Bushveld Minerals: Final Results
Full Year Results for the Period Ended 31 December 2019 & 2020 Guidance 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, is pleased to announce its full year results for the year ended 31 December 2019.
FY2019 Operational and Financial Highlights
- A sound safety record with no fatalities and a 19 per cent year-on-year improvement in its Total Injury Frequency Rate at our operations.
- Acquisition of the Vanchem processing plant (100 per cent interest) completed in November 2019 for a fair value consideration of US$55.8 million.
- Group vanadium production was up 15 per cent year on year, to 2,931 mtV (on a 100 per cent basis) (2018: 2,559 mtV) as a result of an 11 per cent increase at Vametco and incorporation of Vanchem’s two months of production.
- Revenue of US$116.5 million (2018: US$192.1 million) a decline of 39 per cent relative to the prior year, largely due to a 34 per cent reduction in the average realised vanadium price.
- Vametco’s production cash cost was down five per cent year on year, to US$18.11/kgV (2018: US$19.0/kgV)
- Group EBITDA of US$32.6 million (2018: US$101.2 million). A 68 per cent decrease relative to the prior year due to a decline in the vanadium price, partly offset by a reduction in cost of sales.
- Gain recognised on bargain purchase of US$60.6 million for the Vanchem acquisition, completed at fair value consideration of US$55.8 million.
- Profit after tax of US$69.2 million (2018: US$49.0 million).
- Basic Earnings per share of 5.51c (2018: 2.90c).
- Underlying earnings per share excluding gain on bargain purchase of 0.12c (2018: 2.90c).
- Cash and cash equivalents of US$34.0 million as at 31 December 2019 (2018: US$42.0 million) with bank debt of US$18.6 million (31 December 2018: nil) after drawdown of the term loan.
- Secured ZAR375 million in debt facilities from Nedbank, in the form of a ZAR250 million term loan and a ZAR125 million revolving credit facility, which have been fully drawn post year end to provide financial flexibility.
- unaudited gross cash and cash equivalent balance as at 31 March 2020 of US$34.4 million including the entire ZAR375 million debt facilities.
- Significant progress at Bushveld Energy, having launched the Vanadium Redox Flow Battery (“VRFB”) Investment Platform (VIP) in line with strategy for partnering with VRFB companies, including two successful minority investments and the installation of our first VRFB in South Africa.
Fortune Mojapelo, CEO of Bushveld Minerals Limited, commented:
“I am pleased to report on another strong financial year for Bushveld Minerals as we continue steadfastly executing on a strategy, we outlined in 2014, to build one of the world’s largest low-cost and vertically-integrated primary vanadium platforms.
“Following the completion of the acquisition of a 74% interest of Vametco, over a two year 2017-2018 period, I am pleased to see this flagship asset continue to shine. Production grew and costs came in below our guidance estimates. Despite notably lower vanadium prices compared with a year earlier, we were able to report a solid Group EBITDA of US$32.6 million. After tax profits of US$69.2 million were helped by a one-off gain on the acquisition of our second processing facility, Vanchem, which closed near the end of the year, after it was valued higher than our eventual purchase price.
“The acquisition of Vanchem is another significant milestone for the Company, adding another brownfield primary processing plant to complement Vametco. With a 3-kiln configuration, and a product suite of vanadium pentoxide, vanadium chemicals, vanadium trioxide and ferrovanadium, the Vanchem acquisition has positioned Bushveld to own one of the broadest vanadium product portfolios in the world. Located conveniently with access to rail infrastructure passing close to the Vametco operations on the Western Limb and the Mokopane deposit on the Northern Limb of the Bushveld Complex, the Vanchem plant fits seamlessly with the Bushveld’s assets and provides the Company with a flexible and scalable vanadium production platform. Already producing at a rate of approximately 1,000mtV per annum, which is set to grow to more than 4,200mtV per annum following a refurbishment programme, Vanchem will play a key role alongside Vametco and Mokopane in establishing Bushveld Minerals as one of the most significant low cost primary vanadium producers globally.
“With the completion of the acquisition of two of the three primary vanadium producing operations in South Africa and of the four operating primary vanadium processing plants in the world, the Company is now focused on realising the low cost and scalable production potential of these assets as it grows its production base to more than 8,400 mtV per annum. A successful operations transformation programme aimed at unlocking operational efficiencies at Vametco saw the operation achieve record production from magnetite ore, a record we hope to improve on in the 2020 year.
“I am also pleased to report on significant progress in implementing our vertical integration strategy, where our energy storage focused subsidiary, Bushveld Energy, achieved key milestones across all the three key pillars: electrolyte production, supporting Vanadium Redox Flow Batteries (“VRFB”) manufacturing and VRFB energy deployments. These milestones include: approvals by the Industrial Development Corporation (“IDC”) and Bushveld Minerals for the investment into the electrolyte manufacturing plant in East London, progress towards in respect of the solar PV plus VRFB mini-grid at Vametco and successful investments into VRFB manufacturing which has been vindicated with stellar performance of its US$5 million investment into the Avalon – RedT merger (now AIM-listed Invinity Energy Systems).
“With so much already having happened in 2020, much of what we achieved last year may feel like the distant past. However, it is important to reflect on the strong base we were able to form in that time, one which allowed us to enter this unprecedented period of a once-in-a generation global Covid-19 pandemic not only to survive the storm but still be well positioned to take advantage of the opportunities that await on the other side of this crisis. Vanadium, remains well positioned in a post-Covid-19 world that will still see a rise infrastructure spending, hence increased consumption of vanadium l and will likely continue on a decarbonisation energy transition path that will see energy storage (and with it VRFBs) grow in prominence. Bushveld Minerals’ growth strategy will benefit South Africa by ensuring the country’s natural strengths help it to become a global leader in our industry.
“Notwithstanding the short-term capital deferments in the interests of cash preservation that have been necessitated by the COVID-19 pandemic, the Company remains committed to its five-year growth strategy that will ultimately lead to a platform producing in excess of 8,400 mtVp.a. and see Bushveld Energy become a leading energy storage player.
“While internally generated cash flow would always be the priority source of funding for this growth programme, the Company will, over the five-year period, investigate a variety of forms of funding, and prioritise spend depending on market conditions, ensuring an optimal capital structure and the best returns for shareholders in the long-term.”
As we reported in May 2020 the Company rapidly developed and implemented a detailed programme in response to the Covid-19 pandemic. The programme prioritises the protection of its employees and host communities through rapid implementation of health and hygiene controls in the workplace, protocols for dealing with suspected cases of infection and business continuity measures to minimise the effects of disruption caused by the pandemic on the business. Our protocols have functioned effectively, and we will continue to monitor the situation and update our measures in line with the guidelines from the South African health authorities and Government.
2020 Guidance and Market Outlook
- While Vametco and Vanchem’s production were disrupted by the 35-day nationwide lockdown due to the Covid-19 pandemic, the Company retains the previously announced guidance. However, this is dependent on no further Covid-19 related stoppages:
- Vametco is expected to produce between 3,000 mtV and 3,200 mtV at a production cash cost of between ZAR257/kgV and ZAR265/kgV (US$17.20/kgV and US$17.70/kgV); and
- Vanchem is expected to produce between 960 mtV and 1,100 mtV at a production cash cost of between ZAR245/kgV and ZAR260/kgV (US$16.30/kgV and US$17.30/kgV).
- Total capital expenditure expected for 2020 of ZAR135 million (circa US$8 million), with most of the cost being Rand-denominated:
- Vametco: approximately ZAR50 million (circa US$3 million), including:
- A total of ZAR11 million (circa US$660,000) of sustaining capital;
- Approximately ZAR35 million (circa US$2 million) for the completion of the kiln off-gas project in order to comply with environmental regulations and further increase kiln feed throughput; and
- ZAR4 million (circa US$240,000) required for the Vametco Phase 3 prefeasibility study (“PFS”) to achieve a steady state production of 4,200 mtVp.a.
- Vanchem: approximately ZAR85 million (circa US$5 million) has been identified as critical capital expenditure required for 2020 to enable Vanchem to continue to operate sustainably, the majority of which will be incurred during the second half of 2020.
- Vametco: approximately ZAR50 million (circa US$3 million), including:
Q1 2020 operational performance
- Group production for Q1 2020 was 871 mtV (on a 100 per cent basis) an increase of 34 per cent relative to Q1 2019 (649 mtV)
- Vametco production for Q1 2020 was 652 mtV (on a 100 per cent basis) in the form of Nitrovan, marginally ahead of Q1 2019 (649 mtV) despite being impacted by the Covid-19 nationwide lockdown as well as higher than usual rainfall during the quarter.
- Vametco early completion of the annual maintenance programme, which was initially planned for Q2 2020 for a period of 10 days. No further maintenance shutdowns are planned for the remainder of 2020.
- Vanchem production of 219 mtV despite being impacted by 10 days of power rationing as well as the Covid-19 lockdown during the quarter.
- Group sales for Q1 were 1,080 mtV (on a 100 per cent basis) an increase of more than double the sales in Q1 2019 (508 mtV)
- Vametco sales of 898 mtV (on a 100 per cent basis) achieved in Q1 2020, 77 per cent higher than Q1 2019 (508 mtV) as a result of additional production volumes in Q4 2019 and increased customer demand.
- Vanchem achieved sales of 182 mtV during the quarter.
- Vametco production cost of US$18.90/kgV, an eight per cent decrease relative to Q1 2019 (US$20.50/kgV), supported by a weaker ZAR:USD rate.
- Vanchem production cost for the quarter was US$18.50/kgV.
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