Bushveld Minerals Limited (LON:BMN), the AIM quoted, integrated primary vanadium producer, with ownership of high grade vanadium assets, is pleased to provide an operational update for the three months ending March 2020, in respect of Bushveld Vanadium and Bushveld Energy, as well as other corporate activities.
· Production for Q1 2020 was 652 mtV (482.5 mtV 74 per cent net attributable interest) in the form of Nitrovan, marginally ahead of Q1 2019 production of 649 mtV despite being impacted by the Covid-19 nation-wide lockdown as well as higher than usual rainfall during the quarter.
· Sales of 898 mtV (664.5 mtV 74 per cent net attributable interest) achieved in Q1 2020, 77 per cent higher than Q1 2019 as a result of additional production volumes in Q4 2019 and increased customer demand.
· Underlying production cost of US$18.90/kgV, an eight per cent decrease relative to Q1 2019, supported by a weaker ZAR:USD rate.
· Early completion of the annual maintenance programme, which was initially planned for Q2 2020 for a period of 10 days. No further maintenance shutdowns are planned for the remainder of 2020.
· In line with the Government’s “risk-adjusted strategy for economic activity”, following a 35 days Covid-19 lockdown production is ramping up to normal levels.
· Solid operating performance, with production of 219 mtV despite being impacted by 10 days of power rationing as well as the Covid-19 lockdown during the quarter. Vanchem’s production for Q1 2020 represented 31 per cent of total Bushveld attributable vanadium production.
· Sales of 182 mtV achieved comprised of a range of products during the quarter.
· The underlying production cost for the quarter was US$18.5/kgV, due to stock build up, as Vanchem has been ramping up production from December 2019. We expect inventory levels to normalise in Q2 2020.
· Completed the scoping study of a refurbishment programme and prioritised a total of around R85 million as critical capital spend required for 2020 to enable Vanchem to continue to sustainably operate. We expect to incur most of the spend during the second half of the year.
· As with Vametco, production is ramping up to normal levels following Government guidance.
· Approved construction of vanadium electrolyte plant, including receipt of funding approvals for equity and debt from the Industrial Development Corporation (“IDC”).
· In line with its strategy of partnering with Vanadium Redox Flow Batteries (“VRFB”) companies, on 1 April Bushveld announced that it held a 8.71 per cent shareholding in Invinity Energy Systems plc (“Invinity”) the entity created by the merger of Avalon Battery Corporation and redT energy plc.
· Completion of due diligence to acquire Enerox as part of an investment consortium. Bushveld Minerals will continue to update the market on developments around the progress and structure of the transaction.
Capital structure and liquidity
· As previously reported, on 30 October 2019, the Group secured ZAR375 million facilities from Nedbank, comprised of a ZAR125 million revolving credit facility (“RCF”) and a ZAR250 million term loan which was drawn down at the time. The Group drew down the remaining RCF of ZAR125 million at the end of March 2020 to enhance liquidity and provide financial flexibility during this uncertain environment. Overall, the Group’s unaudited gross cash and cash equivalent position as at 31 December 2019 and 31 March 2020 was US$34 million and US$34.4 million, respectively. The 31 March 2020 unaudited gross cash and cash equivalent position includes the full ZAR375 million facilities.
· As the near-term impact of Covid-19 on operating conditions is uncertain, the Group is taking cash preservation measures to manage near term liquidity while preserving the long term sustainability of the assets. These include reviewing and limiting operational expenditure where necessary as well as deferring some growth associated (non-critical) capital expenditure across the mining, processing and energy businesses.
· 2020 production and cost guidance for both Vanchem and Vametco remains under review and will remain so until the Company is in a position to quantify the impact of the Covid-19 pandemic and the South African nation-wide lockdown.
Fortune Mojapelo, CEO of Bushveld Minerals Limited, commented:
“This update comes in the midst of the global Covid-19 pandemic that has not only changed our world but will continue to change it in ways we have not fully understood yet. I am pleased that these difficult circumstances found Bushveld Minerals in a sound state financially, with a set of quality low-cost production assets.
“We are fortunate to operate in a country whose leadership has taken early decisive action to limit the spread of the Covid-19 virus while ensuring that we build the necessary public health care capacity and identify fiscal responses to manage the coming wave of infections, while treatments and vaccines are still under development. Navigating this situation requires us to meet the immediate challenges of ensuring the safety and health of our workers, sustain business continuity and ensure readiness to scale back up to full capacity in due course, while also supporting the fight against Covid-19 among our host communities.
“We used the lockdown period to strengthen our health and safety protocols together with business continuity measures, conducted maintenance and processed intermediary stockpiles, as per the guidelines received from our authorities. We are pleased that both Vametco and Vanchem are safely increasing production to normal levels.
“I am glad that our suppliers and service providers have continued operating and servicing the Company. We have continued to pay our employees during the lockdown, have not had to declare force majeure while continuing to meet our customer orders. In addition, we have carried on playing a supportive role in our local communities by supplying water and sanitisers to local hospitals, police stations and old age homes. I am particularly proud of the management team that has worked so hard to ensure the Company is not only prepared to weather the Covid-19 storm but does so with empathy and responsibility to all our stakeholders.
“From a liquidity perspective, we started the year with a healthy cash balance. We retain a cautiously positive growth outlook on the vanadium market and the Company’s role therein. This notwithstanding, we have undertaken a review of our capital spending, deferring some non-essential capital expenditure for the near term whilst preserving the long term integrity of our business and still positioning the company for growth in the vanadium market in the medium to long term. Furthermore, to enhance our liquidity position and financial flexibility we drew down the full ZAR375 million of bank debt facilities. Meanwhile, the Company’s finances have benefitted from a weakening Rand, given its revenue and cost bases are mostly foreign currency and local currency denominated, respectively. This places us in a stronger position to navigate through this evolving situation.
“We are confident that the measures we have taken will enable us to build an even more resilient Bushveld Minerals, well positioned to exploit the upturn when it comes.
“We are releasing this announcement later than we would have typically done. This has been necessitated by the need to better understand and so provide clarity on the impact of the pandemic and the fast-evolving environment and regulatory landscape we are operating in. We also expect to be in a better position to disclose more on our renewed plans and capital expenditure requirements in our 2019 full year results announcement, when we believe there will be more clarity on what the rest of the 2020 financial year will hold.
“Our intention is to continue adapting to this fluid environment and do everything necessary to protect our people and our business, while doing our part to fight this global pandemic.”