Bushveld Minerals Regulatory News (BMN)

Market Abuse Regulation ("MAR") Disclosure

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR. 

21 July 2021

Bushveld Minerals Limited

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

Q2 2021 and H1 2021 Operational Update

Bushveld Minerals Limited (AIM: BMN), the AIM quoted, integrated primary vanadium producer and energy storage solutions provider with ownership of high-grade assets in South Africa, is pleased to provide an operational update for the three months and six months ending 30 June 2021 ("Q2 2021 and H1 2021"). 

Key Highlights

Bushveld Vanadium

· Group production in Q2 2021 of 886 mtV (Q1 2021: 688 mtV), underpinned by improved operational stability at Vametco in the period.

- Vametco produced 278 mtV and 261 mtV for the months of May and June respectively, as a result of improved operational stability and performance following the 35-day maintenance shutdown in Q1 2021.

- Vametco's monthly production run-rate forecast for the rest of the year maintained at approximately 240 mtV as a result of planned maintenance strategy to enable operational stability.

- Vanchem produced 293 mtV in Q2 2021 in line with Q1 2021 (Q1 2021: 293 mtV).

- Vanchem is expected to maintain its current monthly production levels of approximately between 90 mtV to 100 mtV, through the support of feedstock from the upper seam at Vametco.

· Group sales in Q2 2021 of 820 mtV1 (Q1 2021: 788 mtV), supported by higher production volumes at Vametco.

· On track to meet 2021 Group production guidance of between 3,400 mtV and 3,600 mtV.

· Recent unrest in South Africa, during July 2021, has not impacted production, but the Group has experienced logistics delays in getting final product to the port.

· Logistics delays have now been resolved although general international seaborne logistics pressures due to the COVID-19 pandemic remain. We continue to monitor the international logistics situation closely. The Group expects to maintain export volumes during Q3 2021.

· Q2 2021 Total Injury Frequency Rate ("TIFR") of 1.74, an improvement of 95 per cent relative to Q2 2020 (Q2 2020: 36.34), as a result of improved risk assessment and mitigation measures.

1: Reported as final sales to customers.

Vanadium market

· Q2 2021 London Metal Bulletin ("LMB") Ferrovanadium price averaged US$36.0/kgV, 17 per cent and 44 per cent higher than Q1 2021 (US$30.9/kgV) and Q2 2020 (US$25.0/kgV) respectively. The LMB Ferrovanadium price was US$40.13/kgV as at 16 July 2021.

· The vanadium market is expected to strengthen for the remainder of the year, according to Roskill, driven by higher demand as well as tighter supply, as Chinese steel slag producers are operating at close to capacity. Prices are expected to remain strong in 2021 and gain further momentum in 2022 and 2023, given the predicted market tightness. The Company expects the market fundamentals to continue to support prices going forward.

· Iron ore prices rose to their highest levels in the last five years, exceeding the US$200/t level in May 2021, implying continuing disincentive for vanadium co-producers to blend local vanadium bearing magnetite feedstock with seaborne hematite ores. Prices are anticipated to decline as the Chinese government actively tries to control raw material prices.

Fortune Mojapelo, CEO of Bushveld Minerals Limited, commented: 

"We are pleased to report a significant increase in quarterly production in Q2 2021, albeit from a low production base in Q1 2021. More than the production volume improvements, it is positive to see improved operational stability at Vametco, as a result of not only the extended 35-day maintenance shutdown, but also of several operational improvements, which include a greater discipline in our proactive maintenance practices, process control from the technical team and people development strategy. While Vametco's improvements are welcome, we are retaining our monthly production target of 240 mtV, allowing for any planned maintenance to be executed as part of the production stability plan. We remain on track to meet the annual Group production guidance of between 3,400 mtV and 3,600 mtV.

"In addition, we intend to complete the now expanded prefeasibility studies ("PFS") at Vametco together with the technical studies currently under way at Vanchem in Q4 2021. These studies will determine the optimal path to increase production from Vametco and Vanchem in the most capital efficient manner.

"We are pleased to see strong demand sustained by the increase in Chinese steel production, while momentum continues to build in the application of Vanadium Redox Flow Batteries in the growing energy storage sector. Consequently, we expect the market fundamentals to continue to support the vanadium price going forward. 

"In spite of our rigorous COVID-19 mitigation measures, the third wave of the pandemic in South Africa has seen a significant increase in infection rates among our employees with 54 active cases currently. This has not had a material impact on our operations, and we hope each employee achieves a speedy recovery. Moreover, we are pleased to have commenced the vaccination programme for both the Vametco and Vanchem employees, including Impala Platinum kindly agreeing to collaborate on the use of their vaccination centre for our employees at Vametco.

The recent unrest in South Africa has not impacted production. The Group has experienced logistics delays in getting the final product to the port, these delays have now been resolved. We are monitoring the international logistics situation closely, given the pre-existing COVID-19 related delays but expect the Group to maintain export volumes during Q3 2021." 

Conference call

Bushveld Minerals Chief Executive Officer, Fortune Mojapelo, Finance Director, Tanya Chikanza and Francois Naude, Director of Operations; will host a conference call at 09:00 am UK time (10:00 am SAST) today to discuss the quarterly update with analysts. Participants may join the call by dialling:

Tel: United Kingdom: +44 (0) 330 336 9126; South Africa: +27 11 844 6054

Pin: 9724471 

A replay of the conference call will be available on the Company's website post the call.

Bushveld Vanadium

1. mtV = metric tonnes of vanadium.

Vametco

Table 1: Operational highlights for Vametco (on a 100% basis)1

1. Based on provisional, unaudited figures. Bushveld's net attributable interest of the above figures is approximately 74 per cent. Production cash cost is based on vanadium produced.

2. Repairs to the primary crusher civils enabled mining operations to concentrate on waste mining, thereby increasing the stripping ratio. This increase is a temporary departure from the steady state figure.

3. Recoveries impacted by April slower start-up.

4. mtV = metric tonnes of vanadium.

5. Excludes depreciation, royalties and selling, general & administrative expenses and cost associated with COVID-19. Production cash cost is based on vanadium produced. Production cash cost (C1) measure does not have any standardized meaning prescribed by IFRS and differs from measures determined in accordance with IFRS. This measure is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. This measure is not necessarily indicative of net earnings or cash flow from operating activities as determined under IFRS.

· Q2 2021 production of 593 mtV was 50 per cent higher than Q1 2021 (Q1 2021: 395 mtV), underpinned by improved operational stability in Q2 2021 following the completion of the 35-day maintenance shutdown in Q1 2021, partially offset by the unprotected industrial action in April 2021.

· H1 2021 production of 988 mtV, was 19 per cent lower than H1 2020 (H1 2020: 1,226 mtV), due to poor plant performance in Q1 2021 and the unprotected industrial action in April 2021, subsequently followed by improved performance and stability in Q2 2021.

- Since the successful completion of the shutdown, operational stability and performance have improved owing to enhanced equipment reliability and proactive maintenance programmes. This resulted in May and June production of 278 mtV and 261 mtV respectively, with notable improvements in the stability of the Kiln on-line time and recoveries at the leach section above 85 per cent for the past 60 days.

· Q2 2021 production cash cost (C1) of US$25.8/kgV, was three per cent lower than Q1 2021 (Q1 2021: US$26.5/kgV), as a result of higher volumes in Q2 2021.

· H1 2021 production cash cost (C1) of US$25.9/kgV, a 52 per cent increase relative to H1 2020 (H1 2020: US$17.1/kgV), due to lower production volumes and a stronger ZAR:USD exchange rate.

· 2021 production guidance maintained to between 2,300 mtV and 2,400 mtV, and production cash cost (C1) of between US$23.70/kgV and US$24.20/kgV (ZAR339/kgV and ZAR345/kgV).

- Monthly production run rate forecast for the rest of the year maintained at approximately 240 mtV as a result of planned maintenance strategy to enable operational stability.

Growth Projects

Vametco Phase III PFS

The scope of work of the PFS for Vametco has been extended to include upgrading the concentrate section to a Semi-Autogenous Grinding mill and life of mine of Open Pit with higher production to supply both Vametco and Vanchem, making Vametco the single ore supply for both operations for the medium-term. Details on the ramp-up profile and capital expenditure plans will be provided once the PFS has been completed, which is expected in Q4 2021.

The Upper Seam Project

The Upper Seam portion of the Vametco resource ("The Upper Seam Project") has been earmarked as a near-term source of feedstock for Vanchem to replace the ore stockpile acquired with the plant which is expected to deplete at the end of Q3 2021. The source of the ore will be the Upper Seam reserve and stockpile, which has a V2O5 grade in magnetite of 1.76 per cent and magnetite content of 65 per cent in ore, superior to previous third-party suppliers. This will be upgraded to 80-85 per cent magnetite in ore with a mass yield of 80 per cent, using the temporary ore processing unit. With a reserve base of approximately 0.9 Mt of ore and resource base of 16 Mt, the Upper Seam Project will supply Vanchem with a significant proportion of its ore requirement for 18 months and has the ability to supply 34 kt of ore per month commencing at the end of Q3 2021, removing the necessity of relying exclusively on third-party sources of ore over this period. In addition, the Company is investigating the potential to extend this supply beyond the initial 18 months.

Vanchem

Table 2: Operational highlights for Vanchem

1. Recoveries were positively impacted as a result of the positive restatement ore stockpile levels.

2. mtV = metric tonnes of vanadium.

3. Excludes depreciation and selling, general & administrative expenses and cost associated with Covid-19. Production cash cost is based on vanadium produced. Production cash cost (C1) measure does not have any standardized meaning prescribed by IFRS and differs from measures determined in accordance with IFRS. This measure is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. This measure is not necessarily indicative of net earnings or cash flow from operating activities as determined under IFRS.

· Q2 2021 production of 293 mtV was in line with Q1 2021 (Q1 2021: 293 mtV), anchored to continued operational stability. H1 2021 production of 586 mtV was 35 per cent higher than H1 2020 production (H1 2020: 435 mtV), as a result of the temporary suspension of operations in Q2 2020 due to the 21-day COVID-19 nationwide shutdown in South Africa.

- Production numbers are provided at the time of reporting, after which, based on customer demand, chemicals and flake may be further processed to the required finished product, which will result in production and cost adjustments in line with the demand profiles of the various products.

· Q2 2021 production cash cost (C1) of US$30.9/kgV, was 0.7 per cent higher than Q1 2021 (Q1 2021: US$30.7/kgV), due to a marginally stronger ZAR: USD exchange rate. H1 2021 production cash cost (C1) of US$29.5/kgV, a 46 per cent increase relative to H1 2020 (H1 2020: US$20.2/kgV), due to the higher cost of raw material, increased maintenance and staff costs as well stronger ZAR: USD exchange rate.

· 2021 production guidance maintained to between 1,100 mtV and 1,200 mtV, production cash cost (C1) of between US$30.3/kgV and US$31.1/kgV (ZAR434/kgV and ZAR444/kgV).

· At Vanchem, the ore stockpile acquired with the plant, is expected to deplete at the end of Q3 2021. Vanchem's immediate strategy is to source feedstock either from the Upper Seam at Vametco, which timing coincides with depletion of the existing ore, or to procure ore from third-parties when prices are more competitive when compared to the Upper Seam costs or have other operational and/or blending advantages. We have to date been successful in procuring quantities of third-party ore and additional opportunities are also being considered.

Vanchem Refurbishment programme - Phase I

· Vanchem's Kiln 3 has similar properties to that of Vametco Kiln. It has a length of 90 metres and 4.0m in diameter. In addition, Kiln 3 covers 50 per cent of Vanchem's installed capacity, with Kiln 2 and Kiln 1 at 25 per cent respectively. More details of the ramp-up profile and capital expenditure plans will be provided once the technical studies are completed in Q4 2021.

· Vanchem's production is expected to increase from 1,100 mtV to a production run rate of 2,600 mtVp.a. by the end of 2022, supported by the commissioning of Kiln 3 and associated downstream expansions.

Bushveld Vanadium production profile

· Bushveld Vanadium is targeting to materially grow its vanadium production and achieve an annualised steady state production run rate of between 5,000 mtVp.a. and 5,400 mtVp.a. by the end of 2022.

- Priority at Vametco is to achieve a sustainable and consistent output of 2,800 mtVp.a.

- By bringing Kiln 3 onstream Vanchem will achieve a production run rate of 2,600 mtVp.a.

· Pre-feasibility studies are in progress at both Vametco and Vanchem to determine the optimal path to increase production to a steady state production run rate of between 6,400 mtVp.a. and 6,800 mtVp.a. in the medium-term and to a steady state production run rate of 8,400 mtVp.a. in the long-term.

COVID-19 Response

· In June 2021, the South African government, announced that the country had entered the third wave of COVID-19 and implemented an adjusted level 4 with additional restrictions. Bushveld Minerals has responded by proactively implementing measures over and above existing protocols including amongst others:

- Reduced staff on site by splitting day staff, workshops, and foreman into shifts.

- Prevent physical contact between shifts through scattered lunch breaks.

- Transferred all meetings to virtual platforms.

- Vametco also provides isolation facilities to minimise the potential of exposure to staff family members.

· The Group has recorded 54 active COVID-19 cases among employees. Whilst production remains unaffected additional protocols have been introduced to minimise infections and potential exposures. We continue to monitor exposure and infection cases daily.

· We commenced the vaccination programme, during the week of 12 July 2021, for employees and contractors of over 35 and 50 age groups.

ENDS

Enquiries: info@bushveldminerals.com

ABOUT BUSHVELD MINERALS LIMITED

Bushveld Minerals is a low-cost, vertically integrated primary vanadium producer. It is one of only three operating primary vanadium producers, owning 2 of the world's 4 operating primary vanadium processing facilities. In 2020, the Company produced more than 3,600 mtV, representing approximately three per cent of the global vanadium market. With a diversified vanadium product portfolio serving the needs of the steel, energy and chemical sectors, the Company participates in the entire vanadium value chain through its two main pillars: Bushveld Vanadium, which mines and processes vanadium ore; and Bushveld Energy, an energy storage solutions provider. Bushveld Vanadium is targeting to materially grow its vanadium production and achieve an annualised steady state production run rate of between 5,000 mtVp.a. and 5,400 mtVp.a by the end of 2022, from projects currently being implemented. Beyond that, pre-feasibility studies are in progress to determine the optimal path to increase production even further to a steady state production run rate of between 6,400 mtVp.a. and 6,800 mtVp.a. in the medium-term and to a steady state production run rate of 8,400 mtVp.a in the long term.

Bushveld Energy is focused on developing and promoting the role of vanadium in the growing global energy storage market through the advancement of vanadium-based energy storage systems, specifically Vanadium Redox Flow Batteries ("VRFBs").

Detailed information on the Company and progress to date can be accessed on the website www.bushveldminerals.com 

About Vametco

Vametco is located near Brits on the Western Limb of the Bushveld Complex. The integrated operation comprises a vanadium ore mine and a processing plant that produces mostly Nitrovan, a trademark product sold in major steel markets across the world. The mine lies adjacent to the Brits Vanadium Project, which will in future serve as an alternative source of near surface run of mine ("ROM") ore feed to the Vametco plant.

The Vametco mining operation uses open pit bench mining methods to mine a well-defined orebody. The deposit is continuous with limited faulting and dips in a northerly direction at approximately 19 degrees.

ROM ore is fed into a primary, secondary and tertiary crushing circuit, followed by milling and magnetic separation to produce magnetite concentrates. The magnetite concentrates are fed into the extraction process which includes the kiln for roasting followed by leaching and precipitation. Thereafter the precipitated vanadium as ammonium metavanadate is converted to modified vanadium oxide ("MVO") in rotary calciners. MVO is fed into the mix plant and finally into the shaft furnaces to produce Nitrovan.

About Vanchem

Vanchem is situated at Ferrobank Industrial Park in Emalahleni Local Municipality, Mpumalanga Province in the Republic of South Africa. Vanchem is a primary vanadium producing facility with a beneficiation plant capable of producing various vanadium oxides, ferrovanadium and vanadium chemicals. Vanchem uses the salt roast beneficiation process, similar to the one used at Vametco. The plant comprises: a core salt-roast processing plant, including 3 roasting kilns, an electric smelting ferrovanadium converter, an alumino-thermic smelting facility, also located at Highveld, a vanadium chemical plant; and a rail siding linking the plant with Bushveld deposits and additional potential supply sources through the national rail network.