RE: Diverse business plan24 Apr 2019 22:40
Perhaps at this point it is appropriate to remind ourselves that Fortune Mojapelo is an excellent strategist and maybe one of the reasons that many LTHs are holding for future gains. Certainly one of my key considerations.
Some years ago he announced plans to grow BMN into a low cost vertically integrated vanadium platform, long before I heard anyone else referring to this concept. This was never going to be quick or easy. However once completed there is the potential for considerable returns on shareholder investment. The beauty of this strategy is that when vanadium prices are high BMN makes large profit from sales to the steel industry. We have seen this over the last 18 months and that has provided funds for investment in the expansion of production and other developments. However the recent drop in vanadium prices has made VRFBs far more viable so longterm BMN makes money from energy storage. Remember MN forecast that side of the business to be huge. This is moving towards win win for the company and its shareholders.
Of course the VRFB industry is in its infancy so we are talking about future potential. But isn't this exactly the opportunity that wise investors look for? Find an investment opportunity with great potential and get in early.
Pressure is growing to switch from fossil fuels to renewable energy and energy storage. Then there is the great need to develop off grid energy production and storage, particularly in parts of Africa. Political support in SA is growing and international funds are beginning to declare an interest. BE has already benefitted from a grant from the World Bank. It is my opinion that this is becoming an unstoppable wave of opportunity for companies like BMN.
BMN / BE are already working with their US partner UET on VRFBs and also partner the IDC. Their strategy of vertical integration is completely in line with the SA Government's desire to see local added value industries and employment, develop the mining industry, and to help to solve SA's electricity generation and supply issues. BE is currently building an electrolyte plant and a VRFB is on test with Eskom. Plans have been announced for a solar and battery storage project at Vametco.
Now these developments, not just in SA but globally, are likely to lead to an increase in the demand for vanadium. New sources and increased production at existing plants like Vametco will eventually meet some of this demand, but that will take time. I can't see the current structural deficit in the vanadium market disappearing any time soon. Even when production is increased, if VRFBs take off big time then there still may be a shortfall in vanadium supply. Add to that more enforcement of Chinese rebar regs and it is not difficult to see where things are heading. It is also worth noting that more realistic vanadium prices remove the pressure for steel makers to switch to niobium as a substitute.
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