Another important piece in the evolving jigsaw. The price of US FeV now averaging over $29 per kg.
Also important to note that the "price of vanadium pentoxide increased to 6.5-7.5 USD/LB V2O5," which gains more relevance now that we know that Vanchem will be producing such a product.
"It is expected that it will be difficult to fully recover the domestic start-up and logistics in the short term, and the price will continue to rise in the case of poor supply."
In this phase of BMN's early life, it all about maintaining profitability in order to expand and secure market share, while it is possible to do so. All of which means that current resources remain sufficient to achieve publicly stated plans.
Right now, BMN can be profitable at these pricing levels, which represent at least 80% of their reported global market, with the remaining 20% likely falling into line with these market movements.
Continued daily analysis of share price movements are in my opinion, not healthy and lead to sustained disappointment.
The bigger longer term picture is what is important here and that remains fully intact. Profitability whilst said picture is produced, eliminates a well known risk, which is certainly positive in my eyes.
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At 3p a share buy in, that equates to a conservative 270% return over 2 years.
ACP has more than enough quality in the asset to achieve far better results than this but I don't need to push the parameters to see a very good result. So any further upside can be treated as a bonus and can be reviewed as time goes on.
The most important thing is that the capex remains low, because it vastly reduces the total dilution and makes buying in at these sorts of levels, all the more compelling. All of which is built on the one key question, which I feel strongly has already been answered, that the future market will be there. For me it is abundantly clear already.
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I have built up a sizeable position here of late and the latest drop is of little medium to long term concern for me.
My reasons are simple. EVs are now fully bedded into car market dynamics, driven by the fact that customer mindsets have changed and will not be changing back.
Now it is about the market's ability to expand and widen its raw material supply, to capture the market as it grows.
There are now countless examples of big car concerns adapting their products, implementing supply chain strategies and signing deals, to ensure that the batteries will be there when they will be needed.
Therefore, those potential mines with the highest grades of material, are going to be the first to be gobbled up, be it through production and off-takes, or takeovers.
Whatever problems ACP has had in the past, its graphite mine is far more significant than that past. If the expansion of the EV and energy storage sectors is accepted, then the move to production/sale, for ACP must also logically be accepted.
It is merely about timing of entry and the ability to capture as much a stake as possible for the least amount expense.
I have entered in this period because I believe 2020 is a watershed year, that will be led by investors recognising these assets for their importance and accepting that today's commodity market prices, do not reflect the future. That is in part, why we continue to see off-takes being signed for these new potential mines.
My view is that 2021 is a tad sporty and so believe that early 2022 is more likely.
Even if project finance for the whole project remains constrained, at such a low capex requirement ($35m known to date), this investment can afford to take on circa £15m in new equity (so 50% of the full capex) and still be a very attractive investment, when production starts.
Right now, I expect there to be around 900m shares in issue by the time production starts. That is based on 400m shares being raised for the project finance and the circa 95m in warrants being fully exercised. Those warrants alone deliver ACP around £2.3m in working capital, which I believe would see them through to production.
The 400m in equity raise would equate to around 3.75p a share. Given that the off-takes, Mining Permit and feed study, are all still to come prior to the finance being closed out, I am clearly being very conservative. However, it is best to be so when looking at mining investments, prior to production.
At 900m shares in issue, I get a minimum 49,000 ton graphite mine with all in operating costs of around $450 per ton (again safe), extracting front end (Years 1 - 5 minimum) 15% TGC graphite, with every chance of delivering considerable higher jumbo and larger flakes, than demonstrated in the scoping study.
Even at $1,000 per ton prices, we are talking $30m in EBITDA. That's enough to deliver a +£100m business, delivering me 11p a share.
“Next week, it is expected that ferrovanadium plants will gradually resume production, and some ammonium metavanadate and powder enterprises will gradually start construction. The supply of vanadium market will move to the buffer stage, and the logistics of various regions will still be limited. Therefore, next week, it is expected that the spot flow of vanadium market will still be tight, and the price may continue to remain strong in this atmosphere.”
I agree the presentation has been put together very well and there is much for well informed investors to get their teeth into. However, what we are lacking right now are future milestone dates for when these things are actually going to happen.
That statement does nothing to diminish my interest in the company and its future. For me it is very exciting. Especially if the Vanadium price forecasts for 2021-22 actually come to pass, which are eye opening to say the least. If vanadium hits anywhere near $75 per kg in 2022, then at +4,500Mtv, BMN's valuation is going to rocket.
In the meantime, there are a several really good avenues for growth on the table but we do not know when they are going to start adding to the bottom line. One key example of this is the electrolyte plant, which has been in play for some time now but does not have a commercial production date.
I recognise that when it comes to the VRFB investments, the deals have not been closed out and even when they are, the emphasis will be on the individual companies to drive project wins and therefore vanadium demand.
The same applies to Vanchem, which should have more meat on its bones by the time we receive the Q1 2020 update.
However, there is a feel of caution in the presentation, with one or two indicators of what the BMN team expect but are unwilling to divulge reasoning for.
As for the price forecasts from Roskill and that $75 per kg in 2022, note 1 says ;
"Roskill forecasts assume that all announced projects under development will come into production"
They already have the market at a deficit right through to that period and there is no way that all projects under development can possibly get built. Right now, the volatility of pricing seen this year, has already the pure pay projects included there, back another year if not more.
These observations are not designed to be negative, more realistic about what those that are invested or well read, know, compared to what the wider market is able to appreciate.
In addition to BMN, I am a keen EV metals investor. I believe that both markets are now on the cusp of the wider market finally starting to get, that all of this EV and energy storage talk, can no longer be passed off as a fad. Its happening. The change in consumer mentality has already happened and it isn't going to reverse.
Its now all about when and not if, so however reserved BMN continue to be, it won't truly matter in the end. Just keep on producing the goods, build the story, build the assets, and eventually those two elements will join in unison and it should be quite a show.
As far as I see it, the issue with Coronavirus is not the mortality rate. As things stands, it does not look all that serious on that front, be it people are losing their lives.
What this is about is disruption to the Chinese economy led by its leaderships draconian approach to tackling the virus. Right now China is still battling to contain its spread, which means they are having to enforce lock downs on a large portion of the population. All of which has taken place, shortly after a very large portion of the population has traveled great distances for the Lunar holiday.
That makes it very difficult for workers to return from their homes and start back at work. The situation is then amplified by the need to prevent people from gathering together. So sending workers back to work under those circumstances, is a very difficult decision for the government to make.
Add to this issues with the import and export of goods and materials, driven by a reluctance to send crews into Chinese ports, for fear of being quarantined, and things start to get even messier.
The situation cannot realistically change until the infection rate is brought under control, which right now is clearly not happening.
These things have a tendency to be exaggerated and indeed proclaimed to be more damaging and longer lasting, than the actual reality. However, a number of weeks of further disruption looks very much on the cards here, which will have ripple affect through the Chinese economy.
Nobody should ever wish to make money out of situations where people are losing their lives. For me, the sooner this virus is under control the better.
However, what is happening on the ground at any given point in life, is what it is and comes with consequences. I have been following the Coronavirus closely these last few weeks and for all the weight that the Chinese government is throwing at it, containment looks some way off.
That's not to say that we are facing Armageddon here, as some very well followed social media figures would have us believe. Its not about that, its about the measures being employed to prevent its spread, a spread that is extremely difficult to contain.
In my opinion, the best hope the Chinese government has is warmer weather, which may mean that some of these measures must remain in place right through February/March. What is certain is that everything isn't simply going to go back to normal next week. It looks very much like the disruption will continue well beyond the Lantern Festival, in some shape or form. A situation that for many minerals supplying into China, is a negative. However, for those reliant on Chinese export, the situation is the complete opposite.
And here's the article for those that do not have access to Twitter.
A must read for all those with an interest in vanadium and BMN.
A must read for all vanadium market participants.
"It is expected that the vanadium price will still rise before the outbreak is not completely controlled and during the subsequent recovery buffer period."
Clear evidence of the extent of the issues being created by the Coronavirus.
Remember China produces more #vanadium than it requires. Therefore, the global market currently has an added supply problem. #BMN
One last point from me before I retire for a beverage or two.
In the latest Q4 update, BMN listed the following under the Bushveld Energy 2020 priorities ;
"Submit bids for Battery Energy Storage Systems opportunities as part of South Africa's Integrated Resource Plan."
Without wishing to blow too much smoke up the BMN teams rear end, I don't believe there are many that would argue against the fact, that BMN's management have very close ties to the S.A. government and the associated bodies around them.
Firstly, this is clear through their association with the IDC, the investment arm of the S.A. government, known to have influence at a political and regulatory level.
Then there is the demonstration battery at Eskom, which directly links BE to Eskom.
The IDC are BMN's partner on the electrolyte plant and that demonstration battery. They will also likely be the partner on any future VRFB assembly and part of me is convinced, they may well step in the consortium for Enerox. So it is in their interest to influence those that prevent BMN from achieving its plans in S.A.
Has nobody else ever wonder how easily and so timely, BMN received its Section 11 Ministerial approval change of ownership when it bought out Evraz? Given how long it is still taking to achieve the same at Brits.
For all of their nice guy outward appearance, there is a far harder edge to BMN and in particular FM's inner workings and deal making, than is shown to the markets.
So when they include that sentence as part of the priorities for 2020, then it has some meaning because it likely isn't based on guesswork or hope.
@Berserker I haven't really ever bought into the significance of the JSE listing but I have been supportive of the reasoning given for it. They are South African resources and South Africans should have a right to access the companies that dig them up.
There are a good number of companies on the JSE who conduct much of their business abroad and it does not stop them being invested in by South Africans. The truth could be said for a great many other jurisdictions.
I think front end, South African businesses would want to invest into BMN for its vanadium mining business and a dual listing in a mining friendly market, that understand how S.A. ticks, cannot do any harm.
Right now, BMN's plans for VRFBs and their fully integrated vanadium model, isn't gaining any respect on AIM, which is supposedly based in a much more climate friendly country. So why are we to expect more of South Africa.
BMN is building out its plans in parallel to a world that is rapidly beginning to understand that it needs to change its ways. This is clearly being demonstrated in the actions being taken against fossil fuels.
The further BMN moves down the line towards being a green based business, the further it moves away from being simply a dirty carbon generating miner, and the more attractive it becomes to those wishing to extract themselves from planet destroying industry and businesses.
A s I said earlier, the current trajectory towards being a fully integrated vanadium play, has been set. Its now about implementation and execution.
The changes taking place in society, that are acting parallel to this, could end up being the true drivers in all of this, but will certainly be there to impact on BMN, when their plans come to fruition and demonstrate sufficient worth. I don't see South African politics or policy getting in the way of that. Nor will a JSE listing affect it.
I would of course dearly like to see South Africa, Eskom and indeed the SADC, all be a healthy part of it, but they aren't the catalyst. They are merely one avenue of many in what is a rapidly changing world.
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That all said and trusting I have answered your question at least in part, I do not see that the BESS project is being held up due to political meddling/corruption. It has had financial sign off and is in the main, being supported by concessional finance. It is in the main, a demonstration project to help Eskom gain better performance from existing RE installations. Phase 2 contains a 60MW solar plant, financed by Eskom themselves but that should ave nothing to do with the phase 1 sign off or the 200MW of batteries intended for this phase. That said, it may well be that Eskom wished to sign off the entire project front end and it is only recently that they have gained the necessary finance, through the NDB, for their own financial commitments to this projects.
However, it is important to be clear. The battery element of this project is being fully financed by a consortium led by the World Bank. The finances were previously intended for a CSP project that was unable to reach financial close. The change of use was led by Eskom. The time limits for employing this concessional funding are already under a great deal of pressure and not for the first time. So the decision to allow the tender to proceed, really should not be of a political making, at this stage.
For me we are back to the slow grind of the political wheels and nothing else. The issue that Eskom will now have is the ability to close out phase 1 installations by December 2020, which is what they told the World bank they would do. That date will need to be revisited and the further back it goes, the more ready BE and its supply chain will be.
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@Berserker The progress on the BESS project is disappointing for sure and I have mulled over the South Africa question a good many times.
What i have learnt in my now 6 plus years of being a BMN investor, is that things move slowly there. Investors here can complain as much as they like about it but that is simply the way it is. To a certain extent BMN management at times, even shows the same characteristics, be it nowhere near as strongly as the governing party.
I think one needs to be a bit careful to expect too much of the S.A. market. Whilst there are several really good opportunities for BE in that space, the key opportunity for me remains Eskom, driven by the elusive BESS tender. More recent events, forced upon the ANC by the dire position Eskom finds itself in, have likely delivered an opportunity with business energy users who wish to self generate. According to the minster, those projects do not need licenses. However, more detail is required because the distinction made against project sizes has not been given. That said, I feel confident that a sizeable opportunity exists there. However, it is important to understand that none of the key projects used by the Mineral Council, currently involve storage. So there is a job to do there to infiltrate this new market and secure contracts, which has nothing to do with the ANC.
At the end of the day, the resources required to make the fully integrated vanadium model work, are located in South Africa. The most cost effective VRFB offering that BMN can likely offer, is the one that is sold into South Africa or the SADC market, and so it is worth chasing, lobbying for and building upon.
South Africa is the most advanced power generator in Africa with one of the largest utilities in the world, so it is a natural draw for a company wishing to supply grid scale storage solutions.
However, the S.A. market is no longer what BE is all about. Since I put together my arguments on why BE would be so successful in that BESS tender, we have had the developments at Enerox and Redt/Avalon and we have had the rental product. So the market opportunity is much wider and no longer just about S.A.
That opportunity is already delivering investments in OEMs, it is already delivering the electrolyte facility. The desire to set up VRFB assembly in South Africa, is for me based on the expected demand in the SADC, led by contracts in S.A.
I remember FM stating that local assembly could be achieved with as little as 10MW of contracts, so long as they were regular in their nature. That for me always lent itself to the Eskom BESS programme.
@Ninjamagic Its so often written because to date there hasn't really been a business model like the one that BMN are putting together.
To date, industry observers repeatedly employ seen to date evidence, to reduce or even write off the chances of VRFBs competing in a market dominated by Lithium.
However, to date, nobody has really shined a significant light on what BMN are now doing in this space. It will however inevitably happen and it will no doubt be then treated like some great discovery, which will most probably be to the frustration of a great many investors here, who bought into the concept so early on but the important thing is that it is looking very much like it is going to happen.
In my opinion ;
We are already past the point of no return when it comes to large scale uptake of battery storage. Anyone who thinks that is not the case, for me has not done their homework properly. It is now about expansion, which will be quicker than many expect but will still require a little time.
The VRFB is proven to be a better performing battery technology then lithium-ion, for a sizeable number of the applications, in which they directly compete. There is no denying that fact. So the quality of the technology is not in question.
BMN have already clearly presented their business case for the benefits of supporting OEMs with guaranteed supply of cost effective vanadium. So this is not about simply squeezing a short term gain out of this budding sector.
With the pending investments in Enerox and Redt/Avalon, BMN have demonstrated their methodology for entering battery assembly and supply, and executing on their business plan to drive VRFB take up.
By doing so, BMN and their partners have the opportunity to present a product to the world, that is far more cost effective than has been seen before. I do not need a cost breakdown to appreciate that. Best VRFB technology producers + BMN vanadium supply = successful model.
I could push it further and call that particular partnership, potentially the cheapest battery offering in the market but I don't need to. It will be cost competitive and it will sell because the market is there.
If all of those things are true, then all we need do is wait, watch and allow those parties to exploit that partnership and wake the world up to their VRFB offering.
There are of course things that can go wrong but they are now more in the extraordinary event category because the key obstacles have been overcome.
Market + quality product + best price
Its a winning formula and no actions conducted here or in any other financial corner, can prevent it from happening.
Bassguy I am not looking for or indeed expecting a huge spike in vanadium prices. What i would like to see is BMN delivering healthy sustainable cash flow, to allow it to fulfill the plans it has already demonstrated to the market.
Right now, a 2020 yearly average of circa $35 per kg, based on Vametco's 2019 costs of $24,250 per Mtv, would deliver that and support a strong base in the valuation.
It should not be forgotten that said 2019 ave. Vametco average production cost includes the 441Mtv of product that was produced and not sold in 2019.
Therefore, the reported $42.4m in EBITDA is lighter than was achievable, when more product is pushed into the market.
Add in the lower cost base of up to 5% and the figures get even more support.
What i am still struggling to appreciate, given production will be some 10% higher in 2020 and Q4 production has demonstrated that production costs can push as low as $15.20 per kg (at 880Mtv produced), is why production cost guidance is so high. I assume ti is because there is a desire to avoid further market disappointment through exuberant goal setting. Remember also that 2019 costs came in at 5.7% below ave. guidance.
If the Rand behaves itself, then 2020 should deliver more of the same.
At that sort of price range, the VRFB still has much going for it. However, I really am not too concerned about the wider market of VRFB sales. BMN with its integrated model and direct links into two big VRFB players, has the ability to influence enough of the market, to drive sales for them and their partners, even at $35 per kg.
Production expansion right now is being decided by wider market pricing. When the relationships with Avalon/Redt and Enerox have had chance to gestate, then it will be the success of that relationship, that will begin to drive BMN future expansion. That in turn will be decided on the profitability forecasts of supplying electrolyte/vanadium to those partners.
Surety of supply is a two way street. What is now clear with Mokopone, Vanchem and even further expansion at Vametco, all in play, is that bringing on more supply really is not the problem anymore. It is now about closing out the partnerships and giving them the necessary time, to explore opportunities with their vanadium supply guaranteed and priced at a leve that makes them a completely different player in the game.
That is a sizeable shift change. Previously it was all about a plan to give VRFB companies security of supply and price. Now we are at the point where it becomes a reality. It will still take time. More patience is required. These companies aren't going to simply press a switch and win a whole load of new work. What is however clear, is that many more of the cogs needed to drive the machine are now in place. Its happening. We are on our way.
Visible headlines from Ferroalloy.net.com ;
"Affected by the coronavirus epidemic, vanadium operation rate is low and the quotation is rising"
"Affected by the recent outbreak of new coronavirus pneumonia, the starting time of vanadium enterprises in various regions has been limited to varying degrees, and logistics. . . "
As posted a few days ago, (but perhaps poorly explained through the use of Hubei Province supply) there are various factors in play to suggest that vanadium supply will be constrained, whilst this coronavirus remains so disruptive.
Other factors may be in play for prices outside of China but the above also demonstrates (be it very briefly), that operation rate in China right now, are also under pressure.
"Following the first notifications of #coronavirus, the value of major mining #equities has fallen by around 10%."
Unknown outcomes tend to lead to a desire to head for more safer havens.
Is the Corona virus the reason the BMN SP has dropped from 48p to 19p? No. But is a factor at a time when the country that "now consumes around half of all metals produced globally" is attempting to eradicate a disease, that has led it to close down major manufacturing hubs, prevent travel and extend public holidays.
So it is absolutely a factor for one of the biggest vanadium producers in the world. However, in time, the market will start to appreciate that the lack of Chinese exports of vanadium, will actually act as a driver of prices outside China. How long it will last is debatable but the situation, all of it, is very real.
I wouldn't read too much into today's sell off. There is a market wide reaction to the Coronavirus going on with mining companies right in the line of sight.
The general market players aren't looking to differentiate between those companies that will benefit and those that will lose. The message is sell because the outcome is unknown.
The sooner this virus is under control the better.
The Minister was very clear in his speech of yesterday.
The distinction is between self generation for own use and to sell.
"Self generation will be part of our make-up of energy supply to take the pressure off from Eskom. Self generation for own use will be allowed. All that is needed to be done is to register. However, generation to sell is business. This would require licensing."
I am as skeptical as anyone when it comes to Mr Mantashe and indeed most of the S.A. government, but there looks to be much more substance in this. The timing of the Mining Indaba has perhaps forced them into a corner.