Mandela to Mojapelo – A Vision to change Africa for good
31 December 2018
Nelson Mandela, president of South Africa from 1994 to 1999. He was the country's first black head of state and the first elected in a fully representative democratic election. His government focused on dismantling the legacy of apartheid by tackling institutionalised racism and fostering racial reconciliation in South Africa. He served as President of the African National Congress (ANC) party from 1991 to 1997. He wanted to inspire something great to happen in his country and inspire the younger generation.
Spring forward to 2012 and two young men with a vision to build a successful mining company in South Africa floated their new business on the London AIM market with a vision to build a new Mining Company in South Africa, working with a good friend, a business associate and leading experts in local mineral geology. Those men are Fortune Mojapelo and Anthony Viljoen.
Initially their goal was to build an iron ore mine, but soon the opportunities brought a little known metal to light – Vanadium. At the time it was going though one of its low-price points. But Fortune with much research and conversations with his friend Mikhail Nikomarov developed a vision based on new technologies which could transform energy storage. So they pursued a course to strategically acquire Vanadium assets. In 2014 they formed Bushveld Energy and Mikhail became CEO of this new business.
However at that time, even their foresight could not have foreseen the changes that would come about in China. Vanadium up to this point was nearly 100% used to strengthen steel. As an example approximately 300 grams of vanadium in 1000 kilograms of steel effectively doubles its strength. Low grade vanadium from highly polluting sub process plants in China were being used in steel manufacturing in construction steel – rebar. Rebar is used in every major construction project around the world – the rusty but crucially strong steel poles you see projecting out of concrete all over construction sites!
At this time one of South Africa’s largest processing plant and mine owned by Evraz was shut down. They wanted out and the reason Evraz wanted to sell Vametco is they had chosen to completely pull out of South Africa. This they did, having tried on a number of occasions to get the South African government to help subsidise Highveld Steel and Vanadium. Unfortunately for Evraz the government refused to do. So in 2014/15 Evraz owners made a decision to close Highveld and pull out completely from South Africa. It is believed that Highveld steel actually sent a lot of their Vanadium rich slag to Vanchem for processing and as a result added about 7,000 tonnes per annum to the world's supply of Vanadium at the time. So, Highveld was shut down and shortly afterwards Vanchem also went into administration.
Enter Bushveld Minerals!
This was Fortune’s opportunity for Bushveld. He had already acquired a known resource, Brits and one very large resource Mokopane. For what was described at the time as the deal of the century they managed to buy a significant share in Vametco and then in 2017 increase ownership to 59%. The plant was running at an output of 2400 tonnes per year. Raising small amounts of capital through warrants and short term finance deals, they were able to start a program to increase production over a three stage expansion plan, to 3050 tonnes per annum, then to 3750 tonnes per annum and eventually 5000 tonnes per annum by the end of 2019.
One of the incredible parts of this story is that during just the last two years the market has awoken to the realisation that there was just not enough vanadium miners and processors to deal with issues being faced and increased demand and constrained supply which Fortune had been bringing to every ones attention. Meanwhile in China there was a real problem with Chinese rebar was not that they weren't putting high quality V2O5 or Ferrovanadium in - it was that they weren't putting any Vanadium of any sort in - the Chinese were able to fake stronger steel simply by apply a quench and temper heat treatment process - that got past the original rebar tests but the steel ends up harder but is unfortunately also brittle if you don't add Vanadium - see for example this article.
This culminated in the significant change this November in China’s laws stating that they must use Vanadium at the correct levels to ensure China’s steel is aligned with quality steel from around the world. This has put huge pressure on the pricing going from $45 per kilo in March 2017 to $135 in November.
These rises in the Vanadium prices have allowed Bushveld Minerals to fund the growth of the business through short term borrowing repaid quickly from revenues from sales - leading to minimal dilution of shares. This is an incredible and fairly unique way to grow and company from an explorer, via mineral rich land owner to a major vanadium producer.
2018 has been a truly transformational year for Bushveld Minerals
On the 21st December 2017 – They announced as a mineral project development company with a portfolio of vanadium and coal assets in Southern Africa and a minority investment in tin, “are pleased to announce the Completion of the acquisition of 55 percent of Bushveld Vametco Limited , for the issue of 54,766,364 new ordinary shares in the Company to Yellow Dragon Holdings Limited and the admission to trading on AIM of the enlarged issued share capital will be effective at 8 am that day. This gave Bushveld Minerals operational control of Vametco.”
Then on the 22nd January we had the Q4 results from 2017 -
"We are very pleased with the tremendous strides the Company has made during the fourth quarter of 2017."
"Bushveld Vametco had a solid performance in the 2017 calendar year, supported by a strong vanadium price environment with the ferrovanadium price averaging US$33/KgV1 for the 12 months. This ensured revenue increase of 44% and EBITDA of 553%, compared to the 2016 calendar year. We have taken advantage of the materially higher prices this year to conduct additional maintenance activities at the plant in preparation for 2018. The first phase of the Vametco multi-phased expansion project was successfully completed in the September 2017 quarter, during which Vametco reached an annual production run rate of 3,035 mtV. We have since commenced the second phase of the expansion project which will increase production to 3,750 mtV per annum by June 2018 and to over 5,000 mtV by 2019. As we anticipate an even stronger year ahead, our projection for Vametco's 2018 calendar year production is 3,680 mtV."
"Bushveld Energy has also seen considerable progress having strengthened relations with Eskom, the IDC and UniEnergy Technologies. Global forecasts for stationary energy storage are very bullish. As detailed in our strategy over the past two years, this remains a strong area of our focus. We expect to be at the forefront of development stationary energy storage throughout Southern Africa."
"At Lemur, our decision to increase the scope of the project from a pure coal mine to a fully integrated power project has not only increased the size of the Imaloto project but also significantly de-risked the project by guaranteeing offtake of the coal produced. This gives us various options on the approach and timing of advancing the project. Our immediate next steps on the Imaloto project will remain focussed on delivering a bankable project to help grow sustainable economic development in Southwest Madagascar through supplying much-needed baseload power using locally produced fuel. "I look forward to providing further updates in the coming year."
Then on the 14th March the share overhang from Erongo came to end. They stopped selling! This had a major impact on the stock price and it jumped 32% in a single week.
On the 26th March 2018 there was even bigger news which would transform the business further an equity placing of $22.2 which brought in new large investors. This would be used to:
“Redeem the outstanding Atlas Capital Convertible Bond (US$6.3m) (£4.5 million);
- Simplify Bushveld's organisational and corporate structure to improve Bushveld's exposure to the underlying cash flows of its assets (US$9.0m) (£6.4 million); and
- Support Bushveld's vanadium expansion programme: Expansion of the vanadium reserves and resources at the Vametco mine and Brits Project for future production and support Vametco's expansion plans to increase production to more than 5,000mtV and beyond (US$5.6m) (£4.0 million).”
Then on 11th April yet more news good news was announced in the Bushveld Energy Q1 update:
"We are delighted by the significant progress made by Bushveld Energy in the first quarter of 2018 as it moves forward on delivering on its key aim of exploiting the commercial opportunity of Vanadium Redox Flow Battery ("VRFB") technology within the energy storage market. During the quarter we progressed our two immediate priorities, preparing for the construction of our vanadium electrolyte plant in South Africa and the delivery of our first energy storage system to Eskom. Both projects remain on track.
"We are experiencing increased requests for electrolyte supply and VRFB technology for energy storage projects, both globally and in Africa, even in the context of decade-high vanadium prices. The prevailing price environment, coupled with ownership of a low cost vanadium production base, creates a uniquely attractive opportunity for Bushveld. In this context, our vertical integration strategy, and development of innovative business models for electrolyte delivery into VRFBs, strongly positions us to support adoption of VRFBs in the energy storage market while creating significant value for our shareholders.
Bushveld Energy 2018 FocusGoing forward Bushveld Energy will continue to focus on its stated priorities, being:
- Deploy VRFB systems into market
- Deliver the first VRFB project with Eskom in Q2 CY18
- Grow the energy project across Africa
- Complete environmental work and all requirements at Vametco and at the East London Industrial Development Zone
- Start the Engineering, Procurement and Construction of the electrolyte facility
- Supply samples to VRFB OEMs and secure interest in electrolyte offtake
- Position Bushveld Energy as a thought leader in energy storage in Africa and in VRFBs globally”
So, a clear strategy was starting to place for the future of the business which investors could see was going to transform Bushveld Minerals from a simple mining company in to something far more which Fortune and Mikhail had already discussed but this vision was starting to play out.
Bushveld then announced on the 19th April it would be giving an interactive presentation in May 2018 – The Vanadium 101 webinar to help investors understand the global situation and the uses of Vanadium – this was undertaken on May 3rd.
On the 27th April 2018 Vametco’s Q1 results were out and this was even more positive, output was up and the vanadium price increasing:
- Vametco produced 731 mtV in the form of Nitrovan®, an increase of 35.5% relative to Q4 2017 and 12.9% relative to Q1 2017, supported by the completion of Phase one of the expansion project
- The Metal Bulletin vanadium price based on the FeV mid average price for the quarter was US$61.8/KgV, an increase of 58.1% relative to Q4 2017
- Phase two of the expansion project is progressing to increase production capacity to 3,750 mtV
- Vametco achieved an all-time record magnetite kiln feed during Q1 2018, supported by the completion of Phase one of the expansion project
- The Company has commenced an exploration programme at the Brits Project, which has shown positive drilling results
- Post the completion of the Vametco acquisition the Company is working on integrating its system and reporting standards across the group
The stock price rose again by a further 21%. Then we had confirmation on the 28th June that the plant upgrade to allow production to run to 3750 tonne per annum was completed on time.
“Bushveld has successfully completed the second phase of the three-phased expansion project at Bushveld Vametco, on time and within budget, allowing the company to take advantage of the high vanadium price which has persisted in the first half of 2018. This phase of the expansion project increases the annual production capacity from 3,035 mtV, achieved in Phase One, to 3,750 mtV, with a capex of USD 2.5 million.”
In the meantime Bushveld minerals had given updates on its integrated Coal and Power project in Madagascar – Lemur. This will be completed and going on line in 2021. This legacy asset which was crucial in the acquisition of part of the vanadium assets. It may appear at odds with the green credentials of Bushveld Energy, however when you consider that there is very little power generation in Madagascar and this project has the potential to significantly improve their economy it looks very good indeed, it will create jobs income and a reliable supply of local electricity for a very poor country.
"Notwithstanding Bushveld Minerals' focus on its flagship vanadium platform, the Company is committed to progressing the Lemur project as an integrated coal mining and power project, a configuration that it believes is key to unlocking the significant value inherent in the project. We believe the Imaloto Power Project is key for the southwestern region of Madagascar. The design and location of the Project would immediately increase the country's baseload power supply by approximately 15 per cent, with the option to scale up to supply more power to new electricity users in the region in the longer term."
"I am therefore pleased to see significant progress made on the project - particularly now that it is in process of completing a bankable feasibility study. Moreover, I am delighted to note the positive cooperation with the Madagascan government as we advance discussions on the concession for the power project alongside the various studies that are an important part of the bankable feasibility study."
"Lemur is focused on building on the achievements made in 2017, key among these was the signing of a 30 year PPA with JIRAMA which is a statutory precondition to receiving a concession for the Power Project from the government. The process to obtain the concession is underway and is a top priority for 2018. Likewise, Lemur will focus on completing the Social and Environmental Impact Assessment. These approvals will be pursued together with the Bankable Feasibility Study and discussions with potential partners for project financing."
"A key strategy for Lemur is for the asset to supply sustainable and affordable baseload power by using locally produced fuel to provide power to the southwestern region of Madagascar. This is critical for local industry, manufacturing and economic development in the region."
On the 4th July they announced more important information about the Lemur project:
- A 30-year Project Concession Agreement signed with the Government of Madagascar
- Inception site visit for Social and Environmental Impact Assessment ("SEIA") completed
- Power Purchase Agreement ("PPA") with state owned utility, Jiro sy Rano Malagasy ("JIRAMA") amended to allow the utility up to 25MW offtake
- Draft Bankable Feasibility Study ("BFS") submitted in June 2018 by technical development partner, Sinohydro and currently being reviewed by the Company; and
- Ongoing engagement with lenders for construction phase of the project. Notably, received Expressions of Interest ("EOIs") for finance and political risk insurance from two financial institutions.
On the 29th June 2018 Bushveld Minerals announced the 2017 Year end results – this confirmed what a transformation year 2017 had been:
Highlights Bushveld Minerals
- Successfully implemented the acquisition of Vametco over two phases, the second phase completed on 21 December 2017.
- Vametco is a high-quality, low cost vanadium producer. In 2017, Vametco produced 2,649 mtV in the form of Nitrovan® from magnetite concentrate which accounts for more than three per cent of global vanadium supply.
- Phase 1: completed 06 April 2017
- Bushveld Vametco Limited ("BVL") acquired a 78.8 per cent interest in Strategic Minerals Corporation ("SMC") from Evraz Group S.A., with Bushveld Minerals Limited owning a 45 per cent interest in BVL and Yellow Dragon Holdings Limited ("Yellow Dragon") owning the remaining 55 per cent.
- Bushveld Minerals, effective shareholding in the operating company was that of an associate and was thus equity accounted for from 6 April 2017.
- Phase 2: completed 21 December 2017
- Bushveld Minerals Limited acquired Yellow Dragon's 55 per cent interest in BVL to increase its shareholding in BVL to 100 per cent. Following the acquisition, Bushveld Minerals Limited effectively owns 59.1 per cent of the operating company, which as a subsidiary was consolidated from 21 December 2017.
- Bushveld Minerals agreed to support Jaxson 640 (Proprietary) Limited's acquisition of a controlling interest in the Black Economic Empowerment ("BEE") shareholding in Vametco Holdings (Proprietary) Limited.
- In November 2017, the Company completed the demerger of Greenhills Resources, creating AfriTin Mining Limited ("AfriTin"), a standalone African tin platform.
- Successfully completed the majority acquisition of Vametco vanadium mine in December 2017 to increase the Company's effective interest in the operation to 59.1 per cent.
- Successfully expanded Vametco's production to 3,035 mtV through phase one of a three-phased expansion project.
- On a 100 per cent basis, Vametco reported a Revenue of ZAR 1,052 million and an EBITDA of ZAR 318 million, an increase of 39 per cent and 558 per cent respectively, relative to the prior year
- Completed the studies on African VRFB demand and global electrolyte demand, in partnership with the Industrial Development Corporation ("IDC").
- Secured agreement with South African local utility Eskom for the deployment of the first VRFB in South Africa(announced in November 2017). VRFB commissioning expected to commence in the first half of 2018.
- Signed Memorandum of Understanding ("MoU") with Sinohydro Corporation Limited for joint development and funding options for the Imaloto Power Project in Madagascar.
- Executed a binding Power Purchase Agreement ("PPA"), with Madagascar state-owned utility, Jiro sy Rano Malagasy ("JIRAMA") for an initial 10MW executed as part of the Imaloto Power Project.
- Post year end, executed a binding 30-year concession agreement with the Government of the Republic of Madagascar.
So 2017 was quite a year and yet “the story was still remained only half told!” quoting our CEO.
Then Q2-2018 from Bushveld Vametco brought a mixed story. The upgrade of the processing plant and additional maintenance reduced the output from Q1. Then due to local issues there was some unexpected down time caused from old historical industrial action. But there was a lot of good news too. The Vanadium price had continued to move upwards and potential was still exceptional, and the company were focused on their end game:
Sales revenue and EBITDA for H1 2018 increased by 139.1% and 429.6% respectively to ZAR 1,050 million (H1 2017 was ZAR 439.1 million) and ZAR 521 million (H1 2017 was ZAR 98.4 million) compared with H1 2017, this was supported by much higher vanadium prices in 2018
- The Metal Bulletin FeV mid average price for H1 2018 was US$65.5 per KgV, an increase of approximately 150% relative to the H1 2017 average price of US$26.2 per KgV.
- Phase Two of the Vametco expansion project, comprising the commissioning of the third primary mill and secondary crusher, was successfully completed within budget and on time. This phase of the expansion project increases annualised production capacity to 3,750 mtV, from 3,035 mtV achieved in Phase One, which was completed in Q3 2017. We expect to see gradual increases in output over the course of H2 2018 as the operation ramps-up to the 3,750 mtV rate.
- Vanadium production for Q2 2018 was 629 mtV in the form of Nitrovan® from magnetite concentrate (Q2 2017 had been 794 mtV), a decrease of approximately 13.9% relative to Q1 2018 (Q1 2018 had been already reported at 731 mtV). The production decrease was due to (a) planned kiln maintenance programme, (b) the installation and commissioning of the mill and crusher as part of Phase Two of the expansion, and (c) work stoppages as a result of unprotected industrial action.
- The maintenance programme is part of productivity initiatives and Vametco's continued improvement across the supply chain. These 'de-bottlenecking' activities are planned to increase volume at the roast / leach circuit which will become evident during the course of H2 2018.
- During June 2018, the operation experienced two and a half days of unprotected industrial action, resulting in no production being achieved out of the plant during that period. The matter was fully resolved on the third day of the industrial action and all labour commenced work immediately thereafter.
- Vanadium production for H1 2018 was thus 1,360 mtV. This is less than the anticipated volumes for this period per the Company guidance. The shortfall was due to: (a) lower than expected vanadium grades in magnetite from run of mine material, (b) lower produced magnetite volumes during the installation and commissioning of the mill and crusher as part of Phase Two of the expansion project (c) production interruptions due to the unprotected industrial action which took place in June 2018 and (d) lower than expected recoveries across the extraction process. During the course of Q3, Vametco experienced further production interruptions due to a protest by members of the local community, in addition to the ramp-up to the annualised production rate of 3,750 mtV being slower than expected.
- Consequently, Vametco production guidance for the year has been revised downwards to between 2,850 and 3,000 mtV. The upper range would represent a 13% increase in production over 2017.
- The constraints experienced in H1 2018 are well understood by our management team and are being addressed accordingly. Consequently, the Company expects to see production rates increasing towards the annualised production rate of 3,750mtV in the coming months.
- The Company has commenced an exploration programme at the Vametco mine to increase geological confidence and grade continuity of the ore mined. This is aimed at upgrading Inferred Mineral Resources to Indicated Mineral Resources.
- The Company continues its exploration programme at the Brits Project, which has to date shown positive drilling results, with intersections of Lower Seam, Intermediate Seam and Upper Seam intervals similar to mineralisation at Vametco Mine, and vanadium grades in magnetite of 1.54-2.09% V2O5, similar to grades mined at the Vametco mine. These assay results portray the excellent potential for an eastward extension of the current orebody being mined at Vametco.
- Through its expansion initiatives at Vametco, as well as targeted brownfield opportunities, Bushveld Minerals remains on track with its strategy to expand production to 5,000 mtV by the end of 2019.
Then we move to the next news - not good news – In September there was industrial action which originated before Bushveld had taken ownership but clearly the workers needed it resolving. Never an easy issue to face but one which can happen and one which good management can work with the workers leaders and in the end resulted in a resolution on the 21st September after 16 days.
Now one of the most talked about points amongst share-holders was the shared ownership with of Vametco with Sojitz. Just at a time when the mine needed some really good news, in the middle of the industrial action, it came. The 13th September RNS at 7am stated:
Bushveld Minerals Limited, the integrated primary vanadium producer, with ownership of high grade vanadium assets, is pleased to announce that it has today completed the acquisition of a 21.22 per cent interest in Strategic Minerals Corporation ("SMC"), an intermediate holding company of Vametco Alloys Proprietary Limited, "Vametco") from Sojitz Noble Alloys Corporation ("Sojitz") for a total cash consideration of US$20,000,000 (the "Acquisition"). On completion of the Acquisition, Bushveld has increased its indirect beneficial interest in Vametco from 59.1 per cent to 75 per cent.
Then on the 27th September it was confirmed that as had been discussed before the BEE (Black Economic Empowerment) which requires 26% ownership compliance with South African mineral laws and the Mining Charter has to be adhered too. So another RNS was released which confirmed that our ongoing ownership would be 74%. This means any profits from the Bushveld Vametco business would be at 74% in future calculations. Please note that Bushveld Energy is 84% owned by Bushveld Minerals and the BEE does not apply to the profit generated from that business as it grows.
On the 17th October we had a Q3 update on Lemur holdings and Prince Nyati the CEO of Lemur made the following statement on the progress:
"The BFS and SEIA studies have been our key focus areas in Q3 2018. Notwithstanding, we are pleased to announce the conclusion of the Transmission and Connection agreement with JIRAMA. This is a significant development because the agreement not only addresses the critical aspects of how IPP will connect to the JIRAMA network, but it also provides clarity on the link between the provisions of the concession agreement and the PPA. "
"Our focus for the remainder of 2018 is to complete both the mine and power BFS studies, which we expect to finalise in Q4 2018. We will also be progressing project funding discussions and related due-diligence activities as well as initiating EPC discussions."
On the 31st October Bushveld Energy announced it would be presenting its own 101 Webinar on the 13th November. This was meet with a lot of excitement by shareholders as we have heard Mikhail state before that he saw that the value of the BE business would be in the future many times that of the Vanadium mining business so we all wanted to know what was in the battery pack for the future.
In preparation our appetites were given an agenda to get excited about:
- What is Energy Storage?
- What types of Energy Storage are there, including stationary, mobile and consumer electronics?
- What are the applications for stationary Energy Storage?
- What is the application of Vanadium in Energy storage?
- What are Vanadium Redox Flow Batteries?
- How economical are Vanadium Redox Flow Batteries (VRFBs) in the current Vanadium price environment?
- How real are the substitution risks for VRFBs in Energy Storage from Lithium ion?
- How real is the Energy Storage opportunity for Vanadium and how large is it?
- How will Bushveld Minerals and Bushveld Energy accelerate the adoption of Vanadium Redox Flow Batteries?
On the 9th of November an eagerly awaited Q3 update from Vametco was released:
- Consolidation of Vametco ownership, following the acquisition, of Sojitz's underlying effective 16% interest in Vametco Alloys (Pty) Ltd for US$20 million in September 2018, increasing Bushveld Minerals effective interest to 75%, subsequently reduced to 74% following completion of the sale of 1% to its Black Economic Empowerment shareholders, in line with the requirements of the mining regulations of South Africa.
- Vametco's production for Q3 2018 was 537 mtV in the form of NitrovanTM from magnetite concentrate (Q3 2017 was 669 mtV), a decrease of approximately 14.6% relative to Q2 2018 (Q2 2018 was 629 mtV), primarily due to a 16 day unprotected industrial action during which the plant ceased operations.
- As a result of the industrial action and an unplanned seven day kiln maintenance exercise, Vametco's 2018 production guidance has been reduced downwards from 2,850 mtV to 3,000 mtV to between 2,600 mtV and 2,650 mtV.
- Ferrovanadium price averaged US$85.8 pe KgV in Q3 2018, an increase of 24% relative to the previous quarter. For the nine months to September 2018 the ferrovanadium price averaged US$72.3 per KgV, an increase of 137% relative to the comparable period in 2017.
- Vametco's realised price is based on the prior month's average price.
- Ferrovanadium price has continued to strengthen with the Metal Bulletin FeV mid-price averaging US$114 per KgV during the month of October 2018.
- The Company continues to progress the operational improvement initiatives to enhance Vametco's productivity and achieve maximum throughput.
- The Company has completed 13 (VM001 - VM013) exploration drill holes, as part of an initiative to increase geological confidence and grade control of the ore mined at Vametco. Assay results are expected by December 2018 with an updated Mineral Resource Estimate to be published in Q1 2019.
- The Company has received all assays results for Phase 1 of its exploration programme at the Brits Project, which has to date shown positive drilling results. Sampling results of Phase 2 drill holes are expected to be received in Q1 2019.
It was good to see the Vanadium price continue to strengthen as we moved into November when the Chinese Steel Regulations came into force but the increase on the sales price of vanadium was continuing to grow to weekly record highs and all the time this was boosting Bushveld Minerals profits. With ownership of 74% and all the difficulties behind us as well as higher potential yields moving forwards things were starting to fit into place.
On the 12th November came another momentous piece of news that the last of the warrants that were set up in the early days of the business were behind us.
Everything was set for the Bushveld Energy 101 Webinar
At this very time there was a significant rise in the stock price - from the 29th October to the 12th November is jumped from 28p to 47.5p.
The Bushveld Energy 101 webinar brought some very interesting new information with respect to the plans for the electrolyte plant being initially for 200 MWH of Electrolyte with growth in the short term to 1000 MWH. The presentation also made clear that over the next 10 years vanadium global demand is likely to treble from today’s consumption. This is based on the steady increase in the steel market plus the huge global market for energy storage for renewables and long cycle energy storage of which the most suitable technology is Vanadium Redox Flow Batteries. Bushveld Minerals will be sitting in pole position to supply electrolyte from its new plant which will be constructed in 2019 and ready to supply in late 2019 early 2020.
The presentation was followed days later on with the Q3 update from Bushveld Energy which confirmed some of the points:
Mikhail Nikomarov, CEO of Bushveld Energy, commented
"The third quarter of this year and events following immediately afterwards, have proven beyond doubt that the market for battery storage in both South Africa and Africa overall is significant and immediate. Bushveld Energy has long maintained the attractiveness of this market, especially for the long-duration and high-volume daily utilisation applications that are ideal for VRFBs. The knowledge gained by our team in deploying a system with Eskom and designing and building an electrolyte facility will continue to give Bushveld Energy a competitive advantage in supplying into this growing market. Our business plan, anchored in a low cost scalable primary production platform, will allow us to maximise value for Bushveld and its shareholders along the VRFB value chain, and therefore realise the Company's vision of a deeply vertically integrated vanadium platform."
Test VRFB at Eskom
The maiden VRFB from UET with the national utility, Eskom, in South Africa recommenced at site and is due to be completed before the start of the South African holidays in December 2018. The system is co-owned by Bushveld Energy and the Industrial Development Corporation ("IDC").
Electrolyte production facility
The EIA process for the ELIDZ site is advancing with completion expected in the first half of 2019. This process needs to be completed before the construction of the electrolyte facility commences.
Test work on the project has been performed by two external parties in the conversion of vanadium feedstock from Bushveld Vametco into vanadium electrolyte, yielding positive results for both single and mixed-acid electrolytes. The results are preliminary; however, Bushveld Energy expects to be able to start supplying electrolyte samples to potential customers in the coming months. These activities are important in verifying Bushveld's objective of using an intermediary vanadium product from its mining and processing activities to reduce the cost of conversion into electrolyte. Such efforts are an example of the merits of Bushveld's vertically integrated strategy.
The detailed process design within the facility will follow the process flows created through the aforementioned test work. The capital expenditure required to build the electrolyte plant is approximately $10 million.
Post Q3 activities - market development
In October 2018, the World Bank Group announced a $1 billion programme to support the deployment of energy storage in low to middle income countries. The programme is expected to mobilise a further $4 billion in donor funding and private sector investment to deliver 17,500 MWh of energy storage in these countries by 2025. This announcement is not only an excellent development for energy storage globally, but for Bushveld Energy and its market focus on Africa. With typically over 1/3 of World Bank Group funding directed to sub-Saharan Africa, the programme will likely aim to deliver 5,000-6,000 MWh of storage in Africa alone, or an average of 1,000 MWh per year. Similarly, most of the storage deployed for future projects under the programme will be to ensure greater integration of renewable energy, applications that require long duration, daily storage, which fits into the technical and commercial superiority of the VRFB technology;
In August 2018, the South African Department of Energy (DoE) issued a draft Integrated Resource Plan ("IRP") for South Africa. As a member of the South African Energy Storage Association (SAESA), Bushveld Energy supported SAESA's engagement with the DoE, including formal commentary on key topics. Three key topics included:
i. to ensure that energy storage facilities do not require generation licences;
ii. to permit technologies such as energy storage to replace allocations for other technologies, such as 9,000 MW of natural gas capacity for peak-time generation, where storage is able to provide the same system benefits at equal or lesser cost; and
iii. to ensure that energy storage co-located with generation facilities does not lead to double counting of capacity and only the net output capacity of such co-located facilities or mini-grids is calculated.
The commentary period ended in October with the final IRP expected in early 2019, leading to significant advancement for the South African power sector, including energy storage.
Post Q3 activities - overview of Bushveld Energy Business Plan
The business plan for Bushveld Energy focuses on five types of revenue-generating activities in the midstream and downstream segments of the vanadium value chain. These activities have a low capital requirement relative to the mining business. These five activities broadly include:
1. Electrolyte manufacturing, including building and operating a chemicals plant that purifies vanadium feedstock and converts it into a liquid electrolyte. The electrolyte is sold to VRFB companies or direct users / buyers of VRFB systems;
2. Renting (or leasing) vanadium electrolyte, which is a new product under development. In the product, Bushveld Energy can retain ownership of electrolyte and rent it to the VRFB user. The product is unique to VRFB energy storage technology and essential not just to cover vanadium price peaks, but to also implement a long-term pricing strategy which reduces the upfront capital cost to make VRFB one of the most commercially competitive energy storage technologies in the market;
3. Assembly of VRFBs through an investment in the construction of an assembly plant for a VRFB product (that will be operated by another party). This activity could involve direct investment into a VRFB company or companies that would own the facility as well as the technology;
4. Direct selling of VRFBs in African markets as a value-adding local firm. In addition to identifying opportunities suitable for VRFB energy storage, this activity includes developing local logistics chains covering importation, transport, installation and maintenance of the VRFBs and key components (e.g. electrolyte);
5. Developing and investing in African energy storage projects, which goes beyond purely identification of suitable sites and extends to defining the economic business case for VRFB installations. The activity also includes designing the technical and commercial structure of projects that use VRFBs. Finally, the activity includes direct equity investment into such projects.
Implementation of these five activities will continue to follow principles of strategic partnerships and implementation only where value can be created. Implementation of many of these activities will be done in collaboration with external parties, including development agencies, funders, renewable energy developers and energy storage component providers. By design, all activities will rely to a significant degree on capital from outside of Bushveld Minerals.
The final key announcement came on the 13th December with an announcement of another broker. We are yet to fully understand what they will bring to the business, but they have a global foot print and they have a expertise in leasing finance and this may be very useful to the Bushveld Energy side of the business;
Appointment of Joint Broker: Bushveld Minerals Limited (AIM: BMN), the AIM listed, integrated primary vanadium producer, with ownership of high grade vanadium assets, is pleased to announce the appointment of BMO Capital Markets Limited as joint corporate broker to the Company with immediate effect, to act alongside SP Angel Corporate Finance LLP, who remains the Company's nominated adviser and joint corporate broker, and Alternative Resource Capital, who remains joint corporate broker.
The 24th December 2018 was also significant as our market cap reached a level where we have made it into the AIM 100 list bringing an increased visibility to our company in the city.
This detailed report goes to show the huge progress that Bushveld Minerals has taken in 2018. We started the year with a Share Price of 8.25p on the 2nd January and have risen to a peak of 48.5p on the 19th December.
A summary of the significant events of the year
- Bushveld Minerals have taken the ownership of Bushveld Vametco from 59% to 74%
- Bushveld Minerals have completed Phase 2 of the Vametco upgrade to 3750 tonnes per annum
- Bushveld Minerals have cleared all warrants from company inception
- Bushveld Minerals have no debt
- Bushveld Minerals are in the process of commencing an upgrade to 5000 Tonnes per annum for Vametco to be completed in 2019
- Bushveld Minerals are ready to extend the Vametco mine into Brits
- Bushveld Energy are set to build a 1000 MWH Electrolyte plant in East London, South Africa using their own Vanadium from the Vametco plant
- Bushveld Energy are a key player in Eskom’s plans to grow Energy Storage in South Africa with contracts due to be finalised in 2019
- Bushveld Energy are working on collaboration projects via strategic partners to implement their 5 stage plan which will make Bushveld Energy the leading Energy Storage company in Africa and a major global player
- The price of Vanadium has lifted from less than $50 per kilo to around $125 per kilo and the global demand for vanadium is going to increase with 2019 showing only small increases in global supplies
- Bushveld Minerals has the worlds largest resource of high quality vanadium with grades of 1.75% and above at Vametco, Brits and Mokopane. Bushveld are awaiting the imminent mining licence for Mokopane and this opens up the potential to increase in the long term the output from that mine alone to more than 10,000 tonnes of Vanadium per year. This is on top of the 3 year plan to bring Vametco and Brits to 10,000 tonnes per year.
- Bushveld Minerals have additional brownfield sites ear marked to allow this expansion to take place as the time comes.
- Bushveld have appointed a third broker BMO Market Capital Limited
- Bushveld Minerals beat off stiff competition to win the Mines and Money Mining Company of the year Award for Africa
Bushveld Minerals also have two significant points just around the corner:
- They will shortly announce a listing on the South Africa JSE stock market allowing the people of South Africa to invest easily in this exciting company and enjoy some reward from their resources.
- Bushveld Minerals have made clear in recent press interviews it is their intension to announce a dividend policy to reward shareholders as they are confident that the profits will be sufficient to help fund new projects and reward loyal share holders.
The next big news thereafter should be confirmation of Q4 Bushveld Vametco results which should be bring record revenue into the business due to the average FeV price for the quarter reaching more than $110. Once we have the full H2 figures in February we should see the full picture in a very clear way to the significant revenue and profits for 2018.
There are currently 1,109,871,960 shares in circulation, the current market cap is just under £500 million and as we stand we are now included in the AIM100 companies index.
So 2018 was a good year for Bushveld Minerals, Fortune Mojapelo CEO, Mikhail Nikomarov CEO Bushveld Energy and Prince Nyati CEO Lemur and they and their full teams should be heartily congratulated for all their hard work and exceptional vision.
Now 2019? This has the potential to be explosive for the future of Bushveld, the stock price, full years accounts for Vametco showing the full revenue and profits. Then upcoming dividend policy which will be very exciting for new investors as they come and join this exciting journey.
So, if Mr Mandela is looking down on his beloved South Africa he will see that the vision he had for his country may now be starting to be played out now that young and inspiring leaders such as Mr Mojapelo and Mr Nikomarov are starting to build a leading industry that the whole nation can be proud of.
Investing in Bushveld Minerals is easy via trading platforms - simply search for BMN.L The prices of investments can go up or down and the decision to buy or sell any investment is your own decision. Please research fully before deciding.
On behalf of all the team on the Bushveld Perspective we wish you and your families a very Happy, Prosperous and Healthy New Year!
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