Bushveld Minerals Strong focus at Vametco; growing output and reducing costs

vanadium mining

Bushveld Minerals (LON:BMN), the AIM quoted, integrated primary vanadium producer, with ownership of high grade vanadium assets, today provided an operational update for the 3 months and 12 months ending 31 December 2019, in respect of Bushveld Vanadium and Bushveld Energy, as well as other corporate activities.

Key Highlights                                                                                     

Bushveld Vanadium


·     Record annual production of 2,833 mtV in the form of NitrovanTM achieved in FY2019, in line with guidance of 2,800 mtV to 2,900 mtV; represents an 11 per cent increase relative to 2018 (FY2018: 2,560 mtV).

  • Record quarterly production achieved at Vametco in Q4 2019 of 880 mtV; represents a 32 per cent increase relative to Q4 2018 (Q4 2018: 665 mtV).

·     Achieved FY2019 production cash cost of US$18.10/kgV (ZAR261/kgV), a 5 per cent reduction relative to FY2018 (FY2018: US$19.11/kgV), beating FY2019 guidance of US$18.90/kgV to US$19.50/kgV.  

  • Production cash cost of US$15.2/kgV in Q4 2019, a 20 per cent reduction relative to Q3 2019, supported by higher volumes during the quarter.

·     Generated unaudited underlying EBITDA of US$42.4 million for FY2019 despite a 35 per cent reduction in the average vanadium price received.


·     The acquisition of the Vanchem processing plant (100 per cent interest) was completed in November 2019.

·     Commenced the critical refurbishment programme to meet regulatory standards and improve productivity.

·     Work to finalise the expected capital expenditure plans together with the production ramp-up profile is currently underway. The Company will provide guidance to the market once the assessment is complete.


·      On 29 January 2020 the Department of Mineral Resources and Energy (“DMRE”) in South Africa executed the 30 year mining right in favour of the Company’s subsidiary, Pamish, in respect of the five farms that make up the Mokopane Project: Vliegekraal 783 LR, Vogelstruisfontein 765 LR, Vriesland 781 LR, Schoonoord 786 LR and Bellevue 808 LR.

FY2020 Guidance


·     Expected to produce between 3,000 mtV and 3,200 mtV, a 6 per cent to 13 per cent increase relative to FY2019, with volumes weighted towards H2 2020. 

·      Vametco expected to commence production of Ferrovanadium through Vanchem processing facility.

·     FY2020 production cash cost guidance of between US$17.20/kgV and US$17.70/kgV (ZAR257/kgV and ZAR265/kg), representing a 2 per cent to 5 per cent reduction relative to FY2019.


·     Vanchem expected to produce between 960 mtV and 1,100 mtV of vanadium from stockpiles.

·     Diversification of products expected in FY2020 with Vanchem’s Ferrovanadium and Chemicals production to supplement existing production of NitrovanTM from Vametco.

The Group will be reporting all vanadium production on a metric tonne of vanadium produced.

Bushveld Energy

·     Launched the VRFB Investment Platform (“VIP”) as part of its strategy for partnering with Vanadium Redox Flow Batteries (“VRFB”) companies.

·     As previously reported, two initial investments were made under the VIP, one to support the proposed merger of Avalon Battery Corporation and redT Energy Plc and, as part of a consortium, the acquisition of a minority stake in Enerox GmbH (“Enerox”).

2020 priorities

·     Advance construction of the vanadium electrolyte plant.

·     Implement additional, larger electrolyte rental contracts.

·     Advance VIP and identify further VRFB companies for investment.

·     Prove business case for VRFB deployments, including delivery of the Vametco mini-grid as a funded independent power producer.

·     Submit bids for Battery Energy Storage Systems opportunities as part of South Africa’s Integrated Resource Plan.

Market outlook

·     Vanadium prices have begun to recover from the lows seen in December 2019 of US$22/kgV, with European prices experiencing the strongest rebound relative to the other regions. The London Metal Bulletin (“LMB”) price is currently trading at approximately US$27/kgV1 (2020 Year to date average LMB price of US$24/kgV1). 

·     From a demand perspective, recent data indicates that China has been a net vanadium importer in recent months. This is a result of the increased intensity of vanadium consumption driven by the enforcement of the Rebar standard introduced in November 2018.

·     The supply of vanadium from stone coal production, an important vanadium-bearing resource in China, is expected to continue to reduce as stone coal producers are uneconomical at current price levels. Furthermore, the incentive to substitute vanadium with ferroniobium is significantly diminished at current prices.

·     The supply and demand dynamics point to a positive outlook, supported by reduced supply and increased intensity of use of vanadium in steel from emerging markets, as well as the growing demand for VRFB contributing to increased demand of vanadium.

1.     LMB price as at 24 January 2020.

Bushveld Vanadium

Bushveld has one of the largest, high-grade primary vanadium resource bases in the world. The Company’s vanadium resource base currently consists of three mineral assets, Vametco, Brits and Mokopane, and its processing facilities consist of Vametco and Vanchem which are all situated within the Bushveld Complex in South Africa.


Table 1: Operational highlights for Vametco (on a 100% basis)1

Description UnitQ4 20192019Q4 2019 vsQ3 2019 Q4 2019 vsQ4 2018H2 2019 vsH1 2019FY19 vs FY18
Vanadium (NitrovanTM plus FeV) producedmtV28802,83356.8%32.0%3.6%10.7%
Vanadium soldmtV26732,39211.5%16.6%14.5%-7.0%
Average LMB vanadium price3US$/kgV23.141.6-25.0%-78.6%-52.3%-48.7%
Average CRU RN vanadium price3US$/kgV26.149.2-25.4%-78.0%-55.1%-43.0%
Average Asian Metals price3US$/kgV25.536.8-22.3%-75.4%-34.5%-45.8%
Underlying production cash cost4ZAR/kgV223.4261-20.2%-18.2%-8.6%3.2%
Underlying production cash cost4US$/kgV15.218.1-20.4%-20.6%-11.6%-5.4%
Unaudited Revenue5 6US$’mn/a111.1n/an/a-49.6%-39.4%
Unaudited Underlying EBITDA6US$’mn/a42.4n/an/a-98.3%-60.7%

1.     Based on provisional, unaudited figures. Bushveld’s net attributable interest of the above figures is approximately 74%.

2.     mtV = metric tonnes of vanadium.

3.     The vanadium price is based on the FeV mid average price for the period, published by LMB for sales to Europe, CRU Ryan’s Note (“CRU RN”) for sales to the United States and Asian Metals for sales to Asia. Vametco realised price is based on the prior month’s mid average price.

4.     Excludes depreciation, royalties and selling, general & administrative expenses.

5.     Revenue reported net of sales commission.

6.     The financial figures are based upon unaudited management accounts.

·     Vametco achieved a record annual production of 2,833 mtV (100 per cent basis) in the form of NitrovanTM from magnetite feed only, meeting FY2019 guidance of 2,800 to 2,900 mtV.

  • This is an 11 per cent increase relative to FY2018 (FY2018: 2,560 mtV), reflecting a robust operational performance underpinned by the Transformational Programme, with the full benefits expected to be realised in FY2020.

·     During Q4 2019, Vametco achieved record production of 880 mtV, an increase of 32 per cent relative to Q4 2018 (Q4 2018: 665 mtV), supported by improved operational performance as part of the Transformational Programme.

·     Vametco’s Q4 2019 production increased by 57 per cent relative to Q3 2019 (Q3 2019: 561 mtV), underpinned by the successful completion of the annual maintenance programme during the prior quarter and subsequent improved kiln performance.

·     Vametco beat FY2019 production cash cost guidance of US$18.90/kgV to US$19.50/kgV, achieving FY2019 production cash cost of US$18.10/kgV (ZAR261/kgV).

  • This is a 5 per cent reduction relative to FY2018 (FY2018: US$19.11/kgV), underpinned by a weaker ZAR: USD relative to 2018, as well as higher production volumes and a cost reduction programme which were offset by a higher inflation rate. 

·     During Q4 2019, Vametco achieved a production cash cost of US$15.2/kgV, a reduction of 20 per cent relative to Q3 2019, supported by higher production and cost containment initiatives during the quarter.

·     Vametco generated an unaudited underlying EBITDA of US$42.4 million for FY2019 despite a 35 per cent reduction in the average vanadium price received.

·     Vametco is expected to produce between 3,000 mtV and 3,200 mtV (100 per cent basis) in FY2020, an increase of between 6 per cent and 13 per cent relative to FY2019.

  • Volumes are weighted towards H2 2020 and it is expected to achieve a production run rate of 3,400 mtVp.a. during H2 2020.

·     A 10 day planned maintenance programme is scheduled in Q2 2020. The reduced maintenance period relative to the 22 days in Q3 2019 is a result of Vametco’s improvement in equipment efficiency, reduced downtime and operational stability. 

·     During FY2020, in addition to NitrovanTM, Vametco is expected to commence production of Ferrovanadium through the Vanchem processing facility.

·     Vametco production cash cost guidance for FY2020 of between US$17.20/kgV and US$17.70/kgV (ZAR257/kgV and ZAR265/kg).

·     Vametco sells the majority of its product to the United States, Europe and Asia, with an average delivery period of 8 to 12 weeks to the final customer1. The timing of deliveries that occur on or around half year and year-end impacts the timing and quantum of revenue recognised for commodity sales in each financial period.

·     A JORC compliant Competent Persons Report (“CPR”) for the updated Mineral Reserve and Resource Estimate for Vametco will be published today on the Company’s website.

1. FY2019 Vametco geographic sale split: ~50% the US, ~20% to Europe, ~10% to China and ~20% to the rest of the World.

Other projects underway at Vametco

·    A kiln off-gas project has been initiated to comply with environmental regulatory requirements and further increase kiln feed throughput. Commissioning is planned to be completed during H1 2020.


·     Operations at Vanchem were re-started during Q4 2019 as production had stopped prior to our acquisition on 7 November 2019. Our focus was on safely powering up the operation. A total of 98 mtV, in the form of Ferrovanadium and Vanadium Chemicals, was produced during the first period under Bushveld Minerals’ control.

  • Operations were affected by the power rationing during Q4 2019, however, it did not materially impact Vanchem’s production. The team is exploring possible solutions to mitigate the impact of power rationing.

·     Commenced the critical refurbishment programme to meet regulatory standards and improve productivity.

·     The Company is finalising its plans for the expected capital expenditure and production ramp up profile and will update the market accordingly once the assessment is complete.

·     Expected to produce between 960 mtV and 1,100 mtV of vanadium in FY2020 from stockpiles.

·     The Group continues to refine its plans for Vanchem, and it will provide FY2020 production cash cost guidance in the Q1 2020 Operational update.  


·      On 29 January 2020 the DMRE in South Africa executed the 30 year mining right in favour of the Company’s subsidiary, Pamish, in respect of the five farms that make up the Mokopane Project: Vliegekraal 783 LR, Vogelstruisfontein 765 LR, Vriesland 781 LR, Schoonoord 786 LR and Bellevue 808 LR. The execution of a granted mining right in South Africa means that legal permission is given by the DMRE to proceed with physical mining activities, as defined in the Mining Works Program, and that all other legal requirements, such as rehabilitation guarantees, have been met.

·     A definitive feasibility study (“DFS”) to mine the Main Magnetite Layer and provide a resources and reserves assessment has commenced and will be focussed on Mokopane as the primary feedstock supplier to Vanchem. The DFS is expected to be completed during H2 2020.


·     A JORC compliant CPR for the Maiden Mineral Resource will be published today on the Company’s website. 

Bushveld Energy


·     The Company announced its strategy for partnering with Original Equipment Manufacturers (“OEMs”) of VRFB technology spanning supply of vanadium and electrolyte, deployment of systems in Africa and investment.

·     This included the establishment of a VIP to lead investments in VRFB OEMs with attractive upside potential. Progress on this has been achieved with two initial investments into leading VRFB OEMs:

  • Funding of US$5 million to support the merger of Canada-based Avalon Battery and UK-based redT Energy. The convertible loan will give Bushveld the opportunity to acquire a strategic interest in the merged energy storage company.
  • As part of an investment consortium, the acquisition of an initial 24.9 per cent of Austria-based Enerox from CellCube and initiation of a due diligence process. The intent is for the consortium to acquire 100 per cent of Enerox for €11,000,000 with working capital financing of €1.5 million. The due diligence and transaction are expected to be completed in Q1 2020.
  • In all these investments through the VIP, the Company expects to have significant minority interests without direct operational involvement in the business beyond the supply of vanadium and electrolyte.

Other activities

·     The Company, together with the Industrial Development Corporation, completed the basic design and issued a tender for the Engineering, Procurement and Construction (“EPC”) contract for the vanadium electrolyte manufacturing plant in the East London Industrial Development Zone. Selection of the bidder and tender of the award are expected in Q1 2020.

·      Providing the vanadium electrolyte rental product and deploying the solar plus VRFB mini-grid at Vametco remain priorities for the Company. Both activities continue to advance.

Eskom industrial power rationing

Eskom, South Africa’s national utility, during Q4 2019 implemented industrial power rationing. During this period, Vametco did not experience any periods of total power loss but implemented load curtailment which required a reduction of total power consumption of 12MW to 10MW between the hours of 8am and 6pm each day.

Vametco’s operational bottleneck is not affected by these periods of load curtailment and there is no impact on the plant’s production performance. It is a priority for the management of Vametco to build on the strong relationship with the Eskom regional management and customer relations officer in order to continuously engage on proactive methods to reduce any impact it might have. In doing so, management feels confident that the situation will continue to have no impact at Vametco.

The Company is working with energy policy makers to support initiatives to reverse the downward trajectory of South Africa’s power system. At the same time, the Company is de-risking its operations through its Bushveld Energy subsidiary by increasing its preparedness should the power system continue to deteriorate. This includes the completion of grid connection and geotechnical studies and the commencement of a procurement process for a solar plus energy storage mini grid at the Vametco mine. The project, which will use a VRFB, can be expanded in the future to reduce its dependence on the electric power grid.

The Company is also reviewing the energy needs and self-supply opportunities at its other existing and greenfield sites. The Company believes that there are significant and rapidly growing opportunities for other such projects in South Africa and across the continent.

Fortune Mojapelo, CEO of Bushveld Minerals Limited, commented: 

“The final quarter of 2019 was a very important one for Bushveld. The acquisition of Vanchem was transformational as it gives us the diversification and operational base to achieve our near and medium term growth plans. I am delighted that Bushveld is in the strong position of owning two of the four operating primary processing facilities globally.

Just as important, our improved organisational structure meant we were able to retain our strong focus at Vametco, growing output and reducing costs. Vametco finished 2019 in a solid position, with an 11 per cent production increase, underlying production cash costs down 5 per cent to U$18/kgV, and generating an underlying EBITDA of US$42 million despite the realised price falling 35 per cent year on year. All of this was achieved through the implementation of productivity initiatives identified as part of the Transformational Programme. We expect to see additional benefits realised and improved operational stability at Vametco during the course of 2020.

That said, we are not resting on our laurels and are focused on disciplined cost control across the whole Group to ensure that all operations are run on a sustainable basis in the current price environment.

Elevated production from Vametco, inaugural production from Vanchem and the execution of the Mokopane mining right is to be welcomed, however, one cannot just grow for growth’s sake. We will make sure that we will continue to be conservative in how we invest capital and ensure that any production increase is profitable, especially while the current price environment prevails. In FY2020, we will continue to ensure that Vametco maintains its competitive edge by continuing to innovate, invest for the future and optimise margins, while at the same time providing the team at Vanchem with the resources necessary to replicate Vametco’s achievements. This will allow us to build a business that is resilient throughout the commodity cycle and ready to capture the benefits of a price recovery.

By doing so, we aim to become an even lower cost producer of vanadium, with an increasingly diversified product range, allowing us to see through short term weakness, make decisions with the longer term in mind and provide a stable environment for the development of new downstream demand sources, such as energy storage.

During 2020, we anticipate synergies accruing from both Vanchem and Vametco as we bring the businesses together while we carry on operating in a prudent manner and keep our focus on what we can control: safety, volumes and costs.

Our scalable and low cost production base gives Bushveld a solid platform to implement its vertically integrated business model, through Bushveld Energy, our downstream vanadium-based energy storage business. In 2019, Bushveld Energy made significant progress across all its key areas of focus – advanced the development of electrolyte production capacity, deployment of its electrolyte rental model, development of energy storage mandates and launched the VIP as part of its strategy of developing partnerships for VRFB assembly/manufacturing. Investing in the development and deployment of VRFB technology is a key part of Bushveld’s strategy for two key reasons. Firstly, it will assist to increase the scale of adoption of VRFBs, which will increase demand for vanadium. Secondly, it provides a natural hedge for the Company against vanadium price volatility. Our downstream and upstream targets will grow the Business and generate value for shareholders.

Lastly, we are encouraged to see prices in Europe recovering, which is in line with our view that market fundamentals remain attractive, supported by the increased intensity of use of vanadium in steel, as well as the  growing demand for VRFB which is expected to significantly contribute to increased demand of vanadium.”

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