@Yachty The minister has already stated that selling electricity to the grid is not part of this deal and would require a license.
However, that is not what is key here. The failings of Eskom has created a very large list of disgruntled business customers, who are cash rich and power poor. That gives BMN a very fertile market in which to push its model. They won't all be knocking down BE's door for energy storage. BE will still need to go out and prove that what it has is of worth to these companies, that are still looking to go solar alone or are expressing and interest in lithium-ion based storage.
That is what the Vametco solar battery project is for. A role model.
The key for BMN has never really been about being the cheapest or the most effective technology, it is about creating a willing and ready market and being able to demonstrate to that market, that VRFBs are what they need to be including in their self generation plans.
As many other here have long recognised, Eskom in its failures has provided BE with the first real step because they have pushed a great many customers towards self generation because they really have no other choice.
It will still take time to come to fruition but this green light from the SA government is they key step to get them there in the S.A. market.
EUR and US #vanadium prices rising.
#BMN key US market now at $28 per kg and EUR running at $29.50 per kg.
More China disruption expected.
China normally sizeable exporter to these markets, so expect further rises until virus breakout logistics resolved.
Things appear to be warming up on the political front in South Africa.
Self generation being openly supported by the Minister for Mineral Resources and Energy. No license just registration, although the exact definition of "register", is still to be defined.
Still a very positive development, which if indeed true, is timed perfect for Bushveld Energy.
Just imagine what BE will be able to demonstrate when the Vametco solar and battery project is up and running.
Now take a look at slide 44. Some may remember that at the time of the 1010 presentation, I asked the BB for help establishing exactly which projects these were., without much success.
I won't drag up all the details here now, but I am pretty sure that not a single one of these projects has even made it financial close yet.
I will go one step further. Mokopone even after requiring a revised DFS (due in H2 2020), will highly likely beat all of those projects into production. Not only that but if for some reason it does not make it into production , it will be because the market cannot handle the material and/or prices are just too low to justify the expense. If those prices are too low for Mokopone in its revised Vanchem backed form, then they are far too low for those projects to gain financial close, whatever their backers may wish to sell their particular markets.
What that means is that BMN can feed said additional supply into the market, at a level that the market can handle, without having to commit to a full mine. That's the advantage of Vanchem and those 3 kilns.
As vanadium prices rise, BMN can employ the cash generated to drive a much larger Mokopone/Vanchem operation, far quicker than any of those projects can hope to match, because BMN controls its own financial destiny and does not need to convince a financial backer, that the latest volatile hike in vanadium prices, isn't just a flash in the pan and that their mine is worthy of backing.
BMN can therefore be the swing producer that a great many potential new participants, will be in fear of. They can react far quicker than anyone else outside China and more importantly they can be far cheaper than much of the production that China can temporarily bring to the market.
I come here and talk about the profitability of Vametco in H2 2019 because its a worthwhile subject because its key for me, that BMN have the proven finance to weather this downturn. The exercise was a worthwhile one because it showed that they do. If they lose a little EBITDA along the way it really does not matter. The key is the finance and formula, are there for when the market turns, be it steel or VRFB led, because they have the resource and the cost model, that can take the very best advantage of the market when it turns, which it inevitably will, with or without VRFBs.
The fact that VRFBs are clearly going to be big enough to influence that V supply/demand dynamic, makes the probability of price rises all the more certain, which means that the above market position and the previously mentioned cost positioning, are all the more supportive of a very bright future here.
If VRFBs hit the way many expect, then the above becomes all the more magnified.
Remaining ever so close to a particular share's daily movements over an extended period, can lead to a loss of clarity and a tendency to roll with the psychology, as it sits at any particular time. It doesn't happen to everyone but the influence hides itself perhaps better than many can see.
When vanadium prices were ultra low (2015), it took a great deal of belief to stay the course and trust that the market would turn for the better.
When the vanadium price was flying at over $100 per kg, it was easy to get lost in the frenzy and fail to contemplate that prices could stop rising, or that the market had an answer to vanadium shortages.
Now that the price has receded (and it must be said that prices really aren't that low compared to the long term average), the feeling is that they perhaps will never recover. Its not a sensible reaction but it is certainly an understandable one.
Just like a great many experts say the SP500 won't fall, when it clearly will.
Slide 40 of the Bushveld Vanadium 101 presentation (remember that?), demonstrates through the work of Roskill (so not BMN), just where Vametco at 3,000Mtv sits. More importantly it demonstrates its relationship to the Chinese co-producers, who in 2017 made up 52% of supply.
As we can see there really aren't many producers who are cheaper. Raise that to the 3,400Mtv run rate expected in 2020 and it pushes even lower.
The Chinese are clever, they are in my opinion industrious like no other. Just look how fast they can build a hospital. What other country could do that? However, they cannot fight market dynamics forever and according to Roskill, the vast majority of Chinese co production is dearer than Vametco, even at 3,000Mtv.
Now take a look at slide 43. Mokopone in its previous known format, was also still cheaper than Chinese co-production.
However, rather than costing $298m, which would have meant sizeable debt instruments (circa 50%? $150m?), it is instead costing $50m (with Vanchem $30m cash element), made possible by the money made at Vametco in 2018.
So the debt, which is company carried, is now maximum $25m. That reduces the stated cost to produce.
Then we have to consider and appreciate that Vanchem combined with Vametco, will deliver further cost savings for both operations. They have too. Those costs on those 2 slides, consider those operations as stand alone mine/processors only.
So both those costs are going to fall even further.
When sense prevails, which may only truly come once vanadium prices turn north enough, then the psychology will change and then those above fundamentals will act as drivers for the valuation.
Right now the psychology demands that they are ignored, that it somehow cannot be true, but it is and next time around BMN won't be delivering 2,570Mtv into that rising market but 4,500Mtv and rising.
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I recognise that everything is slightly more complicated than that but we have to start somewhere.
That aside, the H1 2019 performance demonstrates that Vametco under H1 2019 parameters, can produce at $23,000 per Mtv.
For much of H2 2019 prices were more than high enough (and I repeat that US prices were not all that far away from Europe in that period), to deliver positive EBITDA.
Therefore, the points raised around timing of deliveries, potential investments in the operations etc are valid and the actual results as shown, are perhaps not a true reflection of what Vametco is capable of, when investments in the transformation programme, are no longer relevant.
Finally, the gap between actual pricing achieved and the EBITDA result, is for me so great, that the actual results demonstrate either substantial additional costs being put through the Vametco business by BMN, creative accounting, or something else.
What it does not currently show me (and I am open to other opinions and would also like to do some more work myself on this, when i have more time), is that Vametco could possibly be loss making in H2 2019, when these investment considerations are put to one side. So the choice to invest and take the perceived accounting hit, is a tactical one based on future considerations, rather than a business struggling with prices. Given the significant profits in 2018, this is understandable.
Hence why I made the point yesterday that the key focus should be on cost reductions, increased production , and what that means for the future profitability, even at lower prices and without any influence from the VRFB arm and its markets.
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Good morning all,
I am not around much today but I just wanted to point something of importance out, when judging the perceived Vametco performance in H2 2019.
I am spoken many times of the lag in sales and prices that occurs on Vametco sales.
In the interims 2019, this is stated more pointedly.
"Vametco sold 1,115 mtV Nitrovan TM, generating revenues of US$74.3 million in the first half. Vametco's realised price is based on the prior month's average price, which is higher than the quoted LMB weighted average price for the period of US$56.3/kgV. These higher realised prices offset the lower sales in the period."
It is of course not as simple as that because as BMN pointed out yesterday ;
"Vametco sells the majority of its product to the United States, Europe and Asia, with an average delivery period of 8 to 12 weeks to the final customer1. The timing of deliveries that occur on or around half year and year-end impacts the timing and quantum of revenue recognised for commodity sales in each financial period."
A key point that was issued as part of the RNS for a good reason, given the perception that Vametco was loss making in H2.
Back to those interims.
In H1 2019 the stated LMB average price was $56.30 per kg.
Actual revenues were $74.3m. In very simple terms, those 1,115Mtv achieved an average sale price of $66,600 per Mtv.
That's because H1 2019 included Dec 2018, where in Europe the average price ranged from $115 to $70 per kg.
What that means is that in terms of Europe at least (Note - US prices have generally held in and around the European levels throughout H2 2019), June 2019 was deemed the 1st month of sales pricing. In that month prices averaged circa $35 in Europe.
What it also means is that H2 2019 only ran up until end of November 2019. In terms of European prices, FeV prices dropped below $25 per kg on or around 11th October. So approximately 7 weeks from the end of a 26 week period but more importantly did not break below $30 until c. 13th Sept 2019.
In the interim 2019, the EBITDA for Vametco was recorded as $42.3m
That means that the costs were $30m for the production of circa 1,392 Mtv. I appreciate the arguments regarding my take on the 441MTv in stock yesterday and recognise their worth. However, the full cost of the 1,392Mtv will have been recorded in that H2 figure.
$30m / 1,392 = c. $23,000 per Mtv costs to produce at Vametco.
Simplistic but accurate enough for what I am attempting to demonstrate.
European prices dropped through $30 on 13th Sept. So Vametco enjoyed circa 13 weeks of H2 with prices well above the costs to produce in H1 2019 and on close analysis actually barely broke the $23,000 threshold in H2.
H2 2019 production costs were $1,000 per Mtv lower than H1 2019. At 1,277 Mtv sold in H2, that's another $1.28m in cost reductions.
@Bomb3r and ND, thank you, I had not appreciated that revised figure. It is however in the garnd scheme of things irrelevant, for reasons I have already shared. BMN have sufficient cash resources on hand to execute their plans to such a degree, that they can be a far larger operation in a relatively short time duration.
That's not to say that losing money is something I would want to see continue unabated but we as we all know, we are not talking about a miner simply waiting for its pricing cyce to turn. We are talking about a miner actively investing in companies and developments, in order to drive a brand new market.
When Redt/Avalaon/Enerox start making progress, then those offtakes that BMN have secured, are really going to start demonstrating themselves. That's the backbone of what this is all about, not a small loss driven by a temporary shift in market demand/supply/prices.
@Bomb3r It is in the Q2 update from 31st July 2019.
One must be careful not to mix up Vametco EBITDA with overall BMN EBITDA.
I don't believe anywhere in the posts I published this morning, did I write that BMN were profitable in H2 2019.
The point I made about inventory stands. I did not base it on accounting methods because what has been issued today is a EBITDA figure only, and nobody truly knows what is being included in Vametco overall costs.
To be absolutely clear, Vametco EBITDA for H1 2019 was infact $48.6m. So the reported figure today was indeed lower, which does point to a loss across H2. However, I repeat, nobody knows what additional costs Vametco carried for plant upgrades, drilling etc.
However, the reason I am so bullish about today's update is first and foremost, the message that production is not being affected by Eskom loadshedding. So the company, to date is sheltered from this perceived risk. Secondly, costs are reducing and production capacity/availability is increasing, which reduces the breakeven level required.
To put the perceived $6-7m reduction in cash in perspective, BMN held net $66m at 30 June 2019 and have a $25m debt facility in place as well.
They have paid out $23.2m as cash in H2, for the completion of Vanchem.
So cash is potentially running at circa $40m - their pending investments into Enerox $6m at 50%) and Redt/Avalon ($5m).
So now we are talking circa $29m in cash plus a $25m debt facility.
That cash position sees them with upto 4,300Mtv production and a fully licensed Mokopone on the books.
They are now all set and further advanced than any potential junior could ever hope to be.
If established pure play operators are losing money in the H2 2019 pricing environment, then no junior miner has a hope of closing its finance out for a new mine, which means the competition are falling even further behind BMN, as its ability toreact to market demand continues to strengthen.
When the Redt/Avalon and Enerox deals close and both companies have a clear line of sight to expanded project executions, backed by low cost guaranteed supply from BMN (supply that has first refusal or an offer to match or better whatever else is out there), then revenues are going to start to come from other sources and BMN vanadium supply will be stretched or diverted away from typical markets. At 4,300Mtv, that is going to start to affect the overall market.
That is what I am truly here for and today's update strongly supports a business that is becoming leaner, bigger and well prepared to cope with the pending demand that VRFBs will bring. A demand that BMN have manufactured through the deals Bushveld Energy are about to close out.
So these results are not about whether BMN is profitable right now, they are about how well prepared is BMN for that next phase and what are they doing to ensure that their offering is as cost competitive as possible?
If vanadium prices receive a boost in the meantime, then all the better but the bigger picture here is VRFB, of that I am certain.
In my humble opinion, SP Angel are looking at it all wrong.
As an example, the 2nd and 3rd largest Chinese V205 producers in 2019 with a combined 1,900 tons of V205 between them, are both located in Hubei province, the home of Wuhan.
I pointed out earlier that China produced more vanadium feed stock in 2017 than it required. Lower steel production will remove demand for vanadium but given the vast majority of Chinese production is co-produced with that steel, they will also lose more vanadium output and Hubei province is right in the thick of it.
Here is a very interesting line hidden away at the bottom of the report ;
"The Company is working with energy policy makers to support initiatives to reverse the downward trajectory of South Africa's power system."
That line and the lack of attention it seeks, should tell investors who have done their homework on BMN, just how ingrained BMN have made themselves (with the help of the IDC) within the S.A. political and regulatory cogs.
When I read the above statement, I immediately think about the following ;
"The energy ministry published a document on Friday requesting information from the power industry on options for between 2,000 MW and 3,000 MW of new capacity at least cost."
"Firms are to reply by the end of January and present options that could be connected to the grid within three to six months or six to 12 months, if they are selected in a procurement process, the document showed."
Given BMN's clear interest in the Eskom BESS project and any associated access to power generation projects in S.A, it was always odds on that BMN would be interested in this new call for help.
The above statement, as minimal as it is, for me, adds fuel to that particular energy driven fire.
As Ophidian has already pointed out, the Mokopone Mining Right is confirmed and allows them to move to mining, post the completion of the DFS in H2 2020.
It was also very pleasing to read the following ;
"Eskom, South Africa's national utility, during Q4 2019 implemented industrial power rationing. During this period, Vametco did not experience any periods of total power loss but implemented load curtailment which required a reduction of total power consumption of 12MW to 10MW between the hours of 8am and 6pm each day."
"Vametco's operational bottleneck is not affected by these periods of load curtailment and there is no impact on the plant's production performance. It is a priority for the management of Vametco to build on the strong relationship with the Eskom regional management and customer relations officer in order to continuously engage on proactive methods to reduce any impact it might have. In doing so, management feels confident that the situation will continue to have no impact at Vametco."
That is a surprising and most welcome piece of news, which adds strength to the belief that the 2020 guidance will be met.
Here's another way of looking at it.
Take today's average prices in the market, circa $27 per kg (playing safe).
Vametco is holding 441Mtv of inventory based on the 2019 figures alone. When sold, costs for distribution and selling would need to be considered. Selling is deemed 5% of production costs (see BMN 2018 Annual Report).
Let's say its 5% all in of the sales cost. So the average realised price would be $25.50 per kg.
That equates to circa $11.25m in inventory that could/would be classed as EBITDA.
Why didn't they sell it? Either because they did not want to or did not need too. That's because this journey isn't about what the business achieves in 2019 but what 2019 helps the business to go on to achieve in 2020 and beyond.
Firstly I would like to say just how bullish and pleasing an update this is and in my opinion, focusing on the Vametco EBITDA is not where investors should be concentrating their energies right now.
The main reason being that Vametco chose to hold back a whopping 441Mtv of its production in 2019, 277Mtv of this came in H1 when prices were much higher.
Note this part of the update ;
"FY2019 Vametco geographic sale split: ~50% the US, ~20% to Europe, ~10% to China and ~20% to the rest of the World."
As an example, a quick calculation employing the average prices provided and the stock held back, says this ;
US - 50% of sales = 221Mtv @ 2019 ave. $49 per kg = $10.83m
Europe - 20% of sales = 88Mtv @ 2019 ave. $41.60 per kg = $3.67m
China - 10% of sales = 44.1Mtv @ 2019 ave. $36.80 per kg = $1.62m
That's +$16m with another 88Mtv still to be recognised.
The costs to produce this product have been included in the 2019 figures, the sales aren't. So the EBITDA figure is to a large degree irrelevant.
@Derbyone I never truly left. I reduced down a while back having had a very good run but still have a good sized core holding that I intend holding through to production and beyond.
Reading through the evidence to date on this subject, it looks like the president’s comments have been at best misconstrued.
Removing legally backed concessions from foreign investors of the likes of Ganfeng, is a very dangerous path for any politician to follow.
Here’s an example of an article I have just read ;
If true then meetings between the Sonora government and Ganfeng to discuss battery plants and future investment, smacks in the face of concessions being confiscated.
Having seen the post from Corvidae, I decided to run some further checks.
The enclosed copy of the PFS, pages 16-17, gives details of the 10 concessions held on and around Sorona. Page 17 detail a legal opinion from Melicoff & Asociados Abogados, issued in 2014 when BCN listed on AIM.
The opinion and the standing looks watertight to me.
The second document below is the guidance for the attainment of mining concessions and the process to needed to exploit minerals.
As far as I understand, the key document post the concession approval (which allows for exploration and exploitation) is the EIA (see page 23 onwards).
That was notified by BCN in their RNS dated 20th October 2017 (see below) and stated that it covered the current 35,000 tpa lithium carbonate operation at Sonora.
Lastly, the Q3 2017 management update from BCN (again see below), stated that ;
"The approval represents a major milestone for Bacanora as it grants the Company government approval to construct an open-pit mine and a large scale beneficiation processing facility at Sonora."
There is always the chance that a wayward thinking president and his team could/would look to change this but as far as I can see, the statement (and I recognise the limited detail available in the links provided regarding the Mexican president's recent comments), is not supported by the facts, and any attempt to remove said concessions and approvals, would surely be on very shakey ground.
I do however recognise the existence of the articles and that if true, could be problematic for BCN. However, the statement is simply not correct in the case of BCN.
For me what this RNS actually states, is that IMMO are now planning for their move beyond simple break even at the EBITDA level.
Today's cash raise secures a path to 625 headsets, which at even just £300 per headset achieved on the 225 headsets above the so called magical 400 goal, delivers £3.5m above the EBITDA break even point.
However, such larger installs, which may well be repeated as H1 develops, will surely push that average revenue closer to the £476 that the aquariums are achieving.
Hit £400 per headset, then we are talking closer to £4.7m in revenues above the EBITDA breakeven mark on those 225 headsets.
So I agree, the initial attention is very much on the placing but where it should be is on the fact that said money pays for the move to 625 headsets, inclusive of larger locations, highly likely making the company 100% self reliant and more.
Whilst the placing may well of grabbed most of the initial attention to the RNS, the deal at the Mandalay Bay Resort & Casino's Shark Reef Aquarium, is rather eye catching.
At not less than $2.50 per ticket sold expected and historic visitor levels of over 500,000 per annum, those 36 headsets at a conversion of $1.30 per pound, will generate £960,000 per annum, which is around £513 per headset. It will take a little time for the installation to complete and gather momentum, but that's a better outcome than even the aquarium sector achieved in 2019 (£476 per headset). In addition, it is not based on actual participation but on an entry fee with exhibit included.
It is a shame that this announcement could not be made separately but that slight irritation does not remove the facts. This deal for 'just' 36 headsets, can deliver more than 25% of the total revenues achieved in 2019, from one location, which is a significant development.