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

26 September 2023

Bushveld Minerals Limited

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

Unaudited Interim results for the six-months ended 30 June 2023

Bushveld Minerals Limited (AIM:BMN), the integrated primary vanadium producer and energy storage solutions provider, is pleased to announce its interim results for the six months ended 30 June 2023.

H1 2023 Financial Highlights

· Revenue of US$78.4 million (H1 2022: US$76.2 million)

· Sales of 2,096 mtV (H1 2022: 1,644 mtV), supported by higher production of 1,784mtV (H1 2022: 1,641 mtV)

· Average realised price of US$37.4/kgV (H1 2022: US$46.4/kgV)

· Cost per unit sold including sustaining capital of US$33.4/kgV (H1 2022: US$37.8/kgV)

· Adjusted EBITDA1 profit of US$10.3 million (H1 2022: US$15.6 million) 

· Operating profit of US$2.1 million (H1 2022: US$6.1 million)

· Net loss of US$12.5 million (H1 2022: net loss US$0.3 million)

· Free cash outflow2 of US$2.7 million (H1 2022: inflow of US$7.1 million) 

· Cash and cash equivalents of US$3.7 million (2022: US$10.9 million)

· Net debt3 of US$90.7 million (2022: US$79.5 million) including Production Financing Agreement of US$35.1 million

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

3. Net debt is total debt plus lease liabilities less cash and cash equivalents.

Group Priorities and FY2023 operational highlights

· On 11 September 2023, the Company announced a Binding Term Sheet with Southern Point Resources ("SPR") for a cumulative proposed investment of between US$69.5-US$77.5 million.

· Bushveld has since received the ZAR150 million (~US$8.1 million) interim working capital funds as part of the transaction. The Company continues to make progress on the overall transaction.

· Management is confident the restructuring of the Orion Mine Finance ("Orion") convertible loan of ~US$45 million (capital plus interest) will be completed before the end of December 2023.

· Bushveld remains on track to meet the revised 2023 production guidance of between 3,700 mtV and 3,900 mtV, and weighted average production cash cost ("C1") guidance of between US$26.6/kgV and US$26.9/kgV (ZAR481/kgV and ZAR487/kgV).

§ Vanchem produced 160mtV in July and 175mtV in August, 63% higher than the average monthly production of 103mtV achieved in H1 2023.

§ Vametco produced 132mtV in July and 215mtV in August.

Analyst conference call and presentation

Bushveld Minerals' Chief Executive Officer, Craig Coltman, and Finance Director, Tanya Chikanza, will host a conference call and presentation today at 12:00 pm BST (13:00 SAST), to discuss the 2023 interim results 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 Minerals Interim Results when prompted by the operator

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

https://stream.brrmedia.co.uk/broadcast/64f5fe47c6e9d7476c27f389

Investor Meet Company

Bushveld Minerals Chief Executive Officer, Craig Coltman, will host an investor session on 29 September 2023 at 9:00am BST (10:00am SAST) via the Investor Meet Company platform to discuss the operational update. The session is open to all existing and potential shareholders. Investors can submit questions via Investor Meet Company dashboard up until 9:00am the day before the meeting. Investors can sign up to Investor Meet Company for free and register for the event via:

https://www.investormeetcompany.com/bushveld-minerals-limited/register-investor

Investors who already follow Bushveld Minerals on the Investor Meet Company platform will automatically be invited.

Craig Coltman, CEO of Bushveld Minerals commented: "In recent weeks we have announced decisions addressing several of the challenges that were experienced in the first six months of the year and reflected in these financial results.

The improved production at Vanchem, thanks to measures described in the Q2 operational update, tells us that we have a plant that is capable of reaching its full potential. We must now consolidate the improved efficiencies and achieve sustained target growth of 180mtV per month for Vanchem by the end of 2023. With incremental month-to-month improvements, we should be in a position of attaining this by the end of 2023.

We continue to make progress in respect of the refinancing of the Orion convertible loan note and we are confident that this will be completed before the December 2023 due date. In addition, the proposed SPR transaction will solve many of the balance sheet pressures that have arisen, and on this point, we have now received the US$8.1 million working capital funds that form part of the overall proposed transaction."

ENDS

Enquiries: info@bushveldminerals.com

Chief Executive Officer's Review

Dear stakeholders,

The first half of the year reflects the challenges that the Company has been facing operationally at both Vametco and Vanchem for some time. Despite the operational challenges, the Company was able to increase production and sales during the period. However, lower vanadium prices meant that the Group generated only slightly higher revenue of US$78.4 million, a lower adjusted EBITDA profit of US$10.3 million and a net loss after tax of US$12.5 million. As a result of the increased sales volumes and a weaker Rand, the Group cost per unit sold for the half year (including sustaining capital expenditure) improved by 12% to US$33.4/kgV.

During the period the Company halved its capital expenditure to US$4.3 million, however, this still resulted in a negative free cash flow of US$2.7 million, and the cash and cash equivalent balance reducing to US$3.7 million. Total debt increased during the period to US94.4 million (including leases) mostly due to capitalisation of interest and proceeds received from additional funding.

To this end, I have been focusing on addressing the issues that the Company has been facing, by motivating our own people to solve the problems that have negatively impacted production at our operations. We are already seeing some results stemming from the improvements in production at Vanchem in the past couple of months.

The improvement in performance at both Vametco and Vanchem shows that we have plants that are capable of reaching their full potential if we can solve factors that are within our control. Given the ongoing operational improvements, the revised 2023 Group production guidance of between 3,700 mtV and 3,900 mtV, and the Group weighted average production cash cost guidance of between US$26.6/kgV and US$26.9/kgV, has been maintained.

Post-period end, we agreed a binding term sheet with SPR regarding a series of transactions totalling between US$69.5 and US$77.5 million. When concluded, the proposed package of inter-conditional transactions will provide: (i) interim working capital (which has now been received), (ii) the opportunity to retire (either entirely or partially) certain existing financing instruments, (iii) an equity investment from SPR into Bushveld Minerals, (iv) a marketing and working capital solution to replace the Group's existing arrangements as and when they expire over the coming 5-17 months, and (vi) the opportunity to evaluate the business case to recommission Vanchem's Kiln-1, as part of the Group's capital prioritisation initiative. We will update the market as and when the various transaction milestones are reached.

OPERATIONAL OVERVIEW

During the first half of the year, the Company produced 1,784 mtV (H1 2022: 1,641 mtV). The higher production was underpinned by increased production volumes at Vanchem, which produced 617 mtV (H1 2022: 415 mtV). Despite the higher production volume having been supported by the use of Kiln-3, Vanchem's production for the first six months was materially lower than what the Company had anticipated for the period, due to plant breakdowns and unscheduled power disruptions owing to the lack of reliability of the municipality's infrastructure.

Furthermore, there were delays in the use of the better quality third party ore. For these reasons, guidance at Vanchem was revised to between 1,400 mtV and 1,500 mtV (previously between 1,500 mtV - 1,800 mtV). In July, the Company implemented a number of initiatives aimed at Vanchem achieving stable production levels of approximately 180 mtV per month by the end of 2023. These initiatives included:

§ Changing the reagent mix from 100% Sodium Sulphate to a mix of Sodium Carbonate and Sodium Sulphate, which has reduced the silica build up at the kiln and increased the kiln availability.

§ Deploying a team from Vametco to Vanchem to improve knowledge sharing.

§ 24/7 supervisory shift managers to ensure immediate decision-making.

Since the implementation of these initiatives, Vanchem's performance has improved, producing 160 mtV in July and 175mtV in August 2023. The average for July and August's production represents a 63% improvement over the monthly average for the first six months of the year. August is also the highest production month since Bushveld Minerals took over the asset in 2019. The Company is pleased to report that this was done safely without any injuries. We shut down the Kiln for 8 days during September to attend to much needed maintenance and we anticipate production of circa 130 mtV for the month of September.

Unfortunately, during the first half of the year, Vametco's production was affected by unplanned stoppages, including unexpected high rainfall levels which necessitated a plant stoppage due to constraints at the barren dam and the Sulphate Recovery Plant ("SRP").These events contributed to Vametco producing 1,167 mtV (H1 2022: 1,226 mtV) during the period. July production remained low at 132 mtV, and full-year guidance was revised to between 2,300 mtV and 2,400 mtV (previously circa 2,700 mtV). Since then, production has been improving, and during the month of August, Vametco produced 215 mtV. Whilst progress has been made on the SRP performance and barren dam levels, Vametco has experienced reliability challenges at the leach plant. Progress has been made to resolve the issue, however, due to this event, Vametco is expected to produce 180 mtV in September. From October, production is expected to return to the 200 mtV monthly production run rate.

In its efforts to reduce costs and simplify our business, the Company has reassessed the merits of pursuing the mining right application associated with the Brits Project and concluded that it should be discontinued. With Vametco's life of mine conservatively estimated to be in excess of 30 years, the Company wants to focus its efforts on its already secured asset and not be obligated to fulfil the costly commitments associated with a second mining right that is not required. Moreover, a withdrawal of the application would allow the community to apply for the mining right in their own capacity and the Company believes that this would strengthen community relations.

During the first half of 2023, the construction and initial testing of the BELCO electrolyte manufacturing plant was completed. In the same period, the hot commissioning phase commenced. This phase has now been completed and an initial batch of electrolyte has been sent to a few international customers in an effort to qualify BELCO as an approved supplier of electrolyte.

The Vametco hybrid mini-grid project is progressing. The 1 MW/4MWh VRFB system supplied by CellCube was filled with electrolyte and energised for the first time during the third quarter of 2023 and is currently undergoing Site Acceptance Testing under different operating profiles. The construction of the 3.5 MW solar PV plant is nearing completion with 95% of the solar panels already installed. The entire project is expected to become fully operational by the end of the year. Upon completion, the plant will generate approximately 10% of Vametco's electricity requirements.

The Company previously announced its intention to carve out Bushveld Energy by consolidating its assets into Mustang Energy Plc ("Mustang"). The Company announced on 9 August 2023 that Mustang was informed by each of the convertible loan notes ("CLN") holders that they had elected to redeem their CLNs in accordance with the backstop arrangement previously agreed between Bushveld and Mustang. In accordance with the backstop agreement a total of 270,393,578 new ordinary shares were issued to the CLN holders.

As a result of Mustang not being readmitted to trading by 31 July 2023, shareholder Garnet exercised its option to increase its shareholding in CellCube to 60% and committed to invest a further US$3.25 million to support the company in the short term. As a result of these events, alternative options are being considered for Bushveld Energy.

Health and Safety

There were 2 lost time injuries ("LTI") and 3 medical treatment cases ("MTC") recorded in the first half of the year. This is an improvement in safety performance compared to first half of 2022 which recorded 4 LTIs and 6 MTCs. Bushveld continues to implement the action plans from the safety diagnostic audit which commenced at the beginning of 2023. The Company's focus remains to closely monitor the leading indicators, namely, visible felt leadership, planned task observations, inspections and closing all gaps from regulatory inspections. These leading indicators are monitored and reported on a weekly basis. Although the Company has seen an improvement in its safety records, it continues to focus on maturing its safety environment.

2023 priorities and outlook

My focus for the rest of 2023 is to ensure that both Vametco and Vanchem achieve the operational targets that we have set for this year, and keep improving on their respective operational performances. From a financing perspective, we are confident that we will complete the Orion convertible loan note restructuring before the 21st December 2023 due date. The proposed transaction with SPR will put us in a much stronger financial position and we will keep progressing the various work-streams in order to complete the transaction. I am pleased to report we have received the ZAR150 million (~US$8.1 million) in working capital funds which forms part of that transaction. In order to improve the Group's profitability, I will be focusing on various cost containment measures in parallel to these other initiatives.

FINANCIAL OVERVIEW

The financial results for the first six months reflect a challenging start to the year for the Company. The Company recorded an adjusted EBITDA profit of US$10.3 million and an operating profit of US$2.1 million. Both adjusted EBITDA and operating profit were lower than the prior year due to lower realised prices and higher overall costs, offset to some extent by higher sales volumes.

Income statement

The income statement summary below is adjusted from the primary statement presentation.

Revenue

Revenue of US$78.4 million for the Group, underpinned by higher sales volumes partly offset by a lower average realised price of US$37.4/kgV compared to US$46.4/kgV in the prior year.

The geographic split of Group sales during the first half of 2023 was 49% to the USA (H1 2022: 45%), 29% to Europe (H1 2022: 27%), 6% to Asia (H1 2022: 9%), 6% to South Africa (H1 2022: 10%), and 10% to the rest of the world (H1 2022: 9%).

During the period, Bushveld continued to prioritise nitro vanadium sales into North America given the higher vanadium prices in the region. Sales into the aerospace and specialty chemical products sectors were also a focus given the price premiums these sectors attract.

Cost analysis

Cost per unit sold

The Group cost per unit sold for the half year (including sustaining capital expenditure) was US$33.4/kgV. This represents a 12% decrease relative to the prior year primarily as a result of higher sales volumes and a weaker ZAR:US$ exchange rate, partially offset by the cost factors noted below.

Cost of sales

The cost of sales, excluding depreciation, for the first half of 2023 was US$50.9 million, which was US$6.2 million higher than the prior period due to higher costs at both Vametco and Vanchem, primarily due to increased units sold. The cost increases included:

· Increases in use in raw materials and prices from suppliers;

· Higher maintenance costs, at both Vametco and Vanchem, due to unexpected plant breakdowns during the period; and

· Higher energy costs due to the increase in oil and diesel prices, as well as an increase in diesel usage due to unscheduled power disruptions at Vanchem.

Other operating costs and income

Other operating costs and income of US$9.2 million increased by US$2.2 million due to:

· A US$0.6 million increase in selling and distribution costs to US$4.9 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$0.6 million increase in idle plant costs to US$3.8 million, primarily due to:

§ Downtime at Vametco due to unplanned maintenance of the SRP, unplanned maintenance of the dust collectors at the refinery and power instabilities as a result of a transformer failure at the local municipality at the end of June 2023. 

· A US$1.4 million increase in other mine operating costs to US$2.7 million, primarily due to a write-down of work-in-progress inventory at Vanchem of US$1.2 million;

· A US$0.7 million increase in other operating income to US$2.3 million, primarily as a result of foreign exchange gains due to the devaluation of the Rand compared to the US$.

Administration costs

Administration costs, excluding depreciation charges for the half year, was US$8.0 million. Below is a breakdown of the key items included in administration costs:

Adjusted 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.

The Group delivered an adjusted EBITDA of US$10.3 million, a decrease of US$5.2 million compared to the previous year, primarily driven by lower realised sales prices and the higher costs associated with increased sales volumes.

Other losses

Other losses of US$3.4 million primarily reflects the fair value loss recognised on the Mustang convertible loan notes and additional funding provided to CellCube.

Net financing expenses

Net financing expenses were US$7.1 million, US$1.8 million higher than in the prior year. The increase was mainly attributable to interest on the Orion Production Financing Agreement ("PFA") and Orion convertible loan note. Below is a breakdown of net financing expenses:

Interest on borrowings primarily reflected the interest on the Orion convertible loan note of US$3.7 million (H1 2022: US$2.3 million), interest on the Orion production financing arrangement of US$2.2 million (H1 2022: US$2.3 million).

Balance sheet

Assets

Property, plant and equipment decreased by US$15.5 million compared to the previous year primarily due to depreciation of US$8.2 million, exchange rate differences arising from a weaker ZAR:US$ exchange rate of US$11.8 million, partially offset by capital expenditures of US$4.6 million.

Inventories of US$47.0 million decreased by US$8.0 million compared to the prior year, primarily due to a reduction in finished goods and the write-down of work in progress at Vanchem of US$1.2 million. Trade and other receivables increased by US$1.6 million due to additional sales during the period to third parties.

The decrease in cash and cash equivalents to US$3.7 million was primarily due to capital expenditures incurred of US$4.3 million, the payment of finance costs on the Orion PFA of US$2.3 million and the cash used by operations of US$0.9 million, partially offset by proceeds received from borrowings of US$1.3 million.

Liabilities

Total borrowings (excluding lease liabilities) of US$87.9 million increased by US$4.8 million compared to the previous year, primarily due to the capitalisation of interest of US$6.3 million, proceeds received on additional funding from Nesa Investment Holdings ("Nesa") and the Industrial Development Corporation ("IDC") of US$1.3 million, partially offset by the repayment of the finance cost on the Orion PFA of US$2.2 million.

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

Net debt increased by US$11.1 million compared to the prior year primarily due to capitalised interest of US$6.3 million and the decrease in the cash and cash equivalents balance to US$3.7 million.

Cash flow statement

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

Operating activities

Cash used in operating activities was US$0.9 million, a decrease of US$9.6 million from the previous year, primarily driven by the lower Operating profit and higher income taxes paid.

Investing activities

Cash used in investing activities, including sustaining capital expenditure, of US$4.3 million was primarily driven by capital expenditure on property, plant and equipment.

Capital Expenditure

Capital expenditure decreased by US$4.3 million compared to the prior year as 2022 marked the end of a substantive capital investment phase, during which the Company undertook extensive refurbishment and optimisation of Vametco and Vanchem and constructed the BELCO electrolyte plant.

Capital Expenditure (US$' million)

Financing activities

Cash used in financing activities of US$1.3 million comprised the repayment of finance cost on the Orion PFA of US$2.3 million and the repayment of lease liabilities of US$0.3 million, partially offset by the proceeds received from borrowings of US$1.3 million from Nesa to fund CellCube and the IDC to fund the construction of the BELCO electrolyte plant.

Going concern and outlook

The Company closely monitors and manages 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.

Bushveld entered into a non-binding term sheet with Orion on 5 May 2023 to refinance the convertible loan notes. The Orion convertible loan notes are due to mature at the end of December 2023 and given that the current share price is lower than the conversion price, the convertible loan notes will require repayment or refinancing. The closing of the transaction is still subject to certain conditions, including South Africa Reserve Bank approval, shareholders' approval at a still to be convened general meeting, which the Directors urge shareholders to support and the finalisation of definitive binding documentation. The Company is confident the transaction will be completed before the December 2023 due date, as this would be in the best interest of both parties.

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 interim consolidated financial statement. The assessment 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.

The current cashflow forecast indicates that the Group requires additional liquidity to fund its obligations and activities during the next twelve months. The Company has identified and is proactively exercising levers within our control which will improve the Group's liquidity. Importantly, Bushveld has been actively pursuing various financing alternatives and recently announced the transactions with SPR which will result in a significant injection of cash into the Group. 

Key terms of the proposed transactions

1) Interim working capital facility of ZAR150 million (~ US$8.1 million), which has now been received.

o  The interim working capital facility is scheduled to mature on implementation of the other transactions referred to in paragraphs 2, 3 and 4 below, or the first anniversary of financial close.

o  On maturity, the facility will be offset against the amounts payable by SPR in respect of the transactions referred to in paragraphs 2, 3 and 4 below.

2) Sale of 50% of Bushveld's stake in Vanchem and sale of Bushveld's 64% stake in Mokopane to SPR for total of US$25 million, payable as follows:

o  US$12.5 million on closing of the 50% Vanchem sale. 

o  US$10 million on maturity of the ZAR150 million (~US$8.1 million) interim working capital facility.

o  US$2.5 million on a contingent basis if the Mokopane sale closes within one year of the conditions precedent to completion having been met.

o  The proceeds from the sale of Vanchem and Mokopane will be utilised to reduce existing debt and strengthen the Company's balance sheet.

3) New equity investment by SPR in Bushveld Minerals Limited for an amount up to US$12.5 million: 

o  The subscription price per share agreed with Orion in relation to its conversion of the restructured convertible loan note (as announced by Bushveld on 5 May 2023), or if lower, the price per share agreed with Orion after the date of this term sheet in relation to its future conversion of the restructured convertible loan note.

o  The number of shares to be subscribed for shall not be more than 29.9% of Bushveld ordinary shares of 1 pence each in issue.

o  SPR will be entitled to nominate one non-executive director to the Bushveld board.

4) Three-year Marketing and sales appointment of SPR (extendable by a further three years at SPR's discretion) with provisional working capital facility of US$25-30 million, to replace existing marketing and sales arrangements as and when they expire over the coming 5-17 months.

5) Potential future investment into Vanchem by SPR of US$7-10 million in the form of equity, debt or a quasi-debt instrument. This offers the opportunity to evaluate the business case to recommission Vanchem's Kiln-1 and increase output, subject to feasibility studies.

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 completion of the remaining transactions with SPR. These transactions until completed, indicate the existence of material uncertainties that may cast significant doubt on the Group's ability to continue as a going concern.

The interim consolidated financial statements for the six months ended 30 June 2023 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.

Bushveld Minerals Limited

Interim Financial Statements for the period ended 30 June 2023

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

\* The consolidated statement of profit or loss for the six months ended 30 June 2022 was restated to reflect the updated finance costs and fair value gain on derivative liability in accordance with the restatement disclosed in the annual consolidated financial statements for the year ended 31 December 2022.

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

\* The consolidated statement of profit or loss for the six months ended 30 June 2022 was restated to reflect the updated finance costs and fair value gain on derivative liability with the restatement disclosed in the annual consolidated financial statements for the year ended 31 December 2022.

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Notes to the Condensed Consolidated Interim Financial Statements

1. Corporate 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 solution 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 18-20 Le Pollet, St Peter Port, Guernsey. The unaudited condensed consolidated interim financial statements ("consolidated interim financial statements") of the Company for the interim period ended 30 June 2023 comprise of the Company and its subsidiaries and interest in equity accounted investments.

2. Significant accounting policies Basis of accounting

The results presented in this report are unaudited and they have been prepared in accordance with the recognition and measurement principles of UK-adopted International Accounting Standards that are expected to be applicable to the next set of financial statements and on the basis of the accounting policies to be used in those financial statements.

The consolidated interim financial statements does not include all of the information required for full annual financial statements and accordingly, whilst the consolidated interim financial statements have been prepared in accordance with the recognition and measurement principles of the UK-adopted International Accounting Standards, it cannot be construed as being in full compliance with the UK-adopted International Accounting Standards. The financial information contained in this announcement does not constitute statutory accounts as defined by the Companies (Guernsey) Law 2008.

The consolidated interim financial statements have not been audited or reviewed in accordance with International Standard on Review Engagements (UK) 2410. The consolidated financial statements for the period ended 31 December 2022 is based on the statutory accounts for the period ended 31 December 2022. The auditor reported on those accounts which were not qualified but included a material uncertainty related to going concern.

The consolidated interim financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business.

Going concern

The interim 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$12.49 million for the six months ended 30 June 2023 (31 December 2022: US$35.44 million) and as at 30 June 2023 had cash and cash equivalents of US$3.74 million (31 December 2022: US$10.87 million) as well as total borrowings of US$87.90 million (31 December 2022: total borrowing of US$83.13 million).

The Orion convertible loan notes are due to mature in December 2023 and given that the current share price is lower than the conversion price, the convertible loan notes will likely require repayment or refinancing. The Company entered into a non- binding term sheet with Orion on 5 May 2023 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 a still to be convened general meeting which the Directors urge shareholders to support and the finalisation of definitive binding documentation. The Directors are confident that the restructuring will be completed before the December 2023 due date.

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. 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 and entered into a binding term sheet with Southern Point Resources ("SPR") on 11 September 2023 for a cumulative proposed investment of between US$69.5 million and US$77.5 million (refer to note 12). The closing of the transactions are subject to certain conditions. The Group has received the ZAR150 million (approximately US$8.1 million) interim working capital funds as part of the transaction.

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 the completion of the remaining transactions with SPR. 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 interim consolidated financial statements for the six months ended 30 June 2023 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 interim 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.

Use of estimates and judgements

The preparation of consolidated interim financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities as at the date of the consolidated interim financial statements and reported amounts of revenues and expenses during the period ended 30 June 2023. Estimates and assumptions are continuously evaluated and are based on management's experience and other factors, including expectations of future events which are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

3. Loss per share

 Basic loss per share

Basic loss per share is calculated by dividing the net loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period excluding ordinary shares purchased by the Company and held as treasury shares.

Due to the Group being loss making for the period, instruments are not considered dilutive and therefore the diluted loss per share is the same as basic loss per share for all periods.

4. Intangible assets

Mokopane Vanadium and Iron Ore Project

The Group has a 64 per cent interest in Pamish Investment No 39 Proprietary Limited ("Pamish") which holds an interest in Prospecting right 95.

The Department of Mineral Resources and Energy ("DMRE") executed a 30-year mining right on 29 January 2020 in favour of Pamish, over five farms: Vogelstruisfontein 765 LR; Vriesland 781 LR; Vliegekraal 783 LR; Schoonoord 786 LR; and Bellevue 808 LR (the "Mining Right") situated in the District of Mogalakwena, Limpopo, which make up the Mokopane Project. The Mining Right allows for the extraction of several other minerals over the entire Mokopane Project resource area, including, titanium, phosphate, platinum Group metals, gold, cobalt, copper, nickel and chrome.

The Mining Right required Pamish to commence mining activities, including in-situ activities associated with the Definitive Feasibility Study ("DFS") by end of January 2021. The COVID-19 pandemic resulted in a significant delay in the commencement of the DFS and the necessary engagement with local communities required to finalise land use arrangements and, consequently, this deadline was not met. Application to the DMRE for an extension to commence mining activities has been submitted and Pamish is waiting on a response. Engagement has begun with communities to reach agreement for access to the project areas and secure a land use arrangement.

Subsequent to the period end, the Group entered into a binding term sheet with Southern Point Resources to purchase the Group's 64% interest in Pamish (refer to note 12).

Brits Vanadium Project

The Group has been granted Section 11 of the Mineral and Petroleum Resources Development Act ("MPRDA") for acquiring control of Sable Platinum Mining (Pty) Ltd for NW 30/5/1/1/2/11124 PR, held through Great Line 1 Invest (Pty) Ltd and was executed in May 2021. The Group has also applied for Section 102 of the MPRDA and waiting for approval to incorporate NW 30/5/1/1/2/11069 PR into NW 30/5/1/1/2/11124 PR.

The Group has applied for a prospecting right which has been accepted and environmental authorisation has been granted under GP 30/5/1/1/2/10576 PR held by Gemsbok Magnetite (Pty) Ltd.

A renewal application for Prospecting Right NW 30/5/1/1/2/11124 PR was granted for Great 1 Line on Farm Uitvalgrond 431 JQ Portion 3.

The Group re-evaluated the Brits Vanadium Project and after careful consideration it was concluded that the project should be discontinued.

Coal

Coal Exploration licences have been issued to Coal Mining Madagascar SARL a 99 per cent subsidiary of Lemur Investments Limited. The exploration is in South West Madagascar covering 11 concession blocks in the Imaloto Coal basin known as the Imaloto Coal Project and Extension. The Imaloto Coal Project was impaired during the 2022 year as no further expenditures were planned.

5. Property, plant and equipment

*Include decommissioning asset.

Subsequent to the period end, the Group entered into a binding term sheet with Southern Point Resources to purchase a 50% interest in the Group's subsidiary that owns its Vanchem Vanadium plant (refer to note 12).

6. Inventories

The cost of inventories recognised as an expense during the period was US$50.02 million (31 December 2022: US$88.60 million).

The Group recognised a net realisable value write down of finished goods amounting to US$0.30 million (31 December 2022: US$0.33 million) and work in progress amounting to US$1.20 million (31 December 2022: US$0.19 million).

7. Trade and other receivables

Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due for settlement within 15-90 days and therefore are all classified as current.

The fair value of trade and other receivables approximate the carrying value due to the short maturity.

8. Cash and cash equivalents

The fair value of the cash and cash equivalents approximates the carrying value due to the short maturity.

9. Share capital and share premium

The Board may, subject to Guernsey Law, issue shares or grant rights to subscribe for or convert securities into shares. It may issue different classes of shares ranking equally with existing shares. It may convert all or any classes of shares into redeemable shares. The Company may also hold treasury shares in accordance with the law. Dividends may be paid in proportion to the amount paid up on each class of shares.

As at 30 June 2023 the Company owns 670,000 (31 December 2022: 670,000) treasury shares with a nominal value of 1 pence.

Shares issued Directors and staff

The Company issued 2,324,842 new ordinary shares of 1 pence each in the Company in respect of the short-term incentive plans during 2022.

Primorus Investments Plc ("Primorus")

The Company issued a convertible loan note to Primorus. The Company issued a total of 4,157,645 new ordinary shares of 1 pence each in accordance with the conversion provisions during 2022.

Lind Global Macro Fund, LP ("Lind")

The Company issued 20,876,937 new ordinary shares of 1 pence each to Lind in accordance with the Investment Agreement between the Company and Mustang Energy Plc.

Nature and purpose of other reserves Share premium

The share premium reserve represents the amount subscribed for share capital in excess of nominal value.

Share-based payment reserve

The share-based payment reserve represents the cumulative fair value of share options granted to employees.

Foreign exchange translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of financial statements of foreign operations.

Fair value reserve

The fair value reserve comprises the cumulative net change in the fair value of financial assets at fair value through other comprehensive income until the assets are derecognised or impaired.

Accumulated loss reserve

The accumulated loss reserve represents other net gains and losses and transactions with owners (e.g. dividends) not recognised elsewhere.

10. Borrowings

(1)Finance costs include capitalised finance costs of US$0.47 million to property, plant and equipment.

(2)Finance costs include capitalised finance costs of US$0.23 million to property, plant and equipment.

Orion Mine Finance Production Financing Agreement

The Group signed a long-term production financing agreement ("PFA") of US$30 million with Orion Mine Finance ("Orion) in December 2020, primarily to finance its expansion plans at Bushveld Vametco Alloys Proprietary Limited and debt repayment. Exchange control authorization from the South Africa Reserve Bank Financial Surveillance Department was granted in October 2020.

PFA Details

The Group will repay the principal amount and pay interest via quarterly payments determined initially as the sum of:

· a gross revenue rate (set at 1.175 per cent for 2020 and 2021 and 1.45 per cent from 2022 onwards, subject to adjustment based on applicable quarterly vanadium prices) multiplied by the gross revenue for the quarter; and

· a unit rate of US$0.443/kgV multiplied by the aggregate amount of vanadium sold for the quarter.

Once the Group reaches vanadium sales of approximately 132,020 mtV during the term of the facility, the gross revenue rate and unit rate will reduce by 75 per cent (i.e. to 25 per cent of the applicable rates).

On each of the first three loan anniversaries, the Group has the option to repay up to 50 per cent of both constituent loan parts (each may only be repaid once). If the Group utilises the loan repayment option, the gross revenue rate and/or the unit rate will reduce accordingly.

The PFA capital will provide funding to continue to grow production at Vametco to more than 4,200 mtV per annual production level and debt repayment. Part of the proceeds were used by the Group to prepay in full the Nedbank ZAR250 million term loan.