Via a memorandum of understanding (MOU), Australian Vanadium (ASX:AVL) has signed an offtake deal for vanadium with Chinese steel and alloy company Win-Win Development Group.

The vanadium products involved in the non-binding MOU are to be used to make vanadium carbon nitride (VCN) for micro-alloy rebar production.

Win-Win is currently building a 5,000-tonne-per-year VCN production line that requires 7,000 to 8,000 tonnes of 98 percent vanadium pentoxide (V2O5) annually. The first stage will require 2,000 to 3,000 tonnes per year and is set to be operational by 2019, with the second stage docketed for 2020.

The vanadium is set to come from Australian Vanadium’s Gabanintha project in the Murchison province of Western Australia. It is currently in development, and the offtake agreement will help finance and create investment in the project.

“The addition of a substantial agreement with a steel and alloy producer creates a firm foundation with which Gabanintha can participate in the most established market for vanadium,” Australian Vanadium Managing Director Vincent Algar said in a statement.

“We look forward to continuing discussions around the financing and development of the Gabanintha Project,” he added.

Gabanintha’s resource stands at 179.6 million tonnes at 0.75 percent V2O5; that’s made up of a measured mineral resource of 10.2 million tonnes at 1.06 percent V2O5, an indicated mineral resource of 25.4 million tonnes at 0.62 percent V2O5 and an inferred mineral resource of 144 million tonnes at 0.75 percent V2O5. The asset also has a magnetite high-grade zone of 92.8 million tonnes at 0.96 percent.

In addition, the company recently uncovered cobalt, nickel and copper in a sulfide concentrate at Gabanintha, unlocking the potential for further sales through battery metals. In early 2017, Australian Vanadium found significant cobalt assays from drilling in fresh rock containing vanadium in magnetite.

At close of day Wednesday (June 27), Australian Vanadium’s share price was sitting at AU$0.041. Its share price is up 115.79 percent year-to-date and 141.18 percent in the last year.

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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.