London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East and have access to Premium Chat. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
@Halespur, I've been musing along the same lines, moreso now having seen the structured deals Fortune has negotiated. Much safer to have your money underwritten by World Bank than Eskom if possible.
I'd be keeping a weather eye on Lemur for a left field deal at some point also.
I wonder if the world bank/Eskom will be putting money straight into Bushvelds accounts worth a lot more than current profits. Surely there must be some agreement for energy storage and Fortune is seeing massive profits from this side that he doesn’t want to share.
Very exciting and the dilution will seem insignificant When the market cap hits over 1bn
It has to be for a good reason Bushveld wanted to settle early with cash and shares...a very good reason! Anyone else feel it's all getting very exciting again..They must have high aspirations for EBITDA 2020
Apologies, the $600k is relevant to both the accounts and the deal, so the difference is actually as stated, $2.1m ($13.5m - $11.4m).
So the premium is 18.4%.
So BMN must be seeing something very worthwhile in paying that premium now, when FeV prices are circa half of what the H1 2019 average was.
Like I said earlier, watch out for those buses.
This is a really interesting development.
I posted some thoughts on this a few weeks ago. To give some context to this deal, in the 2018 accounts (Note 27), BMN logged a deferred payment for Vametco of $17.4m.
In the H1 2019 interims, this had been reduced to $11.4m , which is a reflection of the fall in vanadium prices.
Vanadium prices in 2018 averaged $81 per kg compared to $56 per kg in H1 2019.
Today's settlement, which takes into account a $600k deferred payment, so is effectively $12.9m, demonstrates a belief that Vametco will better the equivalent result in 2020.
Now I don't know i there is any forwarded thinking allowance on production, but at best we are talking about a jump from a mid case 2,850 mtV to a possible 3,250 mtV in 2020 (3,400 mtV target is full production capacity for 2020 not expected outcome).
So we are talking circa 10% more production.
The settlement price is circa $1.5m higher than the current deferred payment allowance in the accounts. So circa 13% difference.
Not every deal is the best deal but every deal happens for a reason.
1. BMN believe that Vametco will deliver a stronger result than they have currently allowed for in their accounts, which means more than 13% added production but at an average price of $56 per kg.
2. Vametco will be achieving further revenue generation that is currently not covered in the accounts. One example being what I said earlier ;
"Vanchem has significant surplus ferrovanadium smelting capacity that will enable surplus MVO at Vametco to be converted
to ferrovanadium at Vanchem."
Remember Vametco has a partner that sits outside the ownership of Vanchem and/or all other assets that BMN are and are planning to create.
3. This early buyout is a requirement for a plan that is not currently known, an/or could be attached to a clean JSE listing, although I don't personally buy fully that myself.
BMN tend to make good deals, and this deal expects that something significant enough can/will happen in 2020, to justify its brokerage.
Did I mention that I was looking forward to 2020?
BBN.. Your explanation received and understood loud and clear... Many, many thanks for taking the time to put pen to paper in such a detailed and thoughtful manner. A true gent you are Sir. Xx
Well said BBN. You are a credit to the forum, and this one has many credits!
Whilst I would encourage shareholders to always remain vigilant, stay on their toes, and never take anything for granted in this world, I believe there should also be a little room for acknowledgement and enjoyment.
BMN are about to close the deal on their second processing plant, moving from 1 to 4 kilns. More importantly this week, they have effectively delivered the means by which they will advance to 8,400 mtV production. Not nameplate. Production.
In February 2016, the majority of us were still all praying for the Mokopone PFS release, believing its near $300m price tag would deliver the sort of development that would make all our dreams come true.
Jump forward 3.5 years and it turns out that Mokopone is one of the last pieces in the jigsaw, that will help BMN deliver considerably more than what Mokopone set out to do, but for around half the price of what Mokopone would have cost.
More importantly, Mokopone would never have got financed, if it had remained the prime asset of the company. Nor would we be able to say that there are 'only' 1.2 billion shares in issue, because that would have been eaten up by delays to the finance of Mokopone, and if we were lucky, the delivery of the mine and processor there.
So in my view, whilst we can and should pour over the details of the Vanchem acquisition and everthing else that affects our investment here, there is nothing wrong with taking a few moments out, maybe with a warm or cold drink in hand, and reflecting on what could have been and what has indeed come to pass here.
Vametco and Vanchem are some achievement. That achievement is even greater for the cost and dilution they have avoided.
Mix in the pending energy storage market break out, and there is every reason to take those few minutes to smile and say well done.
@Bella6532 All very valid but the beauty of this business right now is that those items could easily be placed in the very nice to have box, and the investment case will still look extremely good here.
I have often in the past talked about focusing on an outcome that does not deliver all goals, in order to establish whether said 'reduced' outcome is in any way tarnished by these missing elements.
We could very easily produce a even greater list of potential revenue streams by including such things as potential bulk ore sales from Mokopone to China, but the point is, value and potential in BMN does not need to be fully wringed out in order for a significant return to be made here.
Therefore, we have a very strong investment case, which has a stream of added bonuses that are capable to supporting that business case, even if one or two included elements, fall by the wayside.
I have perhaps not explained myself well enough but trust you get the gist of what I am attempting to convey.
@Fosters100 Personally I believe it is the wrong strategy to be focusing on the SP/valuation.
What i want to see here is progress of the plans that generate the value. This is all about the fully integrated vanadium energy storage play, and what that means for the market size that BMN can tap into, but also what it means for the de-risking of what is to date, still a cyclical mining play.
Achieve that and everything else will take care of itself, if given sufficient time and patience.
It is very difficult to find companies on this market that set out clear and concise plans. That explains their plans along the way such that one can see clearly where the company is heading. Most importantly it is damn hard to find companies that keeps to those plans as often as BMN does, and in a manner that protects shareholder value wherever possible along the way.
BMN generally does all of those above things about as well as an active public company can do, operating in a very volatile and often unpredictable global market.
Right now the pieces of the puzzle are being brought together. It may be taking longer than some imagined but time really shouldn't be the issue (although I accept some investors make commitments that come with self imposed unavoidable deadlines). The key is the progress and delivering the end game of that fully integrated model. Do that and share valuations won't in my view be a concern anymore.
40quid a share may take a tad longer than that, like your optimism though
BBN... Any thoughts re their comments re investing in battery manufacturer(s).
1. Lease deals.
2. Cash injection for profit share.
3. Outright acquisition.
Any of these could generate new income streams and increased orders for Vanadium and/electrolyte.
Thanks for your input an asset to the board.
How long before we are back in the 40's? 1 year 2 years?
@Jogj99 Thank you I had not seen that. There you go then. Conditions met in line with the BMN led transaction deadline dates.
Next big milestone post completion will be the release of the refurbishment programme, which was detailed in the Vanchem webinar. There FM stated that the refurbishment programme already existed at that time and that it goes to the level of detail that demonstrates, which kiln they will be working on at what time, and at what capacity they expect it to be producing (see vanchem media webinar 42 mins onwards).
So we are not talking about a transaction that leads to a plan. The plan is already there and so the release of this programme should not be too far behind the closure of the transaction.
It is well worth shareholders taking the time to remind themselves of the content of that presentation and webinar.
I would also draw shareholders towards slide 15 of that presentation, which is part of the strategic rationale.
Three very important points ;
"Vanchem has significant surplus ferrovanadium smelting capacity that will enable surplus MVO at Vametco to be converted
to ferrovanadium at Vanchem."
I have talked about this before and it is why I think the initial ramp up in production at Vanchem, from the current 960 mtV, shouldn't be too expensive or time consuming.
"Annual Vametco kiln shutdowns can now be optimally managed group-wide."
So rather than losing 3 weeks or so at Vametco, which at 3,400 mtV can mean circa 200 mtV of lost production, the company can instead in the future, can employ Vanchem as a means to offset this. What this also means is that the next stage of Vametco expansion perhaps does not need to worry so much about losing production at the processor. Particularly if it is as involved as it sounds, given the planning/potential costs etc involved.
"Surplus concentrate production capacity at Vametco could be shipped to Vanchem as kiln feed, providing the opportunity
to accelerate the development of the Brits deposit."
I really like this one because it is a typical example of BMN giving insight to the next stage of the plan, that isn't being considered by the market, because it has its hands full with what is taking place now and near future.
The words say Brits deposit, not Vametco. The Brits deposit is still there and is still waiting for its Section 11 regulatory approval. What's the chances that this deposits future suddenly starts to become far more prevalent once the Vanchem acquisition and the plans for it are out in the open.
I would think that section 11 will also drop through the door, once the appropriate point in time is also reached.
Everything about BMN is long term and for very good reason.
@Paludina I would simplify things much further than that.
Tranche 1 of the convertable loan notes will be available to be converted as of 7th November 2020.
By that time ;
1. BMN will have had minimum 10 months running at plus 4,000 mtV with current production by that point surpassing 4,500 mtV, if Vametco delivers on its 3,400 mtV, as expected during the course of 2020.
2. the electrolyte plant at East London should be in production with every chance it can hit full production.
3. The Mokopone DFS will be completed and construction will have started. Remember the DFS is for a mine only feeding Vanchem.
4. The Vanchem refurbishment will be well underway with the first phase added production likely very close if not realised by that point.
5. The Eskom BESS project will have been tendered, awarded and will be well on the way to being built (see more detail below).
There are more items including vanadium pricing, but at 4,500 mtV, BMN will by that point be producing nearly twice what it will be producing in 2019, so prices don't need to rise very much for the profits to rise significantly. Bear in mind that operating costs will be falling considerable as synergies and increased production across the group kick in.
Eskom BESS Project
Anybody that does not believe that BMN and their subsidiaries will not play some sort of significant part in that tender award, for me simply has not done enough homework on this company and its connections within the S.A. market.
It is important to note that BMN talk about supplying into the BESS tender, and MN talks in the Energy Storage 101 Webinar, about being able to take part on a number of different levels. So winning large scale mandates can happen in a number of different ways. They don't just need to come directly from Eskom.
Securing those mandates opens up VRFB assembly in S.A. Why? Because FM himself talks about the need to secure as little as 10MW to justify it. The Eskom BESS Project is asking for 360MW over 2 phases.
It won't take a very big push to get there.
All of the above is due to happen before then first tranche of convertable loans. So the current valuation of £305m has every chance of being beaten by some margin.
If they hit big on the BESS Project and demonstrates it can deliver further downstream value chain integration, then in my view (unforeseen catastrophes aside), I think they smash it to smithereens, and that isn't something i say very often.
@BBN, the RNS states, ‘All conditions for Transaction Closure have been met’.
Zak - as much as I like cheap stock here a couple of common sense points re: the CLN's BMN will be generating profits and free cash flows, dodgy market so protect the cash flow to develop Mokopane, Lemur resources is very saleable to improve cash flow and pay off any CLN's should the Chinese want full influence in that area.
BMN is a long term hold its only risk area's I can see are 1.Eskom falls over - if that happens the S.A state is tied in and falls as well . 2. ANC dispute kicks up into civil unrest 3. Chinese reintroduce stone coal and nobium.
Eskom - slowly being sorted and addressed.
ANC seem to be calming and negotiating with themselves.
Stone coal is expensive - niobium won't be used as long as V price stays low - it is staying low.
This beast of a company is about the battery's .... buy some sit on them sell them whenever its at your price level.
@ZakTA: Thank you for taking the time to pop up here with your vast quantity of intellectual bull.
Let us not forget this from Q2 Update. "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."
too much convertible debt here guys, they will convert into any rise. hence muted market reaction
A further key statement that supports what I just said ;
"The revised terms ensure the transaction remains competitive under current market conditions and allows the Group to continue executing on its growth plans even in a volatile price environment."
That's the key here. Not to overstretch themselves on one transaction but to make sure that the cash is there to feed the development of the whole integrated platform, as is appropriate to do so.
It is that integrated platform that will deliver the real deal here, such that individual transactions should not be viewed in isolation. This is particularly true when I read such things as ;
"Provides further capacity for electrolyte manufacturing through the existing chemical plant and vanadium oxide production."
Given the developments that are about to take place at Eskom through the BESS programme, that statement is most interesting, and yet another signal that the BMN team and its plans, are far more advanced than we could ever hope to dissect and realise.
The old joke that that you wait ages for one bus and then three come along at once, can time and time again be applied to BMN.
For those that perhaps haven't been here all that long, it may be difficult to believe that BMN news flow can run to such precise and controlled release schedules, and that it often demonstrates that the plans, which so many would question being achieved, are often far more advanced and long term in their make up, than should be possible.
The Mokopone Right was clearly the initial trigger here to a number of updates, that will, at the very least, culminate in the closure of the Vanchem deal.
There are several details I would like to tackle from the RNS, but the first one for me is the revised timetable.
"Due to the revised payment terms the transaction is now expected to be completed on 07 November 2019 ("Transaction Closure")."
Its interesting that as of 23rd Oct 2019, so 2 weeks prior to the revised date, BMN are able to declare an expected completion date, even when they still have a number of conditions to satisfy, including the South African Reserve Bank approval and the cession of specific commercial agreements.
So yet another regulatory approval is required but who would bet against it being concluded at just the moment it is required to complete this transaction.
Anyone thinking that these approvals are straight forward, for me isn't following South African politics or indeed industry news there, close enough, because these things are not easy at all. Yet BMN keep ticking them off as and when they need too. Remarkable.
Moving onto the reduced purchase price, I am delighted to see such a significant reduction because quite frankly the price tag was beginning to look top heavy in this lower vanadium pricing market. Easy to say with hindsight but nevertheless true.
The fact that BMN has had to secure some $23m in convertable loan notes is not overly surprising. We discussed here just the other week the cash reserves that BMN has at its disposal, My viewpoint remains that BMN will be very cautious about employing funds that are deemed to be "non controlling." This deal supports that view but also demonstrates that BMN need to keep further funds in reserve, which can then be employed for the other investments that will stem from this acquisition.
As it turns out the dilution, even at today's prices, is minimal, and delivers far more than it will ever cost existing shareholders. At 27.5p we are talking circa 68m shares, which amounts to just c.6% of the total shares in issue, and with at least 1 year until the first tranche can be converted, that sort of price level for me has every chance of being beaten by a very good margin indeed.
So absolutely no issue with this minimal dilution, and I would welcome more of the same if it is agreed on such good terms and delivers such wonderful acquisitions, such as Vanchem.