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 mtV* 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.

* 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.”

News in full

In the interview below with Bushveld CEO Fortune Mojapelo, we learn how about the Group’s vertically integrated strategy and how the Energy Division acts as a “natural hedge” to the share price volatility.