Western Australia’s landslide state election result could be a watershed moment for vanadium’s elevation in the national energy conversation and the harbinger of a “massive opportunity” for ASX-listed Australian Vanadium, according to a leading local investment firm.
The re-elected WA government put a A$150 million vanadium flow battery (VFB) near transmission infrastructure at Kalgoorlie on its list of poll promises and the 50-megawatt, 10-hour battery is slated to be operational in 2029 if public funding can be supplemented by about $200 million of non-government finance. Mining major Rio Tinto said recently a staged implementation of vanadium and lithium batteries were a crucial part of Australia’s renewable energy roll out.
Promoting the proposed Kalgoorlie VFB in the lead-up to this month’s state election, the Cook Labor government said investment in the “Australian-first” project would spur investment in domestic primary vanadium supply and potentially downstream processing. It said WA had one of the world’s largest vanadium deposits being developed south of Meekatharra, with production slated for 2027.
That would be the cornerstone project of Australian Vanadium, which is working on detailed design of a VFB battery energy storage system, or BESS, under its Project Lumina outlined last November. The company is aiming for a financial investment decision on deployment of a utility-scale VFB BESS in the third quarter of this year. It has already produced high-purity vanadium electrolyte, a key VFB ingredient, at a Perth manufacturing facility.
Shaw and Partners says Australian Vanadium’s focus has been on derisking its eponymous flagship project in stages.
“This will derisk the development of the upstream project, demonstrate the economics of a VFB in the Australian market and generate early cash flow,” it said in its latest market note.
The proposed Kalgoorlie VFB would be the largest outside China and require circa-2% of global vanadium in a single battery.
“We recently modelled a theoretical 10-hour, 50MW VFB similar in size to the one the WA Cook government has promised and found the economics to be compelling,” the Shaw note said. “We calculated a net present value of $256 million and IRR of 12% for just one battery where the present value of the capital cost is $219 million.”
Shaw thinks the broader national energy infrastructure opportunity ahead of companies such as Australian Vanadium is huge, citing Australian Energy Market Operator Integrated System Plan (ISP) forecasts for long-duration energy storage (4-12-hour storage range) in the national electricity market to grow from 13 gigawatt hours in 2025 to 32GWh by 2030. WA’s Wholesale Electricity Market (WEM) is meanwhile predicting an additional 50GWh of growth to 2040.
“Combined, the NEM and WEM are expected to require an average of 7GWh of new installed medium storage per annum,” Shaw says.
“If the market reaches just 50% of this target, and VFBs achieve 25% penetration, the revenue opportunity for Australian Vanadium [AVL] is $240 million by 2030 at our derived revenue forecast [rate of] $307/MWh.
“Even 10% penetration will be enough for AVL to hugely benefit from the halo effect of a growing market.
“Further, under long-term 20-year-plus power purchase agreements contracted volumes for VSUN will deliver utility-like cashflow profiles, supporting debt and underpinning dividends. Minimal sustaining capex profiles will result in EBITDA margins above 90%.”
Shaw said lithium batteries had so far cornered the market for storage of one to two hours, as well as electric vehicles.
“Lithium batteries, however, are prone to catch fire, have a short 6-8-year useful life due to a degradation rate of as much as 5% per annum, cannot be recycled at end of life and are extremely expensive for longer durations,” it said. Suffice to say, VFBs offered superior safety and economics, hence their advanced, large-scale uptake in China and increasingly other markets.
Shaw said funding a VFB would be “similar in structure to funding a toll road”.
“Infrastructure deals tend to assume more debt because the nature of the project involves stable cash flows and less risk, much like a grid-connected battery,” it said.
“In our theoretical 50MW 10-hour battery as foreshadowed in Kalgoorlie, if the government contributes $150 million as promised, this reduces the non-government funding requirement to around $200 million. An assumed 50:50 debt-to-equity split will require $100 million in equity and $100 million from a financing syndicate likely to comprise a mix of domestic and international banks, as well as export development agencies and clean energy financing.”
Australian Vanadium had about $23 million in the bank at the end of 2024.
In September last year – ahead of the latest US election – the company received notification from Export-Import Bank of the United States of a potential $45 million line of credit that could be expanded if it increased its use of US goods and services. US Ambassador to Australia Caroline Kennedy said last year the US export credit agency was “looking for new projects in Australia”.
Resource Capital Funds (RCF) owns 18.1% of Australian Vanadium, which has a current market value of about $150 million.
