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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Bushveld Minerals Limited | LSE:BMN | London | Ordinary Share | GG00B4TM3943 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.025 | 4.00% | 0.65 | 0.60 | 0.70 | 0.675 | 0.625 | 0.625 | 38,492,981 | 15:07:56 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Minrls,earths-ground,treated | 151.18M | -38.97M | -0.0166 | -0.39 | 15.23M |
From Apr 2021 to Apr 2024
TIDMBMN
RNS Number : 9828M
Bushveld Minerals Limited
27 September 2021
Market Abuse Regulation ("MAR") Disclosure
This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR.
27 September 2021
Bushveld Minerals Limited
("Bushveld Minerals" "Bushveld" or the "Company")
Unaudited Interim Results for the Six Months ended 30 June 2021
Bushveld Minerals Limited (AIM: BMN), the AIM quoted, integrated primary vanadium producer and energy storage solutions provider with ownership of high-grade assets in South Africa, is pleased to announce its half year unaudited results for the six months ended 30 June 2021.
Highlights
-- Revenue of US$47.0 million a 9 per cent increase relative to H1 2020 (H1 2020: US$43.1 million), supported by an improved average realised price of US$29.24/kgV (H1 2020: US$24.20/kgV), partly offset by lower sales volumes in H1 2021 of 1,608 mtV(1) (H1 2020: 1,765 mtV).
-- Group production in H1 2021 of 1,574 mtV , a 5.2 per cent decrease relative to H1 2020 (H1 2020: 1, 649 mtV) as a result of unplanned stoppages, a 35-day planned maintenance shutdown during Q1 2021 and the unprotected industrial action at Vametco in April 2021.
-- Improved operational performance at Vametco post the maintenance programme and other operational enhancements initiated by the new management, increased Q2 2021 Group production by 28.8 per cent relative to Q1 2021, which combined with the higher production at Vanchem, resulted in Q2 2021 Group production being 13.4 per cent higher than Q2 2020. The operational stability has laid a platform for sustainable growth, lower unit cost expected in H2 2021 will normalise costs for the rest of the year in line with production cash cost (C1) guidance at both plants.
-- EBITDA loss of US$10.8 million (H1 2020: US$1.0 million) primarily due to a stronger ZAR:USD exchange rate on costs in H1 2021 resulting in a negative impact amounting to US$7.3 million.
- The improved operational performance at Vametco in Q2 2021 was not sufficient to offset the challenging start in Q1 2021.
-- Sustaining capital expenditure of US$6.1 million (H1 2020 of US$0.1 million), supporting the recent operational stability.
-- Cash and cash equivalents as at 30 June 2021 of US$31.6 million (December 2020: US$50.5 million).
-- Approximately US$12.7 million was realised from the sale of the investment in Invinity Energy Systems Plc ("Invinity") and the profit on the sale is not included in EBITDA. The profit realised on the original investment of US$5 million was approximately US$7.7 million.
-- Net debt as at 30 June 2021 of US$54.4 million (December 2020: US$33.7 million), including production financing agreement ("PFA") of US$29.3 million .
-- H1 2021 Total Injury Frequency Rate ("TIFR") of 5.17, an improvement of 78 per cent relative to H1 2020 (H1 2020: 23.75) .
-- On track to meet 2021 Group production guidance of between 3,400 mtV and 3,600 mtV and ramping up at Vanchem using the reallocated PFA capital ringfencing, to increase Group production to a steady-state run rate of between 5,000 to 5,400 mtV by the end of 2022. Production growth reduces unit cost and increases profitability.
1: Reported as final sales to customers.
Fortune Mojapelo, CEO of Bushveld Minerals Limited, commented:
"The operational stability and improved production performance achieved in the last two months of the period under review was carried through into the first two months of the second half, which bodes well for reducing unit costs in the remainder of the year. We are confident of maintaining this rhythm, putting us on course to meet our production and cost guidance for the full year.
2021 marks a rebasing for the Company which creates the environment for us to implement the changes required at the operations, which can sustain production and provide the platform for growth. This means investing in maintenance and sustaining capital to achieve stability and support volume increase. As production growth on the back of our operational stability is key to margin expansion and profitability, we are pleased with the uplift of the PFA capital ringfence and the reallocation of the funding to the Vanchem refurbishment and expansion, given Vanchem's operational stability and opportunity to rapidly scale-up production. As a result of using this existing PFA funding for the Vanchem capital expenditure of about US$18 million in the current year and in H1 2022, we remain on target for Group production to increase to a steady state production run rate of between 5,000 mtVp.a. and 5,400 mtVp.a. by the end of 2022. The increase in production will be the biggest contributing factor to a sustainable cost reduction, with Vanchem's unit costs expected to be in line with Vametco, when it more than doubles its current production to 2,600 mtV.
The Upper Seam Project at Vametco came online in September 2021 and will supply Vanchem with a significant proportion of its ore requirement for the next 18 months.
Finally, i t is with deep sadness we learned of the passing of Professor Morris Viljoen in August 2021, a Technical Advisor to Bushveld Minerals and importantly, one of co-founders of VM Investment Company ("VMIC"). VMIC laid the foundation for the establishment of Bushveld Minerals ."
Table 1: Group financial and operational highlights
Hot Features
Premium
In US$ million unless otherwise specified. SIX MONTHSED
--------------------------------------------
June June 30 %
30 2021 2020 change
-------------------------------------------- --------- -------- --------
FINANCIAL HIGHLIGHTS
Revenue 47.0 43.1 9%
EBITDA loss (10.8) (1.0) 980%
Depreciation (8.9) (8.9) -
Operating Loss (19.7) (9.9) 99%
Loss Before Tax (22.7) (10.7) 112%
Basic loss per share (US cents) (1.50) (0.92) 63%
Net cash used in operating activities (13.8) (2.7) 411%
Group average realised price (US$/kgV) 29.24 24.20 21%
Average foreign exchange rate (USD:ZAR) 14.54 16.65 13%
Total income statement cost per unit
sold (excl. depreciation) (US$/kgV) 36.0 25.0 44%
Sustaining Capital (US$/kgV) 3.7 0.1 3,600%
Cost per unit sold (including sustaining
capital) (US$/kgV) 39.7 25.0 59%
--------- --------
OPERATIONAL HIGHLIGHTS
Group Production (mtV) 1,574 1,661 -5%
Group Sales (mtV) 1,608 1,765 -9%
Post period events
-- Successful negotiations with Orion Mine Finance ("Orion") has resulted in the uplift of the PFA capital ringfence with funds being allocated from Vametco to Vanchem.
-- The Company sold its 4.76 per cent shareholding in AIM-listed Afritin Mining Limited and realised a total of approximately US$3.5 million. The proceeds of the sale are being used for general corporate purposes.
-- Whilst production was not impacted by the unrest in South Africa in July, the Group has experienced logistics delays in getting the final product to port in Q3 2021 due to COVID-19 effects on international shipping availability as well as disruptions at local ports. The Group expects to make up any sales shortfall during Q3 and Q4 2021.
Priorities and outlook
-- Targeting a 5,000 - 5,400 mtVp.a. production run rate by the end of 2022, funded through the PFA.
-- Complete Pre-feasibility studies at Vametco and technical studies at Vanchem in Q4 2021 to increase Group production run rate to between 6 ,400 mtVp.a. and 6,800 mtVp.a. in the medium-term.
-- As previously announced, initiate the Group's Cost Savings Programme to cut costs by between US$2.5 million to US$4 million per year from 2022.
Conference call
Bushveld Minerals Chief Executive Officer, Fortune Mojapelo, Finance Director, Tanya Chikanza and Francois Naude, Director of Operations; will host a webcast and conference call at 11:00 UK time (12:00 noon SAST) today to discuss the update with analysts. Participants may join the call by dialling:
Tel: United Kingdom: +44 (0) 330 336 9125; South Africa:
+27 11 844 6054
Pin: 1037894
Link: https://webcasting.brrmedia.co.uk/broadcast/6149c8013ae1ca74490b0e76
A replay of the conference call will be available on the Company's website post the call.
Chief Executive's Report
Dear Shareholders,
The beginning of the first half of 2021 was challenging for Bushveld Minerals with Vametco experiencing operational instabilities. Due to the weak performance at Vametco during the period, we made the decisions to rebase our plans by reducing our production guidance for the year, increasing the investment in maintenance and sustaining capital, in order for our operations to sustainably produce before embarking on volume increase which will be the biggest factor to sustainable cost reduction. I am pleased to report that at the back of these measures we are now seeing improved plant performance as well as consistently stable production levels .
Group production was five per cent lower relative to H1 2020, owing to the unscheduled stoppages during first quarter and prior to the 35-day maintenance shutdown, as well as the unprotected industrial action at Vametco in April. Post the completion of the maintenance work at Vametco, we have seen improved plant performance as well as operational stability since May 2021 on the back of several operational improvements, which include a greater discipline in our proactive maintenance practices, process control from the technical team and people development strategy. The improved operational performance at Vametco in Q2 2021, with production increasing by circa 50 per cent relative to Q1 2021, was not sufficient to make up for the weaker start to the year. Vanchem showed a solid and consistent production level during H1 2021.
We are encouraged by the operational stability, achieved post the completion of the maintenance period, and pleased to state that we are on target to meet our Group production guidance of between 3,400 mtV and 3,600 mtV and cost guidance at the operations.
Overall, revenue for the period of US$47.0 million, was nine per cent higher than a year ago (H1 2020: US$43.0 million), supported by improved average realised price , and partly offset by lower sales volumes.
The negative impact of a stronger ZAR:USD exchange rate on total costs (cost of sales plus other operating and administrative costs excluding depreciation) was US$7.3 million, combined with the reduced sales volumes and increased production costs, resulted in an EBITDA loss of US$10.8 million for the period (H1 2020: US$1.0 million).
The strong ZAR in the period was supported by increased exports from the mining sector driven by the rapid growth in commodity prices, helped by manufacturing figures that were stronger than expected post the reopening of the economy and high interest rates relative to the US. The ZAR is expected to remain at similar levels for rest of the year.
Production growth on the back of our operational stability is key to margin expansion, cost reduction and profitability. Successful negotiations with Orion Mine Finance ("Orion") have resulted in the uplift of the PFA capital ringfence, allowing us to reallocate the PFA funding to the Vanchem refurbishment and expansion, on the back of its stability and rapid opportunity to scale-up production. As a result of using this existing PFA funding for the Vanchem capital expenditure of about US$18 million in the current year and in H1 2022, Group production is expected to increase to a steady state production run rate of between 5,000 mtVp.a. and 5,400 mtVp.a. by the end of 2022.
This specific expansion entails the refurbishment and ramp up of Kiln 3 at Vanchem, which is of a similar scale and capacity to the primary kiln at Vametco and will see Vanchem produce at an annual steady state production run rate 2,600 mtVp.a. while Vametco will be operating at a sustainable production run rate of 2,800 mtVp.a.
In addition, we are on track to complete the pre-feasibility studies at Vametco and the technical studies at Vanchem in Q4 2021. These studies will determine which future projects between Vametco and Vanchem will be prioritised to achieve a Group's steady state production run rate of between 6,400 mtVp.a. and 6,800 mtVp.a. in the medium term. The Group's maintains its long-term target to achieve a steady state production run rate 8,400 mtVp.a.
As previously announced, we are implementing the Group's Cost Savings Programme to cut costs by between US$2.5 million to US$4 million per year from 2022 .
Focusing on our energy business, construction has commenced of the electrolyte manufacturing facility in East London, South Africa, along with our partners, the Industrial Development Corporation. With a targeted initial capacity of 200 MWh of vanadium electrolyte and capacity to scale up to 800 MWh, the electrolyte plant will be the largest publicly announced plant outside of China. The Group continues to sell vanadium products to Vanadium Redox Flow Batteries ("VRFB") Original Equipment Manufacturers and sold 9,000 kg V(2) O(5) to Invinity realising US$0.2 million in revenue. We expect to scale up the vanadium electrolyte rental product with new contracts and we continued to make progress on the Vametco hybrid mini-grid and expect to attain financial close by the end of the year, subsequent to which we will commence construction.
During the period we secured an indirect interest in VRFB manufacturer Cellcube (previously referred to as Enerox GmbH) of 25.25 per cent. As previously reported on the 14 July 2021, a claim form was issued in the English High court by Garnet Commerce Limited ("Garnet") against VRFB Holdings Limited ("VRFB-H") and Enerox Holdings Limited ("EHL"). EHL owns a 100 per cent interest in Enerox GmbH ("Enerox). Garnet's claim form seeks declarations against VRFB-H concerning an alleged breach of the joint venture agreement in relation to EHL, in respect of the indirect investment into EHL through VRFB-H by Mustang Energy Plc, as announced on 27 April 2021. The litigation remains ongoing and VRFB-H intends to robustly defend against the claims. The Company will update the market accordingly of any developments.
Moving on to the vanadium market during H1 2021 the London Metal Bulletin ("LMB") Ferrovanadium price averaged US$33.4/kgV, 30 per cent higher than H1 2020 (H1 2020: US$25.70/kgV). Iron ore prices reached their highest levels, exceeding the US$200/t level during H1 2021 and have since retracted to levels of US$120/t. Roskill expects iron ore prices to decline further towards the end of the year, due to reduced demand in China as a result of restrictions in steel making volumes. Iron ore prices below US$100/t would be a disincentive for vanadium co-producers to blend local vanadium bearing magnetite feedstock with seaborne hematite ores.
The LMB Ferrovanadium price in Europe is US$34.0/kgV, China US$32.5/kgV and the United States US$37.8 per kg/V as at 17 September 2021.
Furthermore, in August 2021, the US Department of Commerce published results on its investigation, under Section 232 of the Trade Expansion Act of 1962, into the effect of imports of vanadium on the national security of the US, stating that the present quantities and circumstances of vanadium imports do not threaten to impair US national security. The outcome is welcomed by the Company as the US market represents a significant share of Bushveld's sales.
Despite the recent softening in the vanadium price we remain confident that the medium to long term market fundamentals continue to support vanadium prices going forward.
Safety and COVID-19
-- The Group recorded a 78 per cent improvement in Total Injury Frequency Rate to 5.17 relative to the corresponding prior period (H1 2020: 23.75), as a result of improved risk assessment and mitigation measures.
-- As at 31 August 2021, the Group had five active COVID-19 cases, and a 96 per cent recovery rate. Sadly, Bushveld reported two COVID-19 related deaths among its employees during the period and we extend our deepest condolences to their families. We continue to prioritise the safety of our employees.
-- In July, we commenced a vaccination programme for both the Vametco and Vanchem employees.
-- In August 2021, the South African government, confirmed that the COVID-19 vaccine roll out had been ramped up to allow registration for the 18 and 34 age group. In September 2021, the country moved to an adjusted level two as a significant decline in new and active COVID-19 infections was noted around the country, which is encouraging news.
Operational performance
Bushveld Vanadium
Unit Q1 2021 Q2 2021 H1 2021 H1 2020 H1 2021
vs H1 2020
% Change
Group production mtV(1) 688 886 1,574 1,661 -5%
--------- -------- ----------------- -------- ---------- ------------
Vametco production mtV(1) 395 593 988 1,226 -19%
--------- -------- ----------------- -------- ---------- ------------
Vanchem production mtV(1) 293 293 586 435 35%
--------- -------- ----------------- -------- ---------- ------------
Vametco C1 cash
cost(2) US$/kgV 26.5 25.8 25.9 17.1 52%
--------- -------- ----------------- -------- ---------- ------------
Vanchem C1 cash
cost(2) US$/kgV 30.7 28.1 29.5 20.2 46%
--------- -------- ----------------- -------- ---------- ------------
Vametco total sustaining
cash cost(3) US$/kgV 39.7 37.6 38.3 23.1 66%
--------- -------- ----------------- -------- ---------- ------------
Vanchem total sustaining
cash cost(3) US$/kgV 42.0 34.2 38.2 26.3 45%
--------- -------- ----------------- -------- ---------- ------------
1. mtV = metric tonnes of vanadium.
2. Excludes depreciation, royalties and selling, general & administrative expenses and cost associated with COVID-19. 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
3. Excludes depreciation, royalties and cost associated with COVID-19. Includes selling, general & administrative expenses and sustaining capital cash spend.
Vametco
-- H1 2021 production of 988 mtV, was 19 per cent lower than H1 2020 (H1 2020: 1,226 mtV), due to unplanned stoppages and the planned 35-day maintenance shutdown undertaken to increase the reliability of critical segments of the plant in Q1 2021 and the unprotected industrial action in April 2021. Performance and stability improved in Q2 2021.
-- H1 2021 production cash cost (C1) of US$25.9/kgV, a 52 per cent increase relative to H1 2020 (H1 2020: US$17.1/kgV), mostly due to lower production volumes (+US$3.8/kgV), a stronger ZAR:USD exchange rate (+US$3.3/kgV) and higher maintenance cost (+US$0.9/kgV) in order to improve operational stability.
- Q2 2021 costs improved by 2.6 per cent in line with the improved operational performance since the maintenance shutdown. Lower unit cost expected in H2 2021 will normalise costs for the rest of the year in line with production cash cost (C1) guidance.
-- H1 2021 total sustaining cash cost of US$38.3/kgV, a 66 per cent increase relative to H1 2020 (H12020: US$23.1/kgV), mostly due the factors mentioned above in addition to an increase in sustaining capital (+US$2.1/kgV).
-- Sustaining capital expenditure of US$3.1 million relative to H1 2020 (H1 2020: US$0.2 million). The increase is in line with expectations as minimum capital was spent in H1 2020 on sustaining capital due to the effects of COVID-19 on the operation, in addition, priority was to complete and commission the Kiln Off-gas system.
-- Post the period end, in July and August, Vametco produced 251 mtV and 260 mtV respectively as a result of continued operational improvements, which include a greater discipline in our proactive maintenance practices, process control from the technical team and people development strategy. Vametco's minimum monthly production run-rate forecast for the rest of the year is maintained at approximately 240 mtV as a result of planned maintenance strategy to enable operational stability.
-- 2021 production guidance maintained to between 2,300 mtV and 2,400 mtV, and production cash cost (C1) of between US$23.70/kgV and US$24.20/kgV (ZAR339/kgV and ZAR345/kgV).
Vanchem
-- H1 2021 production of 586 mtV was 35 per cent higher than H1 2020 production (H1 2020: 435 mtV), underpinned by consistent plant performance.
-- H1 2021 production cash cost (C1) of US$29.5/kgV, a 46 per cent increase relative to H1 2020 (H1 2020: US$20.2/kgV), due to a stronger ZAR:USD exchange rate (+US$3.7/kgV), higher cost of raw materials (+US$3.1/kgV) due to test work performed with different concentrate in order to optimise process parameters, increased maintenance (+US$0.8/kgV) which is in line with the Group expectations and other items (+US$9.2/kgV). This was partly offset by higher volumes (-US$8.9/kgV).
-- H1 2021 t otal sustaining cash cost of US$38.2/kgV, 45 per cent increase relative to H1 2020 (H1 2020: US$26.3/kgV) mostly due to the factors mentioned above in addition to an increase in sustaining capital (+US$5.6/kgV).
-- Sustaining capital expenditure spend of H1 2021: US$2.8 million relative to H1 2020 (H1 2020: US$0.4 million). The increase in sustaining capital is in line with Group expectations as Vanchem was still ramping up in H1 2020.
-- Commissioning of Kiln-3 is now expected in H1 2022, the delay will not impact Vanchem's production run rate target of 2,600 mtVp.a. by the end of 2022. The full production and cost benefits of Kiln-3 will be realised in 2022.
-- Vanchem produced 96 mtV for both months of July and August. Vanchem is expected to maintain its minimum monthly production levels of approximately between 90 mtV to 100 mtV.
-- 2021 production guidance maintained to between 1,100 mtV and 1,200 mtV, production cash cost (C1) of between US$30.3/kgV and US$31.1/kgV (ZAR434/kgV and ZAR444/kgV).
-- Through the reallocation of the PFA capital to Vanchem, capital expenditure of approximately US$18 million is estimated for the remainder of the year and into 2022, for Vanchem to achieve a steady state production run rate of 2,600 mtVp.a by the end of 2022. At a production of 2,600 mtVp.a., unit costs are expected to be in line with Vametco.
-- At Vanchem, the ore stockpile acquired with the plant will deplete at the end of September 2021. The Upper Seam Project at Vametco has come online and will supply Vanchem with a significant proportion of its ore requirement for 18 months and has the ability to supply 34 kt of ore per month. In addition, with an overall Upper Seam resource base of 16 Mt the potential to extend this particular supply beyond the initial 18 months exists and is being investigated accordingly. Furthermore, we have successfully secured third-party ore for Vanchem.
Financial performance
Overview
Group sales fell by nine per cent to 1,608 mtV (H1 2020: 1,765 mtV) due to low production volumes.
Group Unit H1 2021 H1 H1 2021 vs
2020 H1 2020
Sales mtV 1,608 1,765 -9%
------------------ --------- -------- ------ -----------
Average realised
price US$/kgV 29.24 24.20 21%
------------------ --------- -------- ------ -----------
The Group reported revenue of US$47.0 million (H1 2020: US$43.1 million), and an Earnings Before Interest, Tax, Depreciation and Amortisation ("EBITDA") loss of US$10.8 million (H1 2020: EBITDA of loss of US$1 million).
The changes in fair value through other comprehensive income decrease to (US$4.8 million) (H1 2020: US$3.3 million) due to Invinity and Afritin. The investment in Invinity was sold during the period, contributing to approximately US$12.7 million in cash (the profit on the sale is not included in EBITDA). The profit realised on the original investment of US$5 million was approximately US$7.7 million. Afritin shares are marked to market and reflect the appreciation in the market value to US$3.4 million (H1 2020: US$1.7million). The Afritin shares were subsequently sold in August 2021 for US$3.5 million, and the proceeds of sale are being used for general corporate purposes.
The Group cash balance at the end of the period was US$31.6 million, relative to US$50.5 million as at 31 December 2020.
Net debt increased to US$54.4 million relative to December 2020 US$33.7 million due to the decrease in the Group's cash position for the period .
Analysis of results
Income statement summary as adjusted from "statutory" primary statement presentation.
6 months ended 6 months ended
30 June 2021 30 June 2020
===================================
Unaudited Unaudited
===================================
US$ US$
=================================== ============== ==============
Revenue 47,022,135 43,050,652
Cost of sales (excl. depreciation) (43,439,030) (30,231,587)
Other operating and administration
costs (excl. depreciation) (14,376,544) (13,826,387)
=================================== ============== ==============
EBITDA (10,793,439) (1,007,321)
Depreciation (8,949,235) (8,912,034)
=================================== ============== ==============
Operating loss (19,742,674) (9,919,356)
Net financing expense (2,983,277) (813,435)
Loss before tax (22,725,951) (10,732,791)
Income tax credit 3,729,735 410,263
=================================== ============== ==============
Loss after tax (18,996,216) (10,322,528)
=================================== ============== ==============
Revenue
Revenue for the Group was US$47.0 million (H1 2020: US$43.1 million) supported by improved average realised price, partly offset by lower sales volume as a result of reduced production volumes at Vametco in Q1 2021. The Group sales volume of 1,608 mtV was achieved at an average price of US$29.24/kgV and an average exchange rate of USD:ZAR 14.54 relative to H1 2020 (H1 2020: average price US$24.20/kgV, average exchange rate of USD:ZAR16.65).
Cost of sales
The cost of sales excluding depreciation for the period was US$43.4 million (H1 2020: US$30.2 million), the increase is attributable mainly to:
-- the negative impact amounting to approximately US$5.5 million due to the stronger ZAR:USD exchange rate on costs in H1 2021;
-- increase in maintenance costs to US$7.4 million (H1 2020: US$5.7 million) to sustain the plants, production volumes and improve operational stability;
-- Increase in energy and raw material costs to US$18.6 million (H1 2020: US$16.8 million); and
-- Increase in mining costs due to waste stripping of US$2.2 million (H1 2020: US$1.2 million) associated with bringing the Upper Seam project online in September 2021.
The Group cost per unit sold (including sustaining) of US$39.7/kgV increased by 59 per cent (H1 2020: US$25.0/kgV), mostly due to the cost factors mentioned above and lower sales volumes, in addition to:
-- US$14.4 million (H1:2020 US$14.0 million) in operating and administrative costs;
-- US$6.1 million (H1 2020: US$0.1 million) in sustaining capital which contributed to the operational stability. Minimal capital was spent in H1 2020 on sustaining capital as Vanchem was still ramping up in H1 2020 as well as the effects of COVID-19 on the operation.
The Group unit cost of US$39.7/kgV is in line with the unit cost levels of circa US$38-39/kgV at Vametco and Vanchem. With the projected increase in volumes, the Group cost per unit sold is expected to reduce.
Total cost summary table
6 months ended 6 months ended
30 June 2021 30 June 2020
US$ US$
================================================== ==================== ================
Cost of sales (direct) (excl. depreciation) (43,439,030) (30,231,587)
Operating and administrative costs (excl.
depreciation) (14,376,544) (13,826,387)
Total income statement cost (excl. depreciation) (57,815,574) (44,057,973)
Total units sold (mtV) 1,608 1,765
Total income statement cost per unit
sold (excl. depreciation) US$/KgV 36.0 25.0
Sustaining Capital (6,058,174) (139,191)
Total cost including sustaining capital (63,873,748) (44,197,164)
Cost per unit sold (including sustaining
capital) US$/kgV 39.7 25.0
-------------------------------------------------------- -------------- ----------------
Revenue 47,022,135 43,050,652
Average price realised 29.24 24.20
-------------------------------------------------------- -------------- ----------------
Finance costs
The finance costs increased to US$3.5 million (H1 2020: US$1.4 million) as a result of the interest costs of the Orion PFA and the convertible loan notes with Duferco and Orion .
Other operating and administrative expenses
Unpacking the other operating and administrative costs (excl. depreciation) of US$14.4 million; other mine operating costs of US$1.6 million and idle plant costs of US$3 million are in line with H1 2020, and mainly reflect the 35-day planned maintenance shut down and unplanned stoppages at Vametco during the first half of 2021. Costs in H12020 were impacted by the initial COVID-19 nationwide shutdown.
Administrative expenses of US$8.8 million represent an increase of US$1.2 million relative to H1 2020 (H1 2020: US$7.6 million). The increase was due to foreign exchange movements of US$1.1 million arising from a stronger ZAR:US$ exchange rate relative to H1 2020. A breakdown of the administrative expenses is provided in the table below.
6 months ended 6 months ended
30 June2021 30 June2020
=============================
Unaudited Unaudited
=============================
US$ US$
============================= =========================== ==============
Administrative costs (includes IT services,
security, bank charges) 1,090,009 902,651
Depreciation 153,331 62,317
Professional fees (consultants) 1,173,994 1,938,566
Staff costs 5,038,053 3,659,281
Other costs (includes legal, training,
tax and accounting, other) 1,327,387 1,040,141
8,782,774 7,602,956
=============================================== ========= ==============
Cost Savings initiative
The Group has introduced a Cost Savings Programme aimed at ensuring continued competitiveness throughout the commodity cycle, while enhancing the offering to markets across all the industries in which we compete. We are targeting cost-savings initiatives across the Group, with procurement as the first priority. Our objective is to cut procurement costs by approximately US$2.5 million to US$4 million per year, starting from 2022.
Balance sheet assets
Non-current assets increased during the period. The most significant increase came from the increase in Property, Plant and Equipment as a result of increased assets under construction both at Vametco and Vanchem. The Deferred Tax amount also increased by US$2.4 million from December 2020 as the Group was not profitable and recognises an asset in respect of accumulated tax losses that are expected to be utilised to offset against future tax liabilities. Current assets decreased due to reduced cash and cash equivalents from US$50.5 million in December 2020 to US$31.6 million in June 2021.
Equity and liabilities
Non-controlling interest increased by US$9.9 million to US$42.0 million due to the investments by Acacia Resources Limited of US$2.2 million and Mustang Energy PLC of US$7.4 million in the equity of VRFB-H . The foreign currency translation reserve decreased over the period to US$1.3 million as a result of a stronger ZAR:USD exchange rate. Other liabilities included the increase in trade and other payables to U$25.2 million relative to US$22.1 million in December 2020. Current portions of borrowings of US$18.1 million are as a result of amounts payable to Duferco of US$11.9 million, Orion PFA of US$1 million and Nedbank Revolving Credit Facility ("RCF") of US$5.2 million.
Net debt
The net debt reconciliation below outlines the Group's total debt and cash position.
6 months ended 12 months ended
30 June 2021 31 December
Unaudited US$ 2020 Audited
US$
================================ ============== ===============
Gross Cash and Cash Equivalent 31,565,241 50,540,672
================================ ============== ===============
Nedbank Term Loan and Revolving
Credit Facility (8,818,956) (8,636,535)
================================ ============== ===============
Convertible Loan Notes
- Duferco (11,870,192) (11,585,068)
================================ ============== ===============
Production Financing Agreement
- Orion Mine Finance (29,288,227) (30,105,886)
================================ ============== ===============
Convertible Loan Notes
Instrument -Orion Mine
Finance (35,172,354) (33,073,699)
================================ ============== ===============
Other (845,588) (845,588)
================================ ============== ===============
Net Debt (54,430,077) (33,706,104)
================================ ============== ===============
Cash flows from operating activities
Net cash outflows from operating activities for the period was (US$13.8 million), an increase of US$11.1 million compared to H1 2020 (H1 2020: (US$2.7 million)), due to increase in costs and lower sales volume as a result of reduced production volumes at Vametco in Q1 2021.
Investing activities
Investing activities were driven by capital expenditure growth with Property, Plant and Equipment expenditure of US$4.3 million which mainly included Vametco, Vanchem and Bushveld Energy capital expenditure of US$0.3 million, US$1.8 million and US$2.2 million respectively. The payment of US$1.7 million made for the deferred consideration owed to Evraz. The purchase of investments increased to US$19.6 million (H1 2020: US$2 million) which is due to additional investments in EHL, the holding company for Enerox. The disposal of financial assets held at fair value of US$12.7 million represents the sale of Bushveld's initial investment of 8.71 per cent share in Invinity which was realised, resulting in capital appreciation.
Financing activities
Financing activities of approximately US$8.5 million includes the proceeds from shareholder subscriptions of US$9.6 million, comprising Acacia Resources Limited and Mustang Energy PLC with US$2.2 million and US$7.4 million respectively, offset by US$1.2 million of finance costs, lease payments and Orion PFA repayment.
Cash generation
The table below summarises the main components of cash flow during the 6 months ended 30 June 2021.
6 months ended 6 months ended
30 June 2021 30 June 2020
----------------------------------
US$ US$
---------------------------------- -------------- --------------
Operating (loss) (19 742 674) (9 919 356)
Depreciation and amortisation 8 949 235 8 912 034
Changes in working capital
and provisions (2 975 747) (2 065 067)
Taxes Paid 410 263
---------------------------------- -------------- --------------
Cash (outflow) from operations (13 769 186) (2 662 126)
Sustaining capital (6 058 174) (139 191)
---------------------------------- -------------- --------------
Free cashflow (19 827 360) (2 801 317)
Cash used in investing activities (13 055 181) (4 849 827)
Financing activities 8 462 855 7 077 815
---------------------------------- -------------- --------------
Cash (outflow) (24 419 686) (573 329)
Opening net cashflow 50 540 672 34 011 557
Foreign exchange 5 444 255 (8 832 717)
---------------------------------- -------------- --------------
Closing net cash 31 565 241 24 605 511
---------------------------------- -------------- --------------
As previously announced during the full year results, the Nedbank debt facility available to Vametco is subject to financial covenants which are EBITDA-driven. In light of the low production volumes in H1 2021, as a result of the 35-day maintenance shutdown and the unprotected industrial action at Vametco, the Company successfully renegotiated its covenant testing terms required under the ZAR125 million (US$8.7 million) RCF. Nedbank agreed to waive the covenants for the June 2021 period and relaxed the December 2021 Group net debt to EBITDA ratio from 2.50 times to 4.0 times. A condition of the waiver is that the RCF is amortised by ZAR5 million (approximately US$0.3 million) for August 2021, and ZAR7 million monthly (approximately US$0.5 million) from September 2021, with a bullet payment of ZAR22 million (approximately US$1.5 million) due on the maturity date of 6 November 2022.
Positive progress has been made in negotiations with Duferco Participations Holding S.A ("Duferco") on the remaining balance US$11.5 million of the convertible loan note, that would result in US$5 million being payable in November 2021 and the remaining US$6.5 million being converted into Bushveld shares .
Despite the weaker start in H1 2021, I am pleased to say that we are seeing improved operational stability at Vametco which has continued into the month of July and August, and Vanchem continues to show solid and consistent production levels. We are on track to meet the 2021 Group production guidance of between 3,400 mtV and 3,600 mtV. In addition, we are thankful to our finance partners Orion, for allowing the lifting of the capital ringfence and enabling us to apply funds, previously restricted to Vametco, to grow Vanchem's capacity to 2,600 mtV. This will increase Group production to a steady state run rate of between 5,000 to 5,400 mtV by the end of 2022, reducing unit cost and increasing profitability.
I thank you.
Fortune Mojapelo
Chief Executive Officer
SEnquiries: info@bushveldminerals.com
Bushveld Minerals Limited +27 (0) 11 268 6555 Fortune Mojapelo, Chief Executive Officer Andrew Mari, Chika Edeh, Head of Investor Relations SP Angel Corporate Finance LLP Nominated Adviser & Broker +44 (0) 20 3470 0470 Richard Morrison / Charlie Bouverat Grant Baker / Richard Parlons Peel Hunt Limited Joint Broker +44 (0) 20 7418 8900 Ross Allister / Alexander Allen Tavistock Financial PR Gareth Tredway / Tara Vivian-Neal / Adam Baynes +44 (0) 207 920 3150
ABOUT BUSHVELD MINERALS LIMITED
Bushveld Minerals is a low-cost, vertically integrated primary vanadium producer. It is one of only three operating primary vanadium producers, owning 2 of the world's 4 operating primary vanadium processing facilities. In 2020, the Company produced more than 3,600 mtV, representing approximately three per cent of the global vanadium market. With a diversified vanadium product portfolio serving the needs of the steel, energy and chemical sectors, the Company participates in the entire vanadium value chain through its two main pillars: Bushveld Vanadium, which mines and processes vanadium ore; and Bushveld Energy, an energy storage solutions provider. Bushveld Vanadium is targeting to materially grow its vanadium production and achieve an annualised steady state production run rate of between 5,000 mtVp.a. and 5,400 mtVp.a by the end of 2022, from projects currently being implemented. Beyond that, pre-feasibility studies are in progress to determine the optimal path to increase production even further to a steady state production run rate of between 6,400 mtVp.a. and 6,800 mtVp.a. in the medium-term. The Company retains its long term plan to grow its long-term production to 8,400 mtVp.a. in the long term.
Bushveld Energy is focused on developing and promoting the role of vanadium in the growing global energy storage market through the advancement of vanadium-based energy storage systems, specifically Vanadium Redox Flow Batteries ("VRFBs").
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 mostly Nitrovan, 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 mix plant and finally into the shaft furnaces to produce Nitrovan.
About Vanchem
Vanchem is situated at Ferrobank Industrial Park in Emalahleni Local Municipality, Mpumalanga Province in the Republic of South Africa. Vanchem is a primary vanadium producing facility with a beneficiation plant capable of producing various vanadium oxides, ferrovanadium and vanadium chemicals. Vanchem uses the salt roast beneficiation process, similar to the one used at Vametco. The plant comprises: a core salt-roast processing plant, including 3 roasting kilns, an electric smelting ferrovanadium converter, an alumino-thermic smelting facility, also located at Highveld, a vanadium chemical plant; and a rail siding linking the plant with Bushveld deposits and additional potential supply sources through the national rail network.
Financial statements for the period ended 30 June 2021
Bushveld Minerals Limited
(Registration number 54506)
Consolidated Statement of Profit or Loss and Other Comprehensive Income
6 months 6 months 12 months
ended ended ended 31
30 June 30 June December
2021 2020 2020
Unaudited Unaudited Audited
US$ US$ US$
Notes
-------------------------------------------------- ------- ------------ ------------ ------------
Continuing operations
Revenue 47,022,135 43,050,652 89,988,078
Cost of sales (52,222,217) (38,987,345) (91,260,760)
------------ ------------ ------------
Gross (loss) / profit (5,200,082) 4,063,307 (1,272,682)
Other operating income 1,670,464 771,383 2,304,528
Selling and distribution costs (2,851,646) (2,454,724) (4,828,710)
Other mine operating costs (1,592,894) (1,620,053) (4,699,892)
Idle plant costs (2,985,742) (3,076,313) (4,152,153)
Administrative expenses (8,782,774) (7,602,956) (19,783,176)
Share-based payment - - (375,008)
------------ ------------ ------------
Operating loss (19,742,674) (9,919,356) (32,807,093)
Finance income 517,057 601,074 1,077,991
Finance costs (3,500,334) (1,414,509) (5,732,249)
Movement in earnout estimate - - (206,066)
------------ ------------ ------------
Loss before taxation (22,725,951) (10,732,791) (37,667,417)
Taxation 3,729,735 410,263 484,654
------------ ------------ ------------
Loss for the period (18,996,216) (10,322,528) (37,182,763)
Consolidated other comprehensive income:
Items that will not be reclassified to
profit or loss:
Changes in the fair value of financial
assets at fair value through other comprehensive
income (4,767,013) 3,268,931 13,483,194
Other fair value movements - - 103,448
------------ ------------ ------------
Total items that will not be reclassified
to profit or loss (4,767,013) 3,268,931 13,586,642
------------ ------------ ------------
Items that may be reclassified to profit
or loss:
Currency translation differences 11,271,089 (25,438,821) (10,425,238)
------------ ------------ ------------
Other comprehensive income for the period
net of taxation 6,504,076 (22,169,890) 3,161,404
------------ ------------ ------------
Total comprehensive loss for the period (12,492,140) (32,492,418) (34,021,359)
------------ ------------ ------------
Loss attributable to:
Owners of the parent (17,898,241) (10,764,522) (36,680,615)
Non-controlling interest (1,097,975) 441,994 (502,148)
------------ ------------ ------------
(18,996,216) (10,322,528) (37,182,763)
------------ ------------ ------------
Total comprehensive loss attributable
to:
Owners of the parent (11,394,165) (29,383,559) (32,640,348)
Non-controlling interest (1,097,975) (3,108,859) (1,381,011)
------------ ------------ ------------
(12,492,140) (32,492,418) (34,021,359)
------------ ------------ ------------
Earnings per share
Loss per ordinary share
Basic earnings per share (in cents) 3 (1.50) (0.92) (3.00)
Diluted earnings per share (in cents) 3 (1.50) (0.92) (3.00)
- - -
All results relate to continuing activities.
Consolidated Statement of Financial Position
30 June 31 December
2021 2020
Note Unaudited Audited
US$ US$
--------------------------------------------- ------ ----------- ------------
Assets
Non-Current Assets
Intangible assets 4 60,335,958 59,003,825
Property, plant and equipment 5 172,606,640 167,579,993
Investment property 2,873,358 2,811,017
Deferred tax 7,524,047 5,085,154
----------- ------------
Total Non-Current Assets 243,340,003 234,479,989
----------- ------------
Current Assets
Inventories 6 36,659,909 34,081,625
Trade and other receivables 7 13,966,691 10,425,363
Restricted investment 3,180,469 3,111,465
Current tax receivable 2,077,960 814,067
Financial assets at fair value 8 25,051,999 22,452,877
Cash and cash equivalents 9 31,565,241 50,540,672
----------- ------------
Total Current Assets 112,502,269 121,426,069
----------- ------------
Total Assets 355,842,272 355,906,058
----------- ------------
Equity and Liabilities
Share capital 10 15,858,428 15,858,428
Share premium 10 117,065,907 117,065,907
Retained income 36,503,367 46,734,823
Share-based payment reserve 375,008 375,008
Convertible loan note reserve 54,814 54,814
Foreign currency translation reserve (1,290,980) (11,202,236)
Fair value reserve 532,496 12,966,294
----------- ------------
Equity attributable to owners of the parent 169,099,040 181,853,038
Non-controlling interest 42,031,933 32,146,712
----------- ------------
Total Equity 211,130,973 213,999,750
----------- ------------
Liabilities
Non-Current Liabilities
Post-retirement medical liability 2,163,165 2,076,023
Environmental rehabilitation liability 18,718,345 17,998,366
Deferred consideration 1,802,884 1,802,884
Loans 13 1,664,028 1,597,972
Borrowings 11 67,883,046 70,909,370
Lease liabilities 4,342,671 4,376,483
----------- ------------
Total Non-Current Liabilities 96,574,139 98,761,098
----------- ------------
Current Liabilities
Trade and other payables 12 25,209,468 22,065,601
Provisions 1,921,500 3,296,894
Borrowings 11 18,112,271 13,337,406
Lease liabilities 750,492 625,661
Deferred consideration 2,143,429 3,819,648
----------- ------------
Total Current Liabilities 48,137,160 43,145,210
----------- ------------
Total Liabilities 144,711,299 141,906,308
----------- ------------
Total Equity and Liabilities 355,842,272 355,906,058
----------- ------------
Statement of Changes in Equity
Share Share Foreign Reserves Convertible Fair value Retained Total Non-controlling Total equity
capital premium Exchange for Instruments reserve Income attributable interest
translation own shares reserve to equity
reserve / holders
Share of the group
Repurchase /company
reserve
--------------
US$ US$ US$ US$ US$ US$ US$ US$ US$ US$
-------------- ---------- ----------- ------------ ---------- ----------- ----------- ------------ ------------ --------------- ------------
Balance at 1
January
2020 15,357,271 111,067,064 (1,655,861) - - (620,349) 83,415,435 207,563,560 33,527,723 241,091,283
---------- ----------- ------------ ---------- ----------- ----------- ------------ ------------ --------------- ------------
Loss for the
period - - - - - - (10,764,522) (10,764,522) 441,994 (10,322,528)
Other
comprehensive
income,
net of tax:
Currency
translation
differences - - (21,887,968) - - - - (21,887,968) (3,550,853) (25,438,821)
Fair value
movement
on - - - - - 3,268,931 - 3,268,931 - 3,268,931
investments
---------- ----------- ------------ ---------- ----------- ----------- ------------ ------------ --------------- ------------
Total
comprehensive
Loss for - - (21,887,968) - - 3,268,931 (10,764,522) (29,383,559) (3,108,859) (32,492,418)
the period
---------- ----------- ------------ ---------- ----------- ----------- ------------ ------------ --------------- ------------
Unaudited
Balance
at 30 June 15,357,271 111,067,064 (23,543,829) - - 2,648,582 72,650,916 178,180,004 30,418,864 208,598,868
2020
---------- ----------- ------------ ---------- ----------- ----------- ------------ ------------ --------------- ------------
Loss for the
period - - - - - - (25,916,093) (25,916,093) (944,142) (26,860,235)
Other
comprehensive
income,
net of tax:
Currency
translation
differences - - 12,341,593 - - - - 12,341,593 2,671,990 15,013,583
Fair value
movement
on - - - - - 10,214,263 - 10,214,263 - 10,214,263
investments
Other fair
value
movements - - - - - 103,449 - 103,449 - 103,449
---------- ----------- ------------ ---------- ----------- ----------- ------------ ------------ --------------- ------------
Total
comprehensive
Loss for - - 12,341,593 - - 10,317,712 (25,916,093) (3,256,788) 1,727,848 (1,528,940)
the period
---------- ----------- ------------ ---------- ----------- ----------- ------------ ------------ --------------- ------------
Issue of
shares 501,157 5,998,843 - - - - - 6,500,000 - 6,500,000
Share-based
payment - - - 375,008 - - - 375,008 - 375,008
Equity
component
of
convertible - - - - 54,814 - - 54,814 - 54,814
loan note
---------- ----------- ------------ ---------- ----------- ----------- ------------ ------------ --------------- ------------
Audited
Balance at
31 December
2020 15,858,428 117,065,907 (11,202,236) 375,008 54,814 12,966,294 46,734,823 181,853,038 32,146,712 213,999,750
Loss for the
period
Other
comprehensive
income, net
of tax: - - - - - - (17,898,241) (17,898,241) (1,097,975) (18,996,216)
Currency
translation
reserve - - 9,911,256 - - - - 9,911,256 1,359,833 11,271,089
Fair value
movement
on
investments - - - - - (4,767,013) - (4,767,013) - (4,767,013)
---------- ----------- ------------ ---------- ----------- ----------- ------------ ------------ --------------- ------------
Total
comprehensive
Loss for the
period - - 9,911,256 - - (4,767,013) (17,898,241) (22,665,254) 261,858 (12,492,140)
---------- ----------- ------------ ---------- ----------- ----------- ------------ ------------ --------------- ------------
Transfer
between
reserves - - - - - (7,666,785) 7,666,785 - - 9,623,363
Investment by
NCI
through
subsidiary - - - - - - - - 9,623,363 -
---------- ----------- ------------ ---------- ----------- ----------- ------------ ------------ --------------- ------------
Unaudited
Balance
at 30 June
2021 15,858,428 117,065,907 (1,290,980) 375,008 54,814 532,496 36,503,367 169,099,040 42,031,933 211,130,973
---------- ----------- ------------ ---------- ----------- ----------- ------------ ------------ --------------- ------------
Note 10 10
Consolidated Statement of Cash Flows
6 months 6 months 12 months
ended ended ended 31
30 June 30 June December
2021 Unaudited 2020 Unaudited 2020 Audited
Note US$ US$ US$
--------------- --------------- -------------
Cash flows (used in) / from operating
activities
Loss before taxation (22,725,951) (10,732,791) (37,667,417)
Adjustments for:
Depreciation property, plant and
equipment 5 8,949,235 8,912,034 17,866,153
Movement in earnout estimate - - 206,066
Finance income (517,057) (601,074) (1,077,991)
Finance costs 3,500,334 1,414,509 5,732,249
Changes in working capital (2,975,747) (2,065,067) 1,253,029
Income taxes paid - 410,263 (3,452,492)
--------------- --------------- -------------
Net cash used in operating activities (13,769,186) (2,662,126) (17,140,403)
--------------- --------------- -------------
Cash flows (used in) / from investing
activities
Finance income 517,057 509,622 985,901
Purchase of property, plant and equipment 5 (10,625,864) (996,844) (9,269,924)
Payment of deferred consideration (1,679,943) (1,680,459) (1,680,459)
Purchase of investments (19,616,897) (2,004,375) (1,883,208)
Purchase of exploration and evaluation
assets 4 (374,493) (816,962) (1,471,142)
Disposal of finance assets held at
fair value 8 12,666,785 - -
--------------- --------------- -------------
Net cash used in investing activities (19,113,355) (4,989,018) (13,318,832)
--------------- --------------- -------------
Cash flows (used in) / from financing
activities
Investment by NCI through subsidiary 8 9,623,363 - -
Proceeds from shareholders loan - - 1,597,972
Lease payments (379,905) (416,207) (753,302)
Finance costs (530,603) (709,664) (3,115,205)
Net (repayment) /proceeds of borrowings 11 (250,000) 8,203,686 49,417,161
Disposal of financial assets held
at fair value 8 - - 286,643
--------------- --------------- -------------
Net cash from financing activities 8,462,855 7,077,815 47,433,269
--------------- --------------- -------------
Total cash movement for the period (24,419,686) (573,329) 16,974,034
Cash at the beginning of the period 50,540,672 34,011,557 34,011,557
Effect of translation of foreign
rate 5,444,255 (8,832,717) (444,919)
--------------- --------------- -------------
Total cash at end of the period 9 31,565,241 24,605,511 50,540,672
--------------- --------------- -------------
Notes to the Financial Statements
1. Corporate information and principal activities
Bushveld Minerals Limited ("Bushveld") was incorporated and domiciled in Guernsey on 5 January 2012 and admitted to the AIM market in London on 26 March 2012.
The address of the Company's registered office is 18-20 Le Pollet, St Peter Port, Guernsey. The consolidated financial statements of the Company for the interim period ended 30 June 2021 comprise of the Company and its subsidiaries (The "Group") and the Group's interest in equity accounted investments.
2. Significant accounting policies
Basis of accounting
The results presented in this report are unaudited and they have been prepared in accordance with the recognition and measurement principles of UK adopted International Accounting Standards that are expected to be applicable to the next set of financial statements and on the basis of the accounting policies to be used in those financial statements.
The interim financial information does not include all of the information required for full annual financial statements and accordingly, whilst the interim financial information has been prepared in accordance with the recognition and measurement principles of the UK-adopted International Accounting Standards, it cannot be construed as being in full compliance with the
UK-adopted International Accounting Standards. The financial information contained in this announcement does not constitute statutory accounts as defined by the Companies (Guernsey) Law 2008.
The interim financial information has not been audited or reviewed in accordance with International Standard on Review Engagements (UK) 2410.The financial information for the period ended 31 December 2020 is based on the statutory accounts for the period ended 31 December 2020. The auditor reported on those accounts, their report was unqualified and did not contain statements where the auditor is required to report by exception.
The consolidated interim financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business.
Use of estimates and judgements
In the application of the group's accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates in particular, information about significant areas of estimation uncertainty considered by management in preparing the financial statements is described below:
i. Decommissioning and rehabilitation obligations
Estimating the future costs of environmental and rehabilitation obligations is complex and requires management to make estimates and judgements as most of the obligations will be fulfilled in the future and contracts and laws are often not clear regarding what is required. The resulting provisions are further influenced by changing technologies, political, environmental, safety, business and statutory considerations.
ii. Asset lives and residual values
Property, plant and equipment are depreciated over its useful life taking into account residual values, where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In reassessing asset lives, factors such as technological innovation, product life cycles and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values.
iii. Post-retirement employee benefits
Post-retirement medical aid liabilities are provided for certain existing employees. Actuarial valuations are based on assumptions which include employee turnover, mortality rates, the discount rate, health care inflation costs and rates of increase in costs.
iv. Revaluation of investment properties
The group carries its residential investment properties at fair value. The group engaged an independent valuation specialist to assess the fair value as at 31 December 2020 for residential properties. For residential properties, it measures land and buildings at revalued amounts. Land and buildings were valued by reference to market-based evidence, using comparable prices adjusted for specific market factors such as nature, location and condition of the property.
v. Impairment of exploration and evaluation assets
Whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, the asset is reviewed for impairment. Assets are also reviewed for impairment at each reporting date in accordance with IFRS 6. An asset's carrying value is written down to its estimated recoverable amount (being the higher of the fair value less costs to sell and value in use) if that is less than the asset's carrying value. Impairment losses are recognised in profit or loss.
An impairment review is undertaken when indicators of impairment arise but typically when one of the following circumstances applies:
-- unexpected geological occurrences that render the resources uneconomic; or -- title to the asset is compromised; or -- variations in the foreign currency rates; or -- the Group determines that it no longer wishes to continue to evaluate or develop the field. 3. Profit/(loss) per share
FROM CONTINUING OPERATIONS
Basic earnings per share
The calculation of a basic earnings per share of (1.50) cents (December 2020: (3.00) cents), is calculated using the total loss for the year attributable to the owners of the company of $17,898,241 (December 2020: Loss of $36,680,615) and 1,164,710,352 shares (December 2020: 1,164,710,352) being weighted average number of share in issue during the period.
Diluted earnings per share
Due to the Group being loss making for the period, instruments are not considered dilutive and therefore the diluted loss per share is the same as basic loss per share.
4. Intangible assets
30 June 2021 31 December 2020
(unaudited) (audited)
---------------------- ----------------------
Cost / Carrying Cost / Carrying
Valuation value Valuation value
US$ US$ US$ US$
---------- ---------- ---------- ----------
Vanadium and Iron ore 55,747,786 55,747,786 54,950,331 54,950,331
Coal 4,588,172 4,588,172 4,053,494 4,053,494
---------- ---------- ---------- ----------
Total 60,335,958 60,335,958 59,003,825 59,003,825
---------- ---------- ---------- ----------
Reconciliation of intangible assets - exploration and evaluation - 30 June 2021
Opening Exchange
balance Additions differences Total
US$ US$ US$ US$
---------- ----------- ------------ ----------
Vanadium and Iron ore 54,950,331 25,514 771,941 55,747,786
Coal 4,053,494 348,979 185,699 4,588,172
---------- ----------- ------------ ----------
59,003,825 374,493 957,640 60,335,958
---------- ----------- ------------ ----------
Reconciliation of intangible assets - exploration and evaluation - 31 December 2020
Opening Exchange
balance Additions differences Total
US$ US$ US$ US$
---------- ----------- ------------ ----------
Vanadium and Iron ore 56,827,085 89,764 (1,966,518) 54,950,331
Coal 2,581,736 1,381,378 90,380 4,053,494
---------- ----------- ------------ ----------
59,408,821 1,471,142 (1,876,138) 59,003,825
---------- ----------- ------------ ----------
Vanadium and Iron Ore
The Company's subsidiary, Bushveld Resources Limited has a 64 per cent interest in Pamish Investment No 39 (Proprietary) Limited ("Pamish") which holds an interest in Prospecting right 95 ("Pamish 39"). Bushveld Resources Limited also has a 68.5 per cent interest in Amaraka Investment No 85 (Proprietary) Limited ("Amaraka") which holds an interest in Prospecting right 438 ("Amaraka 85").
The Department of Mineral Resources and Energy ("DMRE") granted a mining right to Pamish Investments No. 39 (Pty) Ltd ("Pamish") on the 28th of August 2019, in respect of the five farms Vliegekraal 783 LR, Vogelstruisfontein 765 LR, Vriesland 781 LR, Schoonoord 786 LR and Bellevue 808 LR situated in the District of Mogalakwena, Limpopo, which make up the Mokopane Project.
Mokopane is one of the world's largest primary vanadium resources, with a 298 Mt JORC compliant resource and a weighted average V2O5 grade of 1.75 per cent in magnetite (1.41 per cent in-situ). The Mokopane deposit is a layered ore body along a 5.5 km north-south strike at a dip of between 18 degrees and 22 degrees west. The project comprises three adjacent and parallel magnetite layers namely the Main Magnetite Layer ("MML"), the MML Hanging Wall ("MML-HW") layer and the AB Zone. 298 Mt (JORC) resources and reserves run across three parallel overlying magnetite layers with grades ranging from 1.6 per cent to over 2 per cent V2O5 as follows:
-- MML: 52 Mt @ 1.48 per cent V2O5 (1.75 per cent V2O5 in magnetite); -- MML-HW & Parting: 233 Mt @ 0.8 per cent V2O5 (1.5-1.6 per cent V2O5 in magnetite); and -- AB Zone: 12 Mt @ 0.7 per cent V2O5 (greater than 2 per cent V2O5 in magnetite).
The mining right allows for the extraction of several other minerals over the entire Mokopane project resource area, including, titanium, phosphate, platinum group metals, gold, cobalt, copper, nickel and chrome.
Brits Vanadium Project
Bushveld Minerals Limited has been granted Section 11 of the Mineral and Petroleum Resources Development Act (MPRDA) for acquiring control of Sable Platinum Mining Pty Ltd for NW 30/5/1/1/2/11124 PR, held through Great Line 1 Invest (Pty) Ltd and was executed in May 2021. The company has also applied for Section 102 of the Mineral and Petroleum Resources Development Act (MPRDA) and waiting for approval to incorporate NW 30/5/1/1/2/11069 PR into NW 30/5/1/1/2/11124 PR.
Bushveld Minerals Limited has applied for a prospecting right which has been accepted and environmental authorisation has been granted under GP 30/5/1/1/2/10576 PR held by Gemsbok Magnetite (Pty) Ltd.
A renewal application for expired Prospecting Right NW 30/5/1/1/2/11124 PR was lodged for Great 1 Line on Farm Uitvalgrond 431 JQ Portion 3. This prospecting right expired on the 3rd of November 2019 and currently awaiting approval.
Coal
Coal Exploration licences have been issued to Coal Mining Madagascar SARL a 99 per cent subsidiary of Lemur Investments Limited.
The exploration is in South West Madagascar covering 11 concession blocks in the Imaloto Coal basin known as the Imaloto Coal Project and Extension.,
5. Property, Plant, and Equipment
Buildings Plant and Motor Decomm-issioning Right of Waste Assets under Total
and machinery vehicles assets use asset stripping construction
other furniture asset
improvements and
equipment
US$ US$ US$ US$ US$ US$ US$ US$
------------- ------------- ------------- ----------- ---------------- ----------- ------------- ------------ --------------
Cost
At 01
January
2020 8,196,521 166,369,583 1,474,110 2,597,288 5,735,890 3,920,684 10,668,778 198,962,854
Additions - 2,256,794 62,665 - - - 6,950,465 9,269,924
Disposals (336,491) (2,490,766) (192,023) - - - - (3,019,280)
Transfers 190,930 11,645,072 121,070 - - - (11,957,072) -
Revaluations - - - (695,244) - - - (695,244)
Foreign
exchange
movements (344,926) (6,179,154) (559,874) 33,180 (231,619) (156,242) (718,321) (8,156,956)
------------- ------------- ------------- ----------- ---------------- ----------- ------------- ------------ --------------
At 31
December
2020
(audited) 7,706,034 171,601,529 905,948 1,935,224 5,504,271 3,764,442 4,943,850 196,361,298
------------- ------------- ------------- ----------- ---------------- ----------- ------------- ------------ --------------
Additions - 2,241,201 154,278 - - - 8,230,385 10,625,864
Foreign
exchange 170,902 8,344,050 (119,412) 42,919 122,071 83,486 244,726 8,888,742
------------- ------------- ------------- ----------- ---------------- ----------- ------------- ------------ --------------
At 30 June
2021
(unaudited) 7,876,936 182,186,780 940,814 1,978,143 5,626,342 3,847,928 13,418,961 215,875,904
------------- ------------- ------------- ----------- ---------------- ----------- ------------- ------------ --------------
Depreciation
At 01
January 2020 (1,022,284) (9,384,009) (535,710) (954,588) (628,963) (1,168,237) - (13,693,791)
Disposals 336,491 2,407,463 248,586 - - - - 2,992,540
Depreciation
charge for
the year (385,785) (14,468,628) (175,976) (53,233) (434,768) (2,347,763) - (17,866,153)
Foreign
exchange
movements 3,367 301,705 (151,754) 31,352 (150,129) (248,442) - (213,901)
At 31
December
2020
(audited) (1,068,211) (21,143,469) (614,854) (976,469) (1,213,860) (3,764,442) - (28,781,305)
------------- ------------- ------------- ----------- ---------------- ----------- ------------- ------------ --------------
Depreciation
charge for
the year (180,361) (8,374,744) (112,648) - (281,482) - - (8,949,235)
Foreign
exchange (42,585) (5,344,265) (15,484) (21,656) (31,248) (83,486) - (5,538,724)
------------- ------------- ------------- ----------- ---------------- ----------- ------------- ------------ --------------
At 30 June
2021
(unaudited) (1,291,157) (34,862,478) (742,986) (998,125) (1,526,590) (3,847,928) - (43,269,264)
------------- ------------- ------------- ----------- ---------------- ----------- ------------- ------------ --------------
Net Book
Value
------------- ------------- ------------- ----------- ---------------- ----------- ------------- ------------ --------------
At 31
December
2020
(audited) 6,637,823 150,458,060 291,094 958,755 4,290,411 - 4,943,850 167,579,993
------------- ------------- ------------- ----------- ---------------- ----------- ------------- ------------ --------------
At 30 June
2021
(unaudited) 6,585,779 147,324,302 197,828 980,018 4,099,752 - 13,418,961 172,606,640
------------- ------------- ------------- ----------- ---------------- ----------- ------------- ------------ --------------
6 months 12 months
ended ended 31
30 June December
2021 Unaudited 2020 Audited
US$ US$
---------------- --------------
6. Inventories
Raw materials 1,913,995 1,761,551
Work in progress 8,256,045 7,454,987
Finished goods 12,982,118 12,070,061
Consumable stores 13,507,751 12,795,026
36,659,909 34,081,625
----------- -----------
The amount of write-down of inventories due to net realisable value provision requirement is nil (2020: nil).
7. Trade and other receivables
Financial instruments:
Trade receivables 6,996,249 3,854,461
Loss allowance - (32,826)
Other receivables 3,090,970 1,610,261
Non-financial instruments:
VAT 3,879,472 4,993,467
----------- -----------
Total trade and other receivables 13,966,691 10,425,363
----------- -----------
Categorisation of trade and other receivables
Trade and other receivables are categorised as follows in accordance with IFRS 9: Financial Instruments:
At amortised cost 10,087,219 5,431,896
Non-financial instruments 3,879,472 4,993,467
---------- ----------
13,966,691 10,425,363
---------- ----------
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due for settlement within 15-90 days and therefore are all classified as current.
Other receivables consist of prepayments and deposits, which are realised over time.
Due to the short-term nature of the current receivables, their carrying amount is considered to be the same as their fair value.
8. Financial assets at fair value
Opening balance 22,452,877 1,952,227
Additions 19,616,897 7,304,099
Disposal (12,666,785) (286,643)
Fair value movement (4,767,013) 13,483,194
Foreign exchange movement 416,023 -
------------ ----------
Closing balance 25,051,999 22,452,877
------------ ----------
AfriTin Mining Limited
The Group measures the fair value of the investment in AfriTin Mining Limited using the quoted price in an active market for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.
Invinity Energy Systems
On 1 November 2019, Bushveld announced it had agreed to provide funding of US$5 million through a convertible loan to Avalon Battery, a Canadian VRFB company, to facilitate a Merger with redT Energy, a UK VRFB company, and a listing on the London AIM exchange. In accordance with the terms of the convertible loan, on successful completion of the Merger in March 2020, the loan was converted into shares in Invinity Energy Systems (AIM: IES). The previously provided US$5 million loan (together with the accrued interest and commitment fee) has been converted into 302,978,063 Ordinary Shares at a price of 1.65 pence in Invinity, representing up to 8.71 per cent of Invinity on 1 April 2020. The shares issued to Bushveld are not subject to a lock-in arrangement. In addition to the funding from Bushveld, Invinity has raised GBP7.9 million in equity and GBP3 million in convertible debt through an equity placing at 1.65 pence per share at the time. Subsequently, Invinity raised a further GBP22.5 million through a placing and open offer on 3 December 2020.
In 2021, the investment in Invinity was realised, resulting in capital appreciation $7,666,785. The proceeds of the sale were used towards Bushveld Energy's 2021 projects.
Enerox Holdings Limited
The investment in Enerox Holdings Limited is in line with Bushveld Minerals' strategy of partnering with Vanadium Redox Flow Battery ("VRFB") companies.
The Consortium, which currently includes Bushveld Energy Limited, a private North American investor and an East Asian Investment Holding Company, held 90 per cent of EHL after an initial acquisition of 24.9 per cent under an initial sale and purchase agreement ("ISPA"). In terms of the ISPA, the members of the Consortium have acquired, in equal proportions, 24.9 per cent of the issued share capital of Enerox for EUR150,000 from Cellcube Energy Storage Systems Inc (the "Seller"). The investment of US$21,920,996 (2020: US$2,304,099) represents Bushveld's share of the investment, which the directors consider to equate to the fair value of the investment at the recording date.
Bushveld Energy anticipates contributing not more than 50 per cent of the funds to be invested by the Consortium and is considering additional investors to participate as part of the Consortium. The Enerox investment is part of Bushveld Minerals' strategy of partnering with VRFB Original Equipment Manufacturers ("OEMs") that includes supply of vanadium and electrolyte, deployments and investment into the rapidly growing energy storage market.
Acacia Resources Limited
Acacia Resources Limited ("Acacia") has interests in minerals involved in the energy transition process. Acacia has invested a total of US$2.198 million for a 27.40 per cent shareholding in VRFB Holdings Limited ("VRFB-H") which holds 50 per cent in Enerox Holdings Limited, the holding company of Enerox GmbH.
Mustang Energy PLC
Mustang is an AIM LSE-listed, Special Purpose Acquisition Company with interests in energy storage and stationary battery assets. On 26 April 2021 Mustang acquired 22.1 per cent interest in VRFB Holdings Limited ("VRFB-H") for US$7.524 million and became a new shareholder of VRFB-H, a subsidiary of Bushveld Minerals Limited. VRFB owns a 50 per cent interest in Enerox Holdings Limited ("EHL") with EHL owning a 100 per cent interest in Enerox GMbH ("Enerox"). Enerox is an Austrian-based vanadium redox flow battery manufacturer. Mustang funded its investment by way of an issue of US$8 million unsecured convertible loan notes at a 10 per cent coupon to certain investors (Mustang Capital raise).
The Mustang Capital Raise, and the concurrent acquisition by Mustang of shares in the capital of VRFB-H, constitutes a reverse takeover under the Financial Conduct Authority's Listing Rules and will require the publication of a prospectus and readmission of Mustang to trading by no later than 31 December 2021. In circumstances where the Mustang readmission does not take place by 31 December 2021, Bushveld Minerals has agreed to issue new ordinary shares in its capital to Mustang's noteholders (the "Backstop") in return for:
-- Mustang transferring to Bushveld Energy all of Mustang's shares in VRFB-H.
-- Mustang paying a fee to Bushveld Minerals of an amount equal to 5 per cent of the Mustang Capital Raise (including both principal and interest), to be satisfied by the issue of new ordinary shares in the capital of Mustang at a price of 20 pence per share (the "Backstop Fee"). The Backstop Fee is payable in the event of readmission not occurring by the afore-said date or immediately prior to completion of readmission.
Certain of Mustang's note holders have the discretion to elect not to receive new Bushveld Minerals shares and instead receive shares directly in the capital of VRFB-H.
9. Cash and cash equivalents
Cash and Cash equivalents consist of:
6 months 12 months
ended ended
30 June 31 December
2021 Unaudited 2020 Audited
US$ US$
---------------- --------------
Bank balances 31,565,241 50,540,672
---------------- --------------
Cash and cash equivalents (which are presented as a single class of assets on the face of the Statement of Financial Position) comprise cash at bank and other short-term highly liquid investments with an original maturity of three months or less. Short- term deposits include funds received from Orion Mine Finance ("Orion") under the Production Financing Agreement (PFA) and Convertible Loan Notes Instrument (CLN). The PFA capital of $24,323,248 is ringfenced to initially provide the necessary funding for the Phase III expansion project to grow production at Vametco to more than 4,200 mtV per annum. The PFA capital has since been reallocated from Vametco to Vanchem.
The directors consider that the carrying amount of cash and cash equivalents approximates their fair value.
Refer to Note 11 for further information in relation to the Production Financing Agreement and Convertible Loan Notes Instrument.
10. Share capital and share premium
Total share
Share premium capital
Shares Share capital and premium
Number US$ US$ US$
------------- --------------- ------------- -------------
At 1 January 2020 1,153,642,682 15,357,271 111,067,064 126,424,335
Shares issued - Duferco 37,115,210 501,157 5,998,843 6,500,000
------------- --------------- ------------- -------------
At 31 December 2020 (audited) 1,190,757,892 15,858,428 117,065,907 132,924,335
------------- --------------- ------------- -------------
At 30 June 2021(unaudited) 1,190,757,892 15,858,428 117,065,907 132,924,335
------------- --------------- ------------- -------------
The Board may, subject to Guernsey Law, issue shares or grant rights to subscribe for or convert securities into shares. It may issue different classes of shares ranking equally with existing shares. It may convert all or any classes of shares into redeemable shares. The Company may also hold treasury shares in accordance with the law. Dividends may be paid in proportion to the amount paid up on each class of shares.
As at the 30 June 2021 the Company owns 670,000 (2020: 670,000) treasury shares with a nominal value of 1 pence.
Shares issued
Duferco Participations Holding S.A. ("Duferco")
As part of the acquisition of Vanchem on the 7th of November 2019, Bushveld Minerals Limited subscribed to US$23million unsecured convertible loan notes ("Loan Notes").
Duferco, the previous owner of Vanchem, agreed to accept the partial early repayment of US$11.5 million of their US$23 million convertible loan notes, originally issued in accordance with the terms of the acquisition of Bushveld Vanchem as announced on 23 October 2019. During 2020 Bushveld Minerals Limited repaid US$5 million of the Duferco loan notes, plus interest of US$1.28 million, in cash and satisfied the balance of US$6.5 million by the issue of 37,115,210 new Bushveld shares, using a conversion price of 12.97p, which is a 5 per cent discount to the prevailing 10-day volume weighted average Bushveld Minerals share price leading up to conversion.
Refer to note 11 for details on the Convertible Loan Note details.
11. Borrowings
6 months 12 months
Ended ended
30 June 31 December
2021 2020
Unaudited Audited
US$ US$
---------- ------------
Nedbank Term Loan and Revolving Credit Facility 8,818,956 8,636,535
Development Bank of Southern Africa 845,588 845,588
Convertible Loan Notes - Duferco 11,870,192 11,585,068
Production Financing Agreement - Orion Mine Finance 29,288,227 30,105,886
Convertible Loan Notes Instrument - Orion Mine Finance 35,172,354 33,073,699
---------- ------------
85,995,317 84,246,776
---------- ------------
Split between non-current and current portions
Non-current liabilities 67,883,046 70,909,370
Current liabilities 18,112,271 13,337,406
---------- ------------
85,995,317 84,246,776
---------- ------------
Development Bank of Southern Africa - Facility Agreement
Lemur Holdings Limited, a subsidiary undertaking, entered into a US$1,000,000 facility agreement with the Development Bank of Southern Africa Limited in March 2019. The purpose of the facility is to assist with the costs associated with delivering the key milestones to the power project. The repayment is subject to the successful bankable feasibility study of the project at which point the repayment would be the facility value plus an amount equal to an IRR of 40 per cent capped at 2.5 times which ever is lower. As at 30 June 2021, only US$845 588 was drawn down.
Nedbank Term Loan and Revolving Credit Facility
Bushveld Minerals Limited secured R375 million (approximately US$25 million) in debt facilities through its subsidiary Bushveld Vametco Alloys Proprietary Limited ("the Borrower") with Nedbank Limited (acting through its Nedbank Corporate and Investment Banking division), a South African based financial institution, in the form of a R250 million loan (US$16.2 million) and a R125 million (US$8.8 million) revolving credit facility.
Key highlights of the R250 million (US$16.2 million) loan which was drawn in November 2019:
-- Five-year amortising loan;
-- Interest rate calculated using the three year or six months JIBAR1 as selected by the Company plus a 3.4 per cent margin;
-- Interest payments are due semi-annually with first payment due in six months from financial close;
-- Principal repayments will be made semi-annually in arrears over four years in eight equal installments, with first payment due 18 months after financial close.
The Nedbank term loan was repaid in December 2020.
Key highlights of the R125 million (US$8.8 million) revolving credit facility, which was drawn in March 2020 (2019: undrawn):
-- Three-year term;
-- Interest rate calculated using the three year or six months JIBAR1 as selected by the Company plus a 3.6 per cent margin;
-- Interest payments are due semi-annually with first payment due in six months from financial close.
The security provided is customary for a secured financing of this nature, including cession of shares in the Borrower, security over the assets of the Borrower, and a parent guarantee.
Financial Covenants undertaken
The Borrower shall ensure that for so long as any amount is outstanding under a Finance Document or any Commitment is in force, in respect of each Measurement Period:
-- the Interest Cover Ratio; and -- the Net Debt to EBITDA Ratio at a Borrower level shall not exceed 2.5 times.
Convertible Loan Note - Duferco
As part of the consideration related to the Bushveld Vanchem acquisition, a payment of US$23.0 million is to be satisfied through the issue of Bushveld Minerals unsecured convertible loan notes ("Loan Notes") with the following repayment, redemption and conversion terms (in addition to customary covenants, warranties and acceleration provisions):
-- Interest at a coupon of 5 per cent per annum payable annually in arrears or on conversion or redemption;
-- Repayable in cash after the second anniversary of Transaction Closure, plus any accrued interest;
-- Convertible at the holder's option in two tranches of up to US$11.5 million each, after the first and second anniversary of Transaction Closure respectively, at a 5 per cent discount to the prevailing 10-day volume weighted average Bushveld Minerals share price leading up to conversion;
-- Early redemption of the Loan Notes at the election of Bushveld Minerals, subject to the condition that the holder will have an option of converting up to 50 per cent of the early redemption amounts into Bushveld Minerals shares on the same terms set out above;
-- Scope for acceleration of redemption of up to US$5 million of the Loan Notes 12 months after Transaction Closure if an average ferrovanadium price of US$40/kgV is realised during any nine-month period during the12 month period after Transaction Closure;
-- Obligation to repay an amount equal to 40 per cent of any cash received on a new share issue which raises more than US$30m, provided no more than 50 per cent of the Loan Notes have already been paid, redeemed or converted;
-- Obligation to repay an amount equal to 50 per cent of any debt raised over US$15 million, provided no more than 50 per cent of the Loan Notes have been repaid, redeemed or converted;
-- Obligation to repay on a substantial sale of assets or change of control;
The holder will not be able to divest any Bushveld Minerals shares received for six months following conversion and be subject to an orderly market arrangement for the following six months.
In 2020 Bushveld Minerals Limited settled US$11.5million of the US$23million convertible loan notes. US$5million plus interest of US$1.28 million was settled in cash and the balance of US$6.5 million was satisfied by the issue of 37,115,210 new Bushveld shares, using a conversion price of 12.97p, which is a 5 per cent discount to the prevailing 10-day volume weighted average Bushveld Minerals share price leading up to conversion.
Duferco continues to hold a total of US$11.5 million convertible loan notes, which are due for repayment on 8 November 2021.
Production Financing Agreement - Orion Mine Finance
During 2020 Bushveld Minerals Limited signed a long-term Production Financing Agreement of US$30 million (or the "PFA") with mining-focused investment business Orion Mine Finance ("Orion"), primarily to finance its expansion plans at Bushveld Vametco Alloys (Pty) Ltd and debt repayment. Exchange control authorization from the South Africa Reserve Bank Financial Surveillance Department was granted in October 2020.
PFA Transaction Details
The Company will repay the principal amount and pay interest via quarterly payments determined initially as the sum of:
-- a gross revenue rate (set at 1.175 per cent for 2020 and 2021 and 1.45 per cent from 2022 onwards, subject to adjustment based on applicable quarterly vanadium prices) multiplied by the gross revenue for the quarter; and
-- a unit rate of US$0.443/kgV multiplied by the aggregate amount of vanadium sold for the quarter.
Once the Company reaches vanadium sales of approximately 132,020 mtV during the term of the facility, the gross revenue rate and unit rate will reduce by 75 per cent (i.e., to 25 per cent of the applicable rates).
On each of the first three loan anniversaries, the Company has the option to repay up to 50 per cent of both constituent loan parts (each may only be repaid once). If the Company utilises the loan repayment option, the gross revenue rate and/or the unit rate will reduce accordingly. The PFA capital has been reallocated from Vametco to Vanchem. Through the reallocation of the PFA capital to Vanchem, capital expenditure of approximately US$18 million is estimated for the remainder of the year and into 2022, for Vanchem to achieve a steady state production run rate of 2,600 mtVp.a by the end of 2022.
Part of the proceeds of the Instrument were used by the Company to repay in full the Nedbank ZAR250 million term loan. In addition, the following amendments will be applied to the financial covenants.
-- Removing the cumulative DSCR covenant; -- Increasing the default level on the Group net debt to Group EBITDA ratio to 2.50 times; -- Changing the gross interest cover ratio to a net interest cover ratio
Convertible Loan Notes Instrument - Orion Mine Finance
Bushveld Minerals Limited, through an affiliate of Orion Mine Finance, issued a US$35 million convertible loan notes instrument (the "Instrument"). The conversion price of the convertible loan notes was set at 17 pence. The Instrument's proceeds will go towards the first phase of Vanchem's critical refurbishment programme and debt repayment.
Financing terms of the Instrument and convertible loan notes
-- A fixed 10 per cent per annum coupon with a three-year maturity date from the drawdown date.
-- All interest will accrue and be capitalised on a quarterly basis in arrears but compounded annually.
-- Accumulated capitalised and accrued interest is convertible into Bushveld ordinary shares. All interest and principal, to the extent not converted into ordinary shares, is due and payable at maturity date.
-- Funds raised are to be used for capital investment purposes for the first phase of Vanchem's critical refurbishment programme, and the balance for debt repayment purposes.
Conversion feature
Between drawdown and the Instrument's maturity date Orion may, at their option, convert an amount of the outstanding debt, including capitalised and accrued interest, into Bushveld ordinary shares as follows:
-- First six months: Up to one third of the outstanding amount;
-- Second six months: Up to two thirds of the outstanding amount (less any amount previously converted);
-- From the anniversary of drawdown until the maturity date: the outstanding amount under the Instrument may be converted;
-- Bushveld also has the option to convert all, but not some, of the amount outstanding under the Instrument, if its volume weighted average share price is more than 200 per cent of the conversion price over a continuous 15 trading day period, a trading day being a day on which the AIM market is open for the trading of securities.
At any time until the convertible maturity date, Orion may convert the debt as above mentioned into an amount of ordinary shares equal to the total amount available for conversion under the Instrument divided by the conversion price of 17 pence.
The Orion and Nedbank borrowings are secured against certain group companies and associated assets.
12. Trade and other payables
6 months 12 months
ended ended
30 June 31 December
2021 2020
(unaudited) (audited)
US$ US$
------------ ------------
Financial instruments:
Trade payables 20,778,004 17,074,422
Other payables 4,431,464 4,991,179
------------ ------------
25,209,468 22,065,601
------------ ------------
Trade and other payables principally comprise amounts outstanding for trade purchases and on-going costs. The average credit period taken for trade purchases is 30 days.
The Group has financial risk management policies in place to ensure that all payables are paid within the pre-arranged credit terms. No interest has been charged by any suppliers as a result of late payment of invoices during the year.
The directors consider that the carrying amount of trade and other payables approximates to their fair value.
13. Loans
6 months 12 months
ended ended
30 June 31 December
2021 Unaudited 2020 Audited
US$ US$
---------------- --------------
The Industrial Development Corporation 1,664,028 1,597,972
---------------- --------------
Non-current liabilities 1,664,028 1,597,972
---------------- --------------
The Industrial Development Corporation
The loan represents The Industrial Development Corporation's (IDC) contribution and is governed by the tripartite agreement between Bushveld Energy Company (Pty) Ltd, Bushveld Electrolyte Company (Pty) Ltd & The Industrial Development Corporation of South Africa Limited. The loan represents the initial capitalised costs plus the initial subscription amount. A total amount of US$3,821,028 will be advanced to Bushveld Electrolyte Company Proprietary Limited. Bushveld Electrolyte Company is a South African producer of vanadium electrolyte. The company is jointly owned by Bushveld Energy and the IDC, with shareholding of 55 per cent and 45 per cent respectively. Its first manufacturing facility is under construction and is located in East London, South Africa.
The loan is interest free, unsecured, subordinated in favour of Bushveld Electrolyte Company's creditors and have no fixed term of repayment in the next 12 months and shall only be repaid from free cash flow as resolved by the board having conducted the solvency and liquidity test as contemplated in the Act.
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END
IR EAPNKAAFFEFA
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