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Bushveld Minerals Limited

Bushveld Minerals Limited another year of incredible progress and growth

Bushveld Minerals Limited (LON: BMN), the AIM listed, integrated primary vanadium producer, with ownership of high-grade assets in South Africa, has today announced its financial results for the year ended 31 December 2018. These results reflect our inaugural full year of consolidated results, reflecting the transition from a junior mining company to producer.

The Annual Report for the year ended 31 December 2018 will be available on the Company’s website later today at the following link: http://www.bushveldminerals.com/financial-reports/

A printed copy of the 2018 Annual Report and Notice of General Meeting will be posted to the Company’s shareholders as per previously elected by 31 May 2018, all other shareholders will receive notification of the publication of the 2018 Annual Report and Notice of General Meeting in accordance with electronic communications. The Annual General Meeting will be held at 18-20 Le Pollet, St Peter Port, Guernsey GY1 1WH at 11 a.m. on Tuesday, 2nd July 2019.

2018 Highlights

Bushveld Minerals

· Raised our effective underlying interest in Vametco from 59.1 per cent to 74.0 per cent in September 2018

· Raised over US$20 m in an equity placing at 10.3 pence per share from experienced mining and UK institutional investors

· The best performing FTSE-AIM Materials stock

· 3rd best performer on the FTSE-AIM All Shares Index

· Revenue of US$192.1 million (2017: US$ 2.8million)

· Adjusted EBITDA (reported as operating profit before depreciation) of US$101 million

· Total cash of US$42 million as at 31 December 2018 (31 December 2017: US$9.7 million) with no debt (31 December 2017: US$7.9 million)

Bushveld Vanadium

· Vametco delivered a solid financial performance in 2018, underpinned by a strong vanadium price environment

· Vametco’s Revenue (Revenue reported net of all sales commissions) and EBITDA for the year ended 31 December 2018 increased by 131% and 353% respectively to US$183.0 million (2017: US$ 79.1 million) and US$108.3 million (2017: US$23.9 million)

· Average Ferrovanadium price up 149% to US$81.2 KgV (2017: US$32.6)

· Vametco annual production down 3.4% to 2,560 mtV (2017: 2,649 mtV) following 37.5 days of stoppages and unexpected operational challenges

· Vametco achieved a safety record of 5,375,848 man-hours without recording a lost time injury and there were no fatalities during the year

Bushveld Energy

· Commissioned the VRFB project with South African national power utility Eskom, including site acceptance testing

· Secured a grant from the USTDA of US$500,000 to support the Eskom project and the energy storage industry in South Africa

· Progressed the development of a 200MWh vanadium electrolyte production facility, including allocating the facility’s site in the East London Industrial Development Zone (“ELIDZ”) and initiating an Environmental Impact Assessment (“EIA”) on site

· Purchased the first 2 mtV from Vametco for conversion into electrolyte using a new production process designed specifically for Vametco’s vanadium feedstock

Chairman’s Statement

It is with great pleasure that I present you the 2018 Annual Report and Financial Statements for what was yet another year of incredible progress and growth for Bushveld Minerals. In early 2016, armed with a viable prefeasibility study on its flagship project, Mokopane, the Company, with a market capitalisation of less than US$25 million, faced a funding requirement of US$300 million to take this project into production. From this funding challenge and convinced of a structural deficit in the vanadium market, the Company embarked on a strategy of targeting brownfield processing facilities it could acquire cheaply and rapidly bring into production.

Thus, began the Company’s accelerated journey from an exploration Company to a meaningful primary vanadium producer, starting with the acquisition in 2017 of a controlling interest in Vametco Alloys, an integrated mining and primary processing plant in Brits, South Africa. In 2018, the Company made significant strides to increase our ownership of Vametco and streamline our corporate structure to allow greater control of the underlying operating asset and its cashflows and to minimise any value leakage during dividend distributions. These efforts saw our shareholding of Vametco increase from 59 per cent shareholding to 74 per cent following the acquisition of Sojitz Noble Alloys Corporation (“Sojitz”) 21.2 per cent interest in Strategic Minerals Corporation, the holding company for Vametco.

This was made possible by the strong support of our existing shareholders and the new investors we welcomed as part of the fundraising earlier in the year.

In pursuit of our stated aim of growing Bushveld Minerals into a leading global vanadium producer and VRFB technology Company, we are pursuing an inward-listing on the main board of the Johannesburg Stock Exchange during the course of 2019. The Bushveld proposition has strong resonance with South Africa from several perspectives: (a) our resource base is based on the world-renowned Bushveld Complex in South Africa, the world’s largest primary vanadium resource base; (b) our vertical integration aligns with the country’s push for in-country beneficiation of its mineral resources; (c) our energy storage proposition with strong local content has a strong proposition for a country whose utilities and government is set to be a big adopter of stationary energy storage and (d) the listing gives us access to significant local capital pools that have an affinity with our story.

It is important, whenever a company issues equity, to make it clear why the funds are being raised and how this will lead to increased shareholder value in future. That has to be followed by the process of effectively deploying this money within a reasonable timeframe. We pride ourselves in efficient deployment of capital.

Our single capital raise of 2018 in March was focussed on redeeming the then existing outstanding convertible bonds, thereby removing any potential share ‘overhang’, simplifying Bushveld Minerals’ organisational and corporate structure to improve its exposure to Vametco’s cashflow, and supporting Bushveld Minerals’ vanadium expansion programme. I am pleased to note that we achieved all these targets before the year ended. Firstly, we redeemed the outstanding convertible bonds. Soon after, we were able to report that the second phase of the three-phase expansion project at Bushveld Vametco had been completed.

Then, in September, we were able to acquire the 21.22 per cent interest in Strategic Minerals Corporation, an intermediate holding company of Vametco, from Sojitz for US$20 million and, in so doing, increased our indirect beneficial interest in Vametco from 59.1 per cent to 75 per cent. We subsequently sold one per cent to our BBBEE partners, leaving us with the maximum allowable ownership stake in the mine, permitted under the recently promulgated South African Mining Charter III, of 74 per cent.

It would be remiss of me not to discuss the decision by the London Stock Exchange to impose a fine related to the timing of the disclosure of certain details of our initial investment in Vametco.

We regret this breach and have learnt valuable lessons from it. In this regard, Bushveld Minerals has undergone key Board and operational changes. Standards of governance, procedures, controls and communication have significantly improved – in line with the Company’s significantly larger operations.

We are committed to reinforcing the Board and Management team and will announce a number of appointments during the course of the coming year.

In 2018, South Africa itself gained new vigour from a series of political changes after years of moribund economic activity. The country’s new president, Cyril Ramaphosa, has shown a resolve to restore an investor-friendly environment. One important aspect of this resolve was shown in the promulgation of Mining Charter III on 27 September 2018, which has brought about much needed regulatory certainty to the mining sector, especially on the ownership requirement for prospecting and mining rights. While there may be ongoing litigations in respect of some aspects of the gazetted mining charter, the charter has received broad acceptance by all critical stakeholders and its current implementation is to be welcomed.

In October, Bushveld was privileged to be invited to speak, and share its capital investment plans, in South Africa at the 2018 South Africa Investment Conference at the Sandton International Convention Centre, hosted by the President and attended by over 1,000 local and international investors. I am pleased to note that the Vanchem transaction and Mokopane project supports the Company’s R2.5 billion commitment stated at the Investment Conference and represents 70 per cent of funding commitments made at the Presidential Investment Summit, less than one year from announcement.

To reflect Bushveld Minerals’ maturity into a producing Company, the Board is aligned with a consistent and disciplined approach to capital allocation to manage the funding of several capital expenditure items in the near and medium-term. In order of priority, the Group’s capital will be allocated to:

· Maintaining existing operations and ensuring maintenance of stable and efficient production across all our operations;

· Supporting a strong balance sheet that is resilient through the vanadium price cycle;

· Investing in the Group’s growth projects, either through organic growth or brownfield acquisitions, to achieve 10,000 mtVp.a. production nameplate capacity and downstream integration in the medium term; and

· Return cash to shareholders.

This framework provides flexibility to support greater value creation for shareholders as it enhances the Company’s ability to invest in growth projects while maintaining a strong balance sheet.

The Company recognises that while the value proposition to shareholders is primarily of a capital growth nature, it will have sufficient cash generating capacity to pay dividends in the future. On this basis the Company’s Board of Directors takes this opportunity to announce the establishment of a dividend policy. The dividend policy reflects Bushveld Minerals’ commitment to return cash to shareholders while prioritising its stated growth strategy. The dividend policy is based on a free cash-flow pay-out ratio. The Board believes this distribution approach is the most suitable for the Company as it takes into account both growth and acquisition capital expenditure. The Board will review the free cash flow generated by the business, the outlook for business conditions and priorities for capital allocation on an annual basis. The Board is not recommending a dividend for the year ended 31 December 2018.

The Board takes a structured and rigorous approach to succession planning. We consider the appropriate Board size, experience and attributes required to effectively govern and manage risk within Bushveld Minerals. During the course of 2019, Geoff Sproule will be stepping down from the Board as Finance Director, and a search for his replacement has begun in earnest. We wish Geoff well in his retirement.

The year 2019 promises to be just as eventful as the previous one. The conditional acquisition of Vanchem is an exciting development for our existing, large resource base, and will add significant tonnage to our near- and medium-term production profile. This acquisition is expected to complete between 31 July 2019 and 31 October 2019.

I would like to thank the management team and the Company’s employees for all their efforts during a year that has catapulted Bushveld Minerals into the league of globally significant mid-tier mining companies. The Board too, has had to deal with a challenging and exciting period of change and I thank them for their advice and availability.

Here’s to another exciting year.

Ian Watson

Non-Executive Chairman

Chief Executive’s Review

I am pleased to present this report on the progress the Company made in 2018. Our progress is measured against the strategy we have outlined, to develop a large, low-cost and vertically integrated vanadium platform, from which our priorities and activities derive.

We began 2018 on an exceptionally strong footing, having just completed the acquisition of a controlling stake in Vametco in December 2017. The acquisition marked a company-defining moment for Bushveld as it marked the transformation of the Company from a minerals explorer to a producer with a platform to build a truly special integrated vanadium company, with healthy cash flow and a robust growth pipeline.

Following the acquisition, the Company moved swiftly to implement several corporate actions designed to consolidate its interest in Vametco further, clean up its balance sheet and simplify the structure. At the same time, we embarked on an expansion programme designed to maximise production at Vametco and further improve its already low costs of production.

On a total shareholder return basis, Bushveld Minerals was the best-performing FTSE-AIM Materials stock and the third-best performer on the FTSE-AIM All Share Index in 2018, with the share price appreciating by more than 350 per cent during the year, outperforming an impressive vanadium price performance. The Company’s performance was recognised in Bushveld Minerals being awarded the best African Mining Company at the Mines & Money Conference London in November 2018.Our share price outperformance occurred against a backdrop of challenging economic conditions in several markets and sectors outside the US, including a US-China trade war, slowing growth in China and other emerging markets (including South Africa) and uncertainty over the UK’s decision to exit from the European Union. The performance of many commodities, with the notable exception of battery minerals, remained lacklustre.

Vanadium price performance picked up from where it left 2017 and continued its upward march reaching a 10 year high of US$127/kgV in November 2018. The general upward move was driven by a structural deficit that has persisted since 2016, even though this was accentuated in late 2018 by temporary factors relating to the anticipated new Chinese rebar standard which came into effect in November 2018, as well as growing substitution of vanadium by niobium. The new Chinese rebar standard is expected to increase China’s vanadium demand by 30 per cent underlying the continued anchor role the steel sector has for vanadium demand.

Meanwhile the growing global adoption of stationary energy storage presents long-term growth opportunities for vanadium and for a company such as Bushveld Minerals. Driving the adoption of stationary energy storage is a confluence of several factors, including the growing share of global energy consumption that is derived from electricity, the move to cleaner renewable forms of energy generation, and the growing need by utilities world-wide to better optimise their generation and transmission infrastructure.

This confluence of factors could not be starker in South Africa. The government is driving an aggressive adoption of renewable energy as it moves away from a centralised, coal-dependent model, incentivising distributed embedded generation by the private sector while its national utility, Eskom, looks to battery energy storage to help it optimise its transmission infrastructure through a 1,400 MWh battery energy storage procurement programme. The World Bank has also announced a US$1 billion programme to support the deployment of 17,500 MWh in battery energy storage in low-to-middle income countries by 2025. Importantly for vanadium, and Bushveld Minerals, in particular, is that a large share of this energy storage opportunity is of a long duration nature, which suits vanadium-based redox flow batteries.

Following years of developing the energy storage business, Bushveld Minerals, is well prepared and positioned for the emerging energy storage opportunities, whilst continuing supply of vanadium into the steel industry on the back of an expanded production platform.

The US$68 million conditional acquisition of Vanchem, announced post year end on 1 May 2019, marks another significant step forward for Bushveld Minerals on the journey to becoming a large, low-cost, vertically integrated vanadium platform. This is aligned to our previously communicated and long-stated strategy to acquire brownfields assets to accelerate development and production from our own extensive resource base. This acquisition is conditional upon regulatory approvals and the cessation of certain commercial arrangements. The transaction is to be completed no sooner than 31 July 2019 and no later than 31 October 2019. Combined with Vametco operating at full capacity, post its Phase 3 expansion, the Company’s portfolio will grow to produce at least 8,400 mtVp.a. taking the Company closer to its target nameplate capacity of 10,000 mtVp.a. in the next three to five years.

The Company continues apace with several capacity development initiatives to assist in effectively managing and sustaining the growth achieved to date and to prepare for the significant growth that still lies ahead.

These initiatives are organized around three key themes:

a) Building organizational capacity – operating model;

b) Building financial capacity; and

c) Building processes & systems.

Bushveld Minerals Financials

Cash generation from operating activities for the year ended 31 December 2018 was positive as a result of a full year’s ownership of the Vametco Operations which generated high sales revenue during 2018 due to positive sales prices. This was, however, offset by additional working capital consumed in trade receivables at the end of the year.

The investing activities of the business resulted in an outflow, with the majority relating to the acquisition of a 21.22 per cent interest in Strategic Minerals Corporation, an intermediate holding company of Vametco Alloys Proprietary Limited, from Sojitz, as well as the additional capex spend on the Vametco Phase 1 & 2 expansion programme. The financing activities had a positive impact on cash as a result of the proceeds from a capital raise and additional shares and warrants which were exercised, which brought the year-end 31 December 2018 cash and cash equivalents balance to US$42 million.

Bushveld Vanadium


Vametco delivered an outstanding financial performance in the 2018 calendar year, underpinned by a strong vanadium price which averaged US$81.2/KgV, an increase of 148.9 per cent over the previous year. Sales revenue and EBITDA for the 2018 financial year increased by 131 per cent and 353 per cent, respectively, to US$183 million and US$108 million.

We are proud that this achievement coincided with Vametco celebrating over five million man-hours worked without a lost-time injury. The last lost-time injury occurred in 2013. We place considerable emphasis on safe mining practices, with zero tolerance for any disregard for safety, health and environmental rules.

Much of the growth of Bushveld Minerals has been mergers and acquisition-driven, and some of these transactions have been executed in phases. Invariably an important part of this growth is integration of the assets within Bushveld Minerals and ensuring the Group is structured optimally at different levels (operational efficiencies, tax efficiencies, et al). The Company’s corporate restructuring has been underway since 2017 and is aimed at simplifying corporate ownership and minimising value leakage. This process has to date included the following:

· Acquiring the Yellow Dragon holding in Bushveld Vametco Limited (“BVL”), thereby increasing Bushveld’s shareholding in BVL to 100 per cent (“YDH Transaction”);

· Acquiring Sojitz’s holding in SMC to increase BVL’s shareholding of SMC to 100 per cent and underlying interest in Vametco to 75 per cent;

· The redemption of Bushveld Vametco Alloys (Pty) Limited (“BVA”) preference shares held by SMC and the payment of all accumulated coupons and dividends thereon;

· The legal restructuring between Bushveld Vametco Holdings (Pty) Limited (“BVH”), the owner of the mining right at Vametco, and BVA, the owner of the production assets at Vameto; and

· The restructuring SMC into a limited liability company (“LLC”) motivated by the need for a simpler organisation with a more efficient tax structure.

The result of the above restructuring exercises is a streamlined corporate structure that will ensure minimal value leakage and positions the Company well for the onset of a dividend policy.

Despite our strong earnings and safety performance, the year was not without the inevitable challenges that come with new ownership of an existing operating mine and processing facility.

In June and September, operations at Vametco were halted due to unprotected strike action, triggered by historic legacy issues and compensation structures that pre-dated Bushveld’s acquisition of Vametco. After several rounds of discussions with the Association of Mineworkers and Construction Union, the representative labour union at Vametco, we were able to reach agreement on these issues. The resulting agreement was a positive outcome for all parties, allowing for resumption of operations while the Company continues its earnest efforts to build towards a sound partnership with all employees. The agreement provided for a settlement of a reward to workers in respect of an employee share ownership participation programme (“ESOP”), which was under negotiation.

Following the resumption of operations, the Company has agreed to a framework for an ESOP structure that will allow employees to participate in the economic performance of Vametco. A detailed agreement is now in negotiations and expected to be concluded during 2019.

In June, we completed the second phase of the three-phase expansion project at Vametco intended to increase annual nameplate capacity to 3,750 mtVp.a. However, operational challenges during ramp-up saw the Company fail to realise these production targets. The diagnostic commissioned by the Company identified several operational shortcomings and recommended a transformation programme designed to drive Vametco’s operational performance towards its nameplate capacity. This programme ultimately aims to improve vanadium feed grade into the plant, key plant availability and throughput. It combines three key elements: a) appointment of a new general manager, Ms Bertina Symonds, and improving the management structure to bring more senior operational leadership to key plant sections; (b) set up of a dedicated transformation office under the focused leadership of William Steinberg, the former Works Manager at Vametco; and (c) implementation of a set of initiatives targeting production bottlenecks and operation gaps identified by the diagnostic.

In addition, a core enabling initiative is the improvement of the overall organisational health at Vametco, which we are confident we will achieve by: (a) building an inclusive and diverse environment; (b) promoting a culture of mutual respect; and (c) having a shared value system that prizes performance and recognises the role and contribution of every stakeholder. We want every employee to begin each day with a sense of purpose and to end the day with a sense of accomplishment.

We commenced the transformation programme and are confident that it will set Vametco on its way to realising its production and cost potential. As a result of this transformation programme, we expect Vametco’s production to improve over the course of the year and reach a steady state production of 3,400 mtvp.a. during the course of 2020. Given the lower production base we began the year at, we anticipate annual production for this year to be in the range of 2,800 mtV to 2,900 mtV, which is nine to 13 per cent above 2018’s production.

We are pleased with the updated Mineral Resource and Ore Reserve which has been declared at Vametco’s Open pit mine following a drilling programme and further validation of historical drilling data. The update has been compiled in accordance with JORC (2012).

The Combined Inferred and Indicated Mineral Resource is reported as 186.7 Mt at an average grade of 1.98 per cent V2O5 in magnetite, with an average magnetite content of 35.0 per cent (in whole rock) for 719,300 tonnes of vanadium, reflecting a 31 per cent increase in Ore Tonnages from the 2017 estimate. This increase is primarily attributed to reporting the Mineral Resource to a maximum depth of 150 meters below the original land surface, versus 120 meters in 2017.

The Ore Reserves in the Probable Category are reported as 48.4 Mt at an average grade of 2.02 per cent V2O5 in magnetite, with an average magnetite content of 28.5 per cent (in whole rock) for 156,300 tonnes of vanadium reflecting an 85 per cent increase in the Ore Tonnages relative to the 2017 estimate. This increase is a result of more mineral resource definition work on the Intermediate and Upper seams.

The improved resource and reserves underpin our production outlook at Vametco and are sufficient to support the growing production profile.

Our priorities at Vametco for 2019 are to:

1) Achieve our production targets and sustainably reduce costs. This will be guided by our strong management team, which has been boosted by the appointment of Bertina Symonds as the new General Manager.

2) Continue to simplify our organisational structure to bring senior management closer to our assets.

3) Execute initiatives identified during the diagnostic review, which has sketched a roadmap for Vametco to achieve steady state production in excess of 4,200 mtVp.a. (approximately 85 per cent of nameplate capacity of 5,000 mtVp.a.).

4) Continue to build on our co-operative partnership with employees and local communities. We are in the process of designing an ESOP to align Vametco’s workforce more closely with its operational targets. In addition, we will be appointing a stakeholder engagement manager and, we have contracted a financial services provider specialising in personal financial planning, provision of unsecured loans and debt consolidation and counselling to help improve the financial wellbeing of our employees.


In 2018, the Company began an exploration programme at Brits, on the farm adjacent to Vametco, over which a prospecting right is held, with the aim of establishing a maiden Mineral Resource Estimate before the middle of 2019. The results of recent drilling on the lower seam indicated a weighted average V2O5 grade of 1.66 per cent in magnetite. While these are marginally lower than the grades at Vametco, they remain among the highest in the world. We are encouraged by these results that support Brits’ potential to be an additional source of feed tonnage for the Vametco plant and, if required, supply concentrate feed to Vanchem.


Mokopane, one of the premier greenfield primary vanadium projects in the world, is a key element of Bushveld’s vanadium strategy. Mokopane has been identified as a primary source of feedstock for Vanchem as a result of its large mineral reserve. The Mokopane-Vanchem model will create a fully-integrated business in a shorter timeline and at lower cost than developing Mokopane as a stand-alone operation. The conditional acquisition of Vanchem also provides product optionality, as Mokopane V2O5 can be toll treated into ferrovanadium at Vanchem. Other options include supplying ore to other primary or secondary producers worldwide. The long-term plan remains to develop Mokopane into a stand-alone, integrated mine and processing plant, producing 5,300 mtVp.a. of >99 per cent purity V2O5 product.

Bushveld Energy

The Bushveld Energy business model is anchored in Bushveld Minerals’ low-cost production platform and smart partnerships along the VRFB value chain. In 2018, we delivered our first VRFB project in South Africa, a battery with peak power of 120kW and 450kWh of peak energy. It passed a series of manufacturer and Eskom site acceptance tests during January and February 2019.

In August, Bushveld Energy and its technical partner for the Eskom project, UniEnergy Technologies (UET) were awarded a grant from the United States Trade and Development Agency to advance testing at Eskom. The facility also supports developing new modelling capabilities to cover the combination – or “stacking” – of multiple benefits from energy storage supplied by one battery.

A key part of Bushveld Energy’s strategy is the creation of an electrolyte production facility under partnership with the Industrial Development Corporation (IDC). Development of this facility advanced in 2018 and included selection of a site for the facility and initiation of the environmental impact assessment for the proposed new plant. After promising pilot results at laboratory scale of the electrolyte production process, Bushveld Energy procured 2 mtV of vanadium feedstock from Bushveld Vametco for conversion into bulk quantities of vanadium electrolyte. The scaled-up conversion process is currently being executed. If proven successful, samples from the electrolyte produced will be provided to battery companies for suitability assessment. In all, sufficient market demand for vanadium electrolyte supports the installation of an initial 200 MWh capacity facility in South Africa. This exciting project remains on track to produce electrolyte in the near term for South African and international markets.

At the beginning of 2019, Bushveld Energy announced development of a net circa 1 MW mini-grid at the Vametco mining and processing facility in South Africa. The mini-grid combines solar PV generation and energy storage using VRFB technology that are co-located at the Vametco mine and processing facility. While the mini-grid will supply, at most, eight per cent of the mine’s energy consumption at any one time, the project will demonstrate the technical and commercial capability of hybrid mini-grids using solar PV and VRFB technology. Bushveld is working together with strategic partners to provide co-investment into the project, bank debt funding and engineering, procurement and construction (“EPC”) services. The project could be scaled up further to provide a larger amount of energy in future. It will also use locally-mined and beneficiated vanadium, showing how VRFB energy solutions can create more local value for South Africa than any other battery storage technology.

In 2019 we plan to build on the strong base we created in 2018 for Bushveld Energy. This will include furthering our VRFB project with Eskom, participating in local tenders for energy storage system supply, developing the solar-VRFB mini-grid at Vametco and refining our vanadium electrolyte rental product. As far as electrolyte supply is concerned, we expect to announce some supply agreements with downstream stakeholders in the VRFB supply chain in the year ahead, while we make further significant progress on the manufacturing plant itself.


Bushveld considers its corporate social responsibility as a strategic imperative that goes beyond compliance. We strive to: 1) create value in the communities in which we operate; 2) maintain safe operations; and 3) minimise our social and environmental impact.

We see local communities as important stakeholders to build partnerships with. For this reason, when we acquired Vametco, out of our own initiative, we established the Peo Matlafatso Trust, a community development trust to house shareholding of up to 12.5 per cent in the Vametco operations. This trust is at the heart of our commitment to local communities and, through it, we envisage playing a community development role targeting the critical areas of education, health care and entrepreneurship and enterprise development.

In addition, since taking ownership of Vametco, we have ensured that we meet our obligations in respect of settlement of any outstanding obligations such as old royalties, surface lease agreements where we pay regular fees to the owners of the land on which we operate, and implementation of all community development initiatives committed to in our social and labour plan.


While the Company has communicated its pivoting to vanadium as its core business; we are pleased with the progress made in advancing the integrated coal mining and power generation project in Madagascar. Since a technical cooperation agreement was signed with Sinohydro Corporation Limited (“Sinohydro”) in 2017, Sinohydro has completed the Bankable Feasibility Study (“BFS”) for both the power plant and the transmission line. With a 30-year Independent Power Producer concession from the government of Madagascar, a 30-year Power Purchase Agreement for an initial 25 MW from JIRAMA, the state-owned utility, and ongoing discussions with various private mining and industrial companies for further potential offtake from the power plant, the project is well positioned to attract appropriate value adding partners as it moves towards financing. I am particularly pleased that we have continued to advance the project in a prudent manner without stretching the Company’s resources. We also welcome the support shown by the Development Bank of Southern Africa, through a US$1m project preparation financing.

Human Capital

The Company’s human capital resource development efforts have been focused on reviewing and re-designing the compensation model to attract and retain top talent as well as developing a new operating model for the Company. In parallel, we undertook a leadership development initiative aimed at crystalising the leadership competencies required by the Company.

Management changes and succession

We are started 2019 with changes in the management team of Vametco, notably with Malcolm Curror stepping down as CEO of Vametco. Malcolm will continue to provide consulting service to Bushveld Minerals. Malcolm has been succeeded by Bertina Symonds who, as Vametco General Manager, combines the roles of CEO and COO. Bertina brings over 20 years of mining and beneficiation experience, most recently as the General Manager of the Nkomati Nickel Mine owned by JSE-listed African Rainbow Minerals Limited.

Lyndon Williams, former COO, has moved to a new role at Bushveld’s Head Office as Group Vanadium Specialist, supporting operational integration and providing technical support to the Group’s product marketing initiatives.

William Steinberg, previously Vametco’s Works Manager, has been appointed as the new Chief Transformational Officer, responsible for driving the operations improvement programme

In April, Hiten Ooka joined us as Group Head of Finance, reporting to the Finance Director. Hiten is responsible for the Group’s financial management capacity, including but not limited to financial reporting, treasury, tax and consolidation.

I also would like to extend my thanks to outgoing Finance Director Geoff Sproule, who will be leaving us soon. He has been a source of strength and leadership for Bushveld Minerals. We wish Geoff well in his retirement. A search for his replacement has commenced and we will look forward to making a new appointment shortly.

Bushveld Minerals: post year-end event

Vanchem acquisition

On 1 May 2019 we announced a business and share purchase agreement with Duferco Vanadium Investment Holdings SA to conditionally acquire the Vanchem businesses in South Africa for US$68 million.

This acquisition of another brownfield operating asset on South Africa’s Bushveld Complex will enable us to cement our position as one of the leading vanadium producers globally and put us well on the path to achieving our 10,000 mtVp.a. production target. It will also allow us to bring the Mokopane project into production quicker and at lower cost.

This highly strategic transaction combines our existing portfolio of high-grade, low-cost primary vanadium resources, including the Mokopane greenfield deposit, with an established production facility. This substantially reduces the capital required to bring Mokopane into production, and in a much shorter timeframe than if we had built a new plant. We consider ourselves the ideal buyer for these businesses and see the timing as opportune, given our sound portfolio of high quality deposits and the strong operating base established at Vametco.

Apart from the benefits generated by adding further brownfield processing capacity to complement the Company’s high-grade deposits, there are several features of Vanchem that make it particularly attractive.

Vanchem not only brings immediate scalable processing capacity, but it also has a three-kiln configuration which provides important flexibility for the Company’s production processes without compromising its cost efficiencies. Furthermore, Vanchem’s attractive suite of vanadium products complements the NitrovanTM produced at Vametco. These include FeV, V2O5, V2O3 and vanadium chemicals. The vanadium chemicals capability will be particularly critical as the Company grows its exposure to the emerging stationary energy storage industry through VRFBs.

This acquisition is core to our growth strategy of becoming a leading, low-cost, vertically integrated producer and our ability to adequately supply the burgeoning energy storage sector.

The immediate next steps are:

a) Completing the Vanchem transaction as soon as possible;

b) Building a sound team to operate Vanchem; and

c) Ensuring that the production ramp-up and cost profile envisaged in the due diligence process is achieved.


2018 marked our first year as a controlling shareholder of Vametco. With a consolidated set of results, the transition from junior miner to established producer is complete. This transition came at an opportune time, with strong and rising vanadium prices that reached a ten year high of US$127/kgV by November 2018 and with Vametco achieving a tremendous result, generating in excess of US$100 million adjusted EBITDA in its first year under the Company’s control. We are mindful, however, that while Vametco generated strong cash flows, operational performance was below expectation. Although we remain one of the lowest cost producers, at 2,560 mtVp.a. we produced 40 per cent less than the potential production capacity of Vametco (albeit with some modest capital spending). The potential to further lower our cost position by maximising throughput is not lost on us and will be a key focus of our future efforts.

Following the refurbishment programme at Vanchem and the expansion programme underway at Vametco, the Company will have created a portfolio of processing assets capable of supplying approximately 10 per cent of the global vanadium market. This was acquired for less than 40 per cent of the estimated US$500 million replacement cost and used cash generated by the same assets for nearly half (~US$100 million) of the cost of creating that capacity.

Once the acquisition of Vanchem is completed, we will have a sizeable production platform with an attractive portfolio of complementary vanadium products, in addition to the flexible production profile of our processing plants. To deliver on the potential of this portfolio, we will focus on disciplined execution, featuring:

· execution of the transformation programme at Vametco to increase production first to 3,400 mtVp.a. and then to 4,200 mtVp.a., following further capital expenditure;

· completion of the Vanchem acquisition and undertaking a refurbishment programme to deliver 4,200 mtVp.a.;

· successful integration of Vanchem into the Bushveld Group to maximise synergies between the Vametco and Vanchem processing plants;

· building an exceptional team of leaders to drive the Company’s future operational performance; and

· successfully executing Bushveld Energy’s strategy to realise several opportunities in front of it, including the mini-grid at Vametco, construction of the electrolyte production plant, successfully launching a vanadium electrolyte rental product, project development of VRFB sites in Africa and securing large mandate opportunities for batteries while continuing our local and global efforts to promote an enabling regulatory environment for VRFBs and storage in general.

I have every confidence in the outstanding and hardworking team that has brought Bushveld Minerals to this stage, and in the expanded team that we are creating to take the Company forward.

We will continue to build strong partnerships with the various stakeholders based on mutual trust. In respect of our workers, we look forward to concluding our ESOP negotiations, laying the foundations for a future of shared responsibility and success of Vametco. In respect of our communities, we look forward to a partnership that goes beyond compliance and is built on a sense of shared ownership (thanks to the shareholding in Vametco that we have established in the interest of the communities).

And to our government in South Africa, we offer a Company deeply committed to growth, to optimising the utilisation of assets and infrastructure already established while pursuing vertical integration and proving that beneficiation has commercial and mutual economic value for us and the country. We are also delighted to be playing our part as meaningful contributors to the social and economic progress of South Africa, through the listing on the JSE later this year, which will allow South African investors access to our compelling story.

Finally, I want to thank all our shareholders who believed and bought into our vision. Delivering attractive returns to them gives me immense satisfaction. To them we owe the platform we have created today.

I have often said that “the story of Bushveld Minerals is not half-told yet.” We have since successfully acquired Vametco and are in the process of acquiring Vanchem. Post the expansion and refurbishment programmes at Vametco and Vanchem, we will have a production platform with an attractive portfolio of vanadium products supplying approximately ten per cent of the global market, while poised to realise our ambition in the energy storage market by playing a leading role along the vanadium redox flow battery value chain. With these achievements, perhaps the story is now half-told. Much remains ahead!

For the opportunity and privilege to continue developing it, I am thankful.

Fortune Mojapelo

CEO, Bushveld Minerals

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