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Part 6
MN “Plus we still retain a lot of optionality to improve the processing capacity that we have, we’ve still got the resource at Mokopane which will be one of the ways that we feed feedstock into Vanchem, but that was our first project, we can still build a whole new mine and processing facility there, we can put another kiln at Vametco, we’ve mentioned that Vanchem has three, Vametco has one. We have more than enough resource to do that, the question is, do we need to put that much more volumes, and if the demand says yes, we can do that a lot faster than someone who doesn’t have the resource, or doesn’t have the grade, or actually doesn’t even have the mining rights. We have the rights to increase the capacity at all those sites.”
“Fair point, the reason I’m asking is that I’m trying to get an understanding of what the cash grants are of the business going forward. You’ve just completed this acquisition, which is great, and you’ve structured it in a very interesting way to kind of defer payment for 40% of the payment. If there is nothing else in the pipeline, there is no big capital fundraising required for that, there is no capital outlay required going forward, I just think this is obviously good news, you can focus on generating cash, is that the plan?”
FM “We are focusing on generating cash, we are focusing on growth - Both. Our story, our proposition still remains. We want to be producing at a rate of more than three times we did last year. That’s a capital growth story. We want to secure a significant position in the energy storage market with an (admirable) proposition. But we want to do that leveraging a very solid cash generation platform which obviously we will be able to do with the resources and processing platform that we’ve got today.”
“Bushveld Energy, you get a lot of coverage online for your expertise, so I hope that you can share some of that with us today. Can you tell us again, just a little summary of what BE is and what you think it can become in the context of BMN?”
MN “Sure, I think what it can become is something even larger than what we are doing on the mining side, I’m not going to put a timeline on that, but in terms of upside that is possible. But that is where the market is going. It is just a question of how we get there. In terms of what BE does itself, think of it as three verticals, one is around electrolyte that is a specific type of vanadium chemical, it’s the piece that stores energy within the batteries. We are building a facility in East London. We are doing it together with the IDC, we’ve got our environmental approvals clearance in September, we just went out to tender for the construction of the facility there."
Part 5
"With the large resource base, with the processing capacity that we have, we think that we are in a very strong position to, one, supply on a low cost basis to the steel industry with a broad range of products and produce vanadium chemicals as well. But we are also in a very good position to respond to, as we indicated earlier, what we see as a growth energy storage market, we also want to be very proactive as a company to unlock that market opportunity. When we are successful to do that, we want to make sure that the security of the supply of vanadium onto that space is not in question, so to answer your question around our strategy, we think that with Vanchem and Vametco, and our resource base, we now are well positioned to really drive up our production, low cost production base, then we really have a solid platform to then do the kind of work that we are looking at in the energy storage market of which MN will tell you about.”
“In terms of the pipeline you are done now, is that what you are saying on this side of the business?”
FM “Let me put it this way, if the energy storage market forecasts something like a 100,000 MWh of energy storage deployments per annum by 2027 come to pass, and if you assume that only 10% of that and bearing in mind that 90% of that is going to be long duration energy storage, which is kind of the sweet spot for VFRB’s. If the area of base could capture only 10% of that we will need something like 50 000 tonnes of new vanadium supply PA going forward and that is more than 50% of 2018’s global vanadium production, so yes I think we would do well to focus over the next few years in unlocking the processing capacity and the growth within the assets we already have now, but make no mistake, the world will need much, much more vanadium than that, and we’ve made the point before that we think the Bushveld complex is the pure .... ? of vanadium and the largest resource base beyond what we have. And I do believe that the eyes of the world will be turning to the Bushveld complex for Vanadium. So you can never say that we are done.”
Part 4
“Stop revenue?”
FM “Well not entirely, because you still have some product past the kiln that is already in the leaching facilities, etc. The good news here with Vanchem is that I can stop one kiln for maintenance and I can have two kilns still running at full throttle. And the ability to scale up and down your production in response to where exactly the market is at any one time quite positive.”
“Tell us a little about the South African Japan vanadium property and also requiring the 100% shares of Ivanti. Do they hold real value today to you or they for something further down the line?”
FM “The SAJV speaks to one of the Ferrovanadium conversion facilities and I mentioned that there are two of them. One of them essentially operates as a ......? a conversion facility, the other is a .......? furnace, both of them produce Ferrovanadium, but one of them converts Vanadium pentoxide and the other Vanadium trioxide. They do have proper value as I indicated that the ability to produce different grades of Ferrovanadium is quite attractive.
Ivanti is a slightly different thing. Ivanti holds the rights to the residual vanadium that gets recovered from what is called the todem (?) which is part of vanadium processing flow sheet at Vanchem. There is a commercial contract in place with another company that extracts whatever residual vanadium is there and through the acquisition of shares of Ivanti we acquired the rights associated with that process.”
“What’s on the horizon, what else on your mind do you need to put into place? I guess Mikal you are going to talk about the energy component in a second, on the vanadium side, what’s on your mind?”
FM “Well Vanchem was the only other primary vanadium plant that existed in South Africa, so between that plant and Vametco we have two of the three primary vanadium plants in South African, or two of the four primary vanadium plants in the world. Between the two on the back of a refurbishment programme and the expansion of Capex at Vametco we have been in the position to produce 8400mtV as I indicated earlier on that is more than treble of what we produced last year. So between the resource base we have, and by the way even producing 8400mtV we still are not consuming over the life of mine even a quarter of the resource base we have."
Part 3
“Fantastic, what are the terms of the convert that you did?”
FM “It’s a two year convertible and it earns an interest of 5% and the holders of the convertible have the right (it’s 5% per annum), to convert 50% of it into Bushveld shares after twelve months and another 50% after twelve months if they don’t want to convert, then after two years we either redeem that bond or possibly convert that $23.5m into Bushveld Shares. The convert is based on a VWAP basis with a small discount applied to it at the time that the election is exercised.”
“So that’s not going to come back and hurt anyone further down the line?”
FM “Well, we think that story of Bushveld and even before we talked to BE has got a lot of headroom for growth. I personally do believe that the sellers of Vanchem would be very well served to convert into Bushveld shares then hold and participate in the growth of the company, and I do believe that as we execute our strategy that proposition will only become that much more attractive and I think there is a fairly good chance that they may well consider to take it up and if they do lets keep it in mind that it is Duferco that we are talking about, they are a very credible party that has been very active in the Vanadium market and I wouldn’t have a problem at all having them on the register of BM, and that’s a positive thing.”
“Remind people what you get within that deal, the plant obviously, but there’s a bunch of other things too. And what value do you attribute to those?”
FM “So Vanchem has three kilns and it has a chemical plant, it has also got a facility that produces Vanadium Pentoxide, it also produced Vanadium Trioxide. It’s actually quite attractive that you can produce those two distinct oxides, to put it in context, at Vametco we’ve produced what we call NVO before we convert it into Nitrovan. And NVO is a bit of a mix of Vanadium Pentoxide, some Trioxide, and even some different oxides, it’s a bit of a mix, and the ability to produce a pentoxide product and a trioxide product is actually quite valuable and then it’s got two conversion facilities for Ferrovanadium which allows us to either convert pentoxide or trioxide into Ferrovanadium and the fact that it’s got three kilns means also that you’ve got a lot of flexibility in the way you run the plant. At Vametco if we shut down the kiln and that means that we stopped roasting while we are doing that.”
Part 2
“Ok, great for the summary, you’ve got a couple of press releases out today which I guess you want to talk about, I’d like to talk about it too, but can we talk about in the context of what you are trying to build. When we last spoke, you talked about building an integrated business, a lot of people do, but they don’t necessarily have the wherewithal or knowledge of how to do that, so Vanchem acquisition is for you quite important, do you want to tell us a little bit about that?”
FM: “What we announced today was the completion of the transaction which has obviously long been in the works and we’ve announced it in the markets 1st May this year and we are delighted that, One, we have been able to complete this transaction and take over Vanchem, but secondly, also that we’ve been able to do it on transaction terms and a structure which we think is very good and very positive for the groups financial position.”
“Can you talk about that, so $53.5 million how does that break down, and why did you do it like that?”
FM “Well you will recall that initially the transaction was announced as a $68 million transaction and in the short term, I think we all know that there has been a downturn in the movement of Vanadium prices, we saw in that an opportunity, in our view, to have a conversation with the sellers around how we possibly restructure that transaction, and we are grateful that they were pragmatic and realistic in agreeing to that so ....? $53.5 million revised transaction consideration which is payable with $30 million which we’ve payed now, and $23.5 million is effect a deferred consideration in the form of a convertible bond which has got a two year term. If you take a very short term view, what has happened in the market is a good justification for the kind of structure that we have. Our view, however, you don’t buy a plant on the basis of a twelve month outlook in Vanadium price. Our’s is a medium to longer term outlook in the commodity and we think that the transaction structure that we’ve got is really good and we remain very bullish about the outlook for the Vanadium market.”
Part 1
“Good afternoon FM and MN”
“Very good thank you”
“Good to talk to you again, we met Fortune in London a few months ago he kind of gave us an introduction to the story. MN, this is the first time we’ve met, so lovely to have you on board, hello.”
“Why don’t we start – Fortune, can you give me the usual one minute summary for people new to the story so that we know what we are going to be talking about.”
FM: “For those that are a bit new to this Bushveld Minerals AIM listed integrated primary vanadium company with a fairly clear strategy that we want to be leading a significant low cost primary vanadium platform that’s integrated downstream into a very exciting energy storage market. Two parts to our story, on the one hand is our primary vanadium production which combines a collection of primary vanadium deposits which combined present 500 and 50 million tonne resource of high grade vanadium deposits which is the largest high grade vanadium resource base of anybody in the world which is complimented with two processing facilities, Vametco which is in Brits, which is currently being the sole source of our revenues for supplying 2560 mtV which is just under 3% of the global market last year. And today we actually completed the acquisition of a second plant which is Vanchem which is based in Mpumalanga province. Between the two plants we now have a very good platform to scale up our production following a refurbishment programme at Vanchem and an expansion programme we are undertaking at Vametco to more than treble our production base to 8400 mtV for the next 3-5 years.
So that is one part of our business. We like the fact that we have two processing plants and we have a fairly good product mix which is broad which comprises Nitrovan and Ferrovanadium which is used in steel making, vanadium pentoxide and trioxide as well as vanadium chemicals and following the completion of our electrolyte manufacturing plant in East London will also include the vanadium electrolyte. So that platform then positions us very well, in our view to respond to what is the really exciting and growing multi-billion dollar energy storage market. Which will be dominated by long duration type energy storage in which we will see vanadium flow batteries really shining. We think it’s quite import that we position the company for that sector and we do that through Bushveld Energy which is really well positioned to drive the adoption of VRFBs in that sector.”
Going to post this in 18 parts (apologies!)
Some words I simply cannot decipher so I have used ......? to denote this.
There are bound to be omissions and errors . That is the nature of the beast. But I apologise once again in anticipation.
Thanks to GirlieNextDoor for much time and effort helping to put this together.
Regards. Pdub.