Bushveld Minerals Limited Bushveld Vanadium Q2 Operational Update (5947Y)

TIDMBMN

RNS Number : 5947Y

Bushveld Minerals Limited

22 August 2018

Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.

22 August 2018

Bushveld Minerals Limited

("Bushveld Minerals" or the "Company")

Bushveld Vanadium Q2 Operational Update

Bushveld Minerals Limited (AIM: BMN), the AIM listed, integrated primary vanadium producer, with ownership of high grade vanadium assets, is pleased to provide an operational update in respect of its Vanadium platform, which consists of Bushveld Vametco Limited ("Vametco"), the Mokopane Project ("Mokopane") and the Brits Vanadium Project ("Brits").

Key Highlights

(Note: Figures shown on a 100% basis, Bushveld's net attributable interest in the following production and financials is approximately 59.1%.)

-- Sales revenue and EBITDA for H1 2018 increased by 139.1% and 429.6% respectively to ZAR 1,050 million (H1 2017: ZAR 439.1 million) and ZAR 521 million (H1 2017: ZAR 98.4 million) compared with H1 2017, supported by higher vanadium prices.

o The Metal Bulletin FeV mid average price for H1 2018 was US$65.5/ KgV, an increase of approximately 150% relative to the H1 2017 average price of US$26.2/ KgV.

-- Phase Two of the Vametco expansion project, comprising the commissioning of the third primary mill and secondary crusher, was successfully completed within budget and on time. This phase of the expansion project increases annualised production capacity to 3,750 mtV, from 3,035 mtV achieved in Phase One, which was completed in Q3 2017. We expect to see gradual increases in output over the course of H2 2018 as the operation ramps-up to the 3,750 mtV rate.

-- Vanadium production for Q2 2018 was 629 mtV in the form of Nitrovan(R) from magnetite concentrate (Q2 2017: 794 mtV), a decrease of approximately 13.9% relative to Q1 2018 (Q1 2018:731 mtV). The production decrease was due to (a) planned kiln maintenance programme, (b) the installation and commissioning of the mill and crusher as part of Phase Two of the expansion, and (c) work stoppages as a result of unprotected industrial action.

o The maintenance programme is part of productivity initiatives and Vametco's continued improvement across the supply chain. These 'de-bottlenecking' activities are planned to increase volume at the roast / leach circuit which will become evident during the course of H2 2018.

o During June 2018, the operation experienced two and a half days of unprotected industrial action, resulting in no production being achieved out of the plant during that period. The matter was fully resolved on the third day of the industrial action and all labour commenced work immediately thereafter.

-- Vanadium production for H1 2018 was thus 1,360 mtV. This is less than the anticipated volumes for this period per the Company guidance. The shortfall was due to: (a) lower than expected vanadium grades in magnetite from run of mine material, (b) lower produced magnetite volumes during the installation and commissioning of the mill and crusher as part of Phase Two of the expansion project (c) production interruptions due to the unprotected industrial action which took place in June 2018 and (d) lower than expected recoveries across the extraction process. During the course of Q3, Vametco experienced further production interruptions due to a protest by members of the local community, in addition to the ramp-up to the annualised production rate of 3,750 mtV being slower than expected.

-- Consequently, Vametco production guidance for the year has been revised downwards to between 2,850 and 3,000 mtV. The upper range would represent a 13% increase in production over 2017.

-- The constraints experienced in H1 2018 are well understood by our management team and are being addressed accordingly. Consequently, the Company expects to see production rates increasing towards the annualised production rate of 3,750mtV in the coming months.

-- The Company has commenced an exploration programme at the Vametco mine to increase geological confidence and grade continuity of the ore mined. This is aimed at upgrading Inferred Mineral Resources to Indicated Mineral Resources.

-- The Company continues its exploration programme at the Brits Project, which has to date shown positive drilling results, with intersections of Lower Seam, Intermediate Seam and Upper Seam intervals similar to mineralisation at Vametco Mine, and vanadium grades in magnetite of 1.54-2.09% V(2) O(5) , similar to grades mined at the Vametco mine. These assay results portray the excellent potential for an eastward extension of the current orebody being mined at Vametco.

-- Through its expansion initiatives at Vametco, as well as targeted brownfield opportunities, Bushveld Minerals remains on track with its strategy to expand production to 5,000 mtV by the end of 2019.

Fortune Mojapelo, CEO of Bushveld Minerals Limited, commented:

"Bushveld Vametco's operating performance during the first six months under Bushveld Minerals control and a new management team has benefitted from a rising vanadium price resulting in significantly higher profit margins relative to the first half of 2017.

"I am pleased to see the completion of Phase Two of the Vametco multi-phased expansion project, which was successfully completed on time and within budget, bringing Vametco's annual production run rate to 3,750 mtV. The slower than expected ramp up to this production capacity has been disappointing contributing to the revised production guidance. Notwithstanding the 2018 production guidance revision, we remain confident that the Company's expansion efforts remain on track to grow Vametco's production capacity to 5,000 mtV per annum to further strengthen our competitive position in a favourable market environment.

"Meanwhile, we are very pleased with the recent positive drilling results at the Brits Vanadium Project, which has shown similar mineralisation to Vametco with vanadium grades in magnetite of 1.54-2.09% V(2) O(5) ."

Bushveld Vametco Limited

Production

-- Sales revenue and EBITDA for H1 2018 increased by 139.1% and 429.6% respectively to ZAR 1,050 million (H1 2017: ZAR 439.1 million) and ZAR 521 million (H1 2017: ZAR 98.4 million) compared with H1 2017, supported by higher vanadium prices.

-- In June 2018 Vametco successfully completed Phase Two of the expansion project. This phase of the expansion project will increase the annual production capacity from 3,035 mtV, achieved in Phase One, to 3,750 mtV, through self-funded capital expenditure of US$2.5 million.

-- Vametco produced 1,360 mtV in the form of Nitrovan(R) from magnetite concentrate during H1 2018 (H1 2017: 1,441 mtV), a decrease of approximately 5.7% relative to H1 2017.

-- Nitrovan(R) production of 629 mtV for Q2 2018, decreased by approximately 13.9% relative to Q1 2018 (Q1 2018: 731 mtV), primarily due to an annual planned kiln maintenance programme, in addition to installation and commissioning of the mill and crusher as part of Phase Two of the expansion, and a two and half days unprotected industrial action during which the plant ceased operations.

o The maintenance programme is part of Vametco's continued improvement across the supply chain and productivity initiatives. These 'de-bottlenecking' activities are planned to increase volume at the roast / leach circuit which will become evident during the course of the second half of the year.

o During the months of June and July 2018, Vametco experienced the following production interruptions, in this the plant ceased operations completely:

-- Two and a half days unprotected industrial action in June, related to historic compensation structures prior to Bushveld's involvement. The industrial action was resolved to both parties' satisfaction and all labour returned to work immediately thereafter; and

-- Four days protest by members of the local community in July 2018, which is part of a widespread action where protesters are targeting several mining operations around Brits. Bushveld Minerals is working with the local community representatives to address the community's grievances and deepen the positive relationship established when the Company took over from the previous mine owners.

-- As a result of the production interruptions during the months of June and July 2018, the slower than expected ramp-up to the operation's expanded capacity of 3,750 mtV and the lower vanadium grades, Vametco production guidance for the year has been revised downwards to between 2,850 and 3,000 mtV. The upper range would represent a 13% increase in production over 2017. The reduced volumes and higher inflation have therefore resulted in a unit cost guidance revision to between ZAR 240/KgV and ZAR 250/KgV.

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

 
 Description                                                     Q2 CY18    Q2 CY18   H1 CY18 
                                Unit      Q2 CY18     H1 CY18         vs         vs        vs 
                                                                 Q1 CY18    Q2 CY17    H1CY17 
 Vanadium (Nitrovan(R) 
  plus FeV) produced          mtV(3)          629       1,360     -13.9%     -20.8%     -5.7% 
                            ---------  ----------  ----------  ---------  ---------  -------- 
 Vanadium sold                mtV(3)          713       1,403      +3.2%      +2.2%     +4.6% 
                            ---------  ----------  ----------  ---------  ---------  -------- 
 Average MB vanadium 
  price(2)                   US$/KgV         69.2        65.5     +11.9%    +156.0%   +150.3% 
                            ---------  ----------  ----------  ---------  ---------  -------- 
 USD/ZAR average exchange 
  rate(4)                    US$:ZAR         12.6        12.3      +5.6%      -4.4%       -7% 

                            ---------  ----------  ----------  ---------  ---------  -------- 
 Revenue                      ZAR'm         623.2       1,050      46.1%     163.5%    139.1% 
                            ---------  ----------  ----------  ---------  ---------  -------- 
 EBITDA                       ZAR'm         331.6         521      75.1%     518.4%    429.6% 
                            ---------  ----------  ----------  ---------  ---------  -------- 
 Production costs(5)         ZAR/kgV       268.18      248.39     +15.9%     +32.1%    +22.4% 
                            ---------  ----------  ----------  ---------  ---------  -------- 
 

1. Based on provisional, unaudited estimates. Bushveld's net attributable interest of the above production and financials is approximately 59.1%.

2. The vanadium price is based on the FeV mid average price for the period, published by Metal Bulletin. Vametco realised price is based on an average one month prior to sale.

   3.     mtV = metric tonnes of vanadium. 
   4.     Source: Bloomberg. The achieved USD/ZAR average exchange rate may vary. 
   5.     Excludes depreciation, royalties, selling, general, & administrative expenses. 

Multi-phased expansion project

-- In 2017, Vametco commenced a three-phased expansion project with the aim of increasing annualised production capacity to more than 5,000 mtV during 2019.

-- Phase One of the expansion plan was successfully completed on time and on budget in the September 2017 quarter, during which Vametco reached an annualised production capacity of 3,035 mtV.

-- Phase Two of the expansion plan was successfully completed on time and on budget in June 2018, which will increase Vametco's production rate to 3,750 mtV.

-- Phase Three of the expansion plan is scheduled to increase Vametco's annualised production capacity to over 5,000 mtV by the end 2019.

-- Completion of the expansion project will enhance Vametco's existing competitive position in a structurally challenged market. In addition, the presence of an integrated platform will allow the development of downstream operations whilst achieving product diversification.

Table 2: Multi-phased expansion project

 
 Project                Investment(1)                Scope             Progress 
 Multiphase expansion         US$0.5m     Increase Vametco       100% completed 
  project - Phase 1                      annual production         in September 
                                         run rate to 3,035                2017. 
                                                      mtV. 
                       --------------  -------------------  ------------------- 
 Multiphase expansion        US$2.5m     Increase Vametco       100% completed 
  project - Phase 2                      annual production        in June 2018. 
                                         run rate to 3,750 
                                         mtV by June 2018. 
                       --------------  -------------------  ------------------- 
 Multiphase expansion          US$15     Increase Vametco           In process 
  project - Phase 3                 m    annual production        of collecting 
                                          capacity to over         the required 
                                          5,000 mtV during        documentation 
                                                     2019.    for environmental 
                                                                     approvals. 
                       --------------  -------------------  ------------------- 
 
   1.     Shown on a 100% basis, Bushveld Minerals effective interest is 59.1%. 

Other projects underway

-- Tailings facility expansion: to maintain deposition capacity for depositing the calcines (which need to be deposited on a H:H liner) as part of ongoing operations will be completed by end of Q3 2018 and deposition commence during Q4 2018.

-- Kiln off-gas project: has been initiated to comply with regulatory requirements and further increase kiln feed throughput. Commissioning planned for end of Q1 2019.

Exploration at Vametco

Following the completion of the initial phase of drill work on the Brits Project, the Company has commenced an exploration programme at Vametco with the aim of upgrading Inferred Mineral Resources to Indicated Mineral Resources. The work is particularly targeting the Upper and Intermediate Seams to increase geological confidence and grade continuity at the mine. During Q2 2018 the Company completed 13 diamond drillholes within the mine boundary, totalling 1,506.35 metres, as per the table below.

Table 3: Vametco Mine Ore Seam Intersections for Boreholes VM001 to VM013

 
              Drillhole                 Total Depth (m)                Targets Intersected 
              VM001                          90.35                           LS, US 
                          -----------------------------  --------------------------------- 
              VM002                          97.86                           LS, US 
                          -----------------------------  --------------------------------- 
              VM003                         120.34                           LS, IS 
                          -----------------------------  --------------------------------- 
              VM004                         117.88                         LS, IS, US 
                          -----------------------------  --------------------------------- 
              VM005                         125.01                         LS, IS, US 
                          -----------------------------  --------------------------------- 
              VM006                         160.78                         LS, IS, US 
                          -----------------------------  --------------------------------- 
              VM007                          75.79                         LS, IS, US 
                          -----------------------------  --------------------------------- 
              VM008                         118.86                           LS, US 
                          -----------------------------  --------------------------------- 
              VM009                         133.94                         LS, IS, US 
                          -----------------------------  --------------------------------- 
              VM010                         146.62                         LS, IS, US 
                          -----------------------------  --------------------------------- 
              VM011                         103.52                           LS, US 
                          -----------------------------  --------------------------------- 
              VM012                         108.36                           LS, US 
                          -----------------------------  --------------------------------- 
              VM013                         107.04                         LS, IS, US 
                          -----------------------------  --------------------------------- 
              Total                         1506.35 
                          -----------------------------  --------------------------------- 
 

LS = Lower Seam, IS = Intermediate Seam, US = Upper Seam

Brits Vanadium Project

The Company continues with the second phase of the exploration programme at the Brits Project, with the aim of delineating a maiden Mineral Resource Estimate at the Brits project. Following completion of the initial phase drilling (drillholes BVL001 to BVL008) during Q1 2018, the second phase drilling commenced in June 2018 with an additional eight diamond drillholes completed thus far and total metres drilled of 1,274.86 metres as at 10 July 2018. The Lower Seam (the primary orebody mined at the adjacent Vametco Mine) has been intersected in all drillholes in the second phase, and the Intermediate Seam has been intersected in BVL011.

Table 4: Brits Vanadium Project Ore Seam Intersections for Boreholes BVL001to BVL016

 
              Drillhole                 Total Depth (m)                Targets Intersected 
              BVL001                         70.76                             LS 
                          -----------------------------  --------------------------------- 
              BVL002                         79.35                             LS 
                          -----------------------------  --------------------------------- 
              BVL003                         77.32                             LS 
                          -----------------------------  --------------------------------- 
              BVL004                         40.35                             LS 
                          -----------------------------  --------------------------------- 
              BVL005                         99.36                           LS, IS 
                          -----------------------------  --------------------------------- 
              BVL006                        173.10                           LS, IS 
                          -----------------------------  --------------------------------- 
              BVL007                        141.44                           LS, IS 
                          -----------------------------  --------------------------------- 
              BVL008                        151.40                         US, IS, LS 
                          -----------------------------  --------------------------------- 
              BVL009                         45.40                             LS 
                          -----------------------------  --------------------------------- 
              BVL010                         33.02                             LS 
                          -----------------------------  --------------------------------- 
              BVL011                        101.62                           LS, IS 

                          -----------------------------  --------------------------------- 
              BVL012                         42.23                             LS 
                          -----------------------------  --------------------------------- 
              BVL013                         72.75                             LS 
                          -----------------------------  --------------------------------- 
              BVL014                         39.86                             LS 
                          -----------------------------  --------------------------------- 
              BVL015                         77.56                           LS, IS 
                          -----------------------------  --------------------------------- 
              BVL016                         29.34                             LS 
                          -----------------------------  --------------------------------- 
              Total                         1274.86 
                          -----------------------------  --------------------------------- 
 

Note Drillholes BVL001 to BVL008 were reported in the Q1 operational update.

LS = Lower Seam, IS = Intermediate Seam, US = Upper Seam

Table 5: Assay results and intersections for Brits Vanadium Project Drilling

 
 Drillhole                    Intersection*       Magnetite       V(2) O(5) % 
                                                          %    (in magnetite) 
                                     4.32-12.91 
 BVL001        LS1                            m       49.11              2.09 
             -------  -------------------------  ----------  ---------------- 
                                  13.31 - 14.70 
 BVL004        LS1                            m       80.08              1.94 
             -------  -------------------------  ----------  ---------------- 
                                  29.00 - 32.32 
 BVL006        US2                            m       34.77              1.75 
             -------  -------------------------  ----------  ---------------- 
                                  34.35 - 41.00 
   US1                                        m       38.40              1.63 
 -------  -------------------------------------  ----------  ---------------- 
                                 98.00 - 100.35 
   IS2                                        m       29.17              1.70 
 -------  -------------------------------------  ----------  ---------------- 
                                 106.00 - 108.5 
   IS1                                        m       30.02              1.68 
 -------  -------------------------------------  ----------  ---------------- 
                                 117.00- 119.00 
   LS8                                        m       36.56              1.64 
 -------  -------------------------------------  ----------  ---------------- 
                                125.60 - 127.00 
   LS7                                        m       41.62              1.65 
 -------  -------------------------------------  ----------  ---------------- 
                                131.85 - 133.10 
   LS6                                        m       57.62              1.66 
 -------  -------------------------------------  ----------  ---------------- 
                                135.00 - 138.00 
   LS5                                        m       44.26              1.70 
 -------  -------------------------------------  ----------  ---------------- 
                                140.20 - 141.10 
   LS4                                        m       53.82              1.66 
 -------  -------------------------------------  ----------  ---------------- 
                                160.00 - 161.75 
   LS3                                        m       46.79              1.54 
 -------  -------------------------------------  ----------  ---------------- 
                                165.00 - 167.73 
   LS2                                        m       39.65              1.79 
 -------  -------------------------------------  ----------  ---------------- 
                                168.15 - 171.36 
   LS1                                        m       65.89              1.78 
 -------  -------------------------------------  ----------  ---------------- 
 

*Note that depths are intersected depths and do not represent true thicknesses

LS = Lower Seam, IS = Intermediate Seam, US = Upper Seam

The sample analysis results in the new intercepts in boreholes BVL001, BVL004 and BVL006 demonstrate the consistent nature in grade and thickness of the Lower Seam (LS), Intermediate Seam (IS) and Upper Seam (US) Layers at the Brits Vanadium Project, which is the eastern strike extension of the orebody currently being mined at Bushveld Vametco Alloys Mine. Boreholes BVL001 and BVL006 have weighted average V(2) O(5) grades in magnetite for the LS is between 1.94% to 2.09% V(2) O(5) %. The weighted average grades in magnetite of the LS, IS and US are 1.70%, 1.69% and 1.67% V(2) O(5) respectively in borehole BVL006. The grade of the LS is marginally lower than that mined at Vametco, but still represents excellent vanadium grades. These new intercepts from the Brits Vanadium project provide evidence of continuity of ore grades and thicknesses similar to the adjacent operating Bushveld Vametco Alloys mine. These assay results portray the excellent potential for an eastward extension of the current orebody being mined at Vametco. Samples for the boreholes BVL002, BVL003, BVL005, BVL007 and BVL008 have been submitted to the laboratory for analysis and currently awaiting results.

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% V2O5 (1.75% V2O5 grades in-concentrate) on which a Pre-Feasibility Study was 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 and expects the New Order Mining Right to be granted shortly. The Company has also been progressing consultations with the local community. As previously discussed, the Company continues to evaluate potential routes to bring the asset into production in the most cost-efficient manner possible. Efforts are also underway to find strategic partners to progress the project.

The intention remains securing the mining right and developing the greenfield project into a vanadium mine and processing plant. For the time being the Company continues to explore means to supply ore from the project to plants in China and / or elsewhere in the world.

Enquiries: [e-mail]

 
Bushveld Minerals                                                 [phone] 
Fortune Mojapelo, Chief Executive 
 Officer 
Chika Edeh, Head of Investor 
 Relations 
 
SP Angel Corporate Finance 
 LLP                                Nominated Adviser & Broker    [phone] 
Ewan Leggat 
Richard Morrison 
 
Alternative Resource Capital        Joint Broker 
Rob Collins                                                       [phone] 
Alex Wood                                                         [phone] 
 
Tavistock                           Financial PR 
Charles Vivian / Gareth Tredway                                   [phone] 
 
Lifa Communications                 Financial PR (South Africa) 
Gabriella von Ille                                                [phone] 
 

ABOUT BUSHVELD MINERALS LIMITED

Bushveld Minerals is a low cost, integrated, primary vanadium producer, with ownership of high grade vanadium assets.

The Company's flagship vanadium platform includes a 59.1 per cent controlling interest in Bushveld Vametco Alloys (Pty) Ltd, a primary vanadium mining and processing company; the Mokopane Vanadium Project and the Brits Vanadium Project.

Bushveld's vision is to become a significant, low cost, integrated primary vanadium producer through owning high grade assets. This incorporates development and promotion of the role of vanadium in the growing global energy storage market through Bushveld Energy, the Company's energy storage solutions provider. Whilst the demand for vanadium remains largely anchored in the steel industry, Bushveld Minerals believes there is strong potential for an imminent and significant global vanadium demand surge from the fast-growing energy storage market, particularly through the use and adoption of Vanadium Redox Flow Batteries.

While the Company's focus is on vanadium operations and the development and promotion of VRFBs, it has additional investments in coal, power and tin.

The coal platform comprises the wholly-owned Imaloto Coal Project, which is being developed as one of Madagascar's leading independent power producers. The Company's tin interests are held through its shareholding in AIM listed AfriTin Mining Limited.

The Company's approach to project development recognises that, whilst attractive project economics are imperative, they are insufficient to secure capital to bring them to account. A clear path to production within a visible timeframe, low capital expenditure requirements and scalability are important factors in ensuring a positive return on investment. This philosophy is core to the Company's strategy in developing projects.

Detailed information on the Company and progress to date can be accessed on the website www.bushveldminerals.com

About Vametco

Vametco is located near Brits on the Western Limb of the Bushveld Complex. The integrated operation comprises a vanadium ore mine and a processing plant that produces Nitrovan(R) , a trademark product sold in major steel markets across the world. The mine lies adjacent to the Brits Vanadium Project, which will in future serve as an alternative source of near surface run of mine (ROM) ore feed to the Vametco plant.

The Vametco mining operation uses open pit bench mining methods to mine a well-defined orebody. The deposit is continuous with limited faulting and dips in a northerly direction at approximately 19 degrees.

ROM ore is fed into a primary, secondary and tertiary crushing circuit, followed by milling and magnetic separation to produce magnetite concentrates. The magnetite concentrates are fed into the extraction process which includes the kiln for roasting followed by leaching and precipitation. Thereafter the precipitated vanadium as ammonium metavanadate is converted to modified vanadium oxide (MVO) in rotary calciners. MVO is fed into the mixplant and finally into the shaft furnaces to produce Nitrovan(R) .

Qualified Person

The technical information in this regulatory announced has been read and approved by Dr Luke Longridge, consulting geologist. Dr Longridge has a PhD in Geology (2012) and over 6 years' experience working on vanadiferous magnetite deposits in the Bushveld Complex. He is a member of the Geological Society of South Africa and is a registered Professional Natural Scientist (Pr Sci.Nat.) in South Africa. Dr Longridge has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined under the JORC Code (2012). Dr Longridge consents to the inclusion in this announcement of the matters based on his information in the form and context in which it appears.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [e-mail] or visit www.rns.com.

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