Member Info for Daisan

Your maths is fine. Thanks.

The drill they have is capable of going further. I hope it does! I would like to see a true depth of 1000m.

coffeecups,

So I assume that you are somewhat sanguine about the impact of high Vanadium prices on VRFB uptake?

The Asianmetal prices suggested that the Chinese prices may be beginning to soften slightly (with the indication that FeV 50% was down a little overnight) and where China leads, other markets follow on this. So it wouldn't surprise me if we went through a period of consolidation. Heaven knows it needs time to cool off a bit!

The enterprise value is just the value that is applied to the business operations so needs to exclude cash elements.

One thing that occurred to me now that Vametco is generating so much cash is that, as every week goes by, BMN's enterprise value is decreasing considerably (bearing in mind that, for us, enterprise value = market capitalisation - cash + debt). To the tune of about $2.5m a week. BMN would have to increase share price by just under 0.2p per week to keep up with cash generation. Or about 5p by the end of the year just to stand still.

kevkan,

I feel the same. There is a different feel to these interviews. Moving on from the man with a vision that requires implementation to someone comfortable that their vision was correct and that they have executed and continue to execute to it. Beyond that, this is someone who is now leading an organisation that is generating formidable amounts of cash and has been doing for long enough to provide a cash buffer against anything that can be thrown up. The pressure is off to start but now shifts towards the pressure to achieve. He is obviously confident in his abilities to do so.

Alfacomp,

Without a doubt technologies tend to be hyped as the next big thing. The thing is, some of them are and more could have been had they found the right application that would have enabled them to become successful. Even the successful ones have to cross into the mainstream and this is frequently a painful process. For VRFBs it would appear that grid level is the application that may lead it to success.

BBN,

I am cautiously optimistic but also somewhat wizened through age and experience of new technologies. I have worked with several companies where the sheer buzz of anticipation was energising which only made the subsequent disappointment so disheartening. I would like to see VRFBs succeed and am sure that it won't be for the want of trying, by Bushveld and many others, should they not reach widespread adoption.

As regards the brownfield option, I tend to agree. I believe that it is either there or nearly so. I also think that the market will receive such an announcement more rapturously than the Vametco purchase for the simple reasons that the Vanadium price is so strong and that the company has proven success with a similar purchase. My one caveat is that, whilst I am sure that the deal will be good for BMN, it is unlikely that the terms will be as eye-openly good.

One further thing should be stressed. Whether VRFBs are ultimately successful or not does not dictate the success of BMN. BMN will be successful irrespective.

Dav3J,

'Chasm', 'Valley of Death', 'Trough of Disillusionment' all refer to the same thing I believe (the last is Gartner's).

Alfacomp,

Whether Graphene makes it or not, the interesting thing is the trying. Nothing more fun (or ultimately frustrating) than playing around with something new!

Interesting that this is the mood music now being played. A bit of stick and carrot on display? The game is not over yet but it was ever a long shot. I actually believe that the CGH offer is better for all concerned but you suspect that neither Centerra nor the government are going to be willing to take the plunge. Better the devil you know.

BBN,

The ones I was involved in were nowhere near the size or significance. But the principle is largely the same and if you look back through history you will see similar situations. A classic example is plastics which took a number of years to be adopted before usage exploded. Graphene is a current example since it was 'discovered' in 2004. My field is data analytics and you can see the same things happening in the likes of Hadoop, Big Data, Data Science, etc.

For those familiar with Gartner you will likely know their version of technology adoption, namely the 'Hype Cycle'.

Alfacomp/coffeecups,

I agree that the leasing model is the right way to go, that the buy back is probably just a stop gap exercise and that BMN/BE are likely to come up with a much better option to attract customers. The very fact that we are talking about such longevity in the product makes it both a challenge and an opportunity to construct an innovative financing package. We will know soon enough from BE.

In the meantime I suppose that we will have to grin and bear the high Vanadium price and the obscenely large profits we are making from it.

If you consider the projected production and supply imbalance for copper the outlook for prices is pretty good beyond this year. It would take an economic collapse to correct that imbalance (although clearly any kind of recession has at least a short term impact on copper pricing as it is generally seen as a bellwether for the economy and attracts trading accordingly).

If anyone wants to see what a severe supply/demand imbalance can do for metal prices, have a look at Vanadium. Whilst I don't expect a price reaction as severe with copper, I do think that prices could go much higher than people expect in the next few years to make more potential mines viable.

Alfacomp,

As we all know, at least in the short term, perception is more important than reality. The perception is certainly that lithium can do the job and, to be honest, finding out in 7 years that this is not the case will not alter that. In fact, in 7 years they could very well make the same decision!

I watched an interesting video this morning on why Graphene is not (yet) dominating the world. (The fact that my spellchecker doesn't recognise the word 'Graphene' may be indicative). The best quote is that a new technology does not have to be merely superior to the old technology it is replacing. It has to be massively superior. I understand that this is not completely applicable to VRFB v LiB as this is a while new space, but it will nevertheless be somewhat reflective of what VRFBs have to overcome.

Technology adoption is a fascinating area. For anyone familiar with this they should certainly be aware of 'Crossing the Chasm' by Geoffrey A Moore which is surely the bible when it comes to this area. In my opinion, VRFBs have not yet 'Crossed the Chasm' and require a substantial push to make it so. I have been involved with several technologies that were pre-chasm and know how difficult it is despite the encouragement provided by some customer wins. Sad to say, most of those technologies never made it across the chasm (despite or because of my involvement?). I would hate for this to be the case for VRFBs.

In my opinion a leasing model based on buy back in 20 years is stillborn. I would be amazed if any company that wasn't incentivised to do so would invest on the back of that offer. It sounds like the sort of offer inspired by technologists and CFOs rather than marketing and sales people. Perhaps they should think again and involve people who actually want to grow the market.

Alfacomp,

Thanks for that. From a personal perspective I would like to see it being taken up before I judge the efficacy of that model. If it really is a buy back at the end of life, I don't see much take up as that would still require an upfront capital cost. If repayment is in 20 years then that doesn't materially affect the economics. (As an example closer to our hearts, consider that in calculating NPVs anything greater than 10 years has little impact on the current value).

RazorShultz,

Only China's command and control economy is going to make that kind of investment decision and, even then, if the Vanadium price sky rockets they are likely to hold back as well. All western countries are driven by ROI, primarily in the short term! Whilst Lithium Ion is not as attractive as VRFBs at the grid level, it can do a job as has been marketed effectively by Musk in Australia. There is little doubt that soaring Vanadium prices will at least cause organisations to pause for thought.

Price paid (22.9p) suggests that you may well be correct.

I think that the likelihood is that VRFBs will take the hit. I see no real alternative for steel. Apart from the effort involved regearing for Niobium as a substitute for Vanadium, that would be an 'out of the frying pan and into the fire' situation as the market is controlled by one mine. There is little doubt that significantly increased demand for Niobium will send the price soaring past Vanadium in very short order. As such, steel manufacturers have to use Vanadium and can pass the cost onto their customers who will either swallow it or stop consuming. The net effect, of course, is that this ultimately slows growth, rebalancing the supply/demand equation until demand can come on stream. The question is at what price? And with what damage to the emerging VRFB market? Leasing models are at the design stage currently.

The Vanadium situation is fast reaching crisis levels. It is in nobody's interest for prices to rise massively. Yes, in the short term we will make massive profits but this is at the expense of longer term factors. Without a doubt it will at least delay VRFB take up. It will encourage the development of assets that would otherwise remain in the ground, boosting supply and likely creating an imbalance at some point in the future.

The chart from Asianmetal is interesting as it shows flat inventories throughout the second half of 2017 and falling inventories in the first half of 2018. Is this normal activity? i.e. is demand skewed to the first half of a year? (not clear to me why this is the case), has there been a steady increase in usage in 2018? (shift to new rebar standards ahead of November? VRFB uptake?) or is there off record stockpiling going on in anticipation of higher prices resulting from the new rebar regulations? (remembering that this is a trader controlled market so inventory could be held separately).

It was also mentioned previously that there is a shift to higher grade iron ore with the result that there would be less Vanadium content in the s l a g. This is very significant as it sets the price point higher when it would be economic to process this, meaning that there is even more headroom for prices to rise.

Something has to give here. Irrespective of price it is clear that there is just not enough Vanadium being produced currently. As it is very unlikely that new primary production is not coming on stream any time soon either the shortfall will come from China resuming production from s l a g (unlikely that they will do such a U turn) or usage will be stifled. Such a stifling will almost certainly fall on VRFBs as the steel market has more flexibility to deal with price shocks.

Not sure that the smart people particularly work for hedge funds. Well, not if you consider performance as a measure of 'smartness' as hedge funds have been under performing the market for years.