Q4 and Full Year 2020 Operational Update

Bushveld Minerals Limited (AIM: BMN), the AIM quoted, integrated primary vanadium producer and energy storage solutions provider, with ownership of high-grade assets in South Africa, (“Bushveld”), is pleased to provide an operational update for the fourth quarter and 12 months ending 31 December 2020 (“Q4 2020” and “12M 2020”).

Key Highlights

Bushveld Vanadium

• 12M 2020 Group production of 3,631 mtV was 24 per cent higher than 12M 2019 (12M 2019: 2,931 mtV), primarily as a result of the inclusion of Vanchem’s production for the full 12-month period, partially offset by impact of the nationwide lockdown in South Africa during H1 2020.
  • Production was marginally lower than 2020 guidance of between 3,660 mtV and 3,940 mtV (less than one per cent).
• 12M 2020 Group sales of 4,264 mtV* were 78 per cent higher than 12M 2019 (12M 2019: 2,392 mtV), as a result of the addition of sales from Vanchem as well as increased demand from customers in H2 2020.
  • Sales to China made up a total of 21 per cent of total volumes sold in 12M 2020 compared with 10 per cent in 12M 2019, in line with the Group’s strategy of increasing sales to higher-priced markets.
• Q4 2020 Group production of 951 mtV was seven per cent below Q3 2020 production (Q3 2020: 1,019 mtV), mainly due to unplanned maintenance stoppages at both operations and severe weather conditions.
• Q4 2020 Group sales of 1,268 mtV** rose by 35 per cent relative to Q3 2020 (Q3 2020: 940 mtV), as demand for vanadium products strengthened during the quarter across all major markets as a result of increasing industrial output in developed economies.
• A Vametco JORC (2012) compliant Competent Persons Report (“CPR”) for the updated Mineral Reserve and Resource Estimate for Vametco was published today on the Company’s website.
• Appointment of Francois Naude as Director of Operations (non-board), overseeing Vametco, Vanchem and Bushveld Electrolyte Company (“BELCO”).

* Sales of 4,264 mtV includes intercompany sales of 1,255 mtV.

** Sales of 1,268 includes intercompany sales of 520 mtV.

Bushveld Energy

Electrolyte

• During the year Bushveld Energy successfully established Bushveld Electrolyte Company (“BELCO”) as the operational company for the electrolyte business. The Engineering phase of the Engineering Procurement Construction (“EPC”) process was completed in Q4 2020. The procurement process will commence in Q1 2021 followed by construction.

Deployments

• Received environmental authorisation and awarded the EPC for the construction of a hybrid mini-grid at Vametco. Enerox GmbH (“Enerox”) will supply the 1MW / 4MWh Vanadium Redox Flow Battery (“VRFB”) for the project and Abengoa will manage the EPC of the project, including 3.5 MW of solar PV.

Investments

• During the year, in line with its strategy, the Group successfully completed its investments in VRFB original equipment manufacturers (“OEMs”), Invinity Energy Systems (“Invinity”) and Enerox.

Financial Highlights

• The Group successfully completed and drew down the US$65 million financing package with Orion Mine Finance (“Orion”) to fund capital projects as well as partially retire existing debt facilities.
• Unaudited Group cash and cash equivalent as at 31 December 2020 was approximately US$50.5 million, compared to US$34.0 million on 31 December 2019. The 31 December 2020 unaudited cash and cash equivalent position includes the Orion production financing arrangement and convertible loan note, and ZAR125 million Nedbank revolving credit facility.

2021 Guidance and Capital Expenditure

Bushveld Vanadium

• Estimated Group production of between 4,100 mtV and 4,350 mtV in 2021, a 13 per cent to 20 per cent increase relative to 2020, with volumes weighted towards the second half due to a 35-day maintenance shutdown at Vametco during Q1 2021.
• Progress procurement and construction of the electrolyte plant. In order to ensure closer alignment of all vanadium operating facilities, BELCO will migrate to the Bushveld Vanadium platform both operationally and in ownership.

Bushveld Energy

• Attaining financial close and commence construction of the hybrid mini-grid at Vametco.
• Advance the development of Bushveld Energy’s Deployment pipeline in Africa, including self-generation options for all of Bushveld’s existing and future electrical energy needs. Bushveld’s energy needs have the potential of more than 125MW of solar PV and 180MWh of battery energy storage systems within our facilities.
• Continue to support and collaborate with global VRFB manufacturers as per Bushveld Energy’s VRFB OEM partnership strategy. This includes scale up of the vanadium electrolyte rental product with new contracts, comprising the rental contract with Pivot Power, part of EDF Renewables.

Group Capital Expenditure

• Capital expenditure expected for 2021 of approximately ZAR540 million (circa US$33.7 million), with most of the cost being Rand-denominated. The Capital expenditure includes the following:
  • Vametco ZAR85.2 million (circa US$5.3 million);
  • Vanchem ZAR251 million (circa US$15.7 million);
  • Mokopane DFS ZAR40 million (circa US$2.5 million); and
  • Bushveld Energy, including BELCO, ZAR152 million (circa US$9.5 million), which will be principally funded by Bushveld Energy’s partial asset sales.
• Further details can be found in the Bushveld Vanadium and Bushveld Energy sections of the update.

Fortune Mojapelo, CEO of Bushveld Minerals Limited, commented:

“Production for the year was 24 per cent higher than the prior year, despite the challenging environment during the year. The fourth quarter was characterised by strong vanadium demand and sales which has carried in 2021. Achieving our production targets while continuing to ensure the safety of our employees is our most important goal.

During the quarter we also completed the US$65 million funding agreement with Orion Mine Finance announced at the end of September 2020. The funding secures our growth plans at Vametco and contributes towards the first phase of Vanchem’s refurbishment programme. Furthermore, the financing has strengthened our balance sheet as we were able to retire the Nedbank term loan and repay half of the Duferco Participations Holding S.A (“Duferco”) convertible loan note with cash and shares.

For 2021, we expect to raise production by between 13 per cent to 20 per cent to between 4,100 mtV and 4,350 mtV. Additional maintenance work has been identified at Vametco which will require further downtime in the year, while further debottlenecking activities will be required on certain parts of the plant. Vanchem’s three-kiln configuration allows the plant to operate without the need of a shutdown while maintenance is being conducted. The maintenance and downtime have all been factored into the production guidance released today. In addition, as part of our initiatives to enhance our operational performance, we are pleased to announce the appointment of vastly experienced Francois Naude as Director of Operations, who brings over 27 years of mining and processing experience. Francois will be overseeing Vametco, Vanchem and BELCO operations.

At Bushveld Energy, we made great strides in growing the awareness and commercial competitiveness of VRFBs as a viable energy storage alternative. Our investment support of entities such as Invinity and Enerox have provided these companies with a strong base to pursue their respective growth initiatives at a time when the world is calling for a large part of post-Covid-19 stimulus spend to be allocated to renewables and green energy. Importantly the rights of first refusal with Invinity and Enerox for us to supply their batteries with our vanadium, provides a future hedge against volatility in the vanadium price as the VRFB market develops. In addition, we have achieved strong returns on our investment in Invinity. Progress with our Enerox investment will be provided in due course, which will include an update in our ownership and strategy. We have made great progress at BELCO, we are excited about the electrolyte rental opportunities that we are developing, which we will update the market in due course with further information.

Meanwhile, we have achieved and learnt so much already from our work on the mini-grid project at Vametco, where we also welcomed strong financing, engineering and construction partners in the year. In addition, with regulations being relaxed for self-generation, it allows us to investigate the scaling up of our own self-generation solutions. We have identified energy needs of more than 125MW of solar PV and 180MWh of battery energy storage systems within our own facilities and in due course will unveil our strategy around this exciting opportunity.

In summary, we have entered the new financial year on a positive footing with the secured funding, the higher production for the year and a rising vanadium price. While Covid-19 remains a part of our everyday lives, we continue to concentrate on executing the goals that are within our own hands, including: meeting our 2021 production guidance, reducing our costs and advancing the development of vanadium redox flow batteries as a major source of energy storage.”

News in full

In the clip below, CEO Fortune Mojapelo outlines Bushveld’s operations, business strategy and the market for Vanadium