ASX-listed Vanadium Resources Limited’s (VR8’s) subsidiary Vanadium Resources (Pty) Limited (VanRes) has executed a binding magnetite ore supply agreement with metals and minerals trader China Precious Asia for the offtake of vanadium-rich magnetite direct shipping ore (DSO) from VR8's Steelpoortdrift vanadium project, in Limpopo.

The agreement follows the recently announced memorandum of understanding between VanRes and China Precious Asia and represents a significant step in VR8's strategy to move towards production and generate early cash flow from its fully permitted asset.

Owing to the absence of a standard spot price for this DSO product, VR8 says the agreement is conditional on VanRes finalising pricing terms with China Precious Asia by August 30.

Additionally, as mining operations have yet to begin, the agreement is subject to VanRes appointing a suitable mining contractor and ensuring that the DSO product meets the agreed specifications.

VanRes has agreed to supply an average of 100 000 t of DSO a month to China Precious Asia over a two-year period. In any month the supply volume may be adjusted by about 10% at VanRes's option.

The offtake positions VR8 to transition from a developer to a producer.

VR8 says it continues to advance its near-term cash flow strategy, which is aimed at unlocking value from Steelpoortdrift's vast Joint Ore Reserves Committee-compliant resource, while preserving the flexibility to pursue full-scale development as market conditions improve.

"We are pleased to formalise our partnership with China Precious Asia through a commercially binding agreement. With a practical and realistic framework now in place for initiating mining activities and product supply, our attention will shift to closing this transaction,” says VR8 executive chairperson Jurie Wessels.

He explains that this includes finalising a pricing mechanism for the product, given the absence of a standard spot price, and appointing a mining contractor.

The selected contractor will be responsible for establishing operations at Steelpoortdrift to extract, crush, screen and stockpile ore in accordance with agreed specifications.

Alongside the anticipated delivery of DSO to China Precious Asia, Wessels says negotiations with other potential offtakers are also progressing.

These may lead to the staged or full-scale development of beneficiation through concentration capacity, enabling the production of higher-grade ore.

“Concurrently, we are assessing commercialisation opportunities with entities that possess downstream processing capabilities.

“Collectively, these initiatives are designed to establish realistic pathways for generating significant operational cash flow for VR8 and its shareholders, without sacrificing our strategy of downstream expansion as soon as market conditions for vanadium improve.”

With the agreement now executed, VR8 is progressing toward the satisfaction of the conditions precedent. These include finalisation of pricing by August 30 and confirmation of both a mining contractor engagement and product specification compliance by November 30.

CONTINUED EXECUTION OF STRATEGY

As previously announced, VR8 says it is prioritising low-capital expenditure, fast-to-market production pathways that support self-funded development while preserving the option to pursue full-scale development once vanadium market conditions materially improve.

In addition to DSO sales, VR8 continues to assess other complementary initiatives in parallel.

This includes potential concentrator development and concentrator offtake and third-party processing options through the access or acquisition of existing market infrastructure, which could produce products such as vanadium oxide flake, vanadium pig iron and vanadium nitride.

VR8 says its ability to capitalise on near-term cash flow opportunities is underpinned by the large, high-grade, and shallow orebody at Steelpoortdrift, as well as the project's granted mining approvals and technical readiness.

“These unique advantages have allowed VR8 to adapt to evolving market conditions by pursuing complementary development opportunities in the region,” the company says.