Vanadium stock booms… but do we all get a little poorer for it?

July 24, 2018

This week respectable producer Largo Resources (TSX – LGO) have added 17.54% to their share value recovering above the $2 barrier for the first time. The financial boost turned heads as the company continues it’s comfortable 12 month rise and vanadium continues to exceed price forecasts. The company seems strong, their commodity of choice however, remains largely mysterious to many.

Largo Resources Share price, 1 year -
Largo Resources Share price, 1 year –

Into the boom…

Vanadium is a hard metal, some 91% of the c.85,800 tonnes used worldwide is used to strengthen steel, with 44% of this used in China. Steel requires lower purity vanadium. The remaining 9% of global usage requires a higher purity product, which Largo provide. It ends in hi-tech industries, including in aerospace composite materials, chemical catalysts and (you guessed it, everybody’s favourite) in home storage and electric car batteries.

German Steel Mill
German Steel Mill

The global steel industry remains steady with a reasonable 2% increase in demand year on year predicted until 2025 (TTP Squared Inc./Vanitec) which is easily met by current production targets. Global aerospace is hanging on an unpredictable cusp dependent on politics and the success of environmental initiatives to replace it.

While earlier this month the world record for most recorded flights in a day was smashed (200,000!), Dubai and America’s squabbling over airspace will dictate the immediate future of production for Airbus & Boeing. Brexit may ground flights for European airlines, (specifically British Airways) and, smaller producers (Bombardier) have had to fight over export tariffs, or simply end up being bought out (Embrear). It’s an exciting time to bank on aerospace, its a dangerous time to link it to vanadium demand.

Brand new Embrear E195-E2
Brand new Embrear E195-E2

Of course, we come swinging back to electric vehicles. While cobalt and lithium have dominated the press coverage during the surging tsunami of EV related information, vanadium is… Well… Cheaper.

While many may protest its market performance is related to its quality… Applied academic research (Uhrig, 2016) into the life-cycle and use of V in through-flow batteries (specifically in home storage, not EV) suggested:

LiBs outperform VRFBs for every studied household. The efficiency gap between the two technologies is too large to become compensated by the larger useable SoC range. However, in terms of cost, especially for larger capacities, the VRFB can be competitive compared to the LiB.

So, lets speculate, hypothesise and conspire shall we?

Largo’s corporate presentation proposes that some 25-30 MTV (Metric tonnes of vanadium) could be used (in batteries specifically) by 2025. The numbers seem reasonable and Largo are well led and likely to be successful in producing their targeted extraction. (I should stress, we have no doubt in the company!)

The question is: Why are we (as consumers, as well as investors) intentionally producing a low quality product?

The answer: with every technological revolution there have been winners and losers, but wherever they land, everybody has been forced to adapt to the changes. Right now I’m sure some of you lucky readers will have a shiny Tesla in your garage, a beautiful machine, well done! Many of us don’t. When the predicted switch from hydrocarbons finally comes, not everybody will have $80,000 in the bank for a decent model, not everybody can simply finance it either, a lot of people have only ever bought second hand and budget cars, they’re not suddenly going to have enough money for a shiny EV.

Apple produce the ‘S’ and Samsung pump out their ‘Young’ series, for their consumers who will always only be able to afford a lower quality product. Car manufacturers are absolutely going to produce knock off companies and models. The lesser product must exist and contain flaws, as it is the brand’s benchmark to justify investment in their more expensive product. (Surely American cultural marketing lesson 101.3 was: segregate classes and create inferiority complexes to drive sales…!?)

Will cheap knock off EVs join the decades waste in dumps like this one?
Will cheap knock off EVs join the decades waste in dumps like this one?

Runaround budget Vanadium EVs may be churned out like $1 shop cell-phone chargers in the near future to satisfy poorly planned government targets. These cars may be intentionally disposable with short life cycles, to encourage more subsidised consumption, more mining and the hungry dollar-eyed beasts that secretly lurk in all of us.

Those actions we took to save the environment around us, may simply end with a spree of EV pollution…

Could I be wrong?

Absolutely, these are not definitive suggestions, just afternoon teacakes for your inquisitive mind.

Technological advances happen daily in the world of EV. Vanadium tomorrow could wash the floor with other competitors and I could be locked in the back of a police Tesla for slander.

Is it worth thinking at length about the moral implications of our investments?

Yes. And especially if we’re going to call them green!

Written by Liam Hardy for MiningIR

Information regarding Largo Resources was taken from their July 2018 report

This article is a ‘food for thought’ discussion and should at no point be considered formal financial advice. Always seek professional guidance and consult a range of sources before investing.

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MiningIR hosts a variety of articles from a range of sources. Our content, while interesting, should not be considered as formal financial advice. Always seek professional guidance and consult a range of sources before investing.
James Hyland, MiningIR