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

21 June 2023

Bushveld Minerals Limited

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

Full Year Results for the 12-month Period Ended 31 December 2022

Bushveld Minerals Limited (AIM: BMN), the integrated primary vanadium producer and energy storage solutions provider, is pleased to announce its full year results for the year ended 31 December 2022.

FY2022 Financial Highlights

· Revenue of US$148.4 million (2021: US$106.9 million).

· Underlying EBITDA1 of US$22.3 million and adjusted EBITDA1 loss of US$1.7 million (2021: Underlying EBITDA loss US$7.5 million and adjusted EBITDA loss of US$9.9 million). 

· Impairment losses of US$24.0 million (2021: US$2.4 million) of which US$$17.2 million relates to Vanchem. The Group previously recognised US$60.6 million gain on bargain purchase on the acquisition of Vanchem in 2019.

· Net loss of US$35.4 million (2021: US$34.2 million).

· Free cash flow2 of US$14.6 million (2021: negative US$19.3 million).

· Cash and cash equivalents of US$10.9 million (2021: US$15.4 million).

· Net debt of US$79.5 million (2021:US$68.9 million).

· Net debt excluding the Orion Production Financing Agreement US$44.4 million (2021:US$35.4 million).

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. Free cash flow defined as operating cash flow less sustaining capital.

Management Changes

· In a separate announcement published today, the Board announced that Craig W. Coltman will be appointed as Chief Executive and will join the Board of the Company with effect from 01 July 2023, the date on which Fortune Mojapelo will step down as Chief Executive.

Group Priorities and Outlook

· The Group has made significant progress with the legal documentation to refinance its existing convertible loan note with Orion Mine Finance ("Orion") of c.US$45 million (capital plus interest).

· On track to meet 2023 production guidance of between 4,200 mtV and 4,500 mtV, and weighted average production cash cost (C1) guidance of between US$26.1kgV and US$27.0/kgV, (ZAR447/kgV and 438/kgV).

· Bushveld Electrolyte plant (BELCO) and the Vametco hybrid mini-grid to be fully operational during the second half of 2023.

· Complete the Bushveld Energy carve-out.

Analyst conference call and presentation

Bushveld Minerals' Chairman, Michael Kirkwood, Chief Executive Officer, Fortune Mojapelo, Finance Director, Tanya Chikanza and Chief Executive designate, Craig W. Coltman will host a conference call and presentation today at 12:00 PM BST (13:00 SAST), to discuss the 2022 full year results and management changes with analysts. Participants may join the call by dialling:

Tel: United Kingdom: +44 (0) 33 0551 0200; South Africa: +27 800 980 512; USA Local: +1 786 697 3501

Password: Quote Bushveld - Full Year when prompted by the operator

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

https://stream.brrmedia.co.uk/broadcast/6426b8b94b959ac1b1e40d18

Annual Report

The Annual Report for the year ended 31 December 2022 will be available on the Company's website on Friday 23 June 2023 at the following link: http://www.bushveldminerals.com/financial-reports/. A further announcement will be made by the Company once hard copies of the Annual Reports have been dispatched to shareholders.

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 2022, the Company produced more than 3,800 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.

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

Abundant opportunity constrained by several challenges

TO OUR SHAREHOLDERS,

I am pleased to preface this Annual Report for the first time, having assumed the role of Chair from Ian Watson during the course of the year under review.

There is a natural tendency for communications such as this to dwell on the positive aspects of a company's performance and to understate or plead mitigation on the challenges and the negatives that impact results. In my view, this approach arguably discredits the overall content, and strains the credibility of what is, after all, the most important annual communication to the current and prospective owners of a company.

FINANCIAL AND OPERATIONAL PERFORMANCE

The Company remained loss-making, although it was able to report free cash flow, which was used to pay down debt and partially fund the Business' other initiatives. The quick ratio approximately halved, gearing increased, and equity accounts declined. This is not the outcome we planned for, nor is it sustainable, and this is reflected in our significantly discounted share price which more than halved in the year under review. The Board and management fully recognise this and have evolved plans to restore momentum in operational stability, revenue generation, cost constraint, profitability and cash generation.

The results for 2022 were, admittedly, impacted negatively by a combination of external and internal factors.

Externally, the conflict in Ukraine triggered an energy price and supply crisis that in turn created an inflationary cycle that central banks around the world responded to with monetary policy actions. Additionally, global supply chains were disrupted. Within South Africa, where the Company primarily operates, electricity supply was constantly disrupted by loadshedding, the government logistics infrastructure and services deteriorated, and raised inflation impacted operating costs.

Internally, the Company faced issues with operational stability, particularly at its Vanchem plant. Production at the newly commissioned Kiln-3 was negatively impacted by the unreliable municipal power supply. The ore supply from Vametco was found to have a higher silica content than ideal resulting in the need for system clearing shutdowns. Thus, although Vametco performed well, Vanchem failed to hit its production target for the year resulting in guidance misses and higher Group overall sustaining costs.

GOING FORWARD AND FINDING SOLUTIONS

I prefaced my remarks by stating that the challenges Bushveld has faced, and the consequential disappointing financial results, mask the abundant opportunity that can be realised as the Company stabilises, and in the mid-term optimises, its operations and financial platform. Your Board believes this is eminently achievable and is underway.

In the face of these challenges, management has and continues to undertake various initiatives to ensure profitability in the current year, to improve the Company's capital structure, to secure a more stable power supply to support increased production, to contain costs and to crystallise value for the Bushveld Energy assets. The BELCO electrolyte plant will be commissioned and commence production during the second half of 2023, making Bushveld a fully-fledged vanadium electrolyte producer. Additionally, we are making good progress with the Vametco mini-grid, which is expected to supply just under 10 percent of Vametco's electrical energy and also be online during the second half of 2023.

At Vanchem, an arrangement has been concluded with the municipality to stabilise power supply and this has already had a positive impact in the first quarter of 2023. Also, an ore supply contract has been concluded with a third-party operating in the Bushveld Complex for the supply of low-silica high-grade ore that will have a positive impact on productivity and costs at the plant.

As previously announced, plans are well advanced for CellCube, one of Bushveld Energy's assets, to be carved out into a listed vehicle on the London Stock Exchange (LSE). Your Company will retain a significant minority holding in this vehicle and therefore keep a stake in the evolution of vanadium as an energy storage resource. This carve-out will help reduce central costs and permit greater focus on the residual core businesses. The devolved pure energy storage entity should also be able to attract capital, new investors, and a valuation aligned to that sector.

We have previously announced that we are negotiating a restructuring of the financing provided by Orion. The objective of the proposed arrangements is to extend debt maturities and to reduce the equity dilution overhang from the convertible loan note. We are grateful to Orion for their continuing support. The refinancing will be conditional on a number of factors being worked on and also upon shareholder approval which we expect will be sought at this year's General Meeting.

GOVERNANCE

During the year under review the Board of Directors has been materially reconstituted. Ian Watson, who chaired the Company since its inception, retired. Ian oversaw the early development of Bushveld and its transformation into an integrated vanadium producer. His long service and guiding hand deserve our full appreciation and we wish him well for the future.

On Ian's retirement I assumed the role of Interim Chair and subsequently the Board has seen fit to confirm my appointment as Chairman on an ongoing basis. I thank my fellow Directors for placing their trust in me and look forward to working with them as a team to the benefit of all our stakeholders.

Additionally, two of our longest serving Directors, Anthony Viljoen (a co-founder) and Jeremy Friedlander retired from the Board. Their wise counsel and engagement in the development of Bushveld should similarly be recognised.

We have been fortunate to attract a new slate of very capable Directors to the Board with the appointments over the last 18 months of Kevin Alcock, Mirco Bardella and David Noko. They bring relevant and valuable experience to the Board and are playing a key role in guiding Bushveld in its next stage of development.

During the year we also welcomed Jacqueline Musiitwa as a Non-Executive Director but unfortunately, she was obliged to step down upon accepting a role within the United States Agency for International Development (USAID) that precluded her from remaining in private sector roles. We wish her success in this important engagement.

Further to this, we have announced that co-founder and Chief Executive, Fortune Mojapelo, has decided to step down from his role as of 01 July 2023. He has led the Company for over 11 years and has, through his vision and dedication to the Company, built Bushveld Minerals from an exploration business to a multi-asset vanadium producer, owning and operating two of four global primary vanadium processing facilities. We sincerely appreciate all that Fortune has done to make Bushveld what it is today and wish him every success in his future endeavours.

We are delighted that Craig Coltman is taking up the position as CEO. Having worked with De Beers Consolidated Mines for over 32 years in various operational and commercial roles, and most recently as Chief Financial Officer and Executive Director of the group, Craig is well qualified to take up the leadership mantle and steer the Company going forward.

We look forward to working with him during a short period of transition and thereafter.

CONCLUSION

We reinforce to our shareholders that our strategic aims are robust and achievable. The foundations are laid, the edifice is progressing but remains work in progress. The focus of the Board and the Management is to deliver value and returns to our owners through, and I am being intentionally repetitive, achieving our operational targets, managing costs, generating free cash flow, strengthening our balance sheet, and investing capital prudently.

The Board has been incredibly engaged and supportive as we tackle our challenges and it remains only for me, on their behalf, to thank the entire Bushveld team for their efforts, resilience and dedication during a challenging year and wish them well for fairer winds ahead.

Michael J. Kirkwood

Chairman

Chief Executive Officer's Review

Progress with more potential in the pipeline

DEAR STAKEHOLDERS,

I am pleased to present the report on Bushveld Minerals' performance over the past financial year. The year 2022 marks 10 years since the Company's listing on AIM as a junior mineral exploration company. It also marks five years since we embarked on our transformative journey from an explorer into a vanadium producer, first with the acquisition of Vametco, and later Vanchem. This allowed us to produce a broad range of vanadium products that enable the production of more environmentally friendly steel and support the global energy transition to green renewable energy through the application of long-duration VRFBs.

In that time the Company has invested substantially to establish a vertically-integrated primary vanadium production platform comprising (a) two of only four operating primary-processing plants in the world, supplying more than three percent of the global vanadium market, with scope to grow this into the future and (b) a VRFB platform that is positioned to play a meaningful role in the growing stationary energy storage market.

While 2022 started with optimism on the back of a receding COVID-19 pandemic, several factors in the geopolitical developments continued to plague the global economy and specifically the vanadium market. Consequently, between 2021 and 2022, vanadium demand in steel making dropped by 0.41 percent which was fortunately mitigated by a 79 percent increase in vanadium demand from the energy storage sector, resulting in an overall increase of 0.48 percent in vanadium demand.

This global backdrop was exacerbated by unique local challenges, most notably the national electricity crisis that saw Vanchem without a steady flow of electrical supply at a pivotal time when it was commissioning and optimising Kiln-3 after the refurbishment programme.

THE YEAR IN REVIEW

If external factors paint a bleak operating environment for the Company in the past three years, they also cast a spotlight on its resilience, as it continued to invest in its producing assets to grow production and lower unit costs (particularly at the recently refurbished and ramping up Vanchem) as well as continuing to develop its vanadium energy storage platform.

The Group production increase from 3,592 mtV in 2021 to 3,842 mtV in 2022, was underpinned by Vametco's operational performance. Having achieved operational stability during the second half of 2021, its consistent production rates enabled it to report full-year production of 2,705 mtV, exceeding the upper end guidance of 2,550 - 2,650mtV.

In contrast to stable production at Vametco, Vanchem production missed guidance for an overall production of 1,137mtV. Consequently, Group production, at 3,842 mtV, was below the lower end of the revised guidance of 3,900- 4,100 mtV. Lower recovery rates from Kiln-1 at Vanchem as it was taken out of service, a slower-than-anticipated ramp-up of Kiln-3 post commissioning, higher silica content in the ore supply, and the impact of loadshedding which affected our ability to optimise output, meant production levels were considerably lower than anticipated. Details on the Group's operational performance can be found in the Operating Assets and Operational Review section of the Annual Report. 

Although we did not achieve our Group production run rate target of 5,000 - 5,400 mtV by the end of 2022, we remain committed to meeting this target by attaining similar levels of operational stability at Vanchem as Vametco - centred around securing supply of suitable ore, stable power supply and improved post commissioning operations - all three areas that the Company has made progress in resolving.

Specifically, in November 2022, an agreement was reached with the Emalahleni Local Municipality putting Vanchem on a load- curtailment contract plan. This arrangement has resulted in reduced/curtailed power supply rather than an outright loss of power during periods of loadshedding. While this has resulted in a marked improvement in power security for Vanchem so far in 2023, we continue to pursue a direct contract with Eskom, in line with Vametco's power supply arrangements. In addition to this, the access to low-silica, third-party feedstock will also contribute to improved production and less downtime at Vanchem.

Group production cash cost of US$27.7/kgV was higher than in 2021 and above our guidance of between US$22.7/kgV and US$23.5/kgV, driven by significantly higher price inflation across most inputs and energy prices as well as a higher fixed cost base not matched by expected higher production at Vanchem. Next to stable production performance, cost containment is an area receiving intense focus across several areas of the business. Details on our cost initiatives can be found in the Finance Director's Review.

BUSHVELD ENERGY

Progress continues in advancing both the development of the BELCO electrolyte plant in East London and the mini-grid at Vametco. We have concluded that the full value and potential of Bushveld Energy as a subsidiary business will be constrained and for this reason we have been preparing its carve-out into a stand-alone business.

As previously announced, we have entered into a conditional agreement to sell our entire interest in CellCube to Mustang, and, in exchange, we will receive shares in Mustang. The sale is an important part of the carve-out process, as it effectively gives Bushveld a significant stake in a London-listed energy storage business. The transaction provides CellCube with direct access to capital markets, allowing it to attain a transparent market value and attract specialist investors looking to participate in this exciting growth sector.

As we have communicated, it is the right time for this emerging energy storage story to take on a life of its own, while we retain an interest in the business through Mustang and, most importantly, maintain our vertically-integrated business model. Subject to various regulatory consents and capitalisation, we expect to complete the carve-out during the second half of 2023.

FINANCIAL PERFORMANCE AND CONVERTIBLE LOAN NOTE

Despite the operational challenges we faced during the year under review, higher prices and sales meant we generated Revenue of US$148.4 million, underlying EBITDA of US$22.3 million and a reduced adjusted EBITDA loss of US$1.7 million. During the year we repaid the entire Nedbank revolving credit facility of US$5.9 million. We generated free cash flow of US$14.6 million and ended the year with a cash and cash equivalent balance of US$10.9 million.

A large proportion of our capital investment over the last five years was funded by debt, which includes a US$35 million convertible loan note held by Orion. With an advancing maturity date of November 2023, the convertible loan note was putting pressure on our balance sheet and creating a potentially dilutive overhang on the share price. We are in advanced discussions with Orion for the convertible loan note to be restructured so as to substantially reduce the pressure on the Company's balance sheet. Details of the revised structure are provided in Note 37 of the Financial Statements.

An extensive assessment of the financial position indicates that the Group requires additional liquidity in order to meet its obligations and activities over the next 12 months. We are exercising levers within our control to improve the Group's liquidity. In addition to these internal mechanisms under our control we are pursuing various financing alternatives to increase our liquidity and capital resources. Details on the Group's Going Concern can be found in the Finance Director's Review and in Note 3 of the Financial Statements.

SUSTAINABILITY AND SAFETY

Long-term sustainability depends on securing and maintaining a solid social licence to operate by nurturing strong partnerships with all our stakeholders, especially our communities.

We also acknowledge that sustainability, for all companies, is a journey. In 2022, we made notable progress in our sustainability journey, highlighted by the establishment of an Environment Social and Governance (ESG) Committee to oversee and monitor the implementation of our ESG strategy. Our longer-term ambitions remain unchanged, the details of which can be found in the Sustainability section of this report. The safety and well-being of our employees and contractors is an absolute priority and we remain committed to the objective of zero harm in our workplace. We had no fatalities during the current reporting period, however, the Group's 2022 Total Injury Frequency Rate (TIFR) of 10.32 was 33 percent higher than 2021. For this reason, in the year under review, we commissioned an audit of our safety procedures and performance. We understand what the gaps are and I am heartened to report that this has started yielding results, as evidenced by the 50 percent improvement in the TIFR in the last quarter of 2022.

CONCLUSION

I extend my heartfelt thanks to every one of Bushveld Minerals' employees. In spite of the many challenges we face, your visible commitment to ensuring the success of this Company in 2022 was greatly appreciated by myself, senior management, and the Board. I would like to thank our shareholders for their patience, commitment, and faith in the Company.

I am confident in the opportunities that lie in the future for the Business and firmly believe that the efforts of the past, position the Company well to capture these going forward.

Finally, the Company and I announced today that after more than 10 years as the founding CEO of Bushveld Minerals, I will be stepping down and will not seek re-election to the board of the Company. Simultaneously announced today is the appointment of Craig Coltman as CEO of the Company with effect from 01 July 2023.

Co-founding and leading Bushveld Minerals into an integrated vanadium platform positioned to play an ever increasing role in the growing vanadium industry has been an immense privilege. While recognising the challenging circumstances the Company has had to navigate in recent years, my conviction in the potential and future success of this Company remains.

To our shareholders and stakeholders, thank you for your trust; and to the team at Bushveld under the leadership of Craig, I wish you the success that all your hard work and the trust of our stakeholders deserves.

Fortune Mojapelo

Chief Executive Officer

Finance Director's Review

Positive Underlying EBITDA as Vametco attains target production

1. OVERVIEW

The 2022 financial results show an improvement on the prior year in a number of line items although we remained loss making. Our strategy to prioritise operational stability and increase investment in maintenance paid off as Vametco achieved consistent and stable operational performance which was reflected in the financial numbers.

We recorded an underlying EBITDA of US$22.3 million and adjusted EBITDA loss of US$1.7 million. While an operating loss of US$20.1 million was incurred, this was a US$9.2 million positive change from the prior year, as realised prices rose and we continued with our cost management measures to mitigate any inflationary pressures and electricity challenges. We realised savings of US$1.5 million owing to initiatives related to procurement. The operating loss also included impairment losses of US$24.0 million, U$21.5 million higher than the prior year. US$17.2 million of the impairment losses pertain to Vanchem.

Two years of volatile prices, operational challenges and the impact of the COVID-19 pandemic have restricted our ability to pay down the rest of the debt on our balance sheet. To this end we recently announced a proposed refinancing of the Orion US$35 million convertible loan notes and capitalised interest into a revised capital structure. Details on the proposed refinancing are included in note 37 in the annual consolidated financial statements. The refinancing will be conditional on several items, including due diligence, shareholder approval at a general meeting and definitive documentation. We have made significant progress with the legal documentation of the restructuring.

The restructure of the convertible loan notes is expected to remove the risk of a large cash outflow, which has been putting pressure on our balance sheet and cash position. The new structure will enable the Group to repay the debt over a longer time period and in line with the Group's planned internally generated cash flows.

2. INCOME STATEMENT

Analysis of results

The income statement summary below is adjusted from the "statutory" primary statement presentation:

Revenue

Revenue

Revenue of US$148.4 million for the Group was 39 percent higher than in the previous year, underpinned by the improved average realised price of US$41.4/kgV (2021: US$32.2/kgV) and increased Group sales volumes of 3,584 mtV, following record production of 3,842 mtV.

The geographic split of Group sales in 2022 was 44 percent to the USA, 27 percent to Europe, 9 percent to Asia, 7 percent to South Africa, and 13 percent to the rest of the world.

During the year, nitro vanadium sales into North America were prioritised due to the higher vanadium prices realised in this region and we maximised worldwide sales into the aerospace and speciality chemical products sectors, which attract price premiums.

Cost analysis

Cost of sales

The cost of sales, excluding depreciation, for the year was US$90.3 million, contained to an inflationary 8 percent increase year-on-year, primarily due to higher costs at both Vametco and Vanchem. The cost increases included:

· Higher personnel costs at Vanchem associated with the commissioning and ramp-up of Kiln-3 in order to seek to achieve the anticipated production run rate of 2,600 mtVp.a which was not attained in the financial year due to ore quality and electricity supply issues;

· Inflationary increases in raw material prices from suppliers;

· Higher energy costs due to the increase in oil and diesel prices as well as an increase in diesel usage during periods of loadshedding at Vanchem;

· Higher maintenance costs, mainly at Vanchem, due to the additional maintenance required on Kiln-1, as well as maintenance costs to sustain the plants, production volumes and improve operational stability; and

· Higher mining costs at Vametco, primarily due to increased activity associated with mining the Upper Seam.

Other operating costs and income

Other operating costs and income increased to US$40.0 million due to:

· A US$2.9 million increase in selling and distribution costs to US$9.3 million, primarily driven by the higher commissions paid which are a consequence of the increased revenue as well as increased shipping and warehouse costs;

· A US$3.3 million increase in idle plant costs to US$6.7 million, primarily due to the unplanned downtime at Vanchem associated with Kiln-1 during the first half of the year, unplanned downtime due to loadshedding and higher than anticipated silica content in the ore;

· A US$21.5 million increase in impairment losses to US$24.0 million, due to an impairment loss of US$17.2 million recognised for Vanchem given the slower than expected ramp up, impairment loss of US$5.1 million in respect of the Imaloto Coal Project as there are no further planned expenditures for this project, and an impairment loss of US$1.6 million recognised for property, plant and equipment. The Group recognised in 2019 a gain on bargain purchase of US$60.6 million on the acquisition of Vanchem being the difference between the fair value of the consideration paid and the fair value of the acquired assets and liabilities; and

· Other operating income of US$2.7 million was unchanged relative the prior year.

Cost per unit sold

The Group cost per unit sold for the year (including sustaining capital expenditure) was US$43.7/kgV. This represents a 17 percent increase relative to the prior year primarily as a result of the cost factors noted above, offset by the cost containment measures we implement; higher sales volumes and a weaker ZAR:US$ exchange rate.

Administration costs

Administration costs, excluding depreciation charges for the year were US$19.9 million. Below is a breakdown of the key items included in administration costs:

Cost-saving programme

We continued with our cost-reduction measures, as previously announced, and realised savings of US$1.5 million owing to procurement initiatives for the 2022 financial year. We re-estimated the projected savings for 2023, in light of inflationary pressures, lingering product shortages, wage escalations, shipping challenges and surging commodity prices, to US$1.3 million. The total expected savings will be US$2.8 million over the two-year period, which is still within the US$2.5 million to US$4.0 million cost-savings target we had previously provided, despite the negative impact of factors outside of our control such as inflation. While production volume growth is expected to contribute the most to reducing unit costs, we will continue to seek broader cost- saving opportunities to improve the Group's unit cost performance even further. These efforts are focused on procurement, payroll, administration costs and maintenance.

Adjusted and underlying EBITDA

Adjusted EBITDA is a factor of volumes, prices and cost of production. This is a measure of the underlying profitability of the Group, which is widely used in the mining sector. Underlying EBITDA removes the effect of impairment charges.

The Group delivered an adjusted EBITDA loss of US$1.7 million, an improvement of US$8.2 million compared to 2021, primarily driven by the higher average realised price and higher sales volumes, and partially offset by the increase in cost of sales and other operating and administration costs. The Group generated an underlying EBITDA of US$22.3 million, which was an improvement of US$29.8 million compared to the previous year.

Net financing expenses

Net financing expenses were US$13.7 million, US$1.3 million higher than in the prior year. The increase was primarily due to interest on the Orion PFA and Orion convertible loan notes. Below is a breakdown of net financing expenses:

Interest on borrowings mainly reflected the finance cost on the Orion convertible loan notes of US$6.4 million (2021: US$5.4 million), interest on the Orion PFA of US$4.4 million (2021: US$4.3 million), and interest on the Nedbank revolving credit facility of US$0.2 million (2021: US$0.6 million). Refer to note 36 in the annual consolidated financial statements for details of the change in the accounting treatment for the Orion convertible loan notes and its impact on finance costs.

Other non-cash costs

The share of loss from investments in joint ventures of US$5.1 million (2021: US$4.4 million) is the Group's share of the loss from its investment in VRFB-H.

The fair value gain on the derivative liability on the Orion convertible loan notes was US$2.9 million, a decrease from the US$9.0 million in the prior year, as restated. The decrease was primarily driven by the decrease in the Company's share price compared to the conversion price on the Orion convertible loan notes of 17 pence.

3. BALANCE SHEET

Assets

Non-current assets related to intangibles and property, plant and equipment decreased compared to the previous year due to impairment losses recognised, depreciation, and exchange rate differences arising from a weaker ZAR:US$ exchange rate, partially offset by capital expenditures.

Investment in joint ventures of US$3.2 million represents the Group's equity investments in VRFB-H and the Vametco mini-grid. The investment in joint ventures decreased from 2021 owing to the recognition of the Group's share of the losses amounting to US$5.1 million, partly offset by the US$1.2 million investment into Vametco's mini-grid.

Inventories of US$55.0 million increased by US$13.4 million compared to the prior year, primarily due to an increase in work in progress at Vanchem as a result of continued loadshedding. This impacted the conversion of work in progress to finished goods.

The decrease in cash and cash equivalents to US$10.9 million was primarily due to capital expenditures incurred (US$18.2 million), the repayment of the Nedbank revolving credit facility (US$5.9 million), the payment of finance costs on the Orion PFA (US$2.9 million), partially offset by cash generated from operations (US$21.2 million), and the proceeds received from funding provided by the IDC to build the BELCO electrolyte plant (US$3.4 million).

Equity

The increase in the share capital and share premium was primarily due to the conversion of the convertible loan notes issued to Primorus Investments Plc and the shares issued to Lind Global Macro Fund, in accordance with the backstop agreement between the Mustang convertible loan notes holders (see RNS dated 29 March 2022). These transactions were entered into in the process of carving out Bushveld Energy.

Liabilities

Total borrowings (excluding lease liabilities) of US$83.1 million increased by US$3.2 million compared to the previous year, due to capitalised finance costs of US$11.7 million and funding provided by the IDC of US$3.4 million in respect of Belco, partially offset by the repayment of the Nedbank revolving credit facility of US$5.9 million, repayment of finance costs on the Orion PFA of US$2.9 million and the fair value gain on the derivative liability of US$2.9 million. Current borrowings increased in 2022 to US$47.9 million, as the Orion convertible loan notes is due by the end of 2023.

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

Net debt increased by US$10.6 million compared to the prior year due to capitalised interest of US$3.4 million on the Orion convertible loan notes, increase in lease liabilities of US$2.8 million due to additional leases and extension of lease terms and the decrease in the cash and cash equivalents balance of US$4.6 million.

The Group expects to repay the Orion debt obligations from internally generated cash flows.

4. CASH FLOW STATEMENT

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

Operating activities

The Group generated cash from operating activities of US$21.2 million, an increase of US$33.3 million from the previous year, primarily driven by the improvement in adjusted EBITDA.

Investing activities

Cash used in investing activities (including sustaining capital expenditure) of US$19.6 million was primarily driven by capital expenditure on property, plant and equipment of US$18.2 million and an equity investment into the Vametco mini-grid of US$1.2 million.

Capital Expenditure

2022 marks the end of a substantive capital investment phase, during which we undertook extensive refurbishment and optimisation of Vametco and Vanchem and constructed the BELCO electrolyte plant. In addition, following the commissioning of Vanchem's Kiln-3, the Company's capital expenditure rate has halved compared to 2021 as spend has been limited mainly to sustaining capital, which is expected to support positive cash generation.

Capital Expenditure (US$' million)

* Most of the spending will be on BELCO

Financing activities

Cash used in financing activities of US$5.3 million comprised the repayment of the Nedbank revolving credit facility (including interest) of US$5.9 million, repayment of finance cost on the Orion PFA of US$2.9 million and repayment of lease liabilities of US$0.7 million, partially offset by the proceeds received from borrowings of US$4.2 million, primarily from the IDC (US$3.4 million).

5. FINANCIAL RISK

The primary 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 consolidated financial statements. 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 outside the control of management. These are 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 cash flows of the business. The slower than planned ramp up in production at Vanchem has hampered our ability to introduce a hedging policy. However, we remain committed to considering a hedging policy and assessing the potential to implement a strategy to address the fluctuations in the ZAR:US$ exchange rate when we attain steady state production at our operations.

6. GOING CONCERN AND OUTLOOK

We closely monitor and manage liquidity risk by ensuring that the Group has sufficient funds for all ongoing operations. As part of the annual budgeting and long-term planning process, the Directors reviewed the approved Group budget and cashflow forecast through to 31 December 2024. The current cashflow forecast has been 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.

We entered into a non-binding term sheet with Orion subsequent to year-end to refinance the convertible loan notes. The closing of the transaction is still subject to certain conditions, including South Africa Reserve Bank approval, shareholders' approval at the general meeting which we urge shareholders to support and the finalisation of definitive binding documentation. We have made significant progress with the legal documentation of the restructuring.

We have performed an assessment of whether the Group would be able to continue as a going concern for at least twelve months from the date of the annual consolidated financial statement. We took into account the financial position, expected future performance of the operations, the debt facilities and debt service requirements, including those of the proposed refinancing of the Orion convertible loan notes, the working capital and capital expenditure commitments and forecasts.

Current cashflow forecast indicates that the Group requires additional liquidity to fund its obligations and activities during the next twelve months. We have identified and are proactively exercising levers within our control which will improve the Group's liquidity. Importantly, we are also actively pursuing various financing alternatives including raising capital to increase liquidity and capital resources. We believe shareholders will support the capital raising endeavours to ensure the growth the Company is positioned for, can be delivered.

The Group's ability to continue as a going concern is dependent on its ability to complete the refinance of the Orion convertible loan notes and obtain the necessary additional funding required through a capital raise or alternative funding sources. These conditions indicate the existence of material uncertainties that may cast significant doubt on the Group's ability to continue as a going concern.

The consolidated financial statements for the year ended 31 December 2022 have been prepared on a going concern basis as, in the opinion of the Directors, the Group will be in a position to continue to meet its operating and capital costs requirements and pay its debts as and when they fall due for at least twelve months from the date of this report. The going concern note included in the accounting policies provides further information.

Tanya Chikanza

Finance Director

1. Adjusted EBITDA is EBITDA excluding the Group's share of losses from joint ventures, fair value gain on derivative liability and other losses.

2. Underlying EBITDA is Adjusted EBITDA excluding impairment losses.

3. Other operating costs and income include other operating income, impairment losses, selling and distribution costs, other mine operating costs and idle plant costs.

4. Finance income less finance costs

5. Other operating costs and income include other operating income, selling and distribution costs, other mine operating costs and idle plant costs

6. Finance income less finance costs

Bushveld Minerals Limited (Registration number 54506) Consolidated Financial Statements for the year ended 31 December 2022

The accounting policies and the notes form an integral part of the consolidated financial statements.

Refer to note 36 for details of restatement

The accounting policies and the notes form an integral part of the consolidated financial statements.

The consolidated financial statements and the notes were approved by the Board of Directors on the 20th of June 2023 and were signed on its behalf by:

Tanya Chikanza Finance Director

The accounting policies and the notes form an integral part of the consolidated financial statements.

Refer to note 36 for details of restatement

Bushveld Minerals Limited

(Registration number 54506)

Consolidated Financial Statements for the year ended 31 December 2022

Consolidated Statement of Changes in Equity

 *Refer to note 36 for details of restatement

The accounting policies and the notes form an integral part of the consolidated financial statements.

*Refer to note 36 for details of restatement

Notes to the Consolidated Financial Statements

1. General information and principal activities

Bushveld Minerals Limited ("Bushveld" or the "Company") and its subsidiaries and interest in equity accounted investments (together the "Group") are an integrated primary vanadium producer and energy storage solutions provider. The Company 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.

As at 31 December 2022, the Bushveld Group comprised of:

1. Held directly by Bushveld Minerals Limited

2. Held by Bushveld Resources Limited

3. Held by Lemur Holdings Limited

4. Held by Bushveld Energy Limited

5. Held by Lemur Investments Limited

6. Held by Imaloto Power Limited

7. Held by Bushveld Vametco Limited

8. Held by Strategic Minerals Connecticut LLC

9. Held by Bushveld Vametco Holdings (Pty) Limited

10. Held by Vametco Alloys (Pty) Limited

11. Held by Bushveld Vanadium 1 (Pty) Limited

12. Held by Bushveld Energy Company (Pty) Limited

13. Held by Bushveld Vanadium 2 (Pty) Limited

14. Held by VRFB Holdings Limited

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 2022, had no material impact on the consolidated 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 2023, in future periods will have no material impact on the consolidated financial statements of the Group, except for the adoption of Amendments to IAS 1 Presentation of Financial Statements: Classification of liabilities as current or non-current and non-current liabilities with covenants.

3. Significant accounting policies

The principal accounting policies applied in the preparation of the consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

Basis of preparation

The consolidated financial statements of the Company and its subsidiaries and interest in equity accounted investments as at and for the year ended 31 December 2022 have been prepared in accordance with the UK-adopted International Accounting Standards.

The consolidated financial statements have been prepared under the historical cost basis, except for certain financial instruments and investment properties measured at fair value. Historical cost is generally based on the fair value of the consideration given in exchange for the assets.

Going concern

The consolidated financial statements have been prepared on the going concern basis, which contemplates continuity of normal business activities and the realisation of assets and discharge of liabilities in the normal course of business.

The Group recorded a net loss after tax of US$35.44 million for the year ended 31 December 2022 (31 December 2021: US$34.22 million) and as at 31 December 2022 had cash and cash equivalents of US$10.87 million (31 December 2021: US$15.43 million) as well as total borrowings of US$83.13 million, of which US$47.85 million is due within 12 months most of which comprised of the Orion convertible loan notes (31 December 2021: total borrowing of US$79.90 million). In recent years, the Group has been loss making due to a combination of weaker vanadium prices and losses incurred whilst the refurbishment work at Vanchem was completed. The refurbished Kiln-3 was commissioned in June 2022, later than initially planned. However, due to unreliable municipal power supply and higher silica content in the ore supply, the production ramp up was slower than expected and had not reached its targeted run rate at the end of 2022.

The Orion convertible loan notes are due to mature in November 2023 and given that the current share price is lower than the conversion price, the convertible loan notes will likely require repayment or refinancing (see note 28). The Company entered into a non-binding term sheet with Orion subsequent to year-end to refinance the convertible loan notes (see note 37). The closing of the transaction is still subject to certain conditions, including South Africa Reserve Bank approval, shareholders' approval at the general meeting which the Directors urge shareholders to support and the finalisation of definitive binding documentation.

The Directors closely monitor and manage the liquidity risk of the Group by ensuring that the Group has sufficient funds for all ongoing operations. As part of the annual budgeting and long-term planning process, the Directors reviewed the approved Group budget and cashflow forecast through to 31 December 2024. The current cashflow forecast has been 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.

The Directors have performed an assessment of whether the Group would be able to continue as a going concern for at least twelve months from the date of this report. In their assessment, the Group has taken into account its financial position, expected future performance of its operations, its debt facilities and debt service requirements, including those of the proposed refinancing of the Orion convertible loan notes, its working capital and capital expenditure commitments and forecasts.

The cashflow forecast assumes that Vametco continues to perform in line with historical levels, 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.

The cashflow forecast for Vanchem takes into consideration the production levels achieved to date, the expected improvements from the arrangement concluded with the municipality to stabilise power supply as well as the arrangement concluded with a third party for the supply of low-silica high-grade ore. This forecast assumes an annual planned maintenance shutdown and these shutdowns proceed in line with the planned timetable and no unplanned shutdowns are experienced during the going concern period.

With regards to pricing, the short to medium term assumptions are that the average price achieved by the Group will be US$36.2 through to 31 December 2023 and average at US$35.5 throughout 2024. The year to date average price achieved by the group was US$37.99.

Current cashflow forecast indicates that the Group requires additional liquidity to fund its obligations and activities during the next twelve months. The Group is actively pursuing various financing alternatives to increase its liquidity and capital resources including raising capital, refinancing of debt facilities, securing additional working capital facilities, as well as disposing of assets and/or an interest therein and/or joint-venture partnerships. The Directors believe shareholders will support the capital raising endeavours to ensure the growth the Group is positioned for, can be delivered.

The Group's ability to continue as a going concern is dependent on its ability to complete the refinance of the Orion convertible loan note, and obtain the necessary additional funding required through a capital raise or alternative funding sources. Although the Group has been successful in the past in obtaining additional liquidity, there is no assurance that it will be able to do so in the future or that such arrangements will be on terms advantageous to the Group.

These conditions indicate the existence of material uncertainties that may cast significant doubt on the Group's ability to continue as a going concern. The consolidated financial statements for the year ended 31 December 2022 have been prepared on a going concern basis as, in the opinion of the Directors, the Group will be in a position to continue to meet its operating and capital costs requirements and pay its debts as and when they fall due for at least twelve months from the date of this report. Accordingly, these consolidated financial statements do not include adjustments to the recoverability and classification of recorded assets and liabilities and related expenses that might be necessary should the Group be unable to continue as a going concern.

Basis of consolidation

The consolidated financial statements present the consolidated statement of financial position and changes therein, consolidated statement of profit or loss, consolidated statement of comprehensive loss and consolidated statement of cash flows for the Group. Where necessary, adjustments are made to the results of subsidiaries and equity accounted investments 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. Where the Group's interest in a subsidiary is less than 100 percent, the Group recognises a non-controlling interest.

Disposal of subsidiaries

When the Group ceases to have control, any retained interest in the entity is remeasured 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.

Business combinations

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 remeasured to fair value at the acquisition date; any gains or losses arising from such remeasurement 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 remeasured and its subsequent settlement is accounted for within equity.

Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker ("CODM"). The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer and the Executive Committee. Operating segments whose revenues, net earnings or losses or assets exceed 10 percent of the total consolidated revenues, net earnings or losses or assets, are reportable segments.

In order to determine the reportable operating segments, various factors are considered, including geographical location and managerial structure.

Functional and presentational currency

The functional currency of each entity in the Group is determined as the currency of the primary economic environment in which it operates. For the purpose of the consolidated financial statements, the results and financial position of each entity within the Group are expressed in US Dollars, which is the presentation currency for the consolidated financial statements.

Transactions denominated in foreign currencies are translated into the entity's functional currency as follows:

· Monetary assets and liabilities are translated at the exchange rate in effect at the balance sheet date;

· Non-monetary assets and liabilities are translated at historical exchange rates prevailing at each transaction date;

· Deferred tax assets and liabilities are translated at the exchange rate in effect at the balance sheet date with translation gains and losses recorded in income tax expense; and

· Revenues and expenses are translated at the average exchange rates throughout the reporting period, except depreciation, which is translated at the rates of exchange applicable to the related assets, and share-based compensation expense, which is translated at the rates of exchange applicable at the date of grant of the share- based compensation.

Exchange gains or losses on translation of transactions are included in the consolidated statement of profit or loss.

The results and financial position of all entities within the Group that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

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

· 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

· all resulting exchange differences are recognised in other comprehensive income and accumulated in foreign currency translation reserve.

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.

On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign currency translation reserve relating to that entity up to the date of disposal are transferred to the consolidated statement of profit or loss as part of the profit or loss on disposal.

Revenue recognition - sale of goods

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 or services to the customer. 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 transferring control 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 ("STI") 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.

The fair value of the performance shares issued under the long-term incentive scheme ("LTI") is recognised as an expense over the vesting period. Non-vesting conditions and market vesting conditions are factored into the fair value of the performance shares granted. An option pricing model is used to measure the fair value of the performance shares.

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.

Current and deferred income tax

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

The current income tax charge is calculated based on the tax laws enacted or substantively enacted at the reporting date in the countries where the Group's subsidiaries operate and generate taxable income.

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 as an impairment loss in the consolidated statement of 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 of disposal and value in use) if that is less than the asset's carrying value. Impairment losses are recognised in the consolidated statement of 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 and accumulated impairment losses, except for investment properties which are carried at fair value. Cost comprises the aggregate amount paid and the fair value of any other consideration given to acquire the asset and includes costs directly attributable to making the asset capable of operating as intended.

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. The depreciation method applied, the estimated useful lives of assets and their residual values are 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 consolidated 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 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 derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the consolidated statement of profit or loss 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 ("CGU") 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 are sourced from the 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.

Investment property

Investment property is initially measured at cost and subsequently at fair value with any change therein recognised in the consolidated statement of 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 the consolidated statement of 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.

Provision is made, if necessary, for slow-moving, obsolete and defective inventory.

Financial assets and liabilities

Financial assets and financial liabilities are recognised in the Group's consolidated 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 ("FVTPL"), transaction costs. Transaction costs of financial assets carried at FVTPL are expensed in the consolidated statement of profit or loss.

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

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 FVTPL. A gain or loss on a debt investment that is subsequently measured at FVTPL is recognised in the consolidated statement of profit or loss and presented net within other income/(expenses) 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 FVTPL are recognised in other income/(expenses) in the consolidated 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.

Trade and other receivables

Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant financing components, then 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 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 33.6 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 an investment in an insurance 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.

Financial liabilities

Accounts payable, accrued liabilities and borrowings are accounted for at amortised cost, using the effective interest rate method.

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.

Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down.

Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

Borrowing costs are capitalized and allocated specifically to qualifying assets when funds have been borrowed, either to specifically finance a project or for general borrowings during the period of construction. Qualifying assets are defined as assets that require more than a year to be brought to the location and condition intended by management. Capitalization of borrowing costs ceases when such assets are ready for their intended use.

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 percent to 11 percent 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 consolidated 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 consolidated statement of profit or loss, 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 liabilities

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 consolidated statement of profit or loss 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 consolidated statement of profit or loss 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

The preparation of consolidated financial statements in conformity with UK-adopted International Accouting Standards requires management to make judgements, estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are continuously evaluated and are based on management's experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Assumptions about the future and other major sources of estimation uncertainty at the end of the reporting period have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities, within the next financial year. The most significant judgements and sources of estimation uncertainty that the Group believes could have a significant impact on the amounts recognised in its consolidated financial statements are described below.

i. Impairment of non-current assets

Judgements made in relation to accounting policies

Both internal and external sources of information are required to be considered when determining the presence of an impairment indicator or an indicator of reversal of a previous impairment. Judgement is required around significant adverse changes in the business climate which may be indicators of impairment such as a significant decline in the asset's market value, decline in resources and/or reserves including as a result of geological reassessment or change in timing of extraction of resources and/or reserves which would result in a change in the discounted cash flow, and lower commodity prices or higher input cost prices than would have been expected since the most recent valuation. Judgement is also required when considering whether significant positive changes in any of these items indicate a previous impairment may have reversed.

Key sources of estimation uncertainty

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 commodity prices, discount rates, foreign currency exchange rates, estimates of costs to produce products and future capital expenditure. Refer to Note 14 for key assumptions.

ii. Impairment of exploration and evaluation assets

Judgements made in relation to accounting policies

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.

As disclosed in note 13, the Mokopane license held by the Group requires that mining operations commence prior to the end of January 2021. As at 31 December 2022 no mining has taken place at the site. Based on the conditions included in the mining right, the Group has the right to apply for an extension to the requirements to commence mining activities and an application has been submitted to the Department of Mineral Resources and Energy ("DMRE"), however a response has not yet been received.

Based on the mining right conditions, including that the Minister has to give written notice regarding a potential suspension or cancellation of the mining right and that the Group has the opportunity to provide reasons to the Minister on why this should not occur and the remedies put in place, 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 with a carrying amount of US$53.47 million is required.

iii. Environmental rehabilitation liabilities

Key sources of estimation uncertainty

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. Refer to note 26.

iv. Valuation of derivative liability

Key sources of estimation uncertainty

The conversion option (embedded derivative liability) in connection with the Orion Mine Finance convertible loan note are carried at fair value. The Group engaged an independent valuation specialist which calculated the fair value of the conversion option using a Monte-Carlo simulation. The Monte-Carlo simulation captured the impact of movements in the US$/GBP exchange rate and the price per ordinary share over the life of the convertible loan note.

4. Segmental reporting

Bushveld Minerals Limited's operating segments are identified by the Chief Executive Officer and the Executive Committee, collectively named as the CODM. The operating segments are identified by the way the Group's operations are organised. As at 31 December 2022, the Group operated within three operating segments, vanadium mining and production, which consists of the Vametco and Vanchem operations; energy and mineral exploration activities for vanadium and coal exploration (together "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). Corporate includes the remaining balances within the Group.

Segment revenue and results

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

Consolidated statement of profit or loss

(1)Include depreciation of US$18.04 million.

(2)Other costs include other operating income, other mine operating costs, selling and distribution costs and idle plant costs.

(3)Include depreciation of US$0.15 million for Vanadium mining and production, US$0.10 million for Energy and USD$0.18 million for Corporate.

Consolidated statement of profit or loss

(1)Include depreciation of US$19.00 million.

(2)Other costs include other operating income, other mine operating costs, selling and distribution costs and idle plant costs.

(3)Include depreciation of US$0.13 million for Vanadium mining and production and US$0.26 for Corporate.

Other segmental information

5. Revenue

Revenue from contracts with customers

Disaggregation of revenue from contracts with customers

The Group disaggregates revenue from customers as follows:

Sale of goods

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.

\* The negative sales amount is due to the return of MVO sold during the 2020 financial year.

6. Staff costs

Details of directors' remuneration are included in note 35 (related party transactions) and the Remuneration Report on page 58.

7. Administrative expenses by nature

8. Finance income

9. Finance costs*

The income tax expense represents the sum of the tax currently payable and the deferred tax adjustment for the year.