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Bushveld Minerals (BMN) - Investors Eye Vanadium Outside China but...

July 15 2020, 11:02 GMT+01:00

Bushveld Minerals (BMN)

  • AIM: BMN
  • Shares Outstanding: 1.15B
  • Share price GB£0.13 (15.07.2020)
  • Market Cap: GB£151M

Bushveld Minerals is a South African primary vanadium producer in the lower cost quartile for production. It is vertically integrated and is 1 of only 3 operating primary vanadium producers globally, owning 2 of the world’s 4 operating primary vanadium processing facilities, currently producing approximately 3,000t of Vanadium pa, which represents ~3% of the global vanadium market. The company's target is to organically grow production to more than 8,400 mtVp.a. in the medium term.

Bushveld Minerals owns a diversified vanadium product portfolio that supplies to the steel, energy and chemical sectors. Bushveld Minerals participates in the entire vanadium value chain through its two main subsidiaries: Bushveld Vanadium: a vanadium mining and processing company; and Bushveld Energy: a project developer/energy storage component manufacturer that is focussed on vanadium-based energy storage systems (VRFBs).

Matthew Gordon talks to Fortune Mojapelo, 15th July 2020


Eventually, Bushveld Minerals aims to develop a sustainable and cash-generating business model that is in a lower quartile for cost. The platform will include high-grade, opencast, low-cost primary vanadium mines, alongside refurbished brownfield processing facilities, which provides a scalable aspect. The company also intends to be a pivotal supplier of electrolyte and other VRFB technologies.

Bushveld Minerals' 2019 financial year numbers were disappointing for everyone. While the company met its guidance for production volumes and cost, the company only generated US$160M in revenues: a significant tail-off from its figure of US$190M for the same period in 2018. However, the vanadium price did fall from US$74/lb to US$48.90. The revenue drop is solely attributable to the drop in the vanadium price. In fairness to Mojapelo, he appears to have controlled what he is able to control, but the market can always have a sting in its tail. The 'v' in vanadium stands for volatile and always will; this is something investors need to get comfortable with, or they need to invest in something else.

Bushveld Minerals' EBITDA was US$32.6M, which is a reasonable figure. Ending 2019 with US$34M in the treasury, the company was able to deal with COVID-19 more comfortably than most. What is the next move for Bushveld Minerals? The company plans to expand vanadium production to 8,400 metric tons a year (mtV), up from the 2,931 mtV it produced in its 2019 financial year. This news is something that could get vanadium investors really excited.

To get to this point, Mojapelo expects an expenditure of US$100M and aims to achieve the production figure within the next 3-5 years. The money will be spent on optimising the downstream to increase throughput at the company's plant, alongside a phased approach to refurbishing three kilns and bringing them online by the end of 2024. It is a robust process, but can it excite the market?

Bushveld Minerals has been attempting to complete a listing on the JSE, but this has been delayed because the company was prioritising the significant acquisition of Vanchem and needed to figure out how to incorporate it into the company's books. What is the benefit of listing in Johannesburg? Mojapelo thinks there is a growing narrative surrounding the company in South Africa, and African countries, in general, are perhaps more amenable to increasing their share of the battery metals value chain. An increase in policies that support these initiatives has gone some way to creating more momentum. Investors will need to decide if this is a waste of time, energy and money, or if this could add accretive value in the long run. Could the project be delisted from AIM in the near future? Mojapelo is coy, but he thinks the share price will eventually take care of itself if Bushveld Minerals continues to grow. Getting some more institutional names onboard would certainly shore up the value proposition and go some way towards boosting the share price. He will need to balance the effort expelled on each project within Bushveld's portfolio effectively if he wants to deliver returns for shareholders. Lemur Holdings, a Madagascan coal player and Bushveld subsidiary, looks like a potential distraction, but he thinks a focus on value will enable it to be a worthwhile venture for shareholders eventually.

His comments could be interpreted as frustration at the level of liquidity and trading in the stock. The question is would the LSE be any better? Does JSE help? It would be marginal in my opinion. The reality is that vanadium just doesn't look good at the moment. Bushveld is a good business with an exceptional CEO, however, Bushveld just looked a lot better at much higher prices. Now, the sheen has come off a bit and there are more exciting things like gold, which is distracting investors from a good story. Also, Bushveld Energy needs time for the market to catch up to VRFBs; it's still early days for this technology. It is set up for success, but the reality is that the share price currently tells a different story. Investors who believe the vanadium thematic have two choices: get in now while the share price is depressed, or wait to see if and when the market recovers and revisit.

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Over at Bushveld Energy, the first phase of its project, a 400MWh VRFB, should be completed this year. Every commentator I've heard on the vanadium space has told me that VRFBs are some way off being commercially realised. They've also told me any that companies that tell investors VRFBs will transform their value proposition are off the mark. What does Mojapelo think? It's an 800MWh project, and he thinks projects of this scale are "great." He'll be looking to get involved in more in the future because the VRFB demand story in Africa is growing by the day. The need for energy storage is increasing as developing countries continue to progress. Could VRFBs play a key role in enhancing peaking capacity? Companies that produce their own power in Africa can now do so under much less regulatory framework, and this can only be encouraging.

The electrolyte plant, a real rarity, is currently being progressed through a phased approach. Bushveld Minerals has conducted the feasibility studies and the EIA. It has reached a construction decision and is ready to move forward with it. Investors will be hoping that Bushveld Energy and VRFBs can add to the company's bottom line in the near future.

What did you make of Fortune Mojapelo? The company is well run, but are you a believer in the vanadium supply-demand fundamentals yet?

Company Website: https://www.bushveldminerals.com/

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