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@bopd Firstly thank you for sharing your research. I have tried to locate the page you have highlighted but without success.

A couple of points I would raise though, which may be relevant.

Firstly, it was October 2019 when HMI announced their intention to change their accounting date from 30th June 2019 to 31st Dec 2019.

Secondly, I would expect as a public company, no matter what the requirements may be of the Brazilian government, information cannot be published without first having been audited and made available to all shareholders.

Thirdly, I would expect that all data recorded with such authorities is historic and the last known published set of figures.

With that in mind, I would expect that the trading figures issued in the final results are likely the most relevant cross check point. There it is stated that HMI achieved c. AUD $1.673m in revenues.. The exact timing of sales is not known but the average US/AUD exchange rate for 2019 was circa AUD $1.44.

That gives a US $ figure of $1.162m

At $48 per ton sale price, that would equate to 24,204 tons. That figure is not all that far away from the figure you have provided. The exchange rate fluctuations and sales prices alone could justify the small difference but there is also the question of when cash on hand etc was recorded in each currency.

Like I say, I would welcome the chance to see the exact page in question but it feels very much like the records relate to the previous 2019 sales, which ended 30th June 2019.

I have been on these boards a long time. Interacted with a wide variety of individuals and been accused of being many things to many people. So not much surprises anymore.

The last paragraph says we because it’s a quote from HMI management, which I clearly highlighted as such in my last post.

This statement has been made in a shareholder Q&A and a trading update, both of which have been released under RNS. Therefore why do we need to question it? Pull it apart or seek further reassurances?

The company is saying it sold 50k in 2019. If so that is considerable progress in comparison to 2018 and that fact, that progress, is not alone.

They have a full mining license, 320kt production capacity, their product far wider proven in the market, an active sales team and have $400k less weight to carry in costs.

They are clear they need no further capital from me, a shareholder. They are so cash rich they feel it acceptable to go out and purchase 18,000 trees to make themselves carbon neutral, which is yet another signal as to where this company now stands and how it feels about its future.

Just takes a bit of trust to see it.

@bopd Good morning. Whilst i appreciate that you have first hand knowledge of product with HMI, I would nevertheless caution that prices in May 2018 bear little relevance to today. The business is a completely different animal now.

The 2nd Dec 2019 update is the most relevant point and the one the company is using to communicate its break even point.

"Sales for past 12 months are ~50Kt, equivalent to breakeven at profit before tax level

Sales price maintained at approximately BRL200 per tonne (US$48/t allowing for variations caused by exchange rate movements)"

With regards to the price being dropped to capture market share, I see the validity of your point but the company is clear that they are on the right path. It is the valuation the market is giving the company that is currently out of sink here.

The 2019 message is that 50k tons sales were achieved at that price. That the vast majority of customers are expected to return in 2020 and orders from them should in the main increase.

Two things that need to be recognised.

1. Margins will be reduced if the BRL price is maintained, be it temporary or more long term.
2. The break even point has been adjusted by the change in the BRL rate but the US $400,000 in costs savings more than counter this, even at the inflated BRL rate of c. 5.15.

What I find most interesting here is that they have been able to achieve 50k in sales with 68% coffee sales. Given the fact that coffee is only the 4th largest market available to them behind soybeans, maize and sugar cane, means even limited market penetration that matches the achievements in coffee, can lead to a substantial uplift in yearly sales.

Point of reference 6th Dec 2019 shareholder Q&A

"The reason coffee is so strong at the moment is because we have been working with coffee producers since we started the project so have more test results and established more relationships. We expect that this will evolve over time as we get more results from other crops."

Bottom line here is that HMI needs a PR injection or to reach tipping point in information flow, to compound the arguments they have been slowly putting together.

A £5m MC is just tragic given what they have achieved. Yes they have made errors. The handling of the interims from March 2019 were a disaster that they to date have not recovered from.

But that does not take away the progress and even if they continue to make a small loss, they have stated quite categorically that they are able to remain self sustaining for 2 years, even if Corona causes delays to things.

I have made an argument for a brighter future due to import supply problems and cost increases. Cost increases HMI won't have affect them because they are local.

A £5m MC juts doesn't cut it even if the BOD have trust issues. The facts are there to see that progress has been made. The cash on hand over the last 6 months proves it.

@bopd the following statement from the 2nd Dec 2019 is key ;

"The Company's total annualised costs, excluding one-off costs, are currently approximately US$2.4m. The average sales price of KPFértil is BRL200 per tonne (±US$50/t allowing for variations caused by exchange rate movements). Accordingly, based on the average sales price and total costs, to reach breakeven the Company would need to sell approximately 50kt. "

So the product price is held at BRL 200, whatever the exchange rate fluctuations.

That means in theory that HMI needs to sell more product to hit their breakeven because a number of costs are in denominations outside of Brazil.

The 2019 accounts demonstrate at least 41% of the costs (cost of sales) look to be in Brazilian Real.

That would indicate that up to 59% are external, likely in AUD.

The AUD is currently running around 15% stronger against the Real than 2019 ave. So there is an argument to be had that 60% of the said BRL 200 (BRL120) is running at 15% higher. So an additional BRL 18 per ton is required to cover AUD related costs.

At 50,000 break even previously, that would be 50,000 x 18 / 200 = 4,500 tons.

A very simple calculation but an indicator that 50,000 became c. 54,500 break even.

However, my points this morning related to the perception HMI finds itself under, in that bad news must lead to punishment of the valuation but good news needs to be ignored.

In their 17th March update HMI stated ;

"Total permanent annual cost savings of approximately US$400k have been identified and implemented"

"All savings are from "general and administration" categories"

"Further cost savings expected to be made during the year"

There is an argument to be had that these costs (general and administration) are AUD denominated and so should be removed from the 60% non Brazil linked costs.

Even if they aren't, based on the previous price guidance of BRL 4 per US dollar, that reduces the break even by 8,000 tons.

So simplistic calculation that it is, we are talking a c. 3,500 ton net gain based on these two fundamental developments with more savings expected during the year.

However, I return to my initial statement regarding sales and demand. 50,000 ton is merely a marker in the sand and said 4,500 tons shouldn't be all that great a focal point in the end. Example being $2.4m actually = 48,000 tons.

The 150% increase in sales for Jan/Feb, as early an indicator as it is, is still an indicator of substantially more demand. Even a third of that increase feeding through to the whole year, would deliver more than enough progress, to demonstrate a self sustaining model.

The words from the company today repeat that message. They are self sustaining and expanding. Hence why I believe the exchange rate fundamentals work far better in their favour than against.

Note - The numbers i have generated are extremely simplistic and merely a guide and nothing else. DYOR

One final point on that. I have heard the criticisms of the HMI product and its performance in comparison to established imported fertilizers and i remain open minded.

The company has reported a high rate of repeat business, which is encouraging, be it price or performance led.

What is important to recognise here, is that this Covid outbreak has and will go on to demonstrate, just how reliant countries are on international supply chains and how easily they can be removed, when those countries supplying to them, run into trouble.

So there is a strong case for countries whose key industries (such as agriculture is to Brazil), are so reliant on imports, revisiting this set up and beginning to look inwardly/locally, to find a means to avoid such reliance in the future.

HMI as a local supplier in the heartland of said agriculture, is a prime example of a company that would gain from such a move.

@f15jcm Indeed but first and foremost this is about demand and sales. HMI is already able to demonstrate itself to be considerably cheaper than imported fertilisers. The problem to date has been proof of concept through implementation by customers and the time needed to achieve that.

We are now one year further down the road with a much wider customer base, in a market where those sitting on the fence, are now staring a +20% increase in import costs due to the deterioration of the Real.

I don't see that situation improving for the foreseeable future. This is compounded by the fact that we are now just 1 month away from the main buying season starting for coffee and sugar cane, with other such as soybean to follow shortly afterwards.

Some farmers may still see imported fertilizer as their preferred option but can they now afford it or are the benefits still there, at such elevated prices. Further interruptions to the supply chain will further compound price increases as more customers fight for less supply.

HMI is local and available. Their only problem is staying in production, which is an unknown to date but as I said earlier, if farmers cannot obtain fertilizer when they need it, then local supply may be deemed critical for the economy.

Its a theory more than anything else but as investors seek out companies that are directly linked to the cure for Covid, the smarter longer term move, may well be to seek out those companies that feed the most critical supply chains of all, our food lines.

Finally, Brazil has been slow to react to the Covid outbreak and may well pay dearly for this but one thing is for certain, their president will fight the shutting down of industry critical to the economy, with everything he has. So HMI's chances of at least supplying stock piled material through this, is higher than in a great many other countries.

Plus at the end of the day, it isn't difficult to mine or indeed to process. So at a time like this, they could be being presented with a golden opportunity, which if nothing else will help them get their product more widely known.

So yes exchange rates into pounds etc is also important but first and foremost this is about sales and they could receive a real boost from the Real and perhaps Covid itself.

(2 of 2)
I am by no means attempting to say that HMI is the best stock since sliced bread or that they management team are perfect or haven't made mistakes.

However, what is also not deserved is the current valuation.

If HMI was sitting at £10-12m in value, I would be saying its cheap but its understandable why. Prove yourselves please by achieving it, then lets see what happens.

However, at £6m, the business isn't being accepted as break even on its business. It is barely being accpeted as having its cash in the bank and is certainly being ignored for what it has cost to set the mine up, push it through its various permits and feasibility studies etc. I accept that further investment in the mine, storage etc sits outside this break even and so taints the numbers and that affects their standing in the investment community.

However, said investments also add value. In addition, they demonstrate that HMI sees the future sales that it so often avoids commenting upon. If not, then why do it to yourselves? Its not bravado or sticking their head in the sand. 2019 has proven that the existing facilities can handle 50,000 tons. So if the future bigger sales aren't there, then why expend monies that push you closer to having to raise cash, when you don't need too. Again more signals.

It may well take this year to demonstrate that the business is achieving what they indicate they are going to. Even longer if Covid has an influence. Whatever the case, I see far more value here than the current valuation, such that I have even added today.

If they get it even half right or better still deliver even more due to the influence of Covid on imports and their prices, then today's valuation is a fraction of the true value, such that the wait for me will be worth it.

(1 of 2)
Long term holder here who post 29th March 2019 Interims results, decided to give the company a chance to see their plans through before judging fully.

Whether investors like it or not, HMI is tainted by the strong perception that management is bending the truth for their own gains. That they are simply taking a pay packet and perhaps running some sort of lifestyle company. This is driven by what is the biggest issue here, a lack of forward guidance and forecasting.

This view point has become so strong that all evidence to the contrary has effectively been ignored by the market, however much it has mounted up.

One clear example of this is today's update. There the company has reported a 150% YoY increase in sales up the end of Feb. Some will ask why can't they forecast this out to future revenues? Well whilst that may have been appropriate before, it is now unfortunately inappropriate given the true impact of Covid on the world, at this time, is unknown.

Whilst the first 2 months of the year are assumed to be the lowest sales months, all the company can do right now is better what they have experienced to date. A 150% increase in sales, however low they were previously, is worthy of note and should be a signal for things to come.

A simple add/subtract of the previous H1/H2 2019 figures (Note HMI changed their reporting date), shows HMI achieved c. AUD $580,000 H1 2019 sales, which at the then US$ exchange of $0.70 = $405,800.

At the reported $50 sale price, that equates to c. 8,116 tons.

We don't know how many of those tons were sold in Jan/Feb. However, it is also important to recognise that whilst the bigger markets of coffee, soybeans and sugar cane, are May to Oct, there are still some crops that are purchased in the earlier months of the year. See slide 10 below.

http://www.harvestminerals.net/media/1316/hmi-presentation-q3-2019.pdf

Now it would be wonderful if HMI could release a YoY update every couple of months, so that investors could get a better feel for how things are developing. However, progress in my eyes is clearly being made.

If they can maintain even half of that progress through to the end of June, they will be running at 20,000 tons prior to the really big trading months.

On the lifestyle side of things, I am encouraged by the decision not to issue performance shares. I have seen bigger companies push these through on worst performances. I am also encouraged by the US$400,000 in cost savings.

This year it is likely c. 45,000 tons (savings instigated post start of year).

So the signals are there that HMI can better 2019, if they can maintain production and sales.

My feeling is the vast majority of businesses will be affected by Covid. However, the indicators on imports being affected and more expensive, lends itself to HMI being encouraged to maintain supply, particularly if they can stockpile ahead of Summer.

@James I am about to go out now and will likely be busy for much of the next 2 days, so a detailed response is difficult right now. I have had a quick look and am slightly confused as to why the already accounted for 2018 tax liabilities would be a consideration for the reported cash position as of June 2019. The tax liabilities have been adjusted in the interim accounts, which would lead me to believe they are not part of the current cash position.

Perhaps I am misunderstanding something, it has been known.

"An unused credit facility"

BMN has substantial cash reserves and an used credit facility even before any profits for H2 2019 or indeed Q1 2020, are taken into account. Be it that these weren't along the same lines as H1 2019.

Said cash reserves will also be making money through interest and likely investment.

They also have a minimum of 360mtV of reported inventory, when deducting the 80mtV of product that is being shipped to Redt and installed in their projects.

So in reality we are talking minimum 440mtV of additional sales, that can be employed to counter any shut down and/or maintenance periods.

What price they achieve is open for debate but sales have the ability to at the very least, offset costs for running the business.

They also now have a very favourable exchange rate that will drive far lower costs when they do re-commence operations and the fact that Rhovan is also shut, means that supply will be severely dented, which supports a better balanced market, post COVID-19.

These facts do not take away all the pain but they give the company considerable wriggle room, such that even an extended shut down, would not be too detrimental for BMN.

I doubt anyone of reasonable intelligence really believes that BMN will fail because of this development. Those proclaiming they will, if indeed well read, are clearly looking to take advantage of the situation.

That time will pass, be it we have much to live through first. For those that choose to remain invested, this is time to double down on what you know, monitor developments as they arise and try one very best, not to be infected by the immense noise that is flying around right now.

What we need to see is a clear plan of attack from BMN on what they will do to ensure that the business remains in the very best of shape through this period. I am sure it is being prepared and if it needs a few days to finalise then that is fine because BMN is about far more than its processing plants in S.A.

What we also all should try to do is be realistic about what is happening here and base as much of our discussions as possible on actual facts (my attempt at production costs duly noted).

The reality is the figures from the May 2019 presentation do not break down the difference between the production cost and the cash cost, enough.

The production cost "Excludes depreciation, royalties, selling, general and administrative expenses" but the overal cost breakdown includes a 13% figure for royalties and taxes together.

If we then employ the cash cost and then deduct the percentages from there, then we have to establish what the "sustaining and non-sustaining capex and exploration capex" are, which aren't mentioned individually in the total cost breakdown.

I do feel that my figure isn't all that far away because the production cost is what is key here. However, I will not try to break it down any further for risk of confusing anyone who reads it.

I feel strongly that the costs to carry BMN through a staggered 3 month shut down in 2020, are not all that problematic for BMN to cover.

I say 3 months because for all it is simply not feasible that one 3 week shut down can snuff this virus out. If it does indeed becomes stop start, then a window of opportunity should open up for maintenance and inventory sales.

Important to remember that Rhovan is also shut down. World demand will be far lower for the foreseeable future but supply shut downs will help keep the market closer to balance, than it otherwise would have been. A silver lining so to speak.

Back to the drawing board because it is more complicated than that.

We need to consider a mixture of the production cost and the total cash cost.

I will review

Sorry please ignore that last post. My figures are completely wrong as I have employed the wrong starting figure.

Good morning everyone,

No doubt a good few investors are searching for information to establish what this shut down truly means for BMN. The first port of call for me needs to be the fixed costs that can be expected. That being the costs that must be paid each week the processors are closed.

Enclosed below is the May 2019 presentation. Slide 13 offers a breakdown of Vametco costs from 2018.

Total production cost per mtV in 2018 was $19,700 with 2,560mtV being produced at ZAR 13.20

A few broad based figures and assumptions ;

During a shut down a strong argument can be made that the following costs fall away ;

Raw materials
Auxiliary materials
Royalties Taxes
Selling expenses
Depreciation

With social expenses, energy, auxiliary materials and electricity all being reduced by a percentage.

G&A and salaries & wages are debatable but at this time I would allow full costs. I would also leave in Other as a means to play it safe. i.e. higher costs rather than wishful lower costs.

Those 3 together amount to 30%

From the other 4 partially reduced costs stated above, which together amount to a further 28%. I would reduce these by 2/3 given the majority will be vastly reduced with social costs likely maintained or perhaps even increased.

So total ongoing cost of around 39%, which I believe to be high.

At $19,700 per mtV x 2,560 x 0.39 = $19.7m

However, as I have been attempting to flag up these last few weeks, the exchange rate today is not ZAR 13.2, as it was in 2018, it is as of day 1 of the shutdown, ZAR 17.60.

The majority of the included costs stated above, are South African based costs.

So there is a potential 33% reduction in costs to be had, although it is of course never that simple.

If so, then the Vametco cost could be around $13m. Add in maximum one third for Vanchem and its c. $17m

I would throw in maximum $3m for head office expenses, not copvered by Vametco.

So we are at base case $20m and that is without lay offs, without government tax incentives/support and I am being deliberately conservative on the figures.

That figure is 1 full year of costs. If we reduce it down to a worst case 3 months, then we are talking $5m.

I posted on 11th March that after all current costs for Redt, Enerox, and Vanchem were removed from the balance sheet, BMN has access to around $44m (note I missed the $3m paid to YD and so $47m became $44m).

So on this very crude basis and it is just that and I would welcome further input from others, we are talking 3 months of costs at $5m vs c. $44m in bank.

So the actual shut down should not hurt BMN or its shareholders too much, be it it will create anxiety. That anxiety is best removed by establishing the facts as best one can and removing as many unknowns as possible. I trust the company will further enforce this shortly.

http://www.bushveldminerals.com/wp-content/uploads/2019/08/May-2019-Corporate-Presentation.pdf

Hello Bella6532, I trust you are keeping well under the circumstances.

The reason why S.A: has had to go so hard at this so early, is the poor general health of its citizens, be it through HIV, TB or general poverty. That is why I applaud the measures being implemented by President Ramaphosa because the decisions are based on the health of their citizens and not the overall economy because right now, that has to be the focus.

If they don't do that, then their death rate will dwarf anything that Italy could ever get near.

I tried to ease the BB into this this morning because I could see clearly that it was going to come. Not everyone may have cared to take the time to read my posts, but if they did, then perhaps this announcement comes with a tad less shock attached.

The key here is that this is going to happen to a great many businesses and to survive, companies have got to have very good balance sheets. BMN has that and so should be able to see this virus out and be stronger for it on the other side.

There are a great many much bigger miners out there, especially in S.A., who are leveraged far more heavily than BMN are and some of them are going to fail.

That means that picking the bones out of the supply and demand profiles of various minerals, right now is almost impossible.

What now is about is survival and what it means when those companies come out the other side.

Wherever the SP drops to tomorrow, it isn't the real story here nor what is most important because it will be based on an immediate reaction, just like much of what we have seen in the markets, since this virus appeared in our world.

All that matters right now is to survive to fight another day and in doing so execute the parts of the business, that allow BMN to succeed the most in the future, which means anything and everything associated with energy storage.

Sorry replace fairly easily with fairly comfortably. It won't be easy but they have finance behind them.

The exact details of what businesses will be allowed to do during this shut down have still to be made clear and the very best source for that will be the company themselves. So an announcement is to be expected shortly.

The words used by President Ramaphosa were "care and maintenance," so there is potentially room for BMN to bring forward the maintenance programme at Vametco.

It is also important to remember that the government has stated that businesses will be supported through tax holidays. So given that BMN is debt free and has cash in the bank, they should be able to ride out even an extended shut down fairly easily.

The leadership will be working from home, so deals such as Redt and Enerox should be able to continue, so long as the counter parties are able to operate also.

This shut down will come with a cost but it is more than manageable for BMN, given their financial strength. As I said this morning, they have the capacity already in place, so the drive is on the ergy storage side of things and those are corporate items right now, which should not be affected. That said, any business being forced to close temporarily is never a positive but these are extraordinary times and the vast majority of the businesses of the world will be doing exactly the same thing, be it now or later.

Like I also said this morning, Rhovan is also in S.A., so vanadium production is going to take a big hit, be it inventory may kick in first of all. In the long run, given the clear demand drops, it is no bad thing to see market supply also temporarily curtailed, be it hard to see clearly at this early stage.