Vanadium Project’s Bankability Boosted by Tax Incentives and Electrolyte Production Scale-Up

Upstream Development and Approvals

Australian Vanadium Limited (ASX: AVL) continues to make robust strides in advancing its Australian Vanadium Project, a vertically integrated initiative spanning mining, electrolyte production, and energy storage. The company is deep into Phase 2 of its Optimised Feasibility Study (OFS), which aims to refine project economics and engineering design. With a detailed mine schedule and basis of design now established, AVL is on track to complete this critical phase by Q3 2025.

Significantly, the Western Australian Minister for Environment has granted approval for the Gabanintha Vanadium Project, a key component of the broader Australian Vanadium Project. This regulatory milestone, coupled with ongoing environmental baseline studies and permitting efforts at the Tenindewa processing site, underscores the project's advancing maturity.

Government Support Bolsters Project Viability

Government backing remains a cornerstone of AVL’s strategy. The project benefits from substantial federal grant funding under the Modern Manufacturing Initiative, with $24.5 million received to date. This funding has been instrumental in reducing execution risk by supporting detailed engineering, approvals, and stakeholder engagement.

In addition, the recently enacted Critical Minerals Production Tax Incentive (CMPTI) offers a refundable tax offset of 10% on eligible processing costs, enhancing the project's financial attractiveness. Complementing this, the Western Australian Government’s commitment to a reduced 2.5% royalty on vanadium products, down from previous rates, and a zero royalty on vanadium electrolyte further improve the project's bankability and incentivise downstream value-adding activities.

Midstream Electrolyte Qualification and Expansion

AVL’s midstream operations are progressing with promising developments in vanadium electrolyte production. The company is advancing product qualification with leading global vanadium flow battery (VFB) original equipment manufacturers (OEMs), having completed multiple rounds of sample testing, including pilot-scale samples for comprehensive evaluation.

To meet anticipated demand from Project Lumina and other utility-scale VFB battery energy storage system (BESS) opportunities, AVL has engaged Primero Group to explore options for scaling electrolyte production to gigawatt-hour levels. This strategic planning aligns with AVL’s vision of a vertically integrated supply chain from mine to battery.

Downstream Energy Storage Progress with Project Lumina

Downstream, AVL’s wholly owned subsidiary VSUN Energy is advancing Project Lumina, a scalable, turnkey utility-scale VFB BESS solution. The project remains on track to be financially investment ready by Q3 2025. Engineering efforts have focused on enhancing deployment speed, reducing capital costs, and increasing local content.

Importantly, cost estimates for a 100MW/800MWh VFB BESS indicate a Levelised Cost of Storage (LCOS) competitive with lithium-ion alternatives, highlighting the technology’s potential in long-duration energy storage markets. VSUN Energy has also submitted formal expressions of interest for over 1.2 GWh of storage capacity across multiple Australian states, signaling growing market traction.

Operational capability is further demonstrated by the Horizon Power pilot VFB installation in Kununurra, which has been performing reliably in extreme heat conditions since November 2024 without requiring air conditioning, an advantage over conventional battery technologies.

Financial Position and Corporate Developments

AVL ended the quarter with a cash balance of $17.1 million, including $9.3 million earmarked for eligible grant-funded activities. The company implemented cost-saving measures during the quarter, including staff reductions and discretionary spending cuts, to preserve cash reserves while maintaining strategic momentum.

High-profile visits from federal and state government officials, including Treasurer Dr Jim Chalmers and WA Premier Roger Cook, underscore AVL’s growing prominence in Australia’s critical minerals and renewable energy sectors. These engagements highlight the government’s interest in supporting AVL’s domestic supply chain strategy and accelerating vanadium flow battery adoption.