QEM (ASX:QEM): Building something special with JCVEP

Near the northwest Queensland town of Julia Creek, QEM (ASX:QEM) has a 250km2 project covering one of the single largest vanadium deposits in the world today. The project (JCVEP – Julia Creek Vanadium and Energy Project) has a significant resource, offtake products with potential to serve several industries, the promise of significant financial terms as outlined in a Scoping Study last year and significant government support.

The rundown of QEM’s JCVEP

JCVEP has a 2,867Mt vanadium Resource with average content of 0.31%. It also hosts a contingent in-situ oil resource. It has 6.3MMbls of oil in the 1C category, 94MMbbls in the 2C category, and 654MMbbLs in the 3C category. QEM’s plan is to produce high purity vanadium pentoxide (primarily for battery electrolyte) and transport fuel, via two distinct process routes from the same ore body.

The company anticipates annual production of 10,571 tonnes of vanadium and 313M litres of fuel, and there are several potential applications including batteries, steel and liquid fuels.

The most recent Scoping Study, completed in August 2024, envisaged an operation around 10,600 tonnes of V2O5 and 313 million litres of transport fuel (such as low sulphur diesel) p.a. for 30 years. The Study placed a Net Present Value on the project of A$1.1bn post tax at an 8% discount rate, after A$791m in capital costs. The IRR is 16.3% and the payback period five years.

Significantly, the mineralisation in this Study is sourced from one open pit, with potential for a further 100 years of resource available within the current tenement boundary. The existing resource is very close to surface – within 65 metres of surface.

Why QEM’s JCVEP matters

QEM’s JCVEP will be a major source of vanadium as well as liquid fuel, commodities that Australia produces very little of.

Vanadium is classed as a Critical Mineral and is a valuable commodity – arguably the world’s most versatile. Vanadium has unique physical and chemical properties that make it unique and strong, including a high melting point of 1910 degrees, excellent weatherability, and malleability. It is commonly used in steel, giving it additional strength, and it can also be used in batteries, specifically Vanadium Redox Flow Batteries (VFBs).

Make a battery with vanadium in the electrolytes (substances that allow electrical current to pass between the cathode and anode of the battery), and the battery produces 78% less CO2 cradle to grave than a typical lithium battery and 99% of a VFB can be recycled.

Moreover, it can be discharged and recharged more than 100,000 times without any loss of performance, which beats lithium hands down. Unlike lithium, that same battery can scale up to whatever size is wanted simply by adding bigger tanks of electrolyte. It can then release the power whatever pace you need, unlike conventional batteries, where greater storage generally means greater power.

For all these reasons, vanadium is recognised as a critical mineral by many governments around the world, including Australia, the US, Japan and the EU. As noted above, the Queensland State government designated the entire Julia Creek/Richmond area as a Critical Minerals Zone because of the amount of vanadium in the ground – there are seven known projects there at various stages of development, but none are operating mines (yet) (Figure 10). Geoscience Australia estimates 8,100kt of Economic Demonstrated Resources (EDR) and 2,948kt of Vanadium Ore Reserves.

Liquid fuel will be important too. With only Lytton refinery and Viva’s Geelong refinery, Australia relies predominantly on imports for its fuel. This has happened at the same time fuel consumption has grown across Australia. If QEM can realise the potential of Julia Creek, it can address the demand and contribute towards Australia’s fuel security.

What is there to look forward to?

A Pre-Feasibility Study (PFS) will begin in 2025, followed by a Bankable Feasibility Study (BFS), and Final Investment Decision (FID) by around 2027. Production is anticipated to commence in 2029.

Those will be the biggest steps, but there is potential for upside as the company undertakes exploration and processing test work at the project. Further government support could help as well. JCVEP already enjoys strong support from the Queensland State Government, which has designated the entire Julia Creek/Richmond area as a Critical Minerals Zone and dedicated hundreds of millions of dollars for clean energy jobs in battery technologies and manufacturing.

Our friends at Pitt Street Research have just released a report on QEM. The report observed that QEM is trading at just 1.43% of JCVEP’s NPV, and that it would be more appropriate for it to trade at 7.4%, in line with peer Richmond Vanadium Technology (ASX:RVT). A 7.4% NPV would equate to a market capitalisation of $82.1m and $0.43 per share under the current number of diluted shares on issue.

Under Pitt Street’s NPV of the project (which is $761.8m), this would be A$0.30 per share. Of course, it is plausible that the NPV in later studies could change.

We encourage those interested in finding out more about QEM to check out Pitt Street’s report.

QEM is a research client of Pitt Street Research.

What are the Best ASX Stocks to invest in right now?

Check our ASX stock buy/sell tips