Bushveld Minerals Limited (BMN.L) Q1 2021 Operational Update

Bushveld Minerals Limited (AIM: BMN), the AIM-quoted, integrated primary vanadium producer and energy storage solutions provider, with ownership of high-grade assets in South Africa, (“Bushveld”), is pleased to provide an operational update for the three months ending 31 March 2021.

The Company also announces that going forward Bushveld Energy updates will be issued separately as standalone announcements.

Key Highlights

Bushveld Vanadium

§ Q1 2021 Group production of 688 mtV (Q1 2020: 880 mtV) affected by the previously announced 35-day planned maintenance shutdown at Vametco, which was successfully completed on time and within budget, during the quarter.

– Vanchem production in Q1 2021 of 293 mtV was 34 per cent higher than Q1 2020 (Q1 2020: 219 mtV) and 12 per cent higher than Q4 2020 supported by improved operational stability.

§ Q1 2021 Group sales of 788 mtV1 (Q1 2020: 1,080 mtV) due to lower production volumes as a result of the planned maintenance shutdown at Vametco.

§ 2021 Group guidance expected towards the lower end of 4,100 mtV and 4,350 mtV, although risks to this guidance exist as a consequence of Vametco’s challenges in achieving consistent plant performance, the slower-than expected ramp-up following the maintenance shutdown, the recent industrial action, as well as risks associated with the ramp-up of Vanchem’s first phase refurbishment.

§ The procurement phase of the Bushveld Electrolyte Plant has commenced, with commissioning expected in H2 2022.

§ Q1 2021 Total Injury Frequency Rate (“TIFR”) of 8.54 (Q1 2020: 14.14).

§ Currently no active Covid-19 cases among employees.

1: Reported as final sales to customers.

Vanadium market

§ Vanadium prices continued to increase during Q1 2021 after a strong start to the year.

§ Prices had risen in China in the midst of the Spring Festival while in Europe, prices increased due to strong demand and tight inventories.

§ Lengthening of the supply chain/logistics disruptions supporting prices.

§ Vanadium demand remains robust, and prices are expected to remain stable for the remainder of Q2 2021.

§ In Q1 2021 the London Metal Bulletin (“LMB”) Ferrovanadium price averaged US$30.9/kgV (Q1 2020: US$26.5/kgV). The current market price for LMB Ferrovanadium is approximately US$32/kgV.

Fortune Mojapelo, CEO of Bushveld Minerals Limited, commented:

“After a year of uncertainty, I am pleased to say that we are seeing a stabilisation of Covid-19 cases in South Africa. We are proud to announce that we currently have no active cases and continue to be vigilant in our approach to tackle the spread of the virus.

“Although Group production was lower this quarter than in Q1 and Q4 of 2020, the Company was able to carry out the previously guided essential maintenance at Vametco. Vanchem meanwhile had a solid quarter of production.

“We recognise that Vametco has underperformed at times and work such as the 35-day maintenance shutdown is expected to improve on the reliability and performance issues experienced in the past. Since the industrial action and ramp-up we have seen a stable period of normalised production levels. Various workstreams remain underway to maintain this stability, including maximizing safety and house-keeping initiatives, better managing process system constraints and optimizing preventative maintenance programmes. In light of Vametco’s challenges in achieving consistent plant performance during Q1 2021 as well as risks associated with the ramp-up of Vanchem’s first phase refurbishment, Group guidance is expected towards the lower end of 4,100mtV to 4,350mtV, albeit there are risks to achieving this target.

“Positively, the vanadium price has continued to rise following a strong start to the year with increased demand in Europe and US on the back of a post-Covid period of growth. As the world continues to open up, we have confidence in the demand side of the vanadium market.”

Conference call

Bushveld Minerals Chief Executive Officer, Fortune Mojapelo, and Finance Director, Tanya Chikanza will host a conference call at 09:00 am UK time (10:00 am SAST) today to discuss the quarterly update with analysts. Participants may join the call by dialling:

Tel: United Kingdom: +44 (0) 330 336 9126; South Africa: +27 11 844 6054

Pin: 4166478

A replay of the conference call will be available on the Company’s website post the call.

Bushveld Vanadium

Bushveld has one of the largest, high-grade primary vanadium resource bases in the world. The Company’s vanadium resource base currently consists of three mineral assets, Vametco, Brits and Mokopane, and its processing facilities consist of Vametco and Vanchem, which are all situated in South Africa.

1. mtV = metric tonnes of vanadium.

As part of the Group’s effort to improve its reporting standards, the Company will now provide additional production metrics at Vametco and Vanchem.

This is the Company’s second year of managing the two operations. In parallel to the capital work that we are carrying out at Vanchem, we continue to work on rightsizing and improving the operational performance and maximising the synergies between Vametco and Vanchem, to enable both operations to sustainably and consistently produce at a competitive rate in the medium to long term.

Vametco

Table 1: Operational highlights for Vametco (on a 100% basis)1

1. Based on provisional, unaudited figures. Bushveld’s net attributable interest of the above figures is approximately 74 per cent. Production cash cost is based on vanadium produced.

2. mtV = metric tonnes of vanadium.

3. Excludes depreciation, royalties and selling, general & administrative expenses and cost associated with Covid-19. Production cash cost is based on vanadium produced. Production cash cost (C1) measure does not have any standardized meaning prescribed by IFRS and differs from measures determined in accordance with IFRS. This measure is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. This measure is not necessarily indicative of net earnings or cash flow from operating activities as determined under IFRS.

§ Q1 2021 production of 395 mtV was 40 per cent below Q1 2020 (Q1 2020: 660 mtV) and 44 per cent below Q4 2020 (Q4 2020: 703 mtV) due to lower production as a result of the planned 35-day maintenance shutdown during the quarter.

– A planned 35-day annual maintenance shutdown was undertaken during February and March 2021 to increase the reliability of critical segments of the plant. All work was completed on time and within budget.

§ Q1 2021 production cash cost of US$26.51/kgV was 37 per cent higher than Q1 2020 (Q1 2020: US$19.36/kgV) and 27 per cent higher than Q4 2020 (Q4 2020: US$20.90/kgV) due to lower volumes as a result of the planned maintenance shutdown and a stronger ZAR:USD exchange rate.

§ Vametco has not achieved consistent plant performance during the quarter. The 35-day maintenance shutdown is expected to improve the reliability and performance issues experienced in the past. However, various workstreams remain underway to enhance and maintain this stability, including maximizing safety and house-keeping initiatives, identifying and solving process system constraints and optimizing preventative maintenance programmes. Management continues to monitor plant performance and keep production guidance under review, however, it is currently anticipated that Vametco production will be towards the lower end of guidance of between 2,700 mtV and 2,850 mtV and the higher end of its production cash cost (C1) of between US$20.0/kgV and US$21.30/kgV (ZAR320/kgV and ZAR340/kg).

Projects

§ Technical studies associated with the Vametco Phase III Pre-Feasibility Study (“PFS”) are progressing and are expected to conclude during Q2 2021. Details on the ramp-up profile and capital expenditure will be provided once the PFS has been completed. Metallurgical Engineering Technology and Construction are conducting the studies.

Impact of unprotected industrial action

§ On 19 April 2021, the Company reported an unprotected industrial action at its Vametco operation which temporarily stopped production with effect from the morning of 16 April 2021. The unprotected industrial action was resolved on 21 April 2021 when the Company and the Association of Mineworkers and Construction Union announced that a resolution was reached, and workers had started returning to work.

§ The plant has been safely ramping back up to sustainable production levels, with an estimated loss of production of approximately 65 mtV.

Vanchem

Table 2: Operational highlights for Vanchem

1. mtV = metric tonnes of vanadium.

2. Includes 124.3 mtV of ammonium metavanadate (AMV) toll treated at Vametco to produce Nitrovan which was sold through Vametco’s normal marketing channels.

3. Excludes depreciation and selling, general & administrative expenses and cost associated with Covid-19. Production cash cost is based on vanadium produced. Production cash cost (C1) measure does not have any standardized meaning prescribed by IFRS and differs from measures determined in accordance with IFRS. This measure is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. This measure is not necessarily indicative of net earnings or cash flow from operating activities as determined under IFRS.

§ Production in Q1 2021 of 293 mtV was 34 per cent higher than Q1 2020 (Q1 2020: 219 mtV) and 12 per cent higher than Q4 2020 (Q4 2020: 261 mtV) supported by improved operational stability.

– Produced 116 mtV of Nitrovan to support production at Vametco during the maintenance shutdown.

– Production numbers are provided at the time of reporting, after which, based on customer demand, chemicals and flake may be further processed to the required finished product, which will result in production and cost adjustments in line with the demand profiles of the various products.

§ The weighted average production cash cost (C1) for the quarter was US$30.70/kgV, 20 per cent higher than Q4 2020 (Q4 2020: US$25.70/kgV), mainly attributable to working capital movements arising from post year end audit adjustments, higher raw materials and maintenance costs, as well as a stronger ZAR:USD exchange rate.

§ Due to heightenedrisks associated with the ramp-up of the first phase refurbishment, production is now expected towards the lower end of guidance of between 1,400 mtV and 1,500 mtV and the higher end of its production cash cost (C1) of between US$26.20/kgV and US$26.70/kgV (ZAR419/kgV and ZAR427/kg).

§ Vanchem continues to utilise ore obtained at acquisition as feedstock to the plant. Vanchem has a strategy of sourcing feedstock ahead of the Mokopane Mine becoming its primary supplier as follows:

– Sourcing either ore or concentrate from Vametco; and/or

– Procuring ore from third parties on an ongoing basis, the process of which has commenced.

Refurbishment programme

§ Phase one of the refurbishment programme continues and is on track.

– The extension of the Waste Disposal Facility is still on track for completion in Q2 2021. Studies, together with some basic design work for the electrical infrastructure upgrade project, are expected to be completed in Q3 2021.

– The kiln-3 refurbishment project commenced in Q1 2021 and is expected to be completed in Q4 2021.

Bushveld Electrolyte Company

§ The development of the 200MWh electrolyte manufacturing plant is progressing according to plan. The remaining environmental permits and safety risk assessments were successfully applied for and conducted respectively during Q1 2021.

§ The procurement phase of the Bushveld Electrolyte Plant has commenced with the ordering of major long lead items. The signing of the lease agreement with the Industrial Development Zone in East London and ground-breaking for the construction of the property is due to occur during Q2 2021, while the installation of major equipment is planned for during Q3 2021. Commissioning of the plant is expected in H2 2022.

§ Including the ZAR36 million spent to date (approximately US$2.1 million), capital expenditure for the construction of the electrolyte plant has been revised to ZAR217 million (approximately US$13.6 million), originally US$10 million.

§ Bushveld’s capital expenditure investment commitment for plant construction has been amended to ZAR81 million (approximately US$5.1 million) through 2024. The remaining balance of ZAR136 million (approximately US$8.5 million) will be funded through equity and debt instruments in terms of the agreement signed between Bushveld Energy and its partner, the Industrial Development Corporation of South Africa.

§ As the project progresses into procurement and construction, Bushveld will transfer its interest in the electrolyte manufacturing plant company, Bushveld Electrolyte Company, to its vanadium production operations, alongside Vametco and Vanchem.


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