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Bushveld Minerals Limited

Bushveld Minerals Limited 2017 was a transformational year

Bushveld Minerals Limited (LON:BMN), the AIM listed, integrated primary vanadium producer, with ownership of high grade assets, has today announced its financial results for the period ended 31 December 2017.

The Annual Report to 31 December 2017 will be available on the Company’s website later today at the following link: http://bushveldminerals.com/financialreports.aspx

A printed copy of the 2017 Annual Report will be posted to the Company’s shareholders as per individual request. A copy of the Notice of the Annual General Meeting to be held at 18-20 Le Pollet, St Peter Port, Guernsey GY1 1WH at 11 a.m. on Wednesday 8th August 2018 will also be posted to all shareholders.


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.

Bushveld Vanadium

* 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.

Bushveld Energy

* 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.

Lemur Holdings

* 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.

Chairman’s Statement

2017 was a transformational year for Bushveld which saw the Company significantly progress the development of each of its platforms. A testament to the tenacity of our management team, the successful completion of the Vametco vanadium mine acquisition in December was a landmark transaction for Bushveld, transforming the Company from being an explorer to a low cost producer with a strategy to become a leading vertically integrated vanadium producer.

Since 2014, Bushveld has operated a commodity focussed platform strategy leading to the adoption of a clear model for long term growth and the development of three independent platforms: Bushveld Vanadium (vanadium); Greenhills Resources (tin); and Lemur (coal and power). The past year has seen each platform make considerable progress in becoming a standalone operating platform, particularly in the case of Greenhills Resources, which gained independent listing on the AIM market of the London Stock Exchange.

The Company’s flagship platform is Bushveld Vanadium, and this is undoubtedly where we made most progress as a Company. The acquisition of Vametco could not have been completed at a more opportune time for the Company, with vanadium prices on a solid upward trajectory throughout 2017, a trend that has continued in 2018. Our long-standing strategy has not changed which is to build a leading vertically integrated vanadium producer focussed on enhancing growth both horizontally and vertically.

Horizontally we seek to grow our production volumes to meet growing demand from the steel and energy storage sectors, while our vertical growth speaks to our efforts to participate downstream along the vanadium value chain.

The focus on the vanadium platform resulted in the demerger of the Company’s tin platform, Greenhills Resources, into a standalone company on AIM, renamed AfriTin Mining Limited. AfriTin was admitted on AIM on 9 November 2017. The transaction significantly simplified Bushveld’s group structure, enabling the Board and management team to focus on the vanadium platform, while allowing shareholders continued ownership of AfriTin’s assets. The Company is confident that AfriTin will continue to build on its position as a leading African tin exploration and development mining company. In addition, following his appointment as Chief Executive Officer of AfriTin Mining, Anthony Viljoen stood down as an executive director at Bushveld Minerals. Anthony continues to serve as non-executive director of the Company.

The Board believes that high standards of governance are crucial to deliver our strategy, create long term value and maintain our licence to operate. Accordingly the Board is always looking at ways of improving the Company’s corporate governance and assurance process.

The Board of Directors takes a rigorous approach to Board planning. It considers skills, experience and attributes required to effectively govern and manage risk within Bushveld Minerals. As a result, post year end the Board appointed Michael Kirkwood as independent non-executive director. Michael is a highly experienced and well respected former international banker, having worked at the highest levels of Citigroup during his 31-year career with the bank. He was latterly the UK country head and chairman of the Corporate Bank and is currently a non-executive director of AngloGold Ashanti Ltd and Chairman of Ondra LLP.

The Board is also determined to ensure that it continues to have the right balance of Directors and carries on with its high level of responsibilities and corporate governance. This process is continuous, and we will bring additional focus to ensuring the Board evolves to take account of the rapidly changing external environment in which Bushveld Minerals operates.

Post year end, the Company successfully raised US$22.2 million (£15.7 million) (before expenses) by way of an oversubscribed share placing. The placing was led by key UK institutional investors and a consortium of cornerstone investors, including the original founders of Mimosa Platinum and LionOre Mining International, as well as the key investors in Mantra Resources at its inception. We are delighted to welcome these new investors as shareholders of the Company.

Bushveld continues to endeavour to build its business and strategy in a way that ensures stakeholders and the communities in which it operates benefit from and are involved in the Company’s operations. This mantra is at the heart of our business and we shall continue to adhere to this along with the mining regulations in the jurisdictions in which we operate. The draft new Mining Charter for South Africa was announced Friday 15 June 2018, requiring that the Black Economic Empowerment (“BEE”) shareholding set to increase to 30 per cent within five years. The new and renewal of existing mining rights will require 14 per cent for black entrepreneurs and 8 per cent ownership for both communities and employees, thus totalling 30 per cent. Whilst the 30 per cent requirement was expected, the new announcement is a 5 per cent free carry provision for both communities and employees, within the 8 per cent. The Charter also mandates a trickle dividend of one per cent of EBITDA to employees and communities respectively from the 6th year where dividends are not previously declared during the said period. The move towards finalising the Mining Charter and thus bringing much needed certainty is welcome. There remains, however, several provisions in the draft Charter that will no doubt be challenged as a consequence of which we expect some revisions before it is finalised. The Company will thus continue to exercise caution in dealing with the Charter until it is finalised.

The Bushveld Minerals story is at heart a South African story of the successful development of a significant global platform from early stage exploration through innovative acquisitions to establish an attractive portfolio of quality, low-cost and cash generating assets. It is thus only natural that the Company would seek a South African capital markets base. Accordingly, Bushveld Minerals is considering the option of listing on the Johannesburg Stock Exchange in the near future, a move that will allow South African investors access to its story while broadening the Company’s access to capital to facilitate its aggressive growth plans and enhance its profile further in the global capital markets.

The Board recognises the importance of returns to shareholders, and consequently it has determined that during the second half of 2018, Bushveld Minerals will define a capital allocation framework, which will outline an approach and strategy towards shareholder return, value creation through investments and financial performance.

The Board believes that the Company is uniquely placed in a buoyant market to grow into a leading vertically integrated vanadium producer. Bushveld has a quality primary vanadium asset portfolio, a strategy to develop this and to become an integrated player. In addition, it has partners and a team in place to deliver this.

After what can only be described as an incredibly significant and transformational year, the year ahead promises to continue in the same way. The 2018 year promises to be another busy and exciting one for the Company as we look to further develop Bushveld’s platforms.

I would like to thank our management team for their considerable efforts in what has been a challenging but exciting time for our Company. The business is dependent upon the hard work, dedication and skills of all our team. I would in particular like to thank our CEO Fortune Mojapelo, who has led the Company and team in an exemplary way. Also, to my colleagues on the Board, I extend my appreciation for their wise counsel and advice that I have received this year. I look forward to supporting Fortune and the management in our pursuit of long term value creation for all our shareholders.

Ian Watson

Non-Executive Chairman

CEO Report


In the past year, Bushveld Minerals made significant progress to deliver on its strategy to become one of the most significant, lowest cost and vertically integrated primary vanadium producers in the world. benefiting from a high grade resource embedded within the Company’s portfolio. We remain focused on delivering on our stated objectives supported by an outstanding management team, great partners, a portfolio of world class assets and strong market conditions.

The highlight of the year was the completion of the acquisition of the Vametco primary vanadium mining and processing plant (“Vametco”), providing Bushveld with a high-quality asset producing a high quality vanadium product for a significant global customer base.

Acquisitions of Strategic Minerals interest and Vametco

During 2017, Bushveld Minerals completed the acquisition of a 78.8 per cent interest in Strategic Minerals Corporation (“SMC”), which holds a 75 per cent shareholding in the vanadium mining and processing companies Vametco Holdings (Proprietary) Limited and Vametco Alloys (Propriety) Limited. This acquisition transformed the Company from an exploration company into a significant vanadium producer with no less than 3 per cent of the global vanadium market share.

The Vametco acquisition was conducted over two phases. During the first phase, Bushveld partnered with Yellow Dragon Holdings Limited (“YDH”) to acquire a 78.8 per cent interest in SMC from the Evraz Group S.A. The partnership was structured through Bushveld Vametco Limited (“BVL”), of which Bushveld held 45 per cent while YDH held the majority 55 per cent. This phase was completed on 6 April 2017.

On 21 December 2017 Bushveld Minerals completed the acquisition from YDH of 55 per cent of the issued share capital of BVL, being all of the ordinary share capital that was not owned by the Company. Following the completion of this transaction, the Company now owns an effective 59.1 per cent indirect beneficial and economic interest in the Vametco vanadium mine.

The value of the Vametco acquisition to Bushveld cannot be over-stated. The Vametco transaction, with a purchase price that was less than ten per cent of replacement value, is an excellent testament of the Company’s strategy of targeting brownfield processing infrastructure which can be acquired at a fraction of a greenfield operation and provides a lower risk and quicker path to production. It provides Bushveld with a low-cost, scalable and profitable vanadium production platform from which the Company can grow and implement its vision of a large, vertically integrated vanadium company with a diversified vanadium products portfolio. Some of the benefits of the acquisitions are summarised below:

· It immediately transforms Bushveld from an exploration company into a producing company with a significant share of the global vanadium market. Vametco enjoys more than a three per cent share of the global vanadium market; which is expected to grow to more than 5 per cent by 2019;

· It gives the Company exposure to vanadium production and cash flows at an opportune time. Vanadium prices have risen from US$19/kgV when the acquisition was first announced to US$43/kgV when the second phase of the transaction was completed.

· While Vametco is benefitting handsomely from the surge in vanadium prices, it is well positioned to continue generating cash flows even in a low-price environment, owing to its low-cost production base;

· The acquisition comes with a solid management team with more than 100 years combined experience in vanadium mining and processing and adds depth to Bushveld’s management capacity

· The production base has the potential to expand by the end of 2019 to 5,000 mtV per annum, supported by one of the largest primary vanadium resource bases in the world (under the ownership of Bushveld);

· Vametco has the potential to diversify its product range beyond its Nitrovan® product; and

· It is aligned with the Company’s aspirations in the global energy storage space by providing capacity for potential electrolyte manufacturing.

Non-core asset strategy

Bushveld has since inception in 2012 operated a multi-commodity-focussed platform strategy since 2012. This approach has led to the adoption of a clear model for long term growth and the development of three independent platforms: Bushveld Vanadium, Greenhills Resources (now listed on AIM as AfriTin) and Lemur.

Four key pillars have guided the subsequent development of the Company’s projects:

· Identifying commodities with a positive market outlook;

· Developing assets with low cost curve positioning;

· Developing a viable low capital expenditure, realisable path to production and, thus cash flow generation; and

· Ensuring project scalability

In late 2013 the Company pivoted on vanadium and has since developed its vanadium platform as the Company’s flagship while the strategy for the other platforms focussed on building critical mass for a short-term spin-off into stand-alone platforms. That strategy resulted in the demerger and listing of AfriTin Mining Limited in November 2017. The Company has made significant progress in building critical mass in Lemur for a future as a standalone coal and energy focused platform. Efforts are underway to evaluate various options in respect to the future.

The Company’s vision

The Company’s vision is to grow into a significant, low cost, vertically integrated vanadium platform that comprises of:

· One of the largest high-grade primary vanadium resource bases in the world, as well as becoming a leading primary vanadium production source;

· A low cost position on the production cost curve, leveraging the high in-situ and in-magnetite V2O5 grades and the open-cast mining proposition of Bushveld’s deposits, as well as access to low cost brownfield processing infrastructure; and

· Development of downstream operations beyond production of end-use vanadium products to include development and deployment of vanadium applications in industries such as the energy storage market, where Bushveld intends to manufacture vanadium electrolyte and to build VRFBs.

Bushveld Vanadium


Vametco had a solid performance in the 2017 calendar year, supported by a strong vanadium price environment with the ferrovanadium price averaging US$33/KgV for the 12 months. Vametco produced 2,649 mtV (Nitrovan® and FeV) during the 2017 calendar year. Unit production costs for the 2017 calendar year were ZAR 220/KgV (US$16.6/kgV).

Vanadium production guidance for the 2018 calendar year remains unchanged at approximately 3,680 mtV. Following the completion of phase two of the expansion project by the end of June 2018, Vametco’s production capacity will ramp up from the current 3,035 mtV to 3,750 mtV per annum. The capital expenditure programme is being funded from operational cashflow.

In 2017, Vametco commenced a three-phased expansion project with the aim of increasing annualised production capacity to 5,000 mtV by the end of 2019. Phase one of the expansion plan was successfully completed on time and on budget in the third quarter of 2017, during which time Vametco reached an annualised production capacity of 3,035 mtV. Phase two of the expansion was, completed on time and in budget in June 2018, resulting in Vametco achieving an annualised production capacity of 3,750 mtV. Phase three of the expansion will increase Vametco’s annualised production run rate to 5,000 mtV by 2019. Completion of the expansion project will enhance Vametco’s existing competitive position in a structurally challenged market.

Mokopane Vanadium Project

The Mokopane Vanadium Project is a key part of Bushveld’s vanadium strategy. The project comprises one of the world’s largest primary vanadium resources hosted in the three adjacent layers of the Main Magnetite Layer (“MML”), the Main Magnetite Layer-Hanging Wall (“MML-HW”) and the AB Zone. The MML hosts high in-situ grades of 1.4 per cent V2O5 and in-concentrate 1.75 per cent V2O5 grades and was the basis for the Pre-Feasibility Study completed in January 2016. An application for a New Order Mining Right was lodged in March 2015 and is currently being processed by South Africa’s Department of Minerals Resources. The Company is in ongoing discussions with the Department of Mineral Resources with a view to being granted a New Order Mining Right and significant progress has been made during the year. The Company has also been progressing in ongoing consultations with the local community and continues to evaluate ways to bring the asset into production in the most cost-efficient manner possible. Efforts are also continuing to find strategic partners for the project. The intention is to secure a mining right and develop the project as a greenfield mining and processing plant; or as mining operation supplying ore to China and or other brownfield processing plants.

Brits Vanadium Project

The Company has begun an exploration programme at the Brits Vanadium Project, which comprises prospecting rights on several farms adjacent to Vametco, with the aim of establishing a maiden Mineral Resource Estimate. After the year end, a soil geochemical sampling programme and ground magnetic survey were carried out over the project area. Interpretation of the results of this work has led to several drilling targets being delineated.

Drilling on these targets commence, post year end, in March 2018, and thus far eight diamond drill holes have been completed, totalling 833.08 metres. The Lower Seam (the primary orebody mined at the adjacent Vametco Mine) has been intersected in several drill holes, and the Intermediate Seam and Upper Seam have also been intersected in some drill holes.

Drill cores are currently being logged and assayed, with the assays being carried out at the Vametco mine laboratory and confirmed by an independent external laboratory. The Company expects to publish the results as they are received. The Company will also commence an infill drilling programme at the project and will begin estimation of the Mineral Resource once logging, sampling and assaying of all drill holes has been completed.

Bushveld Vanadium production plan

Through its expansion initiatives at Vametco, as well as targeted brownfield opportunities, the Company is looking to expand its production to 5,000 mtV by the end of 2019 and to more than 10,000 mtV in the medium term.

Bushveld Energy

Bushveld Energy was established with the objective of not only promoting the adoption of vanadium in the energy storage industry through vanadium redox flow batteries (“VRFBs”) but also exploiting the multi-billion dollar commercial opportunity that the energy storage industry presents.

The Company believes that VRFBs are well positioned to take a significant share of the global utility-scale energy storage market, where their distinctive features, including low life-of-battery costs, flexible scalability, long duration energy storage capacity and inherent safety give them a significant advantage over other technologies. These, and more advantages, are increasingly recognised as global deployments of VRFBs grow year on year.

Since its establishment, Bushveld Energy has made significant progress defining the energy storage market opportunity, building industry awareness for VRFB and developing a business model for Bushveld Energy. The business model is anchored in Bushveld Minerals’ low-cost production platform and smart partnerships along the VRFB value chain. To date Bushveld Energy has signed a cooperation agreement with the Industrial Development Corporation (“IDC”) a local state-owned development finance institution; a Memorandum of Understanding with USA-based VRFB manufacturer Uni Energy Technologies (UET).

During the past year, in particular, the company has made significant progress, including the following:

a) Completion of two key studies carried out in cooperation with the IDC:

The “African VRFB demand” and “Global Electrolyte Demand” study

The study results indicated highly favourable demand for VRFBs, especially in the utility and off-grid, mini-grid use cases, peaking in 2025-2030. It also showed that global electrolyte demand is likely to peak in the same time frame at 1200-1800 megawatt hours (“MWh”) or 40-60 megalitres (“ML”) per annum. Conservatively, the company believes there is the potential for Bushveld to supply an initial 5-10ML of this demand, supporting supply of an initial 200MWh in energy storage per annum.

A techno-economic study for the manufacture of vanadium electrolyte in South Africa

The study results highlighted that Bushveld Energy can manufacture electrolyte on a cost-competitive basis, thereby allowing it to compete both regionally and globally. A scalable plant can be configured with an initial annual production capacity of 200-400MWh. The estimated initial capital expenditure for the plant would be in the region of ZAR130 million (US$9.7 million), of which more than 75 per cent comprises balance of plant. A follow-up locational analysis recommended a dual location design. Pre-purification would be performed at Vametco to reduce capital expenditure through co-location. The second part of the plant will be focussed on electrolyte production and mixing and will be located in an Industrial Development Zone (“IDZ”) in close proximity to a port, positioning it well for export opportunities. While the most significant driver of costs (upwards of 70 per cent) is the vanadium feedstock, Bushveld has access to locally available, low cost supplies within its own portfolio. This gives both the Company and South Africa a natural competitive advantage.

b) Secured an agreement with South Africa’s utility Eskom for a 120kW / 450 kWh VRFB project

In November last year, Bushveld Energy confirmed that the first utility scale VRFB would be deployed in South Africa. The project includes our two existing strategic partner entities: the IDC as a co-developer, and USA-based UET as the VRFB manufacturer. The system will be deployed with Eskom at its Research, Testing and Development (“RT&D”) Centre in Rosherville, South Africa. This follows Eskom’s identification of the need for potentially up to 2,000MW of additional, daily balanced energy storage within the existing grid earlier this year. The project will see the installation of a VRFB with peak power of 120 kW and peak energy of 450 kWh.

The project will allow Eskom to test the VRFB and its performance and applications under numerous simulations and help build the business case for battery energy storage for Eskom. Bushveld Energy is also performing the project integration to the RT&D’s existing micro-grid.

Since the year end, work has continued on this project and manufacturing of the Direct Current (“DC”) portion of the VRFB has been completed with factory acceptance gained in April 2018. Site preparation work has commenced at the Eskom site, which has included earthworks and cabling. Two technicians from South Africa have also been appointed to perform the installation and maintenance on the Eskom project. Technicians were trained at UET, in April 2018. This will give Bushveld Energy the capability to install and maintain future VRFB installations in South Africa and regionally. The entire system is still on track to be delivered towards the end of the second quarter of 2018.

Electrolyte facility

A key part of Bushveld Energy’s strategy is the creation of an electrolyte production facility which Bushveld Energy is looking to establish with the IDC. Post year end, an international chemicals company that has already designed and built a vanadium electrolyte production plant with multiple megalitre annual capacity, was engaged by Bushveld Energy. The scope of the engagement at this stage includes independent verification and improvement of the existing process flow and plant design to cover both the process at Vametco and that of the greenfield facility in the East London Industrial Development Zone (“EL IDZ”). Greater certainty of the cost estimate for the dual-located processing assets, as well as joint work with Bushveld Energy and Bushveld Vametco to expand Vametco’s current laboratory capabilities to include testing of electrolyte in-house and production of batch, single-acid vanadium electrolyte as samples to prospective VRFB customers. This stage also includes the preparation of the project for the Engineering, Procurement and Construction (“EPC”) phase, which is planned for the third quarter of 2018 as well as tendered for environmental assessment that needs to be performed at both Vametco and EL IDZ.

Bushveld Energy Strategy

We see 2018 as a transformational year for Bushveld Energy. Development work to date is expected to yield results in the form of:

1) Proving the Company’s capabilities and securing its position as a developer and integrator of utility scale energy storage projects by delivering its initial projects and securing large scale energy storage mandates in Africa;

2) Positioning itself as a key electrolyte supplier, by supporting the global industry through the low cost production of electrolyte while securing offtake agreements; and

3) Securing additional strategic relationships with downstream stakeholders in the global vanadium battery supply chain and electrical power developers and producers operating in Africa

With these developments, the company will be in a position to outline its business model, cash flow capabilities and valuation contribution within Bushveld Minerals.

Lemur Holdings

The addition of a power component to Lemur’s JORC compliant and resource of approximately 136 million tonnes supports Lemur’s plans to unlock the value of this coal asset in Madagascar, while simultaneously securing a reliable electricity offtake backed by a government entity.

The Company was also delighted to appoint Prince Nyati as CEO of Lemur during the year. Prince has extensive experience in the international energy and mining sector and the team look forward to working with him to deliver Lemur’s strategy.

Excellent progress was made during the year at Lemur. Key among these was the execution of a binding 30-year Power Purchase Agreement (PPA) in November 2017 between Lemur’s Madagascar subsidiary, Imaloto Power Project SARL and state-owned utility, JIRAMA.

Prior to this development, in March 2017, Lemur signed a technical cooperation agreement with Sinohydro Corporation Limited (“Sinohydro”), a subsidiary of Power China, to develop the power project and also to look at funding options. Sinohydro is also completing the bankable feasibility study (“BFS”) under the same agreement.

In October 2017, Lemur appointed an owner’s Engineer, together with other technical, environmental and legal advisors to support the development phase of the project. During the reporting period, Lemur conducted the load demand and transmission routing study to understand the load demand in the catchment area and to align the design and phasing of the power plant capacity in the catchment area. These studies are critical to concluding the BFS on the project.

Post year end, Lemur has, through Imaloto Power Project SARL, executed a binding 30 year concession Agreement with the Government of the Republic of Madagascar, represented by the Ministry of Energy and Hydrocarbons for the approval to develop, construct, operate and maintain the Imaloto Power Project in Madagascar.

With regard to government approvals and regulatory compliance, it is important to note that in addition to the concession, Lemur also started the Social, Environmental and Impact Assessment (SEIA) post year end.

Lemur 2018 priorities

2018 promises to be another strong year for Lemur with a number of key milestones that the Company is looking to deliver. These include:

· Concluding the SEIA Study;

· Pursuing further funding and credit enhancement options for the Project, which has already been initiated;

· Securing additional power offtakes in addition to the current demand from JIRAMA;

· Seeking to conclude coal offtakes with third parties. It is important to note that the coal mine is viable with only supplying coal to the Power Project. Notwithstanding, supplying coal to third parties provides early cashflows prior to commissioning of the power plant; and

· Further exploring strategic partnerships for the Project.

Lemur is well placed to achieve these milestones and the Company is confident that the projected Power Project will be commissioned in 2021.

Financial Report

The most significant transaction during the year was the acquisition of Vametco, which provides Bushveld with a strong cash generating asset. In 2017 Vametco generated ZAR 1,052 million in Revenue and ZAR 318 million in EBITDA. As the acquisition of Vametco was completed on 21 December 2017, resulting on Bushveld Minerals having an effective 59.1 per cent economic interest in Vametco, the reported Bushveld Minerals results reflect Vametco’s consolidated performance only from 21 December 2017.

Corporate Social Responsibility

Corporate Social Responsibility (CSR) is a priority for Bushveld Minerals. We are proud of the Company’s achievements and strive to: 1) create value in the communities in which it operates; 2) maintain safe operations; and 3) minimise social and environmental impact. Through our programmes with the communities we have developed trusting relationships and seek to prioritise the health and safety of our employees and host communities who work with us. We have made significant progress in 2017 and we will continue to build on this success. More information can be found in the CSR section of this report.

Black Economic Empowerment partner

During the year, 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, ensuring the BEE partner at Vametco Holdings is a partner of choice aligned with Bushveld Minerals’ vanadium strategy and focus. The Jaxson transaction took place alongside Bushveld Vametco Limited’s acquisition of a 78.8 per cent interest in Strategic Minerals Corporation.

Bushveld Minerals’ post year end events

In March 2018, the Company successfully raised US$22.2 million (£15.7 million) (before expenses) by way of an oversubscribed ordinary shares placing. The planned use of proceeds of the placing was: redemption of the outstanding Atlas Capital convertible bond; simplifying Bushveld’s organisational and corporate structure; and supporting Bushveld’s vanadium expansion programme.

In September 2017 the Company agreed to issue up to £8 million of unsecured convertible bonds to the UK based fund Atlas Capital Markets Limited, and its New York based joint venture company, Atlas Special Opportunities Limited. The convertible bonds were issued into two tranches of £4,500,000 issued in September 2017 and £3,500,000 issued in December 2017. In June 2018, the Company, fully redeemed the outstanding Atlas convertible bonds.

Following the demerger of Greenhills Resources Limited, Bushveld Minerals retained a 17.48 per cent shareholding in AIM-listed AfriTin Mining Limited from the 17th of November 2017. Post year end, on 20 June 2018, AfriTin successfully completed a private placement of new shares, with the result that Bushveld Minerals interest was diluted from 17.48 percent to 10.04 percent. Since Bushveld Minerals does not exercise significant influence over AfriTin, the investment has since been accounted for as a financial asset available for sale.


Having completed the transformational acquisition of Vametco, we look forward to the year ahead with added confidence as we continue to diligently execute the strategy that we have articulated across all of our platforms. The transformation to a producer with healthy cash flows, while very satisfying, is only a step in our journey to build one of the most significant lowest cost vertically integrated vanadium companies in the world. There is much work ahead and I am very confident that we have the right asset base, the right strategy and the best team to deliver it.

I would like to take this opportunity to thank everyone that has played a crucial role during a year that has been as challenging as it has been rewarding. This includes the outstanding management team for its diligence, the Board of Directors for its continual support and counsel, the local communities in the areas in which we operate for their partnership which we treasure and our advisers for their expert guidance. I look forward with anticipation to reporting this time next year on our continuing progress.

The story of Bushveld Minerals is not yet half told.

Fortune Mojapelo

Chief Executive Officer

Retrospective Compensation Scheme

In June 2016, the Board of Bushveld Minerals formulated a policy to compensate directors and key employees (“Eligible Recipients”) for historic sub-market salary shortfalls and bonuses that had accrued since the inception of the Company. As Bushveld Minerals was in the early stages of its growth cycle and cash was heavily constrained, it was proposed that Eligible Recipients would be given the choice either to receive retrospective compensation via a one-off lump sum cash payment or through proposed share awards. The Board subsequently extended the proposal to compensate certain advisors in lieu of cash consultancy fees to protect the Company’s cash balances during its growth phase.

A number of Eligible Recipients chose to receive shares, thereby aligning their interests with those of the shareholders of the Company, easing pressure on Bushveld’s cash flow and contributing to the growth of the Company.

Since the formulation of the policy, the Company has often been in possession of inside information and so been unable to compensate the Eligible Recipients with share equity in Bushveld Minerals as intended. In the Company’s AIM admission document published on 30 November 2017, the Company indicated its intention to issue up to 24,847,310 new ordinary shares to Eligible Recipients, on the recommendation of its then constituted remuneration committee. The total value of the proposed share award on 29 November 2017, (based on the closing mid-market price of ordinary shares on the last Business Day before the publication of the Admission Document) was c.£2.0 million.

The Company had intended to use part of the authority granted by shareholders on 20 December 2017 to issue ordinary shares to Eligible Recipients however it has not been able to do so. Given that none of the ordinary shares referenced above have been issued since the 2016 award, the cost of servicing the scheme has increased significantly following the material increase in the Company’s share price in recent months. Nevertheless, it is to be noted that while the cost of servicing these share allocations has increased by approximately 10 times, the market capitalization of the company has increased by approximately 16 times from the 2016 period.

In this context the Remuneration Committee has made recommendations and the Board has approved the following retrospective compensation awards:

· A total of ZAR 4,332,584 (GBP 241,000) was paid in once off bonuses as Retrospective Employee Compensation;

· A total of 2,741,310 ordinary shares should be awarded to employees who opted to receive shares in lieu of cash bonus payments; and

· A total of 1,541,000 ordinary shares should be awarded to advisors and consultants as part of the compensation agreed in lieu of professional and advisory fees.

The Company also proposes issuing restricted ordinary share awards to settle historic compensation shortfalls for Executive Directors, Non-Executive Directors and a director of Bushveld Vametco, which are subject to shareholder approval, as follows (Fortune Mojapelo – 7,000,000 Ordinary Shares; Anthony Viljoen – 7,000,000 Ordinary Shares, Bill Chipane, Director of Bushveld Vametco – 2,500,000 Ordinary Shares; Ian Watson, Non-Executive Chairman – 3,015,000 Ordinary Shares, Jeremy Friedlander, Non-Executive Director – 1,050,000 Ordinary Shares).

Fortune Mojapelo, Anthony Viljoen, Ian Watson, Jeremy Friedlander as directors of the Company and Bill Chipane as a director of Bushveld Vametco are each regarded as a related party as defined by the AIM Rules for Companies. The conditional issue of shares to these parties is therefore deemed to be a related party transaction for the purposes of the AIM Rules. Michael Kirkwood and Geoff Sproule, being the independent directors, consider, having consulted the Company’s Nominated Adviser, SP Angel Corporate Finance LLP, that the terms of the related party transaction are fair and reasonable insofar as the shareholders of the Company are concerned.

Shareholders should note that the retrospective compensation and share awards referenced above are in full and final settlement of all compensation shortfalls for prior years, including the current reporting period. They are also subject to a minimum restricted hold period of 12 months except for limited circumstances including meeting any tax liabilities resulting from the share award.

The aggregate share awards relating to retrospective compensation represent approximately 2.5% dilution of existing shareholder interests



We have audited the financial statements of Bushveld Mineral’s Limited and its subsidiaries (the ‘group’) for the period ended 31 December 2017 which comprise of the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Statement of Changes in Equity, Consolidated Statement of Cash Flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

In our opinion:

· give a true and fair view of the state of the group’s affairs as at 31 December 2017 and of the group’s loss for the period then ended;

· are in accordance with IFRSs as adopted by the European Union; and

· comply with the requirements of The Companies (Guernsey) Law, 2008.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

· the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

· the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the group’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Acquisition of controlling interest in Bushveld Vametco Limited

Accounting for the acquisition of Bushveld Vametco Limited requires management to make significant judgements on the fair value of consideration and the fair value of assets and liabilities acquired. The acquisition also resulted in a significant increase in the reported amounts of assets and liabilities in the Statement of Financial Position. As a result, the acquisition of Bushveld Vametco Limited was determined to be a key audit matter.

Our work included:

· Consideration of the completeness of assets and liabilities identified on acquisition

· Audit of management’s judgements of the fair values of assets, liabilities and contingent liabilities acquired, including consultation with valuation experts

· Audit of the fair value of the consideration for the acquisition, both current and deferred elements, and that all transaction costs are appropriately treated

· Audit of the disclosures included in the financial statements with reference to IFRS 3

· Review of the work of component auditors in accordance with ISA (UK) 600

The related disclosures are included in note 32 in the financial statements.

Demerger of Greenhills Resources Limited

The demerger of Greenhills Resources Limited was a complex transaction and as a result was determined to be a key audit matter.

Our audit work included:

· Audit of the accounting treatment of the transaction, including recalculation of the figures reported in the income statement and within equity and challenged the inputs and methodology, including management’s assumptions

· Audit of the classification and valuation of the remaining interest in AfriTin shares and checked compliance with accounting and disclosure requirements

· Audit of the disclosures included in the financial statements

The related disclosures are included in note 12 in the financial statements.

Our application of materiality

When establishing our overall audit strategy, we set certain thresholds which help us to determine the nature, timing and extent of our audit procedures and to evaluate the effects of misstatements, both individually and on the financial statements as a whole. We determined a magnitude of uncorrected misstatements that we judge would be material for the financial statements as a whole (FSM), which was calculated at £1,300,000. We agreed with the Audit Committee that we would report to them all unadjusted differences in excess of £50,000, as well as differences below those thresholds that, in our view, warranted reporting on qualitative grounds.

An overview of the scope of our audit

The audit was scoped to ensure that we obtained sufficient and appropriate audit evidence in respect of:

· the significant business operations of the group

· other operations which, irrespective of size, are perceived as carrying a significant level of audit risk whether through susceptibility to fraud, or for other reasons

· the appropriateness of the going concern assumption used in the preparation of the financial statements

The audit was scoped to support our audit opinion on group financial statements of Bushveld Minerals Limited and was based on group materiality and an assessment of risk at group level.

Where components of the group were considered significant, we reviewed component auditor’s work in accordance with ISA (UK) 600. The Bushveld Vametco Holdings Proprietary Limited group was a significant component and we visited the offices of the component auditor in South Africa to review the audit working papers and discuss the audit issues with the component audit team.

Other information

The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where The Companies (Guernsey) Law 2008 requires us to report to you if, in our opinion:

· proper accounting records have not been kept by the parent company; or

· the parent company financial statements are not in agreement with the accounting records; or

· we have failed to obtain all the information and explanations which, to the best of our knowledge and belief, are necessary for the purposes of our audit.

Responsibilities of directors

As explained more fully in the directors’ responsibilities statement set out on page 51, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs (UK), we exercise professional judgment and maintain

professional scepticism throughout the audit. We also:

· Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

· Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the group’s internal control.

· Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

· Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the group to cease to continue as a going concern.

· Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

· Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, including the FRC’s Ethical Standard, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Use of our report

This report is made solely to the company’s members, as a body, in accordance with section 262 of The Companies (Guernsey) Law 2008. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.


Chartered Accountants

25 Farringdon Street

London, EC4A 4AB

28 June 2018

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