QEM (ASX:QEM) Presentation, FNN Online Investor Event, May 2021

Company Presentations

QEM Limited (ASX:QEM) Managing Director, Gavin Loyden provides an update on the company's flagship Julia Creek vanadium and oil shale project in North Western Queensland, including the decision to appoint a project management specialist for a Green Hydrogen Development on site to service the transport and fuel needs in the region.

Thanks Clive. Let's jump straight in and next slide please. I won't bore your readers with a disclaimer, we can get to that a little bit later. But let me start with an overview of a QEM's Julia Creek Project. The project is based up in North West Queensland within the North West Minerals Province. We're targeting the dual commodities of transport fuels, vis a vis, diesel and vanadium pentoxide. And we can do that from the one resource base. We have a hydrogen component to the process as well, which I'll unpack a little bit in a moment. Transport fuel's very topical at the moment, you may have heard the Federal Minister, Angus Taylor talking about the lack of fuel security in the country or avoiding the question of lack of fuel security in the country, maybe. But obviously the government is looking for solutions and we hope to be able to provide some of those in the future. We've got a globally significant resource, 2.7 billion tons with vanadium at about 0.3 and about 783 million barrels of oil in situ in the shale itself. Vanadium is now defined as a critical mineral by both the US and Australia and now European governments as well. And we've got a team that they can deliver.

Next slide please Clive. That team consists of John Foley as our Chairman, myself, Daniel Harris. Daniel is one of the owners and directors of US Vanadium, which was one of the highest purity developers of vanadium, oxides and products in the US and the founding member of Vanatech and also sits on the board of AVL as well. Not many people in the world more knowledgeable than Daniel and his partner Terry Perles in the US and it has been an absolute bonus to have him on board. And Dave of course provides some of the earliest stage financing and support.

Next slide, please. Quick snapshot with the overview. You can see where R&D phase has been tracking over the last 12 months, but obviously we're seeing some light at the end of that tunnel now. Good support from directors with over 2 million shares purchased on market by directors. None of which have been sold into the market so that creates a good alignment between management and shareholders.

Next slide please. The project itself. The key facts, we've touched on the size of the resource. It is a significant resource. It's a shallow oil bearing shale, which is mineralized with vanadium. We're in a tier one jurisdiction, close to all infrastructure and services. In fact, running right through the top of the tenement area. And the method that we're going to use there is a novel method that we've been developing for the oil extraction and I'll talk a little bit more about that in a moment. It will be a standard open cut method, very shallow resource, low strip ratios, and a very environmentally friendly approach that we're taking, particularly when you're talking about or oil production.

I'll take the time now, Clive, just to go through a short video. Just to let people know exactly where we are, which gives a bit more of a visual representation of where we sit. So this is from a fly through that we created a little while back. We're just going to fly down into Julia Creek now so that will give people an understanding of where this project is. As I mentioned, it's within the North West Minerals Province and also the newly designated Eastern Resource Development Corridor from the Federal Government. So as we fly into the site here, you'll see the four tenement areas appearing. You can see that we're very close to Julia Creek. The site of the project is only a few kilometres out, but the centre of the projects about 15 kilometres. Julia Creek's serviced by an airport there. You can see now the main road and rail starting to appear in the vision. That's the Great Northern Railway and the Flinders Highway. Now this is the connection between Mount Isa and Townsville, the port of Townsville.

 It's about 600 k's to Townsville, about 250 k's going west to Mount Isa. And as we track down the road and rail here, you'll see, just appearing on your left-hand side some of the older workings from where the shale starts to break through the surface and then it progresses to depth as we go further south. You can see that appearing on the left-hand side there now. So this is just moving up now toward the top of our tenement areas. We'll take a bit of a pivot round here at the moment and reorientate to a north, south direction. But you can see that all of the access to those infrastructure facilities are right there on the doorstep, literally. As we pull back, you'll see the tenement areas. Not a great deal of foliage out there unfortunately. They did have a little bit of rain recently, which has greened it up since these images were taken. But not a great deal of growth going on out there at the moment. And we're only have about five landowners to deal with within this project area as well.

So you can see at the bottom of that, the CopperString Project, that's being measured at the moment. And if we go back to that next slide, I'll speak to that a little bit further. Thanks Clive. There is that tenement area highlighted showing now the highlighted in green is the CopperString network, which runs right beneath our project, as well as the existing power opportunities that are available to us on the site as it currently stands.
 
Next slide, please. Let's talk a little bit about the hydrogen process. People have asked me whether it's a pivot away from what we were originally doing. The answer to that is no. We will be using hydrogen within our processing facility, but what we've noticed is, is obviously the market developing and strong input from government and from investment. So we thought we'd bring this aspect of the project to the fore. We've begun some studies with DNV Australia to look at the wind and solar. We're starting to get some of that information fed back to us now so we have plenty of capacity there, over a gigawatt of solar and a gigawatt of wind available to us. And we'll be releasing those reports over the coming weeks.
 
Now this is a project that we're looking to understand the market. So we've also got some market research going on at the moment to try and give us a feel for what the scale of existing markets and potential markets might look like over the next one to two years. And that'll allow us to look at potential scale. We'll obviously need more scale as we go forward with our own project, but we think there's a market developing rather quickly. In fact, we've had unsolicited approaches for offtake agreements at this very early stage, which we're a little bit reluctant to get involved in, because we think we need a little bit more work to do. But we're starting to put some meat on the bones here pretty quickly now.
 Next slide please, Clive. As I mentioned, some of the support around this is very encouraging, particularly from Queensland State Government, who now named their minister for hydrogen, Mick de Brenni. Very supportive, both at a state level and there's plenty of federal support as well.

Next slide please, Clive. I highlighted some of those policy environments here, some of those components to the environment, I should say, including that map there that shows that Eastern Resource Development Corridor. And this is a priority area for developing projects such as Julia Creek. Vanadium obviously is a new economy metal and a new energy metal, and has now got significant placing on the critical minerals list. And there's a great deal of statewide support coming at the moment to help get the vanadium projects off the ground here in Queensland. There's plenty of support in Western Australia with the magnetite process. Ours a little bit different, but we're getting very strong support from government for that. And of course, fuel resilience, as we mentioned earlier. There's a great deal of consternation around the availability of fuels here in Australia at the moment. And I'll unpack that a little bit more as we go forward as well.
 
Next slide please. I won't harp too much more on the government bodies, but needless to say, there is quite a good deal of money around at the moment for projects such as this. Particularly given that we've got the duel commodities of both vanadium for the renewable energy sector, primarily, as well as the steel sector, of course, and of course fuels, which are something that we need in Australia going forward.
 
Next slide, please. Now I'll just let viewers know of some of the uses of vanadium. I often have these discussions. Some people are fairly well versed these days, but not everyone, so I'll just spend a little moment on this. Primarily vanadium is used in the strengthening of steel. It provides higher degrees of strength, flexibility, rust resistance and corrosion resistance, oxidization, that sort of thing. It adds high strength to weight ratio for alloys. And it has other industries outside of the metallurgical, which are the chemical and catalysts. But very interestingly and particularly topical for us as the moment is a lot of vanadium is used in hydrogen storage and pipe work at the moment because it prevents embrittlement through, as you might know, hydrogen is very easy to escape out of different systems, given that it's number one on the elemental table. Vanadium is a crucial component in reducing that embrittlement and increasing the longevity of that pipe work.
 
Smart glass is another interesting component for vanadium at the moment. I've learned a little bit more about thermochromic fenestration recently, which is the process that vanadium changes the context of glass and reduces infrared radiation penetration by a massive amount. Great for energy efficiency in buildings and you're going to see a lot more of that going forward. But obviously the very interesting part of what's going on in vanadium industry at the moment is for the renewable sector, through the use of vanadium redox flow batteries. They're the preferred solution, particularly for large scale energy storage. You will see them in other combinations with lithium these days, as well as not an us and them thing. But there's a lot less, I should say, CO2 output in the production of a VRB as opposed to lithium batteries. And this is when we're talking about some of the scalability of some of these larger projects.
 
Next slide please Clive. What are the advantages of ERB? Well, primarily it's the number of life cycles. They're basically endlessly recyclable. You're only using the one element in the battery. It's got a low self discharge, low environmental footprint. It's fully recyclable, meaning that you can actually recycle the vanadium back into other industries or into other batteries at the end of the life. It can discharge and charge simultaneously, which is completely unique in energy storage and it can release energy instantly. So it's great for that grid support, for load leveling, for off-grid solutions. And it has a very small environmental footprint.
 
Next slide, please Clive. These are some of the rollouts that have happened around the world over the last couple of years. This is a slide from Vanitec from last year. You'll see Australia there at about seven. That's increasing as we speak. There's another new one going in South Australia at the moment, which is significantly larger than the ones that have been applied already. That one's about a six gigawatt project, I believe. But you can see that this roll over's starting to take shape, and it looks to be a very significant market going forward.
 
Next slide, please Clive. The vanadium market itself. Well, globally production was around about 102,000 tons last year. It's growing rapidly. There was a little bit of a shortfall at the moment, given the growth in the Chinese steel industry. Obviously they came out of COVID a little bit quicker than the rest of us and produced over a billion tons of steel last year. Record breaking amounts of steel. And last year they were actually a net importer of vanadium for the first time in quite some time. You can see the tracking of the graph there on the bottom left in regard to pricing. It's come off a little bit. I think it's around $7.50 at the moment, but I think we'll see that accelerating over the course of the next 12 months and certainly into the future as the rest of the world wakes up from the COVID experience and gets back to work. There's hardly any steel being produced in the US at the moment. As that ramps up, you're going to see that impact occur on vanadium. And of course the growth in the battery sector as well, which isn't slowing down. In fact, it's accelerating. So it'll be a very interesting year for vanadium pricing going forward.
 
Next slide, please Clive. We touched a little bit on fuel resilience. Now, this is a really hot topic issue at the moment, and it has been for quite some time, to be honest. As members of the IEA, we're mandated to hold 90 days supply. I think the government was talking about having 80 days of supply currently at the moment. Once you unpack that a little bit, most of that is ships at sea or ships haven't left for sea yet. So a little bit opaque on the figures there, but nevertheless, we do have a very low supply, particularly for products like diesel, which we import a hundred percent at the moment. Throwing money into the refining sector will help in the short term, but we think we've got a longer term play here and we're hoping to bring that to the fore to ease some of these problems.
 
Next slide please Clive. The project design. We're looking at the inputs of the renewables here to come into the process stream. We'll be producing hydrogen on site, green hydrogen. We're using that in the facility. That'll give us the transport fuels that we've mentioned. We'll have some extra hydrogen available to meet market demands as they grow and produce vanadium pentoxide and potentially some cement and building products at the end of the day as well.
 
Next slide, please Clive. Now, this is the interesting part. We've spent quite a bit of time in the R&D phase in the laboratory. We've completed that work now. We've just completed the costing and engineering for the pilot plant. Just putting the final touches on that, and we'll be making some announcements about that in the very near future. We've engaged with CCAP for market research for us, as well as developing our forward strategy and helping assist with it with some grant applications at the moment. So we hope to have this pilot plan underway very shortly. And as I say, I'll be making some more key announcements about that in the very near future. That pilot plant will us the added benefit of having more vanadium material to play with. We've got a few little optimisation tests that we'd like to test at a larger scale, and that's the reason for this pilot plants development.
 
Next slide please Clive. So in conclusion, we think we've got the right project at the right time with all the right components. We've got a significant global resource so we've got plenty of material in situ. We've got defined processes now for extraction, and we think that certainly at the right time with the hydrogen component and very importantly for the fuels and vanadium as well as we seek to grow the economy coming out of the COVID.
 
Next slide please, Clive. I think I might've gone a little bit over time, so I'll leave you there with my contact details. There are some appendixes to this slide deck as well, and I'm sure Clive will be able to provide that to anyone who's interested later on this afternoon. Thanks again for your time and thanks Clive. Thanks to FNN.


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