Operations Update

Ironveld PLC

18 September 2023

 

Ironveld Plc

("Ironveld" or the "Company")

Operations Update

Ironveld plc ("Ironveld" or the "Company"), the AIM quoted mining development company, is pleased to provide an update on recent activities.

Operational and Financial Update Highlights

·    Newly installed power generation at Rustenburg smelter now supplying two furnaces as planned;

·    Ironveld secured a cash generative short term contract from a third party to undertake metals processing;

·    Third furnace refurbishment now due to commence in October;

·    Directors have provided working capital support for the Company with a facility of up to £500,000 to maintain flexibility of funding;

·    Encouraging market conditions for near-term High Purity Iron and future iron powders products; and

·    Burnstar Technologies Pty Ltd. ("Burnstar") Liquified Natural Gas ("LNG") to hydrogen project on track.

Ironveld Smelting Operations

During July and August, activities at Ironveld Smelting's Rustenburg facilities focused on ensuring that the two refurbished furnaces as well as the Argon Oxygen Decarburization ("AOD") Convertor and the Granulator could operate successfully. Although the refurbished plant operated as planned without any material issues, it became clear that further electrical power supply would be required to run all equipment simultaneously to optimum levels. To resolve this problem, additional generators were ordered and then fully installed earlier this month. Whilst this resulted in a short delay in the anticipated level of activity from the first two furnaces, the additional power is now capable of operating all equipment as planned on a full-time basis, which is expected to continue going forward. Final works and commissioning of the third planned furnace at the smelter had been placed on hold pending the arrival of the additional generators and this is now expected to start in October.

Environmentally Friendly and Economical Energy Solution

The use of generators at the site has always formed part of Ironveld's short-term solution to remain off-grid, allowing it to avoid the daily 'load shedding' imposed by the state electricity provider, ESKOM.  As previously announced, Ironveld has contracted for installation of a full solar-LNG hybrid system at its Rustenburg site to provide all power requirements on a materially cheaper basis than both diesel generators and grid power which is expected to be installed during Q1 2024. 

In addition, all works are proceeding as planned with respect to the BurnStar LNG to hydrogen project which is presently on track for commissioning around the end of 2023, followed by commencement of supply during Q1 2024. This may enable Ironveld to use hydrogen as a reductant in the smelting process, thereby further enhancing the Company's 'green metals' credentials.

Third-party Smelting Contract Demonstrates Capabilities of On-site Team and Equipment

In August, whilst waiting for the installation of the additional generators and seeking to utilise the power available at the time, the smelter was able to successfully process a test quantity of third-party metal product to generate revenue. This is expected to lead to an additional cash generative fixed term and quantity contract in the short term whilst the customer conducts maintenance on its own facilities. The outcome has been to demonstrate not only the flexibility of the production team at the smelter, but also the Company's ability to generate value from its on-site equipment. In due course, the fourth furnace at the smelter is also expected to be brought into production and may become available for third party contracts.

The refurbished Granulator at the smelter performed significantly above expectations during this recent processing. The plant was able to consistently generate a minus two-millimetre final product, which based on current feedback, should lead to an increased number of customers for the Company's High Purity Iron product.

Ironveld Mining's IPace DMS Magnetite Joint Venture Progressing

As announced on 1 September 2023, an amendment to the structure of the IPace DMS Magnetite Joint Venture ("JV") has been signed with Sable Exploration and Mining ("SEAM"), bringing in SEAM as funding partner. SEAM has already advanced funding as envisaged by the agreements. At the mine site, ground works and civil works for the DMS Magnetite JV are progressing well and all processing equipment is expected to be installed in approximately four weeks, with first product sales around two to four weeks after that. 

General mining activities to provide the smelter with necessary ore have enabled stockpiles to be created at both sites.

High Purity Iron Powders Opportunity

Ironveld's Board has been very encouraged by recent conversations with potential customers for its planned iron powders products. At present there is no production of water atomised iron powders in the southern hemisphere and, once production of these powders commences, Ironveld will enable local customers to avoid importing these critical materials. The Company has a fully costed capital investment programme of approximately ZAR 80 million (approximately £3.4 million) to upgrade the Rustenburg production facilities and is considering a number of ways to best finance this expansion without further recourse to shareholders.

Additive Manufacturing Research reported earlier this week that metal 3D printing markets had grown 16 per cent year-on-year and Ironveld's planned iron powders will feed into this growing market.  For example, the aerospace industry, including Airbus and Boeing, is increasingly using metal 3D printing for parts, and last month Apple announced that it would be using 3D printers to make the chassis for some of the upcoming Apple Watch Series 9 models. The new manufacturing process that Apple is testing will use less material than the large slabs of metal that are needed for traditional computer numerical control manufacturing, as well as cutting down on the time that it takes to make new devices.

Direct Funding Discussions

As announced on 30 March 2023, the Company reported that it was aware that Grosvenor Resources (Pty) Limited ("Grosvenor") was in talks with potential funders to facilitate its investment transactions.  An institution introduced by Grosvenor is now in direct funding discussions with the Company and the Company will provide a further update when appropriate.

Working Capital Loan Facility

As a result of the short delay in reaching full production capacity at the Rustenburg smelter complex and the additional diesel generator costs as explained above, the Company's operating expenditure has been higher than anticipated at the time of the February 2023 placing. In order to ensure that the Company has a sufficient working capital buffer until the expected receipt of increased product sales from the recently installed additional on-site power, Ironveld has entered into working capital loan facility agreements (the "Facility") with certain Directors, being Peter Cox, Giles Clarke and Nick Harrison, together with Tracarta Limited (in which John Wardle has a beneficial interest). The Facility consists of a maximum of £500,000 in order to provide the Company with flexibility in meeting ongoing operating costs over the coming months.

The key terms or the agreements are as follows:

·    Interest on funds drawn at 11% per annum;

·    Arrangement fee of 2.5% of the Facility value;

·    Term of six months;

·    Repayment of any funds drawn down plus interest immediately upon receipt of funds drawn down from any replacement institutional debt facility or conversion at the issue price in the event of any future equity placing during the loan term; and

·    There are no warrants immediately awarded in connection with the Facility however, conditional upon a replacement institutional debt facility being drawn down during the loan term, 62,500,000 warrants (in total) will be issued to the lenders exercisable at 0.80p per share. The exercise price represents a 162.3% premium to the closing mid price per Ironveld share of 0.305p on 15 September 2023.

Martin Eales, Chief Executive Officer, commented:

"We are extremely pleased to have the processing plant up and running effectively and efficiently again. It was not without great deliberation that we decided to pause certain activities but, ultimately, the decision to do this and install additional generators, until such time as the solar hybrid facility is commissioned, was the correct one.

"Positive discussions with potential iron powder customers are progressing well. In addition, the Company in engaged in preliminary discussions with direct funders, introduced by Grosvenor, which could see the Company further accelerate its activities.

"Ironveld is edging closer to a fully operational smelting plant, with the planned three furnaces nearing full operational status before the end of the year. The sheer size of the mine site, and the vast amounts high grade ore there, together with our ability to process and sell the product, means the upside potential is enormous.

"Notwithstanding the terms of the Facility being provided by the Directors and Tracarta, at present the Company has no intention of seeking new equity capital, and it will give us an important financial buffer as we continue the commissioning and production process.

"We look forward to sharing further positive updates during the remainder of the year."

Change of Name of Nominated Adviser

The Company also announces that its Nominated Adviser and Joint Broker has changed its name to Cavendish Capital Markets Limited ("Cavendish") following completion of its own corporate merger.

Related Party Transaction

The Facility participation by Giles Clarke, Nick Harrison, Peter Cox and John Wardle, all Directors of the Company, constitutes a related party transaction pursuant to Rule 13 of the AIM Rules for Companies. The Company's independent Directors (being Martin Eales and Malebo Ratlhagane) consider, having consulted with the Company's nominated adviser, Cavendish, that the terms of the Facility are fair and reasonable insofar as the Company's shareholders are concerned.

For further information, please contact:

Ironveld plc Martin Eales, Chief Executive Officer		c/o BlytheRay [phone]
Cavendish (Nomad and Broker) Christopher Raggett / Charlie Beeson / George Dollemore		[phone]
Turner Pope (Joint Broker) Andrew Thacker / James Pope		[phone]
BlytheRay Tim Blythe / Megan Ray		[phone]

NOTES TO EDITORS

Ironveld (IRON.LN) is the owner of Mining Rights over approximately 28 kilometres of outcropping Bushveld magnetite with a SAMREC compliant ore resource of some 56 million tons of ore grading 1.12% V2O5, 68.6% Fe2O3 and 14.7% TiO2.

In 2022 Ironveld agreed to acquire and refurbish a smelter facility in Rustenburg, South Africa, in which it can process its magnetite ore into the marketable products of high purity iron, titanium slag and vanadium slag. This transaction became unconditional in March 2023.

Ironveld is an AIM traded company. For further information on Ironveld please refer to www.ironveld.com.

 

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