TIDMBMN
RNS Number : 9604Z
Bushveld Minerals Limited
23 May 2019
Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have
been deemed inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 until the release of this
announcement
23 May 2019
Bushveld Minerals Limited
("Bushveld" or the "Company")
Final Results for the Period Ended 31 December 2018
Bushveld Minerals Limited (AIM: BMN), the AIM listed, integrated
primary vanadium producer, with ownership of high-grade assets in
South Africa, is pleased to announce its financial results for the
year ended 31 December 2018. These results reflect our inaugural
full year of consolidated results, reflecting the transition from a
junior mining company to producer.
The Annual Report for the year ended 31 December 2018 will be
available on the Company's website later today at the following
link: http://www.bushveldminerals.com/financial-reports/
A printed copy of the 2018 Annual Report and Notice of General
Meeting will be posted to the Company's shareholders as per
previously elected by 31 May 2018, all other shareholders will
receive notification of the publication of the 2018 Annual Report
and Notice of General Meeting in accordance with electronic
communications. The Annual General Meeting will be held at 18-20 Le
Pollet, St Peter Port, Guernsey GY1 1WH at 11 a.m. on Tuesday, 2nd
July 2019.
2018 Highlights
Bushveld Minerals
-- Raised our effective underlying interest in Vametco from 59.1
per cent to 74.0 per cent in September 2018
-- Raised over US$20 m in an equity placing at 10.3 pence per
share from experienced mining and UK institutional investors
-- The best performing FTSE-AIM Materials stock
-- 3(rd) best performer on the FTSE-AIM All Shares Index
-- Revenue of US$192.1 million (2017: US$ 2.8million)
-- Adjusted EBITDA (reported as operating profit before depreciation) of US$101 million
-- Total cash of US$42 million as at 31 December 2018 (31
December 2017: US$9.7 million) with no debt (31 December 2017:
US$7.9 million)
Bushveld Vanadium
-- Vametco delivered a solid financial performance in 2018,
underpinned by a strong vanadium price environment
-- Vametco's Revenue (Revenue reported net of all sales
commissions) and EBITDA for the year ended 31 December 2018
increased by 131% and 353% respectively to US$183.0 million (2017:
US$ 79.1 million) and US$108.3 million (2017: US$23.9 million)
-- Average Ferrovanadium price up 149% to US$81.2 KgV (2017: US$32.6)
-- Vametco annual production down 3.4% to 2,560 mtV (2017: 2,649
mtV) following 37.5 days of stoppages and unexpected operational
challenges
-- Vametco achieved a safety record of 5,375,848 man-hours
without recording a lost time injury and there were no fatalities
during the year
Bushveld Energy
-- Commissioned the VRFB project with South African national
power utility Eskom, including site acceptance testing
-- Secured a grant from the USTDA of US$500,000 to support the
Eskom project and the energy storage industry in South Africa
-- Progressed the development of a 200MWh vanadium electrolyte
production facility, including allocating the facility's site in
the East London Industrial Development Zone ("ELIDZ") and
initiating an Environmental Impact Assessment ("EIA") on site
-- Purchased the first 2 mtV from Vametco for conversion into
electrolyte using a new production process designed specifically
for Vametco's vanadium feedstock
Enquiries: info@bushveldminerals.com
+27 (0) 11 268
Bushveld Minerals 6555
Fortune Mojapelo, Chief Executive
Officer
Chika Edeh, Head of Investor
Relations
SP Angel Corporate Finance Nominated Adviser +44 (0) 20 3470
LLP & Broker 0470
Ewan Leggat / Richard Morrison
Jonathan Williams / Richard
Parlons
Alternative Resource Capital Joint Broker
+44 (0) 207 186
Rob Collins 9001
+44 (0) 207 186
Alex Wood 9004
+44 (0) 20 7236
BMO Capital Markets Limited Joint Broker 1010
Jeffrey Couch / Tom Rider
Michael Rechsteiner / Neil
Elliot
Tavistock Financial PR
+44 (0) 207 920
Charles Vivian / Gareth Tredway 3150
Brunswick Financial PR (South
Africa)
+27 (0) 11 502
Miyelani Shikwambana 7300
ABOUT BUSHVELD MINERALS LIMITED
Bushveld Minerals is a low cost, integrated, primary vanadium
producer, with ownership of high grade vanadium assets.
The Company's flagship vanadium platform includes a 74 per cent
controlling interest in Bushveld Vametco Alloys (Pty) Ltd, a
primary vanadium mining and processing company; the Mokopane
Vanadium Project and the Brits Vanadium Project.
Bushveld's vision is to become a significant, low cost,
integrated primary vanadium producer through owning high grade
assets. This incorporates development and promotion of the role of
vanadium in the growing global energy storage market through
Bushveld Energy, the Company's energy storage project developer and
component manufacturer. Whilst the demand for vanadium remains
largely anchored in the steel industry, Bushveld Minerals believes
there is strong potential for an imminent and significant global
vanadium demand surge from the fast-growing energy storage market,
particularly through the use and adoption of Vanadium Redox Flow
Batteries.
While the Company's focus is on vanadium operations and the
development and promotion of VRFBs, it has additional investments
in coal, power and tin.
The Company's approach to project development recognises that,
whilst attractive project economics are imperative, they are
insufficient to secure capital to bring them to account. A clear
path to production within a visible timeframe, low capital
expenditure requirements and scalability are important factors in
ensuring a positive return on investment. This philosophy is core
to the Company's strategy in developing projects.
Detailed information on the Company and progress to date can be
accessed on the website www.bushveldminerals.com.
Chairman's Statement
It is with great pleasure that I present you the 2018 Annual
Report and Financial Statements for what was yet another year of
incredible progress and growth for Bushveld Minerals. In early
2016, armed with a viable prefeasibility study on its flagship
project, Mokopane, the Company, with a market capitalisation of
less than US$25 million, faced a funding requirement of US$300
million to take this project into production. From this funding
challenge and convinced of a structural deficit in the vanadium
market, the Company embarked on a strategy of targeting brownfield
processing facilities it could acquire cheaply and rapidly bring
into production.
Thus, began the Company's accelerated journey from an
exploration Company to a meaningful primary vanadium producer,
starting with the acquisition in 2017 of a controlling interest in
Vametco Alloys, an integrated mining and primary processing plant
in Brits, South Africa. In 2018, the Company made significant
strides to increase our ownership of Vametco and streamline our
corporate structure to allow greater control of the underlying
operating asset and its cashflows and to minimise any value leakage
during dividend distributions. These efforts saw our shareholding
of Vametco increase from 59 per cent shareholding to 74 per cent
following the acquisition of Sojitz Noble Alloys Corporation
("Sojitz") 21.2 per cent interest in Strategic Minerals
Corporation, the holding company for Vametco.
This was made possible by the strong support of our existing
shareholders and the new investors we welcomed as part of the
fundraising earlier in the year.
In pursuit of our stated aim of growing Bushveld Minerals into a
leading global vanadium producer and VRFB technology Company, we
are pursuing an inward-listing on the main board of the
Johannesburg Stock Exchange during the course of 2019. The Bushveld
proposition has strong resonance with South Africa from several
perspectives: (a) our resource base is based on the world-renowned
Bushveld Complex in South Africa, the world's largest primary
vanadium resource base; (b) our vertical integration aligns with
the country's push for in-country beneficiation of its mineral
resources; (c) our energy storage proposition with strong local
content has a strong proposition for a country whose utilities and
government is set to be a big adopter of stationary energy storage
and (d) the listing gives us access to significant local capital
pools that have an affinity with our story.
It is important, whenever a company issues equity, to make it
clear why the funds are being raised and how this will lead to
increased shareholder value in future. That has to be followed by
the process of effectively deploying this money within a reasonable
timeframe. We pride ourselves in efficient deployment of
capital.
Our single capital raise of 2018 in March was focussed on
redeeming the then existing outstanding convertible bonds, thereby
removing any potential share 'overhang', simplifying Bushveld
Minerals' organisational and corporate structure to improve its
exposure to Vametco's cashflow, and supporting Bushveld Minerals'
vanadium expansion programme. I am pleased to note that we achieved
all these targets before the year ended. Firstly, we redeemed the
outstanding convertible bonds. Soon after, we were able to report
that the second phase of the three-phase expansion project at
Bushveld Vametco had been completed.
Then, in September, we were able to acquire the 21.22 per cent
interest in Strategic Minerals Corporation, an intermediate holding
company of Vametco, from Sojitz for US$20 million and, in so doing,
increased our indirect beneficial interest in Vametco from 59.1 per
cent to 75 per cent. We subsequently sold one per cent to our BBBEE
partners, leaving us with the maximum allowable ownership stake in
the mine, permitted under the recently promulgated South African
Mining Charter III, of 74 per cent.
It would be remiss of me not to discuss the decision by the
London Stock Exchange to impose a fine related to the timing of the
disclosure of certain details of our initial investment in
Vametco.
We regret this breach and have learnt valuable lessons from it.
In this regard, Bushveld Minerals has undergone key Board and
operational changes. Standards of governance, procedures, controls
and communication have significantly improved - in line with the
Company's significantly larger operations.
We are committed to reinforcing the Board and Management team
and will announce a number of appointments during the course of the
coming year.
In 2018, South Africa itself gained new vigour from a series of
political changes after years of moribund economic activity. The
country's new president, Cyril Ramaphosa, has shown a resolve to
restore an investor-friendly environment. One important aspect of
this resolve was shown in the promulgation of Mining Charter III on
27 September 2018, which has brought about much needed regulatory
certainty to the mining sector, especially on the ownership
requirement for prospecting and mining rights. While there may be
ongoing litigations in respect of some aspects of the gazetted
mining charter, the charter has received broad acceptance by all
critical stakeholders and its current implementation is to be
welcomed.
In October, Bushveld was privileged to be invited to speak, and
share its capital investment plans, in South Africa at the 2018
South Africa Investment Conference at the Sandton International
Convention Centre, hosted by the President and attended by over
1,000 local and international investors. I am pleased to note that
the Vanchem transaction and Mokopane project supports the Company's
R2.5 billion commitment stated at the Investment Conference and
represents 70 per cent of funding commitments made at the
Presidential Investment Summit, less than one year from
announcement.
To reflect Bushveld Minerals' maturity into a producing Company,
the Board is aligned with a consistent and disciplined approach to
capital allocation to manage the funding of several capital
expenditure items in the near and medium-term. In order of
priority, the Group's capital will be allocated to:
-- Maintaining existing operations and ensuring maintenance of
stable and efficient production across all our operations;
-- Supporting a strong balance sheet that is resilient through the vanadium price cycle;
-- Investing in the Group's growth projects, either through
organic growth or brownfield acquisitions, to achieve 10,000
mtVp.a. production nameplate capacity and downstream integration in
the medium term; and
-- Return cash to shareholders.
This framework provides flexibility to support greater value
creation for shareholders as it enhances the Company's ability to
invest in growth projects while maintaining a strong balance
sheet.
The Company recognises that while the value proposition to
shareholders is primarily of a capital growth nature, it will have
sufficient cash generating capacity to pay dividends in the future.
On this basis the Company's Board of Directors takes this
opportunity to announce the establishment of a dividend policy. The
dividend policy reflects Bushveld Minerals' commitment to return
cash to shareholders while prioritising its stated growth strategy.
The dividend policy is based on a free cash-flow pay-out ratio. The
Board believes this distribution approach is the most suitable for
the Company as it takes into account both growth and acquisition
capital expenditure. The Board will review the free cash flow
generated by the business, the outlook for business conditions and
priorities for capital allocation on an annual basis. The Board is
not recommending a dividend for the year ended 31 December
2018.
The Board takes a structured and rigorous approach to succession
planning. We consider the appropriate Board size, experience and
attributes required to effectively govern and manage risk within
Bushveld Minerals. During the course of 2019, Geoff Sproule will be
stepping down from the Board as Finance Director, and a search for
his replacement has begun in earnest. We wish Geoff well in his
retirement.
The year 2019 promises to be just as eventful as the previous
one. The conditional acquisition of Vanchem is an exciting
development for our existing, large resource base, and will add
significant tonnage to our near- and medium-term production
profile. This acquisition is expected to complete between 31 July
2019 and 31 October 2019.
I would like to thank the management team and the Company's
employees for all their efforts during a year that has catapulted
Bushveld Minerals into the league of globally significant mid-tier
mining companies. The Board too, has had to deal with a challenging
and exciting period of change and I thank them for their advice and
availability.
Here's to another exciting year.
Ian Watson
Non-Executive Chairman
Chief Executive's Review
I am pleased to present this report on the progress the Company
made in 2018. Our progress is measured against the strategy we have
outlined, to develop a large, low-cost and vertically integrated
vanadium platform, from which our priorities and activities
derive.
We began 2018 on an exceptionally strong footing, having just
completed the acquisition of a controlling stake in Vametco in
December 2017. The acquisition marked a company-defining moment for
Bushveld as it marked the transformation of the Company from a
minerals explorer to a producer with a platform to build a truly
special integrated vanadium company, with healthy cash flow and a
robust growth pipeline.
Following the acquisition, the Company moved swiftly to
implement several corporate actions designed to consolidate its
interest in Vametco further, clean up its balance sheet and
simplify the structure. At the same time, we embarked on an
expansion programme designed to maximise production at Vametco and
further improve its already low costs of production.
On a total shareholder return basis, Bushveld Minerals was the
best-performing FTSE-AIM Materials stock and the third-best
performer on the FTSE-AIM All Share Index in 2018, with the share
price appreciating by more than 350 per cent during the year,
outperforming an impressive vanadium price performance. The
Company's performance was recognised in Bushveld Minerals being
awarded the best African Mining Company at the Mines & Money
Conference London in November 2018.Our share price outperformance
occurred against a backdrop of challenging economic conditions in
several markets and sectors outside the US, including a US-China
trade war, slowing growth in China and other emerging markets
(including South Africa) and uncertainty over the UK's decision to
exit from the European Union. The performance of many commodities,
with the notable exception of battery minerals, remained
lacklustre.
Vanadium price performance picked up from where it left 2017 and
continued its upward march reaching a 10 year high of US$127/kgV in
November 2018. The general upward move was driven by a structural
deficit that has persisted since 2016, even though this was
accentuated in late 2018 by temporary factors relating to the
anticipated new Chinese rebar standard which came into effect in
November 2018, as well as growing substitution of vanadium by
niobium. The new Chinese rebar standard is expected to increase
China's vanadium demand by 30 per cent underlying the continued
anchor role the steel sector has for vanadium demand.
Meanwhile the growing global adoption of stationary energy
storage presents long-term growth opportunities for vanadium and
for a company such as Bushveld Minerals. Driving the adoption of
stationary energy storage is a confluence of several factors,
including the growing share of global energy consumption that is
derived from electricity, the move to cleaner renewable forms of
energy generation, and the growing need by utilities world-wide to
better optimise their generation and transmission
infrastructure.
This confluence of factors could not be starker in South Africa.
The government is driving an aggressive adoption of renewable
energy as it moves away from a centralised, coal-dependent model,
incentivising distributed embedded generation by the private sector
while its national utility, Eskom, looks to battery energy storage
to help it optimise its transmission infrastructure through a 1,400
MWh battery energy storage procurement programme. The World Bank
has also announced a US$1 billion programme to support the
deployment of 17,500 MWh in battery energy storage in low-to-middle
income countries by 2025. Importantly for vanadium, and Bushveld
Minerals, in particular, is that a large share of this energy
storage opportunity is of a long duration nature, which suits
vanadium-based redox flow batteries.
Following years of developing the energy storage business,
Bushveld Minerals, is well prepared and positioned for the emerging
energy storage opportunities, whilst continuing supply of vanadium
into the steel industry on the back of an expanded production
platform.
The US$68 million conditional acquisition of Vanchem, announced
post year end on 1 May 2019, marks another significant step forward
for Bushveld Minerals on the journey to becoming a large, low-cost,
vertically integrated vanadium platform. This is aligned to our
previously communicated and long-stated strategy to acquire
brownfields assets to accelerate development and production from
our own extensive resource base. This acquisition is conditional
upon regulatory approvals and the cessation of certain commercial
arrangements. The transaction is to be completed no sooner than 31
July 2019 and no later than 31 October 2019. Combined with Vametco
operating at full capacity, post its Phase 3 expansion, the
Company's portfolio will grow to produce at least 8,400 mtVp.a.
taking the Company closer to its target nameplate capacity of
10,000 mtVp.a. in the next three to five years.
The Company continues apace with several capacity development
initiatives to assist in effectively managing and sustaining the
growth achieved to date and to prepare for the significant growth
that still lies ahead.
These initiatives are organized around three key themes:
a) Building organizational capacity - operating model;
b) Building financial capacity; and
c) Building processes & systems.
Bushveld Minerals Financials
Cash generation from operating activities for the year ended 31
December 2018 was positive as a result of a full year's ownership
of the Vametco Operations which generated high sales revenue during
2018 due to positive sales prices. This was, however, offset by
additional working capital consumed in trade receivables at the end
of the year.
The investing activities of the business resulted in an outflow,
with the majority relating to the acquisition of a 21.22 per cent
interest in Strategic Minerals Corporation, an intermediate holding
company of Vametco Alloys Proprietary Limited, from Sojitz, as well
as the additional capex spend on the Vametco Phase 1 & 2
expansion programme. The financing activities had a positive impact
on cash as a result of the proceeds from a capital raise and
additional shares and warrants which were exercised, which brought
the year-end 31 December 2018 cash and cash equivalents balance to
US$42 million.
Bushveld Vanadium
Vametco
Vametco delivered an outstanding financial performance in the
2018 calendar year, underpinned by a strong vanadium price which
averaged US$81.2/KgV, an increase of 148.9 per cent over the
previous year. Sales revenue and EBITDA for the 2018 financial year
increased by 131 per cent and 353 per cent, respectively, to US$183
million and US$108 million.
We are proud that this achievement coincided with Vametco
celebrating over five million man-hours worked without a lost-time
injury. The last lost-time injury occurred in 2013. We place
considerable emphasis on safe mining practices, with zero tolerance
for any disregard for safety, health and environmental rules.
Much of the growth of Bushveld Minerals has been mergers and
acquisition-driven, and some of these transactions have been
executed in phases. Invariably an important part of this growth is
integration of the assets within Bushveld Minerals and ensuring the
Group is structured optimally at different levels (operational
efficiencies, tax efficiencies, et al). The Company's corporate
restructuring has been underway since 2017 and is aimed at
simplifying corporate ownership and minimising value leakage. This
process has to date included the following:
-- Acquiring the Yellow Dragon holding in Bushveld Vametco
Limited ("BVL"), thereby increasing Bushveld's shareholding in BVL
to 100 per cent ("YDH Transaction");
-- Acquiring Sojitz's holding in SMC to increase BVL's
shareholding of SMC to 100 per cent and underlying interest in
Vametco to 75 per cent;
-- The redemption of Bushveld Vametco Alloys (Pty) Limited
("BVA") preference shares held by SMC and the payment of all
accumulated coupons and dividends thereon;
-- The legal restructuring between Bushveld Vametco Holdings
(Pty) Limited ("BVH"), the owner of the mining right at Vametco,
and BVA, the owner of the production assets at Vameto; and
-- The restructuring SMC into a limited liability company
("LLC") motivated by the need for a simpler organisation with a
more efficient tax structure.
The result of the above restructuring exercises is a streamlined
corporate structure that will ensure minimal value leakage and
positions the Company well for the onset of a dividend policy.
Despite our strong earnings and safety performance, the year was
not without the inevitable challenges that come with new ownership
of an existing operating mine and processing facility.
In June and September, operations at Vametco were halted due to
unprotected strike action, triggered by historic legacy issues and
compensation structures that pre-dated Bushveld's acquisition of
Vametco. After several rounds of discussions with the Association
of Mineworkers and Construction Union, the representative labour
union at Vametco, we were able to reach agreement on these issues.
The resulting agreement was a positive outcome for all parties,
allowing for resumption of operations while the Company continues
its earnest efforts to build towards a sound partnership with all
employees. The agreement provided for a settlement of a reward to
workers in respect of an employee share ownership participation
programme ("ESOP"), which was under negotiation.
Following the resumption of operations, the Company has agreed
to a framework for an ESOP structure that will allow employees to
participate in the economic performance of Vametco. A detailed
agreement is now in negotiations and expected to be concluded
during 2019.
In June, we completed the second phase of the three-phase
expansion project at Vametco intended to increase annual nameplate
capacity to 3,750 mtVp.a. However, operational challenges during
ramp-up saw the Company fail to realise these production targets.
The diagnostic commissioned by the Company identified several
operational shortcomings and recommended a transformation programme
designed to drive Vametco's operational performance towards its
nameplate capacity. This programme ultimately aims to improve
vanadium feed grade into the plant, key plant availability and
throughput. It combines three key elements: a) appointment of a new
general manager, Ms Bertina Symonds, and improving the management
structure to bring more senior operational leadership to key plant
sections; (b) set up of a dedicated transformation office under the
focused leadership of William Steinberg, the former Works Manager
at Vametco; and (c) implementation of a set of initiatives
targeting production bottlenecks and operation gaps identified by
the diagnostic.
In addition, a core enabling initiative is the improvement of
the overall organisational health at Vametco, which we are
confident we will achieve by: (a) building an inclusive and diverse
environment; (b) promoting a culture of mutual respect; and (c)
having a shared value system that prizes performance and recognises
the role and contribution of every stakeholder. We want every
employee to begin each day with a sense of purpose and to end the
day with a sense of accomplishment.
We commenced the transformation programme and are confident that
it will set Vametco on its way to realising its production and cost
potential. As a result of this transformation programme, we expect
Vametco's production to improve over the course of the year and
reach a steady state production of 3,400 mtvp.a. during the course
of 2020. Given the lower production base we began the year at, we
anticipate annual production for this year to be in the range of
2,800 mtV to 2,900 mtV, which is nine to 13 per cent above 2018's
production.
We are pleased with the updated Mineral Resource and Ore Reserve
which has been declared at Vametco's Open pit mine following a
drilling programme and further validation of historical drilling
data. The update has been compiled in accordance with JORC
(2012).
The Combined Inferred and Indicated Mineral Resource is reported
as 186.7 Mt at an average grade of 1.98 per cent V(2) O(5) in
magnetite, with an average magnetite content of 35.0 per cent (in
whole rock) for 719,300 tonnes of vanadium, reflecting a 31 per
cent increase in Ore Tonnages from the 2017 estimate. This increase
is primarily attributed to reporting the Mineral Resource to a
maximum depth of 150 meters below the original land surface, versus
120 meters in 2017.
The Ore Reserves in the Probable Category are reported as 48.4
Mt at an average grade of 2.02 per cent V(2) O(5) in magnetite,
with an average magnetite content of 28.5 per cent (in whole rock)
for 156,300 tonnes of vanadium reflecting an 85 per cent increase
in the Ore Tonnages relative to the 2017 estimate. This increase is
a result of more mineral resource definition work on the
Intermediate and Upper seams.
The improved resource and reserves underpin our production
outlook at Vametco and are sufficient to support the growing
production profile.
Our priorities at Vametco for 2019 are to:
1) Achieve our production targets and sustainably reduce costs.
This will be guided by our strong management team, which has been
boosted by the appointment of Bertina Symonds as the new General
Manager.
2) Continue to simplify our organisational structure to bring
senior management closer to our assets.
3) Execute initiatives identified during the diagnostic review,
which has sketched a roadmap for Vametco to achieve steady state
production in excess of 4,200 mtVp.a. (approximately 85 per cent of
nameplate capacity of 5,000 mtVp.a.).
4) Continue to build on our co-operative partnership with
employees and local communities. We are in the process of designing
an ESOP to align Vametco's workforce more closely with its
operational targets. In addition, we will be appointing a
stakeholder engagement manager and, we have contracted a financial
services provider specialising in personal financial planning,
provision of unsecured loans and debt consolidation and counselling
to help improve the financial wellbeing of our employees.
Brits
In 2018, the Company began an exploration programme at Brits, on
the farm adjacent to Vametco, over which a prospecting right is
held, with the aim of establishing a maiden Mineral Resource
Estimate before the middle of 2019. The results of recent drilling
on the lower seam indicated a weighted average V(2) O(5) grade of
1.66 per cent in magnetite. While these are marginally lower than
the grades at Vametco, they remain among the highest in the world.
We are encouraged by these results that support Brits' potential to
be an additional source of feed tonnage for the Vametco plant and,
if required, supply concentrate feed to Vanchem.
Mokopane
Mokopane, one of the premier greenfield primary vanadium
projects in the world, is a key element of Bushveld's vanadium
strategy. Mokopane has been identified as a primary source of
feedstock for Vanchem as a result of its large mineral reserve. The
Mokopane-Vanchem model will create a fully-integrated business in a
shorter timeline and at lower cost than developing Mokopane as a
stand-alone operation. The conditional acquisition of Vanchem also
provides product optionality, as Mokopane V(2) O(5) can be toll
treated into ferrovanadium at Vanchem. Other options include
supplying ore to other primary or secondary producers worldwide.
The long-term plan remains to develop Mokopane into a stand-alone,
integrated mine and processing plant, producing 5,300 mtVp.a. of
>99 per cent purity V(2) O(5) product.
Bushveld Energy
The Bushveld Energy business model is anchored in Bushveld
Minerals' low-cost production platform and smart partnerships along
the VRFB value chain. In 2018, we delivered our first VRFB project
in South Africa, a battery with peak power of 120kW and 450kWh of
peak energy. It passed a series of manufacturer and Eskom site
acceptance tests during January and February 2019.
In August, Bushveld Energy and its technical partner for the
Eskom project, UniEnergy Technologies (UET) were awarded a grant
from the United States Trade and Development Agency to advance
testing at Eskom. The facility also supports developing new
modelling capabilities to cover the combination - or "stacking" -
of multiple benefits from energy storage supplied by one
battery.
A key part of Bushveld Energy's strategy is the creation of an
electrolyte production facility under partnership with the
Industrial Development Corporation (IDC). Development of this
facility advanced in 2018 and included selection of a site for the
facility and initiation of the environmental impact assessment for
the proposed new plant. After promising pilot results at laboratory
scale of the electrolyte production process, Bushveld Energy
procured 2 mtV of vanadium feedstock from Bushveld Vametco for
conversion into bulk quantities of vanadium electrolyte. The
scaled-up conversion process is currently being executed. If proven
successful, samples from the electrolyte produced will be provided
to battery companies for suitability assessment. In all, sufficient
market demand for vanadium electrolyte supports the installation of
an initial 200 MWh capacity facility in South Africa. This exciting
project remains on track to produce electrolyte in the near term
for South African and international markets.
At the beginning of 2019, Bushveld Energy announced development
of a net circa 1 MW mini-grid at the Vametco mining and processing
facility in South Africa. The mini-grid combines solar PV
generation and energy storage using VRFB technology that are
co-located at the Vametco mine and processing facility. While the
mini-grid will supply, at most, eight per cent of the mine's energy
consumption at any one time, the project will demonstrate the
technical and commercial capability of hybrid mini-grids using
solar PV and VRFB technology. Bushveld is working together with
strategic partners to provide co-investment into the project, bank
debt funding and engineering, procurement and construction ("EPC")
services. The project could be scaled up further to provide a
larger amount of energy in future. It will also use locally-mined
and beneficiated vanadium, showing how VRFB energy solutions can
create more local value for South Africa than any other battery
storage technology.
In 2019 we plan to build on the strong base we created in 2018
for Bushveld Energy. This will include furthering our VRFB project
with Eskom, participating in local tenders for energy storage
system supply, developing the solar-VRFB mini-grid at Vametco and
refining our vanadium electrolyte rental product. As far as
electrolyte supply is concerned, we expect to announce some supply
agreements with downstream stakeholders in the VRFB supply chain in
the year ahead, while we make further significant progress on the
manufacturing plant itself.
Sustainability
Bushveld considers its corporate social responsibility as a
strategic imperative that goes beyond compliance. We strive to: 1)
create value in the communities in which we operate; 2) maintain
safe operations; and 3) minimise our social and environmental
impact.
We see local communities as important stakeholders to build
partnerships with. For this reason, when we acquired Vametco, out
of our own initiative, we established the Peo Matlafatso Trust, a
community development trust to house shareholding of up to 12.5 per
cent in the Vametco operations. This trust is at the heart of our
commitment to local communities and, through it, we envisage
playing a community development role targeting the critical areas
of education, health care and entrepreneurship and enterprise
development.
In addition, since taking ownership of Vametco, we have ensured
that we meet our obligations in respect of settlement of any
outstanding obligations such as old royalties, surface lease
agreements where we pay regular fees to the owners of the land on
which we operate, and implementation of all community development
initiatives committed to in our social and labour plan.
Lemur
While the Company has communicated its pivoting to vanadium as
its core business; we are pleased with the progress made in
advancing the integrated coal mining and power generation project
in Madagascar. Since a technical cooperation agreement was signed
with Sinohydro Corporation Limited ("Sinohydro") in 2017, Sinohydro
has completed the Bankable Feasibility Study ("BFS") for both the
power plant and the transmission line. With a 30-year Independent
Power Producer concession from the government of Madagascar, a
30-year Power Purchase Agreement for an initial 25 MW from JIRAMA,
the state-owned utility, and ongoing discussions with various
private mining and industrial companies for further potential
offtake from the power plant, the project is well positioned to
attract appropriate value adding partners as it moves towards
financing. I am particularly pleased that we have continued to
advance the project in a prudent manner without stretching the
Company's resources. We also welcome the support shown by the
Development Bank of Southern Africa, through a US$1m project
preparation financing.
Human Capital
The Company's human capital resource development efforts have
been focused on reviewing and re-designing the compensation model
to attract and retain top talent as well as developing a new
operating model for the Company. In parallel, we undertook a
leadership development initiative aimed at crystalising the
leadership competencies required by the Company.
Management changes and succession
We are started 2019 with changes in the management team of
Vametco, notably with Malcolm Curror stepping down as CEO of
Vametco. Malcolm will continue to provide consulting service to
Bushveld Minerals. Malcolm has been succeeded by Bertina Symonds
who, as Vametco General Manager, combines the roles of CEO and COO.
Bertina brings over 20 years of mining and beneficiation
experience, most recently as the General Manager of the Nkomati
Nickel Mine owned by JSE-listed African Rainbow Minerals
Limited.
Lyndon Williams, former COO, has moved to a new role at
Bushveld's Head Office as Group Vanadium Specialist, supporting
operational integration and providing technical support to the
Group's product marketing initiatives.
William Steinberg, previously Vametco's Works Manager, has been
appointed as the new Chief Transformational Officer, responsible
for driving the operations improvement programme
In April, Hiten Ooka joined us as Group Head of Finance,
reporting to the Finance Director. Hiten is responsible for the
Group's financial management capacity, including but not limited to
financial reporting, treasury, tax and consolidation.
I also would like to extend my thanks to outgoing Finance
Director Geoff Sproule, who will be leaving us soon. He has been a
source of strength and leadership for Bushveld Minerals. We wish
Geoff well in his retirement. A search for his replacement has
commenced and we will look forward to making a new appointment
shortly.
Bushveld Minerals: post year-end event
Vanchem acquisition
On 1 May 2019 we announced a business and share purchase
agreement with Duferco Vanadium Investment Holdings SA to
conditionally acquire the Vanchem businesses in South Africa for
US$68 million.
This acquisition of another brownfield operating asset on South
Africa's Bushveld Complex will enable us to cement our position as
one of the leading vanadium producers globally and put us well on
the path to achieving our 10,000 mtVp.a. production target. It will
also allow us to bring the Mokopane project into production quicker
and at lower cost.
This highly strategic transaction combines our existing
portfolio of high-grade, low-cost primary vanadium resources,
including the Mokopane greenfield deposit, with an established
production facility. This substantially reduces the capital
required to bring Mokopane into production, and in a much shorter
timeframe than if we had built a new plant. We consider ourselves
the ideal buyer for these businesses and see the timing as
opportune, given our sound portfolio of high quality deposits and
the strong operating base established at Vametco.
Apart from the benefits generated by adding further brownfield
processing capacity to complement the Company's high-grade
deposits, there are several features of Vanchem that make it
particularly attractive.
Vanchem not only brings immediate scalable processing capacity,
but it also has a three-kiln configuration which provides important
flexibility for the Company's production processes without
compromising its cost efficiencies. Furthermore, Vanchem's
attractive suite of vanadium products complements the Nitrovan(TM)
produced at Vametco. These include FeV, V(2) O(5) , V(2) O(3) and
vanadium chemicals. The vanadium chemicals capability will be
particularly critical as the Company grows its exposure to the
emerging stationary energy storage industry through VRFBs.
This acquisition is core to our growth strategy of becoming a
leading, low-cost, vertically integrated producer and our ability
to adequately supply the burgeoning energy storage sector.
The immediate next steps are:
a) Completing the Vanchem transaction as soon as possible;
b) Building a sound team to operate Vanchem; and
c) Ensuring that the production ramp-up and cost profile
envisaged in the due diligence process is achieved.
Outlook
2018 marked our first year as a controlling shareholder of
Vametco. With a consolidated set of results, the transition from
junior miner to established producer is complete. This transition
came at an opportune time, with strong and rising vanadium prices
that reached a ten year high of US$127/kgV by November 2018 and
with Vametco achieving a tremendous result, generating in excess of
US$100 million adjusted EBITDA in its first year under the
Company's control. We are mindful, however, that while Vametco
generated strong cash flows, operational performance was below
expectation. Although we remain one of the lowest cost producers,
at 2,560 mtVp.a. we produced 40 per cent less than the potential
production capacity of Vametco (albeit with some modest capital
spending). The potential to further lower our cost position by
maximising throughput is not lost on us and will be a key focus of
our future efforts.
Following the refurbishment programme at Vanchem and the
expansion programme underway at Vametco, the Company will have
created a portfolio of processing assets capable of supplying
approximately 10 per cent of the global vanadium market. This was
acquired for less than 40 per cent of the estimated US$500 million
replacement cost and used cash generated by the same assets for
nearly half (US$100 million) of the cost of creating that
capacity.
Once the acquisition of Vanchem is completed, we will have a
sizeable production platform with an attractive portfolio of
complementary vanadium products, in addition to the flexible
production profile of our processing plants. To deliver on the
potential of this portfolio, we will focus on disciplined
execution, featuring:
-- execution of the transformation programme at Vametco to
increase production first to 3,400 mtVp.a. and then to 4,200
mtVp.a., following further capital expenditure;
-- completion of the Vanchem acquisition and undertaking a
refurbishment programme to deliver 4,200 mtVp.a.;
-- successful integration of Vanchem into the Bushveld Group to
maximise synergies between the Vametco and Vanchem processing
plants;
-- building an exceptional team of leaders to drive the
Company's future operational performance; and
-- successfully executing Bushveld Energy's strategy to realise
several opportunities in front of it, including the mini-grid at
Vametco, construction of the electrolyte production plant,
successfully launching a vanadium electrolyte rental product,
project development of VRFB sites in Africa and securing large
mandate opportunities for batteries while continuing our local and
global efforts to promote an enabling regulatory environment for
VRFBs and storage in general.
I have every confidence in the outstanding and hardworking team
that has brought Bushveld Minerals to this stage, and in the
expanded team that we are creating to take the Company forward.
We will continue to build strong partnerships with the various
stakeholders based on mutual trust. In respect of our workers, we
look forward to concluding our ESOP negotiations, laying the
foundations for a future of shared responsibility and success of
Vametco. In respect of our communities, we look forward to a
partnership that goes beyond compliance and is built on a sense of
shared ownership (thanks to the shareholding in Vametco that we
have established in the interest of the communities).
And to our government in South Africa, we offer a Company deeply
committed to growth, to optimising the utilisation of assets and
infrastructure already established while pursuing vertical
integration and proving that beneficiation has commercial and
mutual economic value for us and the country. We are also delighted
to be playing our part as meaningful contributors to the social and
economic progress of South Africa, through the listing on the JSE
later this year, which will allow South African investors access to
our compelling story.
Finally, I want to thank all our shareholders who believed and
bought into our vision. Delivering attractive returns to them gives
me immense satisfaction. To them we owe the platform we have
created today.
I have often said that "the story of Bushveld Minerals is not
half-told yet." We have since successfully acquired Vametco and are
in the process of acquiring Vanchem. Post the expansion and
refurbishment programmes at Vametco and Vanchem, we will have a
production platform with an attractive portfolio of vanadium
products supplying approximately ten per cent of the global market,
while poised to realise our ambition in the energy storage market
by playing a leading role along the vanadium redox flow battery
value chain. With these achievements, perhaps the story is now
half-told. Much remains ahead!
For the opportunity and privilege to continue developing it, I
am thankful.
Fortune Mojapelo
CEO, Bushveld Minerals
Consolidated Income Statement
For the year ended 31 December 2018
Year ended 10 months ended
31 December 31 December
2018 2017
Note $ $
Continuing operations
Revenue 5 192,089,845 2,848,360
Cost of sales (65,273,543) (1,409,011)
Gross profit 126,816,302 1,439,349
Other operating income 7,420,109 -
Selling and distribution costs (10,661,706) (284,425)
Other mine operating costs (2,508,971) (158,120)
Idle plant costs (2,688,422) (31,205)
Administration expenses 6 (23,202,234) (4,820,083)
Operating profit / (loss) 95,175,078 (3,854,484)
Share of results of associate - 4,651,931
Impairment loss on demerger of tin
assets - (705,432)
Finance income 8 1,987,333 137,938
Finance costs 9 (1,233,406) (1,112,107)
Share based payment economic empowerment
transaction 34 (3,232,425) -
Movement in earnout estimate 27 (6,091,514) -
Profit / (loss) before tax 86,605,066 (882,154)
Taxation 10 (37,604,907) (10,494)
Profit / (loss) after taxation 49,000,159 (892,648)
Attributable to:
Owners of the parent 30,215,509 (1,228,729)
Non-controlling interests 18,784,650 336,081
============ ===============
49,000,159 (892,648)
Profit / (loss) per ordinary share
Basic and diluted profit / (loss)
per share (in cents) 11 2.9 (0.2)
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2018
Year ended 10 months ended
31 December 31 December
2018 2017
$ $
Profit / (loss) for the year 49,000,159 (892,648)
Other comprehensive income, net of
tax:
Items that may be subsequently reclassified
to profit or loss:
Currency translation differences (13,715,270) 1,827,623
Available-for-sale financial assets
- net change in fair value 19 659,007 (1,052,282)
Other fair value movements 21,796 -
Total comprehensive income for the
year 35,965,692 (117,307)
================= ====================
Attributable to:
Owners of the parent 21,941,346 (383,771)
Non-controlling interests 14,024,346 266,464
Total comprehensive income for the
year 35,965,692 (117,307)
================= ====================
Consolidated Statement of Financial Position
As at 31 December 2018
Company number: 54506
31 December 2018 31 December
2017
Note $ $
Assets
Non-current assets
Intangible assets: exploration
and evaluation 12 57,150,425 60,862,691
Property, plant and equipment 13 47,881,162 44,419,179
Investment properties 14 2,816,007 3,303,502
Deferred tax asset 15 3,004,141 3,275,122
Total non-current assets 110,851,735 111,860,494
Current assets
Inventories 16 17,193,018 17,171,868
Trade and other receivables 17 32,586,185 13,878,230
Restricted investment 18 5,388,953 5,186,937
Income tax receivable 251,382 1,163,229
Available-for-sale financial
assets 19 2,311,272 1,652,265
Cash and cash equivalents 20 42,019,123 9,739,632
Total current assets 99,749,933 48,792,161
Total assets 210,601,668 160,652,655
================ ============
Equity and liabilities
Share capital 25 14,921,079 11,817,573
Share premium 25 101,003,256 69,222,661
Accumulated profit / (deficit) 21,447,137 (13,121,418)
Warrant reserve - 2,113,866
Foreign exchange translation
reserve (7,073,387) 1,881,579
Fair value reserve (371,479) (1,052,282)
---------------- ------------
Equity attributable to owners
of the parent 129,926,606 70,861,979
Non-controlling interests 29,712,446 36,371,168
Total equity 159,639,052 107,233,147
Non-current liabilities
Borrowings 21 - 7,861,526
Other financial liabilities 21 - 1,366,052
Post-retirement medical liability 23 2,377,737 2,783,456
Environmental rehabilitation
liability 24 6,632,607 6,669,432
Deferred consideration 27 17,427,512 11,019,447
Total non-current liabilities 26,437,856 29,699,913
Current liabilities
Trade and other payables 22 20,203,795 20,247,713
Provisions 26 4,320,965 3,471,882
Total current liabilities 24,524,760 23,719,595
Total equity and liabilities 210,601,668 160,652,655
================ ============
Consolidated Statement of Changes in Equity
For the year ended 31 December 2018
Attributable to owners of the parent company
Foreign
Accumulated Warrant exchange Non-
Share Share profits / reserve translation Fair value controlling Total
capital premium (deficit) reserve reserve Total interests equity
$ $ $ $ $ $ $ $ $
Total equity at
28 February
2017 9,393,321 82,198,556 (11,892,689) 801,596 (15,660) - 80,485,123 2,742,822 83,227,945
(Loss) profit
for the
period - - (1,228,729) - - - (1,228,729) 336,081 (892,648)
Other
comprehensive
income,
net of tax:
Fair value
movement on
investments - - - - - (1,052,282) (1,052,282) - (1,052,282)
Currency
translation
differences - - - - 1,897,240 - 1,897,240 (69,617) 1,827,623
---------------- ---------- ------------ ------------ ----------- ------------- ------------- ------------ ------------ ------------
Total
comprehensive
income
for the period - - (1,228,729) - 1,897,240 (1,052,282) (383,771) 266,464 (117,307)
Transactions
with owners:
Grant of
warrants - - - 1,312,270 - - 1,312,270 - 1,312,270
Exercise of
warrants 956,017 1,325,495 - - - - 2,281,512 - 2,281,512
Issue of shares 1,468,235 7,485,492 - - - - 8,953,727 - 8,953,727
Distribution of
capital
on de-merger - (21,786,882) - - - - (21,786,882) - (21,786,882)
Non-controlling
interest - - - - - - - 33,361,882 33,361,882
---------------- ---------- ------------ ------------ ----------- ------------- ------------- ------------ ------------ ------------
Total equity at
31 December
2017 11,817,573 69,222,661 (13,121,418) 2,113,866 1,881,579 (1,052,282) 70,861,979 36,371,168 107,233,147
---------------- ---------- ------------ ------------ ----------- ------------- ------------- ------------ ------------ ------------
Profit for the
year - - 30,215,509 - - - 30,215,509 18,784,650 49,000,159
Other
comprehensive
income,
net of tax:
Fair value
movement on
investments - - - - - 680,803 680,803 - 680,803
Currency
translation
differences - - - - (8,954,966) - (8,954,966) (4,760,304) (13,715,270)
---------------- ---------- ------------ ------------ ----------- ------------- ------------- ------------ ------------ ------------
Total
comprehensive
income
for the year - - 30,215,509 - (8,954,966) 680,803 21,941,346 14,024,346 35,965,692
Transactions
with owners:
Exercise of
warrants 547,453 4,232,445 - - - - 4,779,898 - 4,779,898
Issue of shares 2,556,053 27,548,150 - - - - 30,104,203 - 30,104,203
Reserve transfer - - 2,113,866 (2,113,866) - - - - -
Change in
non-controlling
interest - - 2,239,180 - - - 2,239,180 (19,739,180) (17,500,000)
Dividends paid
to
non-controlling
interest - - - - - - - (943,888) (943,888)
Total equity at
31 December
2018 14,921,079 101,003,256 21,447,137 - (7,073,387) (371,479) 129,926,606 29,712,446 159,639,052
---------------- ---------- ------------ ------------ ----------- ------------- ------------- ------------ ------------ ------------
Consolidated Statement of Cash Flows
For the year ended 31 December 2018
Year ended 10 months ended
31 December 31 December
2018 2017
$ $
Note
Cash flows from operating activities
Profit / (loss) before taxation 86,605,066 (882,154)
Adjustments for:
Depreciation property, plant and equipment 13 6,039,339 60,443
Fair value economic empowerment transaction 34 3,232,425 -
Movement in earnout estimate 27 6,091,514 -
Impairment loss on demerger 12 - 705,432
Finance income 8 (1,987,333) (137,938)
Finance costs 9 1,233,406 1,112,107
Share of profit in associate - (4,651,931)
Changes in working capital (25,350,569) (1,549,643)
Income taxes paid (30,923,733) -
Net cash generated from / (used in)
operating activities 44,940,115 (5,343,684)
------------ ---------------
Cash flows from investing activities
Finance income 8 1,987,333 137,938
Purchase of exploration and evaluation
assets 12 (1,553,219) (1,702,137)
Purchase of property, plant and equipment 13 (11,205,702) -
Acquisition of non-controlling interest 33 (17,500,000) 5,953,901
Net cash (used in) / generated from
investing activities (28,271,588) 4,389,702
------------ ---------------
Cash flows from financing activities
Finance costs - -
Net proceeds from issue of shares
and warrants 25 4,139,825 2,281,512
Net proceeds from capital raised 21 19,006,177 8,830,514
Net repayments of other borrowings 21 (6,907,035) (173,732)
Net cash generated from financing
activities 16,238,967 10,938,294
------------ ---------------
Net increase in cash and cash equivalents 32,907,494 9,984,311
Cash and cash equivalents at the beginning
of the year 9,739,632 176,954
Effect of foreign exchange rates (628,003) (421,633)
Cash and cash equivalents at end of
the year 42,019,123 9,739,632
============ ===============
1. Corporate information and principal activities
Bushveld Minerals Limited ("Bushveld") was incorporated and
domiciled in Guernsey on 5 January 2012 and admitted to the AIM
market in London on 26 March 2012.
Bushveld has changed its presentational reporting currency from
British Pound Sterling to United States Dollars. The change has
been made because the majority of the group's sales and vanadium
prices are denominated in United States Dollars. The comparative
information in these financial statements has been re-translated
into United States Dollars.
The Bushveld Group comprises Bushveld Minerals Limited and its
subsidiaries as noted below.
During the year the Company acquired an effective 74.0% in
Bushveld Vametco Holdings Proprietary Limited through the Company's
acquisition of a 100.0% interest in Strategic Minerals Corporation.
in Bushveld Vametco Holdings Proprietary Limited is the parent
company of Bushveld Vametco Alloys Proprietary Limited, an
operational vanadium mining company which owns a processing plant
and an operating open cast vanadium mine, situated about 6.5 km
northeast of the town of Madibeng (formerly known as Brits) which
is in the Bojanala Platinum District in the North West Province of
the Republic of South Africa. Bushveld Vametco Alloys Proprietary
Limited has approximately 480 employees.
Bushveld Resources Limited ("BRL") is an investment holding
company formed to invest in resource-based vanadium and iron ore
exploration companies in South Africa. The South African
subsidiaries are Pamish Investments No. 39 (Proprietary) Limited
("Pamish 39") in which BRL holds a 64% equity interest, Amaraka
Investments No. 85 (Proprietary) Limited ("Amaraka 85") in which
BRL holds 68.5% equity interest and Frontier Platinum Resources
(Proprietary) Limited in which BRL holds 100% equity interest. The
minority shareholder in Pamish 39 is Izingwe Capital (Proprietary)
Limited and the minority shareholder in Amaraka 85 is Afro Multi
Minerals (Proprietary) Limited.
The Lemur subsidiaries are coal project development companies.
The Lemur subsidiaries are the holder of 11 concession blocks in
South West Madagascar covering the Imaloto Coal Basin.
As at 31 December 2018, the Bushveld Group comprised of:
Company Equity holding Country of Nature of activities
and voting incorporation
rights
Bushveld Minerals Limited N/A Guernsey Ultimate holding company
Bushveld Resources Limited(1) 100% Guernsey Holding company
Pamish Investments 39 64% South Africa Vanadium and iron
(Pty) Limited(2) ore exploration
Amaraka Investments 85 68.50% South Africa Vanadium and iron
(Pty) Limited(2) ore exploration
Frontier Platinum (Pty) 100% South Africa Group support services
Limited(2)
Bushveld Energy Limited(1) 84% Mauritius Holding company
Bushveld Energy (Pty) 100% South Africa Energy development
Limited(6)
Bushveld Vametco Limited(1) 100% Guernsey Holding company
Strategic Minerals Corporation 100% United States Holding company
LLC(9)
Bushveld Vametco Holdings 74% South Africa Holding company
(Pty) Limited(10)
Bushveld Vametco Alloys 100% South Africa Mining and manufacturing
(Pty) Limited(11) company
Bushveld Vametco Properties 100% South Africa Property owning company
(Pty) Limited(12)
Lemur Holdings Limited(1) 100% Mauritius Holding company
Lemur Investments Limited(5) 100% Mauritius Holding company
Coal Mining Madagascar 99% Madagascar Coal exploration
SARL(7)
Imaloto Power Limited(5) 100% Mauritius Holding company
Imaloto Power Project 99% Madagascar Power generation company
Company
SARL(8)
Great 1 Line Investment 62.5% South Africa Vanadium and iron
(Pty) Limited(2) ore exploration
Gemsbok Magnetite (Pty) 74.0% South Africa Vanadium and iron
Limited(2) ore exploration
Caber Trade and Invest 51.0% South Africa Vanadium and iron
1 (Pty) Limited ore exploration
1 Held directly by Bushveld Minerals Limited
2 Held by Bushveld Resources Limited
3 Held by Greenhills Resources Limited
4 Held by Mokopane Tin Company (Pty) Limited
5 Held by Lemur Holdings Limited
6 Held by Bushveld Energy Limited
7 Held by Lemur Investments Limited
8 Held by Imaloto Power Limited
9 Held by Bushveld Vametco Limited
10 Held by Strategic Minerals Corporation LLC
11 Held by Vametco Holdings (Pty) Limited
12 Held by Vametco Alloys (Pty) Limited
2. Adoption of new and revised standards
ACCOUNTING STANDARDS AND INTERPRETATIONS NOT APPLIED
Standards, amendments and interpretations to existing standards
that are not yet effective and have not been early adopted by the
Group:
IFRS 16 Leases The new standard recognises a leased
asset and a lease liability for almost
all leases and requires them to be
accounted for in a consistent manner.
This introduces a single lessee accounting
model and eliminates the previous distinction
between an operating lease and a finance
lease.
------------------------------- --------------------------------------------------
IFRS 17 Insurance Contracts The new standard requires insurance
liabilities to be measured at a current
fulfillment value and provides a more
uniform measurement and presentation
approach for all insurance contracts.
These requirements are designed to
achieve the goal of a consistent, principle-based
accounting for insurance contracts.
------------------------------- --------------------------------------------------
IFRIC 23 Uncertainty over The interpretation addresses the determination
Income Tax Treatments of taxable profit (tax loss), tax bases,
unused tax losses, unused tax credits
and tax rates, when there is uncertainty
over income tax treatments under IAS
12.
------------------------------- --------------------------------------------------
IFRS 9 Prepayment Features Under IFRS 9, a debit instrument can
with Negative Compensation be measured at amortised cost or at
- (Amendments to IFRS 9) fair value through other comprehensive
income, provided that the contractual
cash flows are 'solely payments of
principal and interest on the principal
amount outstanding' (the SPPI) criterion)
and the instrument is held within the
appropriate business model for that
classification. The amendments to IFRS
9 clarify that a financial asset passes
the SPPI criterion regardless of the
event or circumstance that causes the
early termination of the contract and
irrespective of which party pays or
receives reasonable compensation for
the early termination of the contract.
------------------------------- --------------------------------------------------
IAS 19, Plan Amendment, The amendments to IAS 19 Employee Benefits
Curtailment or Settlement address the accounting when a plan
- (Amendments to IAS 19) amendment, curtailment or settlement
occurs during a reporting period.
------------------------------- --------------------------------------------------
IAS 28 Long-term interests The amendments clarify that an entity
in associates and joint applies IFRS 9 to long-term interests
ventures - (Amendments to in an associate or joint venture to
IAS 28) which the equity method is not applied
by that, in substance, form part of
the net investment in the associate
or joint venture (long-term interest).
This clarification relevant because
it implies that the expected credit
loss model in IFRS 9 applies to such
long-term interests.
------------------------------- --------------------------------------------------
IFRS 10 and IAS 28 Sale The amendments address the conflict
or Contribution of Assets between IFRS 10 and IAS 28 in dealing
between an Investor and with the loss of control of a subsidiary
its Associate or Joint Venture that is sold or contributed to an associate
(Amendments to IFRS 10 and or joint venture.
IAS 28)
------------------------------- --------------------------------------------------
IFRS 3, Definition of a The IASB issued amendments to the definition
Business - (Amendments to of a business in IFRS 3 Business Combinations
IFRS 3) to help entities determine whether
an acquired set of activities and assets
is a business or not. They clarify
the minimum requirements for a business,
remove the assessment of whether market
participants are capable of replacing
any missing elements, add guidance
to help entities assess whether an
acquired process is substantive, narrow
the definitions of a business and of
outputs, and introduce an optional
fair value concentration test. New
illustrative examples were provided
along with the amendments.
------------------------------- --------------------------------------------------
IAS 1 and IAS 8 - Definition In October 2018, the IASB issued amendments
of Material - (Amendments to IAS 1 Presentation of Financial
to IAS 1 and IAS 8) Statements and IAS 8 Accounting Policies,
Changes in Accounting Estimates and
Errors to align the definition of 'material'
across the standards and to clarify
certain aspects of the definition.
The new definition states that, 'Information
is material if omitting, misstating
or obscuring it could reasonably be
expected to influence decisions that
the primary users of general purpose
financial statements make on the basis
of those financial statements, which
provide financial information about
a specific reporting entity'.
------------------------------- --------------------------------------------------
The Directors anticipate that the adoption of these Standards
and Interpretations, which become effective for annual periods
beginning on or after 1 January 2019, in future periods will have
no material impact on the financial statements of the Group.
3. Significant accounting policies
Basis of preparation
In accordance with Section 244 of The Companies (Guernsey) Law
2008, the Group confirms that the financial information for the
year ended 31 December 2018 is derived from the Group's audited
financial statements and that this preliminary announcement does
not include the statutory accounts and, as such, does not contain
all information required to be disclosed in the financial
statements prepared in accordance with International Financial
Reporting Standards ("IFRS").
The statutory accounts for the year ended 31 December 2018 have
been audited and approved, but have not yet been filed. The Group's
audited financial statements for the year ended 31 December 2018
received an unqualified audit opinion and the auditor's report
contained no statement under section 263(2) or 263(3) of The
Companies (Guernsey) Law 2008. The financial information contained
within this preliminary statement was approved and authorised for
issue by the Board on 22 May 2019.
The financial year covers the 12 months to 31 December 2018. The
comparative period covered the 10 month period to 31 December
2017.
The consolidated financial statements have been prepared under
the historical cost basis, except for the revaluation of certain
financial instruments and investment properties to fair value.
Historical cost is generally based on the fair value of the
consideration given in exchange for the assets. The principal
accounting policies are set out below.
Going concern
The group closely monitors and manages its liquidity risk, cash
forecasts are regularly produced and sensitivities run for
different scenarios including, but not limited to, changes in
commodity prices and different production profiles from the group's
producing assets. Based on the current status of the group's
finances, having considered going concern forecasts and reasonably
possible investments and downside scenarios, the group's forecasts
demonstrate it will have sufficient liquidity headroom to meet its
obligations in the ordinary course of business for the next 12
months from the date of approval of the financial statements.
Accordingly the directors are satisfied that the group continues
to adopt the going concern basis of accounting in preparation of
the 31 December 2018 financial statements.
4. Segmental reporting
The reporting segments are identified by the directors of the
group (who are considered to be the chief operating decision
makers) by the way that group's operations are organised. As at 31
December 2018 the group operated within four operating segments,
mineral exploration activities for iron ore and vanadium, vanadium
mining and production, coal exploration and energy. Activities take
place in South Africa (iron ore, vanadium and energy) and
Madagascar (coal).
Segment revenue and results
The following is an analysis of the group's revenue and results
by reportable segment.
Vanadium Coal Vanadium Energy
and iron exploration mining and Total
ore exploration production
$ $ $ $ $
Year ended
31
December
2018
Results
Segment
revenue - - 192,089,845 - 192,089,845
Segment
costs (2,721,652) - (84,051,698) (231,540) (87,004,890)
Segmental
(loss)
/ profit (2,721,652) - 108,038,147 (231,540) 105,084,955
================== ================== =================== ================== =======================
Vanadium Coal Vanadium
and iron exploration mining and Total
ore exploration production
$ $ $ $
Period ended 31
December 2017
Results
Segment revenue - - 2,848,360 2,848,360
Segment costs (781,367) (629,355) (1,233,327) (2,644,049)
Segmental (loss)
/ profit (781,367) (629,355) 1,615,033 204,311
----------------- ------------------- ------------------ ------------------
The reconciliation of segmental profit to the group's profit /
(loss) before tax is as follows:
Year ended 10 months ended
31 December 2018 31 December
2017
$ $
Segmental profit 105,084,955 204,311
Unallocated costs (13,142,302) (4,058,755)
Share of results of associate - 4,651,931
Impairment - de-merger of tin
assets - (705,472)
Movement in earnout estimate (6,091,514) -
Finance income 1,987,333 137,938
Finance costs (1,233,406) (1,112,107)
Profit / (loss) before tax 86,605,066 (882,154)
======================== ======================
Unallocated costs relate primarily to corporate costs and parent
company overheads not attributable to a specific segment.
4. Segmental reporting (continued)
Other segmental information
Vanadium Vanadium Coal Energy
and iron mining and exploration Total
ore exploration production
$ $ $ $ $
31 December 2018
Intangible assets
- exploration and
evaluation 55,639,067 - 1,511,358 - 57,150,425
Total reportable
segmental net assets 55,639,067 132,200,627 1,511,358 (420,254) 188,930,798
----------------- ------------ -------------- ------------ --------------
Unallocated net
liabilities (29,291,746)
Total consolidated
net assets 159,639,052
==============
Vanadium Vanadium Coal
and iron mining exploration Total
ore exploration and production
$ $ $ $
31 December 2017
Intangible assets
- exploration and
evaluation 60,862,691 - - 60,862,691
Total reportable
segmental net assets 60,862,691 67,221,312 - 128,084,003
----------------- ---------------- ------------- -------------
Unallocated net
liabilities (20,850,856)
-------------
Total consolidated
net assets 107,233,147
=============
Unallocated assets and liabilities relate to corporate and
parent company liabilities not attributable to a specific
segment.
5. Revenue
Year ended 10 months ended
31 December 2018 31 December 2017
$ $
Revenue from contracts with customers 192,089,845 2,848,360
================== ==================
Revenue with contract customers is generated from sale of goods
and is recognised upon delivery of the goods to the customer and
comprises the invoiced amount of goods to customers, net of value
added tax.
6. Administrative expenses by nature
Year ended 10 months
ended
31 December 31 December
2018 2017
$ $
The profit for the year has been arrived at after charging:
Shares issued to directors and 8,333,360 -
senior employees
Staff costs 7,166,859 1,287,989
Depreciation of property, plant
and equipment 182,159 60,443
Professional fees 1,886,507 977,960
Acquisition expenses - 958,718
Foreign exchange loss 91,082 758,000
Other 5,542,267 776,973
23,202,234 4,820,083
============== ===================
7. Staff costs
Key management personnel have been identified as the Board of
directors.
Details of directors' remuneration are included in note 35
(related party transactions) and the Remuneration Report.
No pension contributions were made on behalf of the Directors
and other staff members.
8. Finance income
Year ended 10 months
ended
31 December 31 December
2018 2017
$ $
Bank interest 1,987,333 137,938
9. Finance costs
Year ended 10 months
ended
31 December 31 December
2018 2017
$ $
Interest on convertible bonds 522,079 301,030
Other finance costs 711,327 811,077
1,233,406 1,112,107
============= =============
10. Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax.
Year ended 10 months ended
31 December 2018 31 December 2017
Factors affecting tax for the year / period: $ $
Profit / (loss) before taxation 86,605,066 (882,154)
Loss before taxation multiplied by Guernsey corporation tax rate of 0% - -
South African tax - current tax 32,218,043 10,494
South African tax - deferred tax 386,864 -
US tax charge on conversion of SMC to a LLC 5,000,000 -
Taxation expense for the year / period 37,604,907 10,494
================== ==================
Management believe that any unrecognised deferred tax assets
relating to the accumulated losses in the subsidiary undertakings
of the group, would be immaterial to these financial
statements.
A tax liability pertaining to the conversion of a subsidiary
from a corporation into a limited liability company in the United
States of America has resulted in an amount of $5,000,000 which is
payable to Internal Revenue Service (IRS).
11. Profit / (Loss) per share
From continuing operations
The calculation of a basic profit per share of 2.9 cents
(December 2017: loss per share of 0.2 cents), is calculated using
the total profit for the year attributable to the owners of the
company of $30,215,509 (December 2017: loss of $1,228,729) and the
weighted average number of shares in issue during the year of
1,043,907,922 (December 2017: 648,698,780). The dilutive effect of
other shares in issue would be immaterial to the profit per
share.
12. Intangible exploration and evaluation assets
Vanadium
and Iron Tin Coal Total
ore $ $ $
$
As at 1 March 2017 56,576,808 24,647,365 - 81,224,173
Exchange differences 2,583,746 (2,121,834) - 461,912
Impairment / loss
on disposal - (22,525,531) - (22,525,531)
Additions 1,702,137 - - 1,702,137
As at 31 December
2017 60,862,691 - - 60,862,691
---------------------- ------------ ------------- ---------- -------------
Exchange differences (5,265,485) - - (5,265,485)
Additions 41,861 - 1,511,358 1,553,219
As at 31 December
2018 55,639,067 - 1,511,358 57,150,425
---------------------- ------------ ------------- ---------- -------------
Vanadium and iron ore
The Company's subsidiary, Bushveld Resources Limited has a 64%
interest in Pamish Investment
No 39 (Proprietary) Limited ("Pamish") which holds an interest
in Prospecting right 95 ("Pamish 39"). Bushveld Resources Limited
also has a 68.5% interest in Amaraka Investment No 85 (Proprietary)
Limited ("Amaraka") which holds an interest in Prospecting right
438 ("Amaraka 85").
Under the agreements to acquire the licences within Bushveld
Resources, the group is required to fully fund the exploration
activities up to the issue of the corresponding mining licences. As
the non-controlling interest party retains their equity interest,
the funding of their interest is accounted as deemed purchase
consideration and is included in the additions in the year to
exploration activities. A corresponding increase is credited to
non-controlling interest.
Brits Vanadium Project
The Company is in a process to secure regulatory approval in
terms of section 11 of the Mineral and Petroleum Resources
Development Act (MPRDA) for change of control in respect of the
acquired Sable Metals & Mining Ltd subsidiaries. Following
approval, Bushveld Minerals will commence with activities to
delineate the shallow resource on the Uitvalgrond farm portion.
-- NW 30/5/1/1/2/11069 PR - held through Great Line 1 (Pty) Ltd
-- NW 30/5/1/1/2/11124 PR - held through Great Line 1 (Pty) Ltd
-- GP 30/5/1/1/02/10142 PR - held through Gemsbok Magnetite (Pty) Ltd
Coal
Coal Exploration licences have been issued to Coal Mining
Madagascar SARL a 99% subsidiary of Lemur Investments Limited.
The exploration is in South West Madagascar covering 11
concession blocks in the Imaloto Coal basin known as the Imaloto
Coal Project and Extension.
Tin
In November 2017 the Group disposed of its tin assets through
the demerger of Greenhills Resources Limited and the subsequent
listing of Afritin Mining Limited.
13. Property, plant and equipment
Buildings and Motor vehicles
other Plant and Furniture and Decommissioning Assets under
improvements machinery Equipment assets construction Total
$ $ $ $ $ $
Cost
At 1 March 2017 - 926,862 - - - 926,862
Additions due to
acquisition 583,360 39,440,168 27,382 1,439,339 892,419 42,382,668
Foreign exchange 27,429 1,780,363 1,288 67,674 41,960 1,918,704
At 31 December 2017 610,789 42,147,393 28,670 1,507,013 934,379 45,228,234
Additions - - - 271,518 10,934,184 11,205,702
Disposals - (1,180,001) (30,017) - - (1,210,018)
Assets under
construction
capitalised 730,388 3,310,376 246,498 - (4,287,262) -
Foreign exchange (82,128) (1,398,908) (3,856) (202,636) (125,639) (1,813,167)
At 31 December 2018 1,259,049 42,878,860 241,295 1,575,895 7,455,662 53,410,751
--------- ----------- -------------- --------------- ------------ -----------
Depreciation
At 1 March 2017 - 550,511 - - - 550,511
Depreciation charge for
the year - 60,443 - - - 60,443
Foreign exchange - 198,101 - - - 198,101
At 31 December 2017 - 809,055 - - - 809,055
Depreciation charge for
the year 237,758 5,508,585 209,890 83,106 - 6,039,339
Disposals - (1,180,001) (30,017) - - (1,210,018)
Foreign exchange - (108,787) - - - (108,787)
At 31 December 2018 237,758 5,028,852 179,873 83,106 - 5,529,589
--------- ----------- -------- --------- --------- -----------
Net Book Value
At 31 December 2018 1,021,291 37,850,008 61,422 1,492,789 7,455,662 47,881,162
At 31 December 2017 610,787 41,338,338 28,669 1,507,009 934,376 44,419,179
========= =========== ======== ========= ========= ===========
Change in estimates
As at 31 December 2018, management reviewed the average usage
lives of property, plant and equipment. As a result, the expected
useful lives of certain assets were decreased and fully depreciated
during 2018. The effect of these changes on actual and expected
depreciation expense, included in 'cost of sales', in current
and future years respectively is as follows:
2018 2019 2020 2021 2022 Later
---------------------------- ---------- ----------- ----------- --------- --------- -----------
Increase/(decrease)
in depreciation
expense 123,234 (10,325) (10,325) (10,325) (10,325) (81,934)
---------------------------- ---------- ----------- ----------- --------- --------- -----------
14. Investment properties
31 December 31 December
2018 2017
$ $
Fair value at start 3,303,501 -
of the year / period
Acquired in the year - 3,303,502
Fair value movements (20,214) -
Foreign exchange (467,280) -
----------------------- -----------------------
Fair value at end
of year / period 2,816,007 3,303,502
======================= =======================
Land and buildings comprise residential housing in Brits and
Elandsrand, North West Province.
Investment properties are stated at fair value, which has been
determined based on valuations performed by Mr WJ van Aardt, an
accredited independent valuer, as at 31 December 2017 and 2018.
Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between
market participants at the measurement date.
The following valuation techniques and key inputs were used in
the valuation of the investment properties:
i. Physical inspection of each property;
ii. Consultation with estate agencies to discuss current sales market trends; and
iii. Comparative sales reports for locations where properties are situated were obtained.
15. Deferred tax asset
31 December 31 December
2018 2017
$ $
As at 31 December
2018 3,004,141 3,275,122
======================= =======================
16. Inventories
31 December 31 December GBP
2018 2017
$ $
Finished goods 6,094,274 6,476,940
Work in progress 4,489,189 4,391,664
Raw materials 2,157,296 1,617,291
Consumable stores 4,452,259 4,685,973
----------------------
Inventories 17,193,018 17,171,868
====================== =======================
The amount of write-down of inventories due to net realisable
value provision requirement is nil.
17. Trade and other receivables
31 December 31 December
2018 2017
$ $
Trade receivables 27,454,540 8,278,854
Other receivables 5,131,645 5,599,376
Trade and other receivables 32,586,185 13,878,230
============ ============
Trade receivables are non-interest bearing and are generally on
15-90 day terms. There were no indicators of impairment at the year
end. At 31 December 2018 the group had one customer which accounted
for approximately 90% of trade receivables.
The directors consider that the carrying amount of trade and
other receivables approximates to their fair value due to their
short- term nature. As at the year end, no receivables are past
their due date, hence no allowance for doubtful receivables is
provided on the basis that expected credit losses are nil.
The total trade and other receivables denominated in South
African Rand amount to $1,602,806 (December 2017: $7,471,478).
18. Restricted investment
31 December 31 December
2018 2017
$ $
Rehabilitation trust fund and
insurance fund 5,388,953 5,186,937
===========
The group is required by statutory law in South Africa to hold
these restricted investments in order to meet decommissioning
liabilities on the statement of financial position (note 24).
19. Available-for-sale financial asset
$
AIM listed shares
As at 1 January 2018 1,652,265
Fair value movement 659,007
As at 31 December
2018 2,311,272
-----------
The Group measures the fair value of an instrument using the
quoted price in an active market for that instrument. A market is
regarded as active if transactions for the asset or liability take
place with sufficient frequency and volume to provide pricing
information on an ongoing basis.
20. Cash and cash equivalents
31 December 31 December
2018 2017
$ $
Cash at hand and in bank 42,019,123 9,739,632
===========
Cash and cash equivalents (which are presented as a single class
of assets on the face of the Statement of Financial Position)
comprise cash at bank and other short-term highly liquid
investments with an original maturity of three months or less. The
directors consider that the carrying amount of cash and cash
equivalents approximates their fair value.
The total cash and cash equivalents denominated in South African
Rand amount to $38,304,481 (December 2018: $7,223,070).
21. Borrowings and other financial liabilities
31 December 31 December
2018 2017
$ $
Convertible loan notes - 7,861,526
Other financial liabilities - 1,366,052
------------------- ------------
- 9,227,578
=================== ============
Settlement of convertible bonds
The outstanding convertible bonds balance was reduced by the
following conversions:
-- $337,300 of convertible bonds converted into 3,078,817
ordinary shares of 1 pence each of the Company at a conversion
price of 8.12 pence each on 18 January 2018. Following the
exercise, Atlas held a total of $9,039,640 Convertible Bonds;
-- $944,440 of convertible bonds converted into 8,620,689
ordinary shares of 1 pence each of the Company at a conversion
price of 8.34 pence each on 23 January 2018. Following the
exercise, Atlas held a total of $8,095,200 Convertible Bonds;
-- $1,349,200 of convertible bonds converted into 11,990,407
ordinary shares of 1 pence each of the Company at a conversion
price of 8.34 pence each on 19 February 2018. Following the
exercise, Atlas held a total of $6,746,000 Convertible Bonds;
-- $978,170 of convertible bonds converted into 8,809,234
ordinary shares of 1 pence each of the Company at a conversion
price of 8.23 pence each 14 March 2018. Following this exercise,
Atlas held a total of $5,767,830 Convertible Bonds.
On 14 June 2018, Bushveld fully redeemed the issued Convertible
Bonds. The Convertible Bonds were settled in full for a final
aggregate cash payment of $6.9 million, including interest and
early redemption charges.
22. Trade and other payables
31 December 31 December
2018 2017
$ $
Trade payables 12,140,084 10,874,018
Other payables - 6,381,182
Accruals 8,063,711 2,992,513
20,203,795 20,247,713
============ ============
Trade and other payables principally comprise amounts
outstanding for trade purchases and on-going costs. The average
credit period taken for trade purchases is 30 days.
The group has financial risk management policies in place to
ensure that all payables are paid within the pre-arranged credit
terms. No interest has been charged by any suppliers as a result of
late payment of invoices during the year.
The directors consider that the carrying amount of trade and
other payables approximates to their fair value.
The total trade and other payables denominated in South African
Rand amount to $15,793,322 (December 2018: $14,840,008).
23. Post-retirement medical liability
31 December 2018
$
Benefit liability
As at 1 January 2018 2,783,456
Actuarial changes
arising from changes
in financial assumption (405,719)
--------------------------
Balance at 31 December
2018 2,377,737
==========================
The benefit comprises medical aid subsidies provided to
qualifying retired employees. Actuarial valuations are made
annually, and the most recent valuation was made on 31 December
2018.
The main assumptions in the valuation are:
Discount rate 9.90%
Health care cost inflation 8.20%
Average retirement age 76.6 years
A one percentage point change in the assumed rate of healthcare
costs would have the following effect on the present value of the
unfunded obligation: Plus 1%: $2,6 million; Less 1%: $2,1
million.
A one percentage point change in the assumed interest rate would
have the following effect on the present value of the unfunded
obligation; Plus 1%: $0,25 million; Less 1%: $0,21 million.
24. Environmental rehabilitation liability
31 December 2018
$ 31 December
2017
$
Provision for future
environmental rehabilitation
costs 6,632,607 6,669,432
============================ =====================
Provision for future environmental rehabilitation costs are made
on a progressive basis. Estimates are based on costs that are
regularly reviewed and adjusted as appropriate for new
circumstances.
The rehabilitation provision represents the present value of
rehabilitation costs relating to the mine sites, which are expected
to be incurred up to 2037, which is when the producing mine
properties are expected to cease operations. The provisions are
based on management's estimates and assumptions based on the
current economic environment. Actual rehabilitation costs will
ultimately depend upon future market prices for the necessary
rehabilitation works and timing of when the mine ceases operation.
Furthermore, the timing of rehabilitation is likely to depend on
when the mines cease to produce at economically viable rates. This,
in turn, will depend upon future vanadium prices, which are
inherently uncertain.
The discount rate used in the calculation of the provision as at
31 December 2018 was 9.73% (2017: 9.79%).
25. Share capital and share premium
Total share
Shares Share capital Share premium capital
Number $ $ and premium
$
At 1 March 2017 696,214,271 9,393,318 82,198,555 91,591,873
Warrants exercised 70,858,086 956,018 1,325,495 2,281,513
Conversion of convertible
bonds 13,056,184 176,155 1,240,506 1,416,661
Other issues - Dawnmin 41,000,000 553,173 323,809 876,982
Distribution of capital
on de-merger - - (21,786,883) (21,786,883)
Shares issued on acquisition 54,766,364 738,909 5,921,179 6,660,088
At 1 January 2018 875,894,905 11,817,573 69,222,661 81,040,234
Conversion of convertible
bonds 32,499,147 413,649 2,991,090 3,404,739
Warrants exercised 33,737,419 429,409 3,710,416 4,139,825
Shares issued 152,749,172 1,944,191 18,080,981 20,025,172
Shares issued to directors
and staff 24,847,310 316,257 8,017,103 8,333,360
Share issue expenses - - (1,018,995) (1,018,995)
At 31 December 2018 1,119,727,953 14,921,079 101,003,256 115,924,335
The Board may, subject to Guernsey Law, issue shares or grant
rights to subscribe for or convert securities into shares. It may
issue different classes of shares ranking equally with existing
shares. It may convert all or any classes of shares into redeemable
shares. The Company may also hold treasury shares in accordance
with the law. Dividends may be paid in proportion to the amount
paid up on each class of shares.
As at the 31 December 2018 the Company owns 670,000 (December
2017: 670,000) treasury shares with a nominal value of 1 pence.
Equity placing
On 26 March 2018, the Company raised approximately US$20 million
(before expenses) by way of an oversubscribed placing of
152,749,172 new ordinary shares of 1 penny each at a price of 10.3
pence per share with leading institutional and mining investors
(the "Placing"). The price was calculated as the 5 day volume
weighted average price (as published by Bloomberg) at close of
trading Monday 19 March 2018. The Placing shares represented
approximately 14.4% of the Company's issued share capital on
admission.
The planned use of the net proceeds of the Placing was to:
-- Redeem the outstanding Atlas Capital Convertible Bond US$6.9m;
-- Simplify Bushveld's organisational and corporate structure to
improve Bushveld's exposure to the underlying cash flows of its
assets US$9.0m ; and
-- Support Bushveld's vanadium expansion programme: Expansion of
the vanadium reserves and resources at the Vametco mine and Brits
Project for future production and support Vametco's expansion plans
to increase production to more than 5,000mtV and beyond US$5.6m
Shares issued to directors and staff
During the course of the year a benchmarking exercise was
conducted in order to address a pay gap matter which resulted in a
one-off retrospective compensation by way of shares being issued to
employees, directors and advisors. Further to the approval by
Shareholders of the Retrospective Compensation Scheme, the
Compensation Shares were issued as follows:
Nature and purpose of reserves
Share premium
The share premium reserve represents the amount subscribed for
share capital in excess of nominal value.
Warrant reserve
The warrant reserve represents proceeds on issue of warrants
relating to the equity component (i.e. option to convert the debt
into share capital).
Foreign exchange translation reserve
The translation reserve comprises all foreign currency
differences arising from the translation of financial statements of
foreign operations.
Fair value reserve
The fair value reserve comprises the cumulative net change in
the fair value of available-for-sale financial assets until the
assets are derecognised or impaired.
Accumulated profit / loss
The accumulated profit / loss reserve represents other net gains
and losses and transactions with owners (e.g. dividends) not
recognised elsewhere.
26. Provisions
Leave pay Performance Surface Other Total
and bonus bonus lease
$ $ $ $ $
Balance at 1 March - - - - -
2017
Acquired during
the period 929,525 1,293,417 1,148,922 100,018 3,471,882
----------- ------------ ----------- ------------ ------------
Balance at 1 January
2018 929,525 1,293,417 1,148,922 100,018 3,471,882
Additional provisions 73,314 1,841,460 (86,905) 2,158,839 3,986,708
Utilised during
the year - (2,175,591) (315,116) (192,524) (2,683,231)
Foreign exchange (166,384) (150,201) (124,285) (13,524) (454,394)
Balance at 31
December 2018 836,455 809,085 622,616 2,052,809 4,320,965
----------- ------------ ----------- ------------ ------------
Leave pay and bonus
Leave pay represents employee leave days due multiplied by their
cost to the company employment package. The bonus represents the
estimated amount due to employees based on their approved bonus
scheme.
Performance bonus
The performance bonus represents an incentive bonus due to
senior employees, calculated in terms of an approved scheme based
on the company's operating results.
Surface lease
The provision is based on management's best estimate of the
expenditure required to settle the obligation for surface lease
rentals to Co--Owners, subsequent to finalisation of the surface
lease agreements.
Other
The other provision represents amounts funded by the Industrial
Development Corporation of South Africa to Bushveld Energy as well
as group tax, legal and consulting fees expected fees to be
charged.
27. Deferred consideration
31 December 2018
$ 31 December
2017
$
Opening balance 11,019,447 -
Initial recognition
on acquisition - 11,019,447
Unwinding of discount 316,551 -
Movement in earnout 6,091,514 -
estimate
Closing balance 17,427,512 11,019,447
============================ ======================
At the year-end management have updated their estimate of the
earnout payable on the acquisition of the Vametco Group, which is
based on the expected EBITDA for the year ended 31 December
2020.
28. Warrants
The warrants in issue during the year are as follows:
Number of warrants
------------------------------------------------- ------------------------------
Outstanding at 1 March 2017 114,109,300
Granted during the 10 months to 31
December 2017 36,877,820
Exercised during the 10 months to
31 December 2017 (103,552,751)
Outstanding at 31 December 2017 47,439,660
Exercisable at 30 December 2017 47,439,660
Exercised during year to 31 December
2018 (47,439,660)
Outstanding at 31 December 2018 -
------------------------------------------------- ------------------------------
29. Financial instruments
The group is exposed to the risks that arise from its use of
financial instruments. This note describes the objectives, policies
and processes of the group for managing those risks and the methods
used to measure them. Further quantitative information in respect
of these risks is presented throughout these financial
statements.
Capital risk management
The group manages its capital to ensure that entities in the
group will be able to continue as going concerns while maximising
returns to shareholders. In order to maintain or adjust the capital
structure, the group may issue new shares or arrange debt
financing. At the reporting date, the group had borrowings of nil
(2017: $9,211,774).
The capital structure of the group consists of cash and cash
equivalents and equity, comprising issued capital and retained
profits.
The group is not subject to any externally imposed capital
requirements.
Significant accounting policies
Details of the significant accounting policies and methods
adopted including the criteria for recognition, the basis of
measurement and the bases for recognition of income and expenses
for each class of financial asset, financial liability and equity
instrument are disclosed in note 3.
Principal financial instruments
The principal financial instruments used by the group, from
which financial instrument risk arises, are as follows:
-- Trade and other receivables
-- Cash at bank
-- Trade and other payables
-- Borrowings
-- Investments in listed shares
Categories of financial instruments
The group holds the following financial assets:
31 December 31 December
2018 2017
$ $
Loans and receivables
Trade and other receivables 32,586,186 13,878,230
Restricted investment 5,388,953 5,186,937
Cash and cash equivalents 42,019,123 9,739,632
Available for sale financial
assets 2,311,272 1,652,265
Total financial assets 82,305,534 30,457,064
============ ============================
The group holds the following financial liabilities:
31 December 31 December
2018 2017
$ $
Other financial liabilities
Trade and other payables 20,203,795 20,247,713
Borrowings - 7,861,526
------------ ------------
Total financial liabilities 20,203,795 28,109,239
============ ============
The directors are of the opinion that the book value of
financial instruments approximates fair value. The carrying value
less allowance for credit losses for trade receivables and payables
are assumed to approximate their fair values.
General objectives, policies and processes
The Board has overall responsibility for the determination of
the group's risk management objectives and policies. The Board
receives reports through which it reviews the effectiveness of the
processes put in place and the appropriateness of the objectives
and policies it sets.
The overall objective of the Board is to set polices that seek
to reduce risk as far as possible without unduly affecting the
group's competitiveness and flexibility. Further details regarding
these policies are set out below:
Price risk
The Group's exposure to commodity price risk is dependent on
the fluctuating price of the various commodities that it mines
and sells.
The average market price of each of the following commodities
was:
2018 2017
$/Kg V $/Kg V
---------------------------------------- -------
NV 67.36 29.25
MVO 110.12 -
If the average price of each of these commodities increased/decreased
by 10% the total sales related to each of these commodities
would have increased/decreased as follows: Effect on 2018 Effect on
revenue 2018 net
$ income
$
NV 17,273,858 12,437,178
MVO 93,862 67,581
17,367,720 12,504,758
=============== ===========
A 2017 analysis has not been included because the group was only
exposed to significant price risk following the acquisition of the
Vametco group in December 2017.
Credit risk
Credit risk arises principally from the group's cash balances
with further risk arising due to its other receivables and
available-for-sale investments. Credit risk is the risk that the
counterparty fails to repay its obligation to the group in respect
of the amounts owed. The group gives careful consideration to which
organisations it uses for its banking services in order to minimise
credit risk.
It is the group's policy that all suppliers who wish to trade on
credit terms are subject to credit verification
procedures. Credit risk arises from credit exposure to
customers, including outstanding receivables and
committed transactions.
Trade account receivables comprise a limited customer base.
Ongoing credit evaluation of the financial position of customers is
performed and granting of credit is approved by directors.
The group's credit risk is considered by counterparty, geography
and by currency. The group has a significant concentration of cash
held on deposit with large banks in South Africa, Mauritius and the
United Kingdom and America with A ratings and above (Standard and
Poors).
The concentration of credit risk by currency was as follows:
31 December 31 December
2018 2017
Currency $ $
Sterling 1,548,907 2,693,382
South African Rand 10,322,765 6,489,818
United States Dollar 30,147,451 556,432
------------ ------------
42,019,123 9,739,632
============ ============
At 31 December 2018, the group held no collateral as security
against any financial asset. The carrying amount of financial
assets recorded in the financial statements, net of any allowances
for losses, represents the group's maximum exposure to credit risk
without taking account of the value of any collateral obtained. At
31 December 2018, no financial assets were past their due date. As
a result, there has been no impairment of financial assets during
the year. An allowance for impairment is made where there is an
identified loss event which, based on previous experience, is
evidence of a reduction in the recoverability of the cash flows.
Management considers the above measures to be sufficient to control
the credit risk exposure.
Liquidity risk
Liquidity risk is the risk that the group will encounter
difficulty in meeting its financial obligations as they fall due.
Ultimate responsibility for liquidity risk management rests with
the Board of directors. The Board manages liquidity risk by
regularly reviewing the group's gearing levels, cash-flow
projections and associated headroom and ensuring that excess
banking facilities are available for future use.
The group maintains good relationships with its banks, which
have high credit ratings and its cash requirements are anticipated
via the budgetary process. At 31 December 2018, the group had
$42,019,123 (December 2017: $9,739,632) of cash reserves.
Market risk
The group's activities expose it primarily to the financial risk
of changes in foreign currency exchange rates and interest
rates.
Interest rate risk
With the exception of cash and cash equivalents, the group's
only interest-bearing assets or liabilities were the convertible
loan notes (see note 21), which carry a fixed rate of interest and
were redeemed or settled in full in the year. The group was
therefore exposed to minimal interest rate risk during the year.
For this reason, no sensitivity analysis has been performed
regarding interest rate risk.
Foreign exchange risk
As highlighted earlier in these financial statements, the
functional currency of the group is US Dollars. The group also has
foreign currency denominated assets and liabilities. Exposures to
exchange rate fluctuations therefore arise. The carrying amount of
the group's foreign currency denominated monetary assets and
liabilities, all in US Dollars, are shown below:
31 December 2018 31 December
2017
$ $
Cash and cash equivalents 11,871,672 9,183,200
Other receivables 5,383,027 5,599,376
Trade and other payables (9,161,039) (20,247,713)
----------------- -------------
8,093,660 (5,465,137)
================= =============
The group is exposed to a level of foreign currency risk. Due to
the minimal level of foreign transactions; the directors currently
believe that foreign currency risk is at an acceptable level.
The group does not enter into any derivative financial
instruments to manage its exposure to foreign currency risk.
30. Operating lease commitments
The group had total commitments at the reporting date under
non-cancellable operating leases falling due as follows:
31 December 31 December
2018 2017
Land and buildings Land and buildings
$ $
Within one year 991,870 1,072,829
Between one and five years 1,904,324 1,908,800
More than five years 7,812,984 -
10,709,178 2,981,629
31. Contingent liabilities
As required by the Minerals and Petroleum Resources Act (South
Africa), a guarantee amounting to $5,651,318 before tax and
$4,068,946 after tax was issued in favour of the Department of
Mineral Resources for the unscheduled closure of the mine. This
guarantee was issued on condition that a portion be deposited in
cash with Guard Risk Insurance Company Ltd with restricted use by
the Group, as per the below.
The restricted cash disclosed as a current asset consists of
$2,455,711 (2017: $2,850,636) paid to Investec Bank Limited and
$1,996,638 (2017:$2,336,300) paid to Guardrisk Insurance Company
Ltd, to enable Guard Risk Insurance Company Ltd to issue a
guarantee to the Department of Mineral Resources for the mine's
environmental rehabilitation obligation. The insurance company
deposited this balance in a Money Market account and interest at a
rate of 5.75% is earned on the net credit balance. The guarantee is
valid for three years, commencing on 1 April 2015 and the funds are
only available if the agreement is terminated with a three months'
notice period. The contract was renewed on 1 April 2018, it will
expire on 31 March 2021.
32. Capital commitments
31 December 31 December
2018 2017
$ $
Authorised and contracted
for 7,599,075 5,887,761
Authorised but not contracted
for 2,258,667 3,098,650
9,857,742 8,986,411
============ ============
33. Acquisition of Sojitz interest in Strategic Minerals Corporation
On 13 September 2018, the group completed the acquisition of a
21.22 per cent interest in Strategic Minerals Corporation, an
intermediate holding company of Vametco Alloys Proprietary Limited,
from Sojitz Noble Alloys Corporation for a total cash consideration
of $17,500,000 ("the transaction"). On completion of the
transaction, the Bushveld group increased its indirect beneficial
interest in Vametco Alloys Proprietary Limited from 59.1 per cent
to 75 per cent.
Transaction summary
-- The group acquired all of Sojitz Noble Alloys Corporation's
shareholding interest and accompanying rights in Strategic Minerals
Corporation, the 75 per cent owner of Vametco Alloys Proprietary
Limited, for a total consideration of US$20,000,000 (twenty million
US dollars). The US$20,000,000 consideration payable comprises:
o US$17,500,000 in cash (seventeen million five hundred thousand
US dollars) for the sale shares; and
o US$2,500,000 in cash (two million five hundred thousand US
dollars) in full and final settlement of accrued but unpaid
dividends on the sale shares;
-- The Sojitz Noble Alloys Corporation shareholding in Strategic
Minerals Corporation was acquired free from all claims, liens,
equities, charges, encumbrances and adverse rights of any
description, and together with all rights attaching thereto,
accrued or contingent.
-- Following completion of the transaction Bushveld, through
wholly owned Bushveld Vametco Limited, owns 100 per cent of
Strategic Minerals Corporation and therefore have an indirect
beneficial interest of 75 per cent in Vametco Alloys Proprietary
Limited (subsequently reduced to 74 per cent - see note 34).
-- The group used existing cash resources to complete the transaction.
34. Broad Based Black Economic Empowerment ownership in the Group
On 27 September 2018, the group completed the sale of a 1.0%
equity interest in Bushveld Vametco Holdings (Proprietary) Limited
equally to its two Broad Based Black Economic Empowerment
Shareholders, Business Ventures Investments No. 1833 (Proprietary)
Limited and Business Ventures Investments No. 973 (Proprietary)
Limited ("BBBEE Shareholders") for a total cash consideration of
R1,780,000.
The commitment to conclude the transaction at the agreed
consideration was made by the previous Strategic Minerals
Corporation owners, prior to Bushveld Minerals Limited's
acquisition of Strategic Minerals Corporation, with a view to
meeting the Black Economic Empowerment equity requirements as set
out in the recently promulgated Mining Charter III. Accordingly,
the sale increased Bushveld Vametco Holdings (Proprietary)
Limited's Broad Based Black Economic Empowerment shareholding from
25.0% to 26.0%, ensuring Bushveld Vametco Holdings (Proprietary)
Limited is fully compliant with the minimum Black Economic
Empowerment ownership requirements of the Mining Charter. Bushveld
Minerals Limited's shareholding in Bushveld Vametco Holdings
(Proprietary) Limited, through its wholly owned subsidiary
Strategic Minerals Corporation, accordingly, reduces to 74%.
Transaction summary
-- Total 1.0% interest acquired to increase total Broad Based
Black Economic Empowerment shareholders interest to 26.0% for a
total cash consideration of R1,780,000;
-- The R1,780,000 consideration was vendor financed provided to
Broad Based Black Economic Empowerment shareholders by Bushveld
Minerals which has since been repaid;
-- The share based payment charge recognised in the income
statement of $3,232,425 represents the difference between the grant
date fair value and the 1% interest and the amount receivable for
the shares. A charge has been recognised in the income statement to
recognise the services (BEE credentials) received by the group.
The fair value of the shares were determined by using the
estimated fair value of the subsidiary company. The fair value of
the subsidiary company was determined using the following
assumptions:
-- Future estimated vanadium prices
-- Future estimated exchange rates
-- Future estimated production volumes
-- Discount rate of 12.8%
-- New order mining rights will expire in 2037
35. Related party transactions
Balances and transactions between the Company and its
subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note.
VM Investments Limited is a related party due to two of the
Executive Directors (Fortune Mojapelo and Anthony Viljoen) of
Bushveld Minerals Limited being majority shareholders of VM
Investments. At the year end, VM Investments Ltd (VMI) owed the
group $22,688 (2017: nil).
The remuneration of the directors, who are the key management
personnel of the group, is set out below. Further information about
the remuneration of individual directors is provided in the
Directors' remuneration report.
Year ended 10 months ended
31 December 31 December
2018 2017
$ $
Fees for services as directors 196,557 65,774
Short-term employee benefits 595,670 336,176
Share based payments (note 6,058,690 -
25)
-------------
6,850,917 401,950
============= ================
36. Events after the reporting date
Vanchem acquisition
On 1 May 2019 the Company announced it had entered into a
Business and Share Purchase Agreement (the "Agreement") with
Vanchem Vanadium Products (Pty) Limited ("VVP"), a subsidiary of
Duferco Vanadium Investment Holding S.A. ("Duferco"), South African
Japan Vanadium Proprietary Limited ("SAJV"), a wholly owned
subsidiary of VVP and Duferco Participations Holding S.A. to
conditionally acquire the following vanadium production assets in
South Africa (the "Transaction"):
(i) the vanadium production business of VVP as a going concern ("Vanchem Plant");
(ii) the ferrovanadium production business of SAJV as a going
concern ("SAJV Business"); and
(iii) 100 per cent of the outstanding shares of Ivanti Resources
(Pty) Limited ("Ivanti"), a subsidiary of Duferco Participations
Holding S.A, which has economic rights to certain secondary
vanadium units treated within the Vanchem Plant.
The assets are being acquired as one indivisible transaction,
for an aggregate cash consideration of US$68 million (the
"Consideration"), which is to be settled in two stages. The Vanchem
Plant and SAJV Business are hereinafter jointly referred to as the
Vanchem Business ("Vanchem Business").
Key aspects of the acquisition transaction include the
following:
-- The Company is acquiring the Vanchem Business and 100 per
cent of the outstanding shares of Ivanti for an aggregate
Consideration of US$68 million.
-- Consideration is payable in two stages,
o US$6.8 million paid on 30 April 2019 following the execution
of the Agreement into an escrow account pending completion of the
Transaction, and
o US$61.2 million to be settled in full no sooner than 31 July
2019 and no later than 31 October 2019.
-- All fair value determinations of assets being acquired will
be completed on or before Transaction completion date.
-- For a 12 month period after completion of the Transaction,
VVP will be entitled to 50 per cent of the profits made by
Ivanti.
-- The Vanchem Plant is a primary vanadium producing facility
with a beneficiation plant capable of producing various vanadium
oxides, ferro-vanadium and vanadium chemicals.
-- The Vanchem Plant is located approximately 200 km by road
from the Company's Mokopane Vanadium Project ("Mokopane"). Mokopane
is intended to become a primary source of feedstock for the Vanchem
Business and its development will be accelerated as a result of the
Transaction.
-- Capital expenditure requirements associated with developing
Mokopane are estimated to be US$20 million.
-- The Vanchem Business provides immediate production growth,
adding an estimated 960mtV on an annualised basis using one of the
three kilns on site and is expected to achieve a steady state
production of 4,200 mtV per annum following refurbishment.
-- Refurbishment costs are expected to be approximately US$45
million and will be incurred over a five year period from the
completion of the Transaction.
-- The Company plans to finance the entire Consideration and
associated capital expenditure from the Company's existing cash
resources, future cash flows as well as, to the extent necessary,
debt facilities which are currently being negotiated.
Lemur funding
Lemur Holdings Limited, a subsidiary entered into a $1,000,000
(One Million United States Dollars) facility agreement with the
Development Bank of Southern Africa Limited in March 2019. The
purpose of the facility is to assist with the costs associated with
delivering the key milestones to the power project. The repayment
is subject to the successful bankable feasibility of the project at
which point the repayment would be the facility value plus an
amount equal to an IRR of 40% capped at 2.5 times which ever is
lower. Due to the uncertainty of the outcome of the project the
liability is classified as contingent at this point in time. As at
end April 2019, no amount has been drawn from this facility.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR EASSDADENEEF
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May 23, 2019 02:01 ET (06:01 GMT)
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