Windimurra Sees Supply Shortfall in Vanadium to 2012 (Update2)
By Jason Scott
bloomberg.com
May 30 (Bloomberg) -- Windimurra Vanadium Ltd., a Western Australian mining company aiming to provide 8.5 percent of the world's vanadium, said power shortages at rivals in South Africa will keep global supply short until at least 2012.
``Supply of vanadium will remain tight,'' said Iain Scott, chief executive officer of the Perth-based company, predicting a benchmark price of $50 a kilogram of the metal used to strengthen steel. ``And that's factoring in a best-case scenario for South African producers, which is no guarantee.''
Power cuts have reduced vanadium output in South Africa, the world's largest producer, with state-owned utility Eskom Holdings Ltd. predicting electricity shortages will peak in 2012. Prices of the metal have doubled this year, pushing Windimurra's shares up 43 percent in the same period.
Windimurra is spending A$450 million ($432 million) on the Australian mine, previously owned by Xstrata Plc. Mechanical output is scheduled for the first quarter next year, Scott said.
Windimurra rose 6 cents, or 2.1 percent, higher to A$2.91 at the 4:10 p.m. Sydney time close on the Australian stock exchange. The benchmark index dropped 1 percent.
The mine will produce about 5,500 metric tons of vanadium annually year from 2009, with global supply averaging an estimated 60,000 to 65,000 tons, he said.
``Even if vanadium went down to about $30 a kilogram, Windimurra would still be profitable,'' Scott said yesterday in an interview. ``But we don't think that will happen. We see a shortage of vanadium in 2008 and 2009, and a market imbalance going through to 2012. Vanadium demand will grow between 7 percent and 8 percent a year through to 2012, which is basically equivalent to one Windimurra coming on-line every year.''
Xstrata, Highveld
In March, Xstrata said it will cut second-quarter deliveries of vanadium by as much as 1 percent because of power shortages in South Africa. Highveld Steel & Vanadium Ltd., the world's biggest vanadium producer, said in February that power outages posed a ``considerable threat'' to future output.
Most South African mines were shut for five days in January after Eskom couldn't meet electricity demand because of plant maintenance, coal supply problems and a government delay in taking a decision to expand capacity.
``The market is very sensitive to power supply issues,'' Scott said. ``Large South African miners are facing up to 15 percent restrictions to their power supply.''
Windimurra raised $127 million last year selling debt. Noble Group Ltd., a Hong Kong-based supplier of raw materials, has agreed to buy all output from the mine over its 20-year life.
To contact the reporter on this story: Jason Scott in Melbourne at jscott14@bloomberg.net
Last Updated: May 30, 2008 03:15 EDT |
