Lemur Q2 Operational Update

RNS Number : 5037T

Bushveld Minerals Limited

04 July 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.

4^th July 2018

Bushveld Minerals Limited

("Bushveld" or the "Company")

Lemur Q2 Operational Update

Bushveld Minerals Limited (AIM: BMN), the AIM listed, integrated primary vanadium producer, with ownership of high grade vanadium assets, is pleased to provide a Q2 operational update in respect of Lemur Holdings Limited ("Lemur"), the Company's coal and energy subsidiary that is developing an integrated thermal coal mining and independent power project ("Imaloto Power Project") in Madagascar.

Q2 Highlights:  

·     A 30-year Project Concession Agreement signed with the Government of Madagascar;

·     Inception site visit for Social and Environmental Impact Assessment ("SEIA") completed;

·     Power Purchase Agreement ("PPA") with state owned utility, Jiro sy Rano Malagasy ("JIRAMA") amended to allow the utility up to 25MW offtake;

·     Draft Bankable Feasibility Study ("BFS") submitted in June 2018 by technical development partner, Sinohydro and currently being reviewed by the Company; and

·     Ongoing engagement with lenders for construction phase of the project. Notably, received Expressions of Interest ("EOIs") for finance and political risk insurance from two financial institutions.

Fortune Mojapelo, CEO of Bushveld Minerals Limited, commented:

"Notwithstanding Bushveld Minerals' focus on its flagship vanadium platform, the Company is   committed to deliver on the value of the Imaloto Power Project by completing the milestones that were set out for this year in order to supply affordable, high quality baseload energy in southwest Madagascar. The granting of the Concession Agreement during the quarter is a critical milestone for the project, aligning its development with the national government's broader plans.

"We are also pleased that the draft of the bankable feasibility study was submitted by our technical partner, Sinohydro and is currently under review. Once finalised, the study will provide a more precise picture of the project's cost and timeline for our ongoing discussion with lenders."

Details of Operational Update

On 12 May 2018, Lemur, through its Madagascar subsidiary Imaloto Power Project SARL ("IPP"), executed a 30-year concession agreement ("Concession") with the Government of Madagascar for the Imaloto Power Project. The Concession gives IPP the right to build, own, operate and supply an initial 60 MW in Imaloto, located in the Toliara Province.

In addition, the Concession, gives Lemur the right to build an Evacuation Line of up to 138kV for the transport of the electricity to the connection points.

As one of the primary offtakers, JIRAMA would be able to resell the electricity to residential and large-scale electricity consumers during the specified period, based on the existing PPA which has been increased from 10MW to 25MW.

Furthermore, the Concession enables granting of the right of way and any land use authorisation for the required infrastructure from the coal-fired power plant to the connection points.

The Concession also contains provisions for lenders' standard terms and conditions to ensure the bankability of the project. In this regard, Lemur continues to engage with potential lenders for the Imaloto Power Project, and has to date received EOIs from two major financial institutions in respect of project finance and political risk insurance. These financial institutions are currently conducting their initial due diligence on the project.

In June 2018, Lemur's technical development partner, Sinohydro, submitted the BFS for the project which is a critical consideration for the funding phase. The BFS is currently being reviewed by an independent consultant. Once the review is completed and the BFS is finalised, it will provide a more accurate view of project construction costs and associated time lines, which will tie back to the funding discussions with lenders. The BFS will also assist Lemur to progress the Engineering Procurement Construction ("EPC") discussions. Funding discussions and the negotiation of the EPC contract will be among the key focus areas for the project in the second half of 2018.

In addition to the above, another important milestone achieved during the quarter was the completion of the inception site visit to the Imaloto Power Project area which Lemur and its team of environmental consultants undertook as part of the SEIA. The inception visit was completed in June 2018 and is the first in the series of the SEIA field-based activities that Lemur needs to complete on both the project site and impacted areas. Overall, the SEIA work for Imaloto remains on track and is expected to be completed by Q4 2018.

Prince Nyati, CEO of Lemur Holdings Limited, commented:

"We are pleased that majority of the key elements required to progress the project to the next development phase are in place, in order to supply energy to residential as well as existing and near-term, large power intensive consumers that have not been able to expand or commence operations.

"In addition to progressing the SEIA study and finalising the BFS with Sinohydro, our efforts for the second half of 2018 will focus on advancing project funding and EPC discussions. As part of the SEIA process we continue to engage with the local community. Overall the project will support the regional economy, by creating 1650 direct jobs, some of which have already been filled. However, the majority of jobs will start during the construction phase, which will occur in the next 1 to 2 years.

"Power from the Imaloto Power Project is a viable alternative to existing expensive diesel generation in the region as it will be based on locally produced low-cost exportable coal, combined with clean coal technology that will in turn create demand for abundant unexploited reserves of limestone from the Toliara region. The baseload energy generated by Imaloto is expected to significantly change the economics of mining projects, in the southwest of Madagascar, that were previously deemed as unfeasible."

Summary of 2018 Project Objectives:

Table 1: Status of 2018 Project Objectives

Objective	Current Status (Q2)
Obtain Project Concession	·   30-year Concession Agreement with government executed
Complete BFS with Sinohydro during H2 CY18	·   Draft BFS completed by Sinohydro ·   Lemur currently reviewing BFS ·   Final BFS dependent upon completion of technical and economic review by independent consultants
Conclude the SEIA Study by Q4 2018	·   Initial desktop work completed ·   Site inception visit completed
Secure additional offtakes above the current demand from JIRAMA	·   Discussions with private industrial offtakers ongoing ·   PPA with JIRAMA amended to increase up to 25MW
Pursue funding and credit enhancement options for the Project	·   Multiple discussions with various lenders at different stages ·   Received EOIs from 2 major financial institutions - a regional financial institution and a South African government-backed credit insurance agency ·   Both are conducting their due diligence

Other Objectives for 2018:

·     Seek to conclude coal offtakes with third parties - 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 expected power project commissioning date is 2021

Overall, the Imaloto project is on track to deliver electricity to south western Madagascar by 2021.

Enquiries: [e-mail]

Bushveld Minerals Limited	[phone]
Fortune Mojapelo, Chief Executive Officer
Chika Edeh, Head of Investor Relations
Lemur Holdings Limited Prince Nyati, Chief Executive Officer, Lemur Holdings Limited	[phone]
SP Angel Corporate Finance LLP	[phone]
Nominated Adviser & Broker
Ewan Leggat
Richard Morrison
Alternative Resource Capital	[phone]
Joint Broker
Alex Wood
Tavistock
Financial PR
Charles Vivian / Gareth Tredway	[phone]
Lifa Communications Financial PR
Gabriella von Ille	[phone]

ABOUT BUSHVELD MINERALS LIMITED

Bushveld Minerals is a low cost, integrated, primary vanadium producer, with ownership of high grade vanadium assets. 

The Company's flagship vanadium platform includes a 59.1 per cent controlling interest in Bushveld Vametco Alloys (Pty) Ltd, a primary vanadium mining and processing company; the Mokopane Vanadium Project and the Brits Vanadium Project.

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.

While the Company's focus is on the vanadium operations and the development and promotion of VRFBs it has additional investments in coal, power and tin.

The coal platform comprises the wholly-owned Imaloto Power 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.

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 Lemur Holdings

Lemur Holdings is a wholly owned subsidiary of Bushveld Minerals and is the company's coal and power platform. The Imaloto Power Project is located in the southwest of Madagascar and consists of a 136 million tonne coal resource (90 per cent of which is of JORC compliant Measured and Indicated). The Project also includes a 30-year Concession for an initial 60MW mine mouth coal power plant as well as over 250km of new transmission lines, developed in parallel as one of Madagascar's leading independent power producers. Imaloto also has a secured 30-year electricity off-take with JIRAMA, the State Utility.  

The initial phase of the Imaloto Power Project will potentially increase Madagascar's baseload capacity by approximately 15 per cent and almost double the transmission lines in the country. This is particularly important as the southwest region is mostly rural and about 95 per cent of the population does not have access to electricity. In terms of the in economic impact on southwest Madagascar, the Imaloto Power Project is set to inject close to US$200 million in foreign direct investment into Madagascar and will create about 1,650 direct jobs and approximately US$1 billion dollars in revenue for the government of Madagascar over its useful life.

 

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