Member Info for HarChris

BMN have run into problems over the past few years but the outlook becomes far more certain and predictable if they manage to bring their all in costs down as they scale to 5100mtV- if/when breakeven moves closer to $30/kgV they’ll just about be profitable with the worst forecasts for V playing out and be making hay if either the base or upside is realised.

The 6p target is based on a near term price of $35/kgV and a medium term of $36.5/kgV vs 18p with $40/kgV.

That may seem ridiculous to you but it affects the near term re managing the CLN on good terms and it can be the difference between loss making and significant profitability.

Take Tesla for example - the lightest, the model 3, requires ~132kg of graphite, the model S ~150kg and the model y ~210kg!

Tesla’s target is 20 million sales annually by 2030…

From the RBC broker report:

Valuation
We set our price target using our long-term FerroVanadium price forecast of $38.50/kgV and Vanadium Pentoxide of $8.50/lbs, translating into a group realised price of $36.50/kgV. Our P/NAV multiple of 0.70x is set at a discount to global
base metal peers to reflect Bushveld’s operational and balance sheet risks as well as its 100% South African exposure. We expect Bushveld's realised prices to fall to $35/kgV in 2023 due to sluggish steel demand. This gives us a price target of 6p, implying around 20% upside versus the current share price.

Our upside scenario of 18p is based on a group realised price of $40/kgV. All other assumptions are left unchanged.

Potential catalysts
• Q4 22: Update on Bushveld Energy carve out
• Q1 23: FY23 production, costs and capex guidance
• H1 23: Commissioning of the electrolyte plant (BELCO)
• Q4 23: Potential re-negotiation of convertible loan terms

Risks to rating and price target
• Vanadium prices: stronger (weaker) than expected vanadium prices could improve (deteriorate) earnings and cash flow generation.
• ZAR/USD: Bushveld sells its products in USD but the majority of its cost base is denominated in rand. As a result, a weaker
(stronger) rand could translate into better (worse) margins.
• Power availability in South Africa: continued load shedding could impede Bushveld from reaching steady state production levels of 5,000-5,400mtV.
• Inflation: could fall (increase) at a higher rate than expected
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So Q1 2023 average realised group prices have exceeded the 18p upside scenario of $40/kgV and far exceeds the sharp decline forecasted in the broker report of $35/kgV (expect from Q4 2022 right through to 2024) + the weaker rand translates into significantly better margins. Additionally this commentary was included alongside the load shedding risk:

'In addition we continue to see near-term operational risks especially at Vanchem which continues to suffer from load shedding. Unlike Vametco, Vanchem does not source its energy directly from the national utility provider Eskom. Instead, it is linked to the local municipality’s network, which does not send advanced notices for load curtailments. This results in the
facility being left without power at times. Bushveld has diesel generators to maintain the kiln operating, but the rest of the processes are temporarily shut down. Bushveld is actively engaging with the municipality in order to implement solutions but the outlook remains uncertain.'

A further risk that has been reduced as we were informed in the Q4 update that an agreement with Emalahleni municipality has been reached.

Could the year have started any better than this given the outlook six months ago?

As we now wait for the Q1 operational update due before the month is out I thought I'd take all the information that's out there in the public domain to have a stab at what the quarter is looking like. I've used Fast Markets for US prices, Asian Metal for Chinese prices and a combination of Fast Markets and Asian Metal to have a best guess at European FeV pricing. I've ignored any premium we might receive from Nitrovan sales and erred on the side of caution with all metrics so as not to overpromise anything. I'm also aware that this won't be a true reflection of Q1 as there is typically a lag when it comes to sales as well as guidance varying QoQ but it provides a reasonable snapshot for what the cash generation and profit margins are.

So at the end of Jan we were given guidance for 2023, taking midpoint for production and costs, as follows:
Cash costs $26.55/kgV and breakeven $36.1/kgV, assuming Zar16.6 to the dollar.

What we've seen from Jan1 to Mar 31:
US prices average ~$42/kgV, currently at ~43.6/kgV
Europe prices ave ~38.6/kgV currently at $37.7/kgV
China (ass. Rest of Asia) $43.2/kgV ave, currently at $40.1/kgV
Zar ave ~17.77, currently at 18.45

So for Q1 we can adjust cash costs to ~$24.7/kgV and breakeven to ~$33.5/kgV. Assuming a geographical split in line with past performance average realised prices throughout the three months period comes in at $41.5/kgV.
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Besides a significant miss in guidance couple with a steep drop in V 2023 is shaping up to be a year of huge cash generation and a return to profitability.

We'll certainly get news when BELCO becomes operational as well as secured contracts. I also expect an RNS update on the Orion CLN unless management believes they can meet full repayment without any restructuring or refinancing from a 'specialist funder' and instead share that in one of the upcoming updates. Then there's the micro grid and finally the BE spin off which should have already happened by now so is entering 'imminent' territory.

The metals named in 'Lithium Iron Phosphate' (LFP) and 'Nickel-Cobalt Lithium Ion' refer to the cathode materials, both primarily use graphite as the anode material.

And to make it through the last year without running out of cash and to return to profitability is a big deal that is being overlooked by the market currently. It won't stay that way once it show through in the accounts.

That's total nonsense, the last placing was in March 2018, the number of shares outstanding has increased 18% over the past five years.

I'd struggle to name an AIM company that has diluted less than BMN in recent years.

Fair enough - well it’s inaccurate.

https://mybroadband.co.za/news/energy/487063-eskom-announces-extra-load-shedding-break-here-is-the-new-schedule.html/amp

‘So far in 2023 we have had 2254 hours (94 days) of national load shedding’
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That made me chuckle. 2254 hours of load shedding so far in 2023 means that South Africa hasn’t gone a single minute without it! So wildly inaccurate.

You’re simply comparing days of load shedding which is irrelevant (it’s been daily for the past six months) , what matters is the number of hours of curtailment each day and fortunately we’re just starting to see meaningful improvement on this front.

BMN deserve praise for making it through some very tough times unscathed.

I suspect both bitcoin and gold will do well in turbulent times.

I do find it interesting how bitcoiners celebrate any nation attempting to adopt it yet appear to turn a blind eye to the people's bank of china continuing to increase their gold exposure month on month. The likes of Brazil, India Russia South Africa and of course China and buying gold and these are nations with economic firepower, more so than the likes of El Salvador experimenting with BTC as legal tender and the likes of the Central African Republic. El Salvador has a smaller GDP than the poorest US state (Vermont) and CAR is less than a tenth of the size.

I think we can safely say bitcoin won't consume gold's 13 trillion market cap any time soon.

As for Shanta (and many others) I look at them as bitcoin miners but without the hype. Those with solid balance sheets and low margins are going to be making far too much money to ignore if that $5-$10k ever occurs (not calling it myself) - hype sectors are cyclical, might just be gold miners this time around.

Yeah, makes for a compelling case for buying gold miners I think (not gold itself, bit of a boring investment imv). I doubled up on my gold play to 10% of the portfolio this week, certainly think there's still a place for gold and can't see bitcoin swallowing it up in the medium term like many bitcoiners have predicted for a while.

Shanta Gold's my play, should check it out. They've reached $100K Oz production run rate now at an All-In-Sustaining-Cost of ~$1200 - and gold's broken $2000 an ounce. Projecting ahead that's $80m margin and mcap is just $150m with other assets to develop with all the cash flooding in.

Sure there's plenty of other gold miners to look at, they're all very unloved at the moment despite how strong gold looks.

Current market cap is now about $3.85B with the majority of the assets being the bitcoin HODL valued at $3.9B and liabilities ~$2.5B. So the bet is whether or not you think bitcoin will rise enough to push net assets above and beyond the current $3.85 valuation (assuming software business fails to ignite and keeps being a drain).

It's a very pure play on bitcoin but again, like with Argo, it's hard to see where the value is vs buying bitcoin directly (besides holding for any temporary sentiment overshoot in a bull run).

A little update on Microstrategy after recent events for those interested:

Previously my summary was that MSTR were slowly running out of cash (besides their enormous BTC stash, obviously) and were going to need to either refinance (likely) or start selling bitcoin (very unlikely) unless they turned a corner on the software business side. Q4 showed that that certainly hasn't happened, losses and cash burn are increasing and sure enough they began issuing shares in February to increase liquidity:
In mid Feb they announced $46.6m in shares sales to add to their $43.8m cash position (which was down $20m QoQ).
They then announced late March they announced they had raised an additional $293m and with it (+ previous $46.6m) paid off the remaining principal on their $205m Silvergate loan and in addition had bought 6455 bitcoin for $150m.
Yesterday MSTR announced that they'd bought 1045 bitcoin for $29.3m taking their holding to 140K BTC.

The paying down of the Silvergate loan is a big positive for the near term as that was to be repaid in 2025 and was seeing very high interest. The downside is that they've now eaten into $340m of the max $500m they can raise through their ATM placing.

This was my conclusion four months ago:

'Old news but looks like when the time comes MSTR will simply raise a ton of money to increase liquidity whilst also buying more bitcoin to boot. It kicks the can down the road for sure and will be shi* for shareholders but it's certainly good for bitcoin short-medium term and will get the bitcoin fan boys frothing at the mount and screaming CONVICTION!!! (when in reality they have no choice and shareholders will be shafted).'

This is exactly how it's playing out and will continue til either bitcoin goes on a bull run or MSTR fails to receive further financing in six months or so and are start selling bitcoin to keep the lights on and to buy themselves time (for bitcoin to go on a bull run.

A mere three day strengthening of the Rand and predictions were being made for it to continue right through to 17 and then 16. Well so far we're back close to three year highs at 18.3Zar to the dollar.

And I like to reiterate current V prices despite the small pullback in V205 and Chinese FeV and guidance (given Zar):
US ~$43.7/kgV, China ~40/kgV, Europe ~ $38.9/kgV.
AISC ~$34/kgV, cash costs $24.8/kgV

It's not been this good for BMN since early 2019.

tomorrowtoday, still waiting for that price to drop back to 25p?

'A close period is a one-month long period before quarterly results and a two-month period before annual results.'

From Chika's comments we can safely assume that Q1 will land three weeks tomorrow at the latest (28th April) but they'll get it out as early as they can, the week before potentially.