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 ending March 2019, in respect of its Vanadium business which consists of Bushveld Vametco Limited, the Brits Vanadium Project and the Mokopane Project. Post-period end, the conditional acquisition of Vanchem was announced and which will, subject to completion, form part of Bushveld Minerals’ Vanadium business.
Fortune Mojapelo, CEO of Bushveld Minerals Limited, commented:
“We ended the quarter on a very strong note, with the best monthly production output from Vametco in more than 21 months. This reflects the initial work completed under the Transformation Programme, announced earlier this year, which resulted in improvements in several key areas of the flow sheet, including scheduling, feed grade and overall plant recoveries.
“Furthermore, as part of the Transformation Programme we have undertaken several changes within the leadership team at Vametco, including the appointment of Bertina Symonds as Vametco’s General Manager. In addition, Lyndon Williams, previously Vametco’s COO, has been appointed as Group Vanadium Specialist in support of operations integration and technical support to the Group’s product marketing initiatives; and William Steinberg, previously Vametco’s Works Manager, has been appointed as the new Chief Transformational Officer, responsible for driving the operations improvement programme.
“As the Company’s revenue and earnings generator and thus engine for growth it is imperative that Vametco operates to its full potential. It is for this reason that we initiated the Transformation Programme, designed to ensure that we maximise production throughput, minimise costs on the back of the improvements implemented by our motivated and fully engaged workforce.
“We are pleased to provide 2019 production guidance for Vametco of 2,800 mtV to 2,900 mtV, which reflects continued expected improvements under the Transformation Programme and represents an overall production increase of between 9 and 13 per cent on the previous year. This does not include any contribution from the proposed acquisition of the Vanchem plant, which we anticipate to complete as soon as July and no later than October.
“We are confident of steadily delivering on Vametco’s productivity targets and, with the recently announced conditional acquisition of the Vanchem vanadium project for US$68 million, Bushveld Minerals is on a clear path to achieving its long term capacity target of 10,000 mtV of annual production capacity. These initiatives will significantly enhance our competitive position in the Vanadium market over the coming years.”
Key Highlights
· Vametco’s production for Q1 2019 was 649 mtV in the form of NitrovanTM from magnetite concentrate, which was consistent with Q4 2018 (Q4 2018: 657 mtV).
· During Q1 2019 the Company commenced several productivity initiatives which were identified as part of the transformation programme announced on 30 January 2019 to enhance Vametco’s production efficiency (“Transformation Programme”).
· Vametco has seen an improvement in mine production scheduling, vanadium grade in kiln feed, together with an increase in the hourly feed rate to the kiln and recovery. In addition, overall plant recovery has seen significant improvements.
§ These improvements resulted in production for March 2019 of 270 mtV, which is the highest monthly production rate achieved by Vametco in the past 21 months.
· Vametco production guidance of 2,800 mtV to 2,900 mtV is expected for the 2019 calendar year, supported by improved operating performance, representing a 9 to 13 per cent increase relative to 2018 production (2018: 2,560 mtV).
· Unit production cost of US$18.90/KgV to US$19.50KgV is expected for the 2019 calendar year, underpinned by economies of scale. This represents a two to four per cent reduction relative to 2018 unit cost (2018: US$19.70/kgV).
· Production volumes are expected to be skewed towards the second half of the year, due to a 24 day planned maintenance programme during the months of June and July.
· Vametco’s production was not affected by recent power rationing implemented by Eskom, the South African national utility, during the month of March.
· Bertina Symonds was appointed General Manager of Vametco.
· An updated Mineral Reserve and Resource Estimate for Vametco will be published once the final stages of review have been completed.
· The sample analysis results for the 10 boreholes from the second phase of exploration drilling at Brits (BVL009-BVL019, excluding BVL018) received in March 2019, indicated consistency in grade of the Lower Seam with a weighted average V2O5 grade in magnetite concentrate of 1.66%
§ The positive results and high grades demonstrate the deposit’s ability to be a future source of raw material for the Vametco plant and concentrate feed for Vanchem if required.
§ The Maiden Mineral Resource Estimate for Brits is expected in Q2 2019.
Table 1: Operational highlights for Vametco (on a 100% basis)1
| Description | Unit | Q1 CY19 | Q1 CY19 vs Q4 CY18 | Q1 CY19 vs Q1 CY18 |
| Vanadium (NitrovanTM plus FeV) produced | mtV3 | 649 | -1.2% | -11.1% |
| Vanadium sold | mtV3 | 508 | -13.4% | -26.5% |
| Average MB vanadium price2 | US$/KgV | 73.3 | -32.1% | +18.7% |
| USD/ZAR average exchange rate4 | US$:ZAR | 14.0 | -1.8% | +17.3% |
| Underlying production costs5 | ZAR/kgV | 260.8 | +1.8% | +12.7% |
| Underlying production costs5 | US$/kgV | 18.6 | +3.6% | -3.9% |
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 through a series of transactions.
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.
Vametco Transformation Programme
Following the Vametco diagnostic review in the last quarter of 2018, an implementation delivery office headed by the Chief Transformational Officer, has been created and several improvement initiatives have been initiated. These initiatives will support Vametco in achieving a steady state production rate of 3,400 mtV during the course of 2020, which represents 90 per cent of the 3,750 mtVp.a. name plate capacity of Phase 2 of the multi-phase expansion project, for no additional capital expenditure requirement. These initiatives include:
o Improving mine production scheduling to stabilise vanadium grade in run of mine ore and concentrate;
o Increasing crusher and mill availability and throughput rates which will increase concentrate production;
o Increasing kiln availability, hourly feed rate and recoveries;
o Improving leach plant recoveries; and
o Improving organisational health.
Vametco has begun to implement a number of these initiatives and we expect all of these initiatives to be put into practice during the course of the year.
As part of the Transformation Programme we have changed the operational leadership at the Vametco plant, with the appointment of Bertina Symonds as the General Manager of Vametco, being a key part of this change. In addition, William Steinberg, previously Vametco’s Works Manager, has been appointed as the new Chief Transformational Officer, and he will be responsible for driving operational excellence and improvements at Vametco.
Phase 3 of the multi-phase expansion project
The Company continues to review the timing and required investment to further increase the production name plate capacity to 5,000 mtV per annum, which we expect to generate a steady state production in excess of 4,200 mtV.
During 2019 Vametco will continue to progress environmental approvals for Phase 3 of the multi-phased expansion project. In addition, detailed design work and capital estimation will commence with a view to construction commencing in 2020.
Stakeholder Management
Employees and local communities are an important part of the Bushveld Minerals strategy and growth plans. As previously communicated, Bushveld Minerals is committed to building a healthy cooperative relationship with its employees and the local communities in which it operates. As part of its commitments, the Company has embarked on an Employee Share Ownership Participation Scheme and an Employee Financial Wellness Programme.
Employee Share Ownership Participation
Bushveld Minerals’ Employee Share Participation Scheme is aimed at closely aligning the interests of Vametco’s workforce to its operational targets. Further updates and progress on the ESOP will be provided as appropriate.
Employee Financial Wellness Programme
Bushveld Minerals is developing an Employees Financial Wellness Programme to assist in improving the financial well-being of employees. To this end Vametco has contracted a financial services provider which specialises in personal financial planning, debt consolidation, debt counselling and provision of unsecured loans.
Other projects underway
· Tailings facility expansion, in order to maintain deposition capacity for calcines, which need to be deposited on a H:H liner, as part of ongoing operations, will be completed during Q2 2019 and commence during this period.
· A Kiln off-gas project has been initiated to comply with regulatory requirements and further increase kiln feed throughput. Commissioning is planned to commence at the end of Q2 2019.
Vanchem
On 1 May 2019, Bushveld Minerals announced that it had entered into a Business and Share Purchase Agreement with Vanchem Vanadium Products (Pty) Limited, a subsidiary of Duferco Vanadium Investment Holding S.A., South African Japan Vanadium Proprietary Limited, a wholly owned subsidiary of VVP and Duferco Participations Holding S.A. to conditionally acquire the following vanadium production assets in South Africa:
· The vanadium production business of VVP as a going concern (“Vanchem Plant”);
· The ferrovanadium production business of SAJV as a going concern (“SAJV Business”); and
· 100 per cent of the outstanding shares of Ivanti Resources (Pty) Limited (“Ivanti”), a subsidiary of Duferco Participations Holding S.A, which has economic rights to certain secondary vanadium units treated within the Vanchem Plant;
for an aggregate cash consideration of US$68 million.
The Vanchem Pant and the SAJV Business consists of integrated vanadium extraction and production facilities which can produce a range of vanadium products. The plant comprises:
· A core salt-roast processing plant, including three roasting kilns, that produce vanadium trioxide and vanadium pentoxide;
· An electric smelting ferrovanadium converter, located at the Highveld Steel & Vanadium (“Highveld”) site, situated approximately 10 km from the Vanchem Plant, which converts vanadium trioxide into ferrovanadium;
· An alumino-thermic smelting facility, also located at Highveld, which converts vanadium pentoxide into ferrovanadium; and
· A vanadium chemical plant producing various vanadium chemical products.
In addition, the Company will acquire 100 per cent of the outstanding shares of Ivanti which has economic rights to certain secondary vanadium units treated within the Vanchem Plant and generates profits from the sale of these secondary units to the Vanchem Plant.
The acquisition, which is expected to complete no sooner than 31 July 2019 and no later than 31 October 2019, is conditional upon:
· South African Competition Commission approval, if required;
· South African Reserve Bank approval;
· The cession of specific commercial agreements; and
· No material adverse changes to the Vanchem Business or Ivanti during the interim period between signature and completion of the agreements.
Mokopane Vanadium Project
Mokopane is intended to become a primary source of feedstock for Vanchem and its development will be accelerated as a result of the Transaction. By transporting a crushed, screened and dry magnetic separated ore from the Mokopane deposit to Vanchem for further beneficiation, the capital expenditure requirements associated with developing Mokopane are significantly reduced to US$20 million (based on current estimates). The Mokopane-Vanchem model will create a fully integrated business in a shorter time and at a lower cost than developing Mokopane as a standalone operation.
