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. 

26 January 2022

Bushveld Minerals Limited

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

Q4 and Full Year 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, is pleased to provide an operational update for the fourth quarter and 12 months ending 31 December 2021 ("Q4 2021" and "12M 2021").

Key Highlights

§ Q4 2021 Total Injury Frequency Rate ("TIFR") of 8.57, an improvement of 1.9 per cent on Q3 2021 (Q3 2021: 8.74).

§ Achieved Group production for the 12M 2021 of 3,592 mtV, at the upper end of 2021 guidance of between 3,400mtV and 3,600mtV. Production was marginally lower than 12M 2020 (12M 2020: 3,631 mtV¹).

- H2 2021 Group production of 2,018 mtV was 28.2 per cent higher than H1 2021 (H1 2021: 1,574 mtV), on the back of the operational improvements implemented after the production target rebasing in H1 2021.

§ Vametco production cash cost (C1) for the 12M 2021 of US$24.0/kgV, in line with guidance of between US$23.7/kgV and US$24.2/kgV.

§ Vanchem production cash cost (C1) for the 12M 2021 of US$30.6/kgV, in line with guidance of between US$30.3/kgV and US$31.1/kgV.

§ 12M 2021 Group Sales of 3,314 mtV (compared to production of 3,592 mtV), impacted by challenges in international logistics channels arising from COVID-19, the unrest in South Africa and disruptions at local ports in July and August. Consequently, the Company was unable to ship some of the product produced during 2021, resulting in a build of finished products inventory of 278 mtV.

§ Unaudited cash and cash equivalents as at 31 December 2021 of US$15 million (30 September 2021: US$25 million). The cash outflow includes amortising circa US$1.4 million of the Nedbank Revolving Credit Facility, retirement of Duferco convertible of US$2.5 million and final payment of deferred consideration for Vanchem of US$2.2 million.

1.     12M 2020 production of 3,361 mtV is made up of Vametco production of 2,654 mtV (includes 15 mtV sold to Vanchem) and Vanchem production of 990 mtV (includes 13 mtV from Vametco). During consolidation of group figures, 13 mtV of AMV produced from Vametco is eliminated.

2022 Guidance and Capital Expenditure

§ Group production of between 4,200 mtV and 4,400 mtV in 2022, with volumes weighted towards the second half due to ramp up, on commissioning Kiln 3 at Vanchem.

-     On track to commission Kiln 3 in Q2 2022, which is expected to increase Vanchem's annual production from 1,100 mtV to an annual run rate of 2,600 mtV by the end of 2022.

§ Vametco's production guidance of between 2,450 mtV and 2,550 mtV, and production cash cost (C1) of between US$22.7/kgV and US$23.5/kgV (ZAR346.9/kgV and ZAR358.7/kgV).

§ Vanchem's production guidance of between 1,750 mtV and 1,850 mtV, and production cash cost (C1) of between US$27.7/kgV and US$28.4/kgV (ZAR422.8/kgV and ZAR433.5/kgV).

Group Capital Expenditure

§ Capital expenditure expected for 2022 of approximately ZAR260 million (circa US$17 million) (2021: US$29 million, including US$10.5 million investment into Enerox Holdings Limited), with most of the cost being Rand-denominated:

-     Vametco ZAR78 million (circa US$5.1 million);  

-     Vanchem ZAR127 million (circa US$8.3 million);

-     Mokopane ZAR3 million (circa US$0.2 million).

§ Bushveld Electrolyte Company ("BELCO") ZAR37 million (circa US$2.4 million)

§ Bushveld Energy ZAR10 million (circa US$0.7 million)

Fortune Mojapelo, CEO of Bushveld Minerals Limited, commented: 

"I am pleased to report another solid set of quarterly operating results, this time for the final quarter of 2021. Our focus on stable, achievable production levels on the back of the operational improvements and enhanced safety helped us reach the upper end of the full year revised guidance and meet the unit cost guidance, pursuant to the rebasing in H1 2021.

"We continue to invest in sustaining and growth capital to maintain the stable production base we have worked hard to achieve from the existing operations and provide the platform to support the volume increase in 2022.

"We look forward to the year ahead on the back of the strong foundation we have set and the production growth mostly attributable to the Kiln 3 commissioning in 2022. Production growth is key to unit cost reduction and margin expansion, as reflected in the guidance for 2022.

"Demand for vanadium in the US, Europe and Rest of the world remains buoyant and Ferrovanadium prices have strengthened and currently trade at an average of approximately US$35/kgV across markets."

Conference call

Bushveld Minerals Chief Executive Officer, Fortune Mojapelo and Finance Director, Tanya Chikanza will host a conference call at 10:30 am UK time (12:30 pm SAST) today to discuss the quarterly update with analysts. Participants may join the call by dialling:

Tel:                   United Kingdom: +44 (0) 330 336 9125; South Africa: +27 11 844 6136

Pin:                  7302955
 

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

Health and Safety

§ Q4 2021 TIFR of 8.57, an improvement of 1.9 per cent on Q3 2021 of 8.74, as a result of integrating safety into all work through a structured planning process.  

§ Whilst there was an increase in the number of COVID19 cases during the reporting period compared to Q4 2020 due to the transmissibility of the Omicron variant, all affected employees have recovered. Employees are encouraged to continue adhering to the health and safety protocols.

Bushveld Vanadium

1.     mtV = metric tonnes of vanadium.

2.     12M 2021 Group Sales of 3,314 mtV were 13.7 per cent lower than 12M 2020 (12M 2020 3,842 mtV), impacted by not being able to ship some of the product we produced during the second half of 2021, resulting in a build-up of inventory.

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. 

§ Q4 2021 production of 700 mtV was in line with Q4 2020 production (Q4 2020: 703 mtV).

§ 12M 2021 production of 2,453 mtV was eight per cent lower than 12M 2020 (12M 2020: 2,654 mtV), due to lower production in H1 2021, pursuant to the production rebasing in H1 2021.

§ Q4 2021 production cash cost (C1) of US$22.9/kgV was nine per cent higher than Q4 2020 (Q4 2020: US$21.0/kgV), as a result of increased maintenance and contract mining costs.

§ 12M 2021 production cash cost (C1) of US$24.0/kgV was 31 per cent higher relative to 12M 2020 (12M 2020: US$18.3/kgV), impacted by the stronger ZAR:USD exchange rate, 12M 2021 production cash cost (C1) in local currency of ZAR354.0/kgV was 18 per cent higher relative to 12M 2020 (12M 2020: ZAR302/kgV).due to production rebasing which led to increased expenditure on costs such as planned maintenance, which will unwind as production increases over time.

Vametco 2022 production guidance and capital expenditure

§ Production guidance of between 2,450 mtV and 2,550 mtV, an increase of 4 per cent at the upper end relative to 2021 production, demonstrating the continued operational stability at Vametco.

§ Production cash cost (C1) guidance of between US$22.7/kgV and US$23.5/kgV (ZAR346.9/kgV and ZAR358.7/kgV

§ Total capital expenditure expected for 2022 of ZAR78 million (circa US$5.1 million), with most of the cost being Rand-denominated includes:

-     ZAR61.0 million (circa US$3.8 million) of sustaining capital;

-     ZAR13.0 million (circa US$0.9 million) of environmental capital.

Vanchem

Table 2: Operational highlights for Vanchem¹

1.     Based on provisional, unaudited figures.

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.

§ Q4 2021 production of 262 mtV was in line with Q4 2020 of 261 mtV and 10 per cent lower than Q3 2021 (Q3 2021 291 mtV), due to challenges arising from the introduction of the ore from the Upper Seam project. Higher than expected clay and silica levels resulted in kiln ring formation and resulted in unplanned downtime to remove same; these issues are being resolved, as detailed in the section on the Upper Seam Project below.

§ 12M 2021 production of 1,138 mtV, in line with 2021 guidance of between 1,100 mtV and 1,200 mtV, and 15 per cent higher than 12M 2020 production of 990 mtV due to Vanchem ramping up production in 2020 and running at capacity in 2021.

§ Q4 2021 production cash cost (C1) of US$36.8/kgV was 43 per cent higher than Q4 2020 (Q4 2020: US$25.7/kgV), impacted by challenges arising from the introduction of the ore from the Upper Seam project. 12M 2021 production cash cost (C1) in local currency of ZAR453/kgV, was 23 per cent higher than 12M 2020 (12M 2020: ZAR369/kgV), and production cash cost (C1) for 12M 2021 of US$30.6/kgV was 37 per cent higher than 12M 2020 (12M 2020: US$18.30/kgV), impacted by the stronger ZAR:USD exchange rate.

-     The unit cost of production reflects the weighted average across all various product categories. Unit costs vary across these product categories. Nitrovan is produced at Vametco converting Vanchem ammonium metavanadate on a toll treatment basis. Chemical products, including specialist V₂O₅ powder are produced at significantly higher unit cost than that of V₂O₅ flake and FeV. These products however attract commensurate premiums to the prevailing V₂O₅ price. FeV has a higher unit cost than V₂O₅ flake due to conversion costs and yield effects.

-     The proportion of FeV and chemical product sales in 2021 was significantly greater than in 2020 which resulted in a commensurate increase in average unit costs of production, including higher packaging and logistics components thereof.

Vanchem 2022 production guidance and capital expenditure

§ Production guidance of between 1,750 mtV and 1,850 mtV.

-     Production guidance includes expected production from Kiln 3 which is on track to commission in Q2 2022 to increase annual production from 1,100 mtV to a run rate of 2,600 mtV by the end of 2022.

§ Production cash cost (C1) of between US$27.7/kgV and US$28.4/kgV (ZAR422.8/kgV and ZAR433.5/kgV

-     The reduction in cost is expected as production volumes increase as kiln 3 comes online which is expected to be commissioned in Q2 2022. The full production benefit of kiln 3 will be realised in 2023.

-     The unit cost at Vanchem will continue to be higher than at Vametco as the product mix, including FeV and chemical products, has a higher cost of production, and in turn attracts premium pricing.

§ Total capital expenditure expected for 2022 of ZAR127 million (circa US$8.3 million), with most of the cost being Rand-denominated includes:

-     ZAR38.0 million (circa US$2.5 million) of sustaining capital;

-     ZAR13.0 million (circa US$0.9 million) of environmental capital and;

-     ZAR69.0 million (circa US$4.3 million) of growth capital.

Growth Projects

The Feasibility and Pre-feasibility studies at Vametco and Vanchem were completed in Q4 2021 and are currently under review, which includes testing the economics of the various stages and options to develop a well-structured growth journey that will provide the best return on investment going forward. An announcement will be made in due course, on completion of the review and approval by the board.

The Upper Seam Project

The Upper Seam project was developed to supply ore to Vanchem (magnetite in ore > 80 per cent, V₂O₅ grade in magnetite >1.65 per cent). The project consists of crushing, screening and dry magnetic separation. The plant was commissioned in Q4 2021 with the final installation of the dry magnetic separator in December 2021. During commissioning and ramp-up ore quality was at times below requirements due to heavy rain and mining constraints, which resulted in operational challenges in the Vanchem kiln. The project team will continue to optimise the plant performance during ramp-up to meet Vanchem ore specification requirements.  In addition, the Vanchem plant is being reconfigured to treat Upper Seam ore efficiently.

Bushveld Vanadium production profile

§ 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. 

-     We continue to prioritise operational stability at Vametco to achieve a sustainable and consistent output of 2,800 mtVp.a.

-     Vanchem's production run rate is expected to more than double from 1,100 mtVp.a. to a run rate of 2,600 mtVp.a. by the end of 2022, supported by the commissioning of Kiln 3 and associated downstream refurbishment. Kiln 3 is expected to be commissioned in Q2 2022.

Vanadium market

§ Demand in the US, Europe and Rest of the world remains buoyant.

§ Q4 2021 London Metal Bulletin FeV price averaged US$33/kgV, 14 per cent lower than Q3 2021 (US$38.2/kgV) and 32 per cent higher than Q4 2020 (US$24.4/kgV).

§ The 2022 year to date average FeV price is approximately US$35/kgV for London metal bulletin and CRU Ryan's Note, Asia Metals is ~US$33/kgV as at 22 January 2022.

ENDS

Enquiries: [email protected]

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 and to a steady state production run rate of 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.