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Bushveld Minerals Limited

Bushveld Minerals Limited Q4 and Subsequent Events Operational Update

Bushveld Minerals (LON: BMN), the AIM listed, integrated primary vanadium producer with ownership of high grade vanadium assets in South Africa, has today provided an operational update for its 84%-owned energy subsidiary, Bushveld Energy Limited.

Q4 and Subsequent Events Highlights

· Commissioned the vanadium redox flow battery project with the South African national power utility Eskom, including site acceptance testing. At completion the unit will have a peak output of 450 kWh.

· Initiated development of a net 1 megawatt mini-grid combining solar photovoltaic generation and energy storage using VRFB technology at Vametco.

· Progressed on the development of a vanadium electrolyte production facility, including procurement of two tons of vanadium for conversion into electrolyte.

· Advanced positioning to participate in 1,000MWh of opportunities in Africa by 2020.

Mikhail Nikomarov, CEO of Bushveld Energy, commented:

“Completion of our first energy storage project in Africa, with Eskom, has allowed Bushveld Energy to expand its project development capabilities during the final quarter of 2018. We can approach the development of a more complex project that includes a hybrid of solar generation and VRFB storage technologies with even higher confidence.

“The mini-grid project will demonstrate both the superior technical merits of long duration VRFB systems when paired with renewable energy, while providing a commercial return to its investors. It will also use locally mined and beneficiated vanadium, showing how VRFB energy solutions can create more local value to South Africa than any other storage technology.

“More urgently, with the current load shedding in South Africa this project is a first step in mitigating the single greatest risk to production faced by the mining sector in South Africa. Combined with our ongoing work with the Industrial Development Corporation on electrolyte manufacturing, the Eskom project and now the hybrid mini-grid will demonstrate solutions to South Africa’s energy challenges that can utilise South African sourced materials.”

Operational highlights for Bushveld Energy projects:

Eskom VRFB project

The VRFB battery commissioning with the South African national utility, Eskom recommenced in November 2018. The VRFB, supplied by UniEnergy Technologies (“UET”), passed a series of manufacturer and Eskom site acceptance tests, during January and February 2019. Subsequent to that, the manufacturer recommended a set of upgrades to the VRFB, at its own cost. These are based on field experience from other operating sites gained in the time since the battery was originally ordered and they will further improve the reliability of the battery going forward. The upgrades are currently in progress. At completion the unit will have a peak output of 450 kWh. The system is co-owned by Bushveld Energy and the Industrial Development Corporation (“IDC”).

Mini-grid project

Bushveld Energy has initiated the development of, a mini-grid project at the Vametco mining and processing facility in South Africa. The new mini-grid will be able to deliver up to 1MW of power to Vametco, the largest size permittable without a generation licence under current regulations.

The mini-grid will consist of solar PV generation paired with a 1MW / 4MWh VRFB and will feed electricity directly into the internal distribution network of the mine. The project is structured on an unsubsidised, commercial basis with project finance, showcasing the commercial viability of both renewable energy and energy storage technologies.

The project will provide significant benefits to the mine, including:

· Reducing overall demand from the South African power grid during the day time and peak periods in the mornings and evenings. The benefit to the mine is a reduction in its electricity tariffs due to lower consumption at the most expensive times of the day. The benefit to the South African power system will be lower demand during times when the power system is most constrained. VRFB technology is ideally suited for such applications, as it will be cycled two times per day to meet both the multi-hour morning and evening peaks of South Africa’s power system;

· By using long duration VRFB technology, additional solar energy can be generated and stored during the day for discharge after sundown; and

· Reducing the mine’s reliance on grid power and increasing its ability in the future to self-generate during load shedding or other instances of grid interruptions.

While the mini-grid will supply at most eight percent 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, which is unmatched in its ability to deliver long-duration storage and cycle multiple times per day. The project could be scaled up further to provide a larger amount of energy in future. It could also be replicated at other grid-connected sites. The design can also be used at off-grid sites to replace more expensive and less environmentally friendly thermal generation.

Similar to the structure of the projects covering the electrolyte production facility and the Eskom VRFB, Bushveld Energy will continue using its cooperation model in developing and delivering this project. Cooperating partners will include project development and investment, project finance and engineering, procurement, construction and integration.

Electrolyte production facility

The development of the process to convert Bushveld-mined vanadium into electrolyte and design the production facility advanced in Q4 2018. After promising pilot results at laboratory scale, Bushveld Energy procured two tons of vanadium for conversion into vanadium electrolyte. The scaled-up conversion process is currently being executed. If proven successful, samples from the produced electrolyte will be provided to battery companies for suitability assessment. There is significant expressed interest from VRFB manufacturers for vanadium electrolyte and appetite to add long duration energy storage to power systems and renewable energy projects in Africa overall. This suggests that there is sufficient market demand for vanadium electrolyte to support the installation of a 200MWh capacity facility in South Africa. The electrolyte production facility is being co-developed by Bushveld Energy and the IDC.

Large energy storage opportunities in Africa

While most attention by energy storage researchers, suppliers and funders has centred on markets in Australia, East Asia, Europe and North America, since its inception Bushveld Energy has maintained that Africa offers potential to meet or exceed the market opportunities of those geographies in the near term. Our expectation of 1,000MWh of annual opportunities by 2020 that befit the technical advantages of VRFB technology, including cost effectiveness in long-duration energy storage requirements, ability to cycle without degradation for over 20 years, and the advantage of having more local content, especially for South African customers. Two specific factors supporting this are:

· The World Bank Group (“WBG”) committed US$1 billion for Battery Storage to accelerate investments in battery storage for energy systems in low and middle-income countries. This is expected to mobilise an additional US$4 billion in concessional climate financing and public and private investments. The program is expected to help these countries ramp up their use of renewables – particularly wind and solar power – improve energy security, increase grid stability and expand access to electricity. The programme aims to finance 17.5GWh of battery storage by 2025;

· South Africa’s draft 2018 Integrated Resource Plan (the country’s electricity plan) has massive opportunities for battery energy storage. This includes 15,000MW of new renewable electricity generation by 2040; 9,000MW in peaking generation capacity with provision for alternative technologies (such as battery energy storage) to participate; and a new allocation of an additional 200MW per annum for small scale embedded generation that can include storage. In addition, the South African Renewable Energy Independent Power Producer (“REIPP”) Procurement Programme has been restarted to continue to add renewable energy to the grid, creating opportunities for long duration battery storage;

Bushveld Energy is well-positioned in terms of capabilities, market knowledge and geography to take advantage of these massive opportunities in the region. For example, nearly 40 per cent of WBG funding historically has gone to sub-Saharan Africa, suggesting that a similar amount of the battery energy storage programme may be deployed there. The South African state-owned electricity utility, Eskom is preparing to roll-out 1,400MWh of battery energy this year and complete it by 2022, in an effort to improve the performance of the power system and integrate more renewable energy. More recently, the decreasing performance of the South African power system and recent return of “load shedding” or power rationing is creating significant demand from electricity consumers for self-supply of electricity, including large amounts of storage.

Vametco Mineral Resource Estimate update

The Vametco Mineral Resource Estimate is now expected by 15 April 2019.