Bushveld Minerals Regulatory News (BMN)

Bushveld Minerals Ltd

("Bushveld" or the "Company")

Pre-Feasibility Study confirms Mokopane Vanadium Project as one of the lowest cost vanadium projects with strategic importance to the future vanadium market

Bushveld Minerals Limited (AIM: BMN), a mineral development company with a portfolio of vanadium and titanium-bearing iron ore, tin and coal assets in Southern Africa, is pleased to present a summary of the Pre-Feasibility Study (PFS) at its 64 % owned Mokopane Vanadium Project ("Mokopane Vanadium" or the "Project") in South Africa. The results of the PFS confirm the emergence of Mokopane Vanadium as a market-leading vanadium project that, on all objective measures, compares favourably with other leading vanadium deposits.

Highlights

· PFS confirms Mokopane Vanadium as a strategic asset of major significance to the future global vanadium market based on:

- Long-term mine life: Ore Reserve of 28.56 million tonnes ("Mt") supporting a minimum 30 year life of mine ("LoM") from less than 10% of the total project resource of 298 Mt, which represents significant exploration upside

- Established processing method lowers project risks: selected salt roast processing method proven on a commercial scale by existing facilities over many decades of operation

- High-quality product: PFS contemplates a 1.0 Mtpa run of mine ("RoM") operation producing on average 9,525 tpa of vanadium pentoxide (V2O5) flakes at 99.5 weighted percent (wt%) purity

- Robust project economics: Payback period of four years with a Pre-tax NPV of US$418.0 M (based on a 9% base case discount rate) and an IRR of 24.8% (pre-tax) using a conservative long-term US$:ZAR12.75 exchange rate and a real vanadium price of US$7.50/lb (US$16.53/kg) for V2O5 flakes at >98 % purity

- Significant market share: RoM production to contribute as much as 6 % of global annualised vanadium output and ~50 % of South African output relative to actual 2014 market supply figures

· Base case scenario involves an integrated mining-concentrator-salt roast process business case for a modest capital expenditure of US$ 298.1 M to produce the 9,525 tpa V2O5

· The mining right application for the Project was submitted in Q1 2015 and Bushveld awaits approval.

Bushveld Minerals CEO, Fortune Mojapelo, said:

"We are pleased to present such a positive PFS for the Mokopane Vanadium Project. The results support our long-held goal to develop this project into a highly profitable, significant contributor to South African and global vanadium market output.

With a first quartile cash cost proposition, the project provides precisely the sort of asset we require to pursue our recently announced integrated vanadium development strategy. We have taken a conservative approach in determinig the PFS parameters and, in my view, as the global economic environment improves the economics of the project will only get better.

While we are mindful of the recent low commodity price environment including sub-US$3.50/lb V2O5 prices, an analysis of the fundamentals of the market, backed by independent research, suggests that a significant proportion of the current global vanadium production is unsustainable at these levels. Significant reductions in vanadium supply during the past 6-12 months, coupled with a robust demand outlook, present a compelling argument for sustainable vanadium price recovery in the medium to long term.

We continue to engage with potential partners on ways to take this project forward towards a Definitive Feasibility Study. We also continue to explore, assisted by insights developed by this PFS, potential brownfield opportunities that could serve to further reduce the capital expenditure requirements from what are already very modest levels, thereby providing an option to bring forward the date of production commencement and cashflow generation."

Executive Summary

The Mokopane Vanadium Project Pre-Feasibility Study was completed by a group of internationally recognised and respected consulting firms and individuals, commissioned to prepare a Technical Report for the PFS on behalf of Bushveld Minerals Limited. These include The MSA Group (Pty) Ltd, who had overall responsibility for compiling the PFS Report, WorleyParsonsRSA, TrueGround Consulting, Hatch Goba (Pty) Ltd, Epoch Resources (Pty) Ltd, Digby Wells Environmental, and Hindsight Financial and Commercial Solutions (Pty) Ltd (collectively the "Consultants") Metallurgical analysis for the Project was undertaken at SGS Laboratories and assays for the geological work and Mineral Resource Estimate were undertaken at Set Point Laboratories. The Study has been completed to a PFS-level of accuracy and all costings, unless specified otherwise, have been undertaken at an accuracy level within ± 25 %.

The Project is located on the central portion of the Northern Limb of the Bushveld Complex in the Limpopo Province of South Africa. It is located within the Prospecting Right LP95PR, issued in accordance with the Mineral and Petroleum Resources Development Act of 2002 (MPRDA), in the Mokopane District, approximately 65 km west of Polokwane and 45 km northwest of Mokopane in the Mokopane District, Limpopo Province, Republic of South Africa.

The Company owns an effective 64 % of the Project through its wholly owned subsidiary Bushveld Resources Limited (or "BRL"), which in turn holds 64 % of Pamish Investments No 39 (Pty) Ltd (or "Pamish"). Pamish holds a Prospecting Right (LP95PR) for an area comprising six farms covering an area of 10,073 hectares. The Prospecting Right allowed for the prospecting of iron ore, vanadium, titanium and other minerals. An application for a new order mining right ("NOMR") was submitted to the Department of Mineral Resources in March 2015 and at the time of this report was still being processed.

While the Project Mineral Resource Estimate totals 297 Mt and comprises three distinct mineralised zones, the PFS has been undertaken on only one of these - the Main Magnetite Layer ("MML"), which was also used for the Scoping Study completed in 2014. Work undertaken during this Pre-Feasibility Study has allowed a 28 Mt Ore Reserve to be declared.

WorleyParsonsRSA undertook the mining studies and modelled the mining requirements to support the determined scope of the Project. RoM of 1.0 Mtpa is to be processed through magnetic separation to make concentrate, which is further processed through a salt roast plant to produce 9,525 tpa of V2O5 flake. WorleyParsonsRSA modelled a two pit mine configuration each using the same open-pit mining method and mining equipment. The pits, which dip to the west at approximately 18°, will be mined to a maximum depth of 80 m below original ground level with an overall high-wall slope angle of 55°. The MML Hanging-Wall ("MML-HW") zones of mineralisation will be stored separately on stock piles for possible future treatment on account of their potentially economic mineralisation. An allowance was made for dilution of 5 % with low grade mineralisation and a 5 % loss of MML material to the stockpiles. The production rate required is readily achievable and should allow for an accurate separation of the two MML intervals from the low grade hanging wall mineralisation and the MML parting. A ramp excavated from the high wall will provide access to the working faces in the pits. Mining contractors will be employed as the mining practitioners and mining operations will take place from Monday to Friday on a 24 hour three shift per day cycle.

The processing plant comprises a concentrator plant and the salt roast plant. The RoM proceeds through three stages of crushing before being milled to the required particle size. A magnetic separation process is used to separate the vanadium-containing magnetic fraction from the non-magnetic waste material to produce a more concentrated, higher metal value concentrate. The waste material slurry is pumped to a tailings facility while the concentrate is filtered, stockpiled and transferred to the salt roast plant for further processing.

The salt roast process is the vanadium industry standard for processing titano-magnetite ores from the Bushveld Complex in South Africa, having been proven on a commercial scale by existing facilities over many decades of operation. The salt roast plant receives concentrate from the concentrator circuit and produces V2O5 flake (99.5 wt% purity) as the final product via the alkali salt roast process. The process involves roasting the concentrate with alkali (sodium) salt, leaching of the resultant material with water, desilication, ammonium metavanadate ("AMV") precipitation and deammoniation to produce the final V2O5 product.

The market fundamentals for vanadium are attractive. Demand is anchored in the steel sector where vanadium is used as an alloying element for strength, corrosion resistance, weldability and fabricability. The most common application of vanadium is in reinforced bar (rebar) for the construction industry. A shift towards stronger steels in the construction sector has seen vanadium consumption grow at almost twice the rate of growth of steel production. In China particularly, authorities have promulgated regulations in favour of strong vanadium containing steels. Use of vanadium in energy storage applications is also poised to drive demand of vanadium going forward.

Supply is concentrated. In terms of feedstock, 64 % of vanadium supply is derived from co-product slag produced by steel plants processing vanadium-bearing magnetites, mostly in China. However, constrained steel economics resulting from low steel prices, lower steel production growth and high cost for captive magnetite ores, pose a threat to co-product supply. Opportunity for Chinese steel plants to substitute high cost low iron ("Fe") grade vanadium bearing ores with cheaper higher Fe-grade seaborne haematite ores has seen supply of vanadium slag feedstock decrease, particularly for steel plants located in close proximity to a coast. Where such substitution opportunities do not exist an outright reduction in steel production is also driving supply down. Highveld Steel & Vanadium has recently (May 2015) ceased production, removing as much as 11 % of global vanadium feedstock supply (slag and primary ore) from the market. Notwithstanding the low prices of sub-US$3.50/lb V2O5 seen during 2015, the vanadium market balance is thus trending towards deficit and is expected to see prices recover.

Roskill estimates that a recovery in FeV prices to about US$ 21 to US$ 24/kgV is likely by 2017 (FeV prices quoted as US$ per kilogram of vanadium). Over the longer term, this price level is expected to offer insufficient incentive to encourage new supply or increases in secondary output. Assuming ongoing growth in vanadium demand, a further recovery (in real terms) to about US$ 24/kgV to US$ 27/kgV could be expected. In nominal terms, the effects of inflation and an eventual recovery in energy prices will likely lead to higher vanadium prices.

A price of US$ 7.50/lb (US$ 16.53/kg) for V2O5 flakes at >98 % purity is assumed for the Project, with an anticipated initial production in 2019. This approximates the 10 year historical average of US$ 7.63/lb (Jun 2005 - May 2015), and is approximately 17 % higher than the 15 year historical average of US$ 6.39/lb (Jun 2000 - May 2015).

The PFS delivers robust economics with upside potential. The base case scenario of 9,525 tpa V2O5 production requires a capital expenditure of US$ 298.1 million and yields a pre-tax NPV using a real 9 % discount rate of US$ 418.0 million and a real pre-tax IRR of 24.8 %. The financial model assumes a long term ZAR/US$ exchange of 12.75. Post-tax metrics were based on a simple application of a 28 % South African corporate tax rate and do not take into account several tax incentives that the Project can access, particularly given alignment of the Project with the South African Government's in-country beneficiation objectives.

A Rand/US$ exchange rate of ZAR 14.03 (10% weaker than the assumed long term rate of ZAR 12.75/US$ and approximately equal to the rate on the effective date (1st October 2015) of this report), increases the real NPV toUS$ 463.7 million and the real IRR to 27.1 % on a pre-tax basis and US$ 292.1 million and 22.2 % on a post-tax basis, respectively.

The following table summarises the Project parameters:

The Pre-Feasibility Study recommends that the Project advances to the next stage of development which would involve the execution of a Definitive Feasibility Study (DFS). The Company is of the view there is now a sound basis to progress discussions with potential partners to continue to advance this exciting project.

The executive summary is available in full at www.bushveldminerals.com.

Appendix

Geology

The Project Area is situated within the Northern Limb of the Bushveld Complex ("BC") and covers the upper portion of the Main Zone ("MZ") and the entire Upper Zone ("UZ") of the Rustenburg Layered Suite ("RLS"). The UZ is approximately 1,250 m thick and dips gently (15° to 25°) to the west. The UZ is characterised by the presence of vanadiferous titano-magnetite ("VTM") layers, which include disseminated, semi-massive and massive VTM intervals of variable thicknesses and variable proportions of oxide (Ti-magnetite) and silicate minerals (feldspar, pyroxene and olivine).

The Project is based on the three mineralised layers associated with the MML, which is part of the UZ. These are the MML, the MML HW and the AB Zone located in the footwall of the MML.

The MML mineralised zone occurs near the base of the UZ and consists of an upper VTM-rich interval ("MAG3") which is separated from a lower VTM-rich interval ("MAG4") by a VTM-poorer leucogabbronorite "parting". The MML has an average true thickness of 9.8 m, including the VTM-poor parting, and dips between 18° and 24° to the west. The MAG3 ranges between 2.59 m and 7.65 m and averages 4.09 m in true thickness. The MAG4 ranges between 2.48 m and 6.30 m and averages 3.59 m in true thickness. The parting ranges from 0.93 m to 4.06 m and averages 2.16 m in true thickness.

The MML HW comprises fourteen continuous layers defined by geological logging and VTM content, consisting of alternating layers of relatively high-grade semi-massive to massive VTM, lower-grade gabbronorite and barren anorthosite. These fourteen layers of the MML HW package are conformable with the MML and have a combined average true thickness of approximately 72 m.

The AB Zone represents the stratigraphically lowest accumulation of abundant VTM and occurs approximately 100 m below the MML, near the base of the UZ. The AB Zone consists of a relatively higher-grade upper and lower layer of strongly disseminated VTM, separated by a lower grade parting. The layers of the AB Zone have an average dip of 21o to the west with a combined average true thickness of approximately 9.3 m.

The Scoping Study and the Pre-Feasibility Study have been based on the MML only and anticipate that the lower grade MML HW layers in the immediate hanging wall of the MML - which form part of the stripping during the mining of the MML - will be stock piled for potential future processing.

Mineral Resource Estimates

The Project's current Mineral Resource totals 298 Mt across three identified zones associated with the MML, and the MML HW. The Mineral Resources stated below have been determined in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves - The JORC Code, 2012 Edition ("JORC"), and are reported at a cut-off grade of 0.30 % V2O5 and to a vertical depth of 120 m below surface. The MML, comprising two intervals as described above, has a Mineral Resource of 63 Mt with average in situ V2O5 and Fe grades of 1.32 % and 40 % respectively. This comprises the two intervals (MAG3 and MAG4) which have a total Mineral Resource of 52 Mt with average grades of 1.48 % V2O5 and 45 % Fe; in addition to the lower grade parting which has a Mineral Resource of 11 Mt at an average grade of 0.58 % V2O5 and 21 % Fe. The Mineral Resource is classified as an Indicated Mineral Resource and is summarized in Table 1 below.

Table 1: MML Mineral Resource Estimate

The MML-HW is subdivided into fourteen continuous layers defined by geological logging and VTM content, consisting of alternating layers of relatively high-grade semi-massive to massive VTM, lower-grade gabbronorite and barren anorthosite. These fourteen layers of the MML HW package are conformable with the MML and have a combined average true thickness of approximately 72 m. The MML-HW Mineral Resource is 222 Mt and has average in situ grades of 0.50 % V2O5 and 19.8 % Fe. It is classified as an Inferred Mineral Resource and is summarized in Table 2 below.

Table 2: MML Hanging Wall Mineral Resource Estimate

The MML-HW Mineral Resource forms part of the Project and it is expected that the MML-HW will be co-extracted with the MML. MML-HW material will be stripped and stockpiled for future processing because the grades are generally lower relative to the MML.

A Mineral Resource Estimate was undertaken on the AB Zone during 2015, which defined a 12.5 Mt Inferred Mineral Resource in accordance with JORC. Davis Tube Tests ("DTT") were undertaken on the samples from this Mineral Resource and showed concentrate grades of between 2.01 % and 2.65 % V2O5 with limited variability, an average concentrate grade of 2.21 % V2O5 and vanadium recoveries of up 97.82 %. However, this Mineral Resource, shown in Table 3 below, does not form part of the scope of the Project PFS.

Table 3: AB Zone Mineral Resource Estimate

Ore Reserve Estimate

The Ore Reserves stated below have been determined in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves - The JORC Code, 2012 Edition ("JORC").

A Probable Ore Reserve of 28.56 Mt was determined for the Project. The Ore Reserve will be depleted at a rate of 952,000 tpa over a period of 30 years. In determining the Ore Reserve, WorleyParsonsRSA modelled a two pit mine configuration using the same open-pit mining method and fleet of mining equipment. The pits will be mined to a maximum depth of 80 m below original ground level with an overall highwall slope angle of 55°. Three zones of mineralisation, (Zone A, Zone B and Zone C), which occur in the hanging wall above the MML, have been identified as having potential economic mineralisation and will be stored separately on the Low Grade and Lower Grade Stockpile for possible future treatment. An allowance was made for dilution of 5 % with low grade mineralisation and a 5 % loss of MML material to the stockpiles. The production rate required is readily achievable and should allow for an accurate separation of the two MML intervals from the low grade hanging wall mineralisation and the MML parting. A ramp excavated from the high wall will provide access to the working faces in the pits. Mining contractors will be employed as the mining practitioners and mining operations will take place from Monday to Friday on a 24 hour three shift per day cycle. The Ore Reserve is summarised in Table 4 below.

Table 4: Probable Ore Reserves

Mining

Prior to the commencement of mining of the MML, bush clearing, topsoil and/or black turf removal and storage, and non-MML and waste removal and storage will be required.

The MML ore will be mined in two pits, each following the dip of the MML (i.e. approximately 18º), one located to the north of the provincial road and one to the south. Each pit will utilise an access ramp excavated from the high wall (on the west) mined down at an angle of 8º to intersect the upper contact of the MML. Once the MML is intersected, mining will follow it along strike on a level gradient to create an open pit width of approximately 30 m. This open pit will then advance via working faces to the north and south utilising the central, common ramp.

It was assumed for the purposes of this PFS that a specialised mining contractor will be appointed to undertake the excavation of the pit and the mining and transportation of the ore. Budget prices for this mining were procured from contractors who have knowledge of the area and have experience in the mining conditions expected. The proposed mining method is within acceptable practices in South Africa.

The Ore Reserves will be depleted at a rate of 952,000 tpa with an allowance of an additional 5 % of non-MML included in the material delivered to the plant. At this rate the LoM is expected to be just under 30 years. The mining study was completed to an accuracy of ± 20 %.

Mineral Processing

Metallurgical test work activities were carried out prior to the commencement of the PFS. The results of these previous test work activities were used to determine various process parameters in the current plant design and are summarised in the PFS Report for reference. No further metallurgical test work has been carried out during the PFS.

The following processing method was adopted for the Project:

Vanadium-bearing RoM is received from mining operations in the concentrator circuit. The RoM proceeds through three stages of crushing before being milled to the required particle size. A magnetic separation process is used to separate the vanadium-containing magnetic fraction from the non-magnetic waste material, thereby producing a more concentrated, higher metal value concentrate. The waste material slurry is pumped to a tailings facility while the concentrate is filtered, stockpiled and then transferred to the salt roast plant for further processing for recovery of the final vanadium product.

The salt roast process is the vanadium industry standard for processing titano-magnetite ores from the Bushveld Complex in South Africa, having been proven on a commercial scale by existing facilities over many decades of operation. The salt roast plant receives concentrate from the concentrator circuit and produces V2O5 flake (99.5 wt% purity) as the final product via the alkali salt roast process. The process involves roasting of the concentrate with alkali (sodium) salt, leaching of the resultant material with water, desilication, ammonium metavanadate ("AMV") precipitation and deammoniation to produce the final V2O5 product.

A summary of the overall concentrator and salt roast plant design basis parameters is presented in Table 5 below.

Table 5: Recovery plant design basis summary

The following is a summary of the testwork carried out in the previous phase of the Project, based on which the above-described processing method was determined.

• Concentrator - Negligible variability for the Mineral Resource feed grade and V2O5 recovery was expected, based on the understanding of the Project geology. This was further confirmed by testing of samples from various drill holes, both down dip and along strike.

Davis tube testing ("DTT") was conducted on composites of samples received from the various drill holes to investigate the optimum grind size for beneficiation based on vanadium grade and recovery achieved.

With respect to product grades, results indicate that the feed material is fully liberated at the grind of 80 % < 53 µm. Tests of specific samples showed that the product grade is not particularly sensitive to the fineness of grind between 38 µm and 212 µm. A grind size of 80 % < 75 µm was ultimately selected as a sensible lower limit for the target grind based on test results related to Fe and V recovery.

The final product (concentrate) specification that was selected based on the test results is shown in Table 6 below.

Table 6: The recommended concentrate analysis

In terms of recovery, the following equation was developed based on the test result data and used to calculate the expected product yield: 

Yield = 1.8296 *FeFeed - 9.0556

· Salt Roast - A Ti-magnetite concentrate sample from the MML was provided to MINTEK (South Africa) to investigate vanadium extraction characteristics based on the alkali (sodium) salt-roast process. Roasting and leaching tests were conducted on the vanadium-bearing concentrate to determine the extraction efficiencies based on the following varied temperature and roasting time parameters.

Based on the test results, literature sources and industry standards the following parameters were selected for this study:

- a hot zone roasting temperature of 1,150 °C which corresponds to industry benchmarks for a combination of sodium carbonate and sodium sulphate salt feed to the kiln;

- a hot zone roasting time of one hour which, corresponds to industry benchmark; and

- a vanadium recovery of 83 % based on the sodium carbonate test results.

Project Infrastructure

The envisaged production of 9,525 tpa does not present infrastructure constraints. Moreover, the Project Area is well serviced with infrastructure, being located in a well-established mining district with existing world-class mining operations:

Service infrastructure

· Rail & Road: The envisaged V2O5 product volumes (9,525 tpa) can be transported to market easily either by road or rail. A well-serviced network of paved roads connects the Project Area to the ports of Richard's Bay (South Africa) or Matola (Mozambique). A railway line with sufficient capacity for the envisaged V2O5 production passes 45 km from the Project Area;

· Port: Options exist in the form of the Richard's Bay Terminal (KwaZulu Natal, South Africa) and the Matola Terminal (Maputo, Mozambique), both of which are undergoing capacity expansions;

· Power: The power supply has been identified as a main Eskom line approximately 10 km from the mine with the existing Eskom servitude on the public road being identified as the route for the incoming line. Back up from a minimum 5 MVA permanent on site diesel generator will be ensured to reduce the risks associated with any potential load shedding. Moreover, power supply from the national grid will be supplemented by 9,600 MW with the progressive commissioning of both the Medupi and Kusile power stations over the next 5 years. Power supply is therefore not considered a constraint;

· Water: It is anticipated that raw water will be provided to site via a new pipeline to be installed from the Flag Boshielo Dam (Olifants River). The Olifants River Water Resources Development Project plans to build a pipeline from the Flag Boshielo Dam to Mokopane to meet the domestic and industrial needs of the area. This pipeline is currently being constructed; however it is anticipated to be able to supply water by 2020. Pamish is liaising with the relevant authorities (Trans-Caledon Tunnel Authority ("TCTA")) to register its water requirements. Prior to 2020, during the Project development and commissioning it is anticipated that existing, identified ground water sources in the Project Area will provide the needed water; and

· Coal: The project is ideally located in close proximity of coalfields that produce suitable coal for feed into the rotary kiln. It is envisaged that coal in the required volumes would be available from nearby mines.

Mining infrastructure

In order to enable mining of Pit 1 and Pit 2, the following infrastructure will be provided:

· bulk water supply and electrical reticulation:

- bulk water is stored at the receiving area from the local bulk water suppliers; and

- electricity from the Eskom Incomer yard to the concentrator, salt roast plant and bulk material handling point of distribution;

· waste water treatment, carried out at a water treatment facility in the concentrator area;

· clean and dirty water runoff channels located at strategic points in and around the mining areas at points determined via interaction with environmental specialists;

· mining contractor laydown area, including operational facilities;

· requisite fencing of the mining and plant operations; and

· pollution control dams including piping and pumping systems to treatment facility located within the process plant.

Waste Infrastructure - Residue Disposal Facility and Stockpiles

Residue disposal facility ("RDF") and Stockpile facilities have been allocated in line with existing environmental legislation for classified waste. The RDF comprises the tailings from the magnetic separation ("Magsep") process and includes:

· a Class C lined Tailings Storage Facility ("TSF").

· a concrete Return Water Sump ("RWS"); and

· a Class C lined Storm Water Dam ("SWD").

The waste assessment norms and standards are articulated in government regulations according to concentration thresholds of particular elements or chemical substances found within the waste.

The calcine, lime cake and sodium sulphate RDF, known as the calcine RDF, comprises:

· a three-phased Class A lined Dry Stack Facility. A Class A liner is a legal requirement for all Type 1 Waste (i.e. the calcine and lime cake and sodium sulphate). It is a "double" liner system comprising of two layers of clay, and two HDPE geomembranes, all underlain by a leakage detection system. Type 1 wastes are classified as products of chemical substance of above LCT2 but below or equal to LCT3 limits; or above TCT 1 and below or equal to TCT2 levels;

· a concrete RWS; and

· a Class A lined SWD.

The Environmental Impact Assessment ("EIA") for Pamish has been conducted and has presented guidelines for all of the Pamish tailings and stockpile infrastructure. This includes both the Low and Lower Grade stockpiles and the Magsep RDF.

The EIA for SaltCo has still to be conducted. This EIA will address all of the associated tailings for SaltCo, (i.e. the calcine, lime cake and sodium sulphate RDF).

Environmental Aspects

The Project site is surrounded by several communities and farmers who could potentially be impacted through the development of the Project.

Pamish is in the process of obtaining the necessary environmental authorisations and aims to comply with all relevant legal requirements. In terms of the requirements of the Mineral and Petroleum Resources Development Act, 2002 as amended (Act No. 28 of 2002) ("MPRDA"), an application for a Mining Right ("MRA") was submitted in March 2015, to the DMR for the Project through the South African Mineral Resource Administration System ("SAMRAD") online portal under Reference LP 30/5/1/1/2/10102 MR; Key tasks that need to be completed to secure the Mining Right include the following:

· EIA and Environmental Management Plan ("EMP") in accordance with the MPRDA in support of the MRA and environmental authorisation in accordance with the National Environmental Management Act, 1998 (Act No. 107 of 1998) ("NEMA");

· Public Participation Process in accordance with the EIA 2014 Regulations (GN R982 published in Government Gazette 38282 of 4 December 2014);

· Specialist investigations in support of the EIA Report and EMP;

· Integrated Water Use Licence Application ("IWULA") in compliance with the National Water Act, 1998 (Act No. 36 of 1998) ("NWA");

· Approval from the South African Heritage Resources Development Agency ("SAHRA") in terms of the National Heritage Resource Act, 1999 (Act No. 25 of 1999) ("NHRA"); and

· Waste Management Licence ("WML") in compliance with the National Environmental Management: Waste Act, 2008 (Act No. 59 of 2008) ("NEM:WA").

The purpose of the EIA process is to ensure that potential environmental and social impacts associated with construction, operation and closure of a project are identified, assessed and appropriately managed. There are two primary phases of an EIA process, namely the scoping phase and the impact assessment phase. Identification of potential impacts occurs during the scoping phase, whilst the assessment and mitigation of those impacts occurs during the impact assessment phase. Both phases have been completed and are awaiting approval by the regulatory authorities. These have included numerous specialist studies that were undertaken as part of the EIA process.

A Public Participation Process was completed during which landowners, communities, traditional structures and other Interested and Affected Parties ("I&Aps") were consulted.

Key environmental authorisations to be completed for the proposed salt roast plant are not material to the mining right application. They have been identified and include:

· environmental authorisation for Listed Activities as per NEMA EIA 2014 Regulations;

· WML in compliance with the National Environmental Management Waste Act 1998 (Act No. 59 of 2008) ("NEM:WA");

· an Atmospheric Emissions Licence ("AEL") application and authorisation from the Waterberg District Municipality as per the requirements of the National Environmental Management: Air Quality Act, 2004 (Act No. 39 of 2004) ("NEM:AQA"); and

· Water Use Licence Application ("WULA") in compliance with the National Water Act, 1998 (Act No. 36 of 1998) ("NWA").

Vanadium market

Properties and uses of Vanadium

Vanadium is a grey, soft, ductile high value metal whose main application is in the steel industry where it lends its high strength-to-weight characteristics, corrosion resistance, weldability and fabricability. Other uses include application in vanadium-containing titanium alloys, and various chemical uses, the most significant of which is its use in utility scale energy storage battery systems.

Consumption

Vanadium consumption is concentrated, with the steel sector accounting for about 90 % of global vanadium consumption. Growing intensity of use of vanadium in steel has seen vanadium consumption grow at a compound annual growth rate ("CAGR") of 7.4 % compared to a 3.6 % CAGR growth in steel production, and is expected to continue being a significant driver of vanadium consumption growth into the future, especially in China which at 46 % of global vanadium consumption, is the largest vanadium consumer in the World. Key to this growing intensity of use of vanadium is greater enforcement of legislation seeking to phase out the use of lower strength steel and replace it with higher strength steel (i.e., Grade III rebar).

The growing energy storage market could also present a step change opportunity for vanadium demand outlook through vanadium-based, utility-scale vanadium redox flow battery ("VRFB") technology. This could see vanadium consumption in the chemicals sector, as vanadium electrolyte, grow from the low levels of approximately 3.5 % (2014). The energy storage market is expected to top US$ 300 billion by 2030, according to various market forecast reports, with vanadium-based energy storage systems estimated to capture a significant share of this market. VRFB's possess scalability, quick recharge rate and nearly unlimited ability to recharge without performance degradation; aspects which are touted as making them attractive in utility-scale applications. The industry estimates that the successful commercialisation of VRFBs could provide a market for up to 10,000 tpa of vanadium pentoxide.

Supply

Vanadium supply is also concentrated both geographically and in terms of type of production. Approximately 80 % to90 % of the global supply of vanadium is from three countries, namely China (53 %), South Africa (20 %) and Russia(17 %). The majority of the vanadium produced (approximately 64 %) is from vanadium slag produced as a co-product in smelting vanadium-bearing magnetite iron ores (co-producers) during the steel production process. The slag is further processed via a roast-leach process in countries with ferrovanadium conversion facilities (e.g. in Czech Republic, South Korea and Japan). A significant amount of vanadium (approximately 20 %) is produced directly from vanadium-bearing magnetite ores with sufficiently high vanadium grades (primary producers), mostly located in South Africa, via a roast-leach process. About 12 % of global vanadium supply is produced from secondary sources.

Vanadium supply from steel plant co-producers, however, is threatened by a combination of the constrained economics of the Chinese co-producer steel mills, driven by high cost low grade iron ore feedstock and a low steel price environment. The availability of cheap higher quality seaborne haematite iron ore presents opportunities for steel plant co-producers, especially the coastal plants, to replace high cost captive vanadium-bearing iron ore, thus reducing availability of vanadium slag.

Market balance

The demand and supply of vanadium have largely been in balance in 2014/15. Lower vanadium consumption that could be expected from negative steel production growth in China, is off-set by a proportionately larger decrease in vanadium slag feedstock supply from co-producer steel production and a still growing intensity of use of vanadium in produced steel. This could have the effect of driving the market towards a vanadium supply deficit, reducing, or eliminating excess vanadium inventories and returning fundamentals to drive vanadium prices going forward, the most significant of which is the cash cost of production.

Cash costs

Roskill estimates costs for V2O5 of US$ 3.50/lb, US$ 4.50/lb and US$ 6.00/lb for co-product, primary vanadium and secondary vanadium production respectively. Roskill further forecasts that, based on current consumption level, the cash cost of the least economic units necessary to meet demand is roughly US$ 6.00/lb V2O5 (US$ 13/kg V2O5 or US$ 23/kgV).

Prices

Roskill estimates that a recovery in FeV prices to about US$ 21 to US$ 24/kgV is likely by 2017 (FeV prices quoted as US$ per kilogram of vanadium). Over the longer term, this price level is expected to offer insufficient incentive to encourage the development of new supply or increases in secondary output. Assuming ongoing growth in demand, a further recovery (in real terms) to about US$ 24/kgV to US$ 27/kgV could be expected. In nominal terms, the effects of inflation and an eventual recovery in energy prices will likely lead to higher vanadium prices.

A price of US$ 7.50/lb (US$ 16.53/kg) for V2O5 flakes at >98 % purity is assumed for the Project. This approximates the 10 year historical average of US$ 7.63/lb (Jun 2005 - May 2015), and is approximately 17 % higher than the 15 year historical average of US$ 6.39/lb (Jun 2000 - May 2015).

Capital and Operating Cost Estimates

The accuracy of the capital and operating expenditure ('capex' and 'opex', respectively) presented in the Pre-Feasibility Study are considered to be within a PFS-level of accuracy of ±25% unless otherwise stated.

The economic analysis for the Project was completed for a 1,000 ktpa RoM and concentrator plant capacity which is equivalent to a production of 673 ktpa of vanadium-containing magnetite concentrate, which in turn is fed into a salt roast plant to produce 9,525 tpa of vanadium pentoxide (V2O5) flakes (99.5 % contained V2O5). The business case metrics are set out in Table 7 below.

Table 7: Business case metrics

The Project will be developed under a "two operating company model". The Mine/Concentrator will be owned by Pamish, the company which is the current holder of the Prospecting Rights for the Project and which has submitted the Mining Right Application to the Department of Mineral Resources (DMR). The Salt Roast Plant will be owned by a company still to be formed (SaltCo), a subsidiary of Bushveld Minerals. The results presented herein are on a consolidated basis for the two companies.

The summary of Project establishment capital expenditure is set out in Table 8 below.

Table 8: Capital expenditure schedule - includes contingencies

A summary of operating cost metrics is set out in the Table 9 below. The US$ cost per pound of V2O5 compares favourably to the Project's industry peers.

Table 9: Salient cash operating metrics of the Project

Note: SRP - Salt Roast Plant

A long term Rand/US$ exchange rate has been set at ZAR 12.75.

Financial Analysis

The results of the financial evaluation of the Project show attractive economics for the base case of 1.0 Mtpa RoM, producing a 672,000 tpa of V2O5 concentrate which is in turn processed in a salt roast plant to produce 9,525 tpa V2O5. The base case produces a pre-tax NPV9.0 and IRR of US$ 418.0 million and 24.8 % respectively. The post-tax NPV9.0 and IRR, based on a simple application of a corporate tax rate (28 %) are US$ 295.3 million and 20.36 % respectively. These results are summarised in Table 10 below.

Table 10: Base Case Financial Evaluation Results Summary

A long term term Rand/US$ exchange rate of ZAR 12.75 was used. A Rand/US$ exchange rate of ZAR 14.03 to the US$ (10 % weaker than the assumed long term rate of ZAR 12.75/US$ and approximately equal to the rate on the effective date of this report), increases the real NPV to US$ 463.7 million and the real IRR to 27.1 % on a pre-tax basis and US$ 292.1 million and 22.2 % on a post-tax basis.

Once the Project is fully operational and a discount rate more commensurate with an operational weighted average cost of capital ("WACC") is applied, significant NPV will be added to the shareholders of the Project (at a real discount rate of 6% the NPV of the Project is US$ 698.4 million on a pre-tax basis and US$ 454.8 million on a post-tax basis.

A sensitivity analysis was undertaken to test the robustness of the project and the results thereof are shown in Table 11 below for the parameters with the most impact.

Table 11: Sensitivities of the Consolidated Project Pre-tax NPV (Real US$ million) to changes in key metrics