Windamurra Vanadium (WVL.ASX)

Share |

My brother was telling me about this company. In fact I have known about this company for some time. Windimurra Vanadium Ltd control a very good vanadium project.
Vanadium metal is an additive used in steel, typically applied as ferro-vanadium. I have not researched it of late, but I can gather what stage it is at from my background and the price action where its at. The stock has rallied to $2.80 in March'06, and since then it has trended sideways in a consollidation channel between $1.50-$2.50. That makes a great range for traders, however its not a buy now, but is in fact likely to challenge its aupport. I see it going back to $1.50. Stocks in these trading channels can go sideways for a long time, but when they finally break out, they do very well. The longer they consolidate, the further they go, whether up nor down. The question is which. Honestly, I dont know. I've not looked at the vanadium market for some time. I doubt doubt prices are high. The issue is whether the industry needs another vanadium supplier given that Xstrata has alot of pricing power. I remember Xstrata acquiring a vanadium project years ago very cheap in the same situation. The market slumped, and they had a right of refusal to develop the deposit. They acquired the project at the bottom of the market. I would tend to be negative on this project, despite its obvious value. Why?
1. Xstrata could play a blocking strategy in the market by increasing capacity, using the forthcoming market weakness to acquire the project cheaply as it did before
2. Its a small market, and I suspect there are other projects around the world.
3. Demand will likely weaken in future, though I think Xstrata is the bigger issue.
The stock does need more research. Reluctant to do it because its not the type of stock to hold for the time. Anyway, it might be worth monitoring the price action.

---------------------------------------------
Andrew Sheldon www.sheldonthinks.com