Market Abuse Regulation ("MAR") Disclosure

 

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR. 

 

27 September 2021

Bushveld Minerals Limited

("Bushveld Minerals" "Bushveld" or the "Company")

Unaudited Interim Results for the Six Months ended 30 June 2021

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, is pleased to announce its half year unaudited results for the six months ended 30 June 2021.

 

Highlights

·      Revenue of US$47.0 million a 9 per cent increase relative to H1 2020 (H1 2020: US$43.1 million), supported by an improved average realised price of US$29.24/kgV (H1 2020: US$24.20/kgV), partly offset by lower sales volumes in H1 2021 of 1,608 mtV¹ (H1 2020: 1,765 mtV).  

·      Group production in H1 2021 of 1,574 mtV, a 5.2 per cent decrease relative to H1 2020 (H1 2020: 1,649 mtV) as a result of unplanned stoppages, a 35-day planned maintenance shutdown during Q1 2021 and the unprotected industrial action at Vametco in April 2021.

·      Improved operational performance at Vametco post the maintenance programme and other operational enhancements initiated by the new management, increased Q2 2021 Group production by 28.8 per cent relative to Q1 2021, which combined with the higher production at Vanchem, resulted in Q2 2021 Group production being 13.4 per cent higher than Q2 2020. The operational stability has laid a platform for sustainable growth, lower unit cost expected in H2 2021 will normalise costs for the rest of the year in line with production cash cost (C1) guidance at both plants.

·      EBITDA loss of US$10.8 million (H1 2020: US$1.0 million) primarily due to a stronger ZAR:USD exchange rate on costs in H1 2021 resulting in a negative impact amounting to US$7.3 million. 

-     The improved operational performance at Vametco in Q2 2021 was not sufficient to offset the challenging start in Q1 2021.

·      Sustaining capital expenditure of US$6.1 million (H1 2020 of US$0.1 million), supporting the recent operational stability.

·      Cash and cash equivalents as at 30 June 2021 of US$31.6 million (December 2020: US$50.5 million).

·      Approximately US$12.7 million was realised from the sale of the investment in Invinity Energy Systems Plc ("Invinity") and the profit on the sale is not included in EBITDA. The profit realised on the original investment of US$5 million was approximately US$7.7 million.

·      Net debt as at 30 June 2021 of US$54.4 million (December 2020: US$33.7 million), including production financing agreement ("PFA") of US$29.3 million.

·      H1 2021 Total Injury Frequency Rate ("TIFR") of 5.17, an improvement of 78 per cent relative to H1 2020 (H1 2020: 23.75). 

·      On track to meet 2021 Group production guidance of between 3,400 mtV and 3,600 mtV and ramping up at Vanchem using the reallocated PFA capital ringfencing, to increase Group production to a steady-state run rate of between 5,000 to 5,400 mtV by the end of 2022. Production growth reduces unit cost and increases profitability.

 1: Reported as final sales to customers.

Fortune Mojapelo, CEO of Bushveld Minerals Limited, commented: 

"The operational stability and improved production performance achieved in the last two months of the period under review was carried through into the first two months of the second half, which bodes well for reducing unit costs in the remainder of the year. We are confident of maintaining this rhythm, putting us on course to meet our production and cost guidance for the full year.

2021 marks a rebasing for the Company which creates the environment for us to implement the changes required at the operations, which can sustain production and provide the platform for growth. This means investing in maintenance and sustaining capital to achieve stability and support volume increase. As production growth on the back of our operational stability is key to margin expansion and profitability, we are pleased with the uplift of the PFA capital ringfence and the reallocation of the funding to the Vanchem refurbishment and expansion, given Vanchem's operational stability and opportunity to rapidly scale-up production. As a result of using this existing PFA funding for the Vanchem capital expenditure of about US$18 million in the current year and in H1 2022, we remain on target for Group production to increase to a steady state production run rate of between 5,000 mtVp.a. and 5,400 mtVp.a. by the end of 2022. The increase in production will be the biggest contributing factor to a sustainable cost reduction, with Vanchem's unit costs expected to be in line with Vametco, when it more than doubles its current production to 2,600 mtV.

The Upper Seam Project at Vametco came online in September 2021 and will supply Vanchem with a significant proportion of its ore requirement for the next 18 months.

Finally, it is with deep sadness we learned of the passing of Professor Morris Viljoen in August 2021, a Technical Advisor to Bushveld Minerals and importantly, one of co-founders of VM Investment Company ("VMIC"). VMIC laid the foundation for the establishment of Bushveld Minerals."

 

Table 1: Group financial and operational highlights

In US$ million unless otherwise specified.	SIX MONTHS ENDED
	June 30 2021	June 30 2020	%  change
FINANCIAL HIGHLIGHTS
Revenue	47.0	43.1	9%
EBITDA loss	(10.8)	(1.0)	980%
Depreciation	(8.9)	(8.9)	-
Operating Loss	(19.7)	(9.9)	99%
Loss Before Tax	(22.7)	(10.7)	112%
Basic loss per share (US cents)	(1.50)	(0.92)	63%
Net cash used in operating activities	(13.8)	(2.7)	411%
Group average realised price (US$/kgV)	29.24	24.20	21%
Average foreign exchange rate (USD:ZAR)	14.54	16.65	13%
Total income statement cost per unit sold (excl. depreciation) (US$/kgV)	36.0	25.0	44%
Sustaining Capital (US$/kgV)	3.7	0.1	3,600%
Cost per unit sold (including sustaining capital) (US$/kgV)	39.7	25.0	59%
OPERATIONAL HIGHLIGHTS
Group Production (mtV)	1,574	1,661	-5%
Group Sales (mtV)	1,608	1,765	-9%

 

 

 

Post period events

·      Successful negotiations with Orion Mine Finance ("Orion") has resulted in the uplift of the PFA capital ringfence with funds being allocated from Vametco to Vanchem.

·      The Company sold its 4.76 per cent shareholding in AIM-listed Afritin Mining Limited and realised a total of approximately US$3.5 million. The proceeds of the sale are being used for general corporate purposes.

·      Whilst production was not impacted by the unrest in South Africa in July, the Group has experienced logistics delays in getting the final product to port in Q3 2021 due to COVID-19 effects on international shipping availability as well as disruptions at local ports. The Group expects to make up any sales shortfall during Q3 and Q4 2021.

 

Priorities and outlook

·      Targeting a 5,000 - 5,400 mtVp.a. production run rate by the end of 2022, funded through the PFA.

·      Complete Pre-feasibility studies at Vametco and technical studies at Vanchem in Q4 2021 to increase Group production run rate to between 6,400 mtVp.a. and 6,800 mtVp.a. in the medium-term.

·      As previously announced, initiate the Group's Cost Savings Programme to cut costs by between US$2.5 million to US$4 million per year from 2022.

 

Conference call

Bushveld Minerals Chief Executive Officer, Fortune Mojapelo, Finance Director, Tanya Chikanza and Francois Naude, Director of Operations; will host a webcast and conference call at 11:00 UK time (12:00 noon SAST) today to discuss the update with analysts. Participants may join the call by dialling:

 

Tel:	United Kingdom: +44 (0) 330 336 9125; South Africa: +27 11 844 6054
Pin:	1037894
Link:	https://webcasting.brrmedia.co.uk/broadcast/6149c8013ae1ca74490b0e76

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

 

Chief Executive's Report

 

Dear Shareholders,

 

The beginning of the first half of 2021 was challenging for Bushveld Minerals with Vametco experiencing operational instabilities. Due to the weak performance at Vametco during the period, we made the decisions to rebase our plans by reducing our production guidance for the year, increasing the investment in maintenance and sustaining capital, in order for our operations to sustainably produce before embarking on volume increase which will be the biggest factor to sustainable cost reduction. I am pleased to report that at the back of these measures we are now seeing improved plant performance as well as consistently stable production levels.

Group production was five per cent lower relative to H1 2020, owing to the unscheduled stoppages during first quarter and prior to the 35-day maintenance shutdown, as well as the unprotected industrial action at Vametco in April. Post the completion of the maintenance work at Vametco, we have seen improved plant performance as well as operational stability since May 2021 on the back of several operational improvements, which include a greater discipline in our proactive maintenance practices, process control from the technical team and people development strategy. The improved operational performance at Vametco in Q2 2021, with production increasing by circa 50 per cent relative to Q1 2021, was not sufficient to make up for the weaker start to the year. Vanchem showed a solid and consistent production level during H1 2021.

We are encouraged by the operational stability, achieved post the completion of the maintenance period, and pleased to state that we are on target to meet our Group production guidance of between 3,400 mtV and 3,600 mtV and cost guidance at the operations. 

Overall, revenue for the period of US$47.0 million, was nine per cent higher than a year ago (H1 2020: US$43.0 million), supported by improved average realised price, and partly offset by lower sales volumes.

The negative impact of a stronger ZAR:USD exchange rate on total costs (cost of sales plus other operating and administrative costs excluding depreciation) was US$7.3 million, combined with the reduced sales volumes and increased production costs, resulted in an EBITDA loss of US$10.8 million for the period (H1 2020: US$1.0 million). 

The strong ZAR in the period was supported by increased exports from the mining sector driven by the rapid growth in commodity prices, helped by manufacturing figures that were stronger than expected post the reopening of the economy and high interest rates relative to the US. The ZAR is expected to remain at similar levels for rest of the year.

Production growth on the back of our operational stability is key to margin expansion, cost reduction and profitability. Successful negotiations with Orion Mine Finance ("Orion") have resulted in the uplift of the PFA capital ringfence, allowing us to reallocate the PFA funding to the Vanchem refurbishment and expansion, on the back of its stability and rapid opportunity to scale-up production. As a result of using this existing PFA funding for the Vanchem capital expenditure of about US$18 million in the current year and in H1 2022, Group production is expected to increase to a steady state production run rate of between 5,000 mtVp.a. and 5,400 mtVp.a. by the end of 2022.

This specific expansion entails the refurbishment and ramp up of Kiln 3 at Vanchem, which is of a similar scale and capacity to the primary kiln at Vametco and will see Vanchem produce at an annual steady state production run rate 2,600 mtVp.a. while Vametco will be operating at a sustainable production run rate of 2,800 mtVp.a.

In addition, we are on track to complete the pre-feasibility studies at Vametco and the technical studies at Vanchem in Q4 2021. These studies will determine which future projects between Vametco and Vanchem will be prioritised to achieve a Group's steady state production run rate of between 6,400 mtVp.a. and 6,800 mtVp.a. in the medium term. The Group's maintains its long-term target to achieve a steady state production run rate 8,400 mtVp.a.

As previously announced, we are implementing the Group's Cost Savings Programme to cut costs by between US$2.5 million to US$4 million per year from 2022.

Focusing on our energy business, construction has commenced of the electrolyte manufacturing facility in East London, South Africa, along with our partners, the Industrial Development Corporation. With a targeted initial capacity of 200 MWh of vanadium electrolyte and capacity to scale up to 800 MWh, the electrolyte plant will be the largest publicly announced plant outside of China. The Group continues to sell vanadium products to Vanadium Redox Flow Batteries ("VRFB") Original Equipment Manufacturers and sold 9,000 kg V₂O₅ to Invinity realising US$0.2 million in revenue. We expect to scale up the vanadium electrolyte rental product with new contracts and we continued to make progress on the Vametco hybrid mini-grid and expect to attain financial close by the end of the year, subsequent to which we will commence construction.

During the period we secured an indirect interest in VRFB manufacturer Cellcube (previously referred to as Enerox GmbH) of 25.25 per cent. As previously reported on the 14 July 2021, a claim form was issued in the English High court by Garnet Commerce Limited ("Garnet") against VRFB Holdings Limited ("VRFB-H") and Enerox Holdings Limited ("EHL"). EHL owns a 100 per cent interest in Enerox GmbH ("Enerox). Garnet's claim form seeks declarations against VRFB-H concerning an alleged breach of the joint venture agreement in relation to EHL, in respect of the indirect investment into EHL through VRFB-H by Mustang Energy Plc, as announced on 27 April 2021. The litigation remains ongoing and VRFB-H intends to robustly defend against the claims. The Company will update the market accordingly of any developments.

Moving on to the vanadium market during H1 2021 the London Metal Bulletin ("LMB") Ferrovanadium price averaged US$33.4/kgV, 30 per cent higher than H1 2020 (H1 2020: US$25.70/kgV). Iron ore prices reached their highest levels, exceeding the US$200/t level during H1 2021 and have since retracted to levels of US$120/t. Roskill expects iron ore prices to decline further towards the end of the year, due to reduced demand in China as a result of restrictions in steel making volumes.  Iron ore prices below US$100/t would be a disincentive for vanadium co-producers to blend local vanadium bearing magnetite feedstock with seaborne hematite ores. 

The LMB Ferrovanadium price in Europe is US$34.0/kgV, China US$32.5/kgV and the United States US$37.8 per kg/V as at 17 September 2021.

Furthermore, in August 2021, the US Department of Commerce published results on its investigation, under Section 232 of the Trade Expansion Act of 1962, into the effect of imports of vanadium on the national security of the US, stating that the present quantities and circumstances of vanadium imports do not threaten to impair US national security. The outcome is welcomed by the Company as the US market represents a significant share of Bushveld's sales.

Despite the recent softening in the vanadium price we remain confident that the medium to long term market fundamentals continue to support vanadium prices going forward.

 

Safety and COVID-19

·      The Group recorded a 78 per cent improvement in Total Injury Frequency Rate to 5.17 relative to the corresponding prior period (H1 2020: 23.75), as a result of improved risk assessment and mitigation measures.

·      As at 31 August 2021, the Group had five active COVID-19 cases, and a 96 per cent recovery rate. Sadly, Bushveld reported two COVID-19 related deaths among its employees during the period and we extend our deepest condolences to their families. We continue to prioritise the safety of our employees.

·      In July, we commenced a vaccination programme for both the Vametco and Vanchem employees.

·      In August 2021, the South African government, confirmed that the COVID-19 vaccine roll out had been ramped up to allow registration for the 18 and 34 age group. In September 2021, the country moved to an adjusted level two as a significant decline in new and active COVID-19 infections was noted around the country, which is encouraging news. 

 

Operational performance

Bushveld Vanadium

	Unit	Q1 2021	Q2 2021	H1 2021	H1 2020	H1 2021 vs H1 2020 % Change
Group production	mtV1	688	886	1,574	1,661	-5%
Vametco production	mtV1	395	593	988	1,226	-19%
Vanchem production	mtV1	293	293	586	435	35%
Vametco C1 cash cost2	US$/kgV	26.5	25.8	25.9	17.1	52%
Vanchem C1 cash cost2	US$/kgV	30.7	28.1	29.5	20.2	46%
Vametco total sustaining cash cost3	US$/kgV	39.7	37.6	38.3	23.1	66%
Vanchem total sustaining cash cost3	US$/kgV	42.0	34.2	38.2	26.3	45%

1.     mtV = metric tonnes of vanadium.

2.     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

3.     Excludes depreciation, royalties and cost associated with COVID-19. Includes selling, general & administrative expenses and sustaining capital cash spend.

 

Vametco

·      H1 2021 production of 988 mtV, was 19 per cent lower than H1 2020 (H1 2020: 1,226 mtV), due to unplanned stoppages and the planned 35-day maintenance shutdown undertaken to increase the reliability of critical segments of the plant in Q1 2021 and the unprotected industrial action in April 2021. Performance and stability improved in Q2 2021.

·      H1 2021 production cash cost (C1) of US$25.9/kgV, a 52 per cent increase relative to H1 2020 (H1 2020: US$17.1/kgV), mostly due to lower production volumes (+US$3.8/kgV), a stronger ZAR:USD exchange rate (+US$3.3/kgV) and higher maintenance cost (+US$0.9/kgV) in order to improve operational stability.

-     Q2 2021 costs improved by 2.6 per cent in line with the improved operational performance since the maintenance shutdown. Lower unit cost expected in H2 2021 will normalise costs for the rest of the year in line with production cash cost (C1) guidance.

·      H1 2021 total sustaining cash cost of US$38.3/kgV, a 66 per cent increase relative to H1 2020 (H12020: US$23.1/kgV), mostly due the factors mentioned above in addition to an increase in sustaining capital (+US$2.1/kgV).

·      Sustaining capital expenditure of US$3.1 million relative to H1 2020 (H1 2020: US$0.2 million). The increase is in line with expectations as minimum capital was spent in H1 2020 on sustaining capital due to the effects of COVID-19 on the operation, in addition, priority was to complete and commission the Kiln Off-gas system. 

·      Post the period end, in July and August, Vametco produced 251 mtV and 260 mtV respectively as a result of continued operational improvements, which include a greater discipline in our proactive maintenance practices, process control from the technical team and people development strategy. Vametco's minimum monthly production run-rate forecast for the rest of the year is maintained at approximately 240 mtV as a result of planned maintenance strategy to enable operational stability.

·      2021 production guidance maintained to between 2,300 mtV and 2,400 mtV, and production cash cost (C1) of between US$23.70/kgV and US$24.20/kgV (ZAR339/kgV and ZAR345/kgV).

 

Vanchem

·      H1 2021 production of 586 mtV was 35 per cent higher than H1 2020 production (H1 2020: 435 mtV), underpinned by consistent plant performance. 

·      H1 2021 production cash cost (C1) of US$29.5/kgV, a 46 per cent increase relative to H1 2020 (H1 2020: US$20.2/kgV), due to a stronger ZAR:USD exchange rate (+US$3.7/kgV), higher cost of raw materials (+US$3.1/kgV) due to test work performed with different concentrate in order to optimise process parameters, increased maintenance (+US$0.8/kgV) which is in line with the Group expectations and other items (+US$9.2/kgV). This was partly offset by higher volumes (-US$8.9/kgV).

·      H1 2021 total sustaining cash cost of US$38.2/kgV, 45 per cent increase relative to H1 2020 (H1 2020: US$26.3/kgV) mostly due to the factors mentioned above in addition to an increase in sustaining capital (+US$5.6/kgV).

·      Sustaining capital expenditure spend of H1 2021: US$2.8 million relative to H1 2020 (H1 2020: US$0.4 million). The increase in sustaining capital is in line with Group expectations as Vanchem was still ramping up in H1 2020.

·      Commissioning of Kiln-3 is now expected in H1 2022, the delay will not impact Vanchem's production run rate target of 2,600 mtVp.a. by the end of 2022. The full production and cost benefits of Kiln-3 will be realised in 2022.

·      Vanchem produced 96 mtV for both months of July and August. Vanchem is expected to maintain its minimum monthly production levels of approximately between 90 mtV to 100 mtV.

·      2021 production guidance maintained to between 1,100 mtV and 1,200 mtV, production cash cost (C1) of between US$30.3/kgV and US$31.1/kgV (ZAR434/kgV and ZAR444/kgV).

·      Through the reallocation of the PFA capital to Vanchem, capital expenditure of approximately US$18 million is estimated for the remainder of the year and into 2022, for Vanchem to achieve a steady state production run rate of 2,600 mtVp.a by the end of 2022. At a production of 2,600 mtVp.a., unit costs are expected to be in line with Vametco. 

·      At Vanchem, the ore stockpile acquired with the plant will deplete at the end of September 2021. The Upper Seam Project at Vametco has come online and will supply Vanchem with a significant proportion of its ore requirement for 18 months and has the ability to supply 34 kt of ore per month. In addition, with an overall Upper Seam resource base of 16 Mt the potential to extend this particular supply beyond the initial 18 months exists and is being investigated accordingly. Furthermore, we have successfully secured third-party ore for Vanchem.

 

Financial performance

Overview

Group sales fell by nine per cent to 1,608 mtV (H1 2020: 1,765 mtV) due to low production volumes. 

Group	Unit	H1 2021	H1 2020	H1 2021 vs H1 2020
Sales	mtV	1,608	1,765	-9%
Average realised price	US$/kgV	29.24	24.20	21%

 

The Group reported revenue of US$47.0 million (H1 2020: US$43.1 million), and an Earnings Before Interest, Tax, Depreciation and Amortisation ("EBITDA") loss of US$10.8 million (H1 2020: EBITDA of loss of US$1 million).

The changes in fair value through other comprehensive income decrease to (US$4.8 million) (H1 2020: US$3.3 million) due to Invinity and Afritin. The investment in Invinity was sold during the period, contributing to approximately US$12.7 million in cash (the profit on the sale is not included in EBITDA). The profit realised on the original investment of US$5 million was approximately US$7.7 million. Afritin shares are marked to market and reflect the appreciation in the market value to US$3.4 million (H1 2020: US$1.7million). The Afritin shares were subsequently sold in August 2021 for US$3.5 million, and the proceeds of sale are being used for general corporate purposes.

The Group cash balance at the end of the period was US$31.6 million, relative to US$50.5 million as at 31 December 2020.

Net debt increased to US$54.4 million relative to December 2020 US$33.7 million due to the decrease in the Group's cash position for the period. 

 

Analysis of results

Income statement summary as adjusted from "statutory" primary statement presentation.

	6 months ended 30 June 2021	6 months ended 30 June 2020
	Unaudited	Unaudited
	US$	US$
Revenue	47,022,135	43,050,652
Cost of sales (excl. depreciation)	(43,439,030)	(30,231,587)
Other operating and administration costs (excl. depreciation)	(14,376,544)	(13,826,387)
EBITDA	(10,793,439)	(1,007,321)
Depreciation	(8,949,235)	(8,912,034)
Operating loss	(19,742,674)	(9,919,356)
Net financing expense	(2,983,277)	(813,435)
Loss before tax	(22,725,951)	(10,732,791)
Income tax credit	3,729,735	410,263
Loss after tax	(18,996,216)	(10,322,528)

 

Revenue

Revenue for the Group was US$47.0 million (H1 2020: US$43.1 million) supported by improved average realised price, partly offset by lower sales volume as a result of reduced production volumes at Vametco in Q1 2021. The Group sales volume of 1,608 mtV was achieved at an average price of US$29.24/kgV and an average exchange rate of USD:ZAR 14.54 relative to H1 2020 (H1 2020: average price US$24.20/kgV, average exchange rate of USD:ZAR16.65).

 

Cost of sales

The cost of sales excluding depreciation for the period was US$43.4 million (H1 2020: US$30.2 million), the increase is attributable mainly to:

·      the negative impact amounting to approximately US$5.5 million due to the stronger ZAR:USD exchange rate on costs in H1 2021;

·      increase in maintenance costs to US$7.4 million (H1 2020: US$5.7 million) to sustain the plants, production volumes and improve operational stability;  

·      Increase in energy and raw material costs to US$18.6 million (H1 2020: US$16.8 million); and

·      Increase in mining costs due to waste stripping of US$2.2 million (H1 2020: US$1.2 million) associated with bringing the Upper Seam project online in September 2021.

The Group cost per unit sold (including sustaining) of US$39.7/kgV increased by 59 per cent (H1 2020: US$25.0/kgV), mostly due to the cost factors mentioned above and lower sales volumes, in addition to:

·      US$14.4 million (H1:2020 US$14.0 million) in operating and administrative costs;

·      US$6.1 million (H1 2020: US$0.1 million) in sustaining capital which contributed to the operational stability. Minimal capital was spent in H1 2020 on sustaining capital as Vanchem was still ramping up in H1 2020 as well as the  effects of COVID-19 on the operation. 

 

The Group unit cost of US$39.7/kgV is in line with the unit cost levels of circa US$38-39/kgV at Vametco and Vanchem. With the projected increase in volumes, the Group cost per unit sold is expected to reduce.

Total cost summary table

 

		6 months ended 30 June 2021  US$			6 months ended 30 June 2020  US$
Cost of sales (direct) (excl. depreciation)			(43,439,030)		(30,231,587)
Operating and administrative costs (excl. depreciation)			(14,376,544)		(13,826,387)
Total income statement cost (excl. depreciation)			(57,815,574)		(44,057,973)
Total units sold (mtV)			1,608		1,765
Total income statement cost per unit sold (excl. depreciation) US$/KgV			36.0		25.0
Sustaining Capital			(6,058,174)		(139,191)
Total cost including sustaining capital			(63,873,748)		(44,197,164)
Cost per unit sold (including sustaining capital) US$/kgV			39.7		25.0
Revenue			47,022,135		43,050,652
Average price realised			29.24		24.20

 

Finance costs

The finance costs increased to US$3.5 million (H1 2020: US$1.4 million) as a result of the interest costs of the Orion PFA and the convertible loan notes with Duferco and Orion. 

 

Other operating and administrative expenses

Unpacking the other operating and administrative costs (excl. depreciation) of US$14.4 million; other mine operating costs of US$1.6 million and idle plant costs of US$3 million are in line with H1 2020, and mainly reflect the 35-day planned maintenance shut down and unplanned stoppages at Vametco during the first half of 2021. Costs in H12020 were impacted by the initial COVID-19 nationwide shutdown.

Administrative expenses of US$8.8 million represent an increase of US$1.2 million relative to H1 2020 (H1 2020: US$7.6 million). The increase was due to foreign exchange movements of US$1.1 million arising from a stronger ZAR:US$ exchange rate relative to H1 2020. A breakdown of the administrative expenses is provided in the table below.

 

	6 months ended 30 June2021			6 months ended 30 June2020
	Unaudited			Unaudited
	US$			US$
Administrative costs (includes IT services, security, bank charges)			1,090,009	902,651
Depreciation			153,331	62,317
Professional fees (consultants)			1,173,994	1,938,566
Staff costs			5,038,053	3,659,281
Other costs (includes legal, training, tax and accounting, other)			1,327,387	1,040,141
		8,782,774		7,602,956

 

Cost Savings initiative

The Group has introduced a Cost Savings Programme aimed at ensuring continued competitiveness throughout the commodity cycle, while enhancing the offering to markets across all the industries in which we compete. We are targeting cost-savings initiatives across the Group, with procurement as the first priority. Our objective is to cut procurement costs by approximately US$2.5 million to US$4 million per year, starting from 2022.

 

Balance sheet assets

Non-current assets increased during the period. The most significant increase came from the increase in Property, Plant and Equipment as a result of increased assets under construction both at Vametco and Vanchem. The Deferred Tax amount also increased by US$2.4 million from December 2020 as the Group was not profitable and recognises an asset in respect of accumulated tax losses that are expected to be utilised to offset against future tax liabilities. Current assets decreased due to reduced cash and cash equivalents from US$50.5 million in December 2020 to US$31.6 million in June 2021.

 

Equity and liabilities

Non-controlling interest increased by US$9.9 million to US$42.0 million due to the investments by Acacia Resources Limited of US$2.2 million  and Mustang Energy PLC of US$7.4 million in the equity of VRFB-H. The foreign currency translation reserve decreased over the period to US$1.3 million as a result of a stronger ZAR:USD exchange rate. Other liabilities included the increase in trade and other payables to U$25.2 million relative to US$22.1 million in December 2020. Current portions of borrowings of US$18.1 million are as a result of amounts payable to Duferco of US$11.9 million, Orion PFA of US$1 million and Nedbank Revolving Credit Facility ("RCF") of US$5.2 million. 

Net debt

The net debt reconciliation below outlines the Group's total debt and cash position.

	6 months ended 30 June 2021 Unaudited US$	12 months ended   31 December 2020 Audited US$
Gross Cash and Cash Equivalent	31,565,241	50,540,672
Nedbank Term Loan and Revolving Credit Facility	(8,818,956)	(8,636,535)
Convertible Loan Notes - Duferco	(11,870,192)	(11,585,068)
Production Financing Agreement - Orion Mine Finance	(29,288,227)	(30,105,886)
Convertible Loan Notes Instrument -Orion Mine Finance	(35,172,354)	(33,073,699)
Other	(845,588)	(845,588)
Net Debt	(54,430,077)	(33,706,104)

 

Cash flows from operating activities

Net cash outflows from operating activities for the period was (US$13.8 million), an increase of US$11.1 million compared to H1 2020 (H1 2020: (US$2.7 million)), due to increase in costs and lower sales volume as a result of reduced production volumes at Vametco in Q1 2021. 

 

Investing activities

Investing activities were driven by capital expenditure growth with Property, Plant and Equipment expenditure of US$4.3 million which mainly included Vametco, Vanchem and Bushveld Energy capital expenditure of US$0.3 million, US$1.8 million and US$2.2 million respectively. The payment of US$1.7 million made for the deferred consideration owed to Evraz. The purchase of investments increased to US$19.6 million (H1 2020: US$2 million) which is due to additional investments in EHL, the holding company for Enerox.  The disposal of financial assets held at fair value of US$12.7 million represents the sale of Bushveld's initial investment of 8.71 per cent share in Invinity which was realised, resulting in capital appreciation. 

 

Financing activities

Financing activities of approximately US$8.5 million includes the proceeds from shareholder subscriptions of US$9.6 million, comprising Acacia Resources Limited and Mustang Energy PLC with US$2.2 million and US$7.4 million respectively, offset by US$1.2 million of finance costs, lease payments and Orion PFA repayment. 

 

Cash generation

The table below summarises the main components of cash flow during the 6 months ended 30 June 2021.

 

	6 months ended 30 June 2021	6 months ended 30 June 2020
	US$	US$
Operating (loss)	(19 742 674)	(9 919 356)
Depreciation and amortisation	8 949 235	8 912 034
Changes in working capital and provisions	(2 975 747)	(2 065 067)
Taxes Paid		410 263
Cash (outflow) from operations	(13 769 186)	(2 662 126)
Sustaining capital	(6 058 174)	(139 191)
Free cashflow	(19 827 360)	(2 801 317)
Cash used in investing activities	(13 055 181)	(4 849 827)
Financing activities	8 462 855	7 077 815
Cash (outflow)	(24 419 686)	(573 329)
Opening net cashflow	50 540 672	34 011 557
Foreign exchange	5 444 255	(8 832 717)
Closing net cash	31 565 241	24 605 511

 

 

 

As previously announced during the full year results, the Nedbank debt facility available to Vametco is subject to financial covenants which are EBITDA-driven. In light of the low production volumes in H1 2021, as a result of the 35-day maintenance shutdown and the unprotected industrial action at Vametco, the Company successfully renegotiated its covenant testing terms required under the ZAR125 million (US$8.7 million) RCF. Nedbank agreed to waive the covenants for the June 2021 period and relaxed the December 2021 Group net debt to EBITDA ratio from 2.50 times to 4.0 times. A condition of the waiver is that the RCF is amortised by ZAR5 million (approximately US$0.3 million) for August 2021, and ZAR7 million monthly (approximately US$0.5 million) from September 2021, with a bullet payment of ZAR22 million (approximately US$1.5 million) due on the maturity date of 6 November 2022.

Positive progress has been made in negotiations with Duferco Participations Holding S.A ("Duferco") on the remaining balance US$11.5 million of the convertible loan note, that would result in US$5 million being payable in November 2021 and the remaining US$6.5 million being converted into Bushveld shares.

Despite the weaker start in H1 2021, I am pleased to say that we are seeing improved operational stability at Vametco which has continued into the month of July and August, and Vanchem continues to show solid and consistent production levels. We are on track to meet the 2021 Group production guidance of between 3,400 mtV and 3,600 mtV. In addition, we are thankful to our finance partners Orion, for allowing the lifting of the capital ringfence and enabling us to apply funds, previously restricted to Vametco, to grow Vanchem's capacity to 2,600 mtV. This will increase Group production to a steady state run rate of between 5,000 to 5,400 mtV by the end of 2022, reducing unit cost and increasing profitability.

I thank you.

Fortune Mojapelo

Chief Executive Officer

 

 

ENDS

 

Enquiries: [email protected]

Bushveld Minerals Limited			+27 (0) 11 268 6555
Fortune Mojapelo, Chief Executive Officer
Andrew Mari, Chika Edeh, Head of Investor Relations
SP Angel Corporate Finance LLP	Nominated Adviser & Broker		+44 (0) 20 3470 0470
Richard Morrison / Charlie Bouverat
Grant Baker / Richard Parlons
Peel Hunt Limited	Joint Broker		+44 (0) 20 7418 8900
Ross Allister / Alexander Allen
Tavistock	Financial PR
Gareth Tredway / Tara Vivian-Neal / Adam Baynes			+44 (0) 207 920 3150

 

ABOUT BUSHVELD MINERALS LIMITED

Bushveld Minerals is a low-cost, vertically integrated primary vanadium producer. It is one of only three operating primary vanadium producers, owning 2 of the world's 4 operating primary vanadium processing facilities. In 2020, the Company produced more than 3,600 mtV, representing approximately three per cent of the global vanadium market. With a diversified vanadium product portfolio serving the needs of the steel, energy and chemical sectors, the Company participates in the entire vanadium value chain through its two main pillars: Bushveld Vanadium, which mines and processes vanadium ore; and Bushveld Energy, an energy storage solutions provider. Bushveld Vanadium is targeting to materially grow its vanadium production and achieve an annualised steady state production run rate of between 5,000 mtVp.a. and 5,400 mtVp.a by the end of 2022, from projects currently being implemented. Beyond that, pre-feasibility studies are in progress to determine the optimal path to increase production even further to a steady state production run rate of between 6,400 mtVp.a. and 6,800 mtVp.a. in the medium-term. The Company retains its long term plan to grow its long-term production to 8,400 mtVp.a. in the long term.

 

Bushveld Energy is focused on developing and promoting the role of vanadium in the growing global energy storage market through the advancement of vanadium-based energy storage systems, specifically Vanadium Redox Flow Batteries ("VRFBs").

 

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 mostly 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 mix plant and finally into the shaft furnaces to produce Nitrovan.

About Vanchem

Vanchem is situated at Ferrobank Industrial Park in Emalahleni Local Municipality, Mpumalanga Province in the Republic of South Africa. Vanchem is a primary vanadium producing facility with a beneficiation plant capable of producing various vanadium oxides, ferrovanadium and vanadium chemicals. Vanchem uses the salt roast beneficiation process, similar to the one used at Vametco. The plant comprises: a core salt-roast processing plant, including 3 roasting kilns, an electric smelting ferrovanadium converter, an alumino-thermic smelting facility, also located at Highveld, a vanadium chemical plant; and a rail siding linking the plant with Bushveld deposits and additional potential supply sources through the national rail network.

 

Financial statements for the period ended 30 June 2021

 

Bushveld Minerals Limited

(Registration number 54506)

 

Consolidated Statement of Profit or Loss and Other Comprehensive Income

 

		6 months ended 30 June 2021 Unaudited	6 months ended 30 June 2020 Unaudited	12 months ended 31 December 2020 Audited
	Notes	US$	US$	US$
Continuing operations
Revenue		47,022,135	43,050,652	89,988,078
Cost of sales		(52,222,217)	(38,987,345)	(91,260,760)
Gross (loss) / profit		(5,200,082)	4,063,307	(1,272,682)
Other operating income		1,670,464	771,383	2,304,528
Selling and distribution costs		(2,851,646)	(2,454,724)	(4,828,710)
Other mine operating costs		(1,592,894)	(1,620,053)	(4,699,892)
Idle plant costs		(2,985,742)	(3,076,313)	(4,152,153)
Administrative expenses		(8,782,774)	(7,602,956)	(19,783,176)
Share-based payment		-	-	(375,008)
Operating loss		(19,742,674)	(9,919,356)	(32,807,093)
Finance income		517,057	601,074	1,077,991
Finance costs		(3,500,334)	(1,414,509)	(5,732,249)
Movement in earnout estimate		-	-	(206,066)
Loss before taxation		(22,725,951)	(10,732,791)	(37,667,417)
Taxation		3,729,735	410,263	484,654
Loss for the period		(18,996,216)	(10,322,528)	(37,182,763)
Consolidated other comprehensive income:
Items that will not be reclassified to profit or loss:
Changes in the fair value of financial assets at fair value through other comprehensive income		(4,767,013)	3,268,931	13,483,194
Other fair value movements		-	-	103,448
Total items that will not be reclassified to profit or loss		(4,767,013)	3,268,931	13,586,642
Items that may be reclassified to profit or loss:
Currency translation differences		11,271,089	(25,438,821)	(10,425,238)
Other comprehensive income for the period net of taxation		6,504,076	(22,169,890)	3,161,404
Total comprehensive loss for the period		(12,492,140)	(32,492,418)	(34,021,359)
Loss attributable to:
Owners of the parent		(17,898,241)	(10,764,522)	(36,680,615)
Non-controlling interest		(1,097,975)	441,994	(502,148)
		(18,996,216)	(10,322,528)	(37,182,763)
Total comprehensive loss attributable to:
Owners of the parent		(11,394,165)	(29,383,559)	(32,640,348)
Non-controlling interest		(1,097,975)	(3,108,859)	(1,381,011)
		(12,492,140)	(32,492,418)	(34,021,359)
Earnings per share
Loss per ordinary share Basic earnings per share (in cents)	3	(1.50)	(0.92)	(3.00)
Diluted earnings per share (in cents)	3	(1.50)	(0.92)	(3.00)
		-	-	-
All results relate to continuing activities.

 

 

 

Consolidated Statement of Financial Position
		30 June	31 December
	Note	2021 Unaudited US$	2020 Audited US$
Assets
Non-Current Assets
Intangible assets	4	60,335,958	59,003,825
Property, plant and equipment	5	172,606,640	167,579,993
Investment property		2,873,358	2,811,017
Deferred tax		7,524,047	5,085,154
Total Non-Current Assets		243,340,003	234,479,989
Current Assets
Inventories	6	36,659,909	34,081,625
Trade and other receivables	7	13,966,691	10,425,363
Restricted investment		3,180,469	3,111,465
Current tax receivable		2,077,960	814,067
Financial assets at fair value	8	25,051,999	22,452,877
Cash and cash equivalents	9	31,565,241	50,540,672
Total Current Assets		112,502,269	121,426,069
Total Assets		355,842,272	355,906,058
Equity and Liabilities
Share capital	10	15,858,428	15,858,428
Share premium	10	117,065,907	117,065,907
Retained income		36,503,367	46,734,823
Share-based payment reserve		375,008	375,008
Convertible loan note reserve		54,814	54,814
Foreign currency translation reserve		(1,290,980)	(11,202,236)
Fair value reserve		532,496	12,966,294
Equity attributable to owners of the parent		169,099,040	181,853,038
Non-controlling interest		42,031,933	32,146,712
Total Equity		211,130,973	213,999,750
Liabilities
Non-Current Liabilities
Post-retirement medical liability		2,163,165	2,076,023
Environmental rehabilitation liability		18,718,345	17,998,366
Deferred consideration		1,802,884	1,802,884
Loans	13	1,664,028	1,597,972
Borrowings	11	67,883,046	70,909,370
Lease liabilities		4,342,671	4,376,483
Total Non-Current Liabilities		96,574,139	98,761,098
Current Liabilities
Trade and other payables	12	25,209,468	22,065,601
Provisions		1,921,500	3,296,894
Borrowings	11	18,112,271	13,337,406
Lease liabilities		750,492	625,661
Deferred consideration		2,143,429	3,819,648
Total Current Liabilities		48,137,160	43,145,210
Total Liabilities		144,711,299	141,906,308
Total Equity and Liabilities		355,842,272	355,906,058