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 2022

Bushveld Minerals Limited

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

Full Year Results for the 12-month Period Ended 31 December 2021

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 2021.

FY2021 Operational and Financial Highlights:

· Group Revenue of US$106.9 million, a 18.8% increase over 2020 (2020: US$90.0 million), supported by improved average realised price of vanadium.

· Group production of 3,592 mtV, at the upper end of 2021 revised guidance of between 3,400mtV and 3,600mtV.

§ H2 2021 Group production of 2,018 mtV, a 28.2% increase over H1 2021 (H1 2021: 1,574 mtV), supported by operational improvements implemented from Q2 2021.

§ Operational stability has continued into H1 2022, resulting in 12 months of stable production levels.

· Group Sales of 3,314 mtV, a 13.7% decrease over 2020 (2020: 3,842 mtV), as a result of international and domestic logistical challenges. 

· Underlying Group EBITDA1 loss of US$7.5 million an improvement of US$7.4 million relative to 2020 (2020: EBITDA loss US$14.9 million).

§ H2 2021 underlying EBITDA profit of US$3.3 million, supported by strong production levels, higher realised prices and continuing to trade on an EBITDA positive basis in H1 2022.

§ The Group has been EBITDA positive for the past 12 months. 

· Ended the year with cash and cash equivalents of US$15.4 million held at 31 December 2021 (2020: US$50.5 million). Gross Debt of US$82.1 million (2020: US$89.2 million).

§ Prioritised significant investments including: growth initiatives at Vanchem (US$4.2 million), construction of BELCO electrolyte plant (US$4.9 million), investment in CellCube (US$10 million) and debt repayments (US$3.9 million).

· Successfully realised its investments in AIM-listed companies AfriTin Mining Limited and Invinity Energy Systems Plc for approximately US$3.5 million and US$12.7 million respectively.

· Obtained an indirect shareholding of 25.25% into CellCube, a Vanadium Redox Flow Battery original equipment manufacturer. 

· Group Total Injury Frequency Rate ("TIFR") was recorded at 7.78 in 2021 representing a 52 per cent improvement from 2020 (2020: 16.06).

1. Adjusted EBITDA is EBITDA, excluding the Group's share of losses from joint ventures and the remeasurement of financial liabilities. Underlying EBITDA is Adjusted EBITDA excluding impairment charges.

2. ZAR14.8:US$ 2020: ZAR16.5:US$

Post period events

· Commissioning of Kiln 3 at Vanchem was completed in June 2022 within budget with a production run rate of 2,600 mtVp.a. anticipated in Q4 2022.

· Secured the funding for the Engineering Procurement and Construction of the Vametco hybrid mini grid.

· Staged growth plans announced to increase Group production to 8,000 mtVp.a., subject to:

§ The achievement of short-term performance objectives to deliver sustainable cash generation at the production rate of 5,000 - 5,400 mtVp.a.; and

§ Sufficient funding secured

· Group unaudited cash and cash equivalents of US$12.7 million as at 31 March 2022.

Priorities and outlook

· On track to meet 2022 Group production guidance of between 4,200 mtV and 4,400 mtV, (weighted towards the second half of the year).

· Ramping up production to achieve an annualised steady state production run rate of between 5,000 mtVp.a. and 5,400 mtVp.a. by the end of 2022.

o  The volume increase will support further unit cost reduction and increase the Group's ability to generate positive margins throughout the vanadium price cycle.

· Commencing in 2022, implement the Group cost savings programme in order to achieve costs savings of approximately US$2.5 million to US$4 million, over a 12 to 24 month period.

· Intention to carve-out of Bushveld Energy as a standalone company focused on the VRFB value chain, Bushveld Minerals will maintain a strategic investment in the company. This will enable Bushveld Energy to have the Board and management team required for success, and it will be in a better position to attract the appropriate institutional investors and market valuation.

· Progress construction of the BELCO electrolyte plant, anticipated completion in H1 2023.

· Commence construction of the Vametco hybrid mini-grid, completion expected in H1 2023.

Group Capital Expenditure

Expected capital expenditure for 2022 of approximately US$22.1 million, of which we have already spent US$9.0 million as at 31 May 2022, with most of the cost being Rand-denominated. The capital expenditure includes the following:

· Vametco US$5.5 million; 

· Vanchem US$8.5 million;

· Bushveld Energy (BELCO) US$8.1 million

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 11:00 BST (12:00 SAST) on Monday 4th July 2022 to discuss the 2021 full year results with analysts. Participants may join the call by dialling:

Tel: United Kingdom: +44 (0) 33 0551 0200; South Africa: +27 800 980 512

Pin: 4157560

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

https://webcasting.brrmedia.co.uk/broadcast/60d9897e0bb2806642d65b88https://stream.brrmedia.co.uk/broadcast/62a0bea519aa2a662fe17234

Annual Report

The Annual Report for the year ended 31 December 2021 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 11 July 2022. A further announcement will be made by the Company once hard copies of the Annual Reports have been dispatched to shareholders.

Fortune Mojapelo, CEO of Bushveld Minerals Limited, commented: 

"I'm pleased that we finished 2021 strongly, generating positive EBITDA in the second half of the year which has carried through into the first half of the 2022 year. This was a year of two halves, as we entered 2021 facing the ongoing challenges of the Covid-19 pandemic, which were compounded by some operational instabilities at Vametco in the first quarter. We adapted quickly to changing conditions and government mandates to instill normal and productive operating conditions and implemented several interventions which included increasing investments in maintenance and sustaining capital and implemented a rigorous and proactive maintenance programme. I am proud of Bushveld's resilience throughout the year.

This approach has seen the Company produce solid successive quarterly performances from the second quarter, enabling the Company to meet the upper end of our revised production guidance for the Group in 2021. Production in the second half of the year of 2,018 mtV was 28.2% higher than the first half, illustrating our success in embedding improvements across all operations. I am pleased to report that this has continued into the current year and am delighted to announce the commissioning of Kiln-3 at Vanchem in June 2022, which will deliver production growth and result in lower unit costs at Vanchem.

.As we continue to pursue incremental operational improvements and further embed our values and culture at Bushveld, we expect the effects will continue to reflect in our production and profitability, helping us realise a sustainable cash generating business. We have already seen an improvement in our safety record, although this is from a very strong baseline.

The Group ended the fiscal year with revenue of US$106.9 million and an underlying EBITDA loss of US$7.5 million (adjusted for a one-off impairment loss of US$2.4 million), an improvement of US$7.4 million over the 2020 EBITDA loss of US$14.9 million. During the course of the year, the strengthening of the South African rand had a substantial effect on expenses. This resulted in a net negative exchange impact of US$11.6 million on underlying EBITDA. Excluding the negative impact of the exchange rate, we would have achieved a positive underlying EBITDA profit of US$4.1 million for the year if the exchange rate had been comparable to 2020. In the second half of the year, the Group realised an underlying EBITDA profit of US$3.3 million due to strong production performance as well as a higher realised price. We are pleased that this profitable performance has continued into the first half of 2022.

Moving on to our energy platform, after incubating Bushveld Energy and establishing the critical mass necessary for its success, we intend to carve-out Bushveld Energy as a standalone company focused on the VRFB value chain. We believe that this will help to crystallise the value of Bushveld Energy and position it in the capital markets to attract the appropriate energy-market focused institutional investors with an appetite and understanding of the energy proposition, while retaining the vertical integration proposition of Bushveld Minerals through a substantial strategic shareholding in the stand-alone energy company.

Whilst still in its early stages, Bushveld Minerals has embarked on a journey to define and implement a comprehensive sustainability strategy. At the heart of this strategy is an overarching philosophy of going "Beyond Compliance", which requires an understanding and commitment to sustainability as core to our business and not a question of meeting regulatory requirements. The philosophy underpins our approach to environment management and engaging with social partners. Bushveld Minerals is well placed to make a meaningful contribution to global decarbonisation efforts through its alloying products that reduce the carbon footprint of steelmaking, and through our electrolyte products used in large-scale long-duration energy storage systems that will support the energy transition through, among others, supporting greater penetration of renewable energy to the global energy mix.

We have successfully transitioned from an exploration company into a sizeable, margin-positive primary vanadium producer with global distribution networks and significant growth potential, an accomplishment we are proud of, considering we began with a market capitalisation of US$20 million and we have amassed an asset base with a net asset value of US$150 million, since 2017. We accomplished this by investing more than US$185 million, which was funded with a relatively heavy reliance on debt markets and a minimal reliance on equity financing; since 2017, the Company has raised only approximately 25 percent of our capital through direct equity financing.

So, our transformation journey continues. With two of the world's four operating primary vanadium production facilities, a diverse product profile and significant growth upside, we are well placed in a market that will increasingly look to primary producers to meet its growing vanadium demand. Our immediate short-term focus is to ensure that the production base continues to be stable and sustainable, as we ramp up production towards the run rate of 5,000 - 5,400 mtVp.a.in the fourth quarter, following the commissioning of Kiln 3 in June 2022. This positions Bushveld as one of the largest and most significant primary vanadium producers with a low cost production base and supplying approximately five per cent of the global market.

We recently announced the key findings of the feasibility and pre-feasibility studies regarding the optimal path forward to increase Vametco and Vanchem's production to 8,000 mtVp.a. The expansion will be conducted in phases and will only be pursued once we have met our short-term performance goals of 5,000 - 5,400 mtVp.a. and secured the necessary funding.

We remain committed to achieving operational excellence at our Business and generating positive margins through our low-cost production platform."

2021 summary

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. Growth plans to 8,000 mtVp.a. will be pursued, subject to funding and market conditions.

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,

While 2020 was the year in which the COVID-19 pandemic plunged lives and business into turmoil across the globe and saw the implementation of emergency measures to keep businesses afloat, 2021 was the year in which those emergency measures were put to the test. As the constant state of flux became the new normal, it became apparent that companies had to adapt for unusual business contingencies.

Restrictions are now lifting around the world, facilitating a return to pre-pandemic life. Not only are we able to see loved ones and to cross borders, and with less onerous restrictions global logistics are improving and the productiveness of industries the world over has begun to escalate considerably. I firmly believe that the last two years have proved our resilience as a Company and made us stronger for the difficulties faced. We continue to operate to the highest standards of business while being mindful of ongoing global uncertainties and their impact on the sector. These include but are not limited to the war in Ukraine, rising COVID-19 cases in China and North Korea, and soaring inflation in the US and Europe.

I applaud our employees for their stalwart commitment to the Company and our operations, ensuring that despite the ongoing impact of COVID-19 and the operational challenges at Vametco, our staff remained safe, and Bushveld adapted quickly and implemented several interventions, enabling the Group to finish the year strongly and make the upper end of our revised guidance for 2021 at 3,592 mtV.

As a result of the improved performance in the second half of the year, the Group generated a positive underlying EBITDA in the second half, but this was not sufficient to offset the EBITDA loss in the H1, and the Group ended the year with an underlying EBITDA loss of US$7.5 million and a loss before tax for the year of US$46.8 million (2020: loss before tax of US$37.7 million). The strengthening of the South African rand had a substantial effect on expenses and on underlying EBITDA. We made an operating loss of US$29.3 million, similarly impacted by the significant ZAR:US$ exchange rate movements and the net loss for the year was US$42.1 million, after net interest and non-cash adjustments, as detailed in the Finance Directors Review.

Furthermore, as we have improved maintenance and ensured operational stability, Bushveld is targeting to reach a Group production run rate of 5,000 - 5,400 mtVp.a, in the last quarter of 2022, following the commissioning of Kiln 3 in June 2022, which is now undergoing stabilisation and optimization, with ramping up expected to commence thereafter. Higher production, once the Group is producing over 5,000 mtV p.a, will lead to lower unit costs, resulting in Bushveld achieving sustainable profitable performance throughout the cycle. As such, we anticipate Group production for the year to be in the region of between 4,200 mtV and 4,400 mtV, between 17-23 per cent higher than 2021, with output weighted towards the second half.

We recently announced the key findings of the Vametco and Vanchem feasibility and pre-feasibility studies, the objectives of which are to increase and achieve a collective production of 8,000 mtVp.a. in the medium to long term. In contrast to the last few years where production growth was necessary to reach critical mass, we can be patient about this next stage.

Management intend to pursue the staged expansion plans, subject to the meeting of short-term performance targets and in a phased manner, once sufficient funding has been secured, accompanied by any necessary third-party validation of associated project economics.

We remain committed to our responsibility to ensure sustainable growth and provide returns to our investors, a consideration at the forefront of every company decision and are proud of the trust you, our shareholders, have placed in us to deliver this. I would like to thank Fortune Mojapelo, the Bushveld management team, and all our staff for their efforts to progress the Company and our operations over the course of the year.

I would like to pay tribute to Professor Morris Viljoen who sadly passed away in August 2021. Alongside his twin brother Richard Viljoen, he was a technical advisor to the Company and major contributor to the founding of Bushveld. His knowledge and expertise were unparalleled in his field and he will be sorely missed.

I have been privileged to have the responsibility of chairing the Board over the last ten years. In this time, I have witnessed the Company go from strength to strength, a small exploration company into a significant producer of vanadium no small achievement.

We have come a long way, from our kick off in 2012 when we listed on AIM as an exploration company with a diversified portfolio including vanadium, tin, coal, titanium and iron ore assets, and raised £5.5 million. We established a quality portfolio of tin assets, which we unbundled and listed as Afritin on AIM, enabling Bushveld shareholders to unlock value from its tin platform.

In this time, Bushveld acquired two brownfield processing plants for a modest acquisition cost, catapulting production over six years from zero in 2016, to about 3,600 mtV in 2021. We have also been at the forefront of pioneering a vertically-integrated vanadium value chain, including our ongoing construction of what will be one of the largest vanadium electrolyte plants with a capacity of 8 million litres of vanadium electrolyte (approximately 1,100 mtV). Our other achievements include securing three large, high-grade opencast deposits, with a primary resource base of ~548 Mt, one of the largest high-grade primary vanadium resources in the world. This gives us the confidence to pursue further growth in the years ahead, knowing that we have decades-long Life-of Mine ahead. All this has been achieved at the modest acquisition cost of approximately US$121 million, significantly less than the capital expenditure it would have required to develop our operational footprint from a greenfield state; plus further capital expenditure spent since acquisition.

On behalf of the Board I must thank Anthony Viljoen for his significant contribution to Bushveld Minerals over more than a decade of service. Anthony played a core part in the formation and shaping of the Company. I wish him all the best as CEO of AfriTin Mining Limited, which is rapidly developing its large-scale tin resources. In addition, I would like to I thank Jeremy Friedlander for his significant contribution to Bushveld with over a decade of service to the Company, helping provide vital guidance and leadership.

While I am sad to be leaving the Bushveld family, I welcome the new members of the Board including Kevin Alcock, Mirco Bardella, Jacqueline Musiitwa and David Noko. These Board appointments have been made to ensure that the Board's composition meets the high standards of corporate governance expected of AIM listed companies. I look forward to seeing the new heights to which I know they will take the Company.

Ian Watson

Independent Non-Executive Chairman

Chief Executive Officer's Review

Dear Stakeholders,

I am pleased to present this annual review statement at a time coinciding with the tenth anniversary of the listing of Bushveld Minerals Limited on the Alternative Investment Market ("AIM") of the London Stock Exchange. In that time, we have successfully transitioned from an exploration company into a sizeable, margin-positive primary vanadium producer with global distribution networks, and significant growth potential.

We have achieved this transition through a brownfield strategy that has seen us acquire two of the only four operating primary vanadium processing plants in the world in 2017 and 2019, respectively. We have now invested significant refurbishment capital into the plants and their connection to some of the world's largest and highest primary vanadium grade deposits has allowed our assets to provide a low-cost production platform, with potential for further cost improvements. While the vanadium market remains volatile, our cost positioning in the market presents a sustainable cash generation opportunity over the cycle, which will be more clearly demonstrated once the Group is producing over 5,000 mtVp.a.

Since 2017, we have built an asset base with a net asset value of US$150 million, an achievement we are proud of as we started with a market capitalisation of US$20 million. We have achieved this by investing in excess of US$185 million in: 1) our acquisitions of Vametco and Vanchem, 2) refurbishment and expansion initiatives at the two sites, including the

recently completed refurbishment of Kiln 3 at Vanchem and 3) investing in sustainable growth of the Bushveld Energy assets. We have grown this formidable asset base with a relatively heavy reliance on debt markets and very limited call on shareholders for equity financing.

2021 Overview

2021 began with significant challenges for Bushveld, impacted by the continued social and economic fallout from the COVID-19 pandemic.

The South African commercial sector was further affected by a range of additional challenges, including periodical power supply shortages, and the severe disruption to local supply chains caused by the unrest in South Africa in July.

Operations

These contextual challenges compounded problems experienced at our operations, particularly in the early part of 2021, which related to operational plant stability on the back of no extensive annual maintenance shutdown being undertaken in 2020 due to the COVID-19 pandemic. In March 2021, a slower than expected ramp-up post a planned 35-day maintenance shutdown at Vametco affected production, further exacerbated by an unprotected industrial action that followed in April 2021.

Following the March 2021 annual shutdown at Vametco, the company has focused on operational stability, which is being achieved through several interventions. These include a rebasing of monthly production in line with historical performance rather than aspirational targets, increasing investments in maintenance and sustaining capital, and implementing a rigorous and proactive maintenance programme.

We have also embarked on a Bushveld culture journey to boost our aspirations towards operational excellence. This has entailed defining and cementing of our values and culture across the business, focusing on a philosophy of Care, Courage, Collaboration, Trust and Excellence.

This shift in approach has seen the Company produce solid successive quarterly performances since the shutdown in March 2021. Production in the second half of the year of 2,018 mtV was 28.2 per cent higher than the H1, illustrating our success in embedding improvements across all operations. I am pleased to report that this has continued into the current year and am delighted to announce the commissioning of Kiln-3 at Vanchem which will deliver production growth and result in lower unit costs at Vanchem.

We expect that as we continue to pursue incremental operational improvements and further emphasise our values and culture at Bushveld over a sustained period, the effects will begin to reflect in our guidance and production numbers. We have already seen an improvement in our safety record, although this is from a very strong baseline, as set out in the Safety section below.

Bushveld achieved production at the upper end of our revised guidance for the year ended 31 December 2021, with total Group production of 3,592 mtV. The higher throughput in the second half resulted in lower unit costs, with production cash cost (C1) for the year of US$24.0/kgV at Vametco and US$30.6/kgV at Vanchem, both in line with revised guidance.

While production performance improved, Group sales of 3,314 mtV were below production levels, owing to the challenges in international logistics channels arising from COVID-19, and the disruptions at local ports in July and August. This resulted in a buildup of finished products inventory.

While some of these logistical challenges have persisted into the 2022 year, we expect to meet our client obligations for the year.

Financials

The operational improvements post Q1 also translated into an improved financial performance, with a positive underlying EBITDA of US$3.3 million in H2 2021, which has been maintained into the 2022 financial year, compared with an H1 2021 underlying EBITDA loss of US$10.8 million.

The overall underlying EBITDA loss of US$7.5 million for the year, an improvement on 2020, was affected by the exchange rate movements that saw the Rand strengthen significantly from ZAR16.46/US$ to ZAR14.79/US$, resulting in a negative impact on costs and on underlying EBITDA amounting to US$11.6 million for the year on a like for like exchange rate with 2020. I am pleased to note that the trajectory of improved earnings has continued into 2022.

After depreciation of US$19.4 million, we made an operating loss of US$29.3 million (2020: loss of US$32.8 million), similarly impacted by the significant ZAR:US$ exchange rate movements. Net loss for the year was US$42.1 million after net interest of US$11.2 million and non-cash adjustments of US$6.2 million, as detailed in the Finance Directors Review.

The Group ended the year with a cash and cash equivalents position of US$15.4 million, as we prioritised significant investment including growth initiatives at Vanchem, Bushveld Energy investments and debt repayments.

More details on the company's financial performance are set out in the Finance Director's Review.

Safety

The Group recorded a 52 per cent improvement in the Total Injury Frequency Rate to 7.8 relative to the previous year (2020: 16.1), as a result of improved risk assessment and the implementation of mitigation measures. While these improvements are welcome, safety will continue to be an area of focus for Bushveld to ensure that we can sustain and continue a strong safety record.

Sustainability

Bushveld Minerals has embarked on a journey to define and implement a comprehensive sustainability strategy. At the heart of this strategy is an overarching philosophy of going "Beyond Compliance", which requires an understanding and commitment to sustainability as core to our business and not a question of meeting regulatory requirements. The philosophy underpins our approach to environment management and engaging with social partners.

Our sustainability journey is in its early stages, defined with short-term (2021 - 2025) objectives to meet our regulatory compliance obligations and ensuring alignment / standardisation of practices across the business, followed by longer-term (2026 onwards ) objectives that give effect to our "Beyond Compliance" ethos. Dedicated personnel have been brought into the business with

executive leadership responsibility allocated for driving our ESG strategy going forward.

Our approach to sustainability is also defined along two important dimensions: (a) being clear about how we operate in a sustainable manner, and (b) articulating how our products and related solutions contribute towards global sustainability efforts.

In respect of the second, Bushveld Minerals is well placed to make a meaningful contribution to global decarbonisation efforts through its alloying products that reduce the carbon footprint of steelmaking, and through its electrolyte products used in large-scale long-duration energy storage systems that will support the energy transition through, among others, supporting greater penetration of renewable energy to the global energy mix.

Growth

Through the acquisitions and investments in our plants we have significantly increased our production by 36 per cent between 2017 to 2021 and Bushveld is now positioned as a significant global vanadium producer. While our current business model and production run rate is sustainable without the need for additional growth, we are in the process of ramping up to a production run rate of 5,000 - 5,400 mtV by the end of 2022, which will provide Bushveld further cash generation potential.

As outlined in the recently announced technical studies, the full production potential of our assets is much greater than the current production run rate, particularly in the wake of the commissioning of Kiln 3 at Vanchem in the second quarter of 2022. The studies provide a well-structured long-term incremental growth path to a production rate of 8,000 mtV per annum, ensuring a permanent and reliable feedstock to both Vametco and Vanchem while reducing production unit costs.

The option to implement the growth path in phases that are each value accretive substantially reduces the upfront capital requirements. We can attain the incremental production more rapidly and generate additional cash flows after each phase, which can be leveraged for the next phase. As we have full flexibility in relation to this growth, any decision in this regard will be dependent on market conditions and subject to capital availability.

Further detail on the findings of the studies can be found in the operating assets section.

Bushveld Energy

The momentum of the energy transition away from fossil fuels to clean energy continued to grow in 2021 and was, in fact, given further impetus by the positive outcome of the COP26 climate change conference in Glasgow. Whilst forecasts of stationary energy storage deployments growth vary among analysts, they all point to substantial growth of the sector. Bloomberg New Energy Finance, for example, forecast that deployed energy storage installations around the world are will multiply by a factor of 122 to 2,850 GWh by 2040. Furthermore, Guidehouse Insights expects global annual deployments of VRFBs to grow at a compounded annual growth rate (CAGR) of 41 per cent over the next 10 years, reaching approximately 32.8 GWh in 2031.

The VRFB deployment forecast by Guidehouse Insights would equate to between 127,500 and 173,800 tons of new vanadium demand per year by 2031, according to Vanitec calculations based off Guidehouse's projection. That would be more than twice as much vanadium as is currently produced annually today.

This certainly presents a substantial opportunity for Bushveld Energy, the company's energy storage focused subsidiary whose mission is the advancement of VRFBs. Since inception in 2016, Bushveld Energy has made significant inroads in establishing the case for VRFBs in the

growing energy storage market through its focus on key activities along the VRFB value chain structured along three key areas:

§ Construction of the building for the vanadium electrolyte manufacturing plant in East London, South Africa, was completed in April 2022 and the Engineering, Procurement and Construction ("EPC") contract is underway. The vanadium electrolyte manufacturing plant, targeting an initial capacity of 8 million litres, will be one of the largest plants outside of China.

§ VRFB Manufacturing: We invested US$10 million this year to acquire an effective shareholding of 25.25 per cent into CellCube, a grid-scale and micro-grid energy storage battery manufacturer, headquartered in Austria, bringing our total investment to $12 million.

§ VRFB Projects Deployments: We completed the development and achieved financial closing for a 3.5 MW solar photovoltaic (PV) generation farm and 4 MWh of VRFB energy storage pilot project at Vametco Mine ("the Vametco mini grid"). Site clearing has

§ commenced and commissioning is targeted for H1 2023; 26 mtV of electrolyte for the battery has been secured from Vametco. The Vametco mini-grid will serve to demonstrate the technical and commercial viability of hybrid mini-grids using solar PV and VRFB technology and in the process open up opportunities for the deployment of such solutions in an environment that is increasingly encouraging self-generation for large energy users.

In addition, we identified captive opportunities within the Group of up to 120 MW of solar and 180 MWh of VRFB storage. These projects will also reduce the Group's reliance on Eskom, help control electricity cost increases and reduce the carbon footprint of our vanadium production, as part of a broader sustainability strategy.

We are pleased to have successfully defended the litigation initiated, during 2021, by Garnet Commerce Limited ("Garnet"), our partner in CellCube, against VRFB Holdings Limited ("VRFB-H") and Enerox Holdings Limited ("EHL"), concerning an alleged breach by VRFB-H of the joint venture agreement in relation to EHL. Successfully defending this litigation which sought to challenge the indirect investment by Mustang plc into EHL, means the indirect investment by Mustang into EHL remains in place.

Notwithstanding the large opportunity presented by the energy transition for energy storage solutions and significant progress made by Bushveld Energy as summarised above, we recognise the complexity of a company spanning the vanadium value chain with operations that belong in different industry sectors and with different business models.

Having incubated Bushveld Energy and created the critical mass to ensure its success, we intend to carve out Bushveld Energy as a stand-alone company focused on the VRFB value chain. We believe that this will help to crystalise the value of Bushveld Energy and to position it in the capital markets to attract the appropriate energy-market focused institutional investors with an appetite and understanding of the energy proposition, while retaining the vertical integration proposition of Bushveld Minerals via a significant shareholding in the stand-alone energy company.

Vanadium Market Outlook

We remain bullish on the vanadium market. We believe the vanadium market is characterised by a structural deficit in the medium to long term, supported by robust and growing demand amidst a concentrated supply base with limited scope for meaningful supply growth.

Demand will continue to be anchored by the steel sector, underpinned by rising intensity of the use of vanadium within high-strength low-alloy ("HSLA") steel. Away from steel, significant upside potential is anticipated for vanadium within VRFBs, as the requirement for energy storage applications for renewable energy sources increases, with decarbonisation and the energy transition fast becoming global themes set to remain relevant for the decades to come.

Vanadium supply is concentrated and increasingly constrained in its ability to respond to demand. Increasing utilisation levels of coproduction steel plants, which account for more than 70 per cent of global vanadium supply, mean decreasing scope for co-producers to

increase vanadium production, even in favourable steel market conditions, which are the key drivers of supply movements among co-producers. Meanwhile historical vanadium price volatility will, at least in the short term, continue to limit the availability of capital for

developing greenfield vanadium projects.

This resulting structural deficit in the medium to long term points towards vanadium price upside relative to historical averages. In the short term, however, vanadium prices continue to be volatile, driven by the lingering impacts of the COVID-19 pandemic, especially in China where hard lock downs have continued to be imposed. The recent Russia-Ukraine conflict and global recession fears have also added to volatility.

The price volatility seen in 2020, 2021 and now in 2022 underscores the importance of being a low-cost vanadium producer and remains a core strategic focus for us as a company. The Russia-Ukraine conflict puts a spotlight on the geopolitics of global vanadium supply, given the geographical concentration of supply with China and Russia accounting for 50 per cent and 17 per cent respectively. This places South Africa in a favourable position, with its massive high grade primary vanadium reserves. With two of the three operational plants in South Africa and scope to grow production on these, Bushveld has the opportunity to emerge as a key producer and supplier of vanadium in a global market.

Outlook

We anticipate an encouraging 12 months ahead as we are on track to meet our Group production and cash cost guidance at the operations. This is supported by the commissioning of Kiln 3 at Vanchem which was completed in June 2022, and we anticipate to achieve a production run rate of 2,600 mtV p.a during the last quarter of 2022.

Overall, we expect Group production of between 4,200 mtV and 4,400 mtV in 2022, with volumes weighted towards the second half as Kiln 3 is ramped up by year end, with lower production cash cost (C1) of: between US$22.7/kgV and US$23.5/kgV at Vametco and between US$27.7/kgV and US$28.4/kgV at Vanchem. Production guidance at Vametco is between 2,450 mtV and 2,550 mtV and at Vanchem it is between 1,750 mtV and 1,850 mtV.

We reported a strong start to the 2022 financial year, with another solid set of quarterly operating results in Q1 2022. Continuing on from the performance in 2021 and the underlying EBITDA profit in H2 2021, we have now successfully produced four quarters of consistent performance,

building on the operational improvements and enhanced safety initiatives.

We believe Bushveld Minerals is now a solid, sustainable, margin positive business, and there still remains a large opportunity to continue our overall growth programme.

Concluding Remarks

So, our transformation journey continues. With two of the world's four operating primary vanadium production facilities, a diverse product profile and significant growth upside, we are well placed in a market that will increasingly look to primary producers to meet its growing vanadium demand. While we remain committed to maximising the production capacity of our plants, our immediate short-term focus is to ensure that the production base is stable, sustainable and cash generating.

Following the commissioning of Kiln 3 and the expected resulting Group production level of 5,000-5,400 mtV per annum by the end of 2022, the Company is in a good position to generate cash and positive margins, as one of the largest and most significant primary vanadium producers with a low cost production base and supplying approximately five per cent of the global market.

Our decision to carve out Bushveld Energy comes at a time when the business has generated sufficient critical mass to stand alone, albeit still linked to the upstream vanadium production platform. It also comes at a time of growing momentum behind the energy transition and long duration energy storage in particular. The positioning this will give Bushveld Energy in the market is incredibly attractive while helping simplify Bushveld Minerals' investment proposition as a vanadium producer. If the above sounds like a reset of sorts, that is because it is - a reset aimed at:

§ consolidating our gains with the capital invested to date;

§ building organisational capacity to successfully manage our assets;

§ realising a sustainable cash generating business characterised by a stable and predictable low-cost production base with a secure balance sheet; and

§ unlocking the value linked to a downstream, sound and growing energy storage platform that is independently funded through energy focused public capital markets. The importance of the simplicity of the resulting investment proposition cannot be over-emphasised.

Supporting this reset are several important developments that I am pleased to announce, which will provide much needed support in this phase. These include the appointment of Lucas Msimanga as Director of Operations with effect from 1 June 2022, significant changes to our Board of Directors with four new appointments who bring a diverse and complimentary skill and experience set, and the appointment of Royal Bank of Canada ("RBC") as a broker and financial advisor to the Company. I am delighted to welcome Lucas to the executive team.

Lucas brings more than 20 years of operational leadership experience in the processing and metallurgy sector which is important for operations whose downstream processing/metallurgical processing accounts for the vast majority of our production processes. RBC brings breadth and depth of capital markets advisory and support to the Company at a crucial time in our development.

Gratitude

Finally, I would like to sincerely thank each and every employee and contractor. Each and every one of you is an invaluable cog in our business and your care, courage and commitment has been fundamental in ensuring the continued success and development of Bushveld Minerals in 2021. I am privileged to work alongside you all and look forward to many years of continued service.

I must also thank Jeremy Friedlander, Anthony Viljoen and of course, Ian Watson, who have been serving on the Board since IPO and during which time they played an important role through a transformative period of the company. Their guidance and leadership over the last decade has been invaluable. Michael Kirkwood will be appointed acting chairperson at the next Annual General Meeting ("AGM"), while the company continues its search for a permanent chairperson. We are pleased to welcome and look forward to working with the new directors as the company continues its growth path and evolution.

Fortune Mojapelo

Chief Executive Officer

Finance Director's Review

Overview

The 2021 underlying result shows improvement from 2020, despite the continuation of the pandemic as we delivered an underlying EBITDA loss of US$7.5 million, up US$7.4 million from the 2020 underlying EBITDA loss of US$14.9 million (underlying EBITDA is adjusted EBITDA excluding impairment charges. Adjusted EBITDA is EBITDA, excluding the group's share of losses from joint ventures and the remeasurement of financial liabilities).

Foreign exchange had a material impact on costs during the year, with the Rand strengthening from ZAR16.46/US$ to ZAR14.79/US$ in that period. This gave rise to a net adverse exchange impact of US$11.6 million on underlying EBITDA. Excluding the adverse exchange rate impact then we would have achieved a positive underlying EBITDA profit of US$4.1 million for the year on a like for like exchange rate with 2020.

Our operational and financial performance in 2021 is however a story of two halves. In the H1, underlying EBITDA amounted to a loss of US$10.8 million, primarily due to a stronger ZAR: US$ exchange rate on costs and exacerbated by weak production performance at Vametco in the first four months. In the second half of the year, the Group achieved an underlying EBITDA profit of US$3.3 million on the back of a strong production performance at both Vametco and Vanchem and a higher realised price. This positive profitability has been maintained into the 2022 financial year to date.

Recognising the potential significant impact of the movement of the ZAR: USD exchange rate on our results, we are constantly reviewing our hedging policy, and we will be better placed to implement this once we attain steady state production in 2023.

The Group reported revenue of US$106.9 million (2020: US$90.0 million), driven by a higher average realised price of US$32.2/kgV (2020: US$23.4/kgV) and offset by lower sales.

We made the decision to rebase our plans by reducing our production guidance for the year, implementing the changes that were required to stabilize production and provide the platform for growth. This entailed increasing investment in maintenance and sustaining capital, to help our operations to achieve stability and support the anticipated volume increase in the 2022 financial year.

Overall, we recorded a Group production for the year of 3,592 mtV, just shy of the upper end of the 2021 guidance of between 3,400mtV and 3,600mtV.

Whilst continuing with the various cash conserving measures put in place to protect the balance sheet during 2020, we remained firmly focused on our strategy to sustainably increase production. As part of our capital allocation process, we prioritised the refurbishment of Vanchem's Kiln 3 as it provided the Group with the most rapid route to near term production growth. We successfully negotiated with Orion Mine Finance ("Orion") to lift the Production Finance Arrangement ("PFA") capital ringfence, allowing us to reallocate US$17.8 million of the PFA funding from Vametco to finance the refurbishment and expansion of Vanchem. Further details of the growth path are set out in the section on Operating Assets and Operational Review.

The commissioning of Kiln 3 was completed within budget post year-end in June 2022, with focus now on plant stabilisation and optimization. The Group's ability to achieve its future production profile is predicated on the Kiln 3's successful increase in production during the first three to four months following commissioning, as it ramps up. This will enable the Group to reach its targeted steady state production run rate of 5000 - 5400 mtV p.a. in the last quarter of the 2022 financial year. This is a significant increase from our production of 3,592 mtVp.a. in 2021 and supports our guidance of between 4,200 - 4,400 mtVp.a. for the 2022 financial year.

During the year, the Duferco loan of US$11.5million was settled by way of US$2.5 million in cash and US$9.0 million by the issue of shares.

Approximately US$12.7 million was realized in the H1 of 2021 from the sale of the investment in Invinity Energy Systems Plc ("Invinity"), earning an overall profit of approximately US$7.7 million on the original investment of US$5.0 million. We invested US$10 million of the proceeds to increase our investment in VRFB manufacturer CellCube (previously referred to as Enerox GmbH), which resulted in an indirect interest of 25.25 per cent in CellCube.

1. Unaudited

The Company sold its 4.76 per cent shareholding in AIM-listed Afritin Mining Limited and realized a total of approximately US$3.5 million. The proceeds of the sale were used for general corporate purposes.

Income Statement

Analysis of results

Income statement summary as adjusted from "statutory" Primary statement presentation

Revenue

Group Sales of 3,314 mtV were 13.7 per cent lower than in 2020 due to challenges in international logistics channels arising from COVID-19, the unrest in South Africa and disruptions at local ports in July and August. Over the course of 2021, we saw a recovery in the Vanadium price to the average London Metal Bulletin of US$34.4/kgV, despite ongoing concerns about COVID-19. This recovery meant that lower sales were offset by a higher average realised price in 2021 of US$32.2/kgV (2020: US$23.4/kgV) resulting in higher revenue for the Group of US$106.9 million 2020:US$90.0 million). The logistical challenges resulted in the Company being unable to ship some of the product produced during 2021, resulting in a build-up of inventory throughout the logistics chain (stock at site, transit to Port, sea-borne and in-country warehouses) of 278 mtV which is included in the cumulative inventory at year end of 832 mtV.

The geographic split of Group sales in 2021 was 47 per cent (2020: 34 percent) to the United States, 29 per cent to Europe, 3 per cent to China and 21 per cent to the rest of the world. We expect the geographic mix to shift as Kiln 3 comes online in 2022 with the resultant wider product mix.

During the year, Bushveld took advantage of the robust vanadium demand and higher prices in the United States by diverting a larger portion of its sales to the Unites States. As a result, sales to the United States increased due to increased vanadium demand from the North American steel and aerospace industries on the easing of the pandemic lock down regulations and opening up of economies. We are pleased to have been able to supply into our framed contracts in the US despite these challenges.

Cost of sales

The cost of sales excluding depreciation for the period was US$83.4 million (2020: US$73.4 million), primarily due to the negative impact amounting to approximately US$8.5 million of the stronger ZAR: US$ exchange rate on costs in 2021. The balance of the increase is largely attributable to an overall increase in costs at both Vametco and Vanchem, as detailed below:

§ Increase in maintenance costs to US$16.5 million (2020: US$12.1 million) to sustain the plants, production volumes and improve operational stability.

§ Increase in energy and raw material costs to US$40.7 million (2020: US$38.5million).

§ Increase in mining costs due

§ to waste stripping of US$5.4 million (2020: US$3.2 million) associated with bringing the Upper Seam project online in September 2021.

§ The Group cost per unit sold (including sustaining capex) of US$37.4/kgV increased by 30 per cent (2020: US$28.8/kgV), mostly due to the cost factors mentioned above and lower sales volumes.

The Group focused on the commissioning of Kiln 3 at Vanchem along with associated downstream refurbishments. As a result, Vanchem production personnel costs increased in line with expectation as we implemented the plan in anticipation of the commissioning scheduled for May 2022. The time lag between the upfront expenditure required ahead of the planned increase in production was a contributing factor to the higher Group cost of US$37.4/kgV (including sustaining capital) relative to 2020 (2020: US$28.8/kgV). We continued with our cost-reduction measures as the Group maintained its focus on embedding the synergies across Vametco and Vanchem to grow production organically.

During the H1 of the year, we carried out a 35-day planned maintenance shutdown at our main operating asset, Vametco, which was followed by a slower than expected ramp up and a 10-day industrial action. The combination of these factors and a step change in our approach to a more sustainable production delivery resulted in a rebasing of our production profile for the year.

The rebasing of production had a negative impact on unit cost of production, with the fixed costs, accounting for approximately 45 per cent of total costs, being absorbed off a lower production volume.

Group production of 2,018 mtV in the second half was an improvement and 28.2 per cent higher than H1 2021 (H1 2021: 1,574 mtV) on the back of the operational improvements implemented after the production target rebasing.

Cost-saving programme

We continued with the cost-savings programme ("CSP") introduced in 2020. The CSP is aimed at ensuring continued competitiveness throughout the commodity cycle while enhancing our product offering to markets across the geographies and industries in which we compete. The Group performed a diagnostic analysis for an addressable baseline procurement spend of around U$55.0 million. The process was concluded in February 2022. The outcome was targeted annualised cost savings of US$2.5 million - US$4.0 million over a 12 to 24 month period from February 2022. While, going forward, growing production is expected to contribute to further lowering of costs through fixed cost dilution, management will continue to seek broader cost saving opportunities to improve the company's unit cost performance even further.

Other operating and administration costs

Group administrative expenses increased by US$1.1 million at US$20.9 million (2020: US$19.8 million). On a like for like exchange rate basis the costs would have reduced by US$2.0 million, demonstrating the success of the cost containment measures we initiated in 2020.

Administrative expenses included staff salaries of US$10.8 million (2020: US$8.1 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$4.8 million (2020: US$4.7 million), whilst the shared service and change to head office division (including directors 'fees), amounted to US$5.1 million (2020: US$3.5 million). The increase in head office staff costs is as a result of the employment of key employees to manage the operations as part of shared services. Professional fees were maintained at US$5.9 million (2020: US$6.0 million), Included in professional fees are costs incurred of US$1.1m for legal fees for the litigation surrounding the Enerox Investment. On account of the successful defense against the litigation a portion of the legal costs have been recouped post year end.

Impairment losses of US$2.4million (2020:US$0) was a result of the impairment of US$0.5million Intangible asset and US$1.9million plant and equipment.

Other mine operating costs include social commitments and obligations at both Vametco and Vanchem costs decreased by US$1.5 million to US$3.2 million (2020: US$ 4.7 million). The idle plant costs of US$3.4 million (2020:US$4.2 million) mainly reflects the 35-day maintenance shut down during the Q1 of 2021. Selling and distribution costs increased by US$1.6 million to US$6.4 million (2020: US$4.8 million) as a result of increased commission paid which is a consequence of increased revenue in 2021 compared to 2020. The distribution costs also increased due to longer holding times as a result of logistical issues experienced in 2021.

Adjusted EBITDA and Underlying EBITDA

The Underlying EBITDA reconciliation shown below illustrates the impact of the increase in vanadium prices from prior year. Offset by the costs analysed above.

Underlying EBITDA is a factor of volumes, prices and cost of production. This is a measure of the underlying profitability of the Group, widely used in the mining sector. Underlying EBITDA removes the effect of impairment charges and remeasurement adjustments, foreign currency translation gains/losses and other non-cash expenses.

Other non-cash costs

IFRS 9 - Remeasurement of financial liabilities

The PFA was subject to remeasurement under IFRS 9. This resulted in a non-cash impact to the income statement of US$1.9 million (2020: US$ nil) remeasurement adjustment and US$2.8 million (2020: US$ nil) notional interest and a resultant increase in the loan of US$4.7 million.

Share of loss of VRFB JV

Our underlying investment in Cellcube, through VRFB holdings Limited (VRFB) is accounted for as an investment in Joint Venture. As such we recognise our portion of the loss recognised in Cellcube for 2021 which amounted to US$4.4 million.

Deferred Tax

Charges for deferred tax in 2021 amounted to a net deferred tax benefit of US$5 million, compared to a net deferred tax benefit of US$6.6 million in 2020 (restated). The deferred tax benefit arises from the unwinding of the liability over the life of the assets.

Deferred Tax on Vanchem acquisition

In 2019, the Group acquired assets in Vanchem which resulted in a recognition of a gain on bargain purchase of some US$60,6 million in the Group accounts and around US$85 million in the subsidiary accounts under IFRS 3 (Business combination). Based on IAS 12-Income taxes, a deferred tax liability of R333 million (c.US$23.7 million) should have been raised with a corresponding charge to tax on the income statement. The liability which has no cash impact will unwind over the life of assets with a credit to 2020 income statement on the tax line of R89 million (c.US$6.1 million) and a credit in the 2021 income statement on the tax line of R76 million (c.US$4.8 included in the US$5 million mentioned above). The overall impact of the adjustment in the 2021 accounts is a deferred tax liability of R167 million (c.US$10.5 million), a debit of retained earnings brought forward of R243m

(c.US$16.6 million) and a current year credit to the P&L of R76m (c. US$5.2m). The prior years in the balance sheet have been restated to reflect these changes and more details can be found in notes 15 and 35 of the financial statements.

Balance Sheet Assets

Assets

Non-current assets related to intangibles and property, plant and equipment remained broadly flat relative to 2020 and changes were mainly due to depreciation in the year. Our investment in VRFB transferred from Current assets (Refer to note 16 of the financial statements for further detail). A deferred tax asset was raised for the assessed loss incurred during the year, (refer to note 15 for further details).

The decrease in Group cash and cash equivalents was as a result of US$15.4 million (2020: US$50.5 million) was primarily due to the capital spend on growth projects at Vanchem, VRFB investment and the construction of our plant in East London.

The movement in fair value is as a result of the Group realising its investments in AfriTin and Invinity. AfriTin realised approximately US$3.5million and Invinity US$3.5million in 2021.

Equity and liabilities

Total current and non-current liabilities of US$149.9 million (2020 US$153.5 million) reduced by US$4.2 million from the prior year. The positive impact of the settlement of the Duferco loan of US$11.5 million of which US$2.5 million was cash and US$9 million settled through the issue of 66,892,037 shares, partial repayment of Nedbank of US$2.2 million as well as Orion US$1.1 million, were offset by the US$4.76million IFRS9 impact on the Orion financing loan, US$3.5million Orion convertible interest, and interest accrual on the PFA for the Q4 2021 which was only due and payable in Q1 2022.

Net debt

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

Cash flow statement

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

Net cash from operating activities was an outflow of US$12.1 million (2020: US$17.1 million), an improvement from the previous year driven by Adjusted EBITDA. Capital expenditure and investing activities for the year were US$17.2 million (2020: US$13.3 million), an increase of

US$3.9 million from 2020 mainly due to investing activities as explained below. The Group ended the year with a cash balance of US$15.4 million, (2020: US$50.5 million), the net outflow arising from, inter alia, higher capital expenditure and repayment of loans.

Investing activities

Investing activities were driven by capital expenditure growth with property plant and equipment expenditure of US$19.5 million, up US$9.3 million from 2020. This was mainly as a result of Kiln 3 capital expenditure of US$4.2 million and construction of the bushveld electrolyte plant of US$4.9million. In addition to above, payments were made for the deferred consideration owed to Evraz of US$1.7 million, Duferco deferred consideration of US$2.2million, Investment in CellCube of US$10million. The costs were offset by finance income to the value of US$1.0 million for the year as well as the disposal of the US$12.7million investment in Invinity and US$3.5million investment in Afritin.

Capital expenditure to sustain and grow our production

In line with our rebasing, we substantially increased sustaining capital at Vametco, in order for our operations to achieve stability and support the volume increase in the 2022 financial year as outlined below.

§ The Group remained firmly focused on our strategy to sustainably increase production, prioritising the refurbishment of Vanchem's Kiln 3. During 2021 the Group spent US$17.1 million 2020:US$8.0 million on sustaining and growth capital. The total spend was comprised of the following:

§ US$3.9 million sustaining capital at Vametco, mainly comprised of medium- and long-term maintenance capex.

§ US$4.2 million growth capital for the refurbishment of Kiln 3 at Vanchem. Vanchem's production scale up to a run rate of 2,600 mtv per annum by the end of the 2022 financial year. The balance to be incurred during 2022.

§ US$4.9 million growth capital for BELCO electrolyte plant.

Financing activities

Financing activities of US$7.0 million comprise of the loan repayments of US$2.2 million on the Nedbank RCF and US$2.5 million Capital repayment of the US$11.5 million unsecured convertible loan note held by Duferco as well as US$1.7million interest on the Orion PFA. As explained above the balance of US$9.0 million which was due for repayment was settled by the issue of 66,892,037 new Bushveld shares. This was offset by the receipt of US$1.3million receipt from the Industrial Development Corporation(refer to note 25) for BELCO.

Financial Risk

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 (market risk). 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. We proactively manage the risks within our control. There are, however, factors which are outside the control of management, specifically volatility in the ZAR: US$ exchange rate as well as the vanadium price, which we do not currently hedge, and which can have a significant impact on the cashflows of the business. As mentioned earlier, implementation of a hedging policy will be considered when we attain steady state production and have a wider range of products for sale in 2023.

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 Board reviewed and approved the Group's budget and cashflow forecasting through to 2023. 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 and regulatory capital funding requirements.

We also closely monitor our working capital and 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. We have a pricing committee which considers commodity pricing outlook, taking into account industry analysts forecasts as well as inhouse intelligence.

Our future production profile in our forecasts is predicated on Vanchem Kiln 3 being commissioned during the H1 of 2022. Kiln 3 has been commissioned and is undergoing stabilisation and optimization, with ramping up expected to commence thereafter. The annual production run rate is forecast to ramp up to 5,000 - 5,400 mtV p.a. in the last quarter of the 2022 financial year and we remain comfortable that Kiln 3 will be at the forecast run rate by the end of year.

The Nedbank Revolving Credit Facility (RCF) of ZAR125 million available to Vametco is subject to financial covenants which are EBITDA-driven. The application of IFRS 9 on the Orion PFA resulted in an increase in accounting interest, over and above the actual interest paid which comprised the calculation of the net interest to debt covenant. Nedbank has approved the waiver of the covenants for the December 31, 2021, and we are confident of passing the 30 June 2022 reporting period. The term of the RCF ends in November 2022 and since August 2021, we have been paying approximately US$0.44 million (ZAR7.0 million) per month towards the RCF. of which approximately US$2.,65 million (R42.0 million) has been paid post the year end.

Although the start of the 2022 financial year has been challenging for Vanchem, as Kiln 1 battled with repairs and maintenance, we are encouraged by the positive production run rate at Vametco and the profitability that is coming through from that operation. The plant at Vametco is currently down for its annual planned shutdown during June 2022 and has generally performed well and is benefitting from the operational stability initiatives we embarked on during 2021. Whilst we have experienced logistical challenges with our sales, we have retained our customer relationships as the Group sells and distributes around 85 per cent of its product as frame contracts.

We 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. Accordingly, the Directors continue to adopt the going concern basis in preparing the consolidated financial information. Further information on the Directors going concern assessment is contained] in the accounting policies.

Tanya Chikanza

Finance Director

Bushveld Minerals Limited (Registration number 54506) Consolidated Financial Statements for the year ended 31 December 2021

The accounting policies on page 8 to 20 and the notes on pages 8 to 52 form an integral part of the consolidated financial statements.

The consolidated financial statements and the notes on pages 1 to 52, were approved by the board of directors on the 22 June 2022 and were signed on its behalf by:

Finance Director

The accounting policies on page 8 to 20 and the notes on pages 8 to 52 form an integral part of the consolidated financial statements.

Bushveld Minerals Limited

(Registration number 54506)

Consolidated Financial Statements for the year ended 31 December 2021

Consolidated Statement of Changes in Equity

The accounting policies on page 8 to 20 and the notes on pages 8 to 52 form an integral part of the consolidated financial statements.

5

*Refer to note 35 for details of restatement

The accounting policies on page 8 to 20 and the notes on pages 8 to 52 form an integral part of the consolidated financial statements.

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 2021 comprise of the Company and its subsidiaries (The "Group") and the Group's interest in equity accounted investments.

As at 31 December 2021, the Bushveld Group comprised of:

2. Adoption of New and Revised Standards Accounting standards and interpretations applied

In the current year, the Group has adopted the following standards and interpretations that are effective for the current financial year and that are relevant to its operations:

The adoption of these Standards and Interpretations, which become effective for annual periods beginning on or after 1 January 2021, had no material impact on the financial statements of the Group.

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:

The Directors anticipate that the adoption of these Standards and Interpretations, which become effective for annual periods beginning on or after 1 January 2022, in future periods will have no material impact on the financial statements of the Group.

3. Significant accounting policies Basis of accounting

In accordance with Section 244 of The Companies (Guernsey) Law 2008, the Group confirms that the financial information for the year ended 31 December 2021 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 UK adopted International Accounting Standards.

The statutory accounts for the year ended 31 December 2021 have been audited and approved but have not yet been filed. The Group's audited financial statements for the year ended 31 December 2021 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 30 June 2022.

The financial year covers the 12 months to 31 December 2021. The comparative period covered the 12 month period to 31 December 2020. The notes to the financial statements for the year ended 31 December 2019 have only been presented where impacted by the restatement (see note 35). With the exception of the amounts restated, the 2019 the 2020 amounts have been derived from the audited statutory accounts for the years ended 31 December 2020 and 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

The Group closely monitors and manages its liquidity risk and day to day working capital requirements. The Group has a R125 million (around $5.8million) Revolving Credit Facility with Nedbank at Vametco which is subject to financial covenants. Cash forecasts are regularly produced, taking into account the global logistical challenges around sales to ensure sufficient cash within the Group to meet its obligations. The Group runs sensitivities for different scenarios, including but not limited to changes in commodity prices and exchange rates. The Group also routinely monitors the covenants associated with the RCF and proactively engages with Nedbank, the lender, where there is a risk of a breach. The accounting treatment of IFRS 9 on the Orion Product Finance Agreement led to an increase in accounting interest, over and above the actual interest paid and resulted in a breach of the net debt to EBITDA covenant as at 31 December 2021. The Group sought and was granted a waiver for the interest cover covenant by Nedbank and as part of that waiver, the definitions of the covenant have been clarified and amended to exclude the impact of IFRS 9. There was no change to the presentation in the financial statements due to breach, as the RCF facility is due for repayment in November 2022 (the cash outflows for which are included within the group forecasts) and was therefore already disclosed as a short term liability. Through our regular monitoring, based on Vametco's actual performance to 30 May 2022 and forecast to 30 June 2022, we are confident of passing the 30 June 2022 covenant testing period.

The main sensitivities considered as part of management's going concern assessment are production, vanadium prices and exchange rates. In terms of production, the newly refurbished Kiln 3 at Vanchem has been commissioned and is ramping up. The Group's ability to achieve its future production profile is predicated on the Kiln's successfull increase in production during the first three to four months following commissioning as this will result in the Group reaching its target of steady state production run rate of 5,000 to 5,400mtv per annum by the end of the 2022 financial year. This assumes forecast production volumes at Vanchem of 222 mtV by December 2022. The pace of ramp up of the kiln has been slower than planned, impacted by electricity loadshedding and technical issues that are consistent with a ramp up. The June 2022 production for Vanchem was 108 mtV. As part of our assessment of going concern, additional sensitivity analysis has been performed on the production profile of Kiln 3, in particular over the next three to four months, where production is assumed to remain at 108 mtV, before ramping up to the year-end target of 222 mtV. We have not identified a cashflow shortfall at group level as part of this sensitivity analysis. These forecasts assume that Vametco continues to perform in line with historic levels and planned maintenance shutdowns are undertaken annually, these shutdowns proceed in line with the planned timetable and no unplanned shutdowns are experienced during the going concern period. We have also stress tested the kiln's long term production plan as well given its planned significant future contribution to the Group's production profile and cashflows.

With regards to pricing, the short to medium term assumptions are that the average price achieved by the Group will be $40.99 through to 31 December 2022 and average at $35.04 throughout 2023. The year to date average price achieved by the group was $44.89. We have performed sensitivity analysis on the basis of the prices falling 10% below those forecast and have not identified a cash shortfall at this level.

The forecasts assume a ZAR / USD rate of 15. This compares to a current spot rate of 15.89 and a 1 year forward rate of 15.29.

As noted above, the Nedbank RCF is due to be repaid in November 2022 and this is modelled in the cashflow forecasts. In November 2023 the convertible loan note with Orion of $35million plus interest is due for repayment. Although this is beyond the 12 month going concern review period as considered by the board, repayment of the convertible loan note is included in the group's long term forecasts through to December 2023. Where additional funding may be required, the Group believes it has several options available to it, including but not limited to, use of the overdraft facility, restructuring of the debt, cost reduction strategies as well as selling of non-core assets.

Based on the current Group finances, having considered group budgets and cashflow forecasts, possible downside scenarios around commodity pricing and exchange rate and in particular around Vanchem's Kiln production profile, the cashflow forecasts demonstrate the Group will have sufficient headroom in its liquid resource to meet its obligations in the ordinary course of business for the next 12 months from the date of approval of the financial statements. Accordingly, the Directors continue to adopt the going concern basis in preparing the consolidated financial information.

Basis of consolidation

The consolidated financial statements present the statement of financial position and changes therein, statement of profit or loss and cash flow information of the Group. Where necessary, adjustments are made to the results of subsidiaries to ensure the consistency of their accounting policies with those used by the group. Intercompany transactions, balances and unrealised profits and losses between group companies are eliminated on consolidation.

Subsidiaries

Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of acquiree's identifiable net assets.

Acquisition-related costs are expensed as incurred.

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer's previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re- measurement are recognised in profit or loss.

Subsequent transactions that do not result in the obtaining of control are accounted for as equity transactions as follows:

· The carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary

· Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid is recognised directly in equity and attributed to the owners of the parent

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IFRS 9 in profit or loss. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.

Disposal of subsidiaries

When the Group ceases to have control, any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

Joint Ventures

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. Investments in joint ventures are accounted for using the equity method. Under the equity method, the share of the profits or losses of the joint venture is recognised in profit or loss and the share of the movements in equity is recognised in other comprehensive income. Investments in joint ventures are carried in the statement of financial position at cost plus post-acquisition changes in the consolidated entity's share of net assets of the joint venture. Goodwill relating to the joint venture is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment. Income earned from joint venture entities reduce the carrying amount of the investment.

Non-controlling interests

Non-controlling interests in subsidiaries are identified separately from the Group's equity therein. Those interests of non- controlling shareholders that present ownership interests entitling their holders to a proportionate share of the net assets upon liquidation are initially measured at fair value. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests' share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Black Economic Empowerment ("BEE") interests are accounted for as non-controlling interests on the basis that the Group does not control these entities.

Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision- maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors, which makes strategic decisions.

Foreign currencies

Functional and presentational currency

The individual financial statements of each Group company are prepared in the currency of the primary economic environment in which they operate (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group company are expressed in US Dollars, which is the presentation currency for the consolidated financial statements and functional currency of the parent company.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

Group companies

The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

a) assets and liabilities for each statement of financial position presented are translated at the closing rate;

b) income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and

c) all resulting exchange differences are recognised in other comprehensive income.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are recognised in other comprehensive income.

Revenue recognition

Sale of goods/products

IFRS 15 requires revenue from contracts with customers to be recognised when the separate performance obligations are satisfied, which is when control of promised goods or services are transferred to the customer.

The Group satisfies a performance obligation by transferring control of the promised goods/products to the customer. In the standard "control of an asset" refers to the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset. Control includes the ability to prevent other entities from directing the use of, and obtaining the benefits from, an asset.

The Group recognises revenue at the amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods or services to a customer. 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.

Cost of sales

When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period in which the write-down or loss occurs.

Share based payments

The fair value of bonus shares granted to employees for nil consideration under the short-term incentive scheme is recognised as an expense over the relevant service period, being the year to which the bonus relates and the vesting period of the shares. The fair value is measured at the grant date of the shares and is recognised in equity in the share-based payment reserve. The number of shares expected to vest is estimated based on the non-market vesting conditions.

Where shares are forfeited due to a failure by the employee to satisfy the service conditions, any expenses previously recognised in relation to such shares are reversed effective from the date of the forfeiture.

Finance income

Interest income is recognised when it is probable that economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition.

Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax charge is based on taxable profit for the year. The Group's liability for current tax is calculated by using tax rates that have been enacted or substantively enacted by the reporting date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit or loss, and is accounted for using the "balance sheet liability" method.

Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax is calculated at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled based upon rates enacted and substantively enacted at the reporting date. Deferred tax is charged or credited to profit or loss, except when it relates to items credited or charged to other comprehensive income, in which case the deferred tax is also dealt with in other comprehensive income.

Intangible exploration and evaluation assets

All costs associated with mineral exploration and evaluation including the costs of acquiring prospecting licences; mineral production licences and annual licences fees; rights to explore; topographical, geological, geochemical and geophysical studies; exploratory drilling; trenching, sampling and activities to evaluate the technical feasibility and commercial viability of extracting a mineral resource; are capitalised as intangible exploration and evaluation assets and subsequently measured at cost.

If an exploration project is successful, the related expenditures will be transferred at cost to property, plant and equipment and amortised over the estimated life of the commercial ore reserves on a unit of production basis (with this charge being taken through profit or loss). Where a project does not lead to the discovery of commercially viable quantities of mineral resources and is relinquished, abandoned, or is considered to be of no further commercial value to the Group, the related costs are recognised impairment loss in profit or loss.

The recoverability of capitalised exploration costs is dependent upon the discovery of economically viable ore reserves, the ability of the Group to obtain necessary financing to complete the development of ore reserves and future profitable production or proceeds from the extraction or disposal thereof.

Impairment of exploration and evaluation assets

Whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, the asset is reviewed for impairment. Assets are also reviewed for impairment at each reporting date in accordance with IFRS 6. An asset's carrying value is written down to its estimated recoverable amount (being the higher of the fair value less costs to sell and value in use) if that is less than the asset's carrying value. Impairment losses are recognised in profit or loss.

An impairment review is undertaken when indicators of impairment arise but typically when one of the following circumstances applies:

· unexpected geological occurrences that render the resources uneconomic; or

· title to the asset is compromised; or

· variations in mineral prices that render the project uneconomic; or

· variations in the foreign currency rates; or

· the Group determines that it no longer wishes to continue to evaluate or develop the field.

Property, plant and equipment (excluding right-of-use assets)

Property, plant and equipment are stated at historical cost less accumulated depreciation, except for investment properties which are carried at fair value.

Depreciation on assets commences when they are available for use by the group. Depreciation for property, plant and equipment is charged on a systematic basis over the estimated useful lives of the assets after deducting the estimated residual value of the assets, using the straight-line method. Depreciation for right-of-use assets is charged on the same basis except that the period is the shorter of the useful life of the asset (in line with the category of property, plant and equipment to which the asset is classified) and the lease term, unless the title to the asset transfers at the end of the lease term, in which case depreciation is over the useful life. The depreciation method applied is reviewed at least at each financial year end, with any changes accounted for as a change in accounting estimate to be applied prospectively. The depreciation charge for each period is recognised in the statement of profit or loss.

The useful life of an asset is the period of time over which the asset is expected to be used. The estimated useful lives of assets and their residual values are reassessed annually at the end of each reporting period, with any changes in such accounting estimates being adjusted in the year of reassessment and applied prospectively. The estimated useful lives of items of property, plant and equipment are as follows

Assets under construction are not depreciated.

Repairs and maintenance is generally charged in profit and loss during the financial period in which it is incurred. However renovations are capitalised and included in the carrying amount of the asset when it is probable that future economic benefits will flow to the Group. Major renovations are depreciated over the remaining useful life of the related asset.

An item of property, plant and equipment is derecognised upon disposal or when no future benefits are expected from its use or disposal. Any gain or loss arising from de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement in the year the asset is derecognised.

Impairment losses

At each reporting date, the Group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

In assessing whether an impairment is required, the carrying value of the asset or CGU is compared with its recoverable amount. The recoverable amount is the higher of the CGU's fair value less costs of disposal (FVLCD) and value in use (VIU). Given the nature of the Group's activities, information on the fair value of an asset is usually difficult to obtain unless negotiations with potential purchasers or similar transactions are taking place. Consequently, the FVLCD for each CGU is estimated based on discounted future estimated cash flows (expressed in real terms) expected to be generated from the continued use of the CGUs using market-based commodity price and exchange assumptions, estimated quantities of recoverable minerals, production levels, operating costs and capital requirements, including any expansion projects, and its eventual disposal, based on the CGU 30 year plans and latest life of mine (LOM) plans. These cash flows were discounted using a real post- tax discount rate that reflected current market assessments of the time value of money and the risks specific to the CGU.

Estimates of quantities of recoverable minerals, production levels, operating costs and capital requirements and sourced from out planning process, including the LOM plans, two-year budgets and CGU-specific studies.

The determination of FVLCD for each CGU are considered to be Level 3 fair value measurements in both years, as they are derived from valuation techniques that include inputs that are not based on observable market data. The Group considers the inputs and the valuation approach to be consistent with the approach taken by market participants.

Key assumptions

The determination of FVLCD is most sensitive to the following key assumptions

· Production volumes

· Commodity prices

· Discount rates

· Exchange rates

Production volumes: In calculating the FVLCD, the production volumes incorporated into the cash flow models were 2 694 mtVpa for Vametco and 1 610 mtVpa for Vanchem in 2022 for a base case scenario. For a full growth case in a steady state, production volumes for Vametco is 3 400 mtVpa and for Vanchem is 4 600 mtVpa taking the total Group production to 8 000 mtVpa. Estimated production volumes are based on detailed life-of-mine plans and take into account development plans for the mines agreed by management as part of the long-term planning process. Production volumes are dependent on a number of variables, such as: the recoverable quantities; the production profile; the cost of the development of the infrastructure necessary to extract the reserves; the production costs; the contractual duration of mining rights; and the selling price of the commodities extracted. As each producing mine has specific reserve characteristics and economic circumstances, the cash flows of the mines are computed using appropriate individual economic models and key assumptions established by management. The production profiles used were consistent with the reserves and resource volumes approved as part of the Group's process for the estimation of proved and probable reserves, resource estimates and in certain circumstances, include expansion projects. These are then assessed to ensure they are consistent with what a market participant would estimate.

Commodity prices: Forecast commodity prices are based on management's estimates and are derived from forward price curves and long-term views of global supply and demand, building on past experience of the industry and consistent with external sources. These prices were adjusted to arrive at appropriate consistent price assumptions for the different qualities and type of commodities, or, where appropriate, contracted prices were applied. These prices are reviewed at least annually. Estimated long-term FeV price for the current year and the comparative year that have been used to estimate future revenues, are as follows:

Discount rates: In calculating the FVLCD, a real post-tax discount rate of 7.70% (2020: 7.09%) was applied to the post-tax cash flows expressed in real terms. This discount rate is derived from the Group's post-tax weighted average cost of capital (WACC), with appropriate adjustments made to reflect the risks specific to the CGU and to determine the pre-tax rate. The WACC takes into account both debt and equity. The cost of equity is derived from the expected return on investment by the Group's investors. The cost of debt is based on its interest- bearing borrowings the Group is obliged to service. Segment- specific risk is incorporated by applying individual beta factors. The beta factors are evaluated annually based on publicly available market data.

Exchange rates: Foreign exchange rates are estimated with reference to external market forecasts and updated at least annually. The rates applied for the first five years of the valuation are based on observable market data including spot and forward values, thereafter the estimate is interpolated to the long term assumption, which involves market analysis including equity analyst estimates. The assumed long-term US dollar/Rand is estimated to be 15.00 (2020:16.00)

Investment property

Investment property is initially measured at cost and subsequently at fair value with any change therein recognised in profit or loss. Any gain or loss on disposal of investment property (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss.

Inventories

Inventories are valued at the lower of cost or estimated net realisable value. Cost is determined on the following basis:

The cost of finished product and work in progress comprises of raw materials, direct labour, other direct costs, and related production overheads (based on normal operating capacity) but excludes borrowing costs.

Net realisable value is the estimated selling price in the ordinary course of business, less costs of completion and selling expenses.

Financial assets and liabilities

Financial assets and financial liabilities are recognised in the Group's statement of financial position when the Group becomes a party to the contractual provisions of the instrument. Financial instruments are classified into specified categories dependent upon the nature and purpose of the instruments at the time of initial recognition.

Financial assets Measurement

At initial recognition, the Group measures all financial assets at fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.

Financial assets are classified at initial recognition and subsequently measured at amortised cost, fair value though other comprehensive income (FVOCI) or fair value through profit or loss (FVPL).

The classification of financial assets at initial recognition depends on the financial asset's contractual cash flow characteristics and the Group's business model for managing them.

Debt instruments

In order for a financial asset to be classified and measured at amortised cost or FVOCI, it needs to give rise to cash flows that are 'solely payments of principal and interest' (SPPI) on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.

The Group's business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows.

The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.

Financial assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is subsequently measured at FVPL is recognised in profit or loss and presented net within other gains/(losses) in the period in which it arises.

Equity instruments

The Group subsequently measures all equity investments at fair value. Where the Group's management has elected to present fair value gains and losses on equity investments in OCI (however, the cumulative gain/loss on disposal is represented within equity), there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognised in profit or loss as other income when the Group's right to receive payments is established.

Changes in the fair value of financial assets at FVPL are recognised in other gains/(losses) in the statement of profit or loss as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.

Impairment

The Group assesses on a forward-looking basis, the expected credit losses associated with its debt instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

Trade and other receivables

Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant financing components, when they are recognised at fair value. The Group holds the trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method, less any allowance for expected credit losses.

To determine the expected credit loss allowance for trade and other receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables, see note 32 for further details.

Other receivables consist of prepayments and deposits, which are initially recognised as non-financial assets and realised over time.

Restricted investment

Restricted investment comprises of short-term deposits with an original maturity of three months or less and an investment in an investment fund. These funds are dedicated towards future rehabilitation expenditure on the mine property.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Investments and other financial assets

Investments are equity instruments which the Group intends to hold for the foreseeable future and has irrevocably elected to classify them at FVOCI at inception.

Convertible loan

Interest-bearing loans are recorded initially at their fair value, net of direct transaction costs. Such instruments are subsequently carried at their amortised cost and finance charges, including premiums payable on settlement, redemption or conversion, are recognised in profit or loss over the term of the instrument using the effective rate of interest.

Instruments where the holder has the option to redeem for cash or convert into a pre-determined quantity of equity shares are classified as compound instruments and presented partly as a liability and partly as equity.

Instruments where the holder has the option to redeem for cash or convert into a variable quantity of equity shares are classified separately as a loan and a derivative liability.

Where conversion results in a fixed number of equity shares, the fair value of the liability component at the date of issue is estimated using the prevailing market interest rate for a similar non-convertible instrument. The difference between the proceeds of issue and the fair value assigned to the liability component, representing the embedded option to convert the liability into equity of the Group, is included in equity. Where conversion is likely to result in a variable quantity of equity shares the related derivative liability is valued and included in liabilities.

The interest expense on the liability component is calculated by applying the prevailing market interest rate for similar

non-convertible debt to the instrument. The difference between this amount and the interest paid is added to the carrying value of the convertible loan note.

Derivative liabilities are revalued at fair value at the reporting date, and changes in the valuation amounts are credited or charged to the profit or loss.

Leases

The Group assesses whether a contract is or contains a lease, at inception of a contract. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease agreements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets. For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate. The discount rate used ranges between 10% - 11% depending on the nature of the underlying asset.

Lease payments included in the measurement of the lease liability comprise:

· fixed lease payments (including in-substance fixed payments), less any lease incentives;

· variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;

· the amount expected to be payable by the lessee under residual value guarantees;

· the exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and

· payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.

The lease liability is presented as a separate line in the Statement of Financial Position. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.

The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:

· the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.

· the lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using the initial discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used).

· a lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.

The Group did not make any such adjustments during the periods presented.

The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day and any initial direct costs.

They are subsequently measured at cost less accumulated depreciation and impairment losses.

Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37. The costs are included in the related right-of-use asset, unless those costs are incurred to produce inventories.

Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease. The Group applies IAS 36 Impairment of Assets to determine whether a right-of- use asset is impaired and accounts for any identified impairment loss.

Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement or comprehensive income, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used the increase in the provision due to the passage of time is recognised as a finance cost.

i. Environmental rehabilitation liability

The Group is exposed to environmental liabilities relating to its operations. Full provision for the cost of environmental and other remedial work such as reclamation costs, close down and restoration costs and pollution control is made based on the estimated cost as per the Environmental Management Program Report. Annual increases in the provisions relating to change in the net present value of the provision are shown in the statement of comprehensive income as a finance cost. Changes in estimates of the provision are accounted for in the year the change in estimate occurs, and is charged to either the statement of comprehensive income or the decommissioning asset in property, plant and equipment, depending on the nature of the liability.

ii. Post-retirement medical liability

The liability in respect of the defined benefit medical plan is the present value of the defined benefit obligation at the reporting date together with adjustments for actuarial gains/losses. Any actuarial gains or losses are accounted for in other comprehensive income. The defined benefit obligation is calculated annually by independent actuaries using the projected unit of credit method.

iii. Provident fund contributions

The Group's contributions to the defined contribution plan are charged to profit and loss in the year to which they relate.

Use of estimates and judgements

In the application of the Group's accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. In particular, information about significant areas of estimation uncertainty considered by management in preparing the financial statements is described below:

i. Decommissioning and rehabilitation obligations

Estimating the future costs of environmental and rehabilitation obligations is complex and requires management to make estimates and judgements as most of the obligations will be fulfilled in the future and contracts and laws are often not clear regarding what is required. The resulting provisions are further influenced by changing technologies, political, environmental, safety, business and statutory considerations.

ii. Asset lives and residual values

Property, plant and equipment are depreciated over its useful life taking into account residual values, where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In reassessing asset lives, factors such as technological innovation, product life cycles and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values.

iii. Post-retirement employee benefits

Post-retirement medical aid liabilities are provided for certain existing employees. Actuarial valuations are based on assumptions which include employee turnover, mortality rates, the discount rate, health care inflation costs and rates of increase in costs. Sensitivities have been disclosed in note 24.

iv. Revaluation of investment properties

The Group carries its residential investment properties at fair value. The Group engaged an independent valuation specialist to assess the fair value as at 31 December 2021 for residential properties. For residential properties, it measures land and buildings at revalued amounts with changes in fair value being recognised in other comprehensive income. Land and buildings were valued by reference to market-based evidence, using comparable prices adjusted for specific market factors such as nature, location and condition of the property.

v. Impairment of financial assets

The loss allowances for financial assets are based on assumptions about risk of default and expected loss rates. The Group uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Group's past history, existing market conditions as well as forward looking estimates at the end of each reporting period. Details of the key assumptions and inputs used are disclosed in note 32.

vi. Impairment of non-current assets

Determining whether an exploration and evaluation asset is impaired requires an assessment of whether there are any indicators of impairment, including by reference to specific impairment indicators prescribed in IFRS 6. If there is any indication of potential impairment, an impairment test is required based on value in use of the asset. The valuation of intangible exploration assets is dependent upon the discovery of economically recoverable deposits which, in turn, is dependent on future vanadium and iron ore prices, future capital expenditures and environmental and regulatory restriction.

The Group also reviews and tests the carrying value of tangible assets when events or changes in circumstances indicate that the carrying amount may not be recoverable. Assets are grouped at the lowest level for which identifiable cash flows are largely independent of cash flows of other assets, which is generally at the individual operating asset level. If there are indications that impairment may have occurred, estimates are prepared of expected future cash flows for each group of assets. Expected future cash flows used to determine the recoverable amount of tangible assets are inherently uncertain and could materially change over time and impact the recoverable amounts. The cash flows and recoverable amount are significantly affected by a number of factors including published reserves, resources, exploration potential and production estimates, together with economic factors such as spot and future metal prices, discount rates, foreign currency exchange rates, estimates of costs to produce products and future capital expenditure. At the reporting date the Group assesses whether any of the indicators which gave rise to previously recognised impairments have changed such that the impairment loss no longer exists or may have decreased. The impairment loss is then assessed on the original factors for reversal and if indicated, such reversal is recognised.

An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. The recoverable amount is estimated based on the positive indicators. If an impairment loss has decreased, the carrying amount is recorded at the recoverable amount as limited in terms of IAS 36 Impairment of Assets.

The directors performed an impairment review on tangible assets at 31 December 2021. No reasonable changes in the key assumptions or inputs would lead to an impairment charge over the next 12 month period.

vii. Impairment of exploration and evaluation assets

As disclosed in note 12, the Mokopane license held by the Group requires that mining operations commence prior to the end of January 2021. As at 31 December 2021 no mining has taken place at the site. An application for an extension to requirement to commence mining activities has been submitted to the Department of Mineral Resources and Energy ("DMRE"), however a response has not yet received. The directors are confident that the extension will be forthcoming and the license therefore remains valid. Consequently, the directors have made a judgment that no impairment of the related intangible asset is required.

viii. Borrowing costs

IAS 23 requires that borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset. It is the judgement of the directors that due to the insubstantial period of time over which assets have been constructed, that no assets meet the definition of a qualifying asset and therefore no borrowing costs have been capitalised.

ix. Assessment of control

The group's investment in VRFB Holdings Limited has been accounted for as a joint venture on the basis that the directors have concluded that under IFRS 10 the group does not have the ability to use its power over the investee entity to influence its returns. This conclusion has been reached on the basis of specific terms of the joint venture agreement with the other investors to VRFB Holdings Limited and represents a significant management judgement.

4. 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 2021 the Group operated within three operating segments, vanadium mining and production, energy and 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 coal exploration. Costs attributable to both segments were of a capital nature.

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