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 announce its half year unaudited results for the six months ended 30 June 2020.

Key Highlights

Financial highlights

• Revenue of US$43.1 million (H1 2019: US$78.0 million), impacted by the continuing lower pricing environment as well as lost production due to the Covid-19 pandemic.
  • Total lost revenue due to Covid-19 of US$9.2 million*, and costs of US$0.4 million associated with hygiene, screening, protective and preventative measurements in place.
• Net cash used in investing activities reduced to US$5.0 million (H1 2019: US$11.4 million), in order to conserve cash during a period of supressed vanadium prices and uncertainty surrounding the impact of Covid-19.
• Cash and cash equivalent of US$24.6 million as at 30 June 2020, included revolving credit facility of ZAR125 million and term loan of ZAR250 million (31 December 2019: US$34.0 million included term loan of ZAR250 million).
• The London Metal Bulletin (“LMB”) Ferrovanadium price averaged US$25.70/kgV in H1 2020, 54 per cent lower than H1 2019 (H1 2019: US$56.30/kgV) and four per cent below H2 2019 (H2 2019: US$26.90/kgV). H2 2020 year to date average LMB Ferrovanadium price of US$25.19/kgV, as at 25 September 2020. The LMB spot price at 25 September 2020 is US$24.73/kgV.

* Total revenue loss of US$9.2 million estimated as 380mtV multiplied by the Group’s average realised sales price of US$24.20.

Table 1: Group financial and operational highlights

Operational highlights

• Vametco and Vanchem recorded zero fatalities.
• Vametco’s Total Injury Frequency Rate (“TIFR”) of 18.80, is an 11 per cent improvement relative to H1 2019 (H1 2019: 21.16). Vanchem recorded a TIFR of 0.009 for the period.
• As at 30 August 2020 the Group had 36 Covid-19 positive cases, all of whom have recovered and successfully returned to work.
• No Covid-19 related stoppages since ramping up to pre-lockdown production levels in May 2020, demonstrating the effectiveness of our stringent Covid-19 protocols within the operations.

Bushveld Vanadium

• 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 Vanchem.
  • Estimated production losses of approximately 380 mtV were directly related to the Covid-19 nationwide lockdown.
  • Vametco production of 1,218 mtV (H1 2019: 1,392 mtV) and production cash cost (C1)1 US$17.20/kgV (H1 2019: US$19.30/kgV).
  • Vanchem production of 431 mtV and production cash cost (C1)1 US$16.40/kgV. Vanchem achieved a record monthly production of 119 mtV in May 2020 and 97 mtV in June 2020.
• Group sales of 1,765 mtV was 58 per cent higher than H1 2019 (H1 2019: 1,115 mtV), as a result of higher sales at Vametco and the inclusion of sales from Vanchem.
• Robust vanadium demand and higher buying price from China resulted in sales to China increasing to 18 per cent of Group sales (H1 2019: 3 per cent).

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

Bushveld Energy

• Electrolyte
  • Received environmental authorisation for construction of the vanadium electrolyte production facility, in partnership with the Industrial Development Corporation (“IDC”).
  • 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.
• Investments
  • Acquired an 8.71 per cent shareholding in Invinity Energy Systems plc (“Invinity”) the entity created by the merger of Avalon Battery Corporation (“Avalon”) and redT energy plc (“redT”), in line with its strategy of partnering with Vanadium Redox Flow Batteries (“VRFB”) companies.
• Deployment
  • Signed a surface sublease agreement and the power purchase agreement (“PPA”) for the Vametco mini-grid, and obtained a debt financing term-sheet from a French Development Bank, to be underwritten by a South African institution.

Outlook and Guidance

• In our H1 Operational Update, announced in early September 2020, we revised 2020 Group production guidance to between 3,660 mtV and 3,950 mtV, subject to no further Covid-19 related disruptions. This production guidance is between 25 per cent and 35 per cent higher than 2019 Group production (2019: 2,931 mtV).
  • Vametco guidance is between 2,700 mtV and 2,850 mtV and production cash cost (C1) guidance is between ZAR295/kgV and ZAR300/kgV (US$17.50/kgV and US$17.90/kgV).
  • Vanchem is expected to meet the lower end of its previously announced 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$19.00/kgV).
• The Kiln-Off Gas Project was commissioned in September. This will enable Vametco to comply with environmental regulations and enable the increase in kiln feed throughput.
• Demand from China for vanadium has recovered as result of increased infrastructure spending and compliance with rebar standards. Demand from Europe is expected to increase as a result of stimulus programmes. Outlook for the rest of the year remains uncertain due to the muted vanadium price, uncertainty surrounding the global economic recovery, longer lead time for delivery to customers, and increased number of non-Chinese producers shipping excess production to China in order to benefit from the higher spot prices.

Events since 30 June 2020

• Today, in a separate release, Bushveld Minerals announced a conditional long-term production financing agreement (“PFA”) of US$30 million with mining-focused investment business Orion Mine Finance (“Orion”), primarily to finance the Vametco phase III expansion project and debt repayment. Drawdown is subject to certain conditions precedent, as set out in this morning’s announcement.
• Under a separate investment agreement, Orion has also conditionally agreed to subscribe for a minimum of US$10 million, and a maximum of US$20 million of convertible loan notes under a US$35 million convertible loan notes instrument (the “Instrument”). The Company intends to seek other subscribers for the balance of the total. The Instrument’s proceeds will go towards the first phase of Vanchem’s critical refurbishment programme and debt repayment.
• Since both the PFA and the Instrument, require the prior written consent of Nedbank Limited (“Nedbank”), the Company and Bushveld Vametco Alloys (Proprietary) Limited, are in discussions with Nedbank on the outstanding term loan and revolving credit facilities, including discussions on the potential pre-payment of the outstanding debt facilities on completion of the PFA. The outstanding balance of the Nedbank facilities is ZAR375 million (circa US$21.9 million), plus accrued interest of US$0.3 million.
• In addition, the Company announced that the previous owner of Vanchem, Duferco Participations Holding S.A. (“Duferco”), has agreed to accept an early repayment of US$11.5 million of their US$23 million convertible loan notes issued in accordance with the terms of acquisition announced on 23 October 2019.
• The financing will enable Bushveld Minerals to recommence the growth initiatives which were under review as part of the Group’s cash preservation and capital allocation measures implemented to manage the near-term uncertain operating conditions as a result of the Covid-19 pandemic.
• The financing and refinancing will allow the Group to reduce its gearing levels and strengthen its balance sheet.
• On 3 August 2020 Bushveld Minerals, announced that Bushveld Energy (an 84 per cent subsidiary of Bushveld Minerals) had completed the investment in Austrian-based Enerox GmbH (“Enerox”) as part of a consortium.

Fortune Mojapelo, CEO of Bushveld Minerals, commented:

“During these difficult times we continued to support our employees while meeting our customers’ orders. In addition, we have carried on playing a supportive role in our local communities by supplying water and sanitisers to local hospitals, police stations, and care homes. Along with our peers in the industry, we halted production at Vametco and Vanchem for almost a full month under the South African government’s lockdown measures imposed in late March 2020, followed by a ramp up towards previous production levels.

Unfortunately, the spread of the virus has continued post-lockdown, resulting in a limited number of positive cases at our own operations. Whilst all of those cases have successfully recovered and returned to work, this has necessitated operational adjustments to accommodate social distancing, Covid-19 protocols and altered shifts for the implementation of certain projects.

Among those impacted was timing of the commissioning of the Kiln-Off Gas project at Vametco, which was a key part of our ability to catch up on the lost month of production earlier in the year and meet our original guidance for 2020. As a result, and after an extensive review, in early September 2020 we reduced annual guidance.

Vanchem, the brownfield processing business we acquired at the end of 2019, continues to perform well, from both a cost and production perspective, and we are excited by the opportunity we have there, in terms of growth, in the years to come.

Bushveld Energy continues to go from strength to strength. Our VRFB Investment Platform has seen us invest in two of the most exciting and developed VRFB storage businesses, and at the same time we have made positive progress on our own projects in South Africa. The electrolyte plant received approval from the South African Department of Trade Industry and Competition and the engineering phase of the plant has commenced.

Vanadium demand has recovered in China post lockdown, but this is not yet the case in Europe and the US. As a result, we have redirected more product to China in order to take advantage of the higher prices. The outlook for the remainder of the year continues to be challenging, as a result of the lower vanadium price and longer delivery period to customers. However, Bushveld is now in a stronger position to execute its growth plans to expand production as demand recovers as a result of global stimulus programmes. We continue to operate our plants safely in accordance with Covid-19 protocols, and our prime responsibility remains to our employees and the communities in which we operate – we thank them for their hard work over the past six months.

We started 2020 on a strong financial footing and accessed our financial facilities to weather the coming storm. With US$24.6 million in cash at the end of June, we entered H2 2020 in a solid financial position.

Today, we separately announced a long-term PFA of US$30 million with Orion. Under a separate agreement, Orion has also conditionally agreed to subscribe for a minimum of US$10 million, and a maximum of US$20 million of convertible loan notes under a US$35 million Instrument with the remaining balance of US$15 million of convertible loan notes to be offered by the Company, to interested third party investors. This funding will provide us with flexibility around the expansion of Vametco and the first phase of the refurbishment of Vanchem.”

News in full

In the interview below with Bushveld CEO Fortune Mojapelo, we learn how demand for the metal is set to increase and how the Energy Division acts as a “natural hedge” to the share price volatility.