Wednesday, September 27th 2023

Ironveld PLC

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A green light shortly for Ironveld?


“…But if all goes to plan Ironveld will be able to move forwards with plans to put what seems a highly promising prospect, serving a dynamic market, into operation….”


After some setbacks prospective vanadium, High Purity Iron (HPI) and titanium miner Ironveld (LON:IRON) is set for a busy 2022 planning the commencement of operations at its magnetite resource in the Bushveld, a South African metallogenic province rich in mineral deposits.

Ironveld holds full mineral rights over some 28 kilometres of outcropping Bushveld magnetite with a SAMREC (South African Code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves) compliant ore resource of approximately 56 million tons of ore, with grades of 1.12pc vanadium, 68.6pc iron oxide and 14.7pc titanium dioxide. A Definitive Feasibility Study published in April 2014 confirmed the project’s potential as a vertically integrated vanadium mining and processing business, prospective for vanadium slag (for which an offtake agreement is in place), and for HPI and titanium.

Opening a new source of supply for critical metals


As discussed in several TMS articles over the past year, vanadium is one of the most interesting energy transition metals. A tough, ductile, silver-grey material, vanadium is in perpetual demand as a steel alloy, but is also used in the aerospace sector, for chemical catalysts, and, increasingly, in vanadium redox flow batteries that facilitate the storage of energy in industrial and utility scale applications. Flow batteries offer the revolutionary promise of electricity grids wholly powered by means of non-carbon energy sources, allowing surplus power generated by solar and wind to be stored and released when required, compensating for the intermittency of renewable power sources. Vanadium’s exceptionally long life makes flow batteries better suited for heavy-duty use in grids than better known lithium-ion batteries: vanadium electrolyte can reliably charge and discharge for decades without degrading. Flow batteries open the prospect of electricity grids wholly powered by renewables, by-passing the requirement to rely on gas-fired power plants to provide back-up when solar and wind are not available.

The world currently depends on China for its vanadium, which supplies two-thirds of global demand by extracting the mineral from steel slag. Ironveld is aspiring to join a select group of vanadium ore miners: just now vanadium is only recovered as the primary product from three mines worldwide – two in South Africa and one in Brazil. The steel market’s demand for vanadium is growing fast, predicted to expand at a compound annual growth rate of around 2.5pc over the next five years.

Titanium is another highly sought after transition metal. With its silver colour, low density and high strength it is ideal for enhancing steel’s resistance to corrosion, and for light but strong alloys suitable for spacecraft and aircraft applications. Titanium powder is a primary agent used in 3D printing and additive manufacturing, and has pharmaceutical and medical uses. HPI is in demand as a water atomised powder, commonly used in the automotive industry, for powder metallurgy, and in magnetic materials.

Ironveld says that direct access to a captive magnetite mine, and the metallurgy manufacturing techniques it proposes to use, would give the company significant competitive advantages. Most powder metal producers have to buy in raw materials, which typically account for up to 70pc of production costs. Ironveld would join the 20pc of producers supplying vanadium direct from an ore body. The company notes the project ore body is near surface, enabling relatively inexpensive, simple, open cast mining, which would use powder metallurgy manufacturing techniques that Ironveld says offer many potential advantages over traditional ‘ingot metallurgy’ processes. Components produced this way can have complex shapes – spur and helical gears for the automotive industry for example – that would be difficult or impossible with traditional manufacturing techniques. They are significantly lighter than cruder equivalents yielded by traditional techniques, and a wider range of metal compositions is possible, unhindered by the chemical, thermal and containment constraints imposed by older processes.

Ironveld is led by CEO Martin Eales, a former CEO at London listed Rainbow Rare Earths Limited, where he oversaw the company’s path to becoming the only rare earths producer in Africa, and a past Managing Director at RBC Capital Markets, which advises natural resource companies on fundraisings and other transactions. Technical Director Dr PJ Cox, who designed South Africa’s narrow reef opencast mining method, is a long-time managing director of Goldline Global Consulting (Pty) Ltd, an engineering consulting company. The company’s Non executive Directors include Giles Clarke, founder of Majestic Wine and Pet City, and a former Chairman of the England and Wales Cricket Board.

Securing a funding deal


Ironveld had entered the 2020-21 financial year seeking to secure financing to allow it to commence operations through a deal with the Inclusive Investment Group (IIG), with which it had signed an option agreement in March 2020 worth £2.7m. After IIG declined to pursue the agreement in November 2020 Ironveld undertook a placing to raise a gross £1.15m. This allowed the company to continue as a going concern until it announced plans last October for a major new investment with Grosvenor Resources Pty Limited, a newly formed South African private company seeking to expand its investments and mining operations in the country.

Under the proposed agreement Grosvenor will invest £5.6m in Ironveld through a a subscription for 561,505,950 new ordinary shares at 1p per subscription share. Following issue and allotment of the new shares Grosvenor will hold 29.9pc of Ironveld’s enlarged share capital. The agreement would also allow Grosvenor to nominate two non-executive Directors to Ironveld’s board. A few weeks later Grosvenor increased its proposed investment to £8m, planning to take a 51pc stake in Luge Prospecting and Mining Company Pty Limited, one of Ironveld’s subsidiary companies, for £2.4m. Luge holds exploration rights for two farms, Luge 697 LR and Non Plus Ultra 683 LR, both prospective for magnetite ore. Ironveld, which  secured mining rights for the property from South African regulators last summer, will retain a 23pc interest in Luge.

With the prospective Grosvenor investment Ironveld says it is ‘fully funded to commence development of its mining and processing project’, and that subject to completion, the company ‘intends to commence mining in 2022 and will look to secure access to the most efficient and cost-effective smelting facilities for processing of its magnetite ore. This may involve construction of new facilities on site, acquiring existing facilities or paying for access to third party facilities’. Ironveld expects Grosvenor’s funds will be ‘remitted early in 2022’. The company’s most recent update on the transaction earlier this month said that it ‘continues its close dialogue with Grosvenor in respect of the progress of Grosvenor’s own funding arrangements necessary to complete the previously announced Equity Subscription Agreement and the sale of the Company’s interest in Luge … the Company will provide further updates in due course.’

Waiting for the green light


Ironveld’s share price soared on news of the prospective Grosvenor deal, doubling from 0.6p to 1.2p, taking the company’s market cap to £13.75m. The price has drifted down somewhat to 1p at the time of writing, but is still up by about 50pc over the past year. Clearly, conclusion of the agreement is crucial: Ironveld’s most recent final results, to 30 June 2021, reported a cash balance of £0.3m. But if all goes to plan Ironveld will be able to move forwards with plans to put what seems a highly promising prospect, serving a dynamic market, into operation. Prospective investors should look out for confirmation of the Grosvenor deal, and further value triggers through the year as Ironveld works out and implements its production plans.