorable weather.

Mass storage batteries such as the vanadium redox flow battery can help by capturing the energy as it is generated, storing it and releasing it as needed.

China is investing heavily in the technology. Prudent Energy recently raised $30 million to try to reduce the cost of its vanadium battery systems, while China Strategic Holding is spending nearly $300 million to build the world's largest vanadium battery, according to industry reports.

"Once you get energy storage into the whole smart grid technology, it can largely reduce the cost and lead to the faster implementation," said Liyu Li, a chemist with the U.S. Department of Energy's Pacific Northwest National Laboratory.

"With just a little more work, the battery could potentially increase the use of wind, solar and other renewable power sources," said Li. "But we need to make sure the cost is acceptable compared with other technologies."

VOLATILE PRICES

At present, vanadium prices tend to surge when steel demand is high and plummet during economic downturns. The volatility is a major deterrent for battery producers.

This has American Vanadium, which owns the Gibellini deposit in Nevada, thinking outside the box.

The company wants to partner with battery makers rather than simply selling them raw vanadium, offering the battery maker a supply at a set price, and giving miner a percentage of the higher-value battery products.

"We're putting ourselves out there as the domestic, secure supply," said Radvak. "We really want to work with the battery companies to capitalize on that, it's a value-added product."

Analysts estimate demand for vanadium in mass storage and electric vehicle batteries will hit about 20,000 tonnes a year by 2014. Steelmaking and aerospace demand is expected to grow from about 60,000 tonnes to 70,000 tonnes in the same period.

With current production dominated by China, Russia and South Africa, securing vanadium supply in the Americas has become a focus for end users.

Largo has signed an off-take deal with Glencore, where Glencore can buy all the vanadium it produces at its Maracas deposit in Brazil for six years.

"From a North American perspective, we are almost 100 percent dependent on imports of vanadium," said Berry. "If you can't access the raw material, then the supply chain doesn't exist."

DRIVING CHANGE

The dream for the future centers on using the supercharger metal to change the game for electric cars, much as the vanadium-using Model T changed the auto sector.

"People are worried about how fast can they charge batteries," said Lee. "One of the benefits of the vanadium phosphate battery is that it can charge and discharge more quickly than others."

German start-up DBM Energy has made a lithium vanadium car battery that it says can travel more than 600 kilometers (375 miles) on a single charge and recharge in just six minutes from a 240-volt source.

That means an electric car would charge in around the time it takes to fill up a conventional vehicle with gasoline.

By comparison, the current front-runner in electric vehicles is GM's Chevrolet Volt, which has a city driving range of 80 kilometers (50 miles) and takes about four hours to charge from a 240-volt source.

But the vanadium car battery technology has not been proven on a commercial level, and if rival batteries using cheaper metals can achieve similar results, vanadium batteries would no longer have any advantage, say analysts.

Still, car-makers like BYD and Subaru have plans to produce electric vehicles using vanadium batteries.

"It's still quite aways away, but there is growth potential there," said Lee. "As supply comes online, you'll see a lot more companies look at using vanadium."

(Editing by Frank McGurty and Janet Guttsman)

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