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Using the above rules, the positioning of the latest shipment from 1st April would be booked against Q2.

This gives us a Q1 run from 26th Jan to 25th March 2019 = 528.9mtv, which when keeping to the known 60% US sales level, means that Q1 would have achieved 881mtv in sales. However, that sits well outside the anticipated upper run rate for 2019 of 3,400 mtv. The key point to remember is that the 2018 average was 60% but the quarter averages differed significantly. Generally speaking the sales rate to the US was under 60% with the H1 figure coming in at 53.2%. That of course lends itself to a figure even greater than 881 mtv, which in my view cannot be correct. Therefore, what we may actually be witnessing with Q4 is a desire to support and increase the shipping to the US.

There is clear evidence available that Vametco was not able to meet its US customer’s needs in Q3 due to the strike. This lends itself therefore to an improved shipping rate in Q4 as delayed orders were processed later than planned. Remember we are saying that Vametco books its sales at the point of shipping. However, if we take another look at the figures we see that Q3 at 345.1mtv was only running circa 28 tons behind the H1 average of 373mtv, and yet the shipments in Q4 ramped up significantly to 469mtv.

So the 60% whilst acting as a good guide is actually looking like a bit of a red herring and the actual run rate/sales for Q1 is a lot more difficult to determine than perhaps some may think.

What we do know is this;

1. The current Q1 US sales figure of 528.9 mtv is over 126mtv more than the same period in 2018 saw at 402.3 mtv (27th April 2018), a quarter that witnessed 713 mtv in total sales.
2. Total sales to the US in H1 2018 were 746.9 mtv against 1,403 mtv total sales. At 528.9 mtv Vametco has already delivered circa 71% of that and is only just over half way H1 (21st July when 22 days shipping required).
3. Even if Vametco maintained the 80.1% of total sales figure seen in Q4 2018 (see above), we would be witnessing a minimum 661 mtv quarter. However, for me the evidence points to Q4 being a catch up quarter and the reality is likely somewhere in the middle, which means Q1 should demonstrate an improvement on Q4.
4. As an example, at 70% shipped to the US, we would see a Q1 figure come in at around 756 mtv. That would be 10% more than the 2018 average and 15% more than 2018’s best quarter (Q1) of 713 mtv and 55.3% of sales heading to the US.
5. Whatever happens with the figures Vametco has achieved 528.9 mtv of sales to a US market whose FeV price has never dropped below $57 per kg in Q1.

Whilst I cannot say exactly what percentage of the sales are now being carried out in the US, what I can say is that there is a lot to be positive about with the current figures. Either Vametco has boosted production significantly or it has changed focus and is hitting stronger pricing markets with more materials. If so then the comparisons and pre

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Thanks to the hard work of Paludina I have been able to take a much closer look at the shipments to the US (See Bushveld Perspective Nitrovan Shipmnets for details).

My goal was to establish what sort of run rate and/or sales we could expect for Q1 2019. To do this I firstly needed to determine what constituted 2018 sales and so confirmed the likely start and end of quarter cut off points. The first thing I did was take the average shipping period as demonstrated by the 14 shipments made since 12th Jan 2019 (22 days) and compared it to the arrival times in 2018. This gave me the following shipment dates that would in my opinion have been included in each period ;

(Note - All shipment dates are arrivals)

Q1 2018 – 690 mtv sold – 60% = 414 mtv – Shipments 26.01 to 20.04 = 381.6mtv = 55.3%
Q2 2018 – 713 mtv sold – 60% = 427.8 mtv – Shipments 27.04 to 13.07 = 365.3mtv = 51.2%
Q3 2018 – 584 mtv sold – 60% = 350.4 mtv – Shipments 05.08 to 30.09 = 345.1mtv = 59.1 %
Q4 2018 – 586 mtv sold – 60% = 351.6 mtv – Shipments 28.10 to 18.01 = 469.17mtv = 80.1%

Total = 1,561.17 mtv shipped = 60.67%.

This assumes that all shipments that were made during a quarterly period were accounted as such.

As we can see the end result is uncannily close to the 60% US sales figure reported by the company and solid enough to employ as a means test for what 2019 is thus far showing us.

This is compounded by the fact that the last arrivals in 2017 (15th Dec) and the first arrivals in 2018 (26th Jan) are sufficiently far enough into their own years that they fall outside of the longest shipment period of 26 days (27 days because the 22 day period includes the vessel set sail). This enables the 2018 figure of 60.67% to be more readily accounted for and thus gives me confidence in the cut off date of 18th Jan 2019.

The next delivery date in 2019 (26th Jan) follows the same rule. What that all means is that there is in my view sufficient confidence to state that all shipments made post 18.01.2019 are 2019 related.

Now lets move onto 2019.

Yes indeed. AMER newest high profile partner has just proven hat they are prepared to go to the market to secure additional barrels of reserves and future potential.

I thought Chevrons offer of $34 per barrel of Anardarko's 1.47 billion proven reeserves was a headline, but Occindental just raised it to nearly $39 a barrel. Yes they see synergies with their own operations but still it is quite figure.

AMER is small fry compared to the $57 billion being put up for Anardarko and it operates in what is a new and more risky area than the Permian Basin (although Anardarko do have asignificant interest if the coast of Mozambique).

However, at the very least OXY have demonstrates that they are afraid of buyouts or consolidation and that future potential drives them to pay a stronger price for proven reserves.

Before AMER and OXY even starts drilling on Put 9 etc AMR should hit 20m of proven reserves driven by the appraisal of Indico. If their partnership with OXY then starts to bear fruit during 2020 and the future risk can be sufficiently eradicated in their eyes (local community issues, drilling success etc) then there is a good chance of a take out in the future. Could be 2021 or later still but with OXY already proclaiming the OBA pipeline as being the key fundamental that drew them to AMER in the first place, there is a strong argument for backing a take out that gives them full ownership of it and opens up what is now a far more business friendly region post war.

At an only recently surmounted $70 per barrel Brent OXY would pay $39 per barrel for proven reserves. Even if they offered half of this to an AMER that has had a full 2020 at CP0-5 and various successes with OXY, and made in-roads into its now 100% owned Put 8, then we should be talking reserves and a valuation substantially ahead of where we are now.

Heck Anardarko is carrying $16 billion in debt. AMER has none.

Certainly an interesting development if nothing else.

There is therefore currently no viable factually supported reason for the $468m battery storage element of the Eskom BESS Project ‘not’ to proceed as planned”

@hhowlett whilst you are fully entitled to air whatever concerns you may harbor regarding Eskoms financial issues, it is still critical that they be factually based.

The World Bank CSP restructuring paper, which describes the transfer of the now redundant CSP project into a BSP (Battery Storage Project) project, is very clear with regards to the financing sources for the project.

Page 3 states ;

“The estimated joint financing mobilized for BSP is US$661 million – of which US$195 million from IBRD and US$273 million from CTF - for delivery of at least 525 GWh (1440 MWh storage per day) of energy through at least 360 MW of storage capacity -- 60 MW of cumulative new solar PV capacity (Eskom-owned) and enabling optimal use of 300 MW of Variable Renewable Energy (VRE) from the Renewable Energy Independent Power Producers (REIPP) program.”

“Of this amount, at least US$468 million will be for battery storage and the balance for Eskom-owned solar PV plants and technical assistance, financed by Eskom and the African Development Bank (AfDB).”

100% of the costs associated with the battery storage element of the project is being paid for by the World Bank led CTF, the fund highlighted as the source for the $1 billion of World Bank finance.

The only part that Eskom needs to partially finance is the new Solar plant and the technical assistance, which was contracted on 9th November 2018 (see page 8). The solar plant will highly likely be contracted out because Eskom don’t tend to build their own. That’s what they have an REIPPP Programme for. However, even if they fail to do that and in doing so fail to achieve funding for the full 60MW of solar, then it still remains of little concern because it would have no bearing on the 300MW of battery storage planner for the existing “Variable Renewable Energy (VRE)” listed in the original quote above.

There is therefore currently no viable factually supported reason for the $468m battery storage element of the Eskom BESS Project to proceed as planned, even when considering Eskoms delicate financial situation. Furthermore, due to the fact the original CSP project was delayed significantly due to their failure to find a valid contractor, Eskom are now under far greater pressure to achieve contract close and gain access to the stated $661m of total external funding available.

As it stands the project is very much alive and when contracted wil be the largest project of its kind in the world, and it sits right on BMNs doorstep.

http://documents.worldbank.org/curated/en/390371543618515176/pdf/Disclosable-Restructuring-Paper-South-Africa-Eskom-Renewables-Support-Project-P122329.pdf

A couple of final thoughts from me for this week.

In my review of the Business Live interview with FM earlier I quoted the BE update from 27th March 2019 on the VRFB planned for Vametco.

"It will also use locally mined and beneficiated vanadium, showing how VRFB energy solutions can create more local value to South Africa than any other storage technology."

Showing who? S.A. investors perhaps or are we talking someone far bigger such as Eskom or the government of the country. Does that then make the battery a sales pitch to future industry customers or is it designed to achieve far greater goals?

Secondly ;

"This would put Bushveld in the top five of global vanadium electrolyte producers and its plans to ramp up to 1,000MWh of capacity in East London would push it to the top, Mojapelo said."

If BMN already feels able to talk to the press about its plans to expand its still to be built electrolyte plant to 1,000MWh, what does that say about their confidence in their plans to expand vanadium production to 10,000mtv how clos they are to coming to fruition?

According to the BMN Energy Storage Webinar 101 each KWh of VRFB requires 5.5kgs of vanadium.

That means that 1,000MWh would require 5,500 mtv of vanadium alone. Thus the majority of the expansion from a phase 3 complete 5,000 mtv Vametco would be designed to go into VRFBs.

This would imply that the 2 go hand in hand, hence the medium term development plan that now appears to be being led by the demand for the electrolyte. What does that say about the size of the market that BMN have seen? What the level of interest is, that their plans are generating given their quest to answer the 2 key questions of security of supply and stability of vanadium costs.

I suspect we all greatly underestimate the demand that can be created by a company that is willing to deliver those two objectives to a hungry VRFB sector.

Exciting times indeed.

@BumblingFool I don't think you are too far off but you have missed out the new drill at Platanillo.

Firstly, CP0-5 will shortly continue at Sol-1 with the company stating that they will return to Indico in the second half of the year.

The Indico drill rig tender stated 39 days for drilling and testing of Indico-1 and 43 days for completion. By my calculations Indico-1 was exactly 39 days. So I would trust that the stated timeline for Sol and Aguila stands true at 32 days to drill and test and 24 days to complete.

A spud by 1st May would have them finished at Sol-1 by late June and on to the next spud by circa late July. The indication is that this will be Indico-2. If it has the same drilling and testing timelines as Indico-1 then it will be reported by mid August. Even with completion time and rig set up etc, that still leaves plenty of time to then drill one of the 3 remaining drills of which my favourite would be the 2nd appraisal well, although things could change. That aside we are talking 3 completed wells on CP0-5 before year end with No.4 capable of being ready for early Q1 2020.

I agree on Put 8 likely moving into 2020 but it will be all about the approvals, which may come sooner. I note none of the recent capex announcements mention civils, although they were included in the earlier plans. There must be a need for this and that will take time to complete.

Put 9 and 12 is alla bout when those civils start because that will signal that the issues with the local population have a solution. These were due to commence in march but the latest line is Q2. We shall see.

Drilling aside and not in any way wishing to undermine its importance, at circa 6,500 bopd with up to 4 drills to add this year, there is significant enough movement in the production so justify much optimism even without hitting their 10 well plans.

Add in 3rd party oil and it gets even better although quantities, ramp up and tariffs levels will all play a part.

Still as i said the other day there is a good chance that 8-9,000 bopd can be hit later in the year and that is very healthy indeed and well worthy of a dividend or buyback starting in 2020, with POO doing so well.

@Pickedpeck I did read that but alos noted a further comment that the company had no intention of paying a dividend at this time.

My own suspicions are that the company is preparing itself for a possible dividend payment off the back of the 2019 accounts but it will be dependant on the level of success experienced between now and then. So circa 12 months of work.

The OXY farmout has certainly given them the excuse to do this because if all goes to plan they could well be drilling 5 blocks next year for what would be limited calls on their cash reserves. It's difficult to justify it when so many blocks lay idle.

It is also a sign of the confidence they have in their ability to increase production moving forward, led of course by CP0-5, which I think will explode into life next year.

Things are looking up for AMER.

Yes i suspect that quite rightly FM is playing his comments very conservatively and being respectful (to an extent) to the fact that he is outside of the official communications line.

It has not gone unnoticed that this is becoming something of a habit and perhaps a sign of where his true future allegiance lies. This sort of information shouldn't really be being divulged to S.A. investors in an article that lies behind an S.A. paywall.

That aside, what this interview confirms is that the fully integrated platform is going further and deeper than has already been planned, even before phase 1 is brought into production. What that in turn does is give further support to the confidence that i have in the fully integarated platform being realised. The talk of 10MW is merely a means to demonstrate that it won't take a geat deal to actually get there and start the ball rolling.

By accepting that the valuation prospects become far more noteworthy and even further removed from the current reality.

Note - He talks down the ability of the Eskom deal to be the catalyst for the production of VRFBs locally, but just one look at the World Bank restructuring paper shows that the individual contracts for the BESS project should be well in excess of that figure, and we are talking 2 phases.

However, now we have the emergence of the 10MW cap and indefinite load shedding. That for me delivers the killer blow and tips the potential over the line.

A fully integrated vanadium platform that produces and sells electrolyte, delivers large scale mandates to both the private and utility scale sectors, and is constructing VRFBs locally at 70% content, is worth vastly more than what we see today.

As I discussed yesterday, BMN doesn't need to achieve the revenues and profits all at once, they just need to demonstrate that the market is there, that is buying into what they have to offer, and that they can service that need from a base that is 'scalable.'

At that inflection point things start to get very interesting around here.

Others may have different opinions but for me the integrated platform is such a reality that discussing BMN as just a vanadium miner is now archaic.

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Key Takeway No.4

"To take the value addition of vanadium to the next step would be orders from Eskom and other big users that would justify the construction of the batteries in SA, with an estimated 70% of local content"

So as I have discussed extensively here the 70% local content is very much in sight when batteries are constructed locally with an indication that orders from Eskom are expected.

"Bushveld would need critical mass in orders of about 50MWh a year. "You need a solid pipeline that’s sustainable and not just a single order from Eskom. But if we get 10MW with four or five hours of storage then you have a business case," Mojapelo said."

10MW is no walk in the park but it is also a small challenge given that at those levels BMN and its partners start to bring localised construction of VRFBs into play. At 70% local content BMN has access to 13 SADC countries tied to a free trade agreement that requires local content in the region of 60-65%.

BMN just confirmed that they know that they can achieve that.

The key point from FM there is the business case. The grounds with which to entice or secure the buy in of technical and financial partners such as UET and the IDC, and it is 'only' going to take regular work of 10MW per annum. The exact level at which the Energy Minister is looking to revise private energy generation to.

So effectively 1 customer per annum wishing to employ the full allowance. There are currently mining companies in S.A. with plans set at 30/60MW, who are complaining that the current limit is simply too low. Eskom is planning a 3 year 2 phase 360MW pilot project, which despite the cautious tone being set by FM, is capable of delivering the units and the time needed to develop the project pipeline to easily deliver 10MW per annum.

I strongly suspect that the 10MW is a given and what FM is truly saying is that the market is already demonstrating multiple opportunities to justify a localised VRFB construction plant, which let's be honest, BMN have been advertising for some 2-3 years now.

The revised IRP cap to 10MW for me delivers the killer blow, it is another example of levers being pulled in BMN's favour, worked by a willing partner in the IDC. It may be that everything gets shared 50/50 down the line but I would caution anyone being disgruntled with this outcome. The IDC innmy view has delivered Eskom and it is now delivering that 10MW. Those 2 outcomes in turn deliver a fully integrated vanadium play feeding and growing from the desperate needs of S.A., prior to taking on larger greater markets from a far greater position of strength.

Investors can argue and analyse the daily movements in the SP as much as they like, but this is where the real news is, and where the real money will be made here.

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Key Takeaway No.2

"Energy-intensive users that would be financially positioned to buy a vanadium battery represents just a small portion of the potential business Bushveld is pursuing, with state-owned power utilities a more important target, Mojapelo said."

"If you want to participate in energy in any meaningful way, you need to get involved in utilities, he said"

That'll be Eskom then.

"Eskom wants to procure up to 1,400 megawatt hours (MWh) in battery energy storage. Bushveld will participate in the tender, due to be released "imminently"."

I didn't need to have confirmation from BMN that they were interested in the Eskom BESS Project but it certainly doesn't do any harm.

Key Takeaway No.3

"Bushveld is building a plant in East London to produce enough vanadium electrolytes to hold 200MWh annually from early 2020 in a $10m project."

"This would put Bushveld in the top five of global vanadium electrolyte producers and its plans to ramp up to 1,000MWh of capacity in East London would push it to the top, Mojapelo said."

There are a good many observers out there in the world rather remarkably still questioning if BMN can achieve 200MWh of sales from its electrolyte facility. In the meantime, BMN is already planning for 1,000MWh and to possibly be the largest supplier of electrolyte in the world. What does that say about their confidence in their product and the interest they are receiving from potential offtake partners.

200MWh would struggle to even service the S.A. market. 1,000MWh is starting to get there. It is less than 2 years since BMN were talking up their ability to easily ramp up to 400MWh per annum. Look are far things have come already. I don't expect this to happen straight away but it is very much on and that is what is most important.

To service all that electrolyte and an expanding steel market, BMN is going to need a bigger vanadium boat.

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@Mrremmy You just uncorked a high quality and delicious bottle of South African red wine, and I intend enjoying as much as I possibly can.

For anyone who hasn't read the Businesslive interview with FM that was tweeted by the company on 24th April, I would encourage you to do so as it is highly likely the most important document you will have read for a while.

Why these details have come out in a South African paywall protected interview first of all is for further debate, but as with most things in investing, it less abou being told and more about finding these things out.

Key take away No.1

The updated IRP due out late this year is expected to include an increase in the cap on electricity generation outside of Eskom, from 1MW to 10MW.

The current recently announced VRFB at Vametco is currently designed "to store and then supply 1MW of the 12MW the operation needs." However, if the cap is adjusted then "the size of the grid could be expanded, CEO Fortune Mojapelo said in an interview on Tuesday."

By adjusting the Vametco battery to 10MW, which for me is an absolute given, BMN can produce upto 83% of Vametco's energy needs without needing to worry about load shedding. By directing the stored power to thise times of day when load shedding would occur, even at 8% Vametco is going to avoid the majority of the problems that load shedding brings. At 83% it is eradicated completely.

However, the latest BE update dated 27th March ( a must read now given what this interview unleashes) states the following ;

"The mini-grid project will demonstrate both the superior technical merits of long duration VRFB systems when paired with renewable energy"

"It will also use locally mined and beneficiated vanadium, showing how VRFB energy solutions can create more local value to South Africa than any other storage technology."

"More urgently, with the current load shedding in South Africa this project is a first step in mitigating the single greatest risk to production faced by the mining sector in South Africa."

This is the sort of thing i was alluding to in my posts yesterday. Except now there is a path to a 10MW demonstration model and the customers that would./could employ it.

That is why FM states ""By revising the cap it could unleash significant investment into private electricity generation capacity,"

The problems that Eskom have created for itself are the exact fundamentals that make a S.A. based integrated vanadium energy play, all the more exciting.

@Roth1 That is a fantastic find and I thank you for sharing. I posted some numbers a while back that indicated that production was coming in at over 6,000 bopd. As has already been said this now places production at closer to 7,000 bopd with a healthy percentage delivering the better returns driven by the OBA.

With further workovers and new drill to come at Putamayo we could see yet further increases and a push to a year end figure pushing 9,000 bopd even if they only drill Platanillo and CP0-5. That would certainly shake things up around here given this marked increase in Q2 is enjoying the very best Brent prices of the year.

Thank you once again.

So having wrote all of that and established (in my head at least) that brownfield mark 2 is fast approaching, I have a thought.

If Brits is going to be employed to supply near surface ore to both Vametco and an additional as yet not published brownfield asset, then could this be the reason why the Brits drilling campaign is taking so long. I appreciate that the company is working towards delivering a reserve at Brits so that perhaps it is ready to be placed immediately into the mine works programme for Vametco. That makes sense.

However, the Brits drilling campaign has now been running for some 16 months and by the time it is completed it will have run for 18 months.

Whilst th ore no doubt has to be confirmed as suitable for Vametco it doesn't take a degree in geology to determine that a strike extension at Vametco is likely to be ok. However, confirming that the same ore is suitable for an existing brownfield processing facility is perhaps another story all together, particularly if it determines the costs associated with upgrading that facility to take the ore from Brits.

There is then of course the discussion around ownership of Brits. The BEE partner is different to Vametco and perhaps a problem that needs to be solved. This is not new I have talked abotu this previously. Brits innmy view really needs to be aligned with Vametco to make the mine plan more fluid and enable the two strikes to be brought together. It is in my mindset too complicated to have two BEE owners feeding ore to Vametco.

If this is the case and I am right, then there is scope to increase the ownership levels because right now the 'partner' hols 35%, which is well above even the new BEE compliance levels of 30%.

These are good exampes of what could possibly be standing in the way of BMN announcing a deal. Brits ore has got to be the minimum requirement to achieve ore feed to another brownfield because as the recent issue have demonstrated, Vametco ore as vast as it is, is perhaps best left in the ground whilst cheaper high grade ore is so readily available at Brits.

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Two things I would say about that. BMN only felt they could introduce the notion of additional brownfield once the Vametco buyout of YD was complete, which signals the closing out of one plan and the commencement of the next phase.

What FM's comments clearly point towards is Brits being used to feed both Vametco (cheaper ore) and a further local brownfield acquisition. Thus his comments to Modern Mining about "constantly looking for additional ‘brownfield’ infrastructure.” simply doesn't wash when it comes to the next acquisition at least because he has already stated it is going to happen.

Now one could include Mokopone in all of this and the message certainly goes back far enough to do so, but would such plans be advertised so clearly, including at Christmas 2018, when the Mining Right is still not confirmed? Possibly because the same argument applies to Brits. However, I just don't think it can be right because a full mine at Mokopone would deliver the +5,000 mtv on its own, without Brits, and the company is definitely including Brits in the discussion. Plus if you only have to dig up one area to solve both problems, why focus on a project 200km down the road and nowhere near anything, when you have Brits on the doorstep of everything.

All of that aside the above map demonstrates that additional brownfield has been considered at least as far back as 19 months ago and prior to the Vametco buyout.

So then we arrive at the following interview on 20th Feb 2019.

http://www.bushveldminerals.com/brr-media/

There FM says this about their plans for 2019 ;

Firstly on Vametco 2018 performance "that positions us as a group very very strongly for our growth agenda going forwards"

Secondly on growth plans "this year we will see more of that Bushveld story unveiled around our growth aspirations in our production capacity. We have put a stake in the ground to say what sort of production levels we want to do. How we are going to achieve it is the atory of 2019" (10,000mtv).

So low and behold after 19 months of telling the market that it was their plan, it is rather unsurprisingly now ready for release.

I have said for a very long time that when BMN put something into writing it means they are highly likely considerably further down the road to achieving it than they let on. That is how they work. It is what they have been doing ever since they started in on Vametco, a process in itself that we were later told was 15 months in the making.

Well brownfield mark 2 is now at least 19 months in the making and pending. It is now merely about what it will look like and how much it will cost but I am under no illusions that the path has long been set.

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Brownfield Timeline

1. Bushveld Minerals Oct 2017 Presentation

Tooked away on slide 31 is the statement "Targeting >10% of global V market." So as far back as 19 months ago BMN were demonstrating a will power to achieve 10,000 mtv, even before they had secured control of 59% of Vametco, which came towards the end of that year.

2. Bushveld Minerals Feb 2018 Presentation

This presentation was the first key update following the previous Feb 2018 and Dec 2016 presentations associated with the buyout of YD at Vametco.

"Continue focus on enhancing value through targeting brownfield opportunities" which was entered under a heading entitled "Targeted Brownfield Opportunities," which was below a title named "Organic Growth," which itself included "Near-term brownfield growth will raise capacity at Vametco to over 5,000 mtV per annum by 2019." (Slide 8)

So there was already a view that the additional growth would come from additional brownfield.

3. Annual Report 2017 released 29th June 2018

"Brownfield facilities in close proximity to deposits offer further processing capacity expansion opportunities." (page 6)

"Through its expansion initiatives at Vametco, as well as targeted brownfield opportunities, the Company is looking to expand its production to 5,000 mtV by the end of 2019 and to more than 10,000 mtV in the medium term." (page 14)

4. Chika Edeh Interview 29th November 2018

"To get to 10,000 metric tonnes a year, the company is looking at either building a new USD100 million kiln at Vametco or buying brownfield sites nearby, or even both."

5. Bushveld Executive Blog "Bringing 2018 To A Close" 23rd Dec 2018

"The Vametco acquisition gives us a solid platform from which to execute our vision of building a large, low cost vertically integrated vanadium platform, supplying more than 10,000 mtV of vanadium to the global market. This growth will come from not only Vametco but our other vanadium assets too and will see Bushveld producing a range of vanadium products, including nitrovanTM, ferrovanadium and vanadium electrolyte for vanadium redox flow batteries (“VRFBs”)."

4. Modern Mining Interview - Site Visit 31st Jan 2019

"the ore could be processed at Vametco or at other facilities in the area. “We are constantly looking for additional ‘brownfield’ infrastructure.”

For BMN to be setting themselves a goal of 10,000 mtv as far back as October 2017 and then shortly after the conclusion of the takeover of Vametco (which gave them control of the operation), introducing the concept of further brownfield acquisitions, says that the plans associated with their stated goals weren't just a wish without substance.

The message appears to have gathered meaning as 2018 progressed, to the point that FM was able to state quite clearly that the expansion to 10,000 mtv "will come from not only Vametco but our other assets too"

@raffym thank you for the heads up on the Modern Mining article, I hadn't seen it before.

A couple of added key quotes for me ;

"Fortune Mojapelo told Modern Mining that he was confident that 2019 would see a much improved performance by Vametco. We have not set our 2019 guidance but will do so when we issue our Q1 2019 report"

"Obviously we will be hoping to better our productionachieved in 2018 and better it quite substantially."

For anyone focusing in upon the word "hoping" in my at times rather unhealthy studies of Fortune Mojapelo and his use of the english language, I have found that he always says hoping, even when it turns out said hope was a dead cert.

The above choise of wording indicates a guidance wil be set that is considerably above 2,560 mtv. I remain in the region of 3,000 - 3,200 mtv, which would be minimum approaching 20% better.

Secondly FM is quoted as saying ;

“The rationale for bringing Brits into production is that it will lower our mining costs – because we can start mining ore
from near-surface – and also give us optionality surrounding selective mining,”

Brits not only delivers cheaper ore but the ability to eradicate issues that have led to the lowered production during 2018, thus adding confidence to the process.

Lastly, FM goes on to say ;

"He added that the ore could be processed at Vametco or at other facilities in the area. “We are constantly looking for additional ‘brownfield’ infrastructure,”

I'll bet you are FM, I'll bet you are. This has always been the public message to date an despite my leaning towards the new $100m kiln at Vametco, I have always maintained that other supplementary processing may also be needed. Whatever my thoughts the party line is both options are on the table, as Chika Edeh stated in November last year.

In my experience BMN don't talk about an option for so long if it isn't part of the plan and hasn't already been taken far enough to ensure it becomes a reality. So perhaps we will see more than one plan this year but whatever the case the message is it is coming in 2019 and that is all that truly matters.

https://user-54716422671.cld.bz/Modern-Mining-March-2019/26/#zoom=z

@Daisan Agreed and I do not expect the market to change its spots but my point is that such measurement rules should not be the only means with which I assess a story with such growth potential.

That doesn't get me ahead of the market.

In my view if I want to truly win at this game i need to be ahead of the market and not just simply following it.

Conducting major analysis of the predicted PE ratio for 2018 as a basis to try and corner the BMN investment case, is for me folly and will only lead to disappointment, which some would clearly be glad to see.

Some of the LTHs to which i was focusing my posts are allowing themselves to be distracted by this and that isn't right because I know that they are here for so much more than that.

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At that point we have the first true inflection point and a change in market understanding.

At that point BMN and its partners have the excuse and fire power they need to invest heavily in a locally based VRFB industry that delivers mass scale and begins to compete with lithium at that level outside of its local market. One need only re-read the Energy Storage 101 webinar to see that that is where lithium-ion currently holds an advantage.

http://www.bushveldminerals.com/wp-content/uploads/2018/11/Energy-storage-101..pdf

Slide 19 states ;

"Have yet to experience scale economies" but as slide 30 then goes on to say "VRFBs do not need the scale of lithium to achieve similar economic benefits"

So what happens when mass scale comes anyway? Mass scale production drives cheaper components, which delivers cheaper units. Go read up about Henry Ford to see just what that can deliver. That sort of level of scale enables export and the ability to compete in markets that aren't so close by and perhaps so well supported.

I could make an argument that Southern Africa would already be being exploited in phase 1 because of the sort of advantages that such things as the free trade agreements would bring. That alone brings 13 countries sharply into focus. But even they aren't available then, then mass production and a proven market in S.A. will deliver them not long after.

At that point we have inflection point No. 2.

But along the way the market has the ability to see the story unfold and along the way something will start to give, as BMN becomes an integrated vanadium story and not just a miner.

Some may doubt this and that is their perogative. But nobody can deny that the energy storage market is real. That the size of it is real, the potential of it is real. It is merely about getting VRFBs in amongst it and nobody out there has a better chance than BMN starting a South African market.

BMN are delivering this very message in that webinar (slide 58) ;

"Exposure to a new, high growth sector that provides access to a market that is multiple times larger than vanadium alone"

"Reduced volatility of revenues and profitability, as energy storage features lower market volatility than commodity markets"

" Higher valuation multiples, as energy and diversified listed companies carry higher earning multiples than miners (in part due to relatively lower capital requirements)"

Demonstrate the ability to deliver those benefits to the market and then we can start to talk about true PE ratios.

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The other thing to consider about the premature talk over PE ratios is that all of the thought that goes into them is currently based on BM the miner.

When the time comes and I am under no doubt that it will come, and BMN reaches the status of being a fully integrated vanadium miner (a position it is highly likely going to reach ahead of any other vanmadium producer outside of China), and in doing so does actually go on to deliver substantially higher profits from the value chain than it does from the ground itself, then what will BMN be?

Will it still be justified to call BMN a miner then? And if not, then at what point along the journey does it begin to change?

I tread carefully here but when Facebook, Twitter, Google etc all embarked on their journey, long before they made any profit, were any of them valued on what they were actually earning at the time? Did their PE ratios have any bearing on the valuation of their businesses? No. That is because they were valued on their potential that the market could clearly determine by the habits of the people that used their services.

BMN as a miner is just that. They live within a cycle based world that can deliver volatile profits that drive equally volatile interest in their stock. It is rigid and comparable and often predicatble.

When BMN becomes a vertically full integrated vanadium business and can demonstrate that it generates greater profits outside of its mining arm, and that the market is out there for its energy storage based high value products, then what happens?

Much like Facebook and Google it won't be about actually delivering the profit it will be about demonstrating that they have access to the sort of market scale that the likes of the Energy Storage 101 webinar describes. That will be the trigger for the belief and not the actual doing.

Whilst BMN grows into its role the market for energy storage is already doing much of the legwork. Energy storage is being accepted and it isn't happening slowly. It is becoming common place in answers being sort for climate change and greater uptake of renewables. It is being included in government led programmes and utilities are changing their focus towards it. Electrochemical based batteries are here. The only issue at the moment is that the bias remains heavily towards lithium-ion

As I have demonstrated earlier, BMN doesn't need to take on lithium-ion across the world, it needs only take it on in its own backyard, backed by the IDC and an S.A. government keen to exploit local minerals and their beneficiation. This is supported in part by a president that has been there and done it in the S.A. mining industry so understands what he is backing and asking for.

By establishing themselves in their own backyard they have the greatest chance of success and the greatest chance of that market recognition. Win the battle on the homefront and the market is set up.