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Here's the SP Angel update for ease of access.

https://www.yugroupplc.com/wp-content/uploads/2021/07/YUG__08072021_Note.pdf

Afternoon all,

Some tweets of mine on the latest SP Angel note released today on YU. The broker target price of £5 held for now but the message is clear it's going to go up.

The interims will be of great interest in terms of the monthly bookings going into H2 but the June figure is so big that it is clear that there is strong momentum in the business. A quick calculation of the H1 average against the first 4 months delivers a May figure of £11m. So again plenty of reason to believe that H2 momentum will be even stronger than H2 2020.

YU management talks about being confident of meeting market expectations. All the signs point to them beating it by a sizeable margin.

https://twitter.com/BigBiteNow/status/1413166395165192199?s=20

@LuckyLuciano,

The $10 per kg is calculated from the table provided by the finance director which I included in my article.

You need to deduct the "direct cost of sales" ($73.4m) from the "total cost including sustaining capital" ($110.51m).

This gives you the 'overhead' cost for 2020. They are the operating and administration costs + sustaining costs. You would need to read the wording around the table to understand the exact costs that are included.

BMN provide the sustaining cost separate from the C1 production cost. Also, if you run the $73.4m figure then you will see that it comes out at $19.10 per kg. The reported production cost (pre-audited accounts) in Feb 2021 was c. $18.30 per kg. Some adjustment is then required for things like inventory sold in 2020 which is the point at which its cost to produce is included.

As a back check if you take the $5.38m in sustaining capital for 2020 and divided it by the 3,842mtV then that would be $1,40 per kg which is far higher than the difference between the pre-audit C1 costs and the actual 2020 outcome.

The capital expenditure for 2021 is a mix of BE items, capex and sustaining capital ($4.4m). Hence why I highlighted the difference to 2020.

Hope that helps.

Hi LuckyLuciano How can I help explain better?

Morning all,

Firstly thank you very much for the positive feedback on my series of blogs. I really hope there is worth there that enables investors to look at angles that perhaps weren't so clear before.

I just wanted to reiterate that in coming to my $36.50 per kg conclusion, I did employ the worst-case scenario as things stand. As I have said many times and I am sure many here are abundantly aware of, the exchange rate and actual production can have fairly dramatic effects on the outcome.

To give you an example, if BMN were to hit the top end revised guidance of 3,600mtV then at R14.25 that EBITDA cost could come in at around $35 per kg. Assuming of course that they sell 400mtV of inventory. That's a c. $6m swing.

If they have more inventory to sell and choose to do so then the situation improves even more.

We will know more as future quarterly updates come to pass.

https://www.bbnbigbitenow.com/post/bushveld-minerals-fy-2020-review-part-1

@lui39 Thank you for your positive feedback. It is exactly because of such investors like your good self that I bother in the first place.

Hi everyone,

Still very much on holiday but naturally after such a significant update I feel compelled to contribute something factual.

Important to appreciate that the revised production cost is heavily affected by the fact that BMN have adjusted the ZAR/$ exchange from R16 to R14.25. This is something they really should have made clearer because it is responsible for the vast majority of the adjustment.

What it does is place the revised average production cost at c.$26.50 per kg which i believe is only c. $1 higher than my own calcs published in my blog on the same subject. This is because I have always taken the live exchange rate into account. H1 exchange was c. R14.55 which means BMN are predicting a H2 fig of around R13.95. That looks far more sensible to me and if achieved would reflect a strong commodities environment and a weaker dollar. Both of which lend themselves to strong vanadium prices.

This doesn’t excuse the big miss on the production numbers. I am merely demonstrating that most of this rise should have already been known about but BMN could have communicated it much better.

Will produce my own detailed thoughts and analysis when I’m back next week. Be it I’m off on hold again the week after.

There's much talk about Serabi Gold being suspended at the end of this month if it doesn't complete its accounts on time.

What I don't understand is why it is being played as such a significant event.

My understanding is that failure to complete their accounts on time would lead to a temporary suspension until such time they could be completed. Continued contact with the exchange is a given and an extension is plausible but if it isn't then it should have no long term bearing on the company's prospects.

It doesn't prevent the gold from being mined and sold. It doesn't eliminate the fact that gold has averaged over $1,800 this year or that Serabi production is returning to pre-Covid levels. It also doesn't prevent Coringa from being licensed and built.

Yes, it could prevent me from trading my shares for a limited period but as a long term holder that's not central to my world.

So where is the actual real problem here?

@Muck165,

I see no wording in the Admission Document that says that those two 'funds' were part of the lock-in agreement. Infact the lock-in agreement only states,

"Each of the Directors, the Company’s employees receiving shares under option schemes and certain other Shareholders, who on Admission will be the holders of 64,948,008 Ordinary Shares in aggregate, representing approximately 67.9 per cent. of the Enlarged Share Capital, (being the Locked-in Shareholders) have entered into Lock-in Agreements."

So no direct mention of which shareholders are involved.

What it does say is,

"In addition, Shareholders not subject to Lock-in Agreements, who on Admission will be the holders of
7,387,248 Ordinary Shares in aggregate, representing approximately 7.7 per cent. of the Enlarged Share
Capital, have entered into Orderly Market Agreements. Under the terms of the Orderly Market Agreements, these Shareholders have undertaken to the Company and N+1 Singer only to dispose of any interest in any Ordinary Shares owned by them or any connected person, in the period prior to the date which is twelve months from the date of Admission, through N+1 Singer during that period in such a way as to maintain an orderly market, except in certain limited circumstances considered customary for an agreement of this nature."

So those c. 7.39m shares have very much been in play since the IPO plus any others that were placed outside of the lock-in arrangement.

The fact that Touchstone hasn't sold down despite having the ability to do so is a big positive for me.

Also, one should not forget that the Chairman and CEO hold 18.5% of the company between them and are locked in until Dec 2021. That demonstrates true skin in the game and a willingness to drive the business in 2021, despite the fact that the DHSC judicial review claim was already in play prior to the IPO.

Whilst ABDX needs some good news to turn its fortunes I do feel it is about when rather than if. Yes, the share register was late in being updated but there are also valid and plausible reasons as to why a seller exists outside of the lock-in arrangement and the DHSC contract was deemed important.

My view is that the AVCT contract alone can bolster the business outlook in their new financial year (so from July) and they have other outlets for business too. 3 assays moving to large scale manufacturing remember + whatever AbC-19 can offer.

What I don't see is a conspiracy or unhand dealings. ABDX had a lot of debtors pre IPO and that does need to wash through somewhat but even then many of them have agreed to sit tight until at least the end of 2021. I'm happy to do so also.

The shareholder list now updated and states Touchstone still holding which (if indeed correct) is interesting because they were the ones that had the 3-month lock in ending in March. All directors and concert party holders (see page 99 of the Admission Doc) are as they were.

As I say, this assumes ABDX have established actual holdings. If Touchstone were selling then they could get away without saying anything until they were done.

In April 2017 BMN completed the purchase of Vametco from Evraz and were the proud owners of minor interest in the facility due to the need to avoid an RTO.

SP on completion was 8p and the price of vanadium was c. $27.50 per kg FeV.

In Nov 2017 the company agreed to buy the 55% of Vametco that they didn't own from their partner Yellow Dragon. This was an RTO and completed on 21st Dec 2017.

Share price post completion was 8.75p and the price of vanadium was $44 per kg.

In March 2018 BMN raised $22m in a fundraise that brought in a consortium of cornerstone investors including LionOre and led to the appointment of Michael Kirkwood as Senior Independent Non-Executive Director where he remains today.

Share price post completion was 13p and the price of vanadium was $72 per kg.

In amongst all of that was some dilution which does skew things a tad but even after securing a full 78.8% holding in Vametco, the highest it ever, the share price barely budged north of its March 2017 position even though the vanadium price had increased by 60%.

For whatever reason, it was the timing of the March 2018 fundraise that really kicked things off. However, even then the SP managed to hold at as low as 8.3p on the 5th March even though vanadium prices were already at $63 per kg.

Post 26th March everything went nuts and the rest as they say is history.

The point is that even back then as BMN was adding ownership and the vanadium price was surging the SP struggled to gain traction. But those that waited long enough gained the rewards delivered by that pent up energy in the share price.

Back then BMN was an array of complicated finance deals with parties that had no intention of staying the course. The deals, the facilities and the market were poorly understood. If anything 2021 gains from the journey that 2018 took us all upon. So the depth of education shouldn't be as necessary.

Nobody can predict the market or the way that it will move when developments come along. All we can do is hit the targets that we research and wait for everyone else to catch up. BMN is in a far stronger position than it was in 2017/18 and is succeeding in 2021 more than it is being recognised for. It doesn't have to be a big conspiracy or something we have missed. We are allowed to be ahead of the crowd. That's how we ultimately win. The hard bit is maintaining belief and staying the course. Some didn't achieve it in 2017/18 and they wasted much hard work and regretted it.

This time around the complexities lie in the energy storage side of the story and not the mining of the vanadium. But the same rules apply. Hold or walk, stay or go. Each must decide for themselves. I'm going nowhere.

It is easy to understand why Acacia is so keen to back Enerox.

Enerox with their $30m of support must in my view ultimately be the tech partner for any localised VRFB assembly and manufacture. It was after all a techno study conducted with the IDC, alongside the one completed for the electrolyte plant and look where that ended up.

FM always said that local assembly would come when the demand warranted it and if I remember correctly that started at c. 10MW. My view at the time was that this was connected to the Eskom contracts but since the mini-grid project was conceived and Enerox got involved and were acquired, the industrial sector angle looks to be the correct one.

This is compounded by the IDC webinar comments from the other week that stated that the industrial sector angle was the focus.

Let's see how it plays out but it should now be a very busy run through to the electrolyte plant commissioning.

It is a truly significant and great day in the world of Bushveld Minerals wherever the share price is and decides to go.

The ramifications for the electrolyte plant, local VRFB assembly and the entire vertically integrated value chain that BMN is building are simply immense.

I saw a lot of promise even in the 10MW threshold but it would have meant scale would have to be worked harder for.

At 100MW the opportunity just went orbital.

The benefits won't be seen today but now BMN has a truly inspiring goal at which to aspire to and all of their moves on the energy storage side in S.A. moving forward have renewed meaning and promise.

I am delighted that I understand this story enough to appreciate what this development means. Many won't which is why the SP won't react strongly but all that truly matter is that I get it and I know where it is ultimately heading. The rest can catch up when they are ready to.

This is the day that the BMN strategy kicks in and as is always the case in S.A. the results (eventually) keeping falling BMN's way. It will now be interesting to see just how closely the Vametco mini-grid license follows this news.

A really great day in BMN's VRFB world.

Thank you that is very clear.

Like I said earlier I think the JSE listing looks much stronger now that the S.A. commodities market is gaining a stronger footing.

The assumption is that BMN would seek a listing on the main JSE board and not the AltX.

If so then something would have to be done about the current listing in the UK.

The company spent c. $1m on the JSE listing to date so I expect them to follow through with it. I will be interested to see how it is dealt with in the upcoming FY report.

In the meantime, BMN life goes on.

I haven't read that there is a requirement to be on the UK main market in order to list on the JSE. I would welcome evidence to the contrary if it exists.

@Benalder I think JSE happens sooner rather than later for BMN. In this emerging commodities bull market, the timing could be perfect. The S.A. mining and quarrying sectors grew 18.1% in the 1st quarter and S.A. overall GDP was up 4.6%.

Mining in S.A. is back in flavour and that makes a JSE launch all the easier to achieve. But I am talking BMN here and not BE.

On the IDC front and those levers that FM always talks about and are clearly centred around the influence of the IDC.

The recent announcement that S.A. intends to deliver a masterplan,

"with priority being given to those primary materials, components and subcomponents used in the manufacture and assembly of the renewables technologies outlined in the Integrated Resource Plan of 2019 (IRP2019), including solar photovoltaic (PV), wind and battery storage."

plays right into those hands and the focus that BMN has on local beneficiation. Yes they have more barriers than many other jurisdictions have and Minister Mantashe fills no one with confidence but the message is that these industries are needed to help phase out coal whose influence is strong within the ANC.

I don't believe for one minute that BMN hasn't helped influence this through their ties with the IDC. Just the same as the mission that encouraged Eskom to go down the battery storage project route which was also proven to be led by the IDC.

This is merely the next leg be it that the S.A. wheels turn vers slowly at times.

https://www.engineeringnews.co.za/article/masterplan-to-position-south-africa-as-globally-significant-renewables-manufacturer-2021-06-08

@Paul150 I don't know is my best answer.

I see some mileage in spinning BE out and going public. It would give the business the ability to valued better and allow directors etc to be rewarded, whilst allowing investors better access to owning it.

That doesn't mean I believe it will happen. BE is an enabler and until it delivers more concrete regular income then it's difficult to see how that would happen. S at best I remain open-minded on it.

My view is that BMN sees itself as a South African company and so naturally leans towards that market and a JSE listing. I am grateful that I can still invest in the company and trust I will always be able to do so. Mikhail Nikamorov may see BE's future on a different market. No conclusion just thoughts.

One other thing I would add.

Those that watched the recent IDC webinar will note that the essence of their message was that companies could secure loans from the IDC so long as they can demonstrate that they can pay it back.

BMN has had ample opportunity to pay down the c. $5m in debt that they will require to fund the electrolyte plant. They don't need the $5m more than the 45% could deliver for them in the future. So why are the IDC still involved?

According to the IDC the partnership is pioneering in its goal to deliver electrolyte manufacturing to S.A.

BMN secured their partnership with the IDC in 2016 when they were a junior miner with no mine. Better still the deal was actually with BE who had only been in existence c. 6 months. Or so we were told. How did little of BE secure a big fish partner like the IDC?

In addition, the official announcement of the partnership with the IDC came just 2 months after BMN announced they would purchase Vametco from Evraz.

The partnership led to a techno study to establish the business case for electrolyte manufacture and VRFB assembly in S.A. There's no point in studying an electrolyte market if there's no mine to feed it.

Everything happens for a reason. The IDC is sticking around for a reason. This is no loan to a company that cannot exist without it.

What we see is an electrolyte plant beginning to be built but what it feeds into is a completely different thing altogether which we won't know about until it's ready to be explained to us.

That may not be to everyone's liking but that's how BMN ticks and to date, they have delivered. Leopards spots etc.

Example.

Invinity systems c. 18.6MWh of contracted projects and $22m in cash at end of April with scope to increase production to c. 120MWh = £120m MC

Enerox H2 2020 order of 13MWh (70% of IES) and $30m of capital to invest and scope to increase production to c. 120MWh.

What value to BMN at 25.25% ownership?

The numbers alone say it's c. = £25m but it's not listed so not concrete. That doesn't make it jam tomorrow. That 13MWh of projects is real and was generated before the $30m of investment and whilst the company was in a transition from being wound up to being under new ownership.

The noises and links around Portliner are real it's just that the general market doesn't know about them yet because generally, it won't look deeper than an RNS. With more tangible news comes more recognition but the achievements aren't any less notable just because the market hasn't seen them yet.

The electrolyte plant is costing around $10m to build + all work associated with getting it to build ready status. So another £7m. 55% goes to BMN. So we are at £29m just on what we have today. The preparation phase.

Total BMN valuation at this time now just £180m. At $40 per kg vanadium and 4,100mtV is that £29m priced in?

Both were paid for through an initial $5m investment in Invinity. So total costs were c. $5m (£3.7m) and the company received a 55% holding in an electrolyte plant and 25.25% of Enerox. Is that effort jam tomorrow? Is that business acumen priced in? Not yet but it will be in time.

The same happened with Lemur and Vametco. The deals far outshone the market reaction because they were complex and difficult to follow and predict what they would mean further down the line. But further down the line came and the recognition did kick in.

A leopard doesn't change his spots for good or for bad. The long game is the game here but the end goals are so much closer than they were and are being supported by the vanadium price we see today and not hope for tomorrow.