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Energizer Resources (EGZ.V) - developing one of the world’s largest vanadium

Full Report by Objective Capital , Dec 09, 2010 download full report
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Key Points:

  • The Green Giant Project is Energizer’s sole focus
    Energizer now holds a 100 percent interest in the 3,600 km2 Green Giant property in southern Madagascar. The unique character of the significant vanadium deposits on the Green Giant property occur as oxide and primary mineralisation. At a 0.5% V2O5 cut-off the oxide and primary zones of the Jaky and Manga deposits hold a total indicated resource of 49.5 Mt at 0.693% V2O5, containing 756.3 Mlb of vanadium pentoxide and a total inferred resource of 9.7 Mt at a grade of 0.632% V2O5, containing 134.5 Mlb of vanadium pentoxide. These indicated and inferred resources are based on drilling only 25% of the vanadium trend which extends across 21 kilometres of Energizer’s property.

  • Energizer is poised to capitalise on forecast growth in vanadium demand
    Developing Green Giant will enable Energizer to capitalise on the expected significant growth in demand for vanadium metal and become a leading, highvolume producer. The future market will be based on 1) steadily increasing demand from the steel sector over the medium term linked to construction industry needs in developing countries and 2) the potential for rapid growth in adoption of Vanadium Redox Battery (VRB) technology to provide power storage capacity in the developed economies.

  • Vanadium has properties essential for enabling new battery technologies
    The redox storage battery is entirely dependent on the properties of vanadium. Energizer’s management also expects strong stepped demand growth from the ‘Electric Revolution’, which development of this long term, high capacity storage battery technology is creating. Vanadium/lithium batteries have been proven to provide the optimum solution for long range automotive applications. Other transformational technologies also herald increasing demand for vanadium.

  • A significant vanadium market development
    With the expected commercialisation of vanadium redox energy storage systems, vanadium industry experts predict a shortage of the high purity vanadium supply required for VRBs. The potential of this technology was underlined by the recent majority-stake acquisition of VRB manufacturer, Cellstrom GmbH, by the renewable energy subsidiary of the German conglomerate Gildemeister. Gildemeister manufactures a range of redox batteries for use in power grid storage and smoothing applications for emergency supply during power cuts. Demand is expected to rise quickly from industrial and private users in areas with unreliable power supply systems as the advantages of Redox power storage become more well known.

  • Increasing vanadium demand cannot be met by existing suppliers
    The vanadium market needs new sources of supply, even to meet the forecast demand for vanadium steel. The annual increase in demand of circa 5,000 t V per year until 2015 can only be met by bringing new mine capacity into play. The scale of Energizer’s deposit appears to be ideal for low cost mining and processing and could meet much of the anticipated increase in demand beyond 2015.

  • The Energizer project may be strategic to future vanadium supply and vanadium economics
    A low production and process cost should place Energizer low on the vanadium cost curve giving it strong leverage in future vanadium markets.

  • Our assessment yields a core base-case valuation of C$0.52
    We assess Energizer’s current value at C$0.52 per share, with significant potential for appreciation with development success. Continued development suggests valuations as high as C$2.65 per share in the post-permitting environment under more optimistic scenarios.

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