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Good morning everyone.

Thank you nick26 for the Eskom/World Bank presentation. I have now had a chance to look through it and have compared it to the other documentation that I have previously found. Here are some comments ;

1. First and foremost what i like is the fact that this document is a joint effort between Eskom and the World Bank. That increases my faith in the World Bank documentation that i have previously discussed here and is compounded by the fact that several pieces of data running through that documentation are repeated in this presentation, which has Eskom's name at the top. I had feared that the World Bank information was merely guidance and that Eskom could alter it significantly. What it is actually looking like is that they are far more in tandem, which breathes far more confidence through the entire project.

Note - The unbundling process at Eskom and the manner in which it is being conducted and expedited, is for me a further supportive move that reinforces my belief that this battery programme will get pushed hard to its conclusion. There is definitely a change in the wind at Eskom and a desire to update its business model and place RE at the centre of its practices moving forward. That in itself demonstrates the importance of this battery pilot project and what a successful outcome will mean for those companies that are able to gain Eskom's favour moving forward.

This is epitomized by slide 6 where it says ;

“More flexibility and more dispatchable clean energy thanks to the batteries, allowing to decommission old coal plants”

That is a direct statement about where this new Eskom sees its future. We have all known for some time that battery projects can remove the need to finance large scale high capex plants, but now we have Eskom stating as much, believing as much. That’s highly significant given where I believe BMN sits within all of this.

Then they say this ;

“Scale up of battery technology in power sector to complement rapid expansion of variable renewable energy”

Now we have to start thinking about that IRP and the call for 20,000MW plus more RE by 2030. If Eskom is recognising the technology, is stating that they see it replacing old coal plants, and they are true to their plan, then there will be a considerable need for a localised battery industry in SA.

Many here know and recognise this already, but now the words are coming from those that really matter, and that is truly significant.

@Niles With all due repsect I think you are coming at this from the wrong direction. From an investment point of view recent developments completely remove any concerns over Platanillo or past drilling shortfalls.

Placing the Platanillo throughput production to one side because despite the understandable concern the figures are robust enough and the company did not sell their portion of oil in December. That said as an investor the key question I have is can the company afford the planned 2019 capex programme and will they need more money from investors?

The beauty of the current situation and the deals that have been struck is that the 2019 total capex is coming in at considerably less than the known cash balance at June 2018 ($36m v $49m).

That capex delivers 10 drills and means that all of the revenues from H2 and full 2019 will go straight onto the balance sheet. Unless of course more rigs are brought in, which is highly likely but will only add to the production.

It looks highly likely that the majority of the CP0-5 drills will come in given the sheer size of the oil column found at Indico. We can talk up percentages etc but as i have shown with the detailed anlysis of Llanos 34, Indico is far bigger than anything that has ever been hit there, depth or flow wise, and Llanos has proven to be highly productive with over 90% success on circa 95 wells drilled. One should never say never but at the very same time one shouldn't ignore what is staring us in the face.

In AMER own words ;

"The scale of success at Indico-1X opens up a significant low risk potential in structures between Mariposa and Indico fields, together with lateral structures within the LS3 play. It is expected that these wells will throw further
light on the combination trapping expected to exist in this play. This has the capacity to create a very large
reserve base."

What more could they possibly say? and they aren't even stretching themselves financially to achieve it.

As for the chance that the drilling campaign might not materialise,

1. They have already started.
2. At CP0-5 at least 5 of the 6 drills already have their civil works completed. Highly likely 6 now given how long ago Sol-1 was reported. That means 3 pads are good to go.
3. The introduction of OXY and GTE is a gamechanger in terms of commitment and intent. AMER have admitted they didn't have the cash to develop Put 9, 12 etc alone, well now they do. AMER is being carried to the tune of $22.7m in 2019.

The only external concern I had was the oil price but it is clear that Saudia Arabia are not going to let it stay below $60 at least for the foreseeable future. It is worth keeping a close eye on but i feel strongly that for 2019 at least, it is safe above $60, which takes that particular fundamental off the table at these levels. Therefore, it is significantly undervalued even on mediocre succes at CP0-5 nevermind everything else.

@Daisan The point I wished to make was that when talking about UET one should not be thinking American but Chinese. They are effectively a veiled Chinese company.

Balong New Materials was up until recently producing over 90% of the world's electrolyte.

That is why BMN in their 2017 Annual Report stated, when talking about the results of the Market Study for the case for VRFBs in the African Market, that ;

"Furthermore, it showed that at present, the vanadium electrolyte supply industry is heavily concentrated in China, and that there is none in the southern hemisphere or Africa / Middle East, regions of direct interest to Bushveld Energy"

What that demonstrates is the significance of what BMN are now executing in South Africa. The electrolyte plant is being built with initial communications centred around use in the SA market and export. Right now UET are the battery partner for projects that come to fruition and will highly likely utilise the electrolyte from that plant.

With the realisation of a major multi site project from Eskom, the largest single project I am aware of to date, there is an opportunity to cement that electrolyte plant and an associated VRFB assembly plant and deliver a successful repeat business driven enterprise that is unique to the southern hemisphere.

The Dalian Balong Holding Company doesn't need to be convinced that VRFBs have a future because they are already backing them and have been backing them for many years now. So their attention is likely far more concentrated than a great many other suitors who are waiting for VRFBs to truly establish a market.

A operational integrated play in SA that has access to multiple battery projects with the 11th largest utility in the world and has a route to a free trade market covering pretty much all of Southern Africa, is a highly desirable asset for any company but particularly those in the know.

So my point for posting really was to say that when it coems down to it BMN is more likely to be taken out before UET ever was, and BMN have little or no chance of buying UET out because of Dalian Balong Holding and what they are about.

If BMN are allowed to invest in UET as opposed to sharing the investment in the VRFB assembly plant, then that is a major flag for me as to Dalong Balong's intentions later down the line.

With all due respect there is very little chance of UET being taken out by anyone because it is effectively Chinese controlled, and is a significant strategic asset for its owners.

The key player in all of this is Dalian Balong Holding Group Co Ltd (See link below). They partnered with the Pacific Northwest National Laboratory to jointly establish the UniEnergy Technologies LLC. They also established Rongke Power in Dalian.

http://www.rongkepower.com/about?lang=en

They also go under the name of Bolong (Dalian) Industry Investment Co. Ltd and are "the holding company of two biggest vanadium producer worldwide"

It is also the holding company for both "Dalian Bolong New Material," "Dalian BHN Special Material" and "Rongke Power"

Rongke Power is strategically linked to Dalian Bolong New Materials because that is where the vast majority of the current supply of world electrolyte comes from, that is how they are able to build the Dalian 800MWh battery. UET is always referred to as the "sister" company of Rongke Power and that is why through a "strategic" partnership it is helping build that Dalian battery. Incidentally the majority of the electrolyte that Balong New materials produces comes from scrap material, hence the references to scrap and recycling etc on the link enclosed below.

http://www.hmeonlinecorp.com/CompanyDetail_16881.html

Here is the Dalian BHN Special Material as another example of what they are into and who they partner with.

http://www.bhn-materials.com/en/guanyuwomen/gongsijianjie/index.html

It is difficult to establish the exact scale of the Dalian Balong Holding Group, but what is clear is that they are central to the VRFB hub that is Rongke Power, Balong New Materials, and UET. I have posted previously that BMN chose UET not just because of their abilities but because of their connections.

Any strategic investment from BMN would have to go past this Chinese owner/majority investor and it would need to satisfy their own startegic requirements. What i cannot possibly see is UET being allowed to be sold just as it is finally coming to fruition and realising the biggest opportunity it has ever been individually given.

The Chinese are very much aware of BMN through this partnership, FM and Co have also visited China and Balong New Materials is a member of Vanitec. UET and Rongke Power are not.

So on the other side of the coin, one should be careful what one wishes for because if BMN take a strategic position in UET, what is stopping Dalian Balong Holding Group doing the same or more with BMN.

Morning everyone.

I have been focused on one or two other things of late and so have not had chance to share my thoughts on some things.

With regards to the minimum throughput agreement of 9,000 bopd, i don't believe it is as easy as saying they will negotiate more. The company had to sign an agreement to construct and commission the Chiritza re-pumping station in Ecuador in order to grow their minimum throughput from 5,000 to 9,000 bopd. That alone demonstrates that increases in volume through the RODA are a complicated issue.

A clue as to the latest thinking on their future strategy is clearly demonstrated in the 2017 Annual Report (page 16). There the company sets out its strategy moving forward and states under its 'Future Plans' ;

1. Chiritza project – connection from Roda
2. RODA twinning or direct line to Lago Agrio

That document was released in April 2018.

However, the company did give other more detailed options in their presentation from the 2017 interims dated 25th Sept 2017 (slide 7 see below).

There they talked about the same 'short term' options achieivng 10kbopd+ outcomes, which contractually have turned into 9kbopd.

However, they also discuss a medium term goal of "connection from Roda to Andes line at Km22 (30 kBOPD available capacity), with the long term plan being the twinning and direct lines to Lago Agrio mentioned in the Annual Report above.

An important telll for me in all of this is the comment that JW gave when the Chiritza pumping deal with PetroAmazonas EP was struck back in Jan 2018, when he said ;

"The increase in Amerisur minimum carrying capacity is necessary in light of our continuing work in Platanillo and the upcoming exploration drilling within both Platanillo and the neighbouring blocks around the OBA facility."

I post all of this for discussion purposes only. I do not have any concerns about the throughput at this time, it is more that the company is going to soon have a very envious problem to solve, if Put 8 and Put 9 both commence drilling in H2 and are immediately successful. Yes they have headroom but when we consider that the Chiritza construction took 10 months to construct and commission, any larger plans are going to take even longer and will need to be negotiated and planned. So at the very least plans must already be afoot even if they cannot be closed out because as the Annual Report states they are dependant on "drill success."

Of coursde plans are there to be adapted and changed and the OXY deal has certainly made far more blocks live now than perhaps were anticipated in April 2018, but if nothing else a plan will be needed this year in order to ensure that thye are ready for the anticipated success in the Putamayo.

http://www.amerisurresources.com/images/rns-pdfs/Interim-Results-2017-Presentation.pdf

Here is the key address from Jeff Radebe at th Energy Storage Conference yesterday.

https://www.ee.co.za/wp-content/uploads/2019/02/Keynote-Address-MoE-SA-RE-ESS-Conf-25-Feb-2019-CT.pdf

There are some wonderful quotes in there but the following 2 were for me key ;

"South Africa further has high-quality minerals and industrial capability that can be used for battery chemistries, beneficiation and manufacturing, both locally and abroad, for domestic use and export markets. Some partnerships have already been formed between government, business, development finance and academic institutions to
develop and commercialise battery energy storage systems in South Africa."

I am under illusion that there are other companies in other technologies attempting to do the same as BE, but i can find no evidence that any of them are sufficiently advanced enough with their plans to justify the Minister of Energy making such claims about them.

"Important aspects that need to be addressed to accelerate the uptake, industry development and deployment of energy storage systems in South Africa include taking a value chain approach to localisation, creating the required technical expertise, designing practical regulations, establishing energy storage standards and incorporating energy
storage systems in long-term least-cost electricity system planning."

This statement clearly mirrors the exact same message that BE and a great many market analysts have been saying for some time. It also mirrors exactly what the IDC have been saying ever sincve they signed up with BE in 2016, that an SA industry value chain was the key goal to create jobs and improve the country's overall productivity.

Again, whilst I have found evidence of lithium-ion development programmes at academic level and pilot programmes at business/academic level, there is no evidence that they are any further advanced than that.

Nor is there any evidence that any other VRFB manufacturer has made any in roads into localised manaufacture in SA
or SA mineral beneficiation, the same applies to lithium-ion.

In my experience ministers don't tend to talk about such things unless there are clear grounds to do so.

As a caveat SA is a very big country and there are a great many alternative companies and technologies out there, but energy storage is relatively industry and thus establishing a value chain takes time, investment and a great deal of support. Thus far I can only find evidence that BE have done this on a scale that warrants such language from the minster and that they are considerably ahead of their potential rivals.

@Beechcomber I did an exercise on this last year and at the time I found no evidence that a lithium industry exits in South Africa.

Back in 2010 the IDC supported a pre-feasability study for a lithium-ion cell battery plant mainly for Evs but with the recognition that the batteries could be later have a secondary use for stationary projects.

As far as I can see it never got beyond that. In parallel there was to be another study that looked into economical lithium deposits in SA. Again I can find nothing relating to this study or future studies.

One could argue that 2010 was too early to be trying to establish a lithium battery plant for EVs and associated stationary. But at the very same time one could ask why if it was possible and had already been looked into, was a lithium battery plant not pushed again in 2015 when the New Industries unit of the IDC opened. Why was the first deal signed with BE and not a viable lithium battery developer, particularly when one appreciates how much bigger and more successful the lithium market was at that time.

https://www.iol.co.za/motoring/industry-news/idc-plans-sa-lithium-ion-battery-plant-835178

In addition, here is a second article referring to the concern that SA would miss out on the battery metals boom. It does talk about there being deposits of a sort in but says;

"“South Africa is not well endowed with battery metals but there are some deposits in the Northern Cape, KwaZulu-Natal and Gauteng that may have some potential; however, even when orebodies are present, they must compete with other deposits within Africa and globally which may be more attractive investment opportunities for various reasons"

So it doesn't even mention lithium specifically and the battery metals being discussed include "graphite, nickel, cobalt, copper, zinc and, in the last two years in particular, lithium."

The article is dated August 2018 and given that it is questioning SA's readiness for the battery boom, then I would expect if there was a significant lithium mine or deposit then it would have been mentioned.

I welcome more thoughts on this but from what I have found or more tha case not found, there is no lithium mining sector, which is why there was never a lithium cell battery plant, which in turn emphasises what all these SA government ministers mean when they talk about a new battery industry in SA that beneficiates SA minerals.

Of course there are zinc deposits and the zinc battery was on the cards for the Eskom test centre, but it hasn;t happened thus far and in all honesty I do not see a zinc battery being developed far enough to pose an immediate threat to VRFBs in SA. Plus they aren;t being backed by the IDC, which when we say hat name really means the SA government.

Headancer Without wishing to assume too much, said IIs along with a very large percentage of the investment community, aren't going to back the complete BMN/BE package until they see results, until they see the integrated platform either at work or far enough down the line to be believed. It is also probably going to take some hard evidence that batterystorage is here to stay though I do think the Eskom BESS Project will be enough to demonstrate that.

There may well be other energy storage project wins out there for BE and they may indeed be announced first, but for me nothing can be of the scale on offer at Eskom nor hold the sort of repeat work opportunities that Eskom can and will go on to offer. So for it is the big one, be it the first phase, second or later opportunities. Though that little caveat aside I believe it will be phase 1.

A great many here live and breathe BMN every day and that like a great many other AIM listings, creates a level of expertise that the vast majority of the investment world will never be able to breach. Now sometimes it goes against us because we choose the wrong horse, thus the expertise gained and the time applied come to nothing as the horse falls well before the finish line. But sometimes that doesn't happen and we are able to gain knowledge in something that enables us to reach beyond the normal market news and information, and back a horse that really is going places, well before it even feels like the race has begun.

BMN is as good a candidate as one could hope for in that category. The search for Vametco coupled with the analysis of the future vanadium market, are proof of how that commitment and knowledge can deliver on a really big scale.

Now we have our very own phase 2 and for me it has all the same hallmarks of that Vametco search. So having seen how long the market took to understand that and respect it, i am under no illusions that phase 2 could also take that long too, and that is just fine with me because its not about if but about when, that is the goal that we are looking for, the certainty of victory, and right now I find myself sitting on Secretariat.

@Knuttie A large scale mandate contract win for Eskom doesn't clear the road, it blows a big hole in the side of the mountain.

A large scale mandate with Eskom delivers scale, it delivers investor certainty and sets up, as a minimum, localised assembly and possibly localised manufacture. That in turn delivers cheaper batteries and thus creates more business opportunities. In addition, it builds confidence in the market and encourages other potential customers, utilities, governments, investment based organisations to do business with the BE led team.

As for profits being snatched, well that didn't happen to the REIPPP programme winners between 2010 and 2015, and they were dealing with a Zuma administration. Why would I believe that a business friendly Ramaphosa led one would turn on the very hands it needs to feed off. Is it a possibility? Yes. Is it likely? No not at this time. There is no evidence to support that theory at this time.

Finally, in terms of profitability, the company has already hinted at the ability that BE has to deliver considerably higehr profits than the mining platform. Plus the World Bank has been clear that the BESS Project is being backed to assist this young industry to grow. It is not designed to create value for money, it is expected to make a loss because it recognises that costs will be elevated whilst the production numbers are small.

That is good enough for me for now.

However, a BE led VRFB that employs locally mined vanadium and locally manufactured electrolyte is capable of delivering a very cost effective battery solution that for me will likely surprise a great many people including all those lithium loving analysts. The BESS Project is being costed at $300 per KWh. I think BE will be well inside this though I don't believe they need to be for reasons I have just given.

However, I am not even looking for BE to declare a profit on the Eskom project. At this stage it isn't about profit margins just like BMN isn't about profits at Vametco. This is about opportunity, this is about demonstrating that the potential is there and it is attainable.

A progressive and expanding vanadium mining platform + a large scale mandate winning energy platform, is going to create a rocket fuelled mining tech mash up that the market is going to need a little time to appreciate, but when it does it will be quite something to behold, and for me it won't be profit based.

In my opinion.

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