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Bushveld Minerals shares soar as plans come together

The company has just agreed to spend the best part of £12mln on the Vametco vanadium mine next door to the company’s own deposit at Brits
picture of steel mine
Vanadium makes steel harder

“On the vanadium side I’m very comfortable”, Fortune Mojapelo, Bushveld Minerals’ (LON:BMN) chief executive told Proactive Investors over a year ago.

That confidence is starting to be borne out as latest numbers from its Vametco mine showed soaring profits alongside a plan to boost production at the South African site by two-thirds.

Profits climb

Improved vanadium prices lifted Vametco’s contribution to 85.5mln rand (£4.9mln) or 80% more than the whole of 2016.

Revenues for the period were 439m'n rand (£25mln), compared to 760mln rand over the whole of 2016 even though half year production was little changed at 1,441 tonnes.

A steel hardening additive, vanadium prices rose from a low of US$14.41/kgV in January 2016 to US$23.23/kgV in December 2016 and have continued to rise due to ongoing shortages, said Bushveld.

“By the end of July 2017, prices of above US$45/kgV were being reported by the recognised industry platform, Metalbulletin, in Europe, with Chinese prices in excess of US$50/kgV.”

A stronger South African rand has offset some of this appreciation, but cash production costs are US$14.50/kgV, well below the current spot price.

Expansion afoot

Fortune Mojapelo, Bushveld’s chief executive, said: “We are extremely pleased to have concluded the Vametco joint-acquisition at the time we did.” 

Bushveld paid US$16.5mln for its effective 27% stake, a price negotiated at the bottom of the vanadium price cycle.

The mine is run by Strategic Minerals Corporation, a joint venture between Bushveld (45% ) and South African firm Yellow Dragon (55%), which owns 79% of the business.

Alongside the results, Bushveld unveiled plans to increase production at Vametco substantially.

Annual output in 2016 totalled 2,804 tonnes, but the aim is for this to increase to 5,000 tonnes over the next three years.

Broker SP Angel said: “Bushveld Minerals’ Vametco is building on its low cost base vanadium production near Brits in S Africa to expand production into an undersupplied vanadium market at a time of improving price”.

It has a target price of 11.6p.

Vametco has the mining right for vanadium at two licences at Brits.

The operation is adjacent to Bushveld's own vanadium deposit, which, unsurprisingly, is a continuation of the mineralisation [strike] at the Vametco mine.

Plenty of vanadium in reserve

Ore reserves at Vametco are 27mln tonnes (JORC), sufficient for 24 years at current production levels with what Bushveld says are the highest in-magnetite vanadium pentoxide (V2O5) grades in the world at 2.55% on average.

Resources overall are in excess of 135mln tonnes (Mt) at vanadium grades of 2.1%.

Bushveld says Vametco is one of the cheapest primary producers of vanadium in the world.

In addition to vanadium nitride for the steel industry, Vametco produces a vanadium oxide product more suited to batteries.

Strings to the bow

Vanadium may be the current focus, but Bushveld has other strings to its bow including iron ore, titanium, tin and coal, where both these latter two have seen major developments recently.

The business is divided into three divisions: Bushveld Vanadium, which comprises Vametco, the Brits/Mokopane deposits, the P-Q iron ore and titanium asset and the vanadium battery business Bushveld Energy.

Greenhills Resources houses the tin assets, and Madagascar coal deposit is part of Lemur.

Float for Greenhills the aim

The tin project at Mokopane has an estimated 18,500t and there is more potential metal at Marble Hall.

Greenhills has also taken a 49.5% stake in the owner of the Uis tin project in Namibia, with the aim of creating a tin business with the critical mass to float separately.

Greenhills Resources is well positioned for life as a stand-alone platform through an IPO on AIM in the near term, efforts for which are now already underway, it said in August.

Lemur brings in Chinese partner

In Madagascar, Bushveld’s acquisition of Lemur Resources brought with it the Imaloto coal deposit with a Chinese partner, Sinohydro, now on board.

A feasibility study will assess an initial 60Mw independent power producer (IPP) coal power plant and associated 200 kilometre transmission line in southern Madagascar.

Coal fuel for the power station will be provided from Lemur's coal mining permit area in Madagascar.

Sinohydro will prepare the bankable study at its own cost within 12 months of signing the MoU.

A ‘star performer’

Bushveld has been a strong performer this year following the completion of the Vametco deal.

Year to date, shares are up more than four-fold at 9.2p, valuing the multi-faceted mining group at £67mln.

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