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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.

https://www.businesslive.co.za/fm/features/2020-02-03-nersa-working-on-lifting-restrictions-for-self-generation-of-power-mantashe/

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.

https://twitter.com/Roskill_Info/status/1224366132666228742?s=20

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.

https://twitter.com/GwedeMantashe1/status/1223885301019529216?s=20

@Yachty The minister has already stated that selling electricity to the grid is not part of this deal and would require a license.

However, that is not what is key here. The failings of Eskom has created a very large list of disgruntled business customers, who are cash rich and power poor. That gives BMN a very fertile market in which to push its model. They won't all be knocking down BE's door for energy storage. BE will still need to go out and prove that what it has is of worth to these companies, that are still looking to go solar alone or are expressing and interest in lithium-ion based storage.

That is what the Vametco solar battery project is for. A role model.

The key for BMN has never really been about being the cheapest or the most effective technology, it is about creating a willing and ready market and being able to demonstrate to that market, that VRFBs are what they need to be including in their self generation plans.

As many other here have long recognised, Eskom in its failures has provided BE with the first real step because they have pushed a great many customers towards self generation because they really have no other choice.

It will still take time to come to fruition but this green light from the SA government is they key step to get them there in the S.A. market.

EUR and US #vanadium prices rising.

#BMN key US market now at $28 per kg and EUR running at $29.50 per kg.

More China disruption expected.

China normally sizeable exporter to these markets, so expect further rises until virus breakout logistics resolved.

https://twitter.com/BigBiteNow/status/1224264904812703744?s=20

Things appear to be warming up on the political front in South Africa.

Self generation being openly supported by the Minister for Mineral Resources and Energy. No license just registration, although the exact definition of "register", is still to be defined.

Still a very positive development, which if indeed true, is timed perfect for Bushveld Energy.

Just imagine what BE will be able to demonstrate when the Vametco solar and battery project is up and running.

https://twitter.com/BigBiteNow/status/1224239023352418304?s=20

Now take a look at slide 44. Some may remember that at the time of the 1010 presentation, I asked the BB for help establishing exactly which projects these were., without much success.

I won't drag up all the details here now, but I am pretty sure that not a single one of these projects has even made it financial close yet.

I will go one step further. Mokopone even after requiring a revised DFS (due in H2 2020), will highly likely beat all of those projects into production. Not only that but if for some reason it does not make it into production , it will be because the market cannot handle the material and/or prices are just too low to justify the expense. If those prices are too low for Mokopone in its revised Vanchem backed form, then they are far too low for those projects to gain financial close, whatever their backers may wish to sell their particular markets.

What that means is that BMN can feed said additional supply into the market, at a level that the market can handle, without having to commit to a full mine. That's the advantage of Vanchem and those 3 kilns.

As vanadium prices rise, BMN can employ the cash generated to drive a much larger Mokopone/Vanchem operation, far quicker than any of those projects can hope to match, because BMN controls its own financial destiny and does not need to convince a financial backer, that the latest volatile hike in vanadium prices, isn't just a flash in the pan and that their mine is worthy of backing.

BMN can therefore be the swing producer that a great many potential new participants, will be in fear of. They can react far quicker than anyone else outside China and more importantly they can be far cheaper than much of the production that China can temporarily bring to the market.

I come here and talk about the profitability of Vametco in H2 2019 because its a worthwhile subject because its key for me, that BMN have the proven finance to weather this downturn. The exercise was a worthwhile one because it showed that they do. If they lose a little EBITDA along the way it really does not matter. The key is the finance and formula, are there for when the market turns, be it steel or VRFB led, because they have the resource and the cost model, that can take the very best advantage of the market when it turns, which it inevitably will, with or without VRFBs.

The fact that VRFBs are clearly going to be big enough to influence that V supply/demand dynamic, makes the probability of price rises all the more certain, which means that the above market position and the previously mentioned cost positioning, are all the more supportive of a very bright future here.

If VRFBs hit the way many expect, then the above becomes all the more magnified.

I

Remaining ever so close to a particular share's daily movements over an extended period, can lead to a loss of clarity and a tendency to roll with the psychology, as it sits at any particular time. It doesn't happen to everyone but the influence hides itself perhaps better than many can see.

When vanadium prices were ultra low (2015), it took a great deal of belief to stay the course and trust that the market would turn for the better.

When the vanadium price was flying at over $100 per kg, it was easy to get lost in the frenzy and fail to contemplate that prices could stop rising, or that the market had an answer to vanadium shortages.

Now that the price has receded (and it must be said that prices really aren't that low compared to the long term average), the feeling is that they perhaps will never recover. Its not a sensible reaction but it is certainly an understandable one.

Just like a great many experts say the SP500 won't fall, when it clearly will.

A reminder.

Slide 40 of the Bushveld Vanadium 101 presentation (remember that?), demonstrates through the work of Roskill (so not BMN), just where Vametco at 3,000Mtv sits. More importantly it demonstrates its relationship to the Chinese co-producers, who in 2017 made up 52% of supply.

As we can see there really aren't many producers who are cheaper. Raise that to the 3,400Mtv run rate expected in 2020 and it pushes even lower.

The Chinese are clever, they are in my opinion industrious like no other. Just look how fast they can build a hospital. What other country could do that? However, they cannot fight market dynamics forever and according to Roskill, the vast majority of Chinese co production is dearer than Vametco, even at 3,000Mtv.

Now take a look at slide 43. Mokopone in its previous known format, was also still cheaper than Chinese co-production.

However, rather than costing $298m, which would have meant sizeable debt instruments (circa 50%? $150m?), it is instead costing $50m (with Vanchem $30m cash element), made possible by the money made at Vametco in 2018.

So the debt, which is company carried, is now maximum $25m. That reduces the stated cost to produce.

Then we have to consider and appreciate that Vanchem combined with Vametco, will deliver further cost savings for both operations. They have too. Those costs on those 2 slides, consider those operations as stand alone mine/processors only.

So both those costs are going to fall even further.

When sense prevails, which may only truly come once vanadium prices turn north enough, then the psychology will change and then those above fundamentals will act as drivers for the valuation.

Right now the psychology demands that they are ignored, that it somehow cannot be true, but it is and next time around BMN won't be delivering 2,570Mtv into that rising market but 4,500Mtv and rising.

http://www.bushveldminerals.com/wp-content/uploads/2018/05/Bushveld-Minerals_-Vanadium-101-final...

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I recognise that everything is slightly more complicated than that but we have to start somewhere.

That aside, the H1 2019 performance demonstrates that Vametco under H1 2019 parameters, can produce at $23,000 per Mtv.

For much of H2 2019 prices were more than high enough (and I repeat that US prices were not all that far away from Europe in that period), to deliver positive EBITDA.

Therefore, the points raised around timing of deliveries, potential investments in the operations etc are valid and the actual results as shown, are perhaps not a true reflection of what Vametco is capable of, when investments in the transformation programme, are no longer relevant.

Finally, the gap between actual pricing achieved and the EBITDA result, is for me so great, that the actual results demonstrate either substantial additional costs being put through the Vametco business by BMN, creative accounting, or something else.

What it does not currently show me (and I am open to other opinions and would also like to do some more work myself on this, when i have more time), is that Vametco could possibly be loss making in H2 2019, when these investment considerations are put to one side. So the choice to invest and take the perceived accounting hit, is a tactical one based on future considerations, rather than a business struggling with prices. Given the significant profits in 2018, this is understandable.

Hence why I made the point yesterday that the key focus should be on cost reductions, increased production , and what that means for the future profitability, even at lower prices and without any influence from the VRFB arm and its markets.

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Good morning all,

I am not around much today but I just wanted to point something of importance out, when judging the perceived Vametco performance in H2 2019.

I am spoken many times of the lag in sales and prices that occurs on Vametco sales.

In the interims 2019, this is stated more pointedly.

"Vametco sold 1,115 mtV Nitrovan TM, generating revenues of US$74.3 million in the first half. Vametco's realised price is based on the prior month's average price, which is higher than the quoted LMB weighted average price for the period of US$56.3/kgV. These higher realised prices offset the lower sales in the period."

It is of course not as simple as that because as BMN pointed out yesterday ;

"Vametco sells the majority of its product to the United States, Europe and Asia, with an average delivery period of 8 to 12 weeks to the final customer1. The timing of deliveries that occur on or around half year and year-end impacts the timing and quantum of revenue recognised for commodity sales in each financial period."

A key point that was issued as part of the RNS for a good reason, given the perception that Vametco was loss making in H2.

Back to those interims.

In H1 2019 the stated LMB average price was $56.30 per kg.

Actual revenues were $74.3m. In very simple terms, those 1,115Mtv achieved an average sale price of $66,600 per Mtv.

That's because H1 2019 included Dec 2018, where in Europe the average price ranged from $115 to $70 per kg.

What that means is that in terms of Europe at least (Note - US prices have generally held in and around the European levels throughout H2 2019), June 2019 was deemed the 1st month of sales pricing. In that month prices averaged circa $35 in Europe.

What it also means is that H2 2019 only ran up until end of November 2019. In terms of European prices, FeV prices dropped below $25 per kg on or around 11th October. So approximately 7 weeks from the end of a 26 week period but more importantly did not break below $30 until c. 13th Sept 2019.

In the interim 2019, the EBITDA for Vametco was recorded as $42.3m

That means that the costs were $30m for the production of circa 1,392 Mtv. I appreciate the arguments regarding my take on the 441MTv in stock yesterday and recognise their worth. However, the full cost of the 1,392Mtv will have been recorded in that H2 figure.

$30m / 1,392 = c. $23,000 per Mtv costs to produce at Vametco.

Simplistic but accurate enough for what I am attempting to demonstrate.

European prices dropped through $30 on 13th Sept. So Vametco enjoyed circa 13 weeks of H2 with prices well above the costs to produce in H1 2019 and on close analysis actually barely broke the $23,000 threshold in H2.

H2 2019 production costs were $1,000 per Mtv lower than H1 2019. At 1,277 Mtv sold in H2, that's another $1.28m in cost reductions.

Terrible grammar and spelling. Apologies

@Bomb3r and ND, thank you, I had not appreciated that revised figure. It is however in the garnd scheme of things irrelevant, for reasons I have already shared. BMN have sufficient cash resources on hand to execute their plans to such a degree, that they can be a far larger operation in a relatively short time duration.

That's not to say that losing money is something I would want to see continue unabated but we as we all know, we are not talking about a miner simply waiting for its pricing cyce to turn. We are talking about a miner actively investing in companies and developments, in order to drive a brand new market.

When Redt/Avalaon/Enerox start making progress, then those offtakes that BMN have secured, are really going to start demonstrating themselves. That's the backbone of what this is all about, not a small loss driven by a temporary shift in market demand/supply/prices.

@Bomb3r It is in the Q2 update from 31st July 2019.

One must be careful not to mix up Vametco EBITDA with overall BMN EBITDA.

https://www.lse.co.uk/rns/BMN/bushveld-minerals-ld-q2-2019-operational-update-99bb1t8kewn62lv.html

I don't believe anywhere in the posts I published this morning, did I write that BMN were profitable in H2 2019.

The point I made about inventory stands. I did not base it on accounting methods because what has been issued today is a EBITDA figure only, and nobody truly knows what is being included in Vametco overall costs.

To be absolutely clear, Vametco EBITDA for H1 2019 was infact $48.6m. So the reported figure today was indeed lower, which does point to a loss across H2. However, I repeat, nobody knows what additional costs Vametco carried for plant upgrades, drilling etc.

However, the reason I am so bullish about today's update is first and foremost, the message that production is not being affected by Eskom loadshedding. So the company, to date is sheltered from this perceived risk. Secondly, costs are reducing and production capacity/availability is increasing, which reduces the breakeven level required.

To put the perceived $6-7m reduction in cash in perspective, BMN held net $66m at 30 June 2019 and have a $25m debt facility in place as well.

They have paid out $23.2m as cash in H2, for the completion of Vanchem.

So cash is potentially running at circa $40m - their pending investments into Enerox $6m at 50%) and Redt/Avalon ($5m).

So now we are talking circa $29m in cash plus a $25m debt facility.

That cash position sees them with upto 4,300Mtv production and a fully licensed Mokopone on the books.

They are now all set and further advanced than any potential junior could ever hope to be.

If established pure play operators are losing money in the H2 2019 pricing environment, then no junior miner has a hope of closing its finance out for a new mine, which means the competition are falling even further behind BMN, as its ability toreact to market demand continues to strengthen.

When the Redt/Avalon and Enerox deals close and both companies have a clear line of sight to expanded project executions, backed by low cost guaranteed supply from BMN (supply that has first refusal or an offer to match or better whatever else is out there), then revenues are going to start to come from other sources and BMN vanadium supply will be stretched or diverted away from typical markets. At 4,300Mtv, that is going to start to affect the overall market.

That is what I am truly here for and today's update strongly supports a business that is becoming leaner, bigger and well prepared to cope with the pending demand that VRFBs will bring. A demand that BMN have manufactured through the deals Bushveld Energy are about to close out.

So these results are not about whether BMN is profitable right now, they are about how well prepared is BMN for that next phase and what are they doing to ensure that their offering is as cost competitive as possible?

If vanadium prices receive a boost in the meantime, then all the better but the bigger picture here is VRFB, of that I am certain.

In my humble opinion, SP Angel are looking at it all wrong.

As an example, the 2nd and 3rd largest Chinese V205 producers in 2019 with a combined 1,900 tons of V205 between them, are both located in Hubei province, the home of Wuhan.

I pointed out earlier that China produced more vanadium feed stock in 2017 than it required. Lower steel production will remove demand for vanadium but given the vast majority of Chinese production is co-produced with that steel, they will also lose more vanadium output and Hubei province is right in the thick of it.

Here is a very interesting line hidden away at the bottom of the report ;

"The Company is working with energy policy makers to support initiatives to reverse the downward trajectory of South Africa's power system."

That line and the lack of attention it seeks, should tell investors who have done their homework on BMN, just how ingrained BMN have made themselves (with the help of the IDC) within the S.A. political and regulatory cogs.

When I read the above statement, I immediately think about the following ;

https://www.reuters.com/article/us-safrica-eskom/south-africa-asks-industry-for-options-to-end-power-crisis-idUSKBN1YH19L

"The energy ministry published a document on Friday requesting information from the power industry on options for between 2,000 MW and 3,000 MW of new capacity at least cost."

"Firms are to reply by the end of January and present options that could be connected to the grid within three to six months or six to 12 months, if they are selected in a procurement process, the document showed."

Given BMN's clear interest in the Eskom BESS project and any associated access to power generation projects in S.A, it was always odds on that BMN would be interested in this new call for help.

The above statement, as minimal as it is, for me, adds fuel to that particular energy driven fire.