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Apologies once more.

Sorry I am out and about today and using my phone, which has some funny ideas about the words I wish to use. Apologies one and all.

‘If BE secures’

I will add this. I’d BE secures a large scale mandate with Eskom, which to be clear I think they will. Then the “additional strategic relationships with downstream stakeholders in the global vanadium battery supply chain” comes automatically because UET would be scrambling to be on board that ship.

The developers, they cone from the realisation that Eskom wants a smoother uptake if renewables into the grid. Therefore, we could well see Eskom adding (perhaps preferred) battery storage to its future REIPP Programmes. Why do it yourself when your keen bidders can do it for you?

So those 3 key developments can actually all effectively be answered by one deal with Eskom. But then of course BE may have other pies and their fat fingers could be all over them. So we may see other deals and other avenues. But I will take Eskom for now, because it’s more than enough to put those defibrillators to good use.

That should have said ‘my eyes and ears are well and truly open’

@Stingystim whilst any outcome us possible and perhaps worthy of a second look, it is for me too far a leap to suggest such things at this time. The only reason I stated that lithium is perhaps ahead in the race for the Eskimo prize, is because it was tested in 2017. However, I very quickly placed a caveat on this by stating that we do not know what Eskom’s timelines are, not do we know what ground work has been put in by BE, UET and the IDC, who really should not be ignored. The testing facility and it’s requirements is one thing but networking and contacts is something entirely different.

Plus the key thing to remember is that we don’t know exactly when the first contract will be awarded, it could still be sometime away. What we do know is that at least one battery technology is of interest enough to enable a more expensive CSP project to be shelved. That at least mean that the price is looking good and one thing the BE battery will have already demonstrated is actual cost.

Note - It should be noted that in the last IRP the only storage technology that was recognized was CSP, even though it has long been proven as being very expensive compared to other options. So it’s sidelining means far more than it demonstrates at face value.

The other thing to remember here is that BE needs to build an electrolyte plant. Now that doesn’t stop the signing of an order, if the date for delivery is 2020. Eskom aren’t desperate, they are simply realigning themselves with the change in technology offerings. Of course UET could temporarily source the electrolyte elsewhere, like they did for the demonstration battery. But for me if the scale is very large then that doesn’t wash for very long. All of which could mean that we are talking about an order being signed later this year or even early next.

However, it’s important at this stage to remind ourselves of the 3 key 2018 developments, BE will use to demonstrate its business model.

1) Proving the Company’s capabilities and securing its position
as a developer and integrator of utility scale energy storage projects by delivering its initial projects and securing large scale energy storage mandates in Africa;

2) Positioning itself as a key electrolyte supplier, by supporting the global industry through the low cost production of electrolyte while securing offtake agreements; and

3) Securing additional strategic relationships with downstream stakeholders in the global vanadium battery supply chain and electrical power developers and producers operating in Africa.

So BMN expects large scale mandates this year, it expects further strategic partnerships with electrical products this year. So given nothing else is on the table yet, Eskom and that battery and that deal, looks to be the central focus right now, whether the battery production comes later or not.

A large scale battery mandate secures the electrolyte plant as designed and green lights its production. Target 2019.

My eyes and ea

Personally I feel as an investor in BMN, one shouldn’t get too far ahead of oneself. Yes lithium is strong and definitely has a head start, but there has been enough research shared here these last few years to show that when given an even playing field, the VRFB is the strongest storage battery over a number of key utility applications.

My points I have raised in my last few posts were designed to demonstrate that BE, in its home nation, has seemingly focused its energy in exactly the right place. That the powers that be are now clearly demonstrating a willingness to accept battery storage at grid level, and that the BE led VRFB has evidently taken up a very strong position in terms of its attractiveness to Eskom. The test facility at Rosherville is designed to find the best battery technology for Eskom’s needs. It therefore isn’t paying attention to the rest of the world is going or how it perceives lithium.

If the BE VRFB is the best, if it can deliver on levelised cost like MN says it can, then it’s going to win through in SA at least, because it is the best in class. That gives BE access to a long term contract with the biggest utility in Africa. That’s a big enough fish for me right now. World dominance can be placed on the back burner and lithium can do what it wants where it wants until further notice. The tying down of Eskom is not just about the likely sizeable orders that will create for the planned electrolyte plant, or UET manufactured VRFBs, it’s about market penetration, market understanding, and market acceptance.

If the largest and most influential utility in Africa is buying BE VRFBs then so will the majority of SADC utilities, so will utilities from further afield. That acceptance, that realisation, is what is on offer here. The signing of a large scale multiple MW deal with Eskom will send the SP here into orbit, but the recognition by the market that VRFBs have really truly arrived, that will take us to whole new galaxies, because that’s the key to the $70 billion industry.

Do like I say, the focus right now should be on the news flow surrounding that Eskom facility, that deal with Theresa, that 100MW battery, and the political posturing in SA, because everything is pointing to a major shift in policy in SA, and if it’s in BE’s direction, then it’s showtime.

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So just because lithium is perceivably ahead in the battle, does not mean it’s won the war.

The key elements for me in all of this are that localized industry. Would the Chinese invest heavily in localized manufacturing to win that contract. Could they? Would it make sense? I have heard very little about lithium mining in SA, but I will dig deeper. The same goes for Primus Power and that zinc battery. But whatever the case we are back to performance, and do if we assume that s batteries will get their chance to prove themselves, then the reality is there is only really one winner. Vanadium.

BMN are on record as saying they plan to build a localized industry, that they will beneficiate local minerals, that they will hit an ambitious target of 1000MWh by 2020. All things they have to be fair, said god a very long time.

It could be that another technology wins through this time around, but is it really likely given the BE connections to the IDC. Remember their representatives have been picture right by BMN’s dude at every energy storage event going. They are backing VRFB not zinc and not lithium.

They are a government owned entity with direct links to political and regulatory leaders. So if a 100MW project is available, if as has been clearly written, battery storage is being welcomed, being backed by external funding, then nobody is better placed than BE, and right now they look nailed on to be the beneficiary. That despite the late start, because the competition and its status and it’s location in the world, doesn’t point to a better solution that answers the points and reasonings being put forward by these statements we are reading.

Right now BMN is a miner making around £36m a year profit. Imagine that miner with a 100MW VRFB project from Eskom with access to 2000MW in the future.

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Good morning everyone.

Yes the wording is certainly very strongly indicating that at least one of the battery storage trchnologies being tested by Eskom is going to make it to the commercial scale. As a reminder to investors here, I have enclosed below the article from June 2017, which explains Eskom’s reasoning for opening the test facility. Eskorte at that timd were already working towards solving the integration of renewables driven by the 2010 IRP. They quite 2000MW if Storage needs to derive 18,000MW of renewables. That figure of course has now been increased through the revised renewables dominated IRP.

The second article is a presentation that gives an update on the progress to date. It is dated December 2017, so it is before the BE VRFB was deployed at Rosherville.

The presentation states that at that time just 2 units from a total of 5 have been placed on test. A lithium ion phosphate battery from China and a sodium nickel chloride battery from the US.

However, slide 7 states that two further batteries will be tested in 2018. The BE led UET battery and the Primus Power zinc bromine battery. So they are the 4 runners as it stands.

What we know is that Eskom has already cancelled a 100MW CSP battery project in favor of a battery storage project, and that the backers of that battery project are tied rather conveniently to the investment announced by Theresa May, a investment that clearly states that the battery technology project will create 1000’s of jobs for locally for young South Africans.

So at the very least Eskom are happy enough with at least 1 technology to commit to cancelling a big CSP project infavour of it. The presentation states that 1 of the 2 batteries thus far test (Dec 2017) is not suitable for Eskom. I will assume that was the sodium battery from GE. Therefore the front runner is the lithium ion battery. However, we then have that tweet from BMN, which came off the back of the CSP project cancellation article. If the battery is lithium then the tweet was misguided. Furthermore, the VRFB from BE is still under test. The presentation on slide 9 states it lasts for 90 days. That would mean first results around about November. However, we don’t yet know when the replacement battery project will be announced. Nor would I expect that one battery technology would be chosen before the others had been given the chance to prove their worth.

https://www.energy-storage.news/news/south-africas-eskom-opens-battery-demo-facility-for-2000mw-energy-storage-n

http://www.ee.co.za/wp-content/uploads/2017/12/Peter-Langley_Eskom_Key-learnings-from-a-battery-test-facility.pdf

@Daisydog in my opinion there is very little to be gloomy about here. FeV just rode out the August shutdown and dropped about $1 through the entire period. This despite prices being over $80 per kg. September will be very interesting if as suspected, the buyers come back in early , because nothing has improved on the supply side at all. If we employ the EBITDA percentage for Q2, then every dollar the H2 average mid price goes up, BMN makes about $1.4m more in EBITDA and £760k net profits at just 3,000 mtv production. That’s on top of the very strong £36m or do net profits I expect them to achieve in 2018 already. The short term SP is one thing the fundamentals are something entirely different. And then of course there is BE.

I would like to further reiterate what I have just posted. Firstly, ‘deadlier’ should have read ‘earlier’. That aside it really is time to wake up and stare headlong at what that news out of SA is telling us. Eskom has helped guide the IRP, the IRP is asking for the right energy for SA and that is in the main renewables. That means the new BOD of Eskom is first and foremost doing its job, so policy can be trusted to be implemented and not as we for so long have seen, ignored or kicked down the street. For Eskom that means a complete about face. They are embracing renewables because they have too, because it makes the most business sense, because it’s the future, and perhaps just perhaps will help them pull back from the financial precipice the previous regime created. It was always the right choice but now we have the confirmation that the 3 corners that matter, Public Enterprises Ministry, Energy Ministry, and Eskom, all are pulling in this direction. That’s a very important point. We can talk about the politics, the corruption and the failings in SA today, but as shareholders of BMN, if we have that all functioning fairly and consistently, then we have our chance. Then it’s about cost, efficiencies, performance and savings. Things Eskom clearly needs. The VRFB is the best in class, so if the door is open then it has the best chance of walking through it. What that all means is clear and willing access to the largest utility provider in Africa and its open for battery storage business. Over to you BE.

(2 of 2) Let’s now piece that together with the deadlier news today, that the UK have given SA $72m to spend on battery storage. This came of course from the meeting between twinkle toes Theresa May and Ramaphosa. Now could one possibly conclude that Theresa May always had battery storage in mind when she walked into that meeting, or was Mr Ramaphosa and his team seeking it. Remember what we know is that Radebe, Gordhan and the Eskom BOD, are Ramaphosa’s people. Eskom is supposed to be just testing battery technologies right now, not implementing them. Yet Eskom has cancelled a 100MW CSP project in favor of battery storage before one of its entrants (BE’s VRFB) had even finished being commissioned. For the record the other entrants simply do not have what it takes to unseat an SA mined and beneficiated local industry and job creating VRFB, that has a performance level beyond reproach in the area of storage Eskom most need. So as I say, I have a very warm and renewable feeling inside. Something is definitely cooking in the SA battery storage kitchen, and if it involves VRFBs and BE, then the BMN SP will be cooking up too.

(1 of 2) I am starting to get a very warm and renewable feeling inside. Further to my thoughts on the SA political situation the other day, here is a very interesting article on Eskom and the new IRP. The title of the article refers to one Pravin Gordhan the relatively new minister for Public Enterprises. Note his clear view point that the new IRzp is “a game changer” for energy. A view that is clearly in line with that of Mr Radebe. He goes on to say that in his opinion with coal’s decline, “there’s no reason. . . That Eskom shouldn’t be a supplier of renewable energy. This would add to Eskom’s competitiveness in the market”. Remember this is the man who effectively overseas Eskom and works closely with its BOD. The article also quotes the current Eskom chair Jabu Mabuza as saying “Eskom had made its own submissions to inform the new IRP”. Now that’s very telling because it means the IRP is effectively heading exactly where Eskom’s BOD wants it to go, and let’s not forget, this is an organization that has clearly stated it needs battery storage technology to integrate those renewables already installed, never mind those that the new IRP calls for. The article compounds the standpoint by quoting Dr Dom Wills of Solar PV company SOLA Future Energy, the builder of a great many PV projects in SA. He says that the new IRP is not only a “modern approach” but also that “less reliance on nuclear and coal shows an understanding that base load can be achieved with a mix of renewable technologies” This means “For the next 20 years, as coal-fired power stations are decommissioned, SA will rely on a combination of renewables and gas and battery storage technologies to keep up with demand” https://m.fin24.com/Economy/Eskom/gordhan-eskom-should-be-allowed-to-compete-in-the-renewable-space-20180829-2

@Alfacomp That would be absolutely fine and thank you.

Let's go a little left field. Whilst I was away on my summer break I spent some time mulling over what the company is planning and how things will pan out here.

I would start by saying that it is not unrealistic to assume that the plans may take a few months longer than expected. There are various stakeholders outside of BMN's control that could and would have an affect on BMN's ability to fulfill its 'Strategic Obkectives' for the year.

That said i am of the mind that much will happen over the next 4 months and that the landscape here will look far different that it is today.

I am intrigued by the JSE listing. I appreciate the wording used by the company in wanting to expand on BMN's investor base and attract a stronger SP to that which likely could be enjoyed on the LSE alone.

However, if BMN were to dual list I cannot help nut feel that the opportunity will be taken to raise funds. It is the easiest way to attract a set of new investors in the shortest amount of time. Now before I go on i want to be absoultely clear that I am in no way afraid of this dilution. I do believe strongly that a JSE listing would give a very healthy boost to BMN's SP. After all any concerns over juristiction will be somewhat dissipated.

I am reminded of the Businesslive article from June (see below), where we first learnt of the possibility of a $100m investment in 'Vametco'.

The actual words employed were as follows :

"where for $100m, just one third the cost of building a new Mokopane project, output could be doubled to 10,000 tonnes a year, a decision the board had yet to make"

That was just 3 weeks before the Annual Report was released and BMN officially stated their plan to raise production in the medium term to 10,000 mtv. BMN are also on paper as stating that they are developing Brits as a means to support their expansion plans at Vametco. I personally find it hard to believe that the decision is one of strategy rathering than timing.

We could of course go further and tie in Mokopome and the brownfield option, but I personally don't believe they are a part of this particualr element of the story.

I think there is a plan to spend upto $100m on Vametco/Brits, I believe the Sojitz buy out is tied in, be it a plan to complete it before the expansion or as part of the funding, and I believe the JSE listing will act as the catalyst for the element of funding required that does not come from Vametco revenues.

I might be wrong but it just seems that there are a great many unanswered questions, which could be coincidental or it could be that a great many of them are tied to one another. We willl shall see.

But as i say I have no problem with limited dilution if it brings me greater reward that it takes away.

https://www.businesslive.co.za/bd/companies/mining/2018-06-07-bushveld-minerals-to-diversify-with-battery-production-powering-ahead/

@Block 16legend Just to be clear the current EBITDA and profit margins are calculated against BMN's 59.1% ownership.

It is here and through the thoughts of BMN's brokers that the increase to 74% through the removal of Sojitz has been discussed.

Whilst on that matter I noted the following quote from the latest ARC broker note :

"We believe the current market discount to our valuation should narrow as Bushveld further progresses its expansion of Vametco and, crucially, simplifies the ownership structure to enhance its access to cash generated by the operation."

and then later they say :

"In reality, we believe dividends may commence earlier (they currently state 2020), particularly if the ownership structure of Vametco is simplified."

It's abundantly clear what ARC believe the 2018 Strategic Objective meant when the company stated :

"Simplify Bushveld Minerals Organisational Structure"

@Daitom I would like to expand a little on my previous post a little.

I don't believe for one second that the ANC through Ramaphosa.'s rise to power has rid itself of corruption. Ramaphosa walks a fine line between two opposing factions and even his toppling of Zuma had to be carefully co-ordinated and played out very slowly in order to succeed. I am in no doubt that given the chance he would have ousted Zuma far sooner, but he had to play the political pawns very carefully and thus it took likely 18 months longer than planned.

The same is playing out right now with the NDPP and Shaun Abrahams. Again I have no doubt that Ramaphosa would have removed Abrahams sooner if he had the power to do so, but he didn't. Therefore, he has had to play it a different way and allow the courts to eventually do his job for him by making the appointment invalid, thus undermining those against his removal.

We should be under no illusion, Zuma still wields a great deal of power and influence in the governing party, depsite his removal and the endless list of charges against him. The removal of Abrahams brings Zuma another step closer to a successful prosecution, so Abrahams was a very big pawn in this particualr game of thrones.

Why do I share all of this? Well the key here is that where Ramaphosa was able to act quickly anf decisively was in those areas of the economy that are most relevant to BE's quest to corner the Southern African energy storage market.

Eskom, the Energy Ministry and the Public Enterprises Ministry were all successfully targeted and legitimate trustworthy individuals and teams finally installed. Under the correct guidance these ministries would target the correct path for SA in temrs of energy production, and that will always include a strong RE programme and when the time is right energy storage. What makes logical sense to us BMN shareholders has for a long time been tampered with whilst darker forces play out their personal desires at the cost of real progress.

Since Ramaphosas intervention that has changed and today's new IRP is a cumulation of the events that were set in motion at the start of this year.

With today's IRP as their guidance, Eskom has the green light to drive its policy towards greater greener energy. However, as the BOD of Eskom has already clearly stated, they need energy storage in order to integrate the current RE programme and deal with the existing issues with the transmission grid. Hence the already publicised 2000MW of energy storage.

So although one should continue to keep a watchful eye on SA politics, one should also rejoice in the fact that with those 3 areas of the SA system, BE has every chance of realising its ambitions.

@Daitom I would of course liked to have seen a direct reference to energy storage but it wasn’t always necessary. As Alfacomp has already alluded to, the key was that the IRP reflected a fair and reasonable analysis of the country’s energy needs going forward. That has been categorically demonstrated in today’s IRP release. To be honest I never saw it turning out any other way because I have read many good things about Mr Radebe, so I always felt that the ship would be turned. What this IRP also reconfirmed is my trust in Ramaphosa when he is able to make a decision without in house party political pressure, which in turn bodes well for Eskom’s current BOD and Eskom’s future decisions moving forward. Eskom have always said they will follow the lead of the IRP, so the increased RE will be implemented. But they have also been clear that RE is intermittent and so requires storage to help integrate it with the existing system. Therefore, with today’s IRP we have a very green light that allows a better run Eskomto instigate a substantial RE Programme that will in turn call upon the best technological energy storage solutions to support it. That for me right now means considerable opportunities for BE moving forward.

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Add this to the H1 result and we will witness a total EBITDA for 2018 of circa $115m plus at least 78.5% of the production cost savings (circa $3m), so $118m. That’s very healthy.

That means that BMN will highly likely achieve a minimum of £51.65m(US/Pound exchange $1.35) in EBITDA for 2018, which if converted at 70% achieves a net profit of around £36m.For me those figures are stress tested enough to state that bar extreme circumstances unfolding, they will be realised in just a few months time.

Now those figures are scarily close to those stated in the latest ARC Broker note dated 22nd August, and it is there that for me we will find the potential that the SP should move now towards..

Remember we are only talking about Vametco, a point that is repeated often here but nevertheless still overlooked. ARC in their valuation place a 10% discount on the Vametco NPV of $306m At their exchange rate of $1.28, the full valuation is just £239m or 21.6p. Thus placing a PE ratio of just 6.54 on BMN (Vametco). Even for SA that is very cheap and to even a half educated eye it feels too cheap. So there is room for movement there for certain.

But then they have also included other elements of the business in their full 30p valuation.

Mokopone with a pending mining right is currently being valued at just 20% of their discounted BMN attributable NPV of $404m (5.7p). But remember that is employing a long term FeV price of just $40 per kg. As several posters here have already said, a mining right with a firmed up plan of execution is going to see that 20% increased substantially. Even 50% of ARC's figure delivers over 14p to the SP.

Brits is an even bigger story waiting to happen. it is currently being valued at a nominal value of just $20m (1.4p). It too will soon have its very own story and the valuation has every chance of delivering many multiples of that 1.4p.

Then there is Lemur, currently valued at just $10m. The DFS was sent to independant consultants in June, that's 2 months ago, so its release must be very close. For the progress that project has achieved and the interest financial institutions are showing, $10m simply does not cut it.

Last but by all means we have BE. That element of the business is currently a big unknown, but given that BMN's SP is more than underpinned by Vametco alone, it is a glorious free carry that I can happily sit and wait for, along with Mokopone, Brits, Lemur, Sojitz and brownfield.

The next 4 months are going to very interesting and I wouldn't miss it for the world, because the figures delivered already point to a higher valuation than we have already seen, but it the future news flow that really sets the heart racing because it is all free carry. The SP is heavily supported by what has and will be delivered by Vametco this year, and that's a really good place to be for us shareholders

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I thought I would add my thoughts to those already posted on the Q2 results.

The average achieved price for H1 was $60,850 per mtv. This is very close ($61,500) to the assumed mid price when allowing a 4 week lag in the prices/sales. Q2 further compounds that argument with the actual achieved price being $69,400 against a predicted $69,000. So I am very happy with the assumptions made.

What it does however mean is that there is currently no clear evidence that a premium for Nitrovan or US pricing, is being realized, so personally moving forward I will continue to base all of my figures on the mid price.

Whilst there may well be further teething problems with the bedding in of phase 2, the upper end 3,000 mtv, for me, should be achievable and I feel safe in employing it as my base figure.

At 3,750 mtv, Vametco is capable of 937 mtv per quarter. At 90% capacity that is 844 mtv, which for me Q4 can achieve. That means Q3 just needs to achieve 80% of the revised capacity to meet this goal.

At 3,000 mtv the company indicates that the production cost will be circa ZAR 240 per kg. That equates to a reduction from H1 $20,250 to $17,780, saving $2,470 per mtv or circa $4m in H2.

If we employ the 4 week lag on sales for Q3, then last Friday was the 12th week of 13, and Q3 is currently running at $78.50 per kg. I do not see much altering this week, so that figure for me stands for Q3. So it is an achieved figure, not a wish or a dream and is very strong indeed.

What I really like is the fact the market has held onto its prices throughout August, that should not be underestimated and bodes very well for the remainder of the year. I expect to see a further uplift in September and it holding at least above $80 for the remainder of the year. I therefore feel confident in raising my H2 average price to $80 per kg. I know some will say it will be much higher but it’s a trustworthy base case that I first ands foremost seek.

That means that H2 should see 1,600 mtv produced at an average price of $80 per kg.

EBITDA

When looking at the EBITDA, I am more interested in what Q2 achieved than the combined efforts of H1. However, for reference I note the following

Quarter results per mtv: Average Price – Total Cost – EBITDA – percentage EBITDA margin

Q1 - $51,545 - $28,670 - $22,875 – 44%

Q2 - $69,400 - $32,500 - $36,900 – 53%

Between Q1 and Q2 the price achieved rose by $17,855 of which 78.5% was converted into EBITDA.

If we ignore the fact that the rate of conversion is clearly rising as the price of Vanadium increases, and simply apply the same 78.5% to the predicted H2 increase in price, then we have a further price rise of $10,600 of which we should see a minimum of $8,320 converted into EBITDA.

That means that at H2 average price of $80 per kg (remember Q3 is about to confirm $78.50), then we should see minimum EBITDA of 1,600 mtv x ($36,900 + $8,320) = $72.35m

I am pretty sure that the 5m warrants are Atlas and are at a revised discounted price to the original 14.4p because of the tin demerger. Things looking very good here.