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Evening all,

I now finally have time to share this important update regarding the Eskom BESS Project.

Enclosed below is a copy of the latest restructuring report from the World Bank for the Eskom Support Project, which includes the battery project. It is important to appreciate that the BESS project financing is a not a stand alone item. It includes Medupi Power Plant and transmission lines work, both of which dwarf the finance required for the BESS project.

Some key takeaways ;

1. On 14th November 2019 Eskom applied for an extension to the phase 1 completion date to 30th June 2021. 1 week later on 21st November 2019, the Public Enterprises Minister gave his authorisation for the project. This was the last ministerial approval that was required, prior to implementation. We know this from the comments made by Prince Moyo of Eskom during the tender webinar in September 2019 (see below).

There he said ;

"The only ministry that has not yet signed off is the Department of Public Enterprises, Moyo added."

https://www.greentechmedia.com/articles/read/south-africas-eskom-preparing-first-large-scale-battery-tender

What that means is that the project is not being held up by political interference or a desire to block renewables based projects in S.A. It has moved through the ministries and very much looks like it is being finalised ready for tender release.

The fact that the extension request was forwarded to the World Bank just 1 week prior to the Public Enterprises sign off, says to me that there has been a coordinated effort, with a view taken on what was am achievable revised date for the project.

In the previous restructuring paper, the Wolrd Bank gave a set of dates for how the phase 1 project would proceed.

"e. Finalize bidding documents: March 15, 2019
f. Receipt of bids: April 30, 2019
g. Complete bid evaluation: June 2, 2019
h. Contract award approvals: August 21, 2019
i. Completion: October 2020"

That demonstrates a circa 20 month period from tender release to completion of phase 1.

Right now the project has approximately 16 months.

It could well be that Eskom have identified ways to expedite the remaining works but even if the tender were to be released tomorrow, at the very least, they would have to find 4 months. So it is certainly interesting that they chose 30th June 2021, considering it was their application and there is no mention of a rebuttal from the lenders in the report.

According to the World Bank, the tender is expected to be released in Q1 2020. Eskom have now had the ball back in their hands for the last c. 3 months. They have approx 6 weeks until the quarter comes to an end.

Perhaps imminent truly is imminent this time but whatever the case, the project is alive and the BMN presentation from 21st Jan, is looking much more relevant right now.

http://documents.worldbank.org/curated/en/945661577445675366/pdf/Disclosable-Restructuring-Paper-Eskom-Investment-Support-Project-P1164

I'm afraid i disagree. What they need to do is get the DFS done properly so that it can be employed to finalise the necessary off-takes, which in turn will enable them to have the very best chance of securing the very best finance deal.

In the end it is that deal that will ultimately open up the best returns for investors here, not which day the DFS arrives on.

Of course further cash may need to be raised and at what level, will of course have an affect on things, but it is still a side issue compared to the above, which is why the DFS needs to be done right and not rushed, simply to appease nervous PIs.

@Bella6532 Whoever the battery partner ends up being for this tender, yes I am sure that local component manufacturer could be speeded up, or that a sales pitch could be put forward for batteries due further down the process line, to contain higher local content. Who knows?

The tender is for 200MW of batteries, currently installed by Dec 2020. That's not going to happen now but the rules of engagement remain the same. How it is implemented, will be for the winning bidder to determine, with Eskom.

Right now I am not about the exact ins and outs but more the likelihood of winning the tender and what that will do to BMN's business plan moving forward.

@Halespur Yes I saw that and have had a brief look.

I believe Tesla will always be a competitor where ever they go, because they are that driven to succeed. I note they also have a sales office in S.A, so they are already in country and are renowned for their ability to infiltrate government thinking.

However, their presentation for me, is designed to push the mini grid solution. I note BE also state that their "core offering is a long duration RE + VRFB minigrid solution."

The biggest problem for Tesla and indeed the Blue Solutions offering, is charge/discharge life spans. The Eskom tender is clear that it will require "performance guarantees over 20 years and will be imposing penalties for noncompliance."

Others may be able to comment better than myself, but I don't believe any lithium-ion battery is able to achieve that yet.

The Blue Solutions offering states "calendar life over 15 years." That's not 20.

Tesla's presentation doesn't appear to even get into life durations. However, Tesla have been involved in big grid scale projects, so like i say they will always be a headache.

However, investors should really be thinking just how big a headache BE and their partners (IDC remember), are going to be for their competitors.

In a nutshell, BE are presenting a very clear message to the ESP stakeholders.

When we win the Eskom tender, we will deliver 40-50% in local content from the start. Who else can match that right now? Who else this that well prepared for this tender?

When we win this tender, we will set in motion an expansion plan, that will lead to "creating up to 80% in local content for SA projects."

As far as my math goes, no lithium-ion manufacturer can achieve that level of local content because the lithium and the graphite just aren't there in S.A.

Now its important to be careful here. Local content is stated to be worth around 10% of the points assigned for each bid. So its not absolutely essential. However, 80% local content is politically and socially, very enticing for a S.A. government short on jobs and good news in general. So it is relevant, if they want to hear it.

Lastly ;

"This is important to set the tone from the first installation to ensure an export-oriented industry emerges as the programme’s legacy."

The last time I checked, the rules on minimum local content, when exporting products to the SADC, using the free trade agreement, stood at 65%.

At 80% locally manufactured VRFB systems, employing locally sourced BMN vanadium and electrolyte, will be a shoe in.

That means zero import duties into 12 of the other 14 countries, currently making up the SADC. Competetive advantage and a firm early feeding ground for a company that holds a "Pan-Africa focus."

There are just 7 slides in that presentation, yet they deliver more than the last 2-3 presentation put together.

Two more key revelations which are both great to see but frustrating in their lack of openness ;

"Currently, we do partial processing in SA and have vanadium converted into electrolyte under agreement with overseas chemical companies;

• By end of year, we plan to have local component manufacturing on-line for electrolyte, the most expensive part of the VRFB"

So once again, we need to understand the context of these words and to who they were being presented.

As suspected the electrolyte plant will likely be in operation by late 2020. However, what the company is making very clear is that when their bid for the BESS Project goes in, it will demonstrate that they will, at the very least, be using locally mined vanadium, partially processed, which is then sent overseas to be turned into electrolyte.

Remember local content requirements for the BESS Project are only 20% right now.

However, by year end, the electrolyte plant will be ramping up and contributing local beneficiated vanadium, which could potentially be introduced to this project, given the tender is still not live.

Remember what BE state later on ;

"If local content in the Eskom Battery programme achieves the 40-50%. . .from the start, it will accelerate the manufacturing and investment business case"

From the start. . .

Lets not forget here that the electrolyte plant is on its way to construction. Its initial 200MWh production is not dependent on this tender. However, further expansion could well be.

However, that doesn't happen overnight and even if it did, the 40-50% local content surely needs other local component supply to be achieved "from the start" So there is a hint there at other plans being instigated to drive greater local content, which will help BE reach 40-50% "from the start."

This is supported by what BE then go on to say ;

"As the market grows, we plan to assemble full systems here, including local sourcing of components besides electrolyte, creating up to 80% in local content for SA projects."

And ;

"Plant design is modular to support scale up from initial annual capacity of 200MWh / 8 ML and up to 800MWh / 32ML"

For me, if there is to be 1 winning bidder, which is what the Eskom presentation from 30th Sept clearly stated, then we are talking 200MW/800MWh of electrolyte.

In this presentation, BE clearly state that they have the authorizations to build an electrolyte plant, that is capable of delivering that amount of electrolyte.

However, it is a tad too perfect for me and time is needed to get even the first 200MWh commissioned and into production, nevermind another 600MWh. So the statement stands, that other local content components are required, front end, to achieve 40-50% local content from the start.

Very interesting.

@Paul150 Firstly thank you for finding and sharing the presentation ;

Key section of the presentation ;

"Immediate local value chain opportunity for South Africa
• If local content in the Eskom Battery programme achieves the 40-50% level, as was prescribed during
REIPPP, from the start, it will accelerate the manufacturing and investment business case;

• This is important to set the tone from the first installation to ensure an export-oriented industry
emerges as the programme’s legacy."

Why?

1. As of 21st January 2020, Bushveld Energy are still discussing the Eskom BESS Project as a live project and they are doing it at the ESP Stakeholder Session, which involved the World Bank, the driver of that Eskom project. So the project is still happening.

2. The current local content requirement for the Eskom BESS project is just 20%. BE in their presentation are talking about 40-50% for a very good reason. What they are truly saying is that when BE tender for the Eskom BESS Project, they will be able to achieve 40-50%. They aren't talking about the battery industry as a whole or their competitors, or other VRFB companies. They are talking about themselves and they are making a direct reference to the catalysts that this project can drive, should they be the winning bidder.

By talking about the importance of setting the right tone for the first installation, they are saying we are ready and capable to install this project and if you give this project to us, then it will drive our investment in a VRFB "export orientated industry."

This is a clear message to Eskom and the S.A. government that if you want to create new jobs, drive local content, achieve local beneficiation, then awarding the Eskom tender to BE, will be the trigger for all of these things.

All those above things have been key buzz words that Ramaphosa himself has employed in his many speeches to undustry and the country as a whole.

This legacy is exactly what the World Bank has set up their $1 billion battery investment to achieve.

The above statements are the first time that I have seen this company really show its cards on what the Eskom tender means for the business. They have hinted at it many times but there was always a need to join well spaced out dots. It demonstrates what I have been advocating for some time. That this project is a key cog in the machine that will drive the fully integrated production platform, in South Africa.

In my view that is a very significant presentation and signal of what is to come as this year develops.

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.

https://www.vanadiumprice.com/vanadium-prices-in-europe-and-the-united-states-continue-to-rise/

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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.”

https://www.vanadiumprice.com/domestic-vanadium-prices-are-strong-this-week/

Morning all,

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.

https://www.vanadiumprice.com/affected-by-the-coronavirus-epidemic-vanadium-operation-rate-is-low-and-the-quotation-is-rising/

https://twitter.com/BigBiteNow/status/1225000017024274434?s=20

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.