Q4 Operational Update

RNS Number : 4614C

Bushveld Minerals Limited

22 January 2018

 

Market Abuse Regulation (MAR) Disclosure

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.

22 January 2018

Bushveld Minerals Limited

("Bushveld" or the "Company")

Q4 Operational Update

Bushveld Minerals is an AIM listed integrated vanadium producer with additional investments in coal, power and tin, is pleased to provide an operational update in respect of Bushveld Vametco ("Vametco"), Bushveld Energy and Lemur Resources ("Lemur").

Fortune Mojapelo, CEO of Bushveld Minerals Limited, commented:

"We are very pleased with the tremendous strides the Company has made during the fourth quarter of 2017.

"Bushveld Vametco had a solid performance in the 2017 calendar year, supported by a strong vanadium price environment with the ferrovanadium price averaging US$33/KgV¹ for the 12 months. This ensured revenue increase of 44% and EBITDA of 553%, compared to the 2016 calendar year. We have taken advantage of the materially higher prices this year to conduct additional maintenance activities at the plant in preparation for 2018. The first phase of the Vametco multi-phased expansion project was successfully completed in the September 2017 quarter, during which Vametco reached an annual production run rate of 3,035 mtV. We have since commenced the second phase of the expansion project which will increase production to 3,750 mtV per annum by June 2018 and to over 5,000 mtV by 2019. As we anticipate an even stronger year ahead, our projection for Vametco's 2018 calendar year production is 3,680 mtV.

"Bushveld Energy has also seen considerable progress having strengthened relations with Eskom, the IDC and UniEnergy Technologies.  Global forecasts for stationary energy storage are very bullish.  As detailed in our strategy over the past two years, this remains a strong area of our focus.  We expect to be at the forefront of development stationary energy storage throughout Southern Africa.

"At Lemur, our decision to increase the scope of the project from a pure coal mine to a fully integrated power project has not only increased the size of the Imaloto project but also significantly de-risked the project by guaranteeing offtake of the coal produced. This gives us various options on the approach and timing of advancing the project. Our immediate next steps on the Imaloto project will remain focussed on delivering a bankable project to help grow sustainable economic development in Southwest Madagascar through supplying much-needed baseload power using locally produced fuel.

"I look forward to providing further updates in the coming year."

Bushveld Vametco

Production:

·      Vametco produced 2,649 mtV in the form of Nitrovan^® from magnetite concentrate during the 2017 calendar year. Vanadium production decreased by 7.2% relative to the 2016 calendar year due to increased maintenance downtime.

·      Vanadium production for the December 2017 quarter decreased by approximately 19.4% relative to the September quarter due to the kiln riding ring repair and kiln upgrades. The intervention on the kiln has allowed increased kiln feed, as part of the second phase of the expansion project.

·      Vanadium production of approximately 3,680 mtV consisting of 3,050 mtV Nitrovan® and 630 mtV Ferrovanadium (FeV) (converting modified vanadium oxide (MVO) to FeV) is expected in the 2018 calendar year, supported by the ramp-up of the second phase of the expansion project which is expected to increase Vametco's production capacity from the current 3,035 mtV to 3,750 mtV per annum by June 2018 for a self-funded capital expenditure of approximately US$2.5 million.

·      Unit production cost for the 2018 calendar year is expected to decrease from ZAR 221/KgV in 2017, by approximately 7% to ZAR 205/KgV, mainly due to economies of scale.

Operational and financial highlights for Vametco (on a 100% basis)²:  

Description	Unit	Q4 CY17	CY17	Q4 CY17 vs Q3 CY17	Q4 CY17 vs Q4 CY16	CY17 vs CY16	CY18 guidance
Vanadium(Nitrovan® plus FeV) produced	mtV3	539	2,649	-19.4%	-29.8%	-7.2%	3,680
Vanadium sold	mtV3	636	2,721	-14.5%	-19.2%	-3.2%	-
Vanadium price1	US$/KgV	39.1	32.6	+0.2%	+75.7%	+76.7%	-
USD/ZAR exchange rate	US$:ZAR	13.6	13.3	+4.5%	-2.1%	- 9.7%	-
Revenue	ZAR'm	346.0	1,090.3	+13.4%	+61.1.0%	+43.5%	-
EBITDA	ZAR'm	126.4	315.6	+39.3%	+373.2%	+553.4%	-
Production costs4	ZAR/kgV	246.6	220.7	+4.0%	+21.1%	+16.3%	205

1.     The vanadium price is based on the FeV mid average price for the period, published by Metal bulletin.

2.     Bushveld's net attributable interest of the above production and financials is approximately 59.1%, and will be consolidated on a 100% basis from the December 2017 financials.

3.     mtV = metric tonnes of vanadium.

4.     Excludes depreciation, royalties, selling, general, & administrative expenses.

Multi-phased expansion project

·      In 2017 Vametco commenced a multi-phased expansion project with the aim of increasing annual production to more than 5,000 mtV over the next three years.

·      The first phase of the expansion was successfully completed on time and on budget in the September 2017 quarter, during which Vametco reached an annual production run rate of 3,035 mtV.

·      The next two phases of expansion will increase production to 3,750 mtV per annum by June 2018 and to over 5,000 mtV per annum by the end of 2019.

·      The completion of the expansion project will enhance Vametco's existing competitive position in a structurally sparse market. In addition, the presence of an integrated platform will allow the development of downstream operations as well as achieving product diversification.

Project	Investment1	Scope	Progress
Multiphase expansion project -Stage 1	US$0.5millon	Increase Vametco annual production run rate to 3,035 mtV.	100% completed in Septmeber 2017.
Multiphase expansion project -Stage 2	US$2.5million	Increase Vametco annual production run rate to 3,750 mtV by June 2018.	Equipment ordered and awaiting delivery.
Multiphase expansion project -Stage 3	-	Increase Vametco annual production run rate to over 5,000 mtV by 2019.	Planning Stages.

1.     Shown on a 100% basis, Bushveld Minerals net interest is 59.1%.

Bushveld Energy

Highlights:

First confirmed South African project

·      Signed agreement with Eskom, the South African national power utility, for the installation of a vanadium redox flow battery (VRFB) with peak power of 120kW and peak energy of 450kWh.

·      The project includes our two strategic partner entities, the South African Industrial Development Corporation (IDC), as a co-developer and USA-based UniEnergy Technologies (UET), as the VRFB manufacturer.

·      Eskom will use the system to evaluate its performance characteristics against a multitude of applications, including minimum load shifting, wind smoothing, solar smoothing, improved power quality among others.

·      Site preparation activities and procurement for long lead time items began in fourth quarter of 2017 in order to achieve operation in the first half of 2018.

Electrolyte production

·      Completed locational study for the vanadium electrolyte production plant in South Africa, jointly with the IDC. A dual locational strategy for electrolyte production is preferred to shorten the environmental approval process, reduce upfront capital and take advantage of local government incentives.

·      Jointly with Bushveld Vametco, produced initial, laboratory batches of vanadium electrolyte using Vametco's intermediary product as feedstock. In-house and international testing confirmed the viability of using the Vametco feedstock to produce various types of battery-grade electrolyte.

Energy storage market and project development activity focus

·      Global forecasts for stationary energy storage are very bullish, including Bloomberg New Energy Finance that forecasts a 125GW / 300GWh market by 2030.

·      Bushveld Energy's project development focus is on the deployment throughout the African continent of large scale energy storage deployments which favour the technical benefits of VRFBs. The size, technical and commercial competency of our team befits a project pipeline of dozens of megawatt-plus-sized projects over thousands of kilowatt-sized ones.

·      Our business model focuses on partnerships and collaborations with national or regional utilities and independent power project (IPP) developers. The recent Bushveld Energy - Eskom project is an example of our utility strategy. Bushveld Energy's work with IPP developers in Africa focuses primarily on mini-grid projects in remote, off-grid locations and medium to large electricity users that suffer from expensive, constrained or intermittent electrical power supplies. With rising electricity prices in South Africa and a rebound in the global price for oil (and thus diesel), Bushveld Energy is seeing a rapid increase in economically viable storage projects across the continent for the coming year.

Mikhail Nikomarov, CEO of Bushveld Energy, commented:

"The fourth quarter of 2017 was extremely productive for Bushveld Energy. Achieved milestones included our first energy storage project and progress towards our own electrolyte production capabilities. We also reiterated our strategy of working through partnerships, further reinforcing our relationship with UET and the IDC, and formalised one with Eskom, one of the largest power utilities in the world. The 2018 year will be an exciting growth year for our company, building on results initiated in the December 2017 quarter."

Lemur Resources

Highlights:  

·      Signed a binding 30 year power purchasing agreement (PPA) with the Madagascar state-owned utility, Jiro sy Rano Malagasy (JIRAMA). The PPA has enhanced the bankability of the project by guaranteeing offtake of power. The PPA with JIRAMA is also a legal requirement for getting a government concession for the project to proceed.

·      Appointed Worley Parsons as Owner's Engineer and Social Environmental Impact Assessment (SEIA) Advisor. Worley Parsons will manage the BFS and other technical aspects of the project.

·      Completed site visit for load, demand study and transmission routing. The intention of the study is to gain an understanding of the load demand and to optimise the power plant design and its phasing.  This is critical to the bankability of the project.

·      Revised Mining Plan to align with the coal asset with a minimum 30 year life of the power station and thus ensure security of fuel supply.

·      Completed Open Tender Process and Selection of Local Madagascar SEIA Consultants. Worley Parsons role was to ensure local compliance with IFC standards. That said, having local consultants conducting the SEIA is critical because they understand the nuances of the Madagascar regulation and social system.

Focus for 2018:

·      Obtaining the concession for the Project.

·      Commencing the SEIA Study, which is a requirement before starting the mining or construction activities on the site.

·      Upon completing the BFS, Lemur will focus on completing funding and credit enhancement options for the project. The company has already started early stage discussions with select parties on funding.

·      Focus on offtakes with other power users to supplement the demand from JIRAMA.

·      Seek to conclude coal offtakes with third parties - the coal mine is viable with only supplying coal to the power project. Notwithstanding, supplying coal to third parties provides early cashflows prior to commissioning of the power plant.

·      Further explore strategic partnerships for the project (technical, commercial and financial).

·      The power project expected commissioning date is 2021.

Prince Nyati, CEO of Lemur Resources Limited, commented:

"Lemur Resources achieved significant developments in the fourth quarter of 2017. The most significant of which was the signing of a binding 30 year Power Purchase Agreement with JIRAMA. The PPA was critical to meeting the statutory requirements for the government to grant a concession for a power project. The concession is a priority for the company going forward.  We plan to start the Social Environmental Impact Assessment study in the first quarter of 2018 and continue progressing the Bankable Feasibility Study."

Enquiries: [e-mail]

Bushveld Minerals	[phone]
Fortune Mojapelo, Chief Executive Officer
Bushveld Energy Limited Mikhail Nikomarov, Chief Executive Officer, Bushveld Energy Limited	[phone]
Lemur Resources Limited Prince Nyati, Chief Executive Officer, Lemur Resources Limited	[phone]
SP Angel Corporate Finance LLP	[phone]
Nominated Adviser & Broker
Ewan Leggat
Richard Morrison
Blytheweigh
Financial PR
Tim Blythe / Nick Elwes	[phone]
Gabriella von Ille	[phone]

ABOUT BUSHVELD MINERALS LIMITED

Bushveld Minerals is an AIM listed integrated vanadium producer with additional investments in coal, power and tin. 

The Company's flagship vanadium platform includes a 59.1% controlling interest in Bushveld Vametco Alloys (Pty) Ltd a primary vanadium mining and processing company; the Mokopane Vanadium Project and the Brits Vanadium Project. The coal platform comprises the wholly-owned Imaloto Coal Project, which is being developed as one of Madagascar's leading independent power producers. The Company's tin interests are held through its shareholding in AIM listed AfriTin Mining Limited.

Bushveld's vision is to become a significant, low cost, integrated primary vanadium producer through owned high grade assets. This incorporates development and promotion of the role of vanadium in the growing global energy storage market through Bushveld Energy, the Company's energy storage solutions provider. 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.

The Company's approach to project development recognises that, whilst attractive project economics are imperative, they are 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 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 mixplant and finally into the shaft furnaces to produce Nitrovan®.

About Bushveld Energy Limited

Bushveld Energy Limited is an energy storage solutions provider focusing on the African market, with registered offices in Mauritius and a wholly owned subsidiary in South Africa. Bushveld Energy recognises that electricity in Africa intersects paramount potential for social transformation with an immense commercial opportunity.

Launched in 2016, 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 by 2020, meeting the demand for utility scale energy storage in Africa by leveraging South Africa-mined and beneficiated vanadium.

http://www.bushveldenergy.com

About Lemur Resources Limited

Lemur Resources is a wholly owned subsidiary of Bushveld Minerals and is the company's coal and power platform. The Imaloto project is located in the southwest of Madagascar and consists of a 136 million ton coal resource (90% of which is of JORC compliant Measured and Indicated). The project also includes an initial 60MW mine mouth coal power plant as well as over 200km of new transmission lines, developed in parallel as one of Madagascar's leading independent power producers.

 

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