Bushveld Minerals Regulatory News (BMN)

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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.

24 November 2020

Bushveld Minerals Limited

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

Q3 and 9 months 2020 Operational Update

Bushveld Minerals Limited (AIM: BMN), the AIM quoted, integrated primary vanadium producer and energy storage provider, with ownership of high-grade assets in South Africa, ("Bushveld"), is pleased to provide its third quarter and nine months ending 30 September 2020 ("Q3 2020" and "9M 2020") operational update.

Key Highlights

Bushveld Vanadium

· Group production for Q3 2020 of 1,019 mtV was 31 per cent higher than Q2 2020 (Q2 2020: 778 mtV) due to the lifting of the nationwide lockdown, which occurred in Q2 2020.

· Group production for 9M 2020 of 2,667 mtV was 37 per cent higher than 9M 2019 (9M 2019: 1,953 mtV), as a result of the inclusion of the Vanchem processing assets for the full nine month period.

· Group sales for 9M 2020 of 2,987 mtV1 was 74 per cent higher than 9M 2019 (9M 2019: 1,719 mtV), as a result of the inclusion of sales from Vanchem.

· Severe weather conditions at the beginning of November 2020 resulted in an unexpected longer than normal power outage at Vametco, impacting the refinery section.

· Despite this incident, and assuming there are no further stoppages, the Group still expects to meet the lower end of its full year production guidance range of between 3,660 mtV and 3,950 mtV.

1. Includes intercompany sales of 446 mtV comprised mainly of Vametco product being sold to Vanchem for further processing.

Vametco

· Production for Q3 2020, in the form of Nitrovan and Ferrovanadium, was 725 mtV, 29 per cent higher relative to Q3 2019 (Q3 2019: 561 mtV) as a result of reduced commissioning and ramp-up time following the tie-in of the Kiln-Off Gas compared to the 2019 maintenance shutdown.

· Production for Q3 2020 was 28 per cent higher than Q2 2020 (Q2 2020: 566 mtV) due to the lifting of the nationwide lockdown which occurred in Q2 2020.

· Production for 9M 2020 was 1,942 mtV, this is in line with the production from 9M 2019 (9M 2019: 1,953mtV), despite the impact of the nationwide lockdown and changes in work arrangements, in line with Covid-19 guidelines.

· Production cash cost (C1) for Q3 2020 was US$18.10/kgV, a 12 per cent decrease relative to Q3 2019 (Q3 2019: US$20.60/kgV), as a result of a weaker ZAR:USD exchange rate.

· Production cash cost (C1) for 9M 2020 was US$17.50/kgV, an 11 per cent decrease relative to 9M 2019 (9M 2019: US$19.70/kgV), due to a weaker ZAR:USD exchange rate.

· Despite the recent power outage, assuming there are no further extraneous incidents, Vametco expects to meet the lower end of its 2020 production guidance range of 2,700 mtV to 2,850 mtV and the higher end of its production cash cost (C1) guidance of between ZAR295/kgV and ZAR300/kgV (US$17.50/kgV and US$17.90/kgV).

Vanchem

· Production for Q3 2020 was 294 mtV, 39 per cent higher than Q2 2020 production (Q2 2020: 212 mtV) due to the lifting of the nationwide lockdown in Q2 2020. Production for the 9M 2020 was 725 mtV.

· On track to meet 2020 production guidance of 960 mtV to 1,100 mtV and production cash cost (C1) guidance of between ZAR310/kgV and ZAR320/kgV (US$18.40/kgV and US$19.0/kgV).

Covid-19 Response

· On 21 September 2020, the South African government moved the lockdown status to a level 1, allowing the majority of the economy to operate with minimal restrictions. We continue to adhere to the South African health authority protocols on dealing with the Covid-19 pandemic.

· The process and procedures that we have implemented at our operations continue to work as cases were sporadic during the period. As a result of these measures, we have been able to continue operating since restarting in May 2020.

Bushveld Energy

· During the period, the acquisition of Enerox GmBH as part of the investment consortium, was completed.

· On 11 November 2020, the Company provided an update on the Vametco Mini-Grid project being developed at the Vametco vanadium mine comprising of 3.5 megawatts ("MW") of solar photovoltaic ("PV") (previously 2.5 MW) generation and 4 megawatt hours ("4MWh") of vanadium redox flow battery ("VRFB") energy storage. Abengoa was appointed to provide Engineering, Procurement and Construction ("EPC") of the project, including the integration of the solar and energy storage systems. Thebe Investment Corporation was announced as a strategic equity partner in the development and funding of the Mini-Grid project.

· In addition, Bushveld announced signing a contract for electrolyte rental with Pivot Power, part of EDF Renewables, under a partnership with Invinity Energy Systems.

Vanadium and VRFB Markets

· Increased Chinese demand during Q3 2020 resulted in price disparities between China and the rest of the world for a short period. This de-synchronisation between China and the rest of the world translated into temporary price premium for vanadium products. As a result, Chinese imports surged and in turn inventory levels increased. The vanadium prices in China have since retracted to similar levels seen across other regions due to increased supply of vanadium products.

· The increased infrastructure spending in China has resulted in higher steel production, supporting vanadium demand, with China been a net vanadium importer during the months of July, August and September 2020. 

· The weak demand in Europe as a result of further lockdown measures being introduced, as well as constrained demand in the United States, is expected to continue until the end of 2020.

· However, we expect increased deployment of VRFBs demand, as governments focus on accelerating the energy transition to a low-carbon energy future, which will increase vanadium demand.

· The London Metal Bulletin Ferrovanadium price averaged US$25.2/kgV in nine months ended 30 September 2020, 47 per cent lower than 9M 2019 (9M 2019: US$47.70/kgV). The spot price was US$23.30/kgV as at 30 October 2020.

Corporate Developments

· On the 23 October 2020, Bushveld Minerals announced that it had received receipt of Exchange Control authorisation from the South African Reserve Bank Financial Surveillance Department, a key condition for the completion of the US$30 million Production Financing Agreement with Orion Mine Finance announced on 30 September 2020. Progress is being made in regard to the outstanding material conditions. 

· On the 9 November 2020, The Company announced that it had successfully raised US$35 million through a Convertible Loan Note Instrument ("Instrument") with Orion Mine Finance ("Orion"). Orion has agreed to subscribe for up to the entire US$35 million of convertible loan notes under the Instrument. As an adjustment to the previously announced terms of the Instrument the conversion price of the convertible loan notes has been set at 17 pence. All other terms remain unchanged. The proceeds from the issue of the convertible loan notes will go towards the first phase of Vanchem's critical refurbishment programme and debt repayment. The issue of the convertible loan notes is conditional, inter alia, on completion of the US$30 million Production Financing Agreement.

· A general meeting of shareholders has been convened for 10 a.m. on 27 November 2020 at Oak House, Hirzel Street, St. Peter Port, Guernsey GY1 3RH to approve, the necessary additional authorities to issue the maximum amount of shares arising on conversion.

· Following the implementation of the Company's incentive schemes in 2019, their effectiveness has been reviewed and the Remuneration Committee ("RemCo") considered changes to the short-term incentive scheme ("STI") construct to reward performance that supports the delivery of the business strategy appropriately. It was found that the deferred equity component of the STI was mirroring the long-term incentive scheme structure, which was considered too onerous for an STI. Consequently, RemCo has approved a revised vesting period so that 50 per cent of the shares vest 12 months after the end of the award period and 50 per cent 18 months after the end of the award period. This amendment will be applied retrospectively to the 2019 STI Bonus Awards announced by the Company on 20 July 2020.

Fortune Mojapelo, CEO of Bushveld Minerals Limited, commented: 

"As we head into the final weeks of a very eventful year, I am pleased to report a solid set of Q3 numbers from our two production assets. We have maintained our intense focus on these assets throughout 2020 as they are at the core of Bushveld's growth story.

Ensuring the health and safety of our people was a key part of this focus, and I would like to thank all of our employees for playing their part in combatting Covid-19 which ultimately resulted in the extremely low infection levels and lack of any significant outbreak at our operations. This success was a result of all of the hard work and controls implemented and adhered to by staff at all levels.

This stability has allowed us to proceed with our growth plans, supported by the funding that Orion Mine Finance has committed to provide both through the Production Financing Agreement and Convertible Loan Note which was announced in recent weeks.

It is also exciting to be reporting to you at a time where positive news around a Covid-19 vaccine has also lifted sentiment and hope for the world returning to normal in the not too distant future. This bodes well for demand from the underlying steel market in Europe and the US, economies that have been the hardest hit by the virus.

Bushveld Energy closed the Enerox acquisition together with other investment partners and achieved significant milestones on its first solar and VRFB mini-grid project during the period under review and in recent weeks.

Unfortunately, post Q3 2020, extraneous weather conditions resulted in an unexpected power outage at Vametco, impacting the refinery section of the plant, however, we still expect to meet Group production guidance, albeit at the lower end of forecasts."

Conference call

Bushveld Minerals Chief Executive Officer, Fortune Mojapelo, and Finance Director, Tanya Chikanza will host a conference call at 9:30 am UK time (11:30 am SAST) today to discuss the quarterly update with analysts. Participants may join the call by dialling:

Tel: United Kingdom: +44 (0) 330 336 9127; South Africa: +27 11 844 6054

Pin: 3572836 

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

Bushveld Vanadium

Bushveld has one of the largest, high-grade primary vanadium resource bases in the world. The Company's vanadium resource base currently consists of three mineral assets, Vametco, Brits and Mokopane, and its processing facilities consist of Vametco and Vanchem, which are all situated in South Africa.

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. mtV = metric tonnes of vanadium.

3. Sales of 639 mtV includes sales to customers of 193 mtV and intercompany sales of 446 mtV.

4. The vanadium price is based on the FeV mid average price for the period, published by LMB for sales to Europe, CRU Ryan's Note ("CRU RN") for sales to the United States and Asian Metals for sales to Asia. Vametco realised price is based on the prior month's mid average price.

5. Excludes depreciation, royalties and selling, general & administrative expenses and cost associated with Covid-19.  

· Production for Q3 2020 was 725 mtV in the form of Nitrovan and Ferrovanadium from magnetite concentrate. Production was 29 per cent higher Q3 2019 production (Q3 2019: 561 mtV) as a result of reduced commissioning and ramp-up time following the 2020 Kiln Off Gas Tie-In compared to the 2019 Maintenance Shutdown.

· Sold 639 mtV in Q3 2020, of which 193 mtV were final sales to customers. The sales volume includes intercompany sales of 446 mtV, of which 223 mtV have post period end been converted into final sales to customers.

· Production cash cost (C1) for Q3 2020 was US$18.10/kgV was 12 percent lower than Q3 2019 (Q3 2019: US$20.61kg/V), supported by a weaker ZAR:USD exchange rate and higher production volumes. 

· Q3 2020 production cash cost (C1) was 21 per cent higher than Q2 2020 due to a stronger ZAR:USD exchange rate and increased maintenance, energy and raw material costs.

· Severe weather conditions at the beginning of November resulted in an unexpected longer than normal power outage at Vametco, impacting the refinery section. The refinery section has since come back online following repair work.

· Despite this incident Vametco expected to meet the lower end of the production guidance of between 2,700 mtV and 2,850 mtV and the higher end of the production cash cost (C1) guidance to between ZAR295/kgV and ZAR300/kgV (US$17.50/kgV and US$17.90/kgV).

Other projects 

· A Kiln Off-Gas project was initiated in 2018 to comply with environmental regulations relating to air emissions and further increase kiln feed throughput.

· Despite Covid-19 restrictions, construction was completed, and the project was commissioned in September 2020. The commissioning and ramp-up was completed ahead of schedule.

· Technical studies associated with the Vametco Phase 3 prefeasibility study have commenced. ZAR4 million is estimated for the prefeasibility study, with some of the capital expenditure falling into 2021.

Logistics

· Vametco sells the majority of its product to the United States, Europe and Asia. Prior to the Covid-19 pandemic, the average delivery period to final customer was of eight to 12 weeks, with delivery to China on average taking eight weeks.

· Due to the Covid-19 pandemic, the delivery period to customers in China has increased to more than eight weeks due to logistics constraints at ports. The increase in transit time has affected overall sales volume for the quarter and we expect this situation to continue for the rest of the year.

· The Group continued to increase sales into China in Q3 2020 as a result of robust demand and higher buying price from China.

Vanchem

Table 2: Operational highlights for Vanchem

1. mtV = metric tonnes of vanadium.

2. Excludes depreciation and selling, general & administrative expenses and cost associated with Covid-19. Production cash cost is based on vanadium produced.

· Production in Q3 2020 was 294 mtV, 39 per cent higher than Q2 2020 (Q2 2020: 212 mtV), due to nationwide lockdown which occurred in Q2 2020, during which production operations were suspended for four weeks.

- Production numbers are provided at the time of reporting, after which, based on customers' 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.

· Achieved sales in Q3 2020 of 301 mtV, were 249 per cent higher than Q2 2020.This was driven by increased demand from customers following the easing of Covid-19 lockdowns globally and the subsequent increased economic activity. Sales are expected to track production for the rest of the year.

· The weighted average production cash cost (C1) for the quarter was US$20.48/kgV; the increase in cost relative to Q2 2020 (Q2:2020: US$10.60/kgV) was due to a stronger ZAR:USD exchange rate, increased raw materials, maintenance and ramp up costs post the lockdown. The 9M 2020 weighted average production cash cost (C1) was US$18.10/kgV.

· Production and production cash cost (C1) guidance for 2020 remains unchanged. Vanchem is expected to meet the lower end of its production guidance of between 960 and 1,100 mtV and the higher end of its production cash cost (C1) guidance of between ZAR310/kgV and ZAR320/kgV (US$18.40/kgV and US$19.0/kgV).

Vanchem refurbishment programme

Phase I of the refurbishment programme

· The 2020 capital expenditure is estimated to be approximately ZAR55 million, previously approximately ZAR85 million, of critical refurbishment, focused on extending the calcine dump and commence the upgrade of the electrical reticulation system and the storm water treatment. Site work on the extension of the Waste Disposal Facility commenced in August 2020, this was later than originally planned due to the Covid-19 pandemic. This project is now expected to be completed during H1 2021, with part of the associated capital expenditure now falling into the associated financial year. This delay will not compromise the expected production for 2021.

Bushveld Energy

Deployment

Hybrid Mini-grid project

· In 2019, Bushveld Energy announced plans for the development of the hybrid solar and storage mini grid co-located at the Vametco mine and processing facility. While the mini-grid will supply just under 10 per cent of the mine's electrical energy consumption at any one time, the project will demonstrate the technical and commercial capability of hybrid mini-grids using solar PV and VRFB technology. Technically, the mini-grid system will be able to operate independently or jointly, either as standalone systems or as a fully functional mini-grid installation.

· In addition, the mini-grid system, will remove over 5,700 metric tonnes of CO2 emissions per year (and nearly 114,000 tonnes over the life of the project), thereby reducing the carbon footprint of Bushveld's mining and processing operations and contributing towards South Africa's low emission development strategy.

· Vametco will supply approximately 25 tons of vanadium in the form of oxide for the VRFB. Enerox GmbH the VRFB developer and manufacturer owned by an investment consortium which includes Bushveld, will supply the VRFB and electrolyte, and Abengoa will supply the solar PV unit, install and integrate the system at the Vametco mine and processing plant. In addition, provide maintenance for the facility post-commissioning.

· The project is part of Bushveld's strategy to demonstrate both the superior technical merits of long duration VRFB systems when paired with renewable energy, while providing a commercial return to its investors.

Electrolyte

Appointment of Electrolyte Plant Manager

· The Company is pleased to announce the appointment of Saahir Masthan who joins Bushveld Electrolyte Company ("BELCO"), a 55 per cent owned subsidiary of Bushveld Energy, as Electrolyte Plant Manager. Saahir brings over 10 years of chemical engineering experience including 5 years as a plant manager at Omnia Fertilizer.

Electrolyte rental

· On 7 September 2020, the Company announced that it had formed a special purpose company in partnership with Invinity Energy Systems plc ("Invinity"), named Vanadium Electrolyte Rental Limited ("VERL"). VERL's purpose is to provide a vanadium electrolyte rental option to Invinity's customers. In addition, Bushveld announced that VERL had signed a contract for electrolyte rental with Pivot Power, part of EDF Renewables. Under this contract, VERL will hold, and rent to Pivot for a period of ten years, the electrolyte in Pivot Power's five megawatt-hour flow battery, supplied by Invinity and to be delivered to Pivot Power's project at the Energy Superhub Oxford. 

Investment

· On 3 August 2020, the Company announced the successful completion of the acquisition by Enerox Holdings Limited ("EHL") of a further 65.1 per cent of the share capital of Enerox. EHL is an investment vehicle formed by a consortium of investors, including Bushveld Energy Limited.

ENDS

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 74 per cent controlling interest in Bushveld Vametco Alloys (Pty) Ltd, a primary vanadium mining and processing company; 100 per cent of Bushveld Vanchem, a primary vanadium processing facility with a beneficiation plant; 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. 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. Bushveld Energy, the Company's energy storage solutions provider, plays a leading role in the development and promotion of the role of vanadium in this market.

The Company's approach to project development recognises that, whilst attractive project economics are imperative, they may be 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.

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.

About Bushveld Energy Limited

Bushveld Energy is a leading energy storage solutions provider, focusing on the African market. Bushveld Energy recognises that electricity in Africa intersects paramount potential for social transformation with an immense commercial opportunity.

Bushveld Energy is focused on developing and promoting the role of vanadium in the growing global energy storage market through application in vanadium redox flow batteries. Its near term strategy is to deploy several VRFB systems as part of its longer term vision to become a significant electricity storage provider in Africa, meeting the demand for utility scale energy storage in Africa by leveraging South Africa-mined and beneficiated vanadium.

http://www.bushveldenergy.com