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Part 4

In western markets we are also seeing a very weak market. In fact we now have prices in the west that are below Chinese prices. It's a very unusual situation . I think the very high price in the end of last year did result in some substitutional loss of market share in the west and as a result of that the major suppliers particularly into Europe are facing a situation where off take and contract customers are not as high as they anticipated and so they are dealing with a problem of placing the last few % of production into a relatively thin spot market and that has caused the western price to actually to move a bit below the Chinese prices. It's unusual given that outside of China there's an annual deficit of about 8,000 tons of vanadium and so normally the availability of Chinese exports drive the western markets.

So today we are in a position where vanadium and niobium are basically at par in terms of their costs for the steel maker. We do look for some rebar producers that moved to niobium in the second half of 2018 to come back to vanadium. The inventories of rebar in China are declining. Rebar production today in China has reached a high point. Rebar production is more than 20% above the levels in February, so the inventory of vanadium at the steel mills are being rapidly depleted and we do expect to see these mills coming back in a big way to start sourcing more vanadium.

So in summary we do think we have a very opaque market here. It's very difficult to understand what's going on and in this environment rumour can take on a life of its own and we do believe that the perception that niobium will replace vanadium in high strength rebar is causing the current weakness in the market and we expect that very soon the market's going to wake up to the fact that the consumption of both vanadium and niobium are increasing dramatically in China.

Part 3

Last year in China we had about 40 million tons of grade 2 rebar. The revised standard eliminates grade 2 rebar and now in theory all of that grade 2 rebar must be produced to grade 3 standard. The revised standard also eliminates the possibility of sending quench and tempered steel into this market. We don't know how much quench and tempered steel went into the market last year but circumstantially it looks like about 10,000 tons of vanadium consumption per year had been impacted by the use of quench and tempered steel in this market. So we fully anticipate that today the mills have started consuming more vanadium and that the grade 2 and the quench and tempered steel is going to be and is being replaced by steel that's alloyed with either vanadium or niobium. As we go through the numbers if we make the rather extreme assumption that half of the grade 3 rebar could be produced using niobium we come up with an analysis that suggests vanadium consumption in China should increase from 36,000 tons of pure vanadium in 2018 to 44,000 tons of pure vanadium in 2019. At the same time niobium consumption in China is forecast in this scenario to rise from 25,000 metric tons of pure niobium to 40,000 metric tons of pure niobium.

The fact that China produces almost no niobium means that imports are a very good proxy for consumption. Import data is readily available so it's easy to see the growth of niobium imports and therefore niobium consumption in China. Far less obvious is the impact of the new situation on vanadium consumption given the fact that China's historically a net importer of vanadium so the internal supply demand changes are not readily visible. Today in China rebar production's reached an historical high point. Inventories of vanadium built at mills in late 2018 are being depleted. It's my view that both consumption of vanadium and niobium are occurring at record levels at Chinese steel mills. We do believe that once the mills have exhausted the inventories built in late 2018 we are going to see a significant increase in buying from the Chinese steel mills.

We do believe that we are going to see the price very soon move back above this $15 per lb V2o5 support level and we do think that there's going to be a very turbulent environment today in China this year given the situation. Also it's important to note that today vanadium prices in China are below niobium prices and in that situation there's no incentive to deal with the operational issues associated with using niobium in this application.

Part 2

What we can see from the data is what we have is an environment where consumption is ahead of production. Vanadium prices at $15 have very strong support level but what we saw January through March saw the price rise from $15 to about $17 on the back of a tight market situation, before we saw the price suddenly start to collapse again. In late March it became apparent that the Chinese steel mills were not ignoring the new standard as evidenced by rising imports of niobium which is the substitute for vanadium in some cases in this application. Significant increase in niobium imports led to a second industry rumour. Obviously the standard was not being avoided or ignored or there would not have been an increase in niobium imports, but the high import levels of niobium in January led some people to believe that niobium would completely replace vanadium in high strength rebar.

It's clearly my view that this speculation is incorrect, metallurgically that's an impossible outcome and I think that this misconception pushed the price down to the point we have now. If we very briefly look at metallurgy, both niobium and vanadium impart higher strength on steel but they do it through very different metallurgical mechanisms. Vanadium is very predictable, it's very easy and it is the best solution for this application. In some cases, if we have the right metallurgical understanding, if we have a reheat furnace with the ability to get the billets up to 1200c, if we have a high powered rolling mill and if we are producing rebar smaller than 25 mm diameter it is theoretically possible to use niobium rather than vanadium. The use of niobium requires a controlled rolling practice that leads to higher energy useage, lower throughput through the mill and will result in higher quality issues, but it can be done in some cases.

So what we really need to understand is what's going on in terms of niobium and vanadium consumption in China. If we look at the latest data available it will suggest that in grade 3 rebar 38% of the rebar is 25mm in diameter or larger and therefore can not be produced with niobium due to the metallurgical limitations. It's also the case that grade 4 and grade 5 high strength rebar in China must use vanadium. There's no question about it. So the new standard has in effect done two things. It's eliminated loopholes that allowed people to send quench and tempered steel into this market advertised as grade 3. Quench and tempered steel does not meet the standard for elongation and it will not perform well in seismic activity. When this use of illegal quench and tempered steel was discovered a research project by the Chinese Iron and Steel research institute was initiated. It was discovered that there were some steel mills sending quench and tempered steel into the market and calling it grade 3 rebar. The revision of the standard is designed to solve that problem.

Part 1

Largo transcript May 2019

Terry Perles on Vanadium market. (From 12 minutes)

I would like to start just looking back over 2018 and a bit of a recap on where we've been. Looking at 2018 vanadium production totalled just more than 89,000 tons of pur vanadium while consumption of vanadium was about 97,000 tons of pure vanadium. So in this year 2018 we saw significant deficit and global inventory drawdown. In 2018 vanadium prices as reported by MetalBulletin publication "in warehouse Rotterdam" duty not paid basis started the year at $9.75 per lb V2o5 and peaked at $29.15 per lb V2o5 in mid November before falling to $15 per lb V2o5 at Christmas. Then from January to late March 2019 prices rose from $15 to $17.75 per lb V2o5 before a second downward movement began taking the price down to today's level of $8.45

Fundamentally vanadium production continues to lag demand and the situation is expected to persist for several years. Given the fundamental situation the market right now is very difficult to explain. Clearly the data shows that there's not a tremendous amount of support for vanadium prices above $15 per lb V2o5 and very high levels above $15 we start to see the loss of market due to substitution and we also see some high cost new sources of production coming to the market. For example the Chinese stone coal mines and energy fuels extracting vanadium from their retention ponds. So the price has moved from $29.15 in November down to $15 was not a surprise although the speed at which the downward movement occurred was a bit if a surprise.

During the second half of 2018 Chinese steel mills built inventory vanadium in advance of the implementation of the new standards effective November for high strength rebar, and this pressure helped push the vanadium price up to a very high level. In November / December with vanadium prices at extremely high levels and the mills having built some inventory spot buying was very weak in China. We have a very opaque market here. Some people interpreted the weak spot business as a reflection of the Chinese mills ignoring the new rebar standard and I believe this perception caused the price to move back down very rapidly by Christmas to the $15 level.

I'm well aware of that Catastrophic. I ignored the childish part of your post as I had no desire to make you look bad LOL

Hi RK. I don't really pay much attention to the iron ore project. Since FM said we need prices above $100 per ton and the price fell well below that I concluded that vanadium was the focus. I believe that still to be true.

However the Resource Update of 07 Feb 2013 listed the total PQ Resource as 752 million tonnes.

http://www.lse.co.uk/share-regulatory-news.asp?shareprice=BMN&ArticleCode=sjpq4i4j&ArticleHeadline=Resource_Update__Bushveld_Iron_Ore

There is of course the possibility of phosphate from the overburden which could make the economics more attractive.

http://www.lse.co.uk/share-regulatory-news.asp?shareprice=BMN&ArticleCode=qsk6yqyv&ArticleHeadline=Potential_Phosphate_Resource_at_Iron_Ore_Project

http://www.lse.co.uk/share-regulatory-news.asp?shareprice=BMN&ArticleCode=9hi2sqrs&ArticleHeadline=Phosphate_Maiden_JORC_Mineral_Resource

Regards. Pdub.

GKP haha.

That's an oil company.

It was operating in Kurdish part of Iraq if I recall. To be honest haven't looked at that since making a bob or two in 2013 / 14.

If you think that BMN is like GKN you really are a beginner haha.

Who have you in mind fizzydrink?

Ninvestor someone with 4 million (or more) shares here is

a) very likely to have a deep understanding of BMN and what it's sp may be worth in years to come,

And

b) very unlikely to be a "panic" seller!

cant see this as a pi selling.

Calamari congratulations.

I am delighted that you now accept that there is legitamcy to Mr Perles point about stocks being depleted in China and holding back V price. It took a long time but we got there.

I am fascinated by your claim "that I was correct". Your point was about manipulation. Whereas Mr Perles gave a good account of the various (ie more that one) factors affecting V price. Stockpiles are one and feed into simple market supply demand balance. Niobium substitution was another, etc.

Anyway happy to have helped you gain a better understanding of the V market. It is complex and I certainly struggle to get my head around it.

Do read the TP transcript again. It is interesting at the very least.

Regards. Pdub

Looking at the prices at the times they could be sells. That would explain the so movement. If buys someone got very good prices!

Haha that could be catastrophic for someone SOTRR!

SOTRR agreed. In the last Q update the production costs at Vametco were under $19 per kg V I believe. Very profitable even at the current V price.

It's worth remembering that a couple of years or so ago we could only dream of V being at this price!

Calamari you really don't read people very well do you. I'm not upset with your nonsense. Far from it. I love challenges like this. I thrive on it because most derampers have weak arguments that are easy to shred.

However I must ask you not to lie about what I have or haven't said. That's a rather unpleasant thing to do. Your reference to me avoiding answering your question about what FM may or may not have said. I refer you to my answer 13.15:

"As far as FM is concerned he does not talk about the sp. He focuses on the business and let's that do the talking. You can either see that as a weakness or a strength. For me it's the latter as we don't suffer the hype and nonsense associated with many AIM companies, and believe me I could list a few."

In anticipation, I will accept your apology.

As for did TP say when he expects the V price start to rise, well you surely have carefully read the transcript . You should know.

By the way I must thank you. Without your assistance today I doubt very much whether there would have been much discussion about the excellent commentary on the V market by TP. However from your comments it is clear that not everyone has fully taken in the details so I am tempted to post it again later this evening. That may also help people to make up their own minds about who to trust ... pi's on this bb or TP.

Alfa if you have time could you post your thoughts on Terry Perles' credentials and why his opinions deserve some attention?

I believe you know more about him than most of us.

Many thanks.

Regards. Pdub.

Calamari you are still huffing and puffing against an intelligent, well connected and well informed expert in the field of vanadium, yet you offer nothing but unsubstantiated opinion.

Your entire argument rests on undermining one of the experts on vanadium and vanadium markets. What are your credentials? I suspect they are nothing more than mine. Just a pi playing the stock market. The difference is that I recognise that I am not an expert working in the field of vanadium and therefore am open to the information provided by those that are.

You on the other hand, reject everything that expert States if it doesn't fit your pet theory ... a theory based upon exactly what knowledge, experience, contacts, etc in the world of vanadium. Precisely none.

Your posts are full of could do, might do, etc but no factual evidence at all. All based on nothing at all.

I suggest that you accept that there are those that know more about the world of vanadium than you do and take note of what they say. And stop this ridiculous line of argument about what they didn't say or don't know. Unless you can write a substantial essay on the vanadium market backed up with facts and proper evidence then it is time to accept that there is much we can learn from the likes of Terry Perles. It's why companies like Largo turn to him for advice.

How is your trading going petertee?

Worth remembering that whilst in 2018 production of pure V was 89,000, consumption was 97,000 tons. I would imagine any stockpiling is limited and thus the supplies from this source currently entering the market from this source will eventually be fully depleted.

If anyone is kidding themselves that it is quick and easy to increase vanadium production by expansion or from new sources, consider how difficult it has been for BMN to achieve this.

If the low V price if stimulating VRFB development we may see a quite a rapid increase in that structural deficit.

Today's sp is of course disappointing, but 12 months from now?

Correction "... less than EXPECTED demand through niobium substitution"

Calamari as far as niobium is concerned I believe you raised the issue of how demand for niobium can rise (vanadium substitution) and price fall. Interesting.

However there are perfectly plausible explanations for this. We know Chinese imports have increased from import data. Let's assume global demand up then. Logically niobium should be rising in price.

Well .... not necessarily. There are a number of factors that we don't know. Most obvious is how much stockpiled niobium existed at the producers. Also what capacity the producers had to increase production quickly to match demand. The rapid decline in V price seems to have taken everyone by surprise. It would be unreasonable to suggest everyone except niobium producers! Their production may have been geared up to taking more of the vanadium market but the fall in V price may have resulted in less demand through niobium substitution. Thus we may have overproduction of niobium, in spite of rising demand.

Don't forget TP also referred to a perception that niobium would replace vanadium. Whilst not fact it may certainly influence producers and possibly contribute to overproduction.

Now of course without the numbers I can't say this has happened, even though it is a perfectly reasonable scenario. It would counter your point and would be simple market forces in action.