Bushveld to focus on growth at vanadium, coal assets this year

9th February 2018 By: Mia Breytenbach - Creamer Media Deputy Editor: Features

Bushveld to focus on growth at vanadium, coal assets this year

FORTUNE MOJAPELO There is a unique window of opportunity for the company to position itself as a large, vertically integrated and low-cost vanadium platform
Photo by: Duane Daws

Following the achievement of significant development milestones during 2017, integrated vanadium producer Bushveld Minerals will focus on enhancing growth at its vanadium and coal assets this year.

“There is a unique window of opportunity for the company to position itself as a large, vertically integrated and low-cost vanadium platform . . . and we want to realise that potential,” Bushveld Minerals CEO Fortune Mojapelo tells Mining Weekly.

He stresses that the completion of the acquisition of Bushveld Vametco in December 2017 enables Bushveld to “more meaningfully” leverage the vanadium platform as the company continues its expansion plans in terms of organically growing Vametco laterally and vertically.

Vametco currently enjoys a significant 3.5% market share of the global vanadium market, which is expected to grow to more than 5% on completion of the three-phased expansion project. Bushveld completed the first phase of the expansion at Vametco in time and under budget in the September 2017 quarter to achieve a yearly production run rate of 3 000 metric tonnes of vanadium (MTV).

The second phase, currently within budget and on schedule for completion in June, will result in production increasing to 3 750 MTV. The third phase, to be completed by 2019, will result in production increasing to more than 5 000 MTV.

In parallel, Bushveld will continue focusing on enhancing growth by targeting brownfield opportunities in South Africa, says Mojapelo.

Meanwhile, vertical growth is driven by the company’s interest in developing “a deeply integrated vanadium platform” by not only producing vanadium but also diversifying the product portfolio through the supply of electrolytes for vanadium redox flow batteries for the energy storage sector.

Bushveld believes that, by expanding its production base and increasing throughput, costs will be significantly reduced, providing the company with additional earnings and cash generation, while remaining at the bottom of the cost curve. “This, in turn, would provide greater security against any potential future price downswings,” says Mojapelo.

He further explains that the rationale for the production expansion plans is the market finding itself in a structural deficit amid a rising vanadium price environment, which is driven by increasing demand for vanadium from the steel and energy storage sectors.

Mojapelo notes that, with China having released a new standard for rebar vanadium content, estimates are that vanadium demand could increase by as much as 30%, while the increasing use of vanadium redox flow batteries could, by 2030, account for up to 20% of vanadium consumption, creating “solid demand”.

Milestones for Bushveld subsidiary coal and power company Lemur Resources’ integrated coal project in the past year include the signing of a binding 30-year power purchase agreement (PPA) with Madagascar State-owned utility Jiro sy Rano Malagasy for the Imaloto power project, an integrated thermal coal mining and independent power producer asset in Madagascar.

Lemur is co-developing the project and an associated 200 km transmission line in southern Madagascar with Chinese State-owned hydropower engineering and construction company Sinohydro, a subsidiary of PowerChina.

The power plant will be fuelled by coal from Lemur’s coal mining permit area. Plans for the coal mine are well advanced, with Lemur having obtained mining rights for the area, which comprises a Joint Ore Reserves Committee-compliant coal resource of 136-million tons, of which 68% is measured.

The PPA has enhanced the bankability of the project by guaranteeing the offtake of coal for power, Mojapelo says, adding that, notably, the PPA with the power utility is also a legal requirement for obtaining a government concession for the project to proceed.

The company also revised the mining plan in September last year to align the coal asset with the power station, which will have a minimum 30-year life and, thereby, ensure security of fuel supply.

Lemur Resources CEO Prince Nyati says the company’s preliminary focus for 2018 will be to obtain a concession, as well as start the social- and environmental-impact assessment (SEIA) study for the project by the end of this month. Conducting an SEIA is a requirement before mining or construction activities can start on site.

“All our efforts and development activities will be focused on making the project bankable and positioning it to supply sustainable and affordable power to the south-western Madagascar region,” Nyati says, adding that Lemur expects the bankable feasibility study (BFS), which is progressing well, to be completed by mid-2018.

On completion of the BFS, Lemur will increase its focus on completing funding and credit enhancement options. Nyati reiterates that the company has started early-stage discussions with select parties on funding.

Lemur will also focus on the possibility of agreeing offtakes with other power users, as well as aim to conclude offtakes with third parties. However, Nyati stresses that the coal mine is viable even if it supplies only the power project, and that additional coal sales will be a bonus.

“Notwithstanding, supplying coal to third parties provides early cash flows prior to commissioning of the power plant,” Nyati says.

He adds that the sizeable domestic third-party offtakers in Madagascar all currently import coal, as there is no coal production in the country.