Financial outlook improves for American Vanadium’s Gibellini

Vancouver- American Vanadium (AVC-V) has significantly improved the economics of its Gibellini vanadium project in Nevada thanks in no small part to a much improved outlook for vanadium oxide prices.

A 2008 scoping study, based on US$5.90 per lb. vanadium oxide, concluded that the Gibellini project had an after-tax internal rate of return of 27%, a net present value of US$55.6-million using a 7% discount, and after-tax cash flow of US$117-million.

The company’s new feasibility study, based on US$10.95 per lb. vanadium oxide, bumps those numbers to an IRR of 43%, a NPV of US$170.1-million, and an after-tax cash flow of US$275.7-million.

The improved financials cut the capital cost payback in half, while the estimated the capital cost itself has only gone up by about US$8-millon to US$95.5-million.  Operating costs, however, have crept up from US$3.06 per lb. to US$4.10 per lb. of vanadium oxide.

American Vanadium has also significantly boosted the mining rate for the open-pit mine to roughly 8,700 tonnes per day compared with 5,000 tonnes per day for the previous study, corresponding to a jump from 8.4 million lbs. vanadium oxide produced per year for the older base case model to 11.4 million lbs. produced per year in the latest study. The strip ratio is still a very healthy 0.22:1 and recovery for the heap leach operation is estimated at an average of 65.9% combining the oxide and transition layers.

Reserves stand at 18.1 million proven and probable tonnes grading 0.302% vanadium oxide over the oxide and transition zones for 120.5 million lbs. of vanadium oxide. There are about 11 million lbs of measured and indicated resources outside the reserves, plus 12.9 million inferred tonnes grading 0.172% vanadium oxide for 49 million contained lbs. that were excluded from the study.

American Vanadium has not identified any significant environmental issues on the site, which sits about 400 km east of Reno near the town of Eureka in a remote part of Nevada. The company secured water rights earlier this year for the project. The heap leach operation should not use much water, but the company noted it was still a critical step for the project in the arid climate.

The company recently closed a $1-million offering, issuing 667,000 units at $1.50 each. Units contained one share and one-quarter of a warrant, with full warrants exercisable at $2 until Feb. 2013.

American Vanadium’s share price dropped 3¢ on the day to end at $1.30 with 46,000 shares traded. The company has a 52-week share price range between 53¢ and $1.95 and 27.3 million shares outstanding.