Member Info for Daisan

Ophidian,

You don't agree that Phase 3 development at Vametco was targeting 5000mtv production by the end of 2019?

From the admission document:

"The last phase of the expansion will be focussed on upgrading the kiln feed and discharge equipment in order to produce to at its maximum mechanical capacity. Further evaporative capacity will need to be increased to cater for the additional evaporative capacity required with the increased production volumes. The production capacity will be 5078 t NitroVan equivalent per year and it is planned to have this phase in operation by end of 2019."

I find it difficult to believe that this is not RNS worthy news! I know that BMN doesn't like to blow its own trumpet but, whether you subscribe to the view or not, the fact is that BMN consider BE to potentially add far more value than is currently encompassed by BMN itself so to not announce the commencement of the first trial underpinning BE's future would seem, at the very least, a missed opportunity.

I had a CEO once who was pretty useless in most respects but what he did know is the effective use of presentations in selling. His motto was:

"Tell them what you are going to say. Say it. Tell them what you said"

I think that this would be very useful advice for BMN. It doesn't matter if they were going to tell the market this in the quarterly update. They can say it first and repeat it there.

Whilst that is true Ophidian, the 5000mtv by end 2019 as originally stated was definitely related to Vametco and the suggestion from the RNS now is that this will not be achieved. If it can be achieved through some other activity, e.g. Brownfield or Mokopane off-take then that is good news as this will be in addition to what ultimately is targeted from Vametco.

Ophidian,

Whilst the target production numbers haven't changed, there was a suggestion (not explicit but strongly implicit) that the target date for achieving 5000mtv per annum moved from the end of 2019 -

"Phase 3 of the multi-phase project......... In addition, detailed design work and capital estimation will commence with a view to construction commencing in 2020"

A bit more complicated than that when you have market makers involved. There are various mechanisms they can use to pull some shares in.

Well, whilst this is actually good news in the long run, the market hates a delay and that is what this indicates. It will be interesting to see how the market reacts. I feel like there is quite a lot of support for the shares so I am hoping for a limited pull back.

Inner-Harmony,

You have managed something impressive - condescension and disingenuousness are difficult to get across in the written word and yet you manage them with aplomb! I salute you sir!

bassguy,

I am assuming that the tonnage produced but not sold in Q4 subsequently formed the basis for the shipment to Baltimore that arrived on 26th January.

I agree with SOTRR on this. There is not much to say about Mokopane until the mining licence is granted. As such, I think that it is probably not worth thinking about it a great deal until the situation changes. Admittedly, it is attractive to consider the NPV in light of higher Vanadium prices but without a licence the effective current value is zero. Of course, that means that news of the licence coming through would be a very nice value addition. Vametco dominates the value in BMN currently which is why all of the other assets are ignored. Production, cash and profits render all other assets a poor second so Vametco will continue to be the focus and value driver of the market until something else potentially cash generative arrives.

Last year we had an initial target which was unachievable in my opinion - 3680mtv. Considering that the capacity as a result of Phase 2 increases was 3750mtv from June it was hard to see how this could be achieved which is possibly contributory to the discussion around aspects of Phase 3 coming early.

I don't think that the revised target was particularly onerous given the fact that capacity for the year was supposed to be over 3000mtv. It was just missed owing to industrial action, plant performance and grade. Some of these issues can be relatively easily addressed with better processes and I am expecting this to take place pretty quickly which is why I am still anticipating a positive report for Q1 production.

Just to clarify why I have pumped for around 2800mtv. Apart from the fact that it shows a meaningful uplift from 2018 production, it should be easily achievable by getting just one aspect of the alterations right - grade control - whilst not pushing too close to what we must now view the upper limit of production, namely 3400mtv. It is always prudent to assume a maximum of 90% of this anyway but being in the situation we are currently in (namely missed targets) I find it even more appropriate to aim for a near certainty to regain market trust.

I think that the market wasn't too impressed with the Q4 update because it wasn't too impressive. Of course, the financials were great but this was due to the Vanadium price which was in the public domain. Yes, it flagged to the market that this is a cash generative company but it is not hard to see that the current Vanadium price is lower than the Q4 price and the market can assess the impact based on current production numbers which are all we have to go by.

And then there is the most significant aspect that the market pretty much always focuses on in my experience - production issues and missed guidance. These things are rarely ignored and, to be honest, I was expecting a sharper drop on the back of this which is testament to how much support there still is for the company's shares.

For me, the potential Vanadium price overrides all other considerations currently. I doubt whether production for 2019 would go under 2500mtv (I am expecting substantially higher) and I expect Vanadium prices to go significantly higher than currently. On that basis alone the shares are good value at this price.

However, the market will get concerned should production volumes not increase from here to show that the actions being put in place are having an affect. I would be looking for an absolute minimum of 700mtv for Q1 but 750mtv would give me reassurance and 775mtv would show that they are on the way to winning the battle as this would be above Phase 1 capacity. That said, I am expecting 2019 guidance around 2800mtv. I think that this should be achievable and that the market would view less as being indications that they were struggling given that it is coming with the Q1 update.

The share price will also struggle to make headway should Vanadium prices reverse again (I am not anticipating this), especially with no visibility of production increases.

So for me, the two things I am keeping a close eye on are the Vanadium price and information pertaining to Vametco production (the best source we probably have for this is Paludina's shipping logs as they are empirical rather than the anecdotal evidence we have received from private sources). Other positive news will obviously be welcome!

It's the delayed trades. You will only get a full picture when all of the trades are published. There is a great deal of obfuscation that goes on.

For BMN VRFBs mean long term sustainable profitability. Short term profits would take a hit compared with what they could be if we effectively subsidised the VRFB purchase with profits from the steel side in a high price Vanadium environment. We will get relatively little margin on the machine itself or the installation.

So BMN are essentially saying that they are willing to invest short term profitability for the sake of building a presence in a potentially very large, long term market. To me the biggest potential winners here are UET. I hope that we buy a stake in the business so that we can benefit from this more fully.

Almost impossible to say based on the trades around it. It's an odd one.

I suspect that the market is setting up for a very strong rise in Vanadium prices. That is going to be challenging for VRFB adoption to say the least even with leasing. Bushveld can do it but at the expense of short term profitability.

No problem! :-)

74%

The RNS indicates the likelihood that they will target a 3400mtv per annum run rate. However, it is likely to take a while to get to that level so the guidance for the year is likely to be less. I would be surprised if the guidance was over 3000mtv and I suspect that it will be lower. The last thing that BMN want at this stage is to miss guidance. We need a period of meeting or exceeding guidance and this is best done by setting the bar at a level that you are pretty sure you are going to meet or exceed. If they target 3400mtv or close I will be pretty disappointed as we have the potential for 2018 guidance all over again.

Ophidian,

"where did that 71MtV of unsold Vanadium go………….."

It was delivered to Baltimore on 26th January!

Yes, Wolfman_Jack, there are a couple of things such as royalties and admin expenses that impact those figures so the trailing PE is higher.