US Department of Defense closes purchase to store vanadium from Bahia
The United States Department of Defense has signed a five-year contract that could include the supply of vanadium produced in Bahia for the American government's strategic stockpile.
Largo, a company listed on the Toronto and Nasdaq stock exchanges, reported that its subsidiary Largo Resources USA has received a contract from DLA (US Defense Logistics Agency) to supply up to 2,876 tons of high-purity vanadium pentoxide.
The material will be destined for the "National Defense Stockpile", the American reserve of materials considered strategic for national security, defense and industrial mobilization.
The maximum value reported by the company is US$ 125 million. The contract, however, is of the IDIQ type, an acronym in English for indefinite delivery and indefinite quantity. In practice, this model creates a structure for the American government to place orders throughout the contracted period, but does not guarantee a minimum purchase quantity or full use of the financial ceiling.
According to the company, orders will have a fixed price per pound of V₂O₅, the chemical name for vanadium pentoxide, with a premium over the 2026 reference indices and a 10% adjustment per year thereafter.
Vanadium is a metal used mainly to increase strength and durability of metallic alloys. It has applications in steel, special alloys, aerospace, defense, the chemical industry and vanadium flow batteries, a technology used for large-scale energy storage.
In the case of the American contract, the focus is on high-purity vanadium pentoxide, a processed form of the mineral used as an input in more sophisticated industrial chains.
Largo's material is produced at the Maracás Menchen mine and chemical complex, in the interior of Bahia. The company claims the operation is one of the highest-grade vanadium mines in the world and the largest active primary vanadium mine.
The American stockpiling strategy is part of a broader policy to reduce vulnerabilities in supply chains considered critical. The National Defense Stockpile functions as a reserve of strategic materials that can be used in emergency situations, conflicts, logistical interruptions or the need for industrial mobilization.
DLA Strategic Materials, the area responsible for this type of contracting, states that its mission is to reduce or prevent the United States' dependence on foreign sources or single points of failure for essential materials in national emergencies.
Largo's entry into this system places a Brazilian mineral operation within the United States' defense supply chain. The company presents itself as a "Western-aligned" supplier in a concentrated market. According to the company, China and Russia account for around 80% to 85% of global vanadium production.
The contract takes place amid the dispute between great powers for chains of critical minerals. The United States, European Union and other allies have sought to reduce dependence on concentrated suppliers, especially in materials used in defense, energy transition and advanced industrial technologies.
Source: CNN