The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
1/2
Afternoon all,
In terms of the Duferco deal, I believe its important to appreciate it within the greater context of what BMN achieved, across the whole of 2020.
It was clearly a difficult year to achieve profitability, sales, deliveries, everything. That meant a lot of treading water for investors, as BMN adjusted its plans to ensure that they not only met their previous significant commitment to close out the Vanchem deal but also found room to set themselves up, for the attack on a plan that they had already set in motion, well before Covid came along and attempted to derail it.
Post the worst that Covid could throw at them, they have emerged with not only a stronger balance sheet but also their Duferco payments in tact and a war chest to drive to the sort of production, that can properly support what should be minimum 2 significant VRFB players (Invinity and Enerox), going forward.
The Cellcube 'about us' plan lays down the gauntlet at 30MW in 2022 and the introduction of their "going large scale" Gen 5 unit in 2023.
https://www.cellcube.com/about-us
That 30MW alone could be demanding c. +600 mtV of vanadium from BMN in 2022.
Right now Invinity are heading towards c. 60 MWh of production by 2022 (see slide 20), as a minimum. Adding another potential 300 mtV on the demand side.
https://invinity.com/wp-content/uploads/2020/12/Invinity-Corporate-Presentation-Nov20_WEB.pdf
So there is a path to 900 mtV of demand by 2022 and as it takes hold, its highly likely going to expand exponentially and BMN, with a much slower turn around, even when employing brownfield expansion, have to ensure that those vanadium products are there, when they are needed.
To that we need to add the electrolyte plant, which may or may not service Invinity/Enerox projects, depending on where they are won.
From the Invinity Placing RNS, dated 3rd Dec 2020 ;
"final assembly (including addition of electrolyte) is conducted in the jurisdiction best suited to the customer, being: Canada for North America; Scotland for Europe; and China for the rest of the world."
So whilst BMN may supply the vanadium, they may not go as far as shipping electrolyte, if other facilities are better placed to conduct that. What that means is potentially even greater demand for BMN vanadium, as up to 1,000 mtV of demand through the electrolyte plant, also starts to come on line in 2022.
Meaning we are talking a possible 1,900 mtV of battery led demand for BMN, starting in 2022.
This for me, is what Fortune Mojapelo talked about in the Nov 2020 Crux interview, when he said (9 mins 50s);
"when you've re-checked your investment thesis, when you've rechecked that your business case holds up, that you should have the courage of your convictions, to ensure that when the upturn comes, you are ready."
https://www.youtube.com/watch?v=fX4pIRRzB9Q
For those that perhaps may be a little less informed as to the workings and strength of Vanitec, here's the link to the current members list.
Interesting that Wogen are now members and Duferco are still there. Gives insight to what they should know about the industry opportunities out there today.
Despite the names, BMN are a big player in that court.
http://vanitec.org/about-vanitec/member-list-locator-map
Sorry I would just like to add something further.
The moves being made by Largo, is a clear signal that the next phase of this market is now starting. It is part of a wider awakening with which I would place the likes of the Orion deal. Wider market acceptance that a VRFB market is feasible.
This is why I spend time looking at the Invinity contract wins because it success by these sort of entities, that will light the way for the miners that feed them.
Proof of concept, demand and an expanding (skys the limit) market, can be the spark that everyone is waiting for and the foundations, the roots that BMN have planted, will make them the bigger of those two successes, when the general market understanding and appreciation is finally there.
Investors have got to get past that superficial V price fundamental and then things can really get going for BMN.
@Snott If I may I will challenge/adapt the analogy a tad.
My opinion is that Largo are in no way late for the party as you call it because the party hasn't even got going yet. BMN on the other hand are effectively part of the party organising committee.
It is this that the general market has yet to grasp. BMN is still seen as solely a market participant who would do well, if and when VRFBs gain sufficient success, which the market is still unclear on, so it chooses to continue to measure BMN by the V price, for now.
BMN key staff have chaired Vanitec during key years when energy storage was introduced to that group. Mikhail Nikomarov was (perhaps still is) Chairman of Vanitec’s Energy Storage Committee, which BMN helped drive the formation of.
Here's VanadiumCorps take on its importance, when they joined it back in 2017.
https://investorintel.com/markets/technology-metals/technology-metals-news/vanadiumcorp-joins-vanitec-energy-storage-committee-esc-provides-schematic-diagram-integrated-technologies/?print=pdf
As I say, BMN drove the formation of that committee but you would have to look very closely to see it.
Mr Nikomarov is also chairman of the S.A. Energy Storage Association, which is why he can share a webinar platform with Frederick Verdol, who leads the World Banks investment team for the Eskom BESS Project. Connected.
What does that say about insight into the Eskom BESS Project and opportunity there?
Vanitec members are encouraged to assist one another on VRFB uptake and partnership, so it would come of no surprise to hear that BMN have consulted for/with Largo because VRFB uptake is a game changer for all V market participants.
This is what 5 years of ground work delivers. Now its about the party itself, which as I say is in the very early stages still but the music is definitely on.
2/2
I congratulate Largo because their success is our success. However, I believe investors are kidding themselves if they think that Largo can rapidly plant the roots, that BMN have been driving into the VRFB ground these last 5 years or so. No PR in the world can hide the work that is required to win the market over, be it that they are entering at a far more opportune time. A VRFB company still has to win contracts. Still has to scale up. Prove itself through demonstration projects, the sort Invinity has achieved great success on, whilst Largo were effectively sleeping or had their hands tied. Its that effort and those results, that will deliver value to investors, not fancy PR, be it that more would of course be welcomed.
What Invinity are planting this year, will bear much greater fruit next and so on and so on. BMN supply all their vanadium if they want to. If its profitable to do so and deemed best for the business as a whole. No PR needed, just actions and the planting of those roots.
That's one avenue. One opportunity. All of which ties in to that demand profile and the front end business case for expanding to 8,400mtV.
In the Crux interview FM talked about being brave and believing that the demand will be there for their expansion plans, which is why the finance with Orion was sort. The reality is that the risk/reward is far higher than FM is willing to talk about. They have put enough pieces together, pulled enough structural levers, to ensure that in their world at least, the demand is clearly going to be there. So the investment has to come now because in 2 years, Invinity and perhaps even Enerox, are going to be demanding substantially more V, even when success is deemed average, to what is being reached for...
...and they are just 2 VRFB companies, highly likely sitting outside any Eskom programme. So to feed that, BMN needs more V online because the VRFB demand profile could well outstrip mining output. No bad thing for V prices but not supportive of continued VRFB success.
BMN made a promise, security of supply and stability of vanadium input costs.
So if the demand for BMN vanadium is clearly going to be there, then BMN has got to be there and so big expansion plans are needed and the need to be brave, whilst recognised, is clearly typical BMN reserved language, that hides their true excitement, created in a period when Largo were still waiting to rid themselves of the Glencore weight around their necks.
Much said, hopefully much worthwhile.
Its very difficult to find an outcome where by BMN, don't make considerable gains from the energy storage boom, that is now commencing but for me, we are talking the difference between a really successful investment and a hugely successfully one. I like that and that's why I am in.
1/2
The ultimate beauty of all this, is that BMN don't need to be successful at commercializing VRFBs. They don't even need to be taking part in the full value chain. They simply need vanadium demand to outstrip supply and push V prices higher. VRFB success helps secure that.
So if Largo are faster, better and more successful, at driving VRFB take up (purely theoretical I assure you), then ultimately BMN wins.
That's what securing 2 of 4 pure play production facilities does. What holding the largest high grade deposits in the world, allows. Supply is inelastic but demand through VRFBs, certainly is anything but and I strongly believe that the big steel players of the world, are currently under prepared for this new competition, which they've never had to deal with before.
Once BMN have expanded into said expanded demand, that success alone is worth a MC many multiples of what we see now, Investors need only sit in their hands and wait for it t happen. That's why the $65m capital injection was so important and none of it has anything to do with BMN being successful, at the very value chain approach, that they effectively pioneered.
I can make a strong argument that the c. 30% rise in valuation, witnessed since the Orion finance was announced, is mainly down to an improving V price and commodities market sentiment, be it that on the scale of things, it still remains limited at this time.
The effects of the finance are actually for me, still to be priced in, which is understandable given the plan is yet to be fully updated, so the market can appreciate where this is all heading. That plan enables any further gains in V prices, to have a greater affect on the valuation.
All of which means that the full vertical value chain, however successful it turns out to be, is the blue sky element on top, which of course comes with that recognition factor, that BMN can deliver revenues/profit, outside of the cyclical mining sector and so through downturns in that cycle. That's the fairy dust that makes everyone fly.
It is not going to be the level of PR that wins the day in the end. Its going to be sales, market penetration and the ability to pull on the necessary structural levers. Whatever BMN lack in market communication, they make up for in their ability to make those cogs turn. Ultimately, that will only come out through longer term success but it certainly looks like its coming to me, which is what matters most of all.
Again, I could argue that BMN only really needs to successfully support the expansion of Invinity and Enerox, to corner a market for its first goal of c. 8,400mtV, with or without wider take up of VRFBs.
However, clearly the plans reach beyond that and projects such as Vametco mini grid and Eskom BESS, lead to bigger things, such as local assembly and production, be it electrolyte or VRFBs themselves.
Sorry everyone, jumping around a bit between LSE and Twitter but I wanted to continue the thread from yesterday because today's news is highly relevant to what I opinionated upon.
Today's news is a really strong shot in the arm for BMN's own belied in where they are heading.
As i point out in the enclosed feed (sorry to those who don't have it but its far easier to include diagrams/exerts on Twitter), I read the kiln refurbishment as being completely separate to the original phase 1 works (see also page 44 below).
So I don't see a need to wait for those works to complete. It therefore becomes about potential regulatory approvals (which I don't see as being necessary at this point), any further studies, which again, given the costs and work have been adjusted for Vanchem, looks to be potentially completed.
Therefore, its should/could be purely about gearing up to start i.e. front end materials etc etc.
We need to hear more from BMN/FM on this but I would n't bet against a 2022 ramp up to minimum 5,800mtV + Vametco front end deliverables. So we could well be seeing BMN producing at over 6,000mtV by the end of 2022.
Whats not to like about that?
http://www.bushveldminerals.com/wp-content/uploads/2020/06/Bushveld-Minerals-2019-Annual-Report-Financial-Results-1.pdf
https://twitter.com/BigBiteNow/status/1333331963000856576?s=20
I wanted to say, what a difference a day makes because today's announcement is really good news.
Morning everyone,
One day later and the landscape has changed and in my view it is much more positive with two big changes/updates to BMN's plans.
Firstly, BMN is retaining the revolving credit facility, which equates to approximately $8.2m. My previous sums from yesterday, allowed for a total payment of the full c. $25m in existing debt. More debt retained on the books but for what looks like very good reason because...
the biggest change is with the Vanchem phase 1 refurbishment works, which now includes "refurbishment of the third kiln for modular production increase leading to 2,600mtv per annum."
That figure does not exist in the 2019 Annual report (page 44) plans.
The 3rd kiln works was reported to bring on line 1,100mtV, whilst the original phase 2 works, was targeting additional production of 2,000mtV. What we appear to now have is a 3rd kiln refurbishment (so 2nd kiln parked), which will not only be included in the phase 1 works (so potential acceleration) but is also coming in at a much lower cost.
Vanchem phase 1 was reported to be $14m on its own and was to deliver a steady production rate of 1,100mtV. What we now see is a total build cost of $20.3m and a gain of 1,500mtV. We need more details on timelines but taking that as read, that is a significant boost in terms of costs saved and potential time gained.
All of which points towards a business that clearly sees this increased production being sold, when it comes on line.
To be clear, we are now talking about BMN producing minimum 5,800mtV (post Vanchem phase 1) with further staged increases coming through from Vametco, as we move through to 2025. I would really like to understand what the revised timelines are for this new Vanchem phase 1 but whichever way I look at it, its a big positive.
The other big bonus here is timing. My conservative timeline for financing to be completed was early Q1 2021. BMN has come in ahead of this, which is a welcome boost.
I still expect the Vametco feasibility study to take until H1 2021 (conservative) but with the Vanchem news, that's not of concern and we may well see some early boosts to Vametco performance, as 2021 comes to a close.
A Vanchem that is operating at 2,600mtV is a completely different proposition, given that it ;
"Provides further capacity for electrolyte manufacturing through the existing chemical plant and vanadium oxide production."
(RNS 1st May 2019)
Furthermore, a BMN tat is operating at minimum 5,800mtV production, could well deliver the lowest cost vanadium producer in the world, with more to come.
Finally, i see this demonstration of intent as a real positive because Vanchem was bought for a reason and as FM said in the Crux interview, its really not paying for itself, if its just operating 1 kiln. So this move is aggressive, clearly well planned and is delivering a long term aim, which for me is heavily centred around energy storage project supply and/or delivery.
What a differen
I never said I thought Enerox would be involved in the Eskom tender. They would struggle to meet the tender requirements, so it’s highly unlikely, unless a BMN consortium have found a way around it.
For me it’s either Rongke, a similar player of size, names of which fail me, or long shot, the tender will be a hybrid solution.
Whilst my approach may come across as conservative, it is designed to demonstrate the base case of what can be achieved, which itself is a good deal higher value than we see today. For me there is little doubt that it will be bettered and there lies the opportunity.
@Paul150 Potentially but it may well be at a South African level only. All new jobs at Enerox of which there has been a good flow, are at their offices in Wiener Neudorf. I count 8 in November alone, which is the sign of a company that is reigniting itself. If operations are to remain in Austria, then that for me places them out of IDC operating reach/desire.
At the South African level is completely different. Here's the original collaboration agreement from June 2016.
"Under the terms of the Agreement, Bushveld Energy will partner with the IDC to determine the economic viability of vanadium redox flow batteries ("VRFB") for use and manufacture in South Africa. Accordingly, Bushveld Energy and the IDC will commission a Feasibility Study to determine the following:
1. Assess VRFB viability and costs in the South African market, including studies of the market potential for VRFB Systems in South Africa and Africa, and techno-economic studies for the local manufacturing of vanadium electrolyte and VRFB system manufacturing in South Africa;
2. Identify potential local and foreign partnerships in support of the roll-out and local manufacturing of VRFBs;"
Key phrase being "techno-economic studies for the local manufacturing of vanadium electrolyte and VRFB system manufacturing in South Africa."
The electrolyte has already been closed out and projects in the form of Eskom's BESS Project, are now on the cards and were delivered with a great deal of influence from the IDC.
What goo reason would I have for thinking that they wouldn't also want a slice of the VRFB production pie, or that it wouldn't be beneficial for BMN or an Enerox of this world, to have them as a partner and tick a great many of those black empowerment/ownership questions? None whats so ever.
Especially when I also read such things as "Identify potential local and foreign partnerships in support of the roll-out and local manufacturing of VRFBs."
This is all more than 4 years in the making.
Does that mean that Enerox were always the intended target? Likely not. Does it matter? No.
The only caveat I have is the grid scale angle and the requirements of Eskom to have 'big' battery players involved in their demonstration project tenders. However, the Enerox play may well play out along the mini grid business case line only and may end up having nothing to do with any Eskom contract win. It could also end up being the case that more than VRFB company goes local.
Whatever the case, there's ample reason to believe that Enerox will enter S.A. and that the IDC will be the true enabler and a partner in that particular consortium.
https://www.karriere.at/f/enerox
@Fatbanker Yes certainly an option but the whole private company issue, is for me a risk and BMN will need to get the balance between ownership and risk right.
I have absolutely no problem with less ownership, if it delivers the urgency and capital required, to get Enerox moving forward like Invinity.
I look around the internet and see very little from Enerox right now, mini grid aside. They don't even have their own website. A search still send me towards CellCube.
I don't see that as lazy, especially after FM's comments on the market opportunity being now and it being down to VRFB companies to scale up now!
So something is a foot. Could be S.A. based but its certainly about plans and market explanation, as opposed to simply not being bothered to tell anyone.
@Faramog I don't believe for one minute that BMN will hold back, if the market demonstrates the need for more Vanadium.
FM was clear on that in his interview with Crux.
Reaction times, planning and the ability to overlap things, will all come into play and we don't have enough info right now to make a complete conclusion.
However, as I say, a BMN operating at c. 4,300mtV in 2021 and enjoying a profitable return, is a damn good start and gets the snowball rolling.
The rest is fluid and must be analysed as it comes to pass.
Also page 44 is clear on Vanchem ;
"Phase 2: includes the refurbishment of the first idle kiln and the construction of a new ammonium metavanadate
plant. This phase will result in the plant achieving a production of 3,100 mtVp.a. after ramp-up. This phase is expected to
require a capital expenditure of ZAR355 million (circa US$21 million) and to be carried out in 2021 and 2022."
Phase 1 as far as I can see, is maximum 6 months behind schedule, due to Covid.
If the cash and security is there in 2021, then BMN may well push the button on phase 2 early or as soon as phase 1 completes. The feasibility studies cost next to nothing in the scheme of things. Vametco phase 3 is just $240,000.
Worst case scenario, Vanchem phase 2 could be with us by mid 2023. So 2.5 years to wait for a ramp up to 6,300mtV plus whatever Vametco adds inbetween. So c. what 6,500mtV by the half way point and a conservative outlook. on a market that is expected to move much quicker than that.
So not all that slow and all along the way, BMN can make really good money as the V market comes under VRFB demand strain.
Post 5.
In terms of the Crux interview, I enjoyed seeing FM put under some pressure by Matt Gordon and I thought he showed some real passion for BMN's story and its future.
I welcome the plans to elevate the company's story in terms of what it means to be Bushveld Minerals in 2020/21 and beyond. Great.
However, I believe the energy element of the story would be better received, if BMN simply delivered a programme of events as they see them moving forward. Big ticket numbers being the electrolyte plant, Enerox and VRFB project tenders etc etc.
I don't expect them to divulge sensitive information that would undermine tenders or contractual relationships, but a lot more focus on actual plans, expected timelines and what each one would mean for the business, as a whole, would allow those that perhaps aren't as immersed or indeed can be, to see what the full value chain proposition, could one day look like.
Yes there would need to be caveats but then the long stop dates, could be just that. For me the company is already beyond preparation stage. Its happening now and there is more to share, than we are seeing.
One big example of this is localised VRFB assembly. I suspect something is brewing with Enerox and yes it is dependent on contract wins etc etc. However, there's nothing wrong with demonstrating the ambition beyond "investigate the business case," at this stage because it is clearly in the pipeline. Something along the lines of 'if X happens, then we will do Y, and Z.
This is not a moan or even overly negative because I feel strongly that this is now all about when and not if, so really good money can be made as an investor. Its simply just a shame, particularly when the CEO highlights understanding as a problem and scratches his head accordingly.
That aside and not wishing to fan the flames of expectation but I am sure I am not alone in thinking, that when FM was at his most heightened, most emotional (and he is very good at keeping his cool) and feeling the need to demonstrate the VRFB market is here now angle, he listed not only Dalian and Sumitomo Electrics 51MWh battery in Japan but also the Eskom BESS project saying this ;
"granted its not only going to be (pause and change of wording), VRFBs are not guaranteed, it'll be multiple technologies but we hope that VRFBs can capture a certain share of that, particularly given their local content proposition."
Given the similar size of the 3 project phases, it is highly unlikely that the tender documents will change very much. There are big questions over turnover (c. $60m i believe) and project history (total 60MW and each project 20MW in size) BUT as of close of tenders for package 1, BMN's CEO is not only demonstrating that BMN will/have taken part but is giving me at least, a massive hint, that there is an expectation of a contract win, in some shape or form. Be it with lithium or instead of it.
4/4 (apologies its 4 not 3 posts)
That's a lot of firepower, which on the production side, at the very least, must wait for the completion of Vanchem phase 1. That's because phase 2, which is the real prize here, at 2,000mtV additional production, surely cannot get going until phase 1 is far enough along.
On the energy side, it offers significant support for their existing investments and their ability to support the nurturing of them through V supply, their quest for large scale mandates to develop and their ability to do anything new on their VIP platform.
Lastly, please understand that all of what I have just pondered upon, is designed to take a very conservative approach, which demonstrates just how well BMN develop in 2021, even without significant financial success.
All of which allows any upside, higher V prices, greater VRFB roll out, VRFB project wins etc etc, to act as a complete bonus to investors, in the knowledge that good money can still be made, in 2021.
A lot to take in and I trust that I have not over complicated things or indeed wander too far off my path of explanation and clarity. BMN is a complicated creature and its impossible to capture all angles in just one set of posts.
Happy Sunday everyone.
3/4
For me investors need to be a little careful expecting too much. Enerox (right now) is private and cannot call upon the markets to finance its business. That's down to its owners, who led by BMN, are to provide a "shareholder loan facility of €3.7 million to Enerox" in order to "provide working capital and funds for capital expenditure to enable Enerox to reach sustainable commercial production."
I take BMN on their official word but that sum of money isn't very much. Employing IES as a worthwhile comparison, they received £3.8m from BMN (so not too dissimilar to Enerox deal) but then went on to try to raise a further £20m upon IPO.
If Enerox stays private and has the same sort of ambitions as Invinity, then the owners are going to have to pay their way.
E.G. If BMN is holding 40%, then they may have to find c. £8m over the course of 2021, to fund Enerox's plans, which to date remain very close to their chest.
The sensible route would surely be to float it but there's been no mention of this to date. The next best choice is a benefactor who can take the majority of the strain.
Until BMN secured the Orion deal, they had very limited ability to fund any reasonable portion of ownership in Enerox. Post said deal, I would estimate that ability has gone up to around 20%. However, keeping Enerox private is risky, be it their plans for their future, remain even more private at this time.
Key takeaways for me are that the Orion deal, at the very least, widens BMN's options. Secondly, Enerox remaining private retains unnecessary risk. Thirdly, we do not know enough about what Enerox's future holds, which I trust BMN management is fully aware of and so there must be good reason for it. BMN cannot withold its final ownership percentage from the market for very long and the reason its being withhold, must be because it isn't yet concluded. So watch this space on that one.
Conclusion.
Some investors may see the opening segment of this post, as negative. That not expanding quicker is disappointing to them. I don't see it that way at all.
Given the progress made this year already, the signs are there that BMN (Covid interruptions aside, which must weighing a little on things here), will deliver over 4,000mtV in 2021.
I expect vanadium suppl to come under pressure during 2021 and that means prices are going to go north.
My estimates say that such output/sales and an average price of just $30 per kg (bear in mind with Vanchem product range on board, its far more complex these days), delivers BMN minimum $16-20m in 2021, based purely on mining and processing output. So no energy storage related influences.
Now that alone for me, delivers a good uplift in the valuation. However, most importantly, it gives BMN the security to drive that $30m in cash on hand harder and in a direction, that services the best interests of the business.
2/3
The speed with which Vametco and Vanchem develop will depend solely on the financial performance of the business. However, even without said profit, at my estimate of minimum $30m available cash (be it Vametco full cost of phase 3 is $26m and exact commitments to Orion on this aren't known at this time), there's plenty left in the pot for other things.
Also, as page 26 of the BMN FY 2019 states, Roskill expect vanadium to move back into deficit in 2021 and stay that way until 2023.
However, the report states this ;
" Roskill takes a conservative view on vanadium consumption in energy storage (through VRFBs), forecasting growth in demand between 2020 and 2027 from 500 mtV to 1,463 mtV. (The Rongke Power 200 MW/800 MWh VRFB project in Dalian, when complete, is expected to consume about ~5,000 mtV of vanadium.)"
Roskill is effectively, at best, stating that the VRFB market will only demand an additional c. 963mtV of vanadium over the next 7 years. Even when evenly distributed, which I am sure Roskill have not, that's just 637mtV in 2021 and c. 775mtV in 2022.
Dalian phase 2 alone, at c. 2,500mtV, delivers that alone.
We therefore have a situation where by BMN can afford to drive their next set of plans to conclusion, delivering that minimum 5,300mtV (be it that is an extremely safe bet, set against a 2025 target) and ensuring that Vanchem not only meets its regulatory commitments but also delivers the security of its production rate (more on that shortly).
In addition, the business has financial security, even at these current low V prices, right through 2021 and in addition (Orion buy in assumed), has cash available to drive other areas of the business.
Note - The reason I highlight said security of production rates, is because FM went out of his way to mention this in the Crux interview. We have already seen signs of this with the Q3 output at Vametco but also through Vanchems ability, to alter its product profile and deliver additional mtV, above and beyond its current advertised run rate (1,100mtV vs Q3 294mtV), when Vametco faces any headwinds (bad weather, power outages etc etc).
The completion of Vanchem phase 1 and the first furthzer de-bottlenecking at Vametco, will only go to compound that further. In a world where V is in deficit, a secured 4,300mtV output, is highly profitable for BMN and their shareholders.
"cash available to drive other areas of the business."
This is why i highlighted Enerox in my response on Friday.
https://twitter.com/BigBiteNow/status/1332347593423278082?s=20
There's been much discussion around actual percentage ownership of Enerox and the plans for said entity.
1/3
In response to Faramog (be it I cover more than that topic), both here and from our Twitter interaction
Good day.
I thought given the detail involved, I would respond to your Twitter reply here, if i may.
My view point.
In essence, the $65m investment by Orion, is designed to carry BMN through to their 2025 goal of 8,400mtV. However, BMN were very clear when the cash was raised, that it is for debt repayments, Vametco phase 3 and Vanchem phase 1. Hence why I stated 5,300mtV and not 8,400mtV.
That being Vanchem stead operating rate of 1,100mtV and Vametco at 4,200mtV = 5,300mtV.
As of end of June 2020, BMN had c. $24m in the bank and circa the same in debt (R375m). With the Rand strengthening, said debt is now closer to $25m (at R15 per dollar). To that we need to add cash outflows in H2 2020, which I believe will be less than H1 because said loss production from Covid is no longer in play, be it said threat remains. However, BMN also have a $6.15m payment to Durferco pending.
So once the $65m becomes available (no drawn down but available to draw down), then personally ( as a precaution and with a reasonable amount of caution built in) I will be booking around $20m as outflows for H2 + Duferco and working capital for FY 2021.
However, it really isn't of significant consequence at this time because of the following...
BMN's expansion plans will be driven by how the V market and demand for their products evolves.
It should not be taken lightly, that BMN are committing significant resources to expand their production, at a time when V prices are low and their operations at best, barely profitable and it is because of this that their plans are set up as they are.
If you look closely at the 2019 FY report pages 42 and 44, there we see that the Vametco phase 3 works is designed to deliver "a steady state production run-rate of 4,200 mtVp.a, by 2025."
This message was repeated by CEO Mojapelo in his interview with Crux this week but expanded upon with his comments about it being a de-bottlenecking exercise. So although, right now, its laid out as upto c. 4 year plan, in reality, benefit from, will begin to flow through much earlier.
Right now said phase 3 is at feasibility stage, which is strongly indicated to complete in H1 2021. Therefore, my current commencement of work (safe) target, is early H2 2021. Actual break downs for the $26m are still to be published, which I expect to happen, once the $65m finance deal is closed out. Likely early 2021.
The other big project is Vanchem, where the works to deliver a fully regulated and steady "production estimated at approximately 1,100 mtVp.a." are expected to complete in 2021 and come at a total cost of $14m. The spend on Vanchem commenced in H2 2020, so it is to be expected that said full sum needs to be accounted for, from our $50m 'available' sum.
So in reality, we are talking c. $36m, with Vametco phase 3 de-bottlenecking costs to be factored in, as 202
@Rahee Thats not my understanding of the Black Rock mining right process, which I discussed here (17th Sept).
https://twitter.com/BigBiteNow/status/1306579347122327553?s=20
Submitted 9th November 2018 (post DFS completion, same as ACP).
Received 26th Feb 2019.
So c. 3.5 months
Blackrocks process took longer because they decided to press ahead with their EIA, whilst they were completing their DFS, which is key to applying for a Mining Right and they didn't yet have.
ACP are 5 months in and so in theory the ACP license can land anytime now.
I simply don't see any reputable finance outfit agreeing binding terms, so long as a Mining Right is outstanding. Its a critical item for them.
2/2
Whilst doing so they can pick off the VRFB projects they choose supply wise. Focusing on the balance between VRFB support and profit. Knowing that at some point their rental model is going to be in much higher demand, as said VRFB companies begin to suffer cost pressures, that their own hard work has helped realise.
Either way, at some point along the road, the BMN business model and their first mover status, begins to win the day.
At some point in the not so distant future, BMN is going to be making really good profits on a revised +5,000mtV production base, just from the cyclical demand of steel.
However, it is the sacrifice that is being made now, that will deliver the sort of demand (a demand that circumnavigates the last big V demand problem, that being niobium), that will really catapult BMN to a level that we all want to see. That being self capitalised rolling expansion to +8,000mtV and beyond.
All of which completely ignores their own journey into the VRFB value chain and the benefits that they can accrue from it.
The biggest fight that BMN long term shareholders have on their hands, is with themselves and their ability to see this through.
It is completely understandable that the last 2 years has worn some down and dare I say the constant daily focus, does not help with staying the course.
Each investor is the king of their own investment lot and must always decide for themselves but for me, BMN has never been closer to realising that end outcome and the fruits of theirs and our labour, are just now beginning to show themselves.
The reaction to those latest IES contract wins is a testament to that, which on the scale of it, are nothing compared to what they can go on to achieve, but is incredibly reassuring because it means the market gets VRFB, its gets energy storage and there's going to come a time 'soon' enough, when it gets BMN's place within it all and in my view, BMN has a far bigger part to play.
I wish you all well with your investment in BMN.