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Bushveld Minerals

Bushveld Minerals Limited Well placed to achieve significant benefits from high quality assets

Fortune Mojapelo, CEO of Bushveld Minerals Limited, commented:

“The successful completion of the acquisition of Sojitz’s interest in Vametco has enabled us to accomplish our objective of achieving maximum ownership of the asset. To obtain the 74% ownership, Bushveld’s cash outlay totalled approximately US$48 million which, given the Vametco earnings already reported for the half year, implies a payback on investment of under 12 months.

“With the completion of most of the corporate action aimed at maximising Bushveld’s ownership of Bushveld Vametco, the Company can accordingly now focus on ensuring maximised production output and efficiencies at Vametco.

“The impact of the two week unprotected industrial action, as well as a seven day kiln shutdown due to unplanned maintenance, has resulted in the downward revision of guidance. This underscores the importance of focusing on operational improvement initiatives, production expansion initiatives, and proactive stakeholder engagement with organised labour and local communities. The latter will ensure these stakeholders remain an important part of our growth journey.

“We continue to benefit from a rising vanadium price supported by China’s new high-strength rebar standard which came into effect on 1 November 2018.

“While higher vanadium prices partially mitigated the impact of the production shortfall, with the Company expected to generate healthy cash flows, Bushveld intends to use this opportunity to sustainably maximise production volumes and drive operating costs down. Accordingly, we are pleased to have commenced with Phase 3 of our expansion plan, which will increase capacity at Vametco to 5,000 mtV per annum. Phase 3 will also benefit from advancement of the Brits Vanadium Project, which has yielded encouraging drilling results.

“Our primary focus is to continue expanding our footprint as we execute on our strategy. We are well placed to achieve significant benefits from our high quality assets and further strengthen our competitive position.”

Bushveld Minerals Limited (LON: BMN), the AIM listed, integrated primary vanadium producer, with ownership of high grade vanadium assets, today provided an operational update for the three months to end-September 2018, in respect of its Vanadium platform which consists of Bushveld Vametco Limited, the Brits Vanadium Project and the Mokopane Project.

Key Highlights

· Consolidation of Vametco ownership, following the acquisition, of Sojitz’s underlying effective 16% interest in Vametco Alloys (Pty) Ltd for US$20 million in September 2018, increasing Bushveld Minerals effective interest to 75%, subsequently reduced to 74% following completion of the sale of 1% to its Black Economic Empowerment shareholders, in line with the requirements of the mining regulations of South Africa.

· Vametco’s production for Q3 2018 was 537 mtV in the form of NitrovanTM from magnetite concentrate (Q3 2017: 669 mtV), a decrease of approximately 14.6% relative to Q2 2018 (Q2 2018: 629 mtV), primarily due to a 16 day unprotected industrial action during which the plant ceased operations.

· As a result of the industrial action and an unplanned seven day kiln maintenance exercise, Vametco’s 2018 production guidance has been reduced downwards from 2,850 mtV to 3,000 mtV to between 2,600 mtV and 2,650 mtV.

· Ferrovanadium price averaged US$85.8/KgV in Q3 2018, an increase of 24% relative to the previous quarter. For the nine months to September 2018 the ferrovanadium price averaged US$72.3/KgV, an increase of 137% relative to the comparable period in 2017.

Vametco’s realised price is based on the prior month’s average price.

· Ferrovanadium price has continued to strengthen with the Metal Bulletin FeV mid-price averaging US$114/KgV during the month of October 2018.

· The Company continues to progress the operational improvement initiatives to enhance Vametco’s productivity and achieve maximum throughput.

· The Company has completed 13 (VM001 – VM013) exploration drillholes, as part of an initiative to increase geological confidence and grade control of the ore mined at Vametco. Assay results are expected by December 2018 with an updated Mineral Resource Estimate to be published in Q1 2019.

· The Company has received all assays results for Phase 1 of its exploration programme at the Brits Project, which has to date shown positive drilling results. Sampling results of Phase 2 drillholes are expected to be received in Q1 2019.

Bushveld Vametco Limited

Production

· NitrovanTM production of 537 mtV for Q3 2018, decreased by approximately 14.6% relative to Q2 2018 (Q2 2018: 629 mtV). The lower volumes were mostly due to production interruptions as a result of a four day protest by members of the local community in July 2018 and a 16 day unprotected industrial action in September 2018.

The industrial action was resolved on 21 September 2018, when the Company and the Association of Mineworkers and Construction Union announced that a resolution was reached through the implementation of a framework for a new Employee Share Options Scheme Structure.

The Company continues to execute on its operational improvement initiative, to enhance Vametco’s productivity and achieve maximum throughput.

· Vametco’s production cost of ZAR298/KgV for Q3 2018, increased by approximately 11.0% relative to Q2 2018, as a result of lower volumes during the quarter due to the production interruptions.

· As a result of the unprotected industrial action in September 2018 and an unplanned seven day kiln maintenance exercise Vametco’s production guidance for the year has been revised downwards from 2,850 mtV to 3,000 mtV to between 2,600 and 2,650 mtV. The reduced volumes and higher inflation have therefore resulted in a unit cost guidance revision to between ZAR 250/KgV and ZAR255/KgV.

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

Description

Unit

Q3 CY18

9mths CY18

Q3 CY18

vs

Q2 CY18

Q3 CY18

vs

Q3 CY17

Q3 YTD CY18

vs

Q3 YTD CY17

Vanadium (Nitrovan®plus FeV) produced

mtV3

537

1,897

-14.6%

-19.7%

Vanadium sold

mtV3

584

1,987

-18.1%

-21.5%

-4.7%

Average MB vanadium price2

US$/KgV

85.8

72.3

+24.1%

+119.8%

+137.3%

USD/ZAR average exchange rate4

US$:ZAR

14.1

12.9

+11.4%

+7.8%

-2.1%

Production costs5

ZAR/KgV

297.74

262.08

+11.0%

+25.1%

+22.4%

 

1. Based on provisional, unaudited estimates. Bushveld’s net attributable interest of the above production and financials was 59.1% as at 12 September 2018 and approximately 74% from 13 September 2018.

2. The vanadium price is based on the FeV mid average price for the period, published by Metal Bulletin. Vametco realised price is based on the prior month’s average price.

3. mtV = metric tonnes of vanadium.

4. Source: Bloomberg. The achieved USD/ZAR average exchange rate may vary.

5. Excludes depreciation, royalties, selling, general, & administrative expenses.

Multi-phased expansion project

· In 2017, Vametco commenced a three-phased expansion project with the aim of increasing annualised production capacity to more than 5,000 mtV. As part of the operational improvement initiative, designed to enhance Vametco’s productivity, the Company is reviewing the timing and required investment to expand production capacity to 5,000 mtV.

· Completion of the expansion project will enhance Vametco’s existing competitive position in a structurally challenged market. In addition, the presence of an integrated platform will allow the development of downstream operations whilst achieving product diversification.

Other projects underway

· Tailings facility expansion: to maintain deposition capacity for depositing the calcines (which need to be deposited on a H:H liner) as part of ongoing operations will now be completed by end of Q4 2018 and deposition commence during Q1 2019.

· Kiln off-gas project: has been initiated to comply with regulatory requirements and further increase kiln feed throughput. Commissioning planned for end of Q1 2019.

Exploration at Vametco Mine

· 13 drillholes have been sampled and submitted for assay. All assay results are expected to be received by December 2018, and an updated Mineral Resource Estimate and Mine Works Programme are expected once all Quality Assurance Quality Control procedures have been completed.

Brits Vanadium Project

The Company has completed the second phase of the exploration programme at Brits. The aim of the exploration programme is to delineate a maiden Mineral Resource Estimate at Brits. 26 drillholes, totalling 2,818.43 metres, have been completed over the two phases. Table 2 summarises the results for the first phase of the exploration programme, the results for the second phase will be provided in Q1 2019.

Table 2: Phase 1 – Assay results and intersections for Brits Vanadium Project Drilling

Drillhole

    Intersection1

Magnetite %

V2O5 % (in magnetite)

BVL0012

LS1

4.32-12.91 m

49.11

2.09

BVL002

LS8

16.45 – 17.55 m

40.69

1.43

LS7

23.00 – 24.93 m

31.55

1.62

LS6

30.00 – 31.10 m

53.88

1.57

LS5

32.00 – 35.32 m

39.04

1.61

LS4

38.00 – 39.50 m

40.58

1.40

LS3

58.35 – 59.78 m

46.05

1.62

LS2

63.30 – 65.60 m

36.04

1.86

LS1

66.00 – 98.68 m

55.50

1.68

BVL003

 

LS8

12.60 – 14.80 m

33.97

1.47

LS7

20.50 – 23.41 m

26.48

1.48

LS6

27.00 – 29.46 m

38.68

1.57

LS5

32.00 – 33.74 m

39.77

1.61

LS4

36.10 – 38.00 m

38.84

1.45

LS3

58.00 – 60.70 m

35.40

1.50

LS2

64.00 – 66.90 m

35.64

1.61

LS1

67.45 – 71.86 m

58.73

1.66

BVL0042

LS1

13.31 – 14.70 m

80.08

1.94

BVL005

IS2

19.46 – 21.70 m

29.50

1.45

IS1

28.00 – 30.15 m

33.99

1.47

LS8

39.16 – 41.18 m

32.80

1.43

LS7

45.96 – 49.00 m

27.03

1.44

LS6

54.00 – 55.25 m

55.64

1.39

LS5

58.00 – 60.00 m

43.11

1.44

LS4

63.00 – 64.40 m

41.71

1.59

LS3

84.00 – 86.30 m

42.12

1.55

LS2

90.00 – 92.18 m

37.88

1.53

LS1

93.00 – 96.22 m

63.43

1.67

BVL0062

US2

29.00 – 32.32 m

34.77

1.75

US1

34.35 – 41.00 m

38.40

1.63

IS2

98.00 – 100.35 m

29.17

1.70

IS1

106.00 – 108.5 m

30.02

1.68

LS8

117.00- 119.00 m

36.56

1.64

LS7

125.60 – 127.00 m

41.62

1.65

LS6

131.85 – 133.10 m

57.62

1.66

LS5

135.00 – 138.00 m

44.26

1.70

LS4

140.20 – 141.10 m

53.82

1.66

LS3

160.00 – 161.75 m

46.79

1.54

LS2

165.00 – 167.73 m

39.65

1.79

LS1

168.15 – 171.36 m

65.89

1.78

BVL007

US1

50.00 – 54.44 m

20.03

1.46

IS2

59.00 – 61.00 m

28.48

1.52

IS1

65.00 – 67.00 m

28.60

1.49

LS8

71.92 – 74.60 m

34.52

1.42

LS7

83.00 – 84.84 m

42.73

1.39

LS6

97.00 – 98.00 m

66.30

1.40

LS5

99.20 – 102.30 m

40.48

1.49

LS4

105.00 – 106.35 m

53.78

1.40

LS3

126.00 – 126.82 m

73.56

1.34

LS2

126.82 – 127.50 m

80.08

1.31

LS1

130.00 – 136.50 m

52.26

1.61

BVL008

New Seam 3

43.00 – 75.00 m

29.22

1.31

New Seam3

107.00 – 108.90 m

32.88

1.36

US2

110.40 – 112.22 m

55.57

1.41

US1

128.65 – 129.34 m

50.59

1.37

IS2

131.70 – 132.20 m

39.65

1.45

IS1

133.00 – 138.58 m

41.29

1.38

1. Note that depths are intersected depths and do not represent true thicknesses

2. BVL001, BVL004 and BVL006 have been previously reported.

3. New Seam overlying Upper Seam (US): consistency to be verified with additional boreholes

LS = Lower Seam, IS = Intermediate Seam, US = Upper

The sample analysis results continue to reaffirm the consistent nature in grade and thickness of the Lower Seam (LS), Intermediate Seam (IS) and Upper Seam (US) Layers at the Brits Vanadium Project. Although the grade of the LS is marginally lower than that mined at Vametco, it still represents world-class vanadium grades. These assay results provide evidence of continuity of ore grades and thicknesses similar to the adjacent operating Bushveld Vametco Alloys mine and confirm the potential for an eastward extension of the current orebody being mined at Vametco.

Mokopane Vanadium Project

The Mokopane Vanadium Project is a key part of Bushveld’s vanadium strategy and the intention remains to secure the mining right and develop the greenfield project into a vanadium mine and processing plant. The Company continues to explore means to supply ore from the project to plants in China and / or elsewhere in the world.

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Disclaimer: Statements in this article should not be considered investment advice, which is best sought directly from a qualified professional.