Ivanhoe Electric’s 90%-owned subsidiary, VRB Energy, has executed a binding term sheet with a subsidiary of China’s Shanxi Red Sun via its subsidiary VRB Energy System (Beijing). . 

The agreement outlines the binding framework for the formation of a joint venture (JV), with Red Sun (a private investment group) owning 51% and VRB Energy (a VFB player) owning 49%.  The transaction is due to close in Q4 2024. 

Red Sun will purchase shares from VRB Energy for US$20M in cash, payable in two equal tranches.  Red Sun will also complete a capital increase of US$35M through 2025 into the JV through the issuance of new shares. 

The JV is being formed to manufacture and sell vanadium flow battery (VFB) systems with a focus on Asia, the Middle East, and Africa.  Red Sun plans to establish two manufacturing sites for the JV, one in Changzhi City, Shanxi Province, with a 300MW production line and a second in Huaihua City, Hunan Province, with a 200MW production line. Combined, these lines will provide approximately ten times the production capacity of VRB Energy’s existing facility.   

The JV will also construct a dedicated electrolyte plant with Red Sun’s funding. This facility, to be constructed in Shanxi Province, is expected to be completed in 2025 and have an electrolyte production capacity of 5,000m3py with the ability to expand as business conditions require. 

Meanwhile, Ivanhoe Electric and VRB Energy will establish a separate US-based VFB business, to be located in Arizona. US$20M of the transaction proceeds will support the establishment of the US-based battery business and the restructuring will allow VRB Energy to concentrate on developing its 100%-owned US-based business. 

Thus, the deal will see US$35M deployed towards the Chinese market and in essence, the deal sees VRB Energy selling a majority interest in its Chinese entity for US$20M, which it will use to fund US market penetration.  Project Blue continues to model scenarios exploring the extent to which VFB build-out will be mainly a China story. This development, which sees US and Chinese entities collaborate at a time of geopolitical tensions, could both help contribute to Chinese and US capacity build out.