Time for Jangada to set sail?
“…With the full Study incorporating the Project’s titanium component on the horizon, and the prospect thereafter of a detailed roadmap to production, this may be the right time to take a position in JAN…”
Prospective battery metals miner Jangada Mines (AIM:JAN) has maintained a relatively quiet market profile over the past year, continuing to work to define the potential of the company’s headline Pitombeiras Vanadium Titano-Magnetite (VTM) Project in South America. But with the publication of a full Definitive Feasibility Study (DFS) on the horizon that brings the possibility of moving ahead to production, is this a small cap energy transition prospect that the market has overlooked?
As we reported in our last update on JAN, the company is closing on a production decision at the fully-owned Project, which covers just over a thousand hectares in north-eastern Brazil, where exploration indicates vanadium mineralisation analogous to that of the Bushveld Complex (South Africa), the Skaergard Intrusion (Greenland), Maracas Menchen (Brazil), the Panzhihua layered intrusion (China), the Kachkanar massif (Russia) and the Windimurra Complex (Australia). Routes to market include Brazil’s Companhia Siderurgica de Pecém refinery and two major Chinese ports.
Defining the VTM Project’s potential
To recap on the company’s progress to date, JAN spent 2021 clarifying the extent of the Project’s VTM mineralisation, particularly over a structural trend underlying three targets, Pitombeiras North and South, and Goela. The work led to an upgraded Total Mineral Resource Estimate (MRE) of 8.26 Mt, with 62pc of the resource now classified at the higher confidence Measured & Indicated Mineral Resources category. In summary, the Mineral Resource classification stated Measured & Indicated Resources of 5.10 Mt at 0.46pc V2O5, 9.04pc TiO2 and 46.06pc of Fe2O3, and an Inferred Resource of 3.16 Mt at 0.44pc V2O5, 9.00pc TiO2 and 45.86pc of Fe2O3. A promising Preliminary Economic Assessment (PEA) forecast a post-tax Net Present Value (NPV) of $106.5m, a 317.8pc post-tax Internal Rate of Return (IRR), and three-month payback. Encouraging metallurgical test results indicated a ferrovanadium-rich concentrate containing a minimum of 62pc Fe, the benchmark for saleable FeV-rich magnetite concentrate. The extent of the Project’s titanium dioxide resource promises further value.
JAN went on to commission a DFS, and this spring published an an major staging post towards the full Study, a Technical Report prepared by Brazilian based GE21 Consultoria Mineral which the company said had de-risked the project, identifying ‘no legal, technical, or geological impediments to proceeding to mine development, construction, and production’. The Report, which, as a DFS could only include the 5.10 Mt in the Measured and Indicated resource categories, and not the 3.16 Mt in the Inferred category, forecast a ‘robust economics’ encompassing a 100.3pc post-tax IRR, a $96.5m post-tax NPV, CAPEX of $18.45m, and a payback time of 13 months. It estimated annual production of 186,000 tonnes Fe/V2O5 and 66,000 tonnes TiO2 at a production/processing rate of 600,000 tonnes per annum (tpa). A life of mine of approximately nine years would generate $415.2m total gross revenue. GE21 is finalising the Study to include the TiO2 resource: assessment of the Fe/V2O5 component has been completed to a DFS standard, but the TiO2 constituent remains at a PEA level. The final report will set out a comprehensive development route to a direct shipping ore mining operation embracing all three commodities. However, the defined route to production outlined in the Technical Report was sufficient for full offtake discussions to begin. JAN expects to secure in-country offtakers, thereby containing operations and transport costs. The company believes increasing global demand for TiO2 will strengthen the Project’s economics further, acting as a hedge against likely variations in the iron ore price.
JAN followed the Report with a shareholder Q&A providing further details on when the final DFS will be published. Acknowledging that evaluation of the Project’s titanium component to DFS standard takes time, the Q&A confirmed that the company had no plans for a fundraise, noting JAN has ‘a strong treasury with the last reported cash position of $5m as at 30 June 2021’ and that the Board ‘controls 42.7pc of the equity and would not want to dilute its position.’ The company’s most recent half-year report, to 30 June 2022, reported cash of $2.988m. Costs involved in advancing the Pitombeiras project and the sell down of the investment in ValOre shares resulted in the company making a loss from continuing operations of $0.418m, against $1.016m for the previous period. Overall, the reported total comprehensive loss for the reporting period was $0.992m (2021: profit of $0.921m).
The vanadium mega trend
Through the VTM Project JAN is seeking to break into a market serving a well documented economic mega trend: the development of storage batteries able to compensate for the intermittency of renewable power sources. Vanadium has long been used to strengthen steel, making its price somewhat dependent on China and other fast growing Asian economies. But it has acquired a new identity as a key ‘green mineral’ because it can be used as an electrolyte in redox flow batteries, which 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. JAN is hoping to join a relatively select set of vanadium suppliers, including Bushveld Minerals, Glencore and Largo Resources, all of which are ramping up production in a sector that currently depends for two-thirds of its supply on Chinese steel slag. Pitombeiras’s titanium, which has grades that bear comparison with those recorded by established VTM miner Largo Resources at its flagship Maracás Menchen site, also has potential: titanium alloy’s use in the aviation, industrial and medical sectors is forecast to drive a market worth more than $5m by 2024.
Though driven by the VTM Project JAN continues to review other opportunities in the battery metals sphere, and has a cluster of other interests. The company supplemented its Pitombeiras interest just last year by taking a stake in Fodere Titanium, now worth nearly 8pc, a UK green tech startup seeking to commercialise the production of titanium dioxide and vanadium from waste materials. Fodere has secured capital to begin building its first industrial production facility (which will have a capacity of more than 22,000 tonnes) and is currently in discussion with prospective customers from the titanium, vanadium, iron, and steel industries.
JAN also has a 0.72pc interest in TSX-listed ValOre Metals Corp, pursuing the palladium, platinum, and nickel Pedra Branca Project in Brazil, and late last year participated in a capital raising by AIM-listed Blencowe Resources, taking a £0.175m stake in a venture holding an emerging portfolio of key battery metals projects located in northern Uganda: the Orom-Cross Jumbo Flake Graphite Project in July 2022 delivered a Pre-Feasibility Study with a Net Present Value of $0.482m and an IRR of 49pc. The company considers this investment a medium term value proposition with strategic upside to both the graphite and nickel sulphide markets. JAN has conducted a desk top review of Blencowe’s assets and remain ‘very excited about the company’s prospects.’
JAN’s share price took a knock after the publication of the VTM Project’s Technical Report – which some investors were concerned indicated a delay in moving to production – from which it has still not recovered, falling from 10p to 6p. The price has since declined to 3.4p at the time of writing over the course of a summer in which the company has had few market updates to announce. JAN’s annual report, published in June, stated that ongoing assessment and the sourcing of funding for the Project ‘are matters the Board will be considering over the next 3-9 months. Whilst it is a strategy the Board is seeking to pursue, it is too early to say definitively whether the project will move into the production phase in 2022.’
The company’s ongoing work to define its potential indicate the considerable promise of a venture – with an NPV of $96.5m, an IRR of 100.3pc and $415.2m total gross revenue – positioned to serve one of the energy transition’s key markets. Current prices for JAN’s commodity basket are at significant premiums to those used in the evolving DFS. With the full Study incorporating the Project’s titanium component on the horizon, and the prospect thereafter of a detailed roadmap to production, this may be the right time to take a position in JAN.