Bushveld Q3 2022 And 9M 2022 Operational Update

Bushveld Minerals Limited (AIM: BMN), the integrated primary vanadium producer and energy storage solutions provider (“Bushveld”), today provides an operational update for the three months and nine months ending 30 September 2022.

Group highlights

·    Production of 2,657 mtV for 9M 2022 (9M 2021: 2,629 mtV).

·    Production of 1,016 mtV for Q3 2022 (Q2 2022: 668 mtV) supported by Kiln 3 improved performance.

·    Weighted average production cash cost (C1) of US$28.9/kgV for 9M 2022 (9M 2021: US$25.80/kgV).

·    Weighted average production cash cost (C1) of US$29.3/kgV for Q3 2022 (Q2 2022: US$31.0/kgV.)

2022 Group guidance

·    Production guidance of 3,900 mtV – 4,100 mtV maintained.

·    (C1) Production cash cost guidance at each asset is maintained.

·    On track to achieve an annualised steady state production run rate of 5,000 mtVp.a. – 5,400 mtVp.a. by the end of 2022..

Fortune Mojapelo, CEO of Bushveld Minerals Limited, commented:

“I am pleased to report a solid production update for the quarter to end-September, reflecting continued stability at Vametco and further ramp-up at Vanchem’s Kiln 3. Despite ongoing power supply issues, the ramp-up at Kiln 3 has seen monthly production more than double from July’s production. I am pleased to report that as a result of Kiln 3, total production at Vanchem has increased by 83% compared to the previous quarter.

This year, South Africa has experienced unprecedented levels of loadshedding whereby the state utility temporarily turns off the electricity to an area due to a supply shortage. Q3 2022 was notably a severe period of loadshedding since the onset of the energy crises in 2007, with 75 events totalling to 218 hours of load shedding and, in turn, lost or significantly curtailed production hours. Calendar 2022 is proving to be the worst year in the last 5 and September was so far the worst month.

The near-term prognosis from Eskom does not indicate significant improvement and at Vanchem, where we are primarily affected, we will continue to use diesel generators during loadshedding periods. Engagements with the local municipality to explore ways to mitigate the impacts are ongoing. In addition, we are exploring renewable self-generation options to supplement power requirements, similar to the mini-grid project we are constructing at Vametco.

The elevated inflationary environment globally continues to put pressure on costs, which we expect to be partially mitigated by the increase in production throughput rates, our continued efforts on cost reduction and the benefit of a weaker ZAR.

Despite these challenges, we remain on track to achieve our annualised steady state production target by the end of 2022, as well as our cost guidance for each asset.”

BUSHVELD VANADIUM

1.     Based on provisional, unaudited figures.

2.     mtV = metric tonnes of vanadium.

3.     Reported as final sales to customers.

VAMETCO

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

1.     Based on provisional, unaudited figures. Bushveld’s net attributable interest of the above figures is approximately 74%. Production cash cost is based on vanadium produced.

2.     mtV = metric tonnes of vanadium.

3.     Excludes depreciation, royalties and selling, general & administrative and social expenses. Production cash cost is based on vanadium produced. Production cash cost (C1) measure does not have any standardized meaning prescribed by IFRS and differs from measures determined in accordance with IFRS. This measure is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. This measure is not necessarily indicative of net earnings or cash flow from operating activities as determined under IFRS.

Production

·      9M 2022 production of 1,892 mtV (9M 2021: 1,753 mtV). The increase is supported by continued operational performance and stability.

–     Q3 2022 production of 666 mtV (Q2 2022: 477 mtV). The annual planned maintenance shutdown was conducted in Q2 2022.

Costs

·      9M 2022 production cash cost (C1) of US$24.8/kgV (9M 2021: US$24.4/kgV). Inflationary pressures resulted in higher raw materials costs and energy costs which were partially offset by a weaker ZAR:USD exchange rate.

–     Q3 2022 production cash cost (C1) of US$26.9/kgV (Q2 2022: US$24.4/kgV). The increase is attributable to the greater use of raw materials during the quarter.

·      Costs are expected to normalise through the rest of the year, with 2022 production cash costs expected to be within guidance as we keep implementing our cost containment initiatives but remain dependant on inflationary pressures not increasing even further.

2022 Guidance

·      On track to meet full-year production guidance of 2,550 mtV – 2,650 mtV.

·      On target to meet production cash cost (C1) guidance of US$22.7/kgV – US$23.5/kgV (ZAR346.9/kgV and ZAR358.7/kgV).

VANCHEM

Operational highlights for Vanchem¹

1.     Based on provisional, unaudited figures.

2.     mtV = metric tonnes of vanadium

3.     Excludes depreciation, royalties and selling, general & administrative and social expenses. Production cash cost is based on vanadium produced. Production cash cost (C1) measure does not have any standardized meaning prescribed by IFRS and differs from measures determined in accordance with IFRS. This measure is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. This measure is not necessarily indicative of net earnings or cash flow from operating activities as determined under IFRS.

Production

·      9M 2022 production of 765 mtV (9M 2021: 876 mtV). Decrease in production due to lower than anticipated recoveries associated with the Kiln 1 wind-down, electricity load shedding, and a slower than expected ramp-up post commissioning of Kiln 3, as previously mentioned.

·    Q3 2022 production of 350 mtV (Q2 2022: 191 mtV). Higher production volumes, supported by improved performance of Kiln 3, with production of 61 mtV in July, 151 mtV in August and 138 mtV in September.

–     Kiln 3 performance would have been even better if it had not been for electricity load shedding, with September experiencing the highest frequency and severity of load shedding.

Costs

·    9M 2022 production cash cost (C1) of US$39.1/kgV (9M 2021: US$28.7/kgV). Increase in cost due to lower production volumes, higher raw material costs and costs associated with the ramp-up of Kiln 3.

·      Q3 2022 production cash cost (C1) of US33.8/kgV (Q2 2022: US$48.5/kgV). Cost reduction, supported by higher production volumes during the quarter.

·      Costs are expected to normalise through the rest of the year, with 2022 production cash costs expected to be within guidance as we keep implementing our cost containment initiatives but remain dependant on inflationary pressures not increasing even further.

2022 Guidance

·    Production guidance of 1,350 mtV – 1,450 mtV is maintained, supported by Kiln 3 ramping-up as planned, although, severe load shedding poses a risk to Vanchem’s ability to meet guidance.

·    Production cash cost guidance of US$34.9/kgV – US$35.5/kgV (ZAR534/kgV and ZAR542/kgV) maintained.

ESKOM ELECTRICITY LOAD SHEDDING  

The South African energy crisis deepened during Q3 2022. As Eskom, South Africa’s national utility, was forced to implement several load shedding measures during Q3 2022, the power utility imposed up to stage 6 which resulted in 6000 MW of demand being curtailed across South Africa. During this period, Vametco’s operational performance was not affected by these periods of load curtailment and there is no impact on the plant’s production performance.

Unlike Vametco, Vanchem purchases its power through its local electricity distributor, the Emalahleni municipality. The municipality imposes periods of total power loss (and not curtailment) during load shedding, resulting in almost total shutdown of the plant, thereby impacting Vanchem’s operational performance. The plant has generators to power the kiln but not the rest of the plant. The use of generators comes at a significant cost implication due to the current cost of diesel. Vanchem has been actively engaging with the local municipality to implement a load curtailment solution. A bilateral technical team from Vanchem and the municipality is preparing for necessary technical hardware to migrate to the curtailment regime that would signal a marked production improvement for Vanchem. Further to this and in collaboration with the Bushveld Energy team, we are developing battery storage and renewable energy import options to supplement the power requirements of Vanchem.

VANADIUM PRICE AND OUTLOOK

·    9M 2022 ferrovanadium London Metal Bulletin (“LMB”) price of US$41.1/kgV, CRU Ryan’s Note of US$56.5/kgV and Asian Metals of US$34.8/kgV (9M 2021: US$38.2/kgV, US$37.7/kgV and US$36.5/kgV) with USA prices trading at a premium to the rest of the world.

·    Q3 2022 LMB Ferrovanadium prices:  US$33.8/kgV, (Q2 2022: US$43.8/kgV). CRU Ryan’s notes US$50.9/kgV (Q2 2022: US$67.5/kgV) and Asian Metals US$30.4/kgV (Q2 2022: US$33.7/kgV).

·    Sales volumes and markets have been flexed to maximise revenue by optimising sales of Nitro Vanadium into the higher priced North American steel market and increasing premium vanadium chemical sales into aerospace and petroleum / catalyst applications.

·    Demand for Bushveld Mineral’s suite of vanadium products remains strong, and the flexibility afforded by the diverse product mix and wide geographic presence is a significant strength when the current reduction in steel capacity utilisation is considered, allowing emphasis on higher value products and markets. The expectation remains that sales volume will equal production volume.

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