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So not only does a BE led VRFB have home advantage and thus delivers high local content, locally beneficiated minerals, a new energy industry and therefore the capacity to provide “1,000’s of jobs for young South Africans,” but that very same VRFB is technologically more suitable for Eskom’s stated needs, far better value for money on a levelised cost basis, and now with the foresight of Bushveld Energy, potentially more cost effective on front end CAPEX as well.

All they need to do is make sure that the vanadium (Vametco 5,000 mtv production output expected in 2019) and the electrolyte (First phase 200MWh facility output expected in 2019) are in place, ready to take maximum advantage of the pending Eskom windfall.

VRFB’s greatest battle was not only to convince the utilities that battery based energy storage had a place in their systems and their regulatory framework, but that those batteries should be measured by their lifecycle costs, not their upfront CAPEX. The Eskom BESS project delivers the victory that the VRFB needed and it sits right on the doorstep of the world’s only fully integrated vanadium producer and VRFB developer, Bushveld Minerals.

Thus it is very easy to understand why Bushveld Energy was presenting at the SA Energy Storage Conference, and why Bushveld Minerals tweeted the following Engineering News article on 22nd October 2018 with the message ;

“Large scale battery energy storage is here. Been working towards being ready for this since launching Bushveld Energy in 2014.”

http://m.engineeringnews.co.za/article/eskom-gearing-up-for-big-grid-scale-battery-storage-roll-out-2018-10-22/rep_id:4433

Well haven’t you just Bushveld. . . and it looks like you are more than ready.

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But it gets better.

The Lazard analysis has been conducted globally. It does not consider a South African based VRFB that has access to locally sourced vanadium and electrolyte, an advantage that no other VRFB producer can match, thus placing all other VRFB producers firmly on the back foot when it comes to that Eskom BESS prize.

As BE demonstrate on slide 8 “Vanadium is a more significant contributor to the cost of VRFBs than key minerals in comparative battery technologies” at circa 30%. However, the delivery and installation is also up to 13% of that cost. Therefore, a South African based VRFB developer executing local contracts for the likes of Eskom, has the ability to further substantially reduce costs by focusing first nd foremost on that 43%.

But let’s go further.

That very same slide highlights 2 key points ;

1. High dependence on one mineral presents a challenge for the technology but an opportunity for vanadium suppliers
2. Strategies for countering high vanadium prices will be key to VRFBs’ sustained success

A fully integrated vanadium producer has the ability to affect the vanadium value chain in a manner that has never been seen before and thus has not yet been measured or analysed. That is the clearly communicated goal of BE, be it that the exact details are still to be made public.

One way that such a producer can and will counter high vanadium prices will be through their ability to affect the method by which the vanadium is sold.

On slide 9 of the BE presentation it explains that “Bushveld Energy’s vanadium rental product takes advantage of the unique properties of vanadium and VRFB technology”

This model describes 3 key benefits of which 2 are listed below ;

1. Significantly lower and predictable CAPEX for the battery that could make it cheaper than lithium ion
2. Lower overall total cost of ownership / levelized cost for a VRFB than an outright purchase

Therefore, not only is the VRFB already up to 32% cheaper than its greatest competitive rival lithium-ion, when measured under the Eskom BESS project scope criteria, but a BE led VRFB also has the ability to further extend both the “lifecycle” cost advantage AND reduce the upfront capex costs (where lithium-ion is still perceived to hold an advantage), by introducing a leasing model.

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According to the Eskom article “the Eskom BESS project involves deployment of solutions at multiple sites in various operating units.” It further states ;

“All solutions will have a primary function and supplemental functions in the form of “stacked benefits”, in order to maximise the value of the BESS. For example, a unit primarily meant for capex deferral during peak times in winter months will be available for functions such as frequency support at any time and peak clipping during summer months. Peak hour discharge shall be for four hours.”

Under the ‘Process Flow’ section the same article further makes clear that “the most attractive applications are for distribution deferred investment and congestion management, and this was prioritised wherever possible.”

If we refer to the BE presentation slide 5 then we see “VRFB’s value proposition is to equalise power distribution and bridges gaps in power generation over longer durations,” so essentially the same thing.

In that same slide BE are quite clear that the “VRFB is ideal for daily, multi-hour, deep cycle storage (e.g. with solar PV), grid support (e.g. peak shaving, system balancing) and off-grid installations (e.g. mines, farms, islands)” based around “utility transmission and distribution support with stacked values.”

So a great many perfect fit performance options for the Eskom BESS but as is always the go to question on VRFBs, can it possibly beat a massed produced lithium-ion battery on cost?

Well the Eskom article goes on to state under Step 5 ‘The Contracting Phase’ that ;

“The evaluation criteria involves preliminary assessment, technical assessment and finally economic lifecycle assessment. The lifecycle phase considers capital cost, energy cost (inefficiency), maintenance cost, replacement/augmentation cost and disposal cost.”

This is a key statement from Eskom because what they are saying is that they are not just looking at the initial capital costs, where it is perceived that Lithium-ion holds the advantage, but at the “lifecycle costs.” For the record that represents a giant leap forward in utility provider thinking and opens a sizeable door of opportunity for the right VRFB play.

If we refer to slide 7 of the BE presentation, we can see what this truly means for the VRFB and its ability to outperform the lithium-ion alternative and thus secure this project.

BE are quite clear when they state that “VRFBs can be cheaper on life-time ownership (or levelised) cost.” This statement is further supported by reference to the analysis by the investment bank Lazard, who state that VRFBs are already 26% cheaper for ‘peaker replacement’ and 32% cheaper for ‘distribution’ solutions. So we aren’t talking a close run race here when the customer is prepared to understand and consider the “economic lifecycle assessment.”

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Note – This set of posts should be read in conjunction with my other recent lengthy efforts entitled ‘BE Your Time is Coming’ and ‘BE Driving VRFB Forward.’

Given the fact that we have effectively been told to expect the launch of BE within the next 6 weeks (Personally I am clear, that it's coming in November), let's now try to better understand the Bushveld Energy VRFB story and in particular it's ability to succeed in tendering for the 1,440 MWh Eskom BESS project

Enclosed below are 2 key documents ;

1. The BE presentation that was delivered at the SA Energy Storage Conference in October this year. The same conference where the 800MWH phase 1 Eskom Battery Energy Storage System project was announced (BE Article).

2. The EE Publisher article by Eskom's Prince Moyo, discussing the Eskom BESS project (Eskom article).

http://www.bushveldminerals.com/wp-content/uploads/2018/10/Bushveld-Energy_SA-energy-storage-presentation_October-2018.pdf

http://www.ee.co.za/article/eskoms-flagship-battery-energy-storage-systems-bess-project.html

Firstly, it is important to understand that whilst the Eskom article covers a number of general topics associated with BESS such as current world programmes and general use cases, it is clear that ;

“the article proposes some guidelines for the specification, testing, operation, maintenance and disposal of BESS systems and potential for wide-spread application on the South African power system.”

Given the author is Prince Moyo, the General Manager for Power Delivery Engineering at ESKOM and a key stakeholder in the launch of the Eskom BESS project, then I am inclined to believe that the guidelines will be included in the tender for their very first phase 1 800MWh battery project.

Warning Warning Warning. . .

Pending 4 part post.

Coming to an LSE forum near you real soon.

Enjoy.

For anyone who hasn't seen it here is the last 'vanadium 101' webinar that was presented on 3rd May 2018.

One interesting point that is worth consideration. Whilst much focus is placed on the staggering growth in vanadium prices these last few years, cost of production should not be forgotten beause it is the staple ingredient of long term success

In the 17th Oct interview, in relation to the dividend policy, FM was keen to express the low cost production angle and what it meant for a 'sustainable' dividend policy.

In the Vanadium 101 presentation (slide 69) a Roskill led analysis of Bushveld Minerals, declared that when Vametco reaches it's 5,000 mtv plus phase 3 production target, it will be the lowest cost producer of vanadium pentoxide in th world.

That means lower than Largo, and lower than Chinese co-production. That is a significant development that shields BMN from any potential future headwinds, should they arise. So we aren'ty just talking lower first quartile, we are talking lowest full stop.

http://www.bushveldminerals.com/wp-content/uploads/2018/05/Bushveld-Minerals_-Vanadium-101-final...pdf

@Bmnfan Yes I am trying not to be too explosive in my opinionating because the explanation may end up being more mundane than i believe. However, there is a very clear big hole in BE information. The company has given us the absolute minimum thus far but expects the market to be able to value not only the BE proposition but also it's tie into Bushveld Minerals, by the end of the year.

That's going to need a pretty big shift in information sharing and understanding.

This is particularly true when we think about the tie into Bushveld Minerals part, because that means understanding how Vametco makes money from all of this, how their part of the electrolyte production chain will be paid for, because the ownership levels and partners are different at vametco to BE. The IDC has no part in Vametco.

Furthermore, i am still scratching my head as to how "large scale energy storage mandates" will be secured before year end (remember they are a trigger for the BE financial model being released), when the Eskom tenders don't come out until Q1 2019. Can we therefore expect a different sort of contract announcement? with another customer source? Or an offtake that delivers large scale mandates for someone else?

Who knows? But if the company is going to do what it says it will before the year end, then there is a heck of a lot of information due on the BE side and the tie ins to Bushveld Minerals.

I will go one step further too.

In that quote from FM in 17th Oct interview, he says this ;

"if you read all the research on Bushveld Minerals, there is no much that is said about Bushveld Energy and it's value contribution to our story"

What or who FM is talking about there is of course SP Angel and ARC. Neither even mention Bushveld Energy in their valuation model.

Now it should also be noted that neither present any true value for the progress that Lemur has made either, and that is far more measurable, given it has achieved a concession, a PPA, and has at the very least, a pre-feasability study in play. But it's not properly valued because said 'researchers' are waitjng on the BFS.

What that means in my head, is that if Lemur cannot be properly valued against such progress, then BE will have to demonstrate a damn sight more than estimated theoretical cost based on a potential market. They need to deliver real achievements, and tie that directly into the BMN mining side of the business.

Remember what FM said ;

"start to get a view what is the earning potential of BE and how does it contribute to the value of Bushveld Minerals"

That for me does not work if all BMN come up with is a cost estimate for their integrated batteries without any contract wins. Nor does it work if the market cannot see how the profits and ownership will be divided. Therefore, we need to know where the IDC sits in this, where UET are, and what they will both be providing and taking from it.

Therefore, the BE model has to be comprehensive, so for me it has to be a launch because anything less would be a marketing faux pas, which is good reason to delay the BE update and good reason to keep things clsoe to one's chest until ready.

6 weeks and counting. . .

@Ludeck you may well be right but this time around, the company has at the very least stated that it expects to deliver the Bushveld Energy business model before the end of the year.

Now I am not saying for one minute it is directly linked to the webinar, but the questions I have in my head are ; why hold this webinar in the first place and why hold it on 13th November, if you haven't published your financial and therefore business model for BE, nor given any direct insight to your shareholders whatsoever, into how it will operate.

In the Proactive interview from 17th Oct, so just 3 weeks ago, FM stated ;

"for the first time we want to provide a framework by which investors can start to put some value towards what we are doing in the energy space"

"If you read all the research on Bushveld Minerals, you will notice that there's not much that is said about BE in terms of it's value contribution to our story, and we think that by presenting what that financial model might look like, people can start to get a view what is the earning potential of BE and how does it contribute to the value of Bushveld Minerals, that we think will be a great development before the end of the year"

So the CEO as of 17th Oct is confident that the BE financial model is on track, and here we are with effectively less than 6 weeks until Christmas (because such news won't be released in the last working week before Christmas nor the Christmas holidays), and what we have thus far is a webinar introducing and explaining to investors the merits of the energy storage market and finishes up with ;

"How will Bushveld Minerals and Bushveld Energy accelerate the adoption of Vanadium Redox Flow Batteries?"

Does that really work when you haven't even told your existing shareholders how BE will do business?

Furthermore, why haven't we had a BE Q3 update. I know for a fact that the EIA is under way, I know they are in the process of buying the land for the electrolyte facility. I am therefore positive there is other news to be had that could fill an update.

Why are we now just 5 working days short of the webinar and no wiser as to what BE has done for the last 3 months? Is it simply because they want to wait for the electrolyte delivery update for Eskom? Is it that important that it should hold up the entire BE update?

If nothing appears this week in the lead up to the webinar, then we will have just 5 effective weeks for BMN to deliver the financial model for BE, to deliver the Q3 BE update, and to deliver the dividend policy.

But let's not forget just what that BE model is indicated to include, offtakes, strategic partnerships, and large scale VRFB mandates, as a minimum.

The webinar in May did not centre itself around a subject that is thus far clouded in mystery, nor was it so close to a Christmas that promises so many gifts. So at the very least, let's say I remain suspicious.

@James0309 BMN stated as far back as June 2017 that the BEE percentage ownership would be 26%, but at the time when Jaxson640 were buying out the previous BEE partner, it stood at just 25%.

It did not move from that 25% until 2 weeks after BMN announced Sojitz had been bought out of their 15.9% ownership of Vametco on 13th Sept 2018. So despite making that statement some 15 months prior to that deal, it was that deal that initiated the actual sale of the 1% to Jaxson 640.

Thus is was alwsys that deal that was going to deliver that 1% uplift and BMN effectively told the market that 15 months ago. It is only now that we can fully appreciate that and understand what that means for the size and length of the plan that is in play and will still be played out here.

It is important also to appreciate that Q3 is likely to be a lower production month, driven by the reasoning presented in the interim report.

My own personal target is 600 mtv but I expect the company to have bolstered sales through the use of inventory. Therefore, my personal target is circa 700 mtv sold.

The average FeV mid price for Q3 employing the same formula as quoted in my post earlier this morning, is $78.50 per kg.

Using the Q2 update calculations, that should deliver EBITDA of around $44,000 per mtv.

Thus I am looking for EBITDA of around $30.8m for Q3, of which BMN would theoretically own $22.8m.

At an average US/pound exchange rate of circa $1.30, that's £17.5m.

If we add Q4, then the $44.5m becomes £34.2m, giving us BMN attributable EBITDA to H2 of circa £52m.

For the first full year of ownership, that would be quite some result.

@James0309 Your positive feedback is much appreciated, thank you.

The answer is a little more complicated than the question.

The figures I have used are for 100% of Vametco and BMN currently hold 74%. Thus is very simple terms BMN would achieve around $44.5m is EBITDA at those rates.

However, the key thing to remember here is that BMN control Vametco and the other 26% is held by the BEE compliant partner. A percentage of that ownership is controlled by the local landowners and communities, whose land the Vametco mine sits on.

The other greater percentage is owned by a consortium called Jaxson640, which is led by one Bill Chipane, who is described in the 5th June 2017 RNS as ;

"an investment professional with more than ten years in the metals and mining investment banking experience. Mr Chipane is well known to Bushveld Minerals and has been a consultant to the group for some time."

Jaxson640 were loaned the money to acquire the BEE stake in Vametco by BMN. The BEE partner is alligned to the thinking of BMN so much, that their leader was a 'consultant' to the company.

The point I am getting at is that the EBITDA that BMN eventually books will be very healthy indeed, but the power that BMN now wields by having a like minded and willing BEE partner, means that the full weight, where appropriate, of the Vametco cash flows, can be brought to bare on any growth plans BMN now have.

That was alwsys the plan, as was the plan to remove Sojitz, because in that same RNS of 5th June 2017, BMN state ;

"Jaxson 640 together with the local communities, on whose land the Vametco mine deposit and processing plant are located, will now hold a 26% shareholding in Vametco."

Many contributors here questioned what that line meant when the BEE ownership stood at 25%, a position that never changed until immediately after the removal fo Sojitz from the Vametco picture.

What that demonstrates is that Sojitz has been on the cards ever since Vametco was bought by BMN, back in March 2017, because it was their percentage that would contribute to the additional 1% due to the BEE partner.

What that means is that the plans at Vametco stretch much further than we can even hope to truly understand, thus that the BEE partner was specifically chosen bwecause they would aid BMN in reaching those plans.

So whilst it remains prudent to focus on what the outcome for BM will be, it is at least equally important to understand the strategy, the longevity of the plan in play, and what that means for the future prosperity of BMN and it's shareholders.

I trust that answers your question.

Good morning all,

So after some belief that prices in Europe had pulled back last week, the reality is that the FeV mid price actually increased to $118.50 per kg.

Employing the Vametco "realised price is based on an average one month prior to sale" formula, as stated by BMN in the Bushveld Vanadium Q2 Update, then after 9 weeks of the Q4 13 week cycle, the average FeV mid price for Q4 is a staggering $107.20 per kg.

A hold at the $118.50 price pevel fot he next 4 weeks, would see Q4 prices average circa $110.70 per kg.

If the company achieves my personal targe of 850 mtv and sell it all, then Vametco sales for Q4 will be around $94m.

At those levels, EBITDA should as a minimum, achieve $70,000 per mtv, based on the Q2 update calculations.

Thus EBITDA for Q4 would be close to $60m. That is some serious firepower for a company is such a steep growth cycle.

@coffeecups I have a few other things to do this evening but I am around tomorrow, so please remind me and I will happily give you my thoughts.

Thank you one and all, the kind words are greatly appreciated even if I am never quick to acknowledge them.

I share such research gladly because I know what it's like being an amateur investor with little time to truly research the ideas we have, in a life full of other things to do.

It's frustrating and we need all the help we can get if we are to have any chance of succeeding in this unforgiving world of investing.

I wish you well FB. It must be a good feeling knowing what you know and your family thus far do not.

It's been quite a journey so far and such stories makes it all the more worth while sharing it.

And for those with good memories and as Karen Carpenter one sang ;

"We've only just begun"

Nobody to pay on the back other than your good self Bmnfan. You've stuck it out through some really tough times here, and earned every penny of that result

Enjoy it.

I feel a BMN crescendo building, in more ways than one. . .

Remember remember November

Whatever has been preventing the SP from moving up these last few weeks, has for the time being at least, stopped.

Usually by this time of the day, the selling has already kicked in at a pace, but thus far she looks very steady.

Where to now Mr Market?