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Hi Mogwhy - I have looked at the RNS’s you mention and they clearly show that Duferco sold 2m shares at that time. However, this was to reduce their holding to less than the reporting figure of 3%. Do you have any proof that they have continued to sell their remaining 35m shares, like a Bloomberg screen shot showing the entire shareholding in Bushveld?
With the final redemption of CLN’s awarded to Duferco, as part of the deal for the purchase of Vanchem, approaching fast I thought it would be worth revisiting the details of the deal hopefully summarized below.
BMN agreed a revised purchase price of $57.5m with $30m cash paid on completion, $2.5m deferred and CLN’s issued for the remaining $23m.
50% of the CLN’s were due for redemption on the 7/11/20 and the remainder on 7/11/21
BMN have negotiated to settle both redemptions with $5m cash and $6.5m (£4.7m) in shares The RNS dated 18/12/20, regarding the first partial payment of Duferco convertible loan notes, shows that a total of 37m shares were issued to Duferco
If the second redemption of $6.5m (£4.7m) is redeemed in shares at an average SP of 10p, this would equate to a further 47m shares being issued to Duferco and increasing the total shares in issue to 1.24b giving Duferco a total holding of 6.8%.
Looking back at the RNS for the end of the 2019 financial year it is shown that there was an independent valuation of Vanchem carried out to establish, under IFRS 3 rules, a Fair Value Calculation of the assets purchased from Duferco. This resulted in the assets being re-valued at $118m and a “Bargain Purchase” adjustment of $60m added to the company profits for the year.
Had BMN agreed to pay the “Fair Value” for the assets at $118m (£87m), this would have required an additional payment of $60m (£46m) which BMN did not have and would have required expensive financing or a share placement at the time of purchase, which could have resulted in 230m shares at 20p being offered to the market giving a dilution of 18.5%. This, together with the dilution from the CLN redemptions would have resulted in a total dilution of over 25%
Duferco must surely have realized the true value of Vanchem and appreciated the vast potential for BMN, particularly with the inclusion of Vanchem. Did they agree to sell the business cheap and accept CLN’s knowing that they would recover way more than the loss incurred on this deal, and has the BOD been happy to hold off on any news to allow Duferco to realise a higher number of shares.
There is a concern among some investors about the low value of the SP and how Duferco are going to benefit from this but, if you consider the above, shareholders may end up with a 6.8%, or less, dilution whereas they could have ended up with a 25% dilution if Fair Value was paid for Vanchem. Also, consider that if Fortune had not been able to negotiate this deal then Vanchem would not have been part of the Bushveld group, which would have had a very material impact on the future performance, and share price, of the company.
I believe that this was another masterstroke by Fortune to protect shareholder value and I also believe Duferco will retain their shares, until they reach at least £1, to recoup the $100m (£72.5m) shortfall between the price they paid in 2008 for Vanchem ($160m) and the price they sold to
UK battery investor Gresham House Energy Storage Fund said in its April annual results that it expects trading to dominate its earnings longer term, “as volatility increases due to rising renewable generation and less gas-fired generation”. Trading made up about 10pc of its £19m revenues last year.
Gresham House Energy Storage Fund performance in 2021
From 5 Jan to 12 July
Jan1526Feb17Mar26Apr162227MayJune17July120.0%5.0%
? Gresham House Energy Storage Fund PLC: 108.9 ? 116.87.2%
More share information on
Ben Guest, lead fund manager at Gresham, says he expects there to be a gap between need and supply of batteries in the short-term, but believes the market is on course to deliver longer term.
“We are going to see a huge amount of offshore wind onshore and solar and batteries will not curtail at a rate that’s going to avoid big increases in balancing costs,” he says. “But if you look over the next five to ten years, I think we are on our way.”
The Government has tried to promote wind and solar power by guaranteeing the amount developers will be paid for the electricity. Battery developers cannot qualify for those subsidy contracts and are reliant instead on less predictable and often short-term contracts with National Grid ESO, as well as trading power on the wholesale market.
In a note early this year, investment bank Stifel said revenue opportunities were “evolving” as National Grid’s need for the services changes. But it warned: “Ultimately, this all adds to the complexity inherent in the sector and why the investment case is not as straightforward as the high level picture would suggest.”
Matt Harper, chief commercial officer at Invinity, agrees the commercial models need to evolve. “The biggest inflection point in the solar industry was the development of 20-year purchase agreements,” he says. “If we could see that same level of reliability of revenue streams on the storage side, that would be a huge improvement.”
The market is becoming more welcoming. Changes to planning rules making batteries easier to build have helped give them an edge against other types of storage, such as pumped hydropower.
“When you look at the alternatives [to batteries], some of them can be quite complex,” says Rob Nickerson, electricity market modelling manager at National Grid ESO. “It’s a bit easier to bring battery projects forward.”
Costs of batteries have also come down, and the technology is improving. Between 2010 to 2018, battery cell costs fell 85pc from $1,160 (£839) /KWh to 176 $/KWh, according to Bloomberg Energy Finance. Battery costs are forecast to continue to fall between 20pc and 50pc over the next 10 years.
A few years ago, batteries tended to be bidding into the market to dispatch power for about half an hour at a time before they needed re-charging. Now one-hour and two-hour durations are more typical, says Nickerson.
Jonty Lovell, investment manager at Foresight Group, reportedly spoke at an industry conference in March of a noticeable “turning point” in the sector over the previous six to 12 months, “where economics have started to become more viable, certainly for equity investors”.
Revenues from trading the power from batteries, rather than National Grid ESO contracts, are also seen as a growing opportunity, given expected spikes and troughs in power prices as the system evolves.
UK battery investor Gresham House Energy Storage Fund said in its April annual results that it expects trading to dominate its earnings longer term, “as volatility increases due to rising renewable generation and less gas-fired generation”. Trading made up about 10pc of its £19m revenues last year.
How batteries can solve Britain’s big renewable energy problem
There are concerns of a looming gap as the supply of renewables grows much faster than the very early stage energy storage market
ByRachel Millard19 July 2021 • 6:00am
Sprawled across a field in north Wiltshire, dozens of large rectangular boxes on the outskirts of the village of Minety are the latest physical sign of the UK’s energy revolution.
Together, they form the biggest storage battery in Europe, providing 100MW of lithium-ion power to prevent blackouts and volatile costs caused by the country’s increasingly renewables-based energy system.
“We fully support the UK’s target of achieving a net-zero emissions society by 2050. Projects like this will enable that transition,” David Wells, vice-president of Shell Energy Europe, which is helping run the project, said last week.
Many more batteries like this will be needed as the country races to cut carbon emissions through measures including generating upwards of 75pc of power from renewable sources.
Relying on the patchy weather for electricity supply can be a problem when power supply and demand needs to be balanced second-by-second, keeping the National Grid at its required 50hz frequency.
Blackouts like those in August 2019, when power to trains, hospitals and more than 1m homes was briefly cut off, are the result if the balance is not kept.
Too much power is just as problematic as too little; wind farms are regularly paid to switch off during particularly gusty days to avoid overloading the grid.
Batteries can help manage some of those problems, storing excess power on windy and sunny days, ready to send it to the grid when generation is low. But there are concerns of a looming gap as the supply of renewable power grows much faster than the very early stage battery market.
“We need to get these assets onto the network as soon as possible, really, because these costs are starting to take off,” says James Basden, founder and director of battery developer Zenobe.
The opportunity for battery developers is huge. In modelling published last week, National Grid ESO, responsible for balancing Britain’s supply and demand, said it expects 43GW of electricity storage will be needed in 2050, compared to 3.5GW today.
Not all of that storage needs to be in the form of batteries, but it would help if a lot of it was. Some can jump into the system in less than 150 milliseconds, responding to sudden surges. National Grid expects small-scale batteries that can supply power for two to four hours to play a crucial role.
That has encouraged several companies into the market, such as lithium-ion battery developer Zenobe and vanadium-flow battery developer Invinity Systems. Utilities giant EDF has also bought battery storage start-up Pivot Power.
The sector, however, remains small, with less than 2GW installed. It has not been seen as an easy investment case, particularly for smaller developers.
I find it curious and frustrating that BMN only show the top 7 shareholders.
Recently a member of the Telegram group shared a screen shot showing all shareholders and their holdings - there were only around 20 in total.
If BMN were to show all holdings on their website, the queries regarding Duferco or other possible sellers could be answered.
How do the BOD propose settling the second tranche of CLN’s, valued at $11.5m (£8.1m), owned by Duferco and due for redemption in November 2021
The 37m shares issued to Duferco in settlement of the first tranche of CLN’s in December 2020, without any restrictions placed on the sale of these shares, would appear to have been slowly sold in the market resulting in a suppressed share price.
My concern is that Duferco will continue to drip feed their shares into the market at a rate that will negatively impact on the SP right up until November 2021, when the second tranche of CLN’s are due to be converted, thus allowing Duferco to obtain a significant number of shares at a suppressed SP value (54m @ 15p). Should this be the case, and Duferco have no interest in holding onto their increased share holding, we would then be left with many more months of selling affecting the SP.
To alleviate this situation, has the BOD considered any of the following to avoid issuing Duferco with further shares.
1 Use the additional cashflow from the increased vanadium price to pay off the CLN’s entirely in cash. An average increase in the value of vanadium of $3 kg for the forecasted 4,100mtv due to be sold this year, would raise $12.3m. The current price of vanadium is way more than $3 above the price used in the company budget for this year.
2. Identify one or more institutional investors to purchase 48m shares @ 17p for cash, in line with the Orion CLN’s, to provide the $11.5m (£8.1m) to clear the CLN’s.
3. Offer a placement of shares to existing shareholders, with 1 share @ 17p for every 24 currently held, to raise the $11.5m (£8.1m).
Fortune has stated that he is reluctant to cause dilution, and reduce shareholder value, but the above options 2 and 3 are only the same as converting the CLN’s to shares in favour of Duferco. Any of the 3 options would hopefully allow the SP to find its true value without being suppressed by continued heavy selling.
Like most people here I am disappointed with the continual delays with starting the build of this facility. However, I have a vague recollection of someone posting on here that this could be due to Eskom. If I remember correctly, part of the criteria for winning a BESS tender was that South Africa had to benefit from some sort of new facility/new employment which had to be created as an effect of winning the tender. Had the plant been already in production, as per the original timescales, then this would not be classed as a new facility post tender award. With the tender process being delayed until June, the electrolyte plant has also had to be delayed so that, when started, it does comply with the tender requirements as being a new facility. I would welcome views as to whether I remember this correctly.
My concern is that Duferco will continue to drip feed their shares into the market at a rate that will negatively impact on the SP right up until November 2021, when the second tranche of CLN’s are due to be converted, thus allowing Duferco to obtain a significant number of shares at a suppressed SP value. Should this be the case, and Duferco have no interest in holding onto their increased share holding, we would then be left with many more months of selling affecting the SP.
To alleviate this situation, has the BOD considered any of the following to avoid issuing Duferco with further shares.
1 Use the additional cashflow from the increased vanadium price to pay off the CLN’s entirely in cash.
2. Identify one or more institutional investors to purchase 42m shares @ 17p for cash, to provide the $11.5m to clear the CLN’s.
3. Offer a placement of shares to existing shareholders, with 1 share @ 17p for every 25 currently held, to raise the $11.5m.
Fortune has stated that he is reluctant to cause dilution, and reduce shareholder value, but the above options 2 and 3 are only the same as converting the CLN’s to shares in favour of Duferco. Any of the 3 options would hopefully allow the SP to find its true value without being suppressed by continued heavy selling.
I look forward to hearing from you
Kind regards
Michael
Dear all
On the 13th April I sent the following email to Chika regarding the Duferco shareholding and have today received a limited response, which I have added at the bottom. Looking at the Bloomberg screen shot posted on Telegram on Friday, Duferco shows the original holding of 37m shares but the RNS on 02/02 confirms that they reduced their holding to 35m shares and below 3%, so that post looks out of date. As Chika states that the shares were issued “without any restrictions” it would indicate that Duferco have been selling although it would be good to have this confirmed by a more up to date Bloomberg screen shot.
Good morning Chika
As you will be aware there is quite a lot of concern on the LSE BB regarding the current SP and whether, or not, we have someone selling down their holding, which is having a negative impact on the SP reflected in a market cap well below true value.
Looking back at the RNS dated 23/10/19, regarding the revised terms for the purchase of Vanchem from Duferco, it states that “The holder will not be able to divest any Bushveld Minerals shares received for six months following conversion and be subject to an orderly market arrangement for the following six months”.
The RNS dated 18/12/20, regarding the partial payment of Duferco convertible loan note, shows that a total of 37,115,210 shares were issued to Duferco and that an application for the admission of these shares to trading on AIM, would occur at 8am on the 24/12/20.
Looking at the list of major shareholders, as at 26/02/21, shown on the BMN website, there is no mention of the shares held by Duferco although data for shareholders 8 and 9 is missing.
In line with the agreement, stated in paragraph 2 above, could you please confirm that Duferco are in fact complying with this agreement and that none of the 37m shares will be sold until after 24/06/21. To further confirm this to be the case, could you please provide me with a list of the current shareholders and number of shares each hold, which should show Dufferco to have 37m.
However, if Duferco are not complying with the agreement and are in fact selling down their holding, this could well be the reason for the poor SP performance.
that when FM agreed the revised deal with Duferco that he allowed them to sell their shares early, instead of after 6 months, providing they were all sold by the end of this week, in time for news on BESS next week, and FM has been holding everything back whilst the sale suppressed the SP, not wanting to waste all the good news.
Also, could the proceeds of the IES shares sale have been used towards the Buy Back of a significant portion of the final 14m sale, reported yesterday, to be held in treasury pending the launch on JSE.
There is a concern among some investors about the low value of the SP and how Duferco are going to benefit from this but, if you consider the above, shareholders may end up with a 6.6%, or less, dilution whereas they could have ended up with a 21% dilution if Fair Value was paid for Vanchem.
I believe that this is another masterstroke by Fortune to protect shareholder value and I also believe Duferco will retain their shares, until they reach at least £2, to recoup the $100m shortfall between the price they paid in 2008 for Vanchem ($160m) and the price they sold to BMN ($58m)
Most of the above is based on research of the BMN RNS files and questions/opinions are just my musings.
Would welcome others thoughts on this.
Good morning all
You will note from my posting history that I am not a regular poster but have been here for 2 years having invested heavily at 25p and been under water ever since. I read this BB and Telegram every day to keep abreast of all the news worldwide relating to battery storage and would offer my thanks to all the generous posters on here who keep us well informed. I still have great faith in the future of this business and the impact it will have on my grandchildren and try to ignore all the negative troll posts and the shenanigans' of the MM's, but I have noted of late the theories with regard to Duferco selling their shares, which may or may not be true, and have looked back to a post I made last year, copied below, which looked at the bargain Fortune achieved when purchasing Vanchem from Duferco. It is very frustrating for LTH's if Duferco are selling and holding back the SP, but it is a short term pain for a longer term gain.
Just trying to get my head around the Duferco deal hopefully summarized below.
BMN agreed a revised purchase price of $57.5m with $30m cash paid on completion, $2.5m deferred and CLN’s issued for the remaining $23m.
50% of the CLN’s are due for redemption on the 7/11/20 and the remainder on 7/11/21
BMN have negotiated to settle the first redemption with $5m cash and $6.5m (£5m) in shares
The SP will be based on the average weighted SP for the 10 trading days prior to 7/11/20
If we assume an avg SP of 12p, that equates to 42m shares and a 3.5% holding
If the second redemption of $11.5m (£10m) is redeemed in shares at an average SP of 25p, this would equate to a further 40m shares being issued to Duferco and giving a total holding of 6.6%.
I would like to think the SP would be considerably higher than 25p in November 21, which would result in fewer shares being issued and a lower holding %.
Looking back at the RNS for the end of the 2019 financial year it is shown that there was an independent valuation of Vanchem carried out to establish, under IFRS 3 rules, a Fair Value Calculation of the assets purchased from Duferco. This resulted in the assets being re-valued at $118m and a “Bargain Purchase” adjustment of $60m added to the company profits for the year.
Had BMN agreed to pay the “Fair Value” for the assets at $118m, this would have required an additional payment of $60m, which BMN did not have, and would have probably resulted in a placement of 230m shares at 20p and giving a holding of an extra 16.5% and 21% in total when the CLN’s are taken into account.
Duferco must surely have realized the true value of Vanchem and appreciated the vast potential for BMN, particularly with the inclusion of Vanchem. Have they agreed to sell the business cheap and accept CLN’s knowing that they will recover way more than the loss incurred on this deal, and has the BOD been happy to hold off on any news to allow Duferco to realise a higher number of shares.
Hi Libero
If you recall back on the 6th November both you and I calculated that the convertible share price would be 11.5p, if actioned at that time, resulting in 42.9m shares being issued.
Today’s RNS showing that only 37.1m shares were actually issued is a great result.
Just found this letter to the editor in the Telegraph re the cost of a replacement EV battery after 8 years.
If this equates to say 65% of the original purchase price of the car, how much would a replacement Li-ion storage battery cost after 10 years?
SIR – My Nissan Leaf – three years old when I bought it in 2015 – is being let down by a tired battery, the range of which has dropped from 70 to 40 miles in the time I have owned it.
When, a year ago, the Portsmouth dealer quoted £7,500 for a new battery, I declined. This proved unwise: this month, the dealer in Gateshead told me that Nissan UK no longer exchanges batteries, and the price of a new one would be £19,000. Meanwhile, the dealer in Swindon quoted £22,500.
With this pricing, I wonder how many good Nissan Leafs with tired batteries are going to be scrapped prematurely.
Additional Shares Reolution
I am a bit confused with this resolution, as the issue of an additional 50m shares does not appear to stack up.
The board currently have authorisation to issue 115m shares and we need to find 43m to issue to Duferco and then at least 175m to Orion, giving a total additional authorisation requirement of 103m shares.
This would then equate to total shares in issue of 1.35 billion and we would then need to agree to a further 135m shares to be available for issue to comply with the 10% availability for ongoing general authorities.
Based on these figures Duferco will have a holding of 3.2%, and Orion 13%, that’s a substantial dilution, but I am sure we will benefit from this arrangement long term.
RNS extract below
As Orion can now subscribe for the full US$35 million of convertible loan notes under the Instrument at a conversion price of 17 pence for each new ordinary share converted, and as the exchange rate is determined at the time of conversion, the Directors require additional authority to issue up to another 50,000,000 new ordinary shares, in addition to the 115,297,268 new ordinary shares authorised for issue by shareholders on a non pre-emptive basis at the Company's General Meeting, held on the 5 August 2020. The total number of new ordinary shares available for conversion would therefore be 165,297,268, which is equivalent to approximately 14.3 per cent of the Company's current share capital.
In addition, the Directors are proposing additional resolutions at the General Meeting to refresh ongoing general authorities to issue additional ordinary shares up to 10 per cent of the Company's issued share capital. These are to provide the Company with the flexibility of ongoing authorities to remain in place until the Company's next annual general meeting (expected to be held in June 2021). These additional resolutions are conditional upon the specific resolutions to issue the additional conversion shares being passed.
Orion CLN
RNS Extract
$35m @ 10% interest pa for 3 years converted to BMN shares at 17p per share.
A fixed 10 per cent per annum coupon with a three year maturity date from the drawdown date.
All interest will accrue and be capitalised on a quarterly basis in arrears but compounded annually.
Accumulated capitalised and accrued interest is convertible into Bushveld ordinary shares.
My Thoughts
Orion have the option to convert a portion of the debt into BMN shares at various times during the loan period, but if they are guaranteed a conversion price of 17p, why would they not wait till the end of the loan period and convert the whole value of the loan, plus 3 years compounded interest, into shares at that time.
If Orion wait until the end of the loan period the outstanding amount would be $47m (inc $12m interest), which equates to £36m at a $1.30 rate, and 212m shares
Should the BMN share price achieve a volume weighted average of 51p for 15 trading days, then BMN can convert the whole outstanding debt at that time into shares. If this were to happen after one year the amount payable would be $38.6m, £29.7m, 175m shares.
Either way this is a significant volume of shares and dilution, but hopefully we will see long term benefits of this agreement.
Production Financing Agreement
Orion have provided $30m of funding to Bushveld (Vametco Alloys) to finance phase 3 of the Vametco expansion project.
Payments to Orion will be made quarterly, based on the income generated from the sale of Vametco stock, and could continue for the life of the Vametco mine.
There will be no issue of shares as a repayment vehicle for this funding, and therefore no additional dilution.
The quarterly repayment amount will be determined as the sum of a gross revenue rate and a unit rate.
If Vametco sales achieve 4200mtv each year, and the vanadium price averages $30 per kgv, the income generated would be $126m per year. Obviously increased/reduced production and/or higher/lower vanadium prices would impact all the figures referenced here and below.
The gross revenue rate payable to Orion for 2020/21, @ 1.175%, would be $1.48m and for 2022 onwards, @ 1.45%, $1.83m.
The unit rate payable to Orion, $0.443 kgv, for each year would be $1.86m, but adjusted annually for inflation.
The total annual payment due based on the above would be $3.34m for 2020/21 and $3.69m thereafter.
Based on a total stock figure of 132k mtv, at a useage of 4.2k mtv sales per annum, would give a life of mine of 31 years.
Payments due to Orion on the above figures would be 2 yrs @ $3.34m and 29 yrs @ $3.69m giving a total of $113.7m.
Any additional sales from Vametco over the 132k mtv would result in additional payments to Orion of $0.22 per kgv sold.
BMN have the option to repay up to 50% of the loan at each of the first 3 anniversaries – so assuming they repay $10m on each anniversary, and repay the whole loan within 3 years, the effect on payments to Orion would be as follows.
2020 payment as above $3.34m
2021 payment of $2.23m (2/3rds payment based on 1/3rd of loan repaid.)
2022 payment of $1.23m (1/3rd payment based on 2/3rds of loan repaid.)
Total payment to Orion $36.8m compared to the $113.7m based on the lifetime of the mine.
I would like to think that the additional production, and sales of Vametco stock, would provide the company with sufficient free cashflow to repay this loan over the 3 years and dramatically reduce the total sum payable to Orion.