Bushveld Minerals has continued to build on firm foundations in H1 2019

Bushveld Minerals (LON:BMN), the AIM listed, integrated primary vanadium producer, with ownership of high grade vanadium assets, has announced today its half year unaudited results for the six months ended 30 June 2019.

Fortune Mojapelo, CEO of Bushveld Minerals Limited, commented: 

“I am pleased to report that Bushveld Minerals has continued to build on firm foundations in the first half of 2019, enjoying progress across the Group and establishing new platforms for further future growth.

“The Group’s EBITDA of US$41million and free cash flow generation of US$23 million achieved in the period highlights the mine’s robust nature as a low-cost, highly cash generative operation, and was achieved in a period of weaker vanadium prices, which averaged 14 per cent less than a year earlier. Even with this strong result, we will be focusing our efforts at Vametco on further refining processes to maintain cost control.

“Operational performance has been improved through our transformation programme at Vametco, which we started to implement at the beginning of the year. Execution of the transformation programme is ongoing throughout the rest of this year and into 2020, during which we will reach a steady state of production of 3,400 mtV per annum.

“In August, we were pleased to receive approval from the Competition Commission of South Africa to acquire the Vanchem assets, without conditions, which was a key milestone in closing the transaction on 31 October 2019. We now look forward to completing the remaining conditions precedent and completing this important transaction for the Group.

“At Bushveld Energy, the first half of 2019 has seen a broader and improved understanding of its innovative business model. The combination of the electrolyte rental product and the current vanadium price is increasing confidence that VRFBs will become a long-term feature of energy grids both in Africa and globally. We expect these events to increase vanadium consumption from VRFBs during second half of 2019 and beyond.”

Key Highlights

H1 2019 Group financial highlights

·    Revenue of US$78.0 million (H1 2018: US$83.7 million).

·    EBITDA¹ of US$41.0 million (H1 2018: US$42.8 million).

·    Profit after tax of US$30.8 million (H1 2018: US$28.5 million).

·    Free cash flow² of US$23.3 million (H1 2018: (US$16.4 million).

·    Net cash balance of US$66.1 million at 30 June 2019 (31 December 2018: US$42.0 million).

·    Earnings per share of 1.92 cents (H1 2018: 1.57 cents).

·    Ferrovanadium price averaged US$56.3/kgV in H1 2019 (H1 2018: US$65.5/kgV).

– Year to date average ferrovanadium price of US$48.2/kgV³_.

1.     EBITDA comprises operating profit plus depreciation and amortisation.

2.     Free cash flow comprises net operating cash flows less net investing cash flows.

3.     London Metal Bulletin year to date average as at 20 September 2019.

H1 2019 Group operating highlights

•     On 1 May 2019, the Company announced the conditional acquisition of Vanchem for a consideration of US$68 million. The transaction is expected to be completed on 31 October 2019.

H1 2019 Bushveld Vanadium operational highlights

Vametco

·    Transformation programme successfully delivering, with Q2 2019 production being the highest quarter for production in over two years.

·    Production for H1 2019 was 1,392 mtV, a two per cent increase relative to H1 2018 (H1 2018: 1,360 mtV).

·    On track to meet 2019 production guidance of 2,800 mtV to 2,900 mtV.

·    On track to meet 2019 unit cash cost guidance of US$18.90/kgV to US$19.50/kgV.

H1 2019 Bushveld Energy operational highlights

Electrolyte Plant

·    The Environmental Impact Assessment (“EIA”) for the proposed plant in East London, South Africa, has passed the public participation stage and is on track to be completed this year.

·    The first batch of electrolyte was successfully produced using Vametco’s feedstock, with the samples being sent to vanadium battery companies for testing.

Vanadium electrolyte rental model 

·    Implementation of the first rental contract was announced with Avalon Battery Corporation and its customer, Sandbar, in the United States.

·    Negotiating larger rental agreements in Africa, Asia, Europe and North America.

·    Negotiations in progress with external commercial debt providers to support the structure.

Eskom Vanadium Redox Flow Battery project

·    The vanadium redox flow battery (“VRFB”) installed with Eskom was commissioned and now operating fully.

Vametco based Solar Mini-Grid Project

·    Commenced a number of activities including an Environmental Assessment, a grid connection and geotechnical studies. Procurement for the project commenced in Q3 2019.

Group events post 30 June 2019

Vametco

·    Successfully completed the wages and benefits negotiations with the Association of Mineworkers and Construction Union (“AMCU”) for the three year period from 1 July 2019 to 30 June 2022.

Vanchem acquisition

·    On 28 August 2019, unconditional approval for the acquisition was received from the Competition Commission of South Africa.

·    The transaction remains on track to be completed on 31 October 2019. The outstanding conditions precedent, namely, the cession of specific commercial agreements and South African Reserve Bank approval, are expected to be satisfied.

·    The Company is making good progress with local banks for debt facilities and remains confident of completing the transaction without relying on equity capital markets. Further updates will be provided as appropriate.

Group Outlook

·    Execution of the transformation programme at Vametco to increase production rates to 3,400 mtVp.a. during the course of 2020 and then to 4,200 mtVp.a. during 2022, remains on track.

·    Develop a production platform of more than 8,400 mtVp.a. with a nameplate capacity of 10,000 mtVp.a within the next five years.

·    On completion of the Vanchem acquisition, the Company will offer a diverse product offering for the steel, chemicals and energy storage markets.

·    Continue to reinforce Bushveld Energy’s position as a leading energy storage solutions provider.

·    Invest in the vanadium supply chain individually or through partnerships.

·    Progress workstreams for the Johannesburg Stock Exchange (“JSE”) listing.

Appointment of joint broker

·    Appointment of Peel Hunt LLP as joint corporate broker to the Company with immediate effect.