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Bushveld says strong vanadium demand seen in Q4 2020 has carried through into 2021

Despite cranking out the vanadium at increasing rates during 2020, ore reserves have not reduced significantly, according to the latest mineral resource estimate for the Vametco vanadium mine

Bushveld Minerals Ltd -

Bushveld Minerals Limited (LON:BMN) has said it expects to produce around 13%-20% more vanadium in 2021 than in 2020.

Group production for 2021 is projected to be between 4,100mln tonnes of vanadium (mtV) and 4,350 mtV. Volumes should be weighted towards the second half of the year due to a 35-day maintenance shutdown at the Vametco plant in South Africa scheduled for the first quarter of the year.

As well as the maintenance work, the group will seek to remove certain production bottlenecks at the plant.

Production in 2020 clocked in at 3,631 mtV, which was 24% higher than in 2019 but marginally – less than 1% - lower than production guidance of 3,660-3,940 mtV.

Fourth-quarter production of 951mtV was down 7% quarter-on-quarter, mainly due to unplanned maintenance stoppages at both of the group’s operations and severe weather conditions.

Sales of 4,264 mtV were up 78% year-on-year, partly as a result of the inclusion of sales from Vanchem this time around but also because of increased demand from customers in the second half of the year.

Capital expenditure in 2021 is expected to be in the region of 540mln South African rand (circa £26.5mln), with most of the cost being rand-denominated.

Unaudited group cash and cash equivalents at the end of 2020 stood at around US$50.5mln, up from US$34.0mln a year earlier.

The end of year cash position includes the Orion production financing arrangement and convertible loan note, and the 125mln rand Nedbank revolving credit facility.

READ Bushveld raises US$35mln through issue of convertibles to Orion Mine Finance

“Production for the year was 24% higher than the prior year, despite the challenging environment during the year. The fourth quarter was characterised by strong vanadium demand and sales which has carried [on] in 2021,” said Fortune Mojapelo, the chief executive officer (CEO) of Bushveld in a statement.

“We have entered the new financial year on a positive footing with the secured funding, the higher production for the year and a rising vanadium price. While COVID-19 remains a part of our everyday lives, we continue to concentrate on executing the goals that are within our own hands, including meeting our 2021 production guidance, reducing our costs and advancing the development of vanadium redox flow batteries as a major source of energy storage," he added.

The group also announced today the appointment of Francois Naude as director of operations at Vametco, Vanchem and the Bushveld Electrolyte Company (BELCO). Naude has more than 27 years of mining and processing experience.

In a separate announcement, Bushveld revealed that despite cranking out the vanadium at increasing rates during 2020, ore reserves have not reduced significantly, according to the latest mineral resource estimate for the Vametco vanadium mine near Brits on the Western Limb of the Bushveld Complex.

Ore reserves were down by about 2% from the end of 2019 estimate. At the end of 2020, ore reserves were estimated at 267,200 tonnes V2O5 in magnetite at a grade of 2.02% V2O5 in magnetite; at the end of 2019, the corresponding number was 274,100 tonnes V2O5 in magnetite.

The combined inferred and indicated mineral resource across three seams was reported at 184.2mln tonnes (Mt) at an average grade of 1.98% V2O5 in magnetite, with an average magnetite content of 35.0% in whole rock for 709.8 thousand tonnes of contained vanadium; a year earlier, the estimated resource had been 185.5 Mt at an average grade of 1.98% V2O5 in magnetite, with an average magnetite content of 35.0% in whole rock for 714.7 thousand tonnes of contained vanadium).

"I am pleased to report no significant change in our ore reserve in the past twelve months, except for the depletion that occurs in the ordinary course of mining the deposit. For a deposit with decades of production ahead of it and potential for expansion, this gives us the confidence to pursue our growth targets knowing we have a quality and consistent resource at Vametco,” said CEO Mojapelo.

Stockbroker Peel Hunt said the 2020 production number was 2% below the consensus forecast of 3,679mtV.

“Sales were higher at 4,264mtV, just below our 4,298mtV forecast, mainly due to destocking in Q4.

“The lower production at year-end was mainly due to mill stoppages (at Vametco and Vanchem), as well as additional maintenance at Vanchem,” the broker noted.

“Realised pricing in 2020 came in at just US$21-23/kg, 15% below consensus forecasts of US$25.9/kg. Costs for 2020 also came in higher than guidance, at both Vametco (3% above) and Vanchem (20% higher), due to the lower production and also optimising the feedstock at the Vanchem kiln,” Peel Hunt continued.

“Guidance for 2021 is for production of 4,100-4,350mtV, significantly below our current 5,160mtV forecast. Capex is also guided higher at US$37m, vs PHe [the Peel Hunt estimate] of US$26mln,” Peel Hunt said.

Shares in Bushveld were down 6.4% at 18.25p.

Quick facts: Bushveld Minerals Ltd

Price: 18.4421 GBX

Market: LSE
Market Cap: £219.75 m

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