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 2018

Bushveld Minerals Limited

("Bushveld" or the "Company")

Unaudited interim results performance report for the period ended 30 June 2018

Bushveld Minerals Limited (AIM: BMN), the AIM listed, integrated primary vanadium producer, with ownership of high grade vanadium assets, is pleased to announce its half year unaudited results, for the six months ended 30 June 2018.

H1 2018 Financial Highlights 

§ First period of fully consolidated accounts since the Company increased its shareholding in Bushveld Vametco Holdings (Proprietary) Limited ("Vametco") from 26.6% to a controlling 59.1% in December 2017, and subsequently to 75% in September 2018;

§ Bushveld Minerals consolidated H1 2018 Revenue of £62.1 million;

§ Bushveld Minerals consolidated EBITDA of £31.7 million (H1 2017: £1.0 million including share of results of associate);

§ Bushveld Minerals consolidated Profit after tax of £21.1 million (H1 2017: £1.1 million);

§ Bushveld Minerals consolidated Free cash flow1 of £10.2 million (H1 2017: (£1.4million));

§ Bushveld Minerals consolidated Cash balance of £26.2 million as at 30 June 2017 (H1 2017: £71.5 thousand);

§ Bushveld Minerals consolidated Gross debt of nil (H1 2017: nil);

§ Earnings per share of 1.14p (H1 2017: 0.26p).

1 Free cash flow: comprises net operating cash flows less net investing cash flows.

H1 2018 Operational Highlights

§ NitrovanTM sales of 1,403 mtV (H1 2017: 1, 341 mtV);

§ NitrovanTM production of 1,360 mtV (H1 2017: 1,441 mtV);

§ Bushveld remains one of the lowest cost vanadium producers in the world, with H1 operating costs of ZAR248.4/KgV (US$20.2/KgV) (H1 2017: US$15.4/KgV);

§ Phase Two of the Vametco Expansion project completed on time and within budget to raise nameplate capacity to 3,750mtV;

§ The exploration programme at the Brits Vanadium Project has shown vanadium grades in magnetite of 1.54 - 2.09% V2O5;

§ Bushveld Energy and the Industrial Development Corporation ("IDC") received delivery of the first vanadium redox flow battery ("VRFB") from UniEnergy Technologies ("UET") in South Africa;

§ Bushveld Energy and IDC continue to progress work to build an electrolyte manufacturing plant in South Africa, to be located at Vametco and the East London Industrial Zone;

§ Lemur Holdings and the Government of Madagascar concluded the 30-year Project Concession Agreement;

§ Lemur Holdings completed the inception site visit for the Social and Environmental Impact Assessment ("SEIA") at the Imaloto Power Project with related field studies commencing thereafter;

§ Lemur Holdings and the state-owned utility, Jiro sy Rano Malagasy ("JIRAMA"), amended the Power Purchase Agreement to significantly increase the latter's offtake to up to 25MW.

H1 2018 Corporate Highlights

§ Completed a £15.7 million (US$22.2 million) equity placing before expenses by way of an oversubscribed placing of 152,749,172 new ordinary shares at a price of 10.3p per share;

§ Redeemed and settled the Atlas Convertible Bonds in full, for a final aggregate cash payment of £5.12 million;

§ Appointed Michael J. Kirkwood as Senior Independent Non-Executive Director;

§ Appointed Alternative Resource Capital, a trading name of Shard Capital Partners LLP, as joint broker of the Company;

§ Listing on the Johannesburg Stock Exchange remains a priority for the Company, with the work progressing accordingly;

§ Number of Warrants in issue as at 25 September 2018.

H1 2018 Bushveld Vanadium Update

§ Vametco H1 2018 Revenue increased by 139.2% to ZAR 1,050 million (£62.1 million) compared with H1 2017 revenue of ZAR 439 million (£26.4 million).

§ Vametco H1 2018 EBITDA increased by 429.6% to ZAR 521 million (£30.8 million) compared with ZAR 98.4 million in H1 2017 (£5.7 million).

§ The Metal Bulletin FeV mid-average price for H1 2018 was US$65.5/ KgV, an increase of approximately 150% relative to the H1 2017 average price of US$26.2/ KgV.

· Vametco's realised price is based on an average one month prior to sale.

§ FeV price has continued to strengthen with the Metal Bulletin FeV mid-price averaging US$80/ KgV in the two months ended August 2018.

§ Vametco achieved an all-time record magnetite kiln feed during Q1 2018, supported by the completion of Phase One of the expansion project.

§ Vametco completed Phase Two of the expansion project. This phase of the expansion project will increase the nameplate capacity from 3,035 mtV, achieved in Phase One, to 3,750 mtV, through self-funded capital expenditure of US$2.5 million.

§ The Company commenced an exploration programme at the Brits Vanadium Project, which has shown positive results with vanadium grades in magnetite of 1.54-2.09% V2O5, similar to grades mined at Vametco.

H1 2018 Bushveld Energy Update

Electrolyte production facility

§ Engaged an international chemicals company that has already designed and built a vanadium electrolyte production plant with multiple megalitre annual capacity.

§ Initiated the Environmental Impact Assessment (EIA) process for the electrolyte production plant, including appointment of local EIA consultants.

Eskom VRFB project

§ Completed manufacturing of the Direct Current (DC) portion of the VRFB.

§ Appointed two technicians from South Africa to perform installation support and maintenance on the Eskom project. The first phase of the technicians' training was held at UET, in April 2018. This will give Bushveld Energy the capability to install and maintain future VRFB installations in South Africa and regionally.

§ Bushveld Energy and the IDC received delivery of the first VRFB from UET in South Africa. This included the mixed-acid vanadium electrolyte to be used in the battery. 

H1 2018 Lemur Holdings Update

§ Lemur Holdings and the Government of Madagascar concluded a 30-year Project Concession Agreement which gives Lemur the right to build, own, operate and supply an initial 60 MW. In addition, the concession gives Lemur the right to build an evacuation line of up to 138kV for transport of the electricity to the connection points.

§ Completed the inception site visit for the SEIA at the Imaloto Power Project and commenced the relevant field work for the SEIA.

§ Amended the Power Purchase Agreement with the state-owned JIRAMA from the existing 10MW to allow the utility to offtake up to 25MW.

Events post 30 June 2018

Bushveld Minerals

§ Completed the acquisition of a 21.22% interest in Strategic Minerals Corporation("SMC") (the ultimate holding company of Vametco Alloys Proprietary Limited) from Sojitz Noble Alloys Corporation. The Acquisition of all of Sojitz's legal and beneficial interest in SMC was acquired for a total cash consideration of US$20,000,000, including US$2,500,000 in accrued dividends. The acquisition increased Bushveld Minerals' controlling interest in Vametco Holdings from 59.1% to 75%.

§ An unprotected industrial action at Vametco temporarily stopped production from the evening of 5 September. The industrial action was in relation to historic legacy issues and compensation structures prior to Bushveld's acquisition of Vametco. The strike ended on 21 September, when Bushveld Minerals and the Association of Mineworkers and Construction Union ("AMCU") announced that they had reached an agreement. The agreement includes:

· The settlement agreement, signed between Vametco and AMCU in May 2018 in respect of payments in lieu of Employee Share Options Scheme ("ESOPS") for the period 2013 to December 2017, is valid and recognised.  

· Vametco will pay employees an amount in lieu of ESOPS for the year 2018 on the same basis as the ESOPS payment made as part of the May 2018 settlement agreement. The payments (the "2018 ESOPS payment") will be structured as a two-part payment:

· A payment of R15,000 (post-tax) shall be paid to each employee in respect of the period 1 January to 30 June 2018. This amount shall be paid on 28 September 2018.

· A second payment, in respect of the period 1 July 2018 to 31 December 2018, shall be payable after the release of the financial results of Bushveld Vametco Alloys Limited for FY2018 which is expected to be paid by 31 March 2019.

· The new agreement discourages any future participation in unprotected industrial actions by the workers at the risk of losing participation of any ESOP payments.

Following 16 days of unprotected industrial action, operations and production at Vametco resumed on 22 September 2018.

The unprotected industrial action may impact Vametco's 2018 production and cost guidance. The Company is in the process of quantifying the impact of the stoppage and such guidance will be provided no later than the Q3 2018 Bushveld Vanadium Operational update.

Bushveld Energy

§ During commissioning of the VRFB, a performance issue was experienced, and initial assessments confirmed a vanadium electrolyte constraint. As a result, the battery was not able to meet the specified operational performance. It was also determined that it would not be possible to resolve the constraint in South Africa at this time and a remediation strategy was immediately implemented. The remediation includes the provision of new electrolyte and hardware for the DC module of the battery. This will allow commissioning to resume and be completed in Q4 2018. The Company will provide an update on progress in November 2018.

§ Bushveld Energy was awarded a grant from the Government of the United States of America, acting through the U.S. Trade and Development Agency (USTDA). The grant will provide support in implementation and enhancement of Bushveld Energy's previously announced VRFB project at the Eskom mini-grid at its Research, Testing & Development centre. It will also support the development of new modelling capabilities to cover the combination - or "stacking" - of multiple benefits from energy storage supplied by one battery.

Commenting on the results, CEO Fortune Mojapelo said:

"I am pleased to report the first set of financial results that reflect the full consolidation of Vametco's accounts since Bushveld Minerals acquired a majority controlling interest last December. It is particularly pleasing to report our first ever consolidated net profit and net free cash flow for the Bushveld Group. We expect to show continuously improving performance as we integrate and grow the business.

"We recently increased our interest in Vametco to 75% to gain maximum exposure of the business we operate. While Vametco is already a low cost producer of vanadium, we believe potential exits to further improve its cost position by improving its productivity. To this end we will be developing and implementing several productivity initiatives, in addition to the expansion plans announced to date, to enhance Vametco's performance across the production process. We expect to see the positive effects of these initiatives in the coming year.

"Key to the success of our efforts at Vametco is a healthy cooperative relationship with all of our stakeholders, not least the local communities in which we operate and the workers. The recent unprotected strike action at the mine, while unfortunate only underscores the importance of us succeeding in this objective. We are pleased that we were able to reach a resolution with the workers and delighted that they will participate in the success of the Company through an Employee Share Options Scheme Structure.

"Meanwhile our efforts in building a leading energy storage company through Bushveld Energy are progressing well on all fronts, the construction of the electrolyte manufacturing plant in South Africa, the deployment of a VRFB at Eskom, securing mandates for large scale VRFB deployments as well as the development of vanadium electrolyte leasing products to promote the adoption of VRFBs in the global energy storage industry. The grant of US$500,000 received from the Government of the United States of America will go a long way to fund the implementation and enhancement of the Eskom Vanadium Redox Flow Batteries project. The commissioning delay experienced with the Eskom Vanadium Redox Flow Batteries project has meant the new battery is now expected to be commissioned during the Q4 2018.

"The signing of a 30-year Project Concession Agreement between Lemur Holdings and the Government of Madagascar is a critical milestone in the development of Lemur's integrated coal-to-power project, bringing it even closer to implementation.

"As we continue to steadily execute our firm strategy to grow into a significant, low-cost vertically integrated vanadium platform, we have a busy pipeline of corporate and operational activities ahead. I look forward to providing further updates on the operations in the second half of the year.

"Finally, we are pleased to see the South Africa government move to clear regulatory uncertainty around the South Africa's Mining Charter bringing much needed clarity and direction for investors."

Enquiries: info@bushveldminerals.com

ABOUT BUSHVELD MINERALS LIMITED

Bushveld Minerals is a low cost, integrated, primary vanadium producer, with ownership of high grade vanadium assets. 

The Company's flagship vanadium platform includes a 75 per cent controlling interest in Bushveld Vametco Alloys (Pty) Ltd, a primary vanadium mining and processing company; the Mokopane Vanadium Project and the Brits Vanadium Project.

Bushveld's vision is to become a significant, low cost, integrated primary vanadium producer through owning high grade assets. This incorporates development and promotion of the role of vanadium in the growing global energy storage market through Bushveld Energy, the Company's energy storage solutions provider. Whilst the demand for vanadium remains largely anchored in the steel industry, Bushveld Minerals believes there is strong potential for an imminent and significant global vanadium demand surge from the fast-growing energy storage market, particularly through the use and adoption of Vanadium Redox Flow Batteries.

While the Company's focus is on vanadium operations and the development and promotion of VRFBs, it has additional investments in coal, power and tin.

The coal platform comprises the wholly-owned Imaloto Coal Project, which is being developed as one of Madagascar's leading independent power producers. The Company's tin interests are held through its shareholding in AIM listed AfriTin Mining Limited.

The Company's approach to project development recognises that, whilst attractive project economics are imperative, they are insufficient to secure capital to bring them to account. A clear path to production within a visible timeframe, low capital expenditure requirements and scalability are important factors in ensuring a positive return on investment. This philosophy is core to the Company's strategy in developing projects. Detailed information on the Company and progress to date can be accessed on the website www.bushveldminerals.com 

Consolidated Income Statement

For the six months ended 30 June 2018

All results relate to continuing activities.

Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2018

Consolidated Statement of Financial Position

As at 30 June 2018

Company number: 54506

Consolidated Statement of Changes in Equity

For the six months ended 30 June 2018 Attributable to owners of the parent company

Consolidated Statement of Cash Flows

For the six months ended 30 June 2018

1. Corporate information and principal activities

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

The company changed its reporting date from 28 February to 31 December during the prior period. These unaudited interim financial statements are for the six months 30 June 2018 with comparatives to 30 June 2017. The ten months to 31 December 2017 are audited.

2. Basis of preparation

The results presented in this report are unaudited and they have been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards ('IFRS") as adopted by the EU 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 interim financial information does not include all of the information required for full annual financial statements and accordingly, whilst the interim financial information has been prepared in accordance with the recognition and measurement principles of IFRS, it cannot be construed as being in full compliance with IFRS. The financial information contained in this announcement does not constitute statutory accounts as defined by the Companies (Guernsey) Law 2008.

The audited financial information for the period ended 31 December 2017 is based on the statutory accounts for the financial period ended 31 December 2017. The auditors reported on those accounts: their report was unqualified and did not contain statements where the auditor is required to report by exception.

The directors do not believe that the adoption of new standards, including IFRS 9 and IFRS 15,will have a material impact on the reported results.

3. Use of estimates and judgements

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

i. Decommissioning and rehabilitation obligations

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

ii. Asset lives and residual values

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

iii. Post-retirement employee benefits

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

iv. Surface rights liabilities

The group has provided for surface lease costs that would accrue to the owners of the land on which the mine is built. The quantum of the amounts due post implementation of the MPRDA and the granting of the new order mining right to the group is somewhat uncertain and need to be negotiated with such owners. The group has conservatively accrued for possible costs in this regard, but the actual obligation may be materially different when negotiations with the relevant parties are completed.

v. Impairment of exploration and evaluation assets

Determining whether an exploration and evaluation asset is impaired requires an assessment of whether there are any indicators of impairment, including by reference to specific impairment indicators prescribed in IFRS 6 - Exploration for and Evaluation of Mineral Resources. If there is any indication of potential impairment, an impairment test is required based on value in use of the asset. The valuation of intangible exploration assets is dependent upon the discovery of economically recoverable deposits which, in turn, is dependent on future of Ferro Vanadium prices, future capital expenditures and environmental and regulatory restrictions. The directors have concluded that there are no indications of impairment in respect of the carrying value of intangible assets at 31 December 2017 based on planned future development of the projects and current and forecast commodity prices.

4. Profit/Loss per share

From continuing operations

The calculation of a basic profit per share of 1.14 pence (December 2017: 0.12 pence loss), is calculated using the total profit for the six months attributable to the owners of the company of £11,198,436 (December 2017: £953,538) and the weighted average number of shares in issue during the six months of 985,904,707 (December 2017: 789,578,440). The dilutive effect of other shares in issue would be immaterial to the profit per share.

5. Intangible exploration and evaluation assets

The Company's subsidiary, Bushveld Resources Limited has a 64% interest in Pamish Investment No 39 (Proprietary) Limited ("Pamish") which holds an interest in Prospecting right 95 ("Pamish 39"). Bushveld Resources Limited also has a 68.5% interest in Amaraka Investment No 85 (Proprietary) Limited ("Amaraka") which holds an interest in Prospecting right 438 ("Amaraka 85").

Under the agreements to acquire the licences within Bushveld Resources, the group is required to fully fund the exploration activities up to the issue of the corresponding mining licences. As the non-controlling interest party retains their equity interest, the funding of their interest is accounted as deemed purchase consideration and is included in the additions in the year to exploration activities. A corresponding increase is credited to non-controlling interest.

Brits Vanadium Project

The Company is in a process to secure regulatory approval in terms of section 11 of the Mineral and Petroleum Resources Development Act (MPRDA) for change of control in respect of the acquired Sable Metals & Mining Ltd.'s subsidiaries. Following approval, Bushveld Minerals will commence with activities to delineate the shallow resource on the Uitvalgrond farm portion.

· NW 30/5/1/1/2/11069 PR - held through Great Line 1 (Pty) Ltd

· NW 30/5/1/1/2/11124 PR - held through Great Line 1 (Pty) Ltd

· GP 30/5/1/1/02/10142 PR - held through Gemsbok Magnetite (Pty) Ltd

6. Property, plant and equipment

7. Inventories

The amount of write-down of inventories due to net realisable value provision requirement is nil.

8. Trade and other receivables

Trade receivables are non-interest bearing and are generally on 15-90 day terms. There were no indicators of impairment at 30 June 2018. At 30 June 2018 the group had one customer which accounted for approximately 90% of trade receivables.

9. Cash and cash equivalents

Cash and cash equivalents (which are presented as a single class of assets on the face of the Statement of Financial Position) comprise cash at bank and other short-term highly liquid investments with an original maturity of three months or less. The directors consider that the carrying amount of cash and cash equivalents approximates their fair value.

10. Trade and other payables

Trade and other payables principally comprise amounts outstanding for trade purchases and on-going costs. The average credit year taken for trade purchases is 30 days.

11. Borrowings

Since December 2017 the outstanding convertible bonds balance was reduced by the following conversions:

· £250,000 of convertible bonds converted into 3,078,817 ordinary shares of 1 pence each of the Company at a conversion price of 8.12 pence each on 18 January 2018. Following the exercise, Atlas held a total of £6,700,000 Convertible Bonds;

· £700,000 of convertible bonds converted into 8,620,689 ordinary shares of 1 pence each of the Company at a conversion price of 8.12 pence each on 23 January 2018. Following the exercise, Atlas held a total of £6,000,000 Convertible Bonds;

· £1,000,000 of convertible bonds converted into 11,990,407 ordinary shares of 1 pence each of the Company at a conversion price of 8.34 pence each on 19 February 2018. Following the exercise, Atlas held a total of £5,000,000 Convertible Bonds;

· £725,000 of convertible bonds converted into 8,809,234 ordinary shares of 1 pence each of the Company at a conversion price of 8.23 pence each 14 March 2018. Following this exercise, Atlas held a total of £4,275,000 Convertible Bonds.

On 14 June 2018, Bushveld fully redeemed the issued Convertible Bonds. The Convertible Bonds were settled in full for a final aggregate cash payment of £5.116 million, including interest and early redemption charges.

12. 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 the 30 June 2018 the Company owns 670,000 (30 June 2017 and 31 December 2017: 670,000) treasury shares with a nominal value of 1 penny.

On 26 March 2018, the Company raised approximately US$22.2 million (£15.7 million) (before expenses) by way of an oversubscribed placing of 152,749,172 new ordinary shares of 1 penny each at a price of 10.3 pence per share with leading institutional and mining investors (the "Placing"). The price was calculated as the 5 day volume weighted average price (as published by Bloomberg) at close of trading Monday 19 March 2018. The Placing shares represented approximately 14.4% of the Company's issued share capital on admission.

13. Events after the reporting period

On 6 July 2018, the Company received an exercise notice for the exercise of warrants over 4,000,000 ordinary shares of 1 pence each ("Ordinary Shares") with an exercise price of 6.9 pence per Ordinary Share. Accordingly, 4,000,000 new Ordinary Shares have been issued. The new Ordinary Shares rank pari passu with the Company's existing Ordinary Shares.

On 6 July 2018, the Company received an exercise notice for the exercise of warrants over 5,000,000 ordinary shares of 1 pence each ("Ordinary Shares") with an exercise price of 13.84 pence per Ordinary Share. Accordingly, 5,000,000 new Ordinary Shares have been issued. The new Ordinary Shares rank pari passu with the Company's existing Ordinary Shares.

On 8 August 2018, the issue and allotment of 24,847,310 new ordinary shares of 1 pence each to be issued to certain directors, senior employees and advisors of the Company (the "Compensation Shares") was approved. Accordingly, 24,847,310 new Ordinary Shares have been issued. The new Ordinary Shares rank pari passu with the Company's existing Ordinary Shares.

On 13 September 2018 the Group completed the acquisition of a 21.22 per cent interest in Strategic Minerals Corporation ("SMC"), an intermediate holding company of Vametco Alloys Proprietary Limited, "Vametco") from Sojitz Noble Alloys Corporation ("Sojitz") for a total cash consideration of US$20,000,000 (the "Acquisition"). On completion of the Acquisition, Bushveld increased its indirect beneficial interest in Vametco from 59.1 per cent to 75 per cent.