Commenting on the results, CEO Fortune Mojapelo said:
“I am pleased to report the first set of financial results that reflect the full consolidation of Vametco’s accounts since Bushveld Minerals acquired a majority controlling interest last December. It is particularly pleasing to report our first ever consolidated net profit and net free cash flow for the Bushveld Group. We expect to show continuously improving performance as we integrate and grow the business.
“We recently increased our interest in Vametco to 75% to gain maximum exposure of the business we operate. While Vametco is already a low cost producer of vanadium, we believe potential exits to further improve its cost position by improving its productivity. To this end we will be developing and implementing several productivity initiatives, in addition to the expansion plans announced to date, to enhance Vametco’s performance across the production process. We expect to see the positive effects of these initiatives in the coming year.
“Key to the success of our efforts at Vametco is a healthy cooperative relationship with all of our stakeholders, not least the local communities in which we operate and the workers. The recent unprotected strike action at the mine, while unfortunate only underscores the importance of us succeeding in this objective. We are pleased that we were able to reach a resolution with the workers and delighted that they will participate in the success of the Company through an Employee Share Options Scheme Structure.
“Meanwhile our efforts in building a leading energy storage company through Bushveld Energy are progressing well on all fronts, the construction of the electrolyte manufacturing plant in South Africa, the deployment of a VRFB at Eskom, securing mandates for large scale VRFB deployments as well as the development of vanadium electrolyte leasing products to promote the adoption of VRFBs in the global energy storage industry. The grant of US$500,000 received from the Government of the United States of America will go a long way to fund the implementation and enhancement of the Eskom Vanadium Redox Flow Batteries project. The commissioning delay experienced with the Eskom Vanadium Redox Flow Batteries project has meant the new battery is now expected to be commissioned during the Q4 2018.
“The signing of a 30-year Project Concession Agreement between Lemur Holdings and the Government of Madagascar is a critical milestone in the development of Lemur’s integrated coal-to-power project, bringing it even closer to implementation.
“As we continue to steadily execute our firm strategy to grow into a significant, low-cost vertically integrated vanadium platform, we have a busy pipeline of corporate and operational activities ahead. I look forward to providing further updates on the operations in the second half of the year.
“Finally, we are pleased to see the South Africa government move to clear regulatory uncertainty around the South Africa’s Mining Charter bringing much needed clarity and direction for investors.”
Bushveld Minerals Limited (LON: BMN), the AIM listed, integrated primary vanadium producer, with ownership of high grade vanadium assets, today announced its half year unaudited results, for the six months ended 30 June 2018.
H1 2018 Financial Highlights
§ First period of fully consolidated accounts since the Company increased its shareholding in Bushveld Vametco Holdings (Proprietary) Limited from 26.6% to a controlling 59.1% in December 2017, and subsequently to 75% in September 2018;
§ Bushveld Minerals consolidated H1 2018 Revenue of £62.1 million;
§ Bushveld Minerals consolidated EBITDA of £31.7 million (H1 2017: £1.0 million including share of results of associate);
§ Bushveld Minerals consolidated Profit after tax of £21.1 million (H1 2017: £1.1 million);
§ Bushveld Minerals consolidated Free cash flow1 of £10.2 million (H1 2017: (£1.4million));
§ Bushveld Minerals consolidated Cash balance of £26.2 million as at 30 June 2017 (H1 2017: £71.5 thousand);
§ Bushveld Minerals consolidated Gross debt of nil (H1 2017: nil);
§ Earnings per share of 1.14p (H1 2017: 0.26p).
1 Free cash flow: comprises net operating cash flows less net investing cash flows.
H1 2018 Operational Highlights
§ NitrovanTM sales of 1,403 mtV (H1 2017: 1, 341 mtV);
§ NitrovanTM production of 1,360 mtV (H1 2017: 1,441 mtV);
§ Bushveld remains one of the lowest cost vanadium producers in the world, with H1 operating costs of ZAR248.4/KgV (US$20.2/KgV) (H1 2017: US$15.4/KgV);
§ Phase Two of the Vametco Expansion project completed on time and within budget to raise nameplate capacity to 3,750mtV;
§ The exploration programme at the Brits Vanadium Project has shown vanadium grades in magnetite of 1.54 – 2.09% V2O5;
§ Bushveld Energy and the Industrial Development Corporation (“IDC”) received delivery of the first vanadium redox flow battery (“VRFB”) from UniEnergy Technologies (“UET”) in South Africa;
§ Bushveld Energy and IDC continue to progress work to build an electrolyte manufacturing plant in South Africa, to be located at Vametco and the East London Industrial Zone;
§ Lemur Holdings and the Government of Madagascar concluded the 30-year Project Concession Agreement;
§ Lemur Holdings completed the inception site visit for the Social and Environmental Impact Assessment (“SEIA”) at the Imaloto Power Project with related field studies commencing thereafter;
§ Lemur Holdings and the state-owned utility, Jiro sy Rano Malagasy (“JIRAMA”), amended the Power Purchase Agreement to significantly increase the latter’s offtake to up to 25MW.
H1 2018 Corporate Highlights
§ Completed a £15.7 million (US$22.2 million) equity placing before expenses by way of an oversubscribed placing of 152,749,172 new ordinary shares at a price of 10.3p per share;
§ Redeemed and settled the Atlas Convertible Bonds in full, for a final aggregate cash payment of £5.12 million;
§ Appointed Michael J. Kirkwood as Senior Independent Non-Executive Director;
§ Appointed Alternative Resource Capital, a trading name of Shard Capital Partners LLP, as joint broker of the Company;
§ Listing on the Johannesburg Stock Exchange remains a priority for the Company, with the work progressing accordingly;
§ Number of Warrants in issue as at 25 September 2018.
|
No. of warrants outstanding |
Exercise Price (GBp) |
Lapse Date |
|
3,598,684 |
6.9p |
31 March 2020 |
|
6,257,309 |
13.84p |
22 September 2020 |
H1 2018 Bushveld Vanadium Update
§ Vametco H1 2018 Revenue increased by 139.2% to ZAR 1,050 million (£62.1 million) compared with H1 2017 revenue of ZAR 439 million (£26.4 million).
§ Vametco H1 2018 EBITDA increased by 429.6% to ZAR 521 million (£30.8 million) compared with ZAR 98.4 million in H1 2017 (£5.7 million).
§ The Metal Bulletin FeV mid-average price for H1 2018 was US$65.5/ KgV, an increase of approximately 150% relative to the H1 2017 average price of US$26.2/ KgV.
· Vametco’s realised price is based on an average one month prior to sale.
§ FeV price has continued to strengthen with the Metal Bulletin FeV mid-price averaging US$80/ KgV in the two months ended August 2018.
§ Vametco achieved an all-time record magnetite kiln feed during Q1 2018, supported by the completion of Phase One of the expansion project.
§ Vametco completed Phase Two of the expansion project. This phase of the expansion project will increase the nameplate capacity from 3,035 mtV, achieved in Phase One, to 3,750 mtV, through self-funded capital expenditure of US$2.5 million.
§ The Company commenced an exploration programme at the Brits Vanadium Project, which has shown positive results with vanadium grades in magnetite of 1.54-2.09% V2O5, similar to grades mined at Vametco.
H1 2018 Bushveld Energy Update
Electrolyte production facility
§ Engaged an international chemicals company that has already designed and built a vanadium electrolyte production plant with multiple megalitre annual capacity.
§ Initiated the Environmental Impact Assessment (EIA) process for the electrolyte production plant, including appointment of local EIA consultants.
Eskom VRFB project
§ Completed manufacturing of the Direct Current (DC) portion of the VRFB.
§ Appointed two technicians from South Africa to perform installation support and maintenance on the Eskom project. The first phase of the technicians’ training was held at UET, in April 2018. This will give Bushveld Energy the capability to install and maintain future VRFB installations in South Africa and regionally.
§ Bushveld Energy and the IDC received delivery of the first VRFB from UET in South Africa. This included the mixed-acid vanadium electrolyte to be used in the battery.
H1 2018 Lemur Holdings Update
§ Lemur Holdings and the Government of Madagascar concluded a 30-year Project Concession Agreement which gives Lemur the right to build, own, operate and supply an initial 60 MW. In addition, the concession gives Lemur the right to build an evacuation line of up to 138kV for transport of the electricity to the connection points.
§ Completed the inception site visit for the SEIA at the Imaloto Power Project and commenced the relevant field work for the SEIA.
§ Amended the Power Purchase Agreement with the state-owned JIRAMA from the existing 10MW to allow the utility to offtake up to 25MW.
Events post 30 June 2018
Bushveld Minerals
§ Completed the acquisition of a 21.22% interest in Strategic Minerals Corporation(“SMC”) (the ultimate holding company of Vametco Alloys Proprietary Limited) from Sojitz Noble Alloys Corporation. The Acquisition of all of Sojitz’s legal and beneficial interest in SMC was acquired for a total cash consideration of US$20,000,000, including US$2,500,000 in accrued dividends. The acquisition increased Bushveld Minerals’ controlling interest in Vametco Holdings from 59.1% to 75%.
§ An unprotected industrial action at Vametco temporarily stopped production from the evening of 5 September. The industrial action was in relation to historic legacy issues and compensation structures prior to Bushveld’s acquisition of Vametco. The strike ended on 21 September, when Bushveld Minerals and the Association of Mineworkers and Construction Unionannounced that they had reached an agreement. The agreement includes:
· The settlement agreement, signed between Vametco and AMCU in May 2018 in respect of payments in lieu of Employee Share Options Scheme for the period 2013 to December 2017, is valid and recognised.
· Vametco will pay employees an amount in lieu of ESOPS for the year 2018 on the same basis as the ESOPS payment made as part of the May 2018 settlement agreement. The payments will be structured as a two-part payment:
· A payment of R15,000 (post-tax) shall be paid to each employee in respect of the period 1 January to 30 June 2018. This amount shall be paid on 28 September 2018.
· A second payment, in respect of the period 1 July 2018 to 31 December 2018, shall be payable after the release of the financial results of Bushveld Vametco Alloys Limited for FY2018 which is expected to be paid by 31 March 2019.
· The new agreement discourages any future participation in unprotected industrial actions by the workers at the risk of losing participation of any ESOP payments.
Following 16 days of unprotected industrial action, operations and production at Vametco resumed on 22 September 2018.
The unprotected industrial action may impact Vametco’s 2018 production and cost guidance. The Company is in the process of quantifying the impact of the stoppage and such guidance will be provided no later than the Q3 2018 Bushveld Vanadium Operational update.
Bushveld Energy
§ During commissioning of the VRFB, a performance issue was experienced, and initial assessments confirmed a vanadium electrolyte constraint. As a result, the battery was not able to meet the specified operational performance. It was also determined that it would not be possible to resolve the constraint in South Africa at this time and a remediation strategy was immediately implemented. The remediation includes the provision of new electrolyte and hardware for the DC module of the battery. This will allow commissioning to resume and be completed in Q4 2018. The Company will provide an update on progress in November 2018.
§ Bushveld Energy was awarded a grant from the Government of the United States of America, acting through the U.S. Trade and Development Agency (USTDA). The grant will provide support in implementation and enhancement of Bushveld Energy’s previously announced VRFB project at the Eskom mini-grid at its Research, Testing & Development centre. It will also support the development of new modelling capabilities to cover the combination – or “stacking” – of multiple benefits from energy storage supplied by one battery.
