Bushveld Minerals has a chunky cash balance as it maps its growth strategy after a hard operational year saved by sharply higher vanadium prices.
A new and freshly profitable vanadium company, Bushveld Minerals, will list on the Johannesburg bourse during 2019, the company’s chair, Ian Watson, said on Thursday.
Bushveld, which is traded on London’s Alternative Investment Market (AIM), was set up in 2012 and became fully in control of the Vametco vanadium operations during 2018.
The company, which has agreed to buy another vanadium set of assets called Vanchem for $68m to expedite and cheaply bring to account its Mokopane deposit, reported a post-tax profit of $49m for the year to end-December compared to a loss of nearly $900,000 the year before.
Bushveld is well capitalised, with cash of $42m, up from $10m the year before, boosted by a $20m rights issue during the year to clear its debt, convertible bonds and to invest in growth, leaving the company in a strong position for its next phase of growth.
“In pursuit of our stated aim of growing Bushveld Minerals into a leading global vanadium producer and VRFB (vanadium redox flow battery) technology company, we are pursuing an inward-listing on the main board of the JSE during the course of 2019,” Watson said.
The reasons for coming to Johannesburg include SA’s holding the world’s largest primary vanadium resource base, the beneficiation strategy Bushveld has in SA, the potential for large stationary energy storage batteries, and “significant local capital pools”.
The Vanchem deal should be concluded by October 2019, setting Bushveld up as one of the world’s leading sources of primary vanadium, which is a mined product rather than a byproduct, Bushveld CEO Fortune Mojapelo said.
Bushveld will lift Vametco output to 3,400 tonnes of vanadium a year and then 4,200 tonnes. Vanchem has the capacity to deliver another 4,200 tonnes annually, bringing Bushveld close to its target of 10,000 tonnes a year and a 10% share of market supply.
On AIM, the Bushveld share increased 350% during 2018, reaching a high of 48 pence.
However, analysts at Peel Hunt said Bushveld had reported lower-than-expected levels of cash at the end of the financial year, high non-operating costs and a miss on the full-year profit, which the analysts had set at $70m.
That miss on market expectations and the lack of a dividend payment could have been behind the 10% fall in Bushveld’s shares in London to 26p on Thursday, giving it a £319m market capitalisation.
Not only is Bushveld a producer of vanadium, which is largely used in the steel industry, but it is also positioning itself to play a leading role as a supplier of large batteries, of a size suitable for power producers such as Eskom, and the maker of vanadium electrolytes at the heart of these batteries. It is building a plant in East London to make these electrolytes.
The year was not without its difficulties, with output down nearly 4% to 2,560 tonnes of vanadium because of 38 days of stoppages stemming from unprotected strikes, with its workforce represented by the Association of Mineworkers and Construction Union (Amcu), and “unexpected operational challenges”.
Talks with Amcu are centred on addressing the union’s concerns, and the company is setting up an employee share ownership scheme.
The reduced output was offset by a 149% increase in the average ferrovanadium price to $81/kg.
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