Bushveld Minerals: Q2 2020 and H1 2020 Operational Update

2nd September 2020 | Bushveld Minerals Limited

Q2 2020 and H1 2020 Operational UpdateAdd New

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 an operational update for the three months and six months ending 30 June 2020 (“Q2 2020 and H1 2020”), in respect of Bushveld Vanadium and Bushveld Energy, as well as other corporate activities.

Key Highlights

Bushveld Vanadium

  • Group production for Q2 2020 of 778 mtV (100 per cent basis) was five per cent higher than Q2 2019 (Q2 2019: 742 mtV) through the inclusion of production from the recently acquired Vanchem processing assets.
  • Group production for H1 2020 of 1,649 mtV (100 per cent basis) was 18 per cent higher than H1 2019 (H1 2019: 1,392 mtV), as a result of the inclusion of the production from the Vanchem processing assets for the full six month period.
  • Estimated production losses of approximately 380 mtV were directly related to the Covid-19 nationwide lockdown in H1 2020. The production losses are comprised of 300mtV at Vametco and 80mtV at Vanchem.

Vametco

  • Production for Q2 2020 was 566 mtV in the form of Nitrovan and Ferrovanadium. Production was 24 per cent below Q2 2019 production (Q2 2019: 742 mtV), due to the Covid-19 nationwide lockdown and limited workforce flexibility and change in shift patterns in order to comply with Covid-19 protocols.
  • Production for H1 2020 was 1,218 mtV (100 per cent basis) in the form of Nitrovan and Ferrovanadium. Production was 13 per cent below H1 2019 production (H1 2019: 1,392 mtV) due to the Covid-19 nationwide lockdown.
  • Q2 2020 production cash cost (C1) of US$15.0/kgV, a 17 per cent decrease relative to Q2 2019 (Q2 2019: US$18.10/kgV), was underpinned by a weaker ZAR:USD rate1.
  • H1 2020 production cash cost (C1) of US$17.20/kgV, an 11 per cent decrease relative to H1 2019 (H1 2019: US$19.30/kgV), supported by a weaker ZAR:USD rate1.

Vanchem

  • Production for Q2 2020 was 212 mtV, three per cent lower than Q1 2020 production (Q1 2020: 219 mtV) and production for H1 2020 was 431 mtV.
  • Q2 2020 production cash cost (C1) of US$10.60/kgV, 54 per cent lower than Q1 2020 (Q1 2020: US$22.90/kgV), as a result of record production achieved in May and June, supported by relatively low fixed costs and a weaker ZAR:USD rate*.

*Production cash cost (C1) is based on vanadium produced, this was previously estimated using vanadium sold. Prior periods have been restated using the same methodology.

2020 Guidance

  • A higher than expected increase in the number of Covid-19 cases in South Africa in Q2 2020, including a limited number of positive cases at the Company’s operations, has led to reduced workforce availability and amended shift patterns to adapt to increased social distancing and Covid-19 guidelines. The commissioning of the Kiln-Off Gas at Vametco has been delayed due to a Covid-19 outbreak at the manufacturer’s facility and it is now expected to be completed and commissioned at the end of September 2020, instead of the beginning of Q3 2020 as originally planned. The Kiln Off-Gas will increase feed throughput of the Kiln and increase production volumes.
  • Group production guidance is therefore revised to between 3,660 mtV and 3,950 mtV (previously 3,960 mtV to 4,300 mtV), subject to no further Covid-19 related disruptions. Even with the revision, 2020 production guidance is between 25 per cent and 35 per cent higher than 2019 Group production (2019: 2,931 mtV).
    • Vametco guidance is revised to between 2,700 mtV and 2,850 mtV (previously 3,000 mtV to 3,200 mtV) and production cash cost (C1) guidance of between ZAR295/kgV and ZAR300/kgV (US$17.50/kgV and US$17.90/kgV)1.
    • Vanchem’s guidance remains unchanged, although it is expected to meet the lower end of its production guidance of between 960 mtV and 1,100 mtV and the higher end of its production cash cost guidance of between ZAR310/kgV and ZAR320/kgV (US$18.40/kgV and US$19.0/kgV)*.

*Production cash cost (C1) is based on vanadium produced, this was previously estimated using vanadium sold.

Covid-19 Response

  • We continue to adhere to the South African health authority protocols on dealing with the Covid-19 pandemic. Our Covid-19 Task Team has put stringent processes and procedures in place for the early detection of cases, which has allowed for immediate self-isolation and tracking to take place so that any positive cases remain sporadic and are not spread. As a result of these measures, we have been able to continue operating since restarting in May.

Bushveld Energy

  • Appointed an Engineering, Procurement and Construction (“EPC”) company, which commenced the engineering phase of the vanadium electrolyte plant.
  • The South African Department of Trade Industry and Competition (“DTIC”) approved the electrolyte plant project.
  • Signed the surface sublease agreement and the power purchase agreement (“PPA”). Obtained a debt financing term-sheet for the Vametco mini-grid from a French Development Bank, underwritten by a South African institution.

Vanadium and VRFB Markets

  • Chinese demand increased in Q2 2020 supported by increased infrastructure spending in line with RMB3.75 trillion (approximately US$500 billion) investment plan to encourage infrastructure investment. This has resulted in price disparities between China and the rest of the world. Robust demand from China is expected for the rest of the year.
  • The Group has taken advantage of the robust vanadium demand and higher price from China compared to other jurisdictions and increased its Chinese sales. As at the end of H1 2020, Bushveld Minerals supplied 18 per cent of its sales to China, compared to three per cent in H1 2019.
  • Demand from the North American and European steel and aerospace industries declined during the period due to the pandemic and associated plant shutdowns. Demand from the United States and Europe is expected to remain constrained for the rest of the year due to the economic slowdown.
  • The European Union agreed a €1.8 trillion (approximately US$2.1 trillion) budget and corona virus recovery fund to confront the recession, which is expected to include significant infrastructure spend.
  • The Covid-19 pandemic has increased the delivery period to customers due to logistics constraints at ports. The increase in transit time has affected overall sales volumes for Q2 2020 and is expected to continue for the rest of the year.
  • Increased deployment of VRFBs and demand, is likely to rise 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$25.70/kgV in H1 2020, 54 per cent lower than H1 2019 (H1 2019: US$56.30/kgV), four per cent below H2 2019 (H2 2019: US$26.90/kgV).

Corporate activities

  • The interims account for the six months ending 30 June 2020 will be published by 30 September 2020.

Fortune Mojapelo, CEO of Bushveld Minerals Limited, commented:

“The safety and health of our employees remains a key priority. We are proud that the measures we have implemented have resulted in the early identification of positive cases at Vametco and Vanchem. Since the lockdown in April, we have been able to ramp up operations, however, the virus remains present within our society. Our work to ensure the early detection of any cases and to maintain social distancing within our workforce has forced us to change how we operate, and we have adopted new shift patterns and work arrangements, which have affected productivity. Due to these reasons, Vametco will not be able to recover the lost production of 300 mtV which occurred during the nationwide lockdown, and Vanchem is expected to meet the lower end of its production guidance. As a Group we now expect to produce between 3,660 mtV and 3,950 mtV , which represents an increase of between 25 per cent and 35 per cent, relative to 2019.

We are encouraged by the progress made at Bushveld Energy, particularly with the electrolyte plant, and the Vametco solar photovoltaic (“PV”) and VRFB mini-grid project. Moreover, Bushveld Energy will devise self-generation options for all of Bushveld’s existing and future electrical energy needs at its operations. With current aggregate loads of 21MW that are expected to increase to over 50MW post completion of expansion and refurbishment programmes, this need has the potential of more than 125MW of solar PV and 180MWh of battery energy storage systems within our facilities.

Sales are being closely managed and maintaining flexibility across our supply chain remains a key focus. Our strategy to increase sales to China has paid off with prices from that part of the world trading at a premium to those in our more traditional US and European markets, after the country increased its infrastructure spending as part of its fiscal policy in response to the Covid-19 crisis. Owing to the Covid-19 pandemic, the delivery period to customers has increased due to logistics constraints at ports, and the increase in lead time has impacted sales volumes for the quarter. We expect the longer lead time to continue for the remainder of the year.

This recovery in demand out of a reignited Chinese economy and the recent plans to provide stimulus to the European Union, which include the development of green infrastructure to aid Europe’s economic recovery, show that the long-term demand fundamentals for vanadium remain in place. The metal’s unique characteristics as a key element of rebar production ensure it will form part of stimulus plans that countries announce in order to reinvigorate their respective economies in a post-Covid-19 world.

Overall, the market continues to find its feet after these unprecedented global events, which have affected growth, trade and supply chains globally.”

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