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Bushveld achieves record 2020 production, but 2021 guidance lowered

Fortune Mojapelo

Fortune Mojapelo

30th June 2021

By: Tasneem Bulbulia

Senior Contributing Editor Online

     

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Aim-listed Bushveld Minerals achieved record group production of 3 631 t of vanadium in the year ended December 31, 2020, primarily as a result of the inclusion of Vanchem Vanadium’s products for a full year.

The Vanchem acquisition was completed by Bushveld in November 2019.

Bushveld also achieved record group sales of 3 842 t of vanadium, as a result of the full year contribution of sales volumes from the Vanchem mine.

Revenue for the period was $90-million, a 23% reduction relative to 2019, as a result of a 52% decline in the average realised price, partly offset by an increase in sales volumes.

“While 2020 witnessed depressed vanadium prices, we believed, as we still do, that the market fundamentals for vanadium are robust and supportive of price upside. This market view underscored our conviction to complete the acquisition of Vanchem even in the midst of a declining price,” CEO Fortune Mojapelo said in a statement on June 30.

He added that, despite the positive growth outlook for vanadium, operating conditions in 2020 were challenging as a consequence of a low price environment and Covid-related disruptions to operations and global supply and logistics, significantly impacting on production and costs, which contributed to a weak financial performance.

In this regard, Bushveld recorded a loss before interest, taxes, depreciation and amortisation of $14.9-million, largely owing to a decline in vanadium prices, and partly offset by a reduction in other operating and administrative costs. 

However, the group was able to enter into a transaction with Orion Mine Finance under which it successfully secured $65-million in funding. The financing provides support to the group to achieve a steady-state production run rate of between 5 000 t/y and 5 400 t/y by the end of 2022.

Bushveld ended the year with cash and cash equivalents of $50.5-million.

It highlighted continued progress in implementing the company's strategy in the growing stationary energy storage sector through subsidiary Bushveld Energy.

This entailed successfully completing investments in vanadium redox flow batteries (VRFB) original-equipment manufacturers Invinity Energy Systems and Cellcube; and signing an electrolyte rental contract between Pivot Power, which is part of EDF Renewables, and Vanadium Electrolyte Rental, a joint venture established with Invinity.

“Despite the challenges of the Covid pandemic, progress continued on our mini-grid project at Vametco, where Cellcube has been selected to supply a 4 MWh VRFB.

"The project will demonstrate the business case for self-generation solutions using photovoltaic solar and VRFB systems at a time when the South African government is creating a supportive regulatory environment for self-generation, including lifting the cap for such projects being developed without a generation licence to 100 MW from 1 MW,” Mojapelo acclaimed.

POST PERIOD

The group had unaudited cash and cash equivalents of about $31-million as at June 27.

Post period, it successfully renegotiated the covenant testing terms required under a R125-million revolving credit facility (RCF).

In this regard, finance organisation Nedbank has agreed to waive the covenants for the June period and relax the December group net debt to earnings before interest, taxes, depreciation and amortisation ratio from 2.50 times to 4 times.

A condition of the waiver is that the RCF is amortised by R5-million monthly from August 6, with a bullet payment of R50-million due on the maturity date of November 6, 2022.

Bushveld highlighted positive renegotiations with Duferco Participations Holding on the remaining balance of $11.5-million of convertible balance, to result in $5-million being payable in November and the remaining $6.5-million being converted into Bushveld shares.

The group also started construction of the 200 MWh electrolyte plant in June. The plant, in the Eastern Cape in South Africa, will make electrolyte for VRFB.

Lastly, it monetised investment in Invinity and realised about $13-million.

2021 GUIDANCE

Bushveld has lowered its production guidance for this year to between 3 400 t and 3 600 t of vanadium.

As previously noted by Bushveld, Vametco's performance was impacted by a slower-than-expected ramp-up post the successful completion of the 35-day planned maintenance shutdown.

There were more unforeseen mechanical breakdowns after start-up, followed by six days of unprotected industrial action in April.

Owing to this, Vametco's full-year guidance has been revised to between 2 300 t and 2 400 t of vanadium, compared with the previously guided 2 700 t to 2 850 t of vanadium.

Moreover, production cash costs have been revised to between $23.70/kg and $24.20/kg of vanadium, up from the previously guided $20/kg to $21.30/kg of vanadium.

Owing to delays in securing steel supplies for the Kiln 3 refurbishment schedule, Vanchem's 2021 guidance has been revised to 1 100 t to 1 200 t of vanadium, from the previously guided 1 400 t to 1 500 t of vanadium.

Production cash costs have also been revised to between $30.30/kg and $31.10/kg of vanadium, compared with the $26.20/kg to $26.70/kg of vanadium previously expected.

Vanchem’s capital expenditure for the year, associated with the refurbishment programme, has been revised to $11.3-million, compared with the $15.7-million previously guided, with most of the cost being rand-denominated.

The company has reiterated its plans to increase its vanadium production to a run rate of 5 000 t/y to 5 400 t/y of vanadium by the end of 2022, following completion of the refurbishment and ramp-up of Kiln 3 at Vanchem, which is of a similar scale and capacity to Vametco, and will see Vanchem produce at a yearly steady state production run rate of 2 600 t of vanadium.

Prefeasibility studies are under way at Vametco and Vanchem to increase group production run rate to between 6 400 t/y and 6 800 t/y of vanadium in the medium-term and to 8 400 t/y in the longer term.

Completion of the studies in the fourth quarter would allow a capital efficient sequencing of the growth phases between Vametco and Vanchem, Bushveld said.

The group will also implement a cost savings programme to achieve costs savings of about $2.5-million to $4-million a year, starting from 2022.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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