Bushveld Minerals Regulatory News (BMN)

Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement

30 June 2021

Bushveld Minerals Limited

("Bushveld Minerals" "Bushveld" or the "Company")

Full Year Results for the Period Ended 31 December 2020 & 2021 Guidance Update

Bushveld Minerals Limited (AIM: BMN), the AIM quoted, integrated primary vanadium producer and energy storage provider, with ownership of high-grade assets in South Africa, is pleased to announce its full year results for the year ended 31 December 2020 and an update on 2021 guidance.

Annual Report

The Annual Report for the year ended 31 December 2020 will be available on the Company's website today at the following link: http://www.bushveldminerals.com/financial-reports/ . Physical copies of the Annual Report will be posted to shareholders who have elected to receive them, during the week commencing the 12th of July 2021. A further announcement will be made by the Company once hard copies of the Annual Report have been despatched to shareholders.

FY2020 Operational and Financial Highlights

· An improved safety record achieving a Total Injury Frequency Rate ("TIFR") at Vametco of 18.21, an improvement of 22 per cent (2019: 23.49), and a TIFR of 5.26 at Vanchem.

· Record Group production of 3,631 mtV (2019: 2,931 mtV), primarily as a result of the inclusion of Vanchem for a full year.

· Record Group sales of 3,842 mtV (2019: 2,392 mtV), as a result of the full year contribution of sales volumes from Vanchem.

· Revenue of US$90.0 million, a 23 per cent reduction relative to 2019 (2019: US$116.5 million) as a result of a 52 per cent decline in the average realised price, partly offset by an increase in sales volumes.

· Group cost per unit sold of US$29/kgV (2019: US$37/kgV), reduction is supported by the dilution of fixed costs through the acquisition of Vanchem and increase in its production.

· EBITDA loss of US$14.9 million, (2019: US$32.6 million) largely due to a decline in vanadium prices, and partly offset by a reduction in other operating and administrative costs.

· Entered into a transaction with Orion Mine Finance under which we successfully secured US$65 million in funding. The financing provides support to the Group to achieve a steady state production run rate of between 5,000 mtVp.a. and 5,400 mtVp.a. by the end of 2022.

· Ended the year with cash and cash equivalents of US$50.5 million held at 31 December 2020 (2019: US$34.0 million).

· Continued progress in implementing the Company's strategy in the growing stationary energy storage sector through Bushveld Energy:

§ Successfully completed investments in Vanadium Redox Flow Batteries Original Equipment Manufacturers Invinity Energy Systems plc ("Invinity") and Cellcube.

§ Signed an electrolyte rental contract between Pivot Power, part of EDF Renewables, and Vanadium Electrolyte Rental Limited, a joint venture established with Invinity.

Post period events

· Group Unaudited cash and cash equivalent of approximately US$31.0 million as 27 June 2021.

· Successfully renegotiated the covenant testing terms required under the ZAR125 million Revolving Credit Facility ("RCF").

§ Nedbank has agreed to waive the covenants for the June 2021 period and relax the December 2021 Group net debt to EBITDA ratio from 2.50 times to 4.0 times. A condition of the waiver is that the RCF is amortised by ZAR5 million (approximately US$0.3 million) per month from 6 August 2021, with a bullet payment of ZAR50 million (approximately US$3.4 million) due on the maturity date of 6 November 2022.

· Positive renegotiations with Duferco Participations Holding S.A ("Duferco") on the remaining balance US$11.5 million of convertible balance, to result in US$5 million being payable in November 2021 and the remaining US$6.5 million being converted into Bushveld shares.

· Commenced construction of the 200 MWh electrolyte plant in June 2021.

· Monetised investment in Invinity and realised approximately US$13 million.

2021 Guidance

Bushveld Vanadium

· Group production guidance revised to between 3,400 mtV and 3,600 mtV.

§ As reported in the Q1 2021 operational update, Vametco's performance was impacted by slower than expected ramp up post the successful completion of the 35-day planned maintenance shutdown. There were more unforeseen mechanical breakdowns after start-up, followed by six-days of unprotected industrial action in April 2021. Due to this:

o Vametco's 2021 guidance has been revised to between 2,300 mtV and 2,400 mtV, previously between 2,700 mtV and 2,850 mtV.

o Production cash cost (C1) has been revised to between US$23.7/kgV and US$24.20/kgV (ZAR339/kgV and ZAR345/kgV), previously US$20.0/kgV and US$21.30/kgV (ZAR320/kgV and ZAR340/kg).

§ Due to delays in securing steel supplies for the Kiln 3 refurbishment schedule, Vanchem's 2021 guidance has been revised to 1,100 mtV and 1,200 mtV, previously 1,400 mtV and 1,500 mtV.

o Production cash cost (C1) has been revised to between US$30.3/kgV and US$31.1/kgV (ZAR434/kgV and ZAR444/kgV) previously, between US$26.20/kgV and US$26.70/kgV (ZAR419/kgV and ZAR427/kg).

o Vamchem's capital expenditure for the year associated with the refurbishment programme has been revised to US$11.3 million, previously US$15.7 million with most of the cost being ZAR-denominated.

· The Company is to grow its vanadium production to a production run rate of between 5,000 mtVp.a. and 5,400 mtVp.a. by the end of 2022, following completion of the refurbishment and ramp up of Kiln 3 at Vanchem, which is of a similar scale and capacity to Vametco, and will see Vanchem produce at an annual steady state production run rate 2,600 mtV.

· Pre-feasibility studies are under way at Vametco and Vanchem to increase Group production run rate to between 6,400 mtVp.a. and 6,800 mtVp.a. in the medium-term and to 8,400 mtVp.a. in the longer term. Completion of the studies in Q4 2021 will allow a capital efficient sequencing of the growth phases between Vametco and Vanchem.

· Implement the cost savings programme in order to achieve costs savings of approximately US$2.5 million to US$4 million per year, starting from 2022.

Bushveld Energy

· Progress construction of the electrolyte plant, with an initial 200 MWh capacity.

· Scale up the vanadium electrolyte rental product with new contracts.

· Support and fund the growth of Cellcube, together with the other shareholders.

· Attain financial close and commence construction of the Vametco hybrid mini-grid.

Group Capital Expenditure

· Capital expenditure expected for 2021 of approximately US$26.8 million, of which we have already spent US$8.6 million as at 31 May 2021, with most of the cost being Rand-denominated. The Capital expenditure includes the following

§ Vametco approximately US$6.0 million;

§ Vanchem approximately U$11.3 million; and

§ Bushveld Energy, approximately US$9.5 million, including the capital of Bushveld Electrolyte Company ("BELCO"), (principally funded by Bushveld Energy's partial asset sales of its Invinity shares in H1 2021.)

Fortune Mojapelo, CEO of Bushveld Minerals Limited, commented: 

"Following the completion of the Vanchem acquisition in November 2019, we began 2020 with a clear focus to integrate our operating assets, implement our new operating model designed to ensure adequate oversight over and extract the most synergies between our assets, even as we undertook the capital expansion projects to grow production at Vanchem and Vametco.

Yet early into the year the world found itself in the grip of a global COVID pandemic whose disruption of everything posed an existential threat to most businesses, ours included. Amidst the uncertainty and disruption that continues still, I am pleased to report that our comprehensive and agile response plan combined with the diligence and hard work of all Bushveld's employees, helped us find the balance between keeping our employees safe and ensuring business continuity. Better still we were able to report record Group production thanks to the inclusion of Vanchem production for a full year..

While 2020 witnessed depressed vanadium prices, we believed, as we still do, that the market fundamentals for vanadium are robust and supportive of price upside. This market view underscored our conviction to complete the acquisition of Vanchem even in the midst of a declining price. I am especially grateful that our positive outlook for vanadium and primary producers is shared by Orion Mine Finance with whom we completed a US$65 million funding agreement at the end of 2020. The funding secures our near-term growth plans and strengthened our balance sheet as we were able to retire the Nedbank term loan and repay half of the Duferco Participations Holding S.A ("Duferco") convertible loan note with cash and shares.

Notwithstanding the positive growth outlook for vanadium, operating conditions in 2020 were challenging as a consequence of not only a low price environment but also COVID-related disruptions to operations and global supply and logistics, significantly impacting production and costs. All of this contributed to a weak financial performance with a Group EBITDA loss of US$14.9 million. In this context, I am pleased that we have since successfully renegotiated the covenant testing terms required under the Nedbank ZAR125 million Revolving Credit Facility.

Our focus at an operational level is on attaining operational excellence at our assets. This is especially important at Vametco which has shown operational instability at the beginning of 2021. In this respect I am pleased to have welcomed Mr Francois Naude, who joined us at the start of 2021, as the Director of Operations. Supported by a sound technical team, Francois brings extensive operations turnaround experience and will play a key role in our quest to extract value from our operations.

Meanwhile, the need to prioritise operational stability at Vametco has necessitated a longer than usual 35 day maintenance shutdown in Q1 2021 and a downward revision of our targets for the plant's operating metrics in line with historically observed performance metrics, resulting in an unfortunate downward revision of production guidance for 2021. This effort has also seen us launch a comprehensive Group-wide cost review exercise to drive improved unit cost performance.

Our commitment to organic production growth remains, not only for its revenue growth proposition but also for its contribution to lowering our unit costs. Yet, in a capital constrained environment we must sequence the multiple expansion initiatives in a way that prioritises the cheapest next vanadium unit in our expansion initiatives, while promoting stability at our operations. This is the subject of current pre-feasibility studies underway at both Vametco and Vanchem. We will provide details on the production path and expected capital expenditure once the studies are concluded, which we expect to complete in Q4 2021.

At Bushveld Energy, the Company made great strides in growing the awareness and commercial competitiveness of VRFBs as a viable energy storage alternative. Our strategy to invest in VRFB manufacturing, which is designed to be a catalyst for mobilising financing to build scale among VRFB Original Equipment Manufacturers, has also been fruitful. Our US$5 million investment in AIM-quoted Invinity, whose creation we facilitated in 2020, delivered immediate benefits. Invinity has won several important contracts and its share price rose by more than 300 per cent in 2020. We have since crystallised our position and realised a total of approximately US$13 million.

Despite the challenges of the Covid pandemic, progress continued on our mini-grid project at Vametco, where Cellcube has been selected to supply a 4 MWh VRFB for the project. The project will demonstrate the business case of self generation solutions using PVsolar and VRFB systems at a time when the South African government is creating a supportive regulatory environment for self-generation, including lifting the cap for such projects being developed without a generation licence to 100MW from 1MW a few years ago.

In 2020, we started a process of developing our sustainability strategy, which will focus on Environment, Social and Governance ("ESG") principles. We will integrate material ESG considerations across the value chain into the business decision-making process; report on material ESG key performance indicators; and communicate a consistent message to stakeholders on key ESG commitments.

The successful acquisition of Vametco and Vanchem are important pillars in our brownfields growth strategy. With a combined acquisition cost for the two plants of approximately US$120 million and a growth capital expenditure of approximately US$30 million we now have the platform that will take the Group's steady state production run rate to between 5,000 mtVp.a. and 5,400 mtVp.a, from the projects currently being executed, with further growth ahead as more capex is spent. As importantly, we have funded this growth since 2016 with limited equity financing (through equity placing, convertible and warrant instruments) (approximately US$60 million) while the balance came from cashflows generated by the operations and debt funding. Our task now is to match the capital efficiency we have demonstrated in growing our asset base with operational efficiency- realising their full production capacity and competitive cost position. We are up to the task."

Analyst conference call and presentation

Bushveld Minerals Chief Executive Officer, Fortune Mojapelo and Finance Director, Tanya Chikanza will host a conference call and presentation at 14:00 BST (15:00 SAST) today to discuss the 2020 full year results with analysts. Participants may join the call by dialling:

Tel: United Kingdom: +44 (0)330 336 9126; South Africa: +27 11 844 6054

Pin: 1720767

Alternatively, the presentation can be accessed as a webcast here:

https://webcasting.brrmedia.co.uk/broadcast/60d9897e0bb2806642d65b88

ENDS

Enquiries: info@bushveldminerals.com

ABOUT BUSHVELD MINERALS LIMITED

Bushveld Minerals is a low-cost, vertically integrated primary vanadium producer. It is one of only three operating primary vanadium producers, owning 2 of the world's 4 operating primary vanadium processing facilities. In 2020, the Company produced more than 3,600 mtV, representing approximately three per cent of the global vanadium market. With a diversified vanadium product portfolio serving the needs of the steel, energy and chemical sectors, the Company participates in the entire vanadium value chain through its two main pillars: Bushveld Vanadium, which mines and processes vanadium ore; and Bushveld Energy, an energy storage solutions provider. Bushveld Vanadium is targeting to materially grow its vanadium production and achieve an annualised steady state production run rate of between 5,000 mtVp.a. and 5,400 mtVp.a by the end of 2022, from projects currently

being implemented. Beyond that, pre-feasibility studies are in progress to determine the optimal path to increase production even further to a steady state production run rate of between 6,400 mtVp.a. and 6,800 mtVp.a. in the medium-term and to a steady state production run rate of 8,400 mtVp.a in the long term.

Bushveld Energy is focused on developing and promoting the role of vanadium in the growing global energy storage market through the advancement of vanadium-based energy storage systems, specifically Vanadium Redox Flow Batteries ("VRFBs").

Detailed information on the Company and progress to date can be accessed on the website www.bushveldminerals.com.

Chairman's Statement

Dear Stakeholders,

There is no doubt that 2020 will be remembered for decades to come as a difficult period for everyone, and for some more than others.

It was also a year when responsibility came to the forefront. The responsibility of governments to look after their citizens, corporates to ensure the health and safety of their employees, and companies like Bushveld Minerals to ensure that the value of our tier-one assets were retained throughout the difficult period of the COVID-19 pandemic.

As a corporate citizen in South Africa, Bushveld Minerals' responsibilities run deep, starting with our local communities. The sustainability of our communities is intrinsically linked to the success and longevity of our operations.

I would like to applaud management for acting swiftly to protect our employees early and throughout the pandemic. Management halted operations, in line with the government's equally commendable measures, and applied strict health and safety protocols, including social distancing, sanitising, education and a revised shift system, once operations were restarted.

Vanadium prices were not excluded from the pandemic's effect on global growth, as prices of basic materials, including those needed for steel production, dipped initially, due to weakness in key markets.

Again, management must be commended for finding new sources of demand in China. The country emerged from the pandemic with a strong appetite for metals, and its demand was higher than in other parts of the world.

Late in 2020 and in the first half of 2021, we have seen vanadium prices continue to rise globally as growth returns after a year of lockdowns.

Prudently, the Board and management conducted an internal review of capital expenditure plans, ensuring the roll-out of these planned investments matched our ability to finance them and that they were not slowed down by short-term market dynamics.

We entered into a transaction with Orion Mine Finance, under which we successfully secured US$65 million in funding. The financing provides a structure that will support the Group to achieve a steady state production run rate of between 5,000 mtVp.a. and 5,400 mtVp.a. by the end of 2022. Studies are currently being conducted to determine the optimal way to deploy this capital for further growth to a steady state production run rate of between 6,400 mtVp.a. and 6,800 mtVp.a., which may include re-sequencing some of our capital projects. Our objective is to grow production in an efficient, sustainable manner, while avoiding any strain on our balance sheet.

This is not a race, but a journey, and we want to make certain that once we reach our goal, we can maintain our production rates for decades into the future.

In the year under review, we controlled our newest asset, Vanchem, for the full financial year. Vanchem diversifies our product mix and delivers key brownfield growth that we previously indicated was an important part of our strategy, given our vast resource in the ground.

Despite the unforeseen challenges of the past year, governments have recognised and embraced the opportunity to steer the world towards the clean energy transition faster than was previously evident. Many governments have put renewable energy and a focus on reduced emissions at the centre of their stimulus programmes.

In South Africa, the government has prioritised the need to resolve its energy supply crisis and it has taken some bold steps since the start of 2021. Several recent announcements are promising for the future of renewable energy and energy storage.

The first key announcement was confirmation by National Treasury that it had agreed with Eskom on an implementation plan and timelines for the restructuring of the utility. This will allow competition and cost transparency in electricity generation. The second key announcement was the increase in the threshold for self-generation without a licence from 10 MW to 100 MW, which will help to increase electricity supply, particularly from renewable resources. The third was the revival of the renewable procurement programme. This was halted in 2015 but re-prioritised under the 2019 Integrated Resource Plan. All three are important steps to increase competition in the power sector.

These developments support Bushveld Minerals' plans to develop its downstream operations beyond the production of end-use vanadium products, to become a key player across the renewable energy storage value chain. As we have repeatedly stated, the energy storage market presents a sizeable commercial opportunity for our Company. Our integrated strategy means we will not only benefit from the uptick in demand arising from this opportunity, but will also be able to participate meaningfully in the downstream sector.

As you know, we recognised this opportunity much earlier than most others and had already established a solid energy base. We were able to benefit from our investment in Invinity Energy Systems ("Invinity"), the London-listed entity that resulted from the merger between Avalon Battery Corporation and redT energy plc, as Invinity's shares gained appreciably in value after its re-listing in April 2020. It has subsequently secured several exciting sales contracts. Additionally, we invested into Cellcube as part of an investment consortium.

We have also made significant progress in our efforts towards self-generation at Vametco. We have developed a strong platform for externally-funded solar generation and Vanadium Redox Flow Battery ("VRFB") storage that will satisfy just under 10 per cent of Vametco's energy requirements and reduce its carbon footprint. This project is part of Bushveld's strategy to demonstrate the superior technical and economical merits of long-duration VRFB systems when paired with renewable energy, as the South African government relaxes regulatory hurdles around energy self-generation.

Another key responsibility for us is to our shareholders. While much of the regular in-person engagement with our investor base was impossible in 2020, our responsibility to ensure sustainable returns for the long term informed every decision we made. Despite a global event that no-one had prepared for, the business was managed appropriately through this challenging period.

To progress the Company so much under such constraints would have been impossible without the combined efforts of our people, who are essential to our success.

Although COVID-19 infections continue to rise by varying degrees in different countries, we are seeing signs of progress in the world's efforts to combat the pandemic through vaccination programmes, including South Africa. We will continue to prioritise the safety of our employees as we prepare the business for a global economic recovery and an acceleration of the new energy future, fuelled by governments' policies to encourage the transition.

I would like to thank Fortune and the entire Bushveld team for their efforts during a very challenging year.

Finally, I pay tribute to Dolly Mokgatle, our former non-Executive Director, who tragically passed away in early 2021. Dolly, was an established and highly- experienced business leader in South Africa, who will be sorely missed by all.

Ian Watson

Independent Non-Executive Chairman

Chief Executive Officer's Review

While COVID-19 was an unprecedented and unexpected challenge, I am pleased to say we have emerged from 2020 in a robust position. This reflects our pragmatic approach to the outbreak. We sought to keep our employees and communities safe, while building resilience and agility so that the Business could continue to operate while maintaining an appropriate growth outlook.

2020 overview

I would like to begin by expressing my deep gratitude to every individual within the Bushveld Group for their efforts to ensure that the Company survived 2020 relatively unscathed. Our comprehensive response to the COVID-19 pandemic, ably led by the COVID-19 Task Team we established, was only effective because our employees respected and followed the protocols that were prescribed.

Our response plan operated in a context of a laudable and decisive set of risk-adjusted actions by the government of South Africa, which included a series of lockdowns and several other measures that have helped the country weather the COVID storm. This enabled its people to return to some sense of normality and ordinary operating conditions far sooner than many other countries.

While COVID-19 was and is an unprecedented challenge, I am pleased to say we have emerged from 2020 in a robust position. This reflects our pragmatic approach to the outbreak. We sought to keep our employees and communities safe, while building resilience and agility so that the Business could continue to operate while maintaining an appropriate growth outlook.

This meant, in the short-term, prioritising:

• The health and safety of our employees, to prevent and minimise transmission of the virus in the workplace and at home. We implemented safety protocols in the workplace, including social distancing, supplying sanitisers, education about the virus, and restructuring the shift system. We supported our local communities by supplying water and sanitisers to local hospitals, police stations and care homes.

• Cash preservation, which entailed a review of all capital expenditure and the deferment of several growth initiatives until we had clarity on the expected impact of the pandemic on our operations and markets.

• Adapting our business to align with new operational realities, such as disrupted supply chains and logistics, to ensure we could still service our customers.

During the initial lockdown imposed by the South African government in late March 2020, we were able to maintain some scaled-down operations at Vametco. Vanchem was placed on care and maintenance. The re-start and ramp-up to normal production levels necessitated operational adjustments to accommodate social distancing, COVID-19 protocols and altered shifts for the implementation of certain projects. We continue to use an agile remote working set-up to ensure that all employees remain productive while we minimise any potential outbreaks in the workplace.

At the start of 2020, execution of our previously- announced growth strategy was well advanced.

This strategy included: the refurbishment programme at Vanchem and the planned expansion at Vametco, targeting an increase of production to 4,200 mtVp.a at both operations; construction of the electrolyte manufacturing plant in East London; and making investments in the Vanadium Redox Flow Battery ("VRFB") value chain. Due to the pandemic, we had to review some of our targets.

In the short-term, our decision to defer some planned growth capital expenditure was reinforced by a declining vanadium price. The vanadium price fell from approximately US$30/kgV to lows of circa US$20/kgV (London Metal Bulletin prices) in part due to the pandemic's disruptive impact on global commodities markets.

However, a review of the outlook for vanadium in a post-COVID world highlighted a stronger case for growth in the longer term driven by economic recovery in key global economies, several of whom embarked on fiscal programmes targeting infrastructure development and an accelerated energy transition investments, both of which are favourable for vanadium demand.

Our financial stress-testing indicated that the business was in a healthy position. However, prevailing market conditions meant we would need external funds to support our growth plans.

Towards the end of the year, we successfully closed a US$65 million financing arrangement with Orion Mine Finance ("Orion"), through a Production Financing Agreement and convertible loan note issue. The funding placed us in a strong position to maintain our growth strategy. Some of the funding was used to strengthen the balance sheet by partially retiring existing debt facilities. We ended the year with cash and cash equivalents of US$50.5 million.

During Q4 2020, as economies reopened, there was strong vanadium demand, not only from China, but also from some of our more traditional markets, such as the USA and Europe. This demand has continued into 2021.

Bushveld generated revenue of US$90 million on the back of sales of 3,842 mtV. However, we recorded an EBITDA loss of US$14.9 million due to a 52 per cent decline in the realised vanadium price.

Safety

We recorded 54 COVID-19 cases among our employees in 2020, all of whom have fully recovered. We are grateful, not only to our colleagues working hard to ensure compliance with our safety protocols, but also to the employees abiding by these protocols. Post year end, however, we were sad to record two fatalities due to COVID, underscoring the need to remain vigilant, even as the country's mass vaccination programme is set to pick up momentum in H2 2021.

Governments around the world are now well into the next phase of recovery, reinvigorating parts of the economy that have been severely affected, upping infrastructure spend, and focusing on those sub-sectors that have a prosperous future, such as the new energy transition. We are proud that the South African government is on the same path.

Despite the ongoing pandemic, we were pleased to achieve a Total Injury Frequency Rate ("TIFR") at Vametco of 18.21, an improvement of 22 per cent from 23.49 in 2019, and a TIFR of 5.26 at Vanchem. The safety of our workforce and all employees remains front of mind for us.

Bushveld Vanadium: operational performance 

Production for the year was 24 per cent higher than in 2019, despite the challenging environment and 380 mtV of lost production due to the COVID-19 pandemic. The consolidation of Vanchem for a full-year period made up a large part of the production and sales volume increase. Sales volumes rose 61 per cent relative to 2019, owing to the addition of sales from Vanchem, as well as increased demand from customers during the second half of the year. In the early part of the year, we began diverting a larger portion of our sales to China, as the country's economy was one of the first to ease lockdown measures and re-start industrial production. During 2020, 23 per cent of our sales were to China, up from nine per cent in 2019. This is in line with the Company's strategy of increasing sales to higher-priced markets.

Strategic focus

Brownfield assets acquisition

We believe that vanadium market fundamentals significantly favour primary producers. We are thus pleased to have been able to acquire Vanchem in November 2019, following the acquisition of Vametco in 2017 and 2018. This puts Bushveld in a competitive position, as it owns two of the world's four operating primary processing plants. The acquisitions are part of a brownfields strategy we announced in 2016, which has seen the Company transform from an exploration to a Vanadium mining and processing company.

The combined acquisition cost for these two plants was approximately US$120 million. The capital expenditure of approximately US$30 million (including US$15 million in Environmental compliance related capital expenditure), will take the Group's steady state production run rate to between 5,000 mtVp.a. and 5,400 mtVp.a, from the projects currently being executed, such as the Vanchem kiln 3 refurbishment (Phase1). We achieved this growth by leveraging cashflows generated by the operations, debt funding and approximately US$60 million in equity financing (through equity placing, convertible and warrant instruments) since 2016.

Following these acquisitions, our main focus has been to refurbish and expand production at these assets, to integrate and operate them efficiently, and to maximise synergies between them. Maximising efficiencies also entails addressing the historic under-investment in maintenance at Vanchem and Vametco, which will deliver greater performance reliability. Where necessary, plant reliability will be prioritised ahead of growth.

Another key focus has been aligning the operations with the Group's operating model, culture and standards, and building the leadership team. Our operating model is based on having strategic control of our assets to ensure we can exercise sufficient oversight and strategic direction. This requires building the necessary capacity at head office, with a fit-for-purpose organisational design, appropriate technical skills, integrated business processes and establishing robust shared service functions to maximise efficiencies.

This is no small task for an operation with this depth of vertical integration in mining, crushing and milling, concentration, pyrometallurgy and hydrometallurgy.

Meanwhile, the continuing operation and growth of Vanchem necessitates securing its ore supply while the Mokopane project is being developed. With the ore stockpile acquired with the plant depleting, we anticipate replacing this supply with ore from Vametco, which has an abundant resource base.

Specifically, we have earmarked the Upper Seam portion of the Vametco resource through a targeted operation ("The Upper Seam Project"). With a reserve of 0.9 Mt of in-situ ore, the Upper Seam Project will supply Vanchem with 34 kt per month commencing in Q3 2021, removing the necessity of relying exclusively on third-party sources of ore over this period. The Upper Seam Project resource has similar mineralogy to the current ore used at Vanchem, and tests conducted to date have proven its suitability for processing at Vanchem.

The cost of supply to Vanchem will be in line with or better than third-party suppliers. This initiative will ensure that Vanchem has sufficient competitively-priced ore feedstock in the short to medium term, with no significant capital expenditure requirements. Since the total Upper Seam resource base is 16 Mt, we are investigating the potential to extend this source of supply beyond the initial 18 months.

Operational stability

We are mindful that over the years Vametco's performance has not met expectations. In 2020, its output would have been 2,954 mtV, if it were not for production lost through the effects of COVID-19. The plant did not undertake the standard annual shutdown in an effort to make up time. This resulted in significant operational instability, which caused several unscheduled stoppages during Q1 2021, prior to the 35-day maintenance shutdown.

Since the successful completion of the shutdown, operational stability and performance have improved. Sustaining this stability, however, requires a recalibration of Vametco's monthly production levels and a disciplined, proactive maintenance strategy over a period of time. As a consequence, the management team has revised the monthly production targets for Vametco to approximately 240 mtV per month, previously 270mtV. This changes Vametco's 2021 production guidance to between 2,300 mtV and 2,400 mtV, from previous guidance of between 2,700 mtV and 2,850 mtV. The run rate for the remaining months of 2021 is an annualised production of approximatively between 2,600 mtVp.a. and 2,700 mtVp.a.

We want to ensure that Vametco achieves sustainable and consistent output of 2,800 mtVp.a. before embarking on aggressive production growth.

Disappointingly, the commissioning of Vanchem's kiln 3, which is currently under refurbishment and the consequent production run rate increase of 2,600 mtVp.a. is likely to be delayed to the end of Q4 2021 owing to among others, delays in securing steel supplies. This requires revising 2021 production guidance to between 1,100 mtV and 1,200 mtV, previously between 1,400 mtV and 1,500 mtV. Overall, 2021 Group full-year production guidance has been revised to between 3,400 mtV and 3,600 mtV, previously between 4,100 mtV and 4,350 mtV.

We are also mindful of the increases in costs at Vametco over the past three years and have initiated a review of those costs to see where improvements are possible. Further detail is provided in the Finance Director's Statement.

We have not taken these decisions lightly. While we retain confidence in the plant's ability to produce above this level, our philosophy is that growth must be built on a foundation of robust, stable and efficient operations and must be pursued in a capital-efficient manner.

Capital projects sequencing

Notwithstanding the production revisions, our plans to grow output to 8,400 mtVp.a. in the long-term remain unchanged. During the current year, the studies on the Vametco Phase III expansion project and the Vanchem Phase II refurbishment will determine which project will be prioritised to achieve our production targets beyond our first production target. The decision will be guided by the principle of capital efficiency of 'securing the next-cheapest unit of vanadium'. As we are reviewing our production profile to achieve optimal sequencing between Vametco and Vanchem, the scope of the pre-feasibility study ("PFS") for Vametco has been extended. It is now expected to be completed in Q4 2021 together with the technical studies currently under way at Vanchem.

The stability of operations at Vanchem relative to Vametco and the emerging view, supported by studies, that expanding production at Vanchem is likely to be significantly cheaper than at Vametco, has helped shape a growth outlook that comprises:

• The current growth phase, which is being implemented, will see production increase to a steady state production run rate of between 5,000 mtVp.a. and 5,400 mtVp.a. by the end of 2022.

• This reflects Vametco and Vanchem operating at a steady state production run rate of 2,800 mtVp.a. and 2,600 mtVp.a., respectively. Vanchem's production is expected to increase from 1,100 mtV to a run rate of 2,600 mtV by the end of 2022, supported by the commissioning of Kiln 3 and associated downstream expansions.

• A second growth phase to increase production to a steady state production run rate of between 6,400 and 6,800 mtVp.a.

• A third growth phase to a steady state production run rate of 8,400 mtVp.a., when the rest of the expansion initiatives are implemented.

We will provide details on the production path and expected capital expenditure once the studies are completed.

Bushveld Energy

We are delighted to see the growing global momentum behind the energy transition away from fossil fuels to clean energy, especially renewable energy and energy storage in particular. An increasing number of countries are committing to reducing their carbon footprints and increasing the share of renewable energy in the power sector. The role of electricity continues to grow.

We are fortunate to be based in a country that has made bold decisions on this energy transition and has grown to be the sixth-largest residential energy storage market in the world. We expect it to grow into the global top five utility energy storage markets, with policies that catalyse deployment of more stationary energy storage systems. Moreover, growing interest in increasing the country's share of the value chain unlocks greater opportunities for local suppliers These developments validate our forward-thinking strategy, set in motion in 2014, to vertically integrate downstream into the energy storage sector, through the launch of Bushveld Energy in 2016. They come as we make significant progress across the three areas of focus for Bushveld Energy: electrolyte manufacturing, sales and rentals; deployment of VRFBs in Africa; and investments into VRFB manufacturing.

During the year we made progress on our plans to build an electrolyte manufacturing plant in East London, South Africa. With an initial capacity of 200 MWh of vanadium electrolyte and capacity to scale up to 800 MWh, the electrolyte plant will, be the largest announced plant outside China.

Our strategy to invest in VRFB manufacturing, which is designed to be a catalyst for mobilising financing to build scale among VRFB Original Equipment Manufacturers, has also been fruitful. Our investment in AIM-quoted Invinity Energy Systems Plc ("Invinity"), whose creation we facilitated in 2020, delivered immediate benefits. Invinity has won several important contracts and its share price rose by more than 300 per cent in 2020. We have since crystallised our position and realised a total of approximately US$13 million, providing a significant return on capital of more than double our initial investment of US$5 million, in just over a year.

With a right of first refusal for supply of vanadium and electrolyte, we have an attractive opportunity to develop a vanadium supply relationship with Invinity. Through a joint venture agreement with Invinity, we are now developing and deploying vanadium electrolyte rentals to Invinity's customers.

We also played a key role in partnering with other investors to acquire Cellcube, of which we now own 25.25 per cent indirect interest. Cellcube, the holding company for Enerox GmbH, an Austrian-based leading VRFB manufacturer, has a solid track record in manufacturing grid-scale energy storage systems.

As with Invinity, we have a right of first refusal to supply vanadium to Cellcube, creating more offtake potential for our vanadium and electrolyte products and hedging against future volatility in vanadium prices, as the VRFB market develops.

Despite the challenges of the Covid pandemic, progress continued on our mini-grid project at Vametco, where Cellcube has been selected to supply a 4 MWh VRFB for the project. The solar PV and storage project will save nearly 114,000 tonnes of CO2 over its 20 year. The mini-grid provides an important proof of concept for self-generation solutions in a country that has made firm commitments to establish a supportive framework for self-generation. In the latest development, the threshold for self-generation without a licence will be lifted from 10 MW to 100 MW, unlocking faster growth in behind-the-meter generation and storage.

Sustainability: Value beyond compliance

In 2020, we started a process of developing our sustainability strategy, which will focus on Environment, Social and Governance ("ESG") principles. We will integrate material ESG considerations across the value chain into the business decision-making process; report on material ESG key performance indicators; and communicate a consistent message to stakeholders on key ESG commitments.

We also initiated the process of developing an ESG Management System ("EMS"). The purpose of the EMS is to provide the framework to enable Safety, Health and Environmental ("SHE") and social risks to be understood, and to develop, implement and appropriately manage mitigation measures.

Collectively, the ESG strategy and management system will assist us to comply with relevant authorisations, legal requirements, the International Finance Corporation Standards and other obligations, in a systematic and structured framework.

We are especially proud that, through vanadium, we play an important role in global decarbonisation efforts.

• In steel - the use of vanadium as an alloying element will reduce the intensity of steel in construction, resulting in a reduced carbon footprint for steelmaking.

• Through VRFBs, vanadium plays a key role in supporting the global energy transition to a greener mix, which is fast gaining momentum.

Through a commitment to developing renewable energy based energy generation solutions we will also ensure that our production platform has a favourable carbon footprint.

Finally, through the innovative electrolyte rental solutions that we are developing and implementing, not only will we help to accelerate the adoption of VRFBs, but also help advance the circular economy by ensuring vanadium is re-used through multiple life-cycles.

Johannesburg Stock Exchange listing

We continue to monitor market conditions and engage with South African institutional investors. However, because of the unforeseen events of 2020, we had to redirect much of our focus towards dealing with the pandemic, prioritising the safety of employees, and focusing on managing our operations. This included securing US$65 million from Orion. The Company remains interested in the potential listing and will continue to explore the opportunity to do so when conditions are suitable.

Appointments and integration

In 2019, we adopted our new operating model. Overall, we remain on course to roll it out across the Group, in spite of the setbacks of 2020. This is a key step in ensuring that we have sufficient organisational capacity to support our growth plans.

Our priority in 2020 was to manage the impact of COVID-19, while keeping a firm handle on initiatives

to build critical organisational capacity. We are pleased to report that some of the work that was already under way to implement the operating model has contributed to our ability to manage the COVID-19 challenges more effectively. The model was primarily designed to help us achieve operational excellence, by ensuring that our business operations have sufficient support and that we can achieve greater integration across the various parts of the Group.

We have made significant strides in building our organisational capacity. We will continue to do so, focusing on human capital, financial resources, the operating model, and business processes and systems.

As one of our initiatives to enhance our operational performance, we announced the appointment of Francois Naude as Director of Operations. Francois brings over 27 years of mining and processing experience and he will oversee the Vametco, Vanchem and Bushveld Electrolyte Company ("BELCO") operations, with the latter, migrating to the Bushveld Vanadium platform. The appointment is key to our operational strategy.

The Operations Director's mandate covers the following key parameters: meeting the Company's production volume aspirations; achieving cost targets; meeting

SHE objectives; maintaining our social licence to operate; and effectively implementing capital projects on budget and in time.

Looking forward

Our emphasis in 2021 is on achieving consistent operational stability, enhancing operational performance and ensuring that both Vametco and Vanchem achieve their near- and medium-term production and cost targets, with optimal efficiency. Francois and his team have already made significant headway, prioritising operational stability and reliability, especially at Vametco.

While we are always mindful of achieving our growth targets, we believe it is more prudent to invest efficiently. This could necessitate resequencing our capital projects and potentially revising development timelines. I am confident that we now have in place a sound technical leadership team to ensure we succeed.

Through Bushveld Energy we have championed the place of VRFBs in the growing energy storage space. Not only did we have the foresight to see the opportunity, we also developed an appropriate and agile strategy for vertical integration along the value chain that we are pleased to see other vanadium producers adopting. Some of our key focus items are construction of the 200 MWh electrolyte plant, which commenced in June 2021, and obtain a generation licence. Furthermore, we intend to achieve financial close on, and begin construction of the Vametco hybrid mini-grid.

Overall, fundamentals for the vanadium market remain strong, characterised by a growing intensity of use of vanadium in steel. We expect governments across the world to adopt similar policies to those of China, by increasing infrastructure spending to revive and support their economies post-COVID. The energy transition will continue, resulting in greater renewable and energy storage deployment, in which VRFBs are expected to capture a significant market share, increasing vanadium demand. We retain the view that vanadium supply remains constrained and concentrated. All these factors benefit primary vanadium producers such as Bushveld Minerals.

We remain fully committed to our vertically-integrated growth strategy of achieving our long-term production of 8,400 mtVp.a. while becoming a leader in the downstream VRFB industry.

Once again, I would like to thank all of our employees and investors for continuing to believe in Bushveld, despite an uncertain and difficult year. We have begun 2021 in a solid position, benefiting from increased vanadium demand and higher prices, as the world economy recovers and accelerates its adoption of new energy sources. We have reason to look forward to the future with great optimism.

Fortune Mojapelo

Chief Executive Officer

Finance Director's Review

Overview

The 2020 financial year was a difficult year operationally due to the impact of the COVID-19 pandemic, which resulted in 380 mtV in lost production, as well as additional costs associated with adapting our work practices to ensure our workplaces were safe for us to continue to operate, following the first South African Covid-19 nationwide lockdown.

Group production nevertheless increased by 24 per cent to 3,631 mtV, as Vanchem operated for a full 12 months under the Bushveld Group umbrella, underscoring the importance of our acquisition. Group sales increased by 61 per cent to 3,842 mtV, despite the COVID-19 logistical challenges. This was a significant achievement, which also reflects the inclusion of Vanchem's sales for the full financial year, and increased customer demand in H2 2020.

The financial benefits of this performance were significantly diluted by market factors, as the decline in vanadium prices experienced in the second half of 2019 persisted throughout 2020. Year-on-year, realised prices declined by approximately 52 per cent, consequently eroding Group profitability and cashflows.

The Group reported revenue of US$90 million (2019: US$116.5 million), and an Earnings Before Interest, Tax, Depreciation and Amortisation ("EBITDA") loss of US$14.9 million (2019: EBITDA of US$32.6 million).

The Group put in place several measures to conserve cash and protect the balance sheet in light of the uncertain operating environment. We scaled back on our planned capital expenditure, optimising our capital allocation process to preserve cash. From a cost perspective, we continued to focus on cost containment even as we integrated the two operations. We expect to realise synergies in areas such as the shared procurement platform we established, as we progress. The Group's focus and early wins on cost containment is illustrated later in this report under the Cost of sales section.

Administrative expenses were reduced by US$4.9 million to US$19.8 million (2019: US$24.7 million) as a result of cash preservation measures implemented by the Group. These costs are further analysed in the administration cost section. Net cash from operating activities was an outflow of US$17.1 million (2019: US$28.5 million), mainly driven by the decline in price.

Despite uncertain market conditions, we successfully secured US$65 million of funding from the mining- focused investment business, Orion Mine Finance ("Orion"). The Group ended the year with a strong cash balance of US$50.5 million (2019: US$34.0 million).

Orion: US$65 million financing package

In November 2020, the Company announced that it had successfully completed and drawn down on a US$65 million financing package from Orion. The funding comprised a US$30 million Production Financing Agreement and a US$35 million convertible loan note. Part of the proceeds were used to retire the Nedbank ZAR250 million term loan, repay US$5 million of the Duferco loan notes, plus interest of US$1.28 million, as well as to fund capital projects in Bushveld Vanadium.

Analysis of results

Income statement summary as adjusted from "statutory" primary statement presentation.

Revenue

Revenue for the Group was US$90.0 million (2019: US$116.5 million). Group sales in 2020 amounted to 3,842 mtV at an average price of US$23.4/kgV and an average exchange rate of ZAR16.46 to the US dollar (2019: 2,392 mtV, average price US$48.7/kgV, average exchange rate of ZAR14.5 US dollar). The geographic split of Group sales in 2020 was 34 per cent to the United States, 24 per cent to Europe, 23 per cent to China and 19 per cent to the rest of the World. Sales to China in 2020 were significantly higher than the nine per cent achieved in 2019, in line with our strategy of creating sufficient flexibility in the business to enable the Group to increase sales to higher-priced regions.

Cost of sales

The cost of sales excluding depreciation for the period was US$73.4 million (2019: US$47.8 million). The increase is partially attributable to the inclusion of Vanchem for the full financial year as well as increase in areas such as energy and maintenance costs at Vametco.

The material cost benefits of increasing production are illustrated in the table below, which shows that our strategy of growing production through the acquisition of Vanchem and increasing its production has resulted in a lower Group cost of US$29/kgV (including sustaining capital) relative to 2019 (2019: US$37/kgV) as a result of the dilution of fixed costs. The effects of the bargain purchase of US$60.6 million have been excluded from the calculation below as it is a once off in nature and did not contribute cash to the bottom line performance of the business in 2019. We expect to see continued cost reductions as the Group continues to embed synergies across Vametco and Vanchem and grow production organically.

Cost-saving initiative

To ensure that Bushveld Minerals remains competitive at a lower vanadium price and reaps the benefits of a higher commodity price, the Group has introduced a cost- savings programme ("CSP"). The CSP is aimed at ensuring continued competitiveness throughout the commodity cycle, while enhancing the offering to markets across all the industries in which we compete. We are targeting cost-saving initiatives across the Group, with procurement as the first priority. Our objective is to cut costs by approximately US$2.5 million to US$4 million per year, starting from 2022.

Other operating and administration costs Other mine operating costs included community, social and labour plan costs at Vametco and Vanchem. Even though the Group as a whole was not profitable, mainly driven by the poor vanadium price, the Group still maintain its social commitments and obligations. The idle plant costs of US$4.2 million (2019:US$2.9 million) mainly reflects the 21-day shutdown, as a result of the South African COVID-19 nationwide lockdown during the first half of 2020.

Group administrative expenses reduced by US$4.9 million to US$19.8 million (2019: US$24.7 million), due to our effective cost control measures. The overall effectiveness of the containment can also be noted with the full year of administrative costs associated with the Vanchem site fully absorbed whilst still delivering a reduction in the administrative costs when compared to 2019.

Administrative expenses included staff salaries of US$8.1 million (2019: US$9.6 million) for both the operations and head office administration and management staff. Since the costs are not directly attributable to the cost of production, they are recoded under administrative expenditure based on industry practice. The operation salaries amounted to US$4.7 million (2019: US$5.7 million), whilst the shared service and change to head office division (including directors fees), amounted to US$3.5 million (2019: US$3.8 million). The reduction in overall salary costs was as a result of one-off costs incurred in 2019 associated with Vametco legacy staff offset by a slight ramp up in staff costs for Vanchem and capacity building of the Shared Service departments professional fees of US$8 million (2019: US$7.6 million), are mainly attributable to the costs associated with the Orion transaction as well as other Bushveld Energy corporate development initiative such as Invinity and Cellcube that were implemented in the year.

Other costs incurred related to additional overheads on establishing the Vanchem administrative departments as well as the general security and maintenance of the sites.

The EBITDA reconciliation shown below illustrates the impact of the decline in the vanadium price from the prior year. Operating costs increased due to the Vanchem operations running for the full year, this was offset by a declined in the mineral royalty payable relative to sales prices. The royalties are paid by Vametco at the Unrefined Rate of 0.5 + { EBIT / (Gross Sales x 9) } x 100 with a seven per cent maximum royalty percentage payable on unrefined minerals.

Balance sheet Assets

Total current assets increased during the year as a result of the increase in value of financial assets US$22.4 million (2019 US$1.9 million) which related to the investments made in Invinity Energy Systems ("Invinity") and Cellcube. Refer to note 21 of the financial statements for further detail. The other material increase was as a result of the Group cash and cash equivalents of US$50.5 million (2019: US$34.0 million) due to the Orion financing package offset by the settlement of the Nedbank term debts as well as other borrowing obligations.

Non-current assets related to intangibles and property, plant and equipment remained consistent to the prior year and changes were mainly as a result of depreciation in the year. A deferred tax asset was raised for the assessed loss incurred during the year, (refer to note 16 for further details).

Equity and liabilities

Total current and non-current liabilities increased by US$48.2 million due to the Orion production financing agreement and convertible loan notes, offset by the repayment of the Nedbank term loan. The trade and other payable also contributed to the increase as a result of Vanchem coming online for the full year and the additional trade balance required as a result.

The share capital balance also increased as a result of the Duferco convertible loan note which was exercised at the end of the financial year.

Net debt

The net debt reconciliation below outlines the Group's total debt and cash position.

Cash flows

Net cash outflow from operating activities for the year were (US$17.1 million), a decrease of US$45.6 million compared with 2019, driven by reduced profitability on the back of sustained low vanadium prices. Capital expenditure and investing activities for the year were US$13.3 million, a decrease of US$36.4 million from 2019 mainly due to the cash preservation measures implemented during the year.

Cash generation

The table below summarises the main components of cash flow during the year.

Investing activities

Investing activities were driven by capital expenditure growth with property plant and equipment expenditure of US$3.9 million, as well as a payment made for the deferred consideration owed to Evraz of US$1.7 million. Investment in Cellcube of US$1.9 million, and US$1.5 million spent on intangibles. The costs were offset by finance income to the tune of US$1 million for the year.

Financing activities

Financing activities of US$47.4 million include the US$65 million Orion financing package and approximately US$8 million from the Nedbank revolving credit facility. This was partially offset by the US$5 million repayment of the US$23 million unsecured convertible note held by Duferco plus interest of US$1.28 million in cash. The balance of US$6.5 million which was also due for repayment was settled by the issue of 37,115,210 new Bushveld shares. The Nedbank term loan of R250 million US$17 million was also fully retired.

Financial risk management

The main financial risks faced by the Group relate to the availability of funds to meet business needs (liquidity risk), the risk of default by counterparties to financial transactions (credit risk), fluctuations in interest and foreign exchange rates and commodity prices. These factors are more fully outlined in the notes to the accounts. They are important aspects to consider when addressing the Group's going concern status, particularly in the context of the COVID-19 pandemic. We are proactively managing the risks within our control. There are, however, factors which are outside the control of management, specifically volatility in the ZAR:USD exchange rate as well as the vanadium price, which we do not currently hedge and which can have a significant impact on the Business.

Going concern and outlook

We manage liquidity risk by ensuring that the Group has sufficient funds for all ongoing operations. Our philosophy is to maintain a low level of financial gearing, given exposure to the vanadium price and exchange rate fluctuations.

As part of the annual budgeting and long-term planning process, the Group's budget and cashflow forecasting is reviewed and approved by the Board. The forecast is amended in line with any material changes identified during the year. Equally, where funding requirements are identified from the cashflow forecast, appropriate measures are taken to ensure these requirements can be satisfied. In particular, a capital allocation framework is applied which prioritises maintenance, critical and regulatory capital funding requirements.

We also closely monitor liquidity risk. We regularly produce cash forecasts and analyse sensitivities to different scenarios, including, but not limited to, changes in commodity prices and different production profiles from the Group's producing assets.

The Nedbank debt facility available to Vametco is subject to financial covenants which are EBITDA-driven. After year end, in light of the weak vanadium price during H2 2020 and the low production volumes now expected for H1 2021, as a result of the 35-day maintenance shutdown and the unprotected industrial action at Vametco, we proactively engaged Nedbank. This enabled us to successfully renegotiate the covenant testing terms required under the ZAR125 million Revolving Credit Facility ("RCF"). Nedbank has agreed to waive the covenants for the June 2021 period and relax the December 2021 Group net debt to EBITDA ratio from 2.50 times to 4.0 times. A condition of the waiver is that the RCF is amortised by ZAR5 million (approximately US$0.3 million) per month from 6 August 2021, with a bullet payment of ZAR50 million US$3.4 million) due on the maturity date of 6 November 2022.

Since year-end, renegotiations of the Duferco convertible balance of US$11.5 million have been positive and near conclusion. This would result in US$5 million being payable in November 2021 and the remaining US$6.5 million being converted into Bushveld shares.

Post year end, the investment in Invinity was realised, resulting in capital appreciation of some 160 per cent. The proceeds of the sale were used towards Bushveld Energy's 2021 projects, including its investment in Cellcube, as explained in the CEO's Review.

As mentioned in the CEO's Review, we are evaluating the Group' growth production sequencing and funding requirements for all operations in order to determine the ideal production sequencing to achieve our targets. Details on the Group's production path and funding will be provided on completion of technical studies currently underway at Vametco and Vanchem.

Although the start of the 2021 financial year has been challenging, we are encouraged by the positive production run rate at Vametco post-maintenance and by the upward vanadium pricing trajectory that we have seen to date.

Vanchem is expected to make EBITDA losses for the rest of the year, but this situation is expected to reverse after the growth capital spending, as it will enable Vanchem to ramp up production to a sustainable steady state production run rate of approximatively 2,600 mtVp.a. by the end of 2022. Beyond 2021, the Group is expected to benefit from the synergies of running both operations, as the combined production from Vametco and Vanchem will contribute to the Group's fixed costs.

Looking forward, we will continue to prudently manage costs and conserve cash, as long as uncertainty lingers over the global health and possible economic consequences of COVID-19, even though COVID-19 vaccine programmes are being implemented globally.

The vanadium price was impacted in 2020 by lower global demand due to the COVID-19 pandemic. Prices have significantly improved from their lows of 2020 and are currently trading above US$40/kgV, supported by various fiscal stimulus measures, which are expected to drive demand for raw materials.

We will continue to prioritise financial stability through cost containment, conserving cash and adhering to a clear capital allocation framework, to ensure the Group's resilience through the operating cycle.

Tanya Chikanza

Finance Director

Bushveld Minerals Limited

(Registration number 54506)

Consolidated Financial Statements for the year ended 31 December 2020

Consolidated Statement of Profit or Loss and Other Comprehensive Income

Consolidated Statement of Changes in Equity

Notes to the Consolidated Financial Statements

1. Corporate information and principal activities

Bushveld Minerals Limited ("Bushveld") was incorporated and domiciled in Guernsey on 5 January 2012 and admitted to the AIM market in London on 26 March 2012.

The address of the Company's registered office is Oak House, Hirzel Street, St Peter Port, Guernsey, GY1 3RH. The consolidated financial statements of the Company as at and for the year ended 31 December comprise of the Company and its subsidiaries (The "Group") and the Group's interest in equity accounted investments.

As at 31 December 2020, the Bushveld Group comprised of:

2. Adoption of New and Revised Standards

ACCOUNTING STANDARDS AND INTERPRETATIONS APPLIED

Definition of a Business (Amendments to IFRS 3) Amendments to References to the Conceptual Framework in IFRS Standards and Definition of Material (Amendments to IAS 1 and IAS 8)

Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)

The new standard is aimed at resolving the difficulties that arise when an entity determines whether it has acquired a business or a group of assets.

The amendments clarify the definition of 'material' and to align the definition used in the Conceptual Framework and the standards themselves.

The new standard is aimed at resolving the potential effects the IBOR reform could have on financial reporting. 

Accounting standards and interpretations not applied

Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group:

Covid-19-Related Rent The new standard provides lessees with an exemption from assessing whether a COVID-19-related

Concessions (Amendment to rent concession is a lease modification. IFRS 16)

Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and

IFRS 16)

Reference to the Conceptual Framework (Amendments to IFRS 3)

Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37) Property, Plant and Equipment - Proceeds before Intended Use (Amendments to IAS 16)

IFRS 17 'Insurance Contracts'

The new standard addresses issues that might affect financial reporting after the reform of an interest rate benchmark, including its replacement with alternative benchmark rates.

The amendments update an outdated reference in IFRS 3 without significantly changing its requirements.

The amendments address costs a company should include as the cost of fulfilling a contract when assessing whether a contract is onerous.

The amendments prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by

management.

.

The new standard provides a more uniform measurement and presentation approach for all insurance contracts.

.

Classification of Liabilities as The amendments provide a more general approach to the classification of liabilities under IAS 1 based

Current or Non-current (Amendments to IAS 1)

on the contractual arrangements in place at the reporting date.

The Directors anticipate that the adoption of these Standards and Interpretations, which become effective for annual periods beginning on or after 1 January 2020, in future periods will have no material impact on the financial statements of the Group.

3. Significant accounting policies 

Basis of preparation

In accordance with Section 244 of The Companies (Guernsey) Law 2008, the Group confirms that the financial information for the year ended 31 December 2020 is derived from the Group's audited financial statements and that this preliminary announcement does not include the statutory accounts and, as such, does not contain all information required to be disclosed in the financial statements prepared in accordance with International Financial Reporting Standards ("IFRS").

The statutory accounts for the year ended 31 December 2020 have been audited and approved but have not yet been filed. The Group's audited financial statements for the year ended 31 December 2020 received an unqualified audit opinion and the auditor's report contained no statement under section 263(2) or 263(3) of The Companies (Guernsey) Law 2008. The financial information contained within this preliminary statement was approved and authorised for issue by the Board on 29 June 2021.

The financial year covers the 12 months to 31 December 2020. The comparative period covered the 12 month period to December 2019.

The consolidated financial statements have been prepared under the historical cost basis, except for the revaluation of certain financial instruments and investment properties to fair value. Historical cost is generally based on the fair value of the consideration given in exchange for the assets. The principal accounting policies are set out below.

Going concern

During the 2020 financial year Covid-19 introduced a significant level of uncertainty in the market as well as multiple challenges from an operating and logistic perspective. Our operations resumed in early May following a 35-day national Covid-19 lockdown in South Africa during which Vanchem was non-operational and Vametco was classified as essential services and had limited production. This disruption coupled with the depressed prices realised during 2020 financial year, resulted in an operating loss for the financial period 2020. This loss has increased the financial pressure on the business.

The Group however, closely monitors and manages its liquidity risk, cash forecasts are regularly produced, and sensitivities run for different scenarios including, but not limited to, changes in commodity prices and different production profiles from the Group's producing assets. The Group will continue to prioritise operational performance, cost efficiencies and synergies across Vametco and Vanchem, and will maintain a disciplined approach towards managing capital expenditure and optimising operating margins. Based on the current status of the Group's finances, having considered going concern forecasts and reasonably possible investments, downside and Covid-19 scenarios, the Group's forecasts demonstrate it will have sufficient liquidity headroom to meet its obligations in the ordinary course of business for the next 12 months from the date of approval of the financial statements. This has been further supported by the improvement in the market price of vanadium. Further details of the group's current funding situation and strategy are included in the Going Concern and Outlook section of the Finance Director's Report.

Accordingly, the directors are satisfied that the Group continues to adopt the going concern basis of accounting in preparation of the 31 December 2020 financial statements.

3. Segmental reporting

Bushveld Minerals Limited's operating segments are identified by the Chief Executive Officer and the Executive Committee, collectively named as the Chief Operating Decision Makers (CODM). The operating segments are identified by the way the Group's operations are organised. As at 31 December 2020 the Group operated within four operating segments, vanadium mining and production, energy, mineral exploration activities for vanadium and coal exploration. Activities take place in South Africa (iron ore, vanadium and energy), Madagascar (coal), other African countries (energy project development) and global (battery investment, vanadium sales).

Segment revenue and results

The following is an analysis of the Group's revenue and results by reportable segment.

During the year there were no costs incurred for the exploration of vanadium and iron ore as well as the coal segment. Costs attributable to both segments were of a capital nature.

The reconciliation of segmental profit to the Group's profit before tax is as follows:

Unallocated costs relate primarily to corporate costs and parent company overheads not attributable to a specific segment.

4. Segmental reporting (continued)

Unallocated assets and liabilities relate to corporate and parent company assets and liabilities not attributable to a specific segment.

5. Revenue

Revenue with contract customers is generated from sale of goods and is recognised upon delivery of the goods to the customer, at a point in time and comprises the invoiced amount of goods to customers, net of value added tax.

2020 2019

US$ US$

6. Administrative expenses by nature

7. Staff costs

Details of directors' remuneration are included in note 35 (related party transactions).

8. Acquisitions

8.1 Acquisition of Bushveld Vanchem Business

On 7 November 2019, the Bushveld Group completed the acquisition of 100% of the Vanchem Plant as well as 100 per cent of Ivanti Propriety Limited from Duferco Investments ("Duferco").

A viable business case for Vanchem Vanadium Products "VVP" was formulated with key focus on ore feedstock from within the Group (Mokopane) and a refurbishment programme, and presented to the Board of Directors ("BoD") in June 2018. The BoD approved that Bushveld reopened negotiations with Duferco, including revised commercial terms and an extended exclusivity period. An approach to Duferco was made and an initial agreement was reached with Duferco which resulted in the execution of the term sheet on 5 December 2018. The agreement was for a Transaction consideration of US$68 million. The US$68million was made up of deposit of US$6.8 million payable when the definitive agreements had been executed (01 May 2019) with the balance of US$61.2million payable on then-envisaged Transaction closing dates of 30 June 2019 or 30 September 2019 (long stop date). The final executed purchase price of US$53.5million plus a working capital adjustment for the acquisition was renegotiated in September 2019, the fair value of the consideration price is reflected in section C below.

Acquisition rationale remained clear:

Ÿ Would significantly contribute toward Bushveld's Vanadium production growth strategy of 8 400 tVpa in the next five years;

Ÿ Brownfields expansion (total acquisition and refurbishment capex was estimated to be around US$140 million for circa 4 200 tVpa capacity including Mokopane mine development, this compared favourably against the then estimated US$350 million capital requirement to develop and build 5 400tV facility at Mokopane);

Ÿ Would facilitate the expeditious development of Mokopane, preserving the tenure of the project and ensuring the option for an end-to-end production facility would be crystalised;

Ÿ Would provide geographic diversification with Bushveld production now in two geographic locations;

Ÿ Would provide production diversification - moving from a one kiln company to a four-kiln Group;

Ÿ Would provide product diversification - moving from a single product offering to a wider range of products comprised of Nitrovan, FeV, V2O5 and specialized chemical products;

Ÿ Significant NPV at long term FeV price estimates at a conservative long term FeV price;

Ÿ Increased footprint reduces Group overhead cost structure;

Ÿ Improved IP and market presence adds value with long term off-take agreements;

Ÿ Assist and expedites the development of Bushveld's own marketing channel; and

Ÿ In a benign vanadium price environment of 2018, Vanchem's 6 months annual financial statements to 31 March 2019 presented net profit amount in excess of R200million operating at less than 20% of capacity.

This acquisition of Vanchem demonstrates the value in the Company's growth strategy of targeting brownfields processing infrastructure which can be acquired at a lower price compared to the cost of building a greenfield operation, providing a lower risk and a quicker path to production. This has been reflected in Bushveld agreeing and paying an amount far less than the fair value of the assets and liabilities assumed. The Mokopane resource will also enable Bushveld to create a fully integrated vanadium production facility within the Group.

The Group has agreed to pay the selling shareholder a deferred payment of US$0.5 million, payable in cash 2 years post completion of the acquisition.

II. Working Capital Adjustment

The working capital adjustment was the difference between the original working capital included in the agreement versus the final balances transferred to Bushveld. The amount is payable in cash after 2 years post completion of the acquisition and disclosed as deferred consideration.

III. Convertible loan

A payment of US$23.0 million satisfied through the issue of Bushveld Minerals unsecured convertible loan notes ("Loan Notes") with the following repayment, redemption and conversion terms (in addition to customary covenants, warranties and acceleration provisions):

Ÿ Interest at a coupon of 5% per annum payable annually in arrears or on conversion or redemption;

Ÿ Repayable in cash after the second anniversary of Transaction Closure, plus any accrued interest;

Ÿ Convertible at the holder's option in two tranches of up to US$11.5 million each, after the first and second anniversary of Transaction Closure respectively, at a 5% discount to the prevailing 10-day volume weighted average Bushveld Minerals share price leading up to conversion;

Ÿ Early redemption of the Loan Notes at the election of Bushveld Minerals, subject to the condition that the holder will have an option of converting up to 50% of the early redemption amounts into Bushveld Minerals shares on the same terms set out above;

Ÿ Scope for acceleration of redemption of up to US$5 million of the Loan Notes 12 months after Transaction Closure if an average ferrovanadium price of US$40/kgV is realised during any nine-month period during the12 month period after Transaction Closure;

Ÿ Obligation to repay an amount equal to 40% of any cash received on a new share issue which raises more than US$30m, provided no more than 50% of the Loan Notes have already been paid, redeemed or converted;

Ÿ Obligation to repay an amount equal to 50% of any debt raised over US$15 million, provided no more than 50% of the Loan Notes have been repaid, redeemed or converted;

Ÿ Obligation to repay on a substantial sale of assets or change of control;

Ÿ 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.

Acquisition related costs

The Group incurred acquisition-related costs of US$1,519,969. These costs have been included in the calculation of the bargain purchase below.

B. Identifiable assets and liabilities acquired

The following table summarises the recognised amounts of assets acquired, and liabilities assumed at the date of acquisition: