TIDMBMN
RNS Number : 2778H
Bushveld Minerals Limited
31 July 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.
31 July 2019
Bushveld Minerals Limited
("Bushveld Minerals" or the "Company")
Q2 2019 Operational Update
Bushveld Minerals Limited (AIM: BMN), the AIM listed, integrated
primary vanadium producer, with ownership of high grade vanadium
assets, is pleased to provide an operational update for the three
months ending 30 June 2019 ("Q2 2019"), in respect of Bushveld
Vanadium, Bushveld Energy and Lemur Holdings, as well as other
corporate activities.
Key Highlights
Vametco
-- Transformation programme successfully delivering higher
production rates with Q2 2019 production recording the highest
quarterly production rate in over two years.
-- Production for Q2 2019 was 742 mtV in the form of
Nitrovan(TM) from magnetite concentrate, a 14 per cent increase
relative to Q1 2019 (Q1 2019: 649 mtV), and an 18 per cent
improvement relative to Q2 2018 (Q2 2018: 629mtV).
-- Improvements in mine production scheduling and vanadium grade
in kiln feed continues, together with an increase in the hourly
feed rate to the kiln and recovery. Overall plant recovery
continues to improve.
-- Production for H1 2019 was 1,392 mtV, a 2 per cent increase
relative to H1 2018 (H1 2018: 1,360 mtV).
-- On target to meet current 2019 production guidance of 2,800
mtV to 2,900 mtV which remains unchanged, underpinned by the
continued implementation of several productivity initiatives during
the course of H2 2019.
-- Unit production cost for H1 2019 was US$17.40/KgV, a 14 per
cent reduction relative to H1 2018 (H1 2018: US$20.2/KgV),
supported by a weaker ZAR relative to the USD during H1 2019,
higher volumes and cost reductions.
-- Unit production cost guidance of US$18.90/KgV to US$19.50/KgV
for the 2019 calendar year remains unchanged due to the
anticipation of a stronger ZAR relative to the USD during H2
2019.
-- H1 2019 Revenue of US$74.3 million (H1 2018: US$81.2 million)
and H1 2019 EBITDA of US$48.6 million (H1 2018: US$42.4
million).
-- Vametco achieved an EBITDA margin in excess of 50 per cent,
underpinned by strict controls on unit cost and a weaker ZAR.
-- At current vanadium prices Vametco remains cash flow
positive. During H2 2019 the business will continue to focus on
cost control and reduction.
-- Successfully completed the wage and benefits negotiations
with the Association of Minerals Workers and Construction Union
("AMCU") for the 3-year period 1 July 2019 to 20 June 2022.
Bushveld Energy
Electrolyte Plant
-- The Environmental Impact Assessment ("EIA") for the proposed
plant in East London, South Africa has passed the public
participation stage and is on track to be completed this year.
-- The first batch of electrolyte was successfully produced
using Vametco's feedstock, with the samples being sent to vanadium
battery companies for testing.
Vanadium electrolyte rental model
-- Implementation of the first rental contract was announced
with Avalon Battery Corporation and its customer, Sandbar, in the
United States.
Eskom VRFB project
-- The Vanadium Redox Flow Battery ("VRFB") installed with Eskom
was commissioned and continues to operate.
Vametco based Solar Mini-Grid Project
-- Commenced a number of activities including an Environmental
Assessment, a grid connection and geotechnical studies. Procurement
for the project will commence in the third quarter of 2019.
Corporate
Vanchem acquisition
-- Completion of the Transaction announced on 01 May 2019 in
respect of the acquisition of Vanchem (as defined below), will now
occur on 31 October 2019, due to certain conditions precedent
having not yet been fulfilled. Fulfilment of those conditions are
on track so that transaction closure can take place by 31 October
2019.
Johannesburg Stock Exchange Listing
-- The application for the listing of the Company's shares on
the Johannesburg Stock Exchange ("JSE") will now occur in calendar
year 2020. The revised timing is due to the completion of the
Vanchem acquisition now being scheduled to occur on 31 October
2019.
Fortune Mojapelo, CEO of Bushveld Minerals Limited,
commented:
"Results from work under the Transformation Programme at
Vametco, aimed at establishing operational excellence and
stability, continue to be reflected in the operating performance
with Q2 2019 being a record quarter since the same quarter in 2017.
In addition, Vametco generated an EBITDA of US$49 million in the
first half of the year and an EBITDA margin in excess of 50%.
"We are pleased to report that we are on course to meet
Vametco's production guidance of 2,800 mtV to 2,900 mtV for the
2019 calendar year, with several further productivity initiatives
to be implemented during the course of H2 2019, from where we can
continue to build towards our target of 3,400mtv per annum during
the course of 2020.
"We are delighted to announce the successful completion of the
wage negotiations with AMCU for the next three years, which
eliminates the risks of strikes relating to wage negotiations and
highlights the ongoing cooperative relationship with our workforce
and AMCU. We continue to work on finalising an Employee Share
Ownership Participation structure, which will allow our workforce
to share in the success of the Company.
"The Company is working to complete the acquisition of Vanchem,
however certain conditions precedent remain outstanding and we now
expect to complete the acquisition on the second target date being
31 October 2019.
"We continue to make progress on several fronts within Bushveld
Energy, including the production of the first batch of electrolyte
from Vametco feedstock, which has been sent for testing at various
battery producers. In addition, we delivered our first vanadium
battery rental product, which was developed in conjunction with and
sold by Avalon Battery Corporation of Fremont, California.
"I am pleased by the solid performance the Group has achieved
during this first half of the year and I look forward to an even
stronger second half."
Bushveld Vanadium
Vametco
Table 1: Operational highlights for Vametco (on a 100%
basis)(1)
Description Unit Q2 H1 CY19 Q2 CY19 Q2 CY19 H1 CY19
CY vs vs vs
19 Q1 CY19 Q2 CY18 H1
CY18
Vanadium (Nitrovan(TM)
plus FeV) produced mtV(2) 742 1,392 14.3% 18.0% 2.4%
--------- ----- -------- --------- --------- --------
Vanadium sold mtV(2) 607 1,115 19.6% -14.8% -20.5%
--------- ----- -------- --------- --------- --------
Average MB vanadium price(3) US$/KgV 39.4 56.3 -46.3% -43.1% -13.9%
--------- ----- -------- --------- --------- --------
Underlying production costs(4) US$/KgV 16.4 17.4 -11.7% -22.6% -13.7%
--------- ----- -------- --------- --------- --------
Revenue(5) US$'m 30.0 74.3 -32.6% -36.2% -8.6%
--------- ----- -------- --------- --------- --------
EBITDA US$'m 16.9 48.6 -46.9% -35.5% 14.6%
--------- ----- -------- --------- --------- --------
1. Based on provisional, unaudited estimates. Bushveld's net
attributable interest in Vametco is 74%.
2. mtV = metric tonnes of vanadium.
3. The vanadium price is based on the FeV mid average price for
the period, published by Metal Bulletin. Vametco realised price is
based on the prior month's average price.
4. Excludes depreciation, royalties, selling, general, & administrative expenses.
5. Revenue reported net of all sales commissions.
Description Unit Q2 Q1 Q2 H1 H1
CY19 CY19 CY18 CY19 CY18
USD/ZAR average exchange US$:
rate(1) ZAR 14.4 14.0 12.6 14.2 12.3
------ ------ ------ ------ ------ ------
1. Source: Bloomberg. The achieved USD/ZAR average exchange rate may vary.
-- Vametco's solid operational performance is underpinned by the
execution of the productivity initiatives identified as part of the
Transformational Programme which includes: a) improvement in mine
production scheduling; b) increased vanadium grade in kiln feed; c)
increased hourly feed rate; and d) improvement in the recovery
across the plant.
-- Vametco commenced a 24-day planned maintenance programme in
July, which is expected to be completed in August and will not
affect annual guidance.
-- An updated Mineral Reserve and Resource Estimate for Vametco
was published during the quarter. This comprised an Indicated and
Inferred Mineral Resource of 186.7 Mt (100 per cent Gross Basis)
with 138.1 Mt (74 per cent Net Attributable Basis) and a Probable
Mineral Reserve of 48.4 Mt (100 per cent Gross Basis) with 35.8 Mt
(74 per cent Net Attributable Basis).
-- Indicated Resources increased by 187 per cent. to 965,900
tonnes of V(2) O(5) in magnetite (previously 336,604 tonnes V(2)
O(5) in magnetite).
-- Probable Ore Reserves more than doubled to 279,100 tonnes
V(2) O(5) in magnetite (previously 137,152 tonnes V(2) O(5) in
magnetite), while the grade has increased by 3 per cent to 2.02 per
cent V(2) O(5) (previously 1.96 per cent V(2) O(5) ).
Multi-phase expansion project
The implementation delivery office headed by the Chief
Transformational Officer has commenced several improvement
initiatives at Vametco. These initiatives are intended to support
Vametco achieving its full potential with a single kiln operation
targeting 3,400 mtVp.a. (which represents 90 per cent of the 3,750
mtVp.a. name plate capacity) during the course of 2020, with no
additional capital expenditure. Since the inception of these
transformation initiatives good progress has been made on
stabilising and improving production. This was achieved by:
-- Improving kiln reliability through improved maintenance scheduling;
-- Optimising the annual shutdown to improve the quality of work
and to ensure the shortest possible production interruption;
-- Stabilising kiln wet magnetite feed rate;
-- Stabilising overall recovery throughout the plant; and
-- Improving mine production scheduling to stabilise vanadium grade into the kiln.
The Company continues to review the timing and required
investment to further increase the production nameplate capacity to
5,000 mtVp.a., which we expect to generate a steady state
production in excess of 4,200 mtV.
During 2019, Vametco will continue to progress environmental
approvals for Phase 3 of the multi-phased expansion project. In
addition, detailed design work and capital estimation will commence
with a view to targeting the commencement of construction in
2020.
Other projects underway
-- Tailings facility expansion, in order to maintain deposition
capacity for calcines, completed on time and budget during Q2
2019.
-- A kiln off-gas project has been initiated to comply with
regulatory requirements and further increase kiln feed throughput.
Commissioning is planned to be completed during 2020.
Brits
A Maiden Mineral Resource statement for Brits was published
during the quarter. This comprised an Indicated and Inferred
Resource of 66.8 Mt (100 per cent Gross Basis) with 41.8 Mt (62.5
per cent Net Attributable Basis) with an average grade of 1.58 per
cent V(2) O(5) in magnetite.
Vanchem
On 1 May 2019, the Company announced a conditional agreement to
acquire the primary vanadium processing assets of Vanchem Vanadium
Plant (Pty) Limited, the ferrovanadium production business of South
African Japan Vanadium (Pty) Ltd as a going concern, and a 100 per
cent of the outstanding shares of Ivanti Resources (Pty) Limited, a
subsidiary of Duferco Participations Holding S.A, (collectively
"Vanchem").
-- The transaction remains on track; however, whilst progress
has been made in achieving the conditions precedent for completion,
shareholders should note that the first possible date for
completion, being 31 July 2019, has not been met as the Company is
yet to receive approval from the Competition Commission.
-- Good progress is being made in achieving the conditions
precedent, being approval from the Competition Commission, the
cession of specific commercial agreements and South African Reserve
Bank approval. Bushveld Minerals is confident that these will be
met by the second target date for completion, being 31 October
2019.
-- Negotiations with local banks for debt facilities are
progressing. Further updates and progress on the debt facilities
will be provided as appropriate.
Mokopane Vanadium Project
A definitive feasibility study has commenced for the development
of the Mokopane mine. Mokopane is intended to become a primary
source of feedstock for Vanchem and its development will be
accelerated as a result of the Transaction. The capital expenditure
requirements associated with developing Mokopane are significantly
reduced to approximately US$20 million (based on current
estimates). The Mokopane-Vanchem business model will create a fully
integrated business in a shorter time and at a lower cost than
developing Mokopane as a standalone operation.
Bushveld Energy
Electrolyte
Electrolyte Plant
-- The EIA has passed the public participation stage and it is
on track to be completed this year.
-- The first batch of electrolyte was successfully produced using Vametco's feedstock.
-- These samples are being sent to vanadium battery companies for assessment and approval.
Vanadium electrolyte rental model
-- Implementation of the first rental contract was announced
with Avalon Battery Corporation and its customer, Sandbar, in the
United States.
-- Bushveld Energy and Avalon Battery worked together to
structure and design this specific rental product.
-- Renting the underlying metal rather than selling it upfront
is a characteristic unique to this storage technology given the
lack of degradation by vanadium while in use inside a redox flow
battery.
-- This rental is the first of three steps in Bushveld Energy's
strategy to establish a dedicated vanadium electrolyte rental fund,
which are:
1. Balance-sheet financing for the rental solution, while key
legal and structuring aspects are "de-risked" and is limited to
smaller transactions.
2. The introduction of bank debt funding for larger vanadium
electrolyte rental contracts, several of which are under
consideration.
3. The creation of a dedicated fund financed through larger long-term debt instruments.
-- In total, the product allows for the significant reduction in
the upfront costs of the battery, creates a sustainable and
circular process of using but not consuming vanadium and ensures
the long-term viability of VRFB technology.
VRFB Manufacturing
The Company continues to increase its activities and options for
VRFB manufacturing. This includes investment or further
partnerships directly with VRFB manufacturers globally and South
Africa-based facilities. The intent is also to establish local VRFB
manufacturing capacity in collaboration with the Industrial
Development Corporation of South Africa and such identified global
VRFB manufacturers.
Battery Deployment
Eskom VRFB project
The VRFB installed with Eskom, co-funded with the Industrial
Development Corporation of South Africa, was commissioned and
continues to operate. Analysis and monitoring of the system's
performance under various operational profiles also continues.
Vametco based Solar Mini-Grid Project
During the first half of 2019 the Company commenced a number of
activities including an Environmental Assessment, a grid connection
and geotechnical studies. Procurement for the project will commence
in the third quarter of 2019.
Lemur
-- Completed the Mine Bankable Feasibility Study gap analysis
involving a more detailed study aimed at optimising the mine by
including an underground operation.
-- The Revised Bankable Feasibility Study that includes both the
opencast and underground is expected to start in Q3 2019.
-- Completed technical and minimum functional requirements for
the Imaloto transmission line and subsequently issued a request for
proposals ("RFP") to qualified respondents selected from the
Expression of Interest process. The RFP process is expected to be
completed by Q4 2019.
-- The Social and Environmental Impact Assessment fieldwork is
ongoing but expected to extend beyond the initially envisaged
completion target date of Q2 2019 in order to accommodate the
transmission line RFP bidding process. Submission to the Ministry
of Energy is still expected during Q4 2019.
-- Engagement with potential lenders for project finance is still progressing.
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 solutions provider.
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.
About Vametco
Vametco is located near Brits on the Western Limb of the
Bushveld Complex. The integrated operation comprises a vanadium ore
mine and a processing plant that produces Nitrovan(TM) , a
trademark product sold in major steel markets across the world. The
mine lies adjacent to the Brits Vanadium Project, which will in
future serve as an alternative source of near surface run of mine
(ROM) ore feed to the Vametco plant.
The Vametco mining operation uses open pit bench mining methods
to mine a well-defined orebody. The deposit is continuous with
limited faulting and dips in a northerly direction at approximately
19 degrees.
ROM ore is fed into a primary, secondary and tertiary crushing
circuit, followed by milling and magnetic separation to produce
magnetite concentrates. The magnetite concentrates are fed into the
extraction process which includes the kiln for roasting followed by
leaching and precipitation. Thereafter the precipitated vanadium as
ammonium metavanadate is converted to modified vanadium oxide (MVO)
in rotary calciners. MVO is fed into the mixplant and finally into
the shaft furnaces to produce Nitrovan(TM) .
About Bushveld Energy Limited
Bushveld Energy is a leading energy storage solutions provider,
focusing on the African market. Bushveld Energy recognises that
electricity in Africa intersects paramount potential for social
transformation with an immense commercial opportunity.
Launched in 2016, Bushveld Energy is focused on developing and
promoting the role of vanadium in the growing global energy storage
market through application in vanadium redox flow batteries. Its
near term strategy is to deploy several VRFB systems as part of its
longer term vision to become a significant electricity storage
provider in Africa by 2020, meeting the demand for utility scale
energy storage in Africa by leveraging South Africa-mined and
beneficiated vanadium.
http://www.bushveldenergy.com
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END
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