A closer look at Jangada Mines following high-grade vanadium deposit discovery
Jangada Mines (LSE:JAN) enjoyed a strong start to the week on Monday when it confirmed the presence of a high-grade vanadium deposit at its Pitombeiras West venture in north-eastern Brazil. The prospective asset complements the business’s flagship Pedra Branca platinum group metals (PGM) and nickel project, where it is aiming to release a bankable feasibility study in Q2 2019.
Despite an impressive rise from 1.6p to 2.7p this year on the back of this progress, the company’s shares remain below the 4.8p they sat at before last year’s resources market downturn. With a sturdy metal market backdrop and plenty of newsflow on the horizon, Jangada’s current £6.3m market cap could represent a decent buying opportunity.
Jangada shares have traded sideways toward 2.7p following the news of its discovery at Pitombeiras West, a large magnetic anomaly identified by Anglo American Platinum Exploration in 2015. The firm’s 300m of diamond core drilling intersected high-grade, near-surface vanadium and titanium mineralisation at four holes. This was consistent with expectations from a recently-completed surface sampling campaign. Meanwhile, its geological model is in line with other significant vanadium deposits being exploited in the northeast of Brazil.
The firm said that the results indicate a deposit with grades around three times higher than the 0.25pc in-situ grade at which 70pc of the world’s vanadium resources are currently mined. More specifically, a high-grade zone at the deposit contains an average of 0.83pc vanadium pentoxide, 11.6pc titanium dioxide and 48.4pc iron over a 12.8m average downhole width. Meanwhile, total mineralised intersections range from 26m to 46m wide with average grades of 0.57pc vanadium pentoxide, 8.1pc titanium dioxide, and 37pc iron.
Jangada said that preliminary metallurgical tests suggest that ore mined at Pitombeiras West can be processed by conventional methods used globally. Finally, it added that high-grade mineralisation commences at the surface and remains open at depth and along strike, suggesting the potential for significant resource delineation.
Brian McMaster, executive chairman of Jangada, said:
‘The findings of this drill campaign are highly encouraging, and further support our belief that we are discovering a potentially world class vanadium deposit. The mineralisation is consistent in width and grade, with high grade mineralisation starting at surface, all of which are very positive indications. The holes that we have drilled to date are shallow and have returned excellent results. The resource potential remains open at depth and along strike. If we continue to replicate these results in future holes then we will likely be holding a very substantial deposit.’
Although near, Pitombeiras West is distinct from Pedra Branca and gives Jangada exposure to a new metal market. Vanadium, traditionally used to strengthen steel, has seen its price soar in recent years thanks to its growing use in battery technology and a drop in output from China. It was the best performing battery minerals in 2018, with the average price of ferrovanadium for the year coming in at $81.2/kg. This was well over double the average price for the previous 12-month period.
Elsewhere, Jangada has enjoyed steady progress at Pedra Branca, where it is working towards completing a bankable feasibility study. Last November, an updated and optimised project process flowsheet identified a 32pc reduction in the project’s overall capex figure to $43.9m.
At the end of January, the firm then announced a 117pc increase in the site’s JORC-classified resource to 74.84MMts. This translated to a 103pc jump in palladium equivalent resource to 3.05MMts. The rise stemmed from a 48pc jump in PGM and gold resources to 2.17MMozs and a 104pc increase in base metal content to 362.6MMlbs. The latter was attributed to a newly discovered nickel sulphide resource, announced in December, that included 298Mlbs of nickel, 49.5Mlbs of copper and 15Mlbs of cobalt beneath the existing resource. Jangada decided to advance these nickel assets into the BFS.
A preliminary economic assessment (PEA) released in June last year gave Pedra Branca an NPV of $192m, an IRR of 67pc, and a 1.6-year payback period. This was based on average annual production of 64,000pz of PGM and gold over a 13-year life of mine. However, Jangada believes the new JORC resource could enhance this considerably, adding c.$110m to revenues with minimal additional capex costs
According to the firm’s BFS timetable, it has since been working on completing a hydrology study, legal, environmental, and social factors, and metallurgy test work verification. Once this has finished, it will begin mine design. This is the final stage of the BFS and is expected to complete in Q2 2019.
Against this backdrop of progress, the markets for Pedra Branca’s two essential metals are enjoying favourable supply/demand dynamics. According to Jangada’s most recent presentation, the use of palladium in autocatalysts surged by 450Koz in 2017 to reach an all-time high. Then, in 2018, total demand rose a further 8pc, leading a deficit in the market to widen to 800Koz.
Meanwhile, 2018 represented the third consecutive year of a growing supply deficit for nickel. This has stemmed from ongoing growth in demand for the metal in both the production of stainless steel and lithium-ion batteries. The growth of the latter is expected to continue over the coming years as electric vehicles are forecast to make up a growing share of the global vehicle market.
Alongside the strength of its projects, Jangada has several other strings to its bow. Importantly, it operates in Brazil, which, controversial new prime minister aside, is a broadly supportive jurisdiction for mining and foreign investment with plenty of infrastructure. Indeed, the mining sector currently makes up almost 7pc of Brazil’s GDP and the country recently became a priority for mining giant Anglo American. Elsewhere, the business boasts an experienced leadership team with plenty of skin in the game – for example, McMaster and non-executive Luis Azevedo own around a fifth of the firm’s shares each.
On the funding side, Jangada had $718,000 of cash as of 31 December 2018, according to its most recent interim results. Meanwhile, its admin expenses came in at $764,000 for the six months ended 31 December 2018, around $127,333/month.
“However, it is worth noting that, as part of its £2.1m fundraise package in September, the business agreed a draw down 12-month unsecured loan facility from Celtic Capital for up to $1m. It also established an agreement with mineral consultant Consulmet to pay for work undertaken at Pedra Branca, including part of the plant design and metallurgy study, in shares rather than fees. Both of these points boost its financial position considerably.
Jangada’s favourable location, management experience & support, and operational progress are a healthy combination. With the highly significant Pedra Branca BFS on the cards and a new vanadium project on the scene, the firm could be about to enter a critical period.
You can catch the latest video presentation by Jangada Mines here
The author was remunerated but does not hold shares in the company