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I don't believe I3E took the decision to relocate the Borgland Dolphin at the weekend without knowing that their final permits would come through in a timely manner post anchors being set.

Al 4 remaining permits sit at 'decision' status, so I expect the confirmation to drop anytime now and the spud news to follow shortly afterwards.

@Bobbyaxe I am not so sure the goldilocks price analogy is the correct one, although perhaps you will explain to me different.

In terms of lowest price I would want to see, for me, with what I know of the last quarterly update from Vametco, I feel comfortable at $30 per kg, but I and I believe the market too, would want to see how the Vametco transaction is going to be put to bed.

BMN may declare that they have $66m in cash but it isn't all theirs.

The best figure to employ as far as I can see is the total comprehensive income figure of $34,496,430, of which we are told that $10,228,556 is designated as non controlling interests.

However, in the consolidate cash flow sheet the figure is slightly different at $34,684,591, which generate a net increase in cash and cash equivalents of $21,507,494. This figure along with the $2,604,102 effect of foreign exchange rates figure, generates the reported total $66.1m in cash.

Its complicated so one must tread carefully but as simple analysis, if we take the percentage breakdown from the comprehensive income figure ($34,496,430 and $10,228,556), we see that the percentage non controlling interest figure is circa 29.65%.

If we apply this to the net increase in cash and effect of foreign exchange rates figures (Total = $24.1m), then we should be deducting circa $7.15m from that total $24.1m cash increase because it isn't BMN's.

A similar calculation would need to be done on the 2018 figures but at the appropriate percentage ownership.

So, as good as that $66m figure looks, the assumption is that it does not all belong to BMN and their shareholders.

This is where it gets interesting because the non controlling interest, in the main, belongs to the BEE partner and the long standing business partner and consultant of BMN, Bill Chipane.

That non controlling interest does not automatically get paid to Mr Chipane. Payments out of Vametco should really be made via dividends. However, it will be interesting to see just how much of this capital BMN can employ, under what circumstances, and therefore how much debt BMN needs to raise to complete on Vanchem.

I see no issue with BMN raising debt and completing Vanchem but I can understand why the market might be cautious at this time, because the accounts may say $66m but BMN don't own all of that cash, and the bill for Vanchem is $61.2m. So at the very least there are questions that need to be answered and when they are, I feel a bit more of the achievement of acquiring Vanchem will be then priced in here.

Hello Garby1

Having conducted a detailed analysis of the Brazilian gold pricing and Real/US$ for Q3 2019, I come up with an actual average realised US$ gold price of circa $1,450 per oz.

The YTD AISC cost is $1,085 but this was affected by the lower production in Q2. The Q1 production of 10,164 oz and an AISC of $1,021, is for me a better read across, given that SRB expects full year production to come in at between 40-44k oz, and this was confirmed as recently as the 13th September 2019 presentation, which is just 2 weeks short of the full Q3 period.

So the lower figure should be more relevant if they hit their targets.

Therefore, the $2m operating profit reported in the Q1 results, is for me the springboard from which to measure Q3.

That consisted of a production of 10,164 oz at AISC $1,021 and a realised gold price of $1,287.

If we assume the same gold production and sales for Q3, then we are talking a circa 61% improvement in profitability.

Thus the $2m becomes circa $3.25m for Q3.

However, YTD production sits at 19,691 oz. So the next 2 quarters would have to average above that Q1 figure to meet even the bottom end target set by the company. So we have every chance of seeing that AISC push lower and (if the sales have been made) the oz sold pushing higher.

All of which bodes well for the circa $11.5m Coringa payment that is due late December 2019. I do believe the market is looking for a little more security on how that costs will be met and indeed the circa $25m Coringa build cost but I also believe that the company has it under far more control now than the market is willing to accept.

Coringa won't kick off construction until Q3 2020, which means there is good opportunity for the cash reserves to be built up again post this payment. Also having already built Palito for under $20m, I believe the CEO when he says they can likely bring Coringa in for a similar price.

There is circa $6m debt sitting on the books , whose payments have now been pushed into the first 6 months of 2020, but with the Coringa asset and its measured/indicated resources, now more than doubling the total resources on hand, SRB has a far greater asset base from which to re-negotiate this and any future debt, that may be required for Coringa.

However, gold prices whilst capable of dipping, look set for a very healthy end to the year and an even better 2020, and the timing of Coringa construction should be just about perfect for capturing my expectations of market's mood on gold next year.

So for me this stock is about buying and simply waiting for that expected play, to play out.

@Jasethep01 In these times of doubt, which are very understandable, it is important to re-visit the information over and over again. Knowledge is power in this game and assists with the negative noises start to grow louder.

That's not to say that we should continually look to defend our decision if the fundamentals that brought us to it have changed. The point is to test, test and test again and prove whether anything has actually changed and if so, how detrimental is it to the overall picture and reasons for being here.

Vanadium prices are down and that is going to affect the profitability of vanadium producers and thus their share price. That is inevitable. However, vanadium is a mineral that has a very good chance of carving out a new industry use that has the ability to take up any slack seen through substitution or a slackening of demand in the steel sector.

Within the limited options that are available for investor exposure to that opportunity, I believe BMN to be the very best of them.

No other vanadium producer is as active or forward thinking as BMN in the energy storage sphere and so if that chance is to be grabbed, then BMN have the very best chance of doing so.

In addition (and here comes that information revisit I talked about), in the energy storage webinar 101 Fortune Mojapelo is very clear when he says about the vanadium rental product (listen 1 hour 10 mins 50s in) ;

"in this high price environment, if we can show that VRFBs can be deployed successfully, by adopting a model like this. This model will only get more attractive as vanadium prices normalise going forward."

The vanadium price is falling and BMN is being judged on that because that is what BMN does. It produces vanadium and sells it fro a profit, and that profit is currently dwindling.

However, the market being what it is, does not and will not be prepared to understand, the opportunity that VRFBs present to BMN through its fully integrated model. So it currently has absolutely no chance of appreciating that a falling vanadium price (be it that it is important to stay profitable), actually supports an even stronger argument for VRFBs and makes them substantially more competitive against lithium-ion.

However, as Mr Mojapelo says, the BMN rental product, the only one in the world today as far as I can still tell, further increases that competitive advantage even more, and it belongs to Bushveld Energy.

Logic tells me that when Bushveld Energy go looking for those Eskom BESS mandates, that rental product will be in toe. The battery cost is already defined at minimum $468m but that doesn't mean that someone can't go and beat it, and I believe that's exactly what BE will look to do.

So falling vanadium prices whilst causing a headache shorter term for us shareholders, are actually timing themselves perfectly for the Eskom BESS Project tender, and the key now is simply its release to the market.

(3 of 3)

The next step for Bushveld Energy is VRFB assembly. In the webinar (slide 59) Fortune Mojapelo says ;

"Once we've sufficient scale of energy storage mandates, that creates in its own right a business case for VRFB assembly, and by so doing we believe there is significant margin that can be captured."

This ties in with the highly significant "potential for value chain scale up" comment from Price Moyo.

Despite the findings of the market assessment, there have been studies made on a lithium-ion industry in South Africa, and efforts to revitalize component manufacture particularly around the use of Manganese, of which S.A. is the world's largest producer. (see below).

https://www.esi-africa.com/industry-sectors/future-energy/the-road-ahead-for-lithium-ion-batteries/

However, its not even off the ground yet and the Nelspruit facility, "one of the world's largest producers of electrolytic manganese dioxide, a key ingredient of some commercial alkaline and Li-ion batteries" was closed in 2014 and remains in such a state, as recently as February 2019.

So whilst there will no doubt be competition who will wish to demonstrate their intent on the value chain side of the market, Bushveld Energy I am sure, will be putting forward a bid that demonstrates that "sufficient scale of energy storage mandates" can lead to "a business case for VRFB assembly" and that ties very much in with the IDC's goal of job creation and local beneficiation vision.

I have looked high and low and I can find no other company that can offer that amount of localised development, that is quoted time and again as being critical by Eskom, The IDC, and even Ramaphosa himself. So if nothing else the chances look about as good as they can be at this stage, and that's the key here. The percentages.

Time will tell just exactly what 'imminent' actually means but when Prince Moyo says "the only ministry that has not yet signed off is the Department of Public Enterprise" and that consent “has been escalated to the highest level,” then that can only mean Pravin Gordhan, and he is a man that in my view is trust worthy, wants the best for S.A, and its citizens, and is not against change at Eskom. This battery project presents him and his government with a way out of their Eskom mess, be it at a very early stage. It presents his boss Ramaphosa with a new industry, new jobs and new mining opportunities.

So I expect that imminent is capable of being just that this time around because that sign off is going to come.

If so then the ribbon will be cut on the race to that first 200MW of battery mandates and Bushveld Energy has a really, really good chance of being first over the line.

(2 of 3)

What is also key is that whilst the USTDA study highlighted lithium-ion battery as having significant cost advantages at the time, as well as "significant near to long term potential for S.A. utility scale energy storage", it was not noted as being an S.A. resource, although elements of it do exist in S.A. such as manganese.

However, vanadium understandably was, and was further noted as being "significant now and long term potential for S.A. Utility scale energy storage."

As I stated at the time, the IDC is the driver of this new market in S.A. and to date has still only ever partnered with Bushveld Energy in this field. Not only that but the IDC is a financial partner in both the Eskom battery and the future electrolyte plant that will beneficiate local vanadium.

Not only that the USTDA have issued a grant to Bushveld Energy to further its work on its battery project based at Eskom's Rosherville (see below).

So we have the author of the market assessment and the leader of the S.A. Energy storage committee both partnering with a vanadium producer who is presenting an integrated model, that beneficiates local minerals for use in energy storage solutions.

Now to the latest article and some quotes from Prince Moyo of Eskom,

"Moyo said bidders would need to be aware of a minimum 20 percent local content requirement in the first phase of procurement."

"The authorities saw battery storage as a new market for South Africa,” he added. “South Africa has a lot of potential in terms of minerals and industrialization. The potential for value-chain scale-up is demonstrated.”

As head of the steering committee those authorities, really have to include the IDC, although conflicts of interest do come into question. However, back in that 2017 engineering article Christo Fourie did say "The IDC’s role lies in developing new industries."

Their role is to promote and right now their No.1 contender is Bushveld Energy.

It would be wrong to assume that Bushveld Energy's path is completely clear here. There will no doubt be stiff competition because this combined project is arguably the largest outside of China.

What I am seeing here is a business that as Fortune Mojapelo stated in the Energy Storage 101 webinar, has pulled on the regulatory and political levers available to it in order to give itself the very best chance when the time comes. In doing so it has been party to the development of the Eskom test site and the process associated with getting us to this point with the Eskom BESS project.

So the key understanding required here is the advantage that Bushveld Energy has gained in being able to prepare for something, many months before its competition will ever have got wind of it. Try to imagine what that means for a business when it is able to shape its make up and offering, in order to position itself for future work that it knows is highly likely going to come.

(1 of 3)

With the recent news out of South Africa regarding the proposed utility scale battery project from Eskom, I decided to do a little back testing on some of the previous work that I produced on this subject.

Last November I wrote a set of articles on the Eskom battery storage project, explaining how the evidence demonstrated very clearly that BMN and their partner the IDC, were central to the development of this project. These articles are still available on the Bushveld Perspective and in my opinion, continue to contain some very relevant information.

Firstly, what is key to remember here is that this whole project was born out of the South Africa Energy Storage Technology and Market Assessment.

"The objective of the South Africa Energy Storage Technology and Market Assessment was to provide advisory services to the IDC and Steering Committee that will help guide and promote the adoption of energy storage technologies in South Africa."

https://www.ee.co.za/article/south-africa-energy-storage-technology-market-assessment-report-released.html

All South African based key stakeholders are part of this steering committee including Eskom, their research arm and NERSA.

The report was produced by the USTDA in August 2017. Just 2 months prior to this Eskom opened its test centre at Rosherville, which is where the Bushveld Energy battery would go to make its home.

A couple of months later (Oct 2017), an engineering article was released in which Bertie Styrdom of the IDC was quoted as saying ;

"The “most significant mileage” for the IDC, however, is in the backward integration of storage technologies into South Africa’s significant mineral value chain”

http://www.engineeringnews.co.za/article/south-africa-gauging-energy-storage-growth-opportunities-yet-greater-understanding-required-2017-10-13/rep_id:4136

In my first article entitled "Bushveld Energy Your Time is Coming" I said this ;

"The IDC partnered with BE before the USTDA had even completed it’s study.

The IDC are working with BE to establish both electrolyte production and VRFB assembly in SA, a process that is already past the point of no return.

When the study was completed it stated very clearly that only vanadium redox batteries can deliver locally beneficiated minerals."

At 5 mins 50s in that 31st Oct 2018 interview, the CEO talks about the LIB upside appraisal well (currently A3) being employed to "optimally locate the 2nd development well in the Phase 1 area" and this is the L4 well that actually sits in the new neighbouring block but is classed as phase 1 under the revised scheme (i.e. post additional block acquisition in 2018).

So the A3 well is not only designed to prove the upside but also to establish the site of the 2nd production well location. Given the statements made about LIB not being closed out at the border of the original block, the company is clearly confident that this appraisal well will come good. Of course time will tell.

The key takeaway though is the importance of the A3 well in terms of the agreement made with the OGA and its ability to confirm the L4 location.

If it does, then I3E has L4 and L1 as its phase 1 production well locations, even if L2 proves to be substandard. Hence why the company is still stating in the interims that ;

"We are preparing to fund Liberator Phase I on a 100% working interest basis through our progression of a US$100 million reserve-based lending facility."

The company needs to fully evaluate the LIB area, including the phase 2 area, before it knows exactly what it has. That it now perhaps needs the L4 well more because of the perceived failure at L2 is clear, but given it is an appraisal well, is that any different to the chance any other E&P company take sin the North Sea and beyond?

What I3E are attempting to do is create the most optimal development plan, which would clearly be L2 and L4, which they have discussed previously. L1 is longer and contains less oil so would affect the break even price, but as the CPR demonstrates, it is still highly economical, and right now the market is pricing I3E as a failure, before the LIB upside has been fully tested, and indeed backed up further by Serenity.

To put it very plainly. A successful appraisal well on the LIB upside will deliver reserves and the phase 2 development but more importantly, it will deliver the expected LIB phase 1, which the market has completely removed because of the perceived miss on L2. I say perceived because to date we still do not know the outcome of the data and what it means for the L2 well.

As I keep saying over and over, ALL the information has to be read, re-read and read again, to understand what is the reality and what a rather lazy market is wanting to believe.

At around 4 mins onwards the CEO explains why the development plan changed from the original CPR 2 well development. Why it was driven by the fact that the Liberator asset increased from 11mmbbl to circa 80mmbbl or more. He talks about the need to optimise the recovery for both the NPV but also to satisfy the OGA requirement on maximising recoveries from North Sea fields.

The development plan he talks about was the 2 well programme that included the 1st phase 1 development well and the appraisal of the upside in the neighbouring block (Liberator East/West).

He goes on to state that "we have to appraise the upside in the field properly," which "was a commitment that was made to the OGA when they awarded the license next door."

So A3 or a form of it has to be drilled and that is why I3E are busy reviewing their data in order to complete this drill post S1.

At 7 mins 35s onwards Graham Heath talks about what the directors role in the company is and why the development plan had been changed and first oil date extended. That it is to create "deep long term shareholder value."

Then I would encourage shareholders to have a good listen to the segment from around 12 mins 30s on, where Majid Shafiq talks about the history of his involvement, where he met Graham Heath and Neil Carson. His viewpoint on the Liberator asset as an investment banker by trade, and how good a deal was made to obtain it given the quality of it.

He uses the words "great opportunity," "a very good asset" and that "the team they've got in Aberdeen is very good, all very experienced people." So much reinforcement of the company and its abilities.

From 13 mins 50s he then talks about the fact that the original asset, so pre-additional block acquisition with LIB upside, at 11mmbbl was economic but that now they are sitting on 80mmbbl "with prospectivity to make it much larger than that". That sitting on 100mmbbl potentially "makes you a very significant player."

The development plan has been updated to ensure the most optimised development plan is achieved. That plan will not doubt be adjusted again following well results, but clearly requires the A3 well to complete the story (see next post).

"If we can execute on that then we can make a lot of money for our shareholders."

Like I say well worth a listen in the context of what has been learnt since and what is to come.

There are still some voices out there attempting to sell the notion that I3E cannot afford its drill programme or indeed its working capital commitments.

The "Going Concern" section of the Interims in my view, when properly understood, should alleviate this concern.

"The financial statements have been prepared on a going concern basis. The Board successfully raised approximately £19.15 million, prior to expenses, during the period through equity issuances as well as secured £22 million in H1-2019 loan notes. The net proceeds of the placing, in addition to the debt facility, will be used for asset appraisal, development and working capital requirements.

Based on the Board's assessment that the cash flow budgets can be achieved, the Directors have a reasonable expectation that the Group and the Company has access to adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting."

"The interim financial statements have been prepared in accordance with IAS 34." (See Note 2 - Basis of preparation in the interims)

Under IAS 34 that statement is normally accepted as being used to cover a period of 12 months following the date of authorisation for issue. According to the I3E interims ;

"The consolidated financial statements of i3 Energy plc, company number 10699593, were approved by the Board of Directors and authorized for issue on 30 September 2019."

Therefore, that Going Concern statement was made post the L2 pilot well result. 10 days after the standing down of the Borgland Dolphin and its crews. Post the permit to locate the Borgland Dolphin at Serenity was received but prior to the permission to drill permit has been issued.

The company did not have to include all the detail in that Going Concern statement but what they have clearly stated, is that whilst the drill programme is perceived to be running late, the company can still pay all of its bills up to around the end of September next year.

If there was doubt over their ability to finance the drill programme or meet their known anticipated obligations over the next 12 months, then it would have been stated in this section but it hasn't.

Even better the company has gone out of its way to include now only asset appraisal and working capital but also asset development, which would mean those tasks associated with carrying the asset through to the conclusion of the senior debt to fund LIB phase 1.

I3E do not mention the need to raise additional capital in this statement and it is one of several key messages running through the interims on how confident I3E are in their assets and the phase 1 development.

Now some may say they are simply lying, overstretching themselves, or over confident or!

Perhaps they are simply telling the market in very simply terms what they have always said and perhaps just perhaps, the L2 well is being totally overplayed.

For those that wish to push the argument that the I3E team are somehow incompetent or their mapping and seismic is clearly a problem, I would offer this extract from the interims ;

"This was an unexpected result that was not only disappointing for i3's technical team, but also a surprise to the myriad of independent technical reviewers, reserves auditors, and third-party consultants who have conducted due diligence on behalf of the Company's stakeholders. All three sets of seismic utilised to map the Liberator structure had conformed to one another and resolved the 13/23c-9 well location as a relatively low-risk target at a structural high, even though proximal to the edge of the channel."

Critics of the company wish to point out that they have debt funding to service but in doing so fail to recognise just how good an asset a company must have to achieve that debt funding in the first place. Furthermore, there is a failure to appreciate just how much technical due diligence would have been done on the I3E data, prior to the funding being agreed.

Therefore, I3E and all of their data would have been put through the ring very thoroughly prior to being signed off.

The above message clearly explains that. So if the I3E team is to be criticized then so should all of that additional expertise too. It was also that additional expertise that helped drive the location of the L2 pilot well and so should at the very least share some of that blame.

Given how many experts and auditors were involved and given that the well had up to 80% COS and not 90% as is still being banded around, then the fairest conclusion to make is that the remaining 20% came in. That being the case it is fair to say that this particular drill simply failed and that, just like all other oil explorers out there, it is time to check the data and if you as fortunate as I3E in having a completely independent target to fill your time, then move onto the next target.

That is what I3E are doing and are doing in a very efficient and professional manner.

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