Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Silver Elephant Mining (TSX: ELEF) has announced the results of a preliminary economic assessment (PEA) for its Gibellini vanadium project, demonstrating an after-tax internal rate of return (IRR) of 25.4% and net present value (NPV) of $127.9 million.
The Gibellini project is designed as an open-pit, heap-leach operation in the Battle Mountain region of Nevada, about 25 km (15 miles) south of Eureka. Once in production, it would become the first primary vanadium mine within US borders.
Silver Elephant recently proposed to spin off the vanadium project, along with its Minago nickel project in Manitoba and various royalty investments, as part of a reorganization of the company to focus on precious metals exploration.
According to the PEA, the Gibellini project will have an initial capital cost of $147 million (including contingency) and generate cumulative cash flow of $260.8 million (after-tax), with a payback period of 2.5 years.
Over a projected 11-year mine life, average annual production will be 10.2 million pounds of V2O5 at all-in sustaining cost of $6.04/lb, with a strip ratio of 0.18 to 1 (waste rock to leach material).
Should it be selected by the Bureau of Land Management, Gibellini would be the first mine in the US completely powered by renewable energy
The PEA base case assumes a vanadium price of $10/lb, and Silver Elephant said the project is positioned to benefit from a rising price environment. A 30% increase in the vanadium price to $13/lb, relative to the base case, translates to a 42% IRR and a $295.4 million NPV, the study showed.
As of the last business day prior to the PEA release, the European price of vanadium pentoxide (98%) was $9.60/lb.
The PEA mineral resource is based on estimates for the Gibellini deposit as well as the nearby Louie Hill and Bisoni McKay deposits, totaling 131.34 million pounds of contained V2O5 in the measured and indicated categories, plus 227.81 million pounds in the inferred category.
In July, Silver Elephant submitted its notice of intent with the Federal Register to prepare an environmental impact statement (EIS) for the Gibellini project.
According to the company, the project conforms to the current US administration’s green energy initiatives, and the EIS record of decision is expected in early 2022. Should it be selected by the Bureau of Land Management, it would be the first mine in the US completely powered by renewable energy.
Vanadium was designated a critical material by the US government in 2018 due to its importance to the defense and energy storage sectors. There is currently no domestic production, with most of its supply coming from Russia, China and South Africa.
Silver Elephant says that a structural vanadium deficit is expected to occur by 2025, with the rising popularity of the vanadium redox flow battery.
The company’s shares surged 7.7% following the release of the Gibellini PEA. The nickel, silver and vanadium explorer has a market capitalization of C$53.3 million ($42.2m).
