Bushveld Minerals Limited (AIM: BMN), the AIM quoted, integrated primary vanadium producer, with ownership of high grade vanadium assets, is pleased to provide an operational update for the three months ending March 2020 (“Q1 2020”), in respect of Bushveld Vanadium and Bushveld Energy, as well as other corporate activities.
Key Highlights
Bushveld Minerals
Vametco
· Production for Q1 2020 was 652 mtV (482.5 mtV 74 per cent net attributable interest) in the form of Nitrovan, marginally ahead of Q1 2019 production of 649 mtV despite being impacted by the Covid-19 nation-wide lockdown as well as higher than usual rainfall during the quarter.
· Sales of 898 mtV (664.5 mtV 74 per cent net attributable interest) achieved in Q1 2020, 77 per cent higher than Q1 2019 as a result of additional production volumes in Q4 2019 and increased customer demand.
· Underlying production cost of US$18.90/kgV, an eight per cent decrease relative to Q1 2019, supported by a weaker ZAR:USD rate.
· Early completion of the annual maintenance programme, which was initially planned for Q2 2020 for a period of 10 days. No further maintenance shutdowns are planned for the remainder of 2020.
· In line with the Government’s “risk-adjusted strategy for economic activity”, following a 35 days Covid-19 lockdown production is ramping up to normal levels.
Vanchem
· Solid operating performance, with production of 219 mtV despite being impacted by 10 days of power rationing as well as the Covid-19 lockdown during the quarter. Vanchem’s production for Q1 2020 represented 31 per cent of total Bushveld attributable vanadium production.
· Sales of 182 mtV achieved comprised of a range of products during the quarter.
· The underlying production cost for the quarter was US$18.5/kgV, due to stock build up, as Vanchem has been ramping up production from December 2019. We expect inventory levels to normalise in Q2 2020.
· Completed the scoping study of a refurbishment programme and prioritised a total of around R85 million as critical capital spend required for 2020 to enable Vanchem to continue to sustainably operate. We expect to incur most of the spend during the second half of the year.
· As with Vametco, production is ramping up to normal levels following Government guidance.
Mokopane
· The definitive feasibility study (“DFS”) to mine the Main Magnetite Layer based on the assumption that Mokopane will be the primary feedstock supplier to Vanchem. As part of Group’s growth associated (non-critical) capital expenditure review, timing for the DFS is now under consideration. This does not affect’s Vanchem’s processing ability as it has sufficient ore supply to support current levels of production, until H1 2021. The Company retains the optionality to supply magnetite concentrates from Vametco to the Vanchem Plant.
Bushveld Energy
· Approved construction of vanadium electrolyte plant, including receipt of funding approvals for equity and debt from the Industrial Development Corporation (“IDC”).
· In line with its strategy of partnering with Vanadium Redox Flow Batteries (“VRFB”) companies, on 1 April Bushveld announced that it held a 8.71 per cent shareholding in Invinity Energy Systems plc (“Invinity”) the entity created by the merger of Avalon Battery Corporation and redT energy plc.
· Completion of due diligence to acquire Enerox as part of an investment consortium. Bushveld Minerals will continue to update the market on developments around the progress and structure of the transaction.
Capital structure and liquidity
· As previously reported, on 30 October 2019, the Group secured ZAR375 million facilities from Nedbank, comprised of a ZAR125 million revolving credit facility (“RCF”) and a ZAR250 million term loan which was drawn down at the time. The Group drew down the remaining RCF of ZAR125 million at the end of March 2020 to enhance liquidity and provide financial flexibility during this uncertain environment. Overall, the Group’s unaudited gross cash and cash equivalent position as at 31 December 2019 and 31 March 2020 was US$34 million and US$34.4 million, respectively. The 31 March 2020 unaudited gross cash and cash equivalent position includes the full ZAR375 million facilities.
· As the near-term impact of Covid-19 on operating conditions is uncertain, the Group is taking cash preservation measures to manage near term liquidity while preserving the long term sustainability of the assets. These include reviewing and limiting operational expenditure where necessary as well as deferring some growth associated (non-critical) capital expenditure across the mining, processing and energy businesses.
Outlook
· 2020 production and cost guidance for both Vanchem and Vametco remains under review and will remain so until the Company is in a position to quantify the impact of the Covid-19 pandemic and the South African nation-wide lockdown.
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