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Bushveld Minerals Ld - Interim Results for six months to end-June 2020

RNS Number : 5645A
Bushveld Minerals Limited
30 September 2020
 

Market Abuse Regulation ("MAR") Disclosure

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

 

 

30 September 2020

Bushveld Minerals Limited

("Bushveld Minerals" "Bushveld" or the "Company")

Unaudited Interim Results for the Six Months ended 30 June 2020

Bushveld Minerals Limited (AIM: BMN), the AIM quoted, integrated primary vanadium producer and energy storage provider, with ownership of high-grade assets in South Africa, ("Bushveld"), is pleased to announce its half year unaudited results for the six months ended 30 June 2020.

 

Key Highlights

Financial highlights

§ Revenue of US$43.1 million (H1 2019: US$78.0 million), impacted by the continuing lower pricing environment as well as lost production due to the Covid-19 pandemic.

-       Total lost revenue due to Covid-19 of US$9.2 million1, and costs of US$0.4 million associated with hygiene, screening, protective and preventative measurements in place. 

§ Net cash used in investing activities reduced to US$5.0 million (H1 2019: US$11.4 million),  in order to conserve cash during a period of supressed vanadium prices and uncertainty surrounding the impact of Covid-19.

§ Cash and cash equivalent of US$24.6 million as at 30 June 2020, included revolving credit facility of ZAR125 million and term loan of ZAR250 million (31 December 2019: US$34.0 million included term loan of ZAR250 million).

§ The London Metal Bulletin ("LMB") Ferrovanadium price averaged US$25.70/kgV in H1 2020, 54 per cent lower than H1 2019 (H1 2019: US$56.30/kgV) and four per cent below H2 2019 (H2 2019: US$26.90/kgV). H2 2020 year to date average LMB Ferrovanadium price of US$25.19/kgV, as at 25 September 2020.  The LMB spot price at 25 September 2020 is US$24.73/kgV.

 

1.     Total revenue loss of US$9.2 million estimated as 380mtV multiplied by the Group's average realised sales price of US$24.20.

 

Table 1: Group financial and operational highlights

In US$ million unless otherwise specified.

Six Months Ended

 

 

 

June 30, 2020

June 30, 2019

%

 change

 

 

 

 

FINANCIAL HIGHLIGHTS

 

 

 

 

 

Revenue

43.1

78.0

-45%

 

 

EBITDA

 (1.0)

41.0

-102%

 

 

Depreciation

(8.9)

(3.5)

154%

 

 

Operating (Loss) / Profit

(9.9)

37.5

-126%

 

 

(Loss) / Profit Before Tax

(10.7)

44.7

-124%

 

 

Basic (Loss) / Earning per share (US cents)

(0.92)

1.92

-148%

 

 

Net cash (used in) / from operating activities

(2.7)

 34.7

-108%

 

 

Net cash used in investing activities

(5.0)

(11.4)

-56%

 

 

OPERATIONAL HIGHLIGHTS

 

 

 

 

 

Group Production (mtV)

1,649

1,392

18%

 

 

Group Sales (mtV)

1,765

1,115

58%

 

 

Sales to China (%)

18.0

3.0

500%

 

 

Group average realised sales price (US$/kgV)

24.20

70.00

-65%

 

 

L.M.B. average Ferrovanadium price (US$/kgV)

25.70

56.30

-54%

 

 

 

 

Operational highlights

§ Vametco and Vanchem recorded zero fatalities.

§ Vametco's Total Injury Frequency Rate ("TIFR") of 18.80, is an 11 per cent improvement relative to H1 2019 (H1 2019: 21.16). Vanchem recorded a TIFR of 0.009 for the period.

§ As at 30 August 2020 the Group had 36 Covid-19 positive cases, all of whom have recovered and successfully returned to work.

§ No Covid-19 related stoppages since ramping up to pre-lockdown production levels in May 2020, demonstrating the effectiveness of our stringent Covid-19 protocols within the operations.

 

Bushveld Vanadium

§ Group production for H1 2020 of 1,649 mtV (100 per cent basis) was 18 per cent higher than H1 2019 (H1 2019: 1,392 mtV), as a result of the inclusion of the production from Vanchem.

-     Estimated production losses of approximately 380 mtV were directly related to the Covid-19 nationwide lockdown.

-     Vametco production of 1,218 mtV (H1 2019: 1,392 mtV) and production cash cost (C1)1 US$17.20/kgV (H1 2019: US$19.30/kgV).

-     Vanchem production of 431 mtV and production cash cost (C1)1 US$16.40/kgV. Vanchem achieved a record monthly production of 119 mtV in May 2020 and 97 mtV in June 2020.

§ Group sales of 1,765 mtV was 58 per cent higher than H1 2019 (H1 2019: 1,115 mtV), as a result of higher sales at Vametco and the inclusion of sales from Vanchem.

§  Robust vanadium demand and higher buying price from China resulted in sales to China increasing to 18 per cent of Group sales (H1 2019: 3 per cent).

 

1.     Excludes depreciation, royalties and selling, general & administrative expenses and cost associated with Covid-19.  

 

Bushveld Energy

§ Electrolyte

-     Received environmental authorisation for construction of the vanadium electrolyte production facility, in partnership with the Industrial Development Corporation ("IDC").

-     Appointed an Engineering, Procurement, and Construction ("EPC") company, which commenced the engineering phase of the vanadium electrolyte plant.

-     The South African Department of Trade Industry and Competition ("DTIC") approved the electrolyte plant project.

§ Investments

-     Acquired an 8.71 per cent shareholding in Invinity Energy Systems plc ("Invinity") the entity created by the merger of Avalon Battery Corporation ("Avalon")  and redT energy plc ("redT"), in line with its strategy of partnering with Vanadium Redox Flow Batteries ("VRFB") companies.

§ Deployment

-     Signed a surface sublease agreement and the power purchase agreement ("PPA") for the Vametco mini-grid, and obtained a debt financing term-sheet from a French Development Bank, to be underwritten by a South African institution.

 

Outlook and Guidance

§ In our H1 Operational Update, announced in early September 2020, we revised 2020 Group production guidance to between 3,660 mtV and 3,950 mtV, subject to no further Covid-19 related disruptions. This production guidance is between 25 per cent and 35 per cent higher than 2019 Group production (2019: 2,931 mtV).

-     Vametco guidance is between 2,700 mtV and 2,850 mtV and production cash cost (C1) guidance is between ZAR295/kgV and ZAR300/kgV (US$17.50/kgV and US$17.90/kgV).

-     Vanchem is expected to meet the lower end of its previously announced production guidance of between 960 mtV and 1,100 mtV and the higher end of its production cash cost guidance of between ZAR310/kgV and ZAR320/kgV (US$18.40/kgV and US$19.00/kgV).

§ The Kiln-Off Gas Project was commissioned in September. This will enable Vametco to comply with environmental regulations and enable the increase in kiln feed throughput.

§ Demand from China for vanadium has recovered as result of increased infrastructure spending and compliance with rebar standards. Demand from Europe is expected to increase as a result of stimulus programmes. Outlook for the rest of the year remains uncertain due to the muted vanadium price, uncertainty surrounding the global economic recovery, longer lead time for delivery to customers, and increased number of non-Chinese producers shipping excess production to China in order to benefit from the higher spot prices.   

 

Events since 30 June 2020

§ Today, in a separate release, Bushveld Minerals announced a conditional long-term production financing agreement ("PFA") of US$30 million with mining-focused investment business Orion Mine Finance ("Orion"), primarily to finance the Vametco phase III expansion project and debt repayment. Drawdown is subject to certain conditions precedent, as set out in this morning's announcement.

§ Under a separate investment agreement, Orion has also conditionally agreed to subscribe for a minimum of US$10 million, and a maximum of US$20 million of convertible loan notes under a US$35 million convertible loan notes instrument (the "Instrument"). The Company intends to seek other subscribers for the balance of the total. The Instrument's proceeds will go towards the first phase of Vanchem's critical refurbishment programme and debt repayment.

§ Since both the PFA and the Instrument, require the prior written consent of Nedbank Limited ("Nedbank"), the Company and Bushveld Vametco Alloys (Proprietary) Limited,  are in discussions with Nedbank on the outstanding term loan and revolving credit facilities, including discussions on the potential pre-payment of the outstanding debt facilities on completion of the PFA. The outstanding balance of the Nedbank facilities is ZAR375 million (circa US$21.9 million), plus accrued interest of US$0.3 million.

§ In addition, the Company announced that the previous owner of Vanchem, Duferco Participations Holding S.A. ("Duferco"), has agreed to accept an early repayment of US$11.5 million of their US$23 million convertible loan notes issued in accordance with the terms of acquisition announced on 23 October 2019.

§ The financing will enable Bushveld Minerals to recommence the growth initiatives which were under review as part of the Group's cash preservation and capital allocation measures implemented to manage the near-term uncertain operating conditions as a result of the Covid-19 pandemic.

§ The financing and refinancing will allow the Group to reduce its gearing levels and strengthen its balance sheet.

§ On 3 August 2020 Bushveld Minerals, announced that Bushveld Energy (an 84 per cent subsidiary of Bushveld Minerals) had completed the investment in Austrian-based Enerox GmbH ("Enerox") as part of a consortium.

 

Fortune Mojapelo, CEO of Bushveld Minerals, commented:

"During these difficult times we continued to support our employees while meeting our customers' orders. In addition, we have carried on playing a supportive role in our local communities by supplying water and sanitisers to local hospitals, police stations, and care homes. Along with our peers in the industry, we halted production at Vametco and Vanchem for almost a full month under the South African government's lockdown measures imposed in late March 2020, followed by a ramp up towards previous production levels.

Unfortunately, the spread of the virus has continued post-lockdown, resulting in a limited number of positive cases at our own operations. Whilst all of those cases have successfully recovered and returned to work, this has necessitated operational adjustments to accommodate social distancing, Covid-19 protocols and altered shifts for the implementation of certain projects.

Among those impacted was timing of the commissioning of the Kiln-Off Gas project at Vametco, which was a key part of our ability to catch up on the lost month of production earlier in the year and meet our original guidance for 2020. As a result, and after an extensive review, in early September 2020 we reduced annual guidance.

Vanchem, the brownfield processing business we acquired at the end of 2019, continues to perform well, from both a cost and production perspective, and we are excited by the opportunity we have there, in terms of growth, in the years to come.

Bushveld Energy continues to go from strength to strength. Our VRFB Investment Platform has seen us invest in two of the most exciting and developed VRFB storage businesses, and at the same time we have made positive progress on our own projects in South Africa. The electrolyte plant received approval from the South African Department of Trade Industry and Competition and the engineering phase of the plant has commenced.

Vanadium demand has recovered in China post lockdown, but this is not yet the case in Europe and the US. As a result, we have redirected more product to China in order to take advantage of the higher prices. The outlook for the remainder of the year continues to be challenging, as a result of the lower vanadium price and longer delivery period to customers. However, Bushveld is now in a stronger position to execute its growth plans to expand production as demand recovers as a result of global stimulus programmes. We continue to operate our plants safely in accordance with Covid-19 protocols, and our prime responsibility remains to our employees and the communities in which we operate - we thank them for their hard work over the past six months.

We started 2020 on a strong financial footing and accessed our financial facilities to weather the coming storm. With US$24.6 million in cash at the end of June, we entered H2 2020 in a solid financial position.

 

Today, we separately announced a long-term PFA of US$30 million with Orion. Under a separate agreement, Orion has also conditionally agreed to subscribe for a minimum of US$10 million, and a maximum of US$20 million of convertible loan notes under a US$35 million Instrument with the remaining balance of US$15 million of convertible loan notes to be offered by the Company, to interested third party investors. This funding will provide us with flexibility around the expansion of Vametco and the first phase of the refurbishment of Vanchem."

 

 

Conference call

 

Bushveld Minerals Chief Executive Officer, Fortune Mojapelo, and Finance Director, Tanya Chikanza will host a conference call at 9:30am BST (10:30am SAST) today to discuss the announcement with analysts. Participants may join the call by dialling:

 

Tel:                 United Kingdom: +44 (0) 330 336 9127; South Africa: +27 11 844 6054

Toll Free:        United Kingdom: 0800 358 6377; South Africa: 0800 998 654

Pin:                 2792652

Webcast link     https://webcasting.brrmedia.co.uk/broadcast/5f6e055667e6d719f1fc1362 

 
 

A replay of the conference call will be available on the Company's website post-call.

 

 

Chief Executive's Report

Dear Shareholders,

There is no doubt the past six months will go down in history as one of the most challenging periods in our generation of modern society.

Having said that, and while the pandemic continues to spread, the world is in a much better position to tackle this virus now than in the early days of the outbreak; evidenced by a much lower mortality rate, increased testing, and the implementation of protocols around social distancing and other preventative measures that are now a part of our everyday life.

From Bushveld's perspective, we continue to believe the South African government's lockdown measures in March 2020 were the best course of action to stop the rapid spread of the virus. There is no doubt this action saved countless lives.

Fundamentals for the vanadium market remain robust, supported by the recovery in demand from China, which was a net vanadium importer in June and July and the European Union's €1.8 trillion (circa US$2.1 trillion) budget and corona virus recovery fund to stimulate the European economy, which is expected to include significant infrastructure spending. Bushveld Minerals is well positioned to take advantage of future increases in global vanadium demand.  

Despite the unprecedented challenges that we have faced in the first half of the financial year, the Company remains committed to delivering on its strategic initiatives to deliver a truly integrated and leading low-cost vanadium platform characterised by large high-grade vanadium deposits and mines; scalable, low-cost, vanadium primary processing assets and a downstream energy storage business, positioned to play a leading role in the growing stationary energy storage market.  

                                                                                             

Safety and Covid-19

Health and safety remain a top priority for the Company, and we are committed to providing a safe environment for our employees. During these difficult times we have supported our local communities by supplying water and sanitisers to local hospitals, police stations and old age homes. As at 30 August 2020 we had 36 Covid-19 positive cases, I am glad to announce that all individuals have recovered and returned to work.

Furthermore, I am pleased to report that there were no fatalities. Vametco recorded an 11 per cent improvement in TIFR to 18.80 relative to the corresponding prior period (H1 2019: 21.16) and Vanchem recorded a TIFR of 0.009. 

Operations

Bushveld has one of the largest, high-grade primary vanadium resource bases in the world. The Company's vanadium resource base currently consists of three mineral assets, Vametco, Brits and Mokopane. Bushveld's processing facilities consist of Vametco and Vanchem. The Company's mineral resources and processing facilities are situated in South Africa.

While Bushveld Vanadium was initially operating at the run-rate required to meet its Group 2020 guidance of between 3,960 mtV and 4,300 mtV, this was interrupted on 23 March 2020 when the South African Government issued a directive imposing 21 days nationwide lockdown effective from midnight on 26 March 2020, for all citizens, to minimise movement of non-essential businesses and activities. On 9 April, the Government announced a two-week extension of the lockdown period to 30 April 2020.

As per the Amended Disaster Regulations announced by the South African Government on 16 April 2020, mining operations were allowed to re-open and operate at a reduced capacity of 50 per cent of normal production levels. Vametco recommenced processing activities in April at a reduced capacity of approximately 50 per cent of production manning levels, in accordance with the Government's directive. Open pit and processing plant were permitted to return to 100 per cent production levels from 1 May 2020. Both Vametco and Vanchem commenced ramp-up and returned to pre-lockdown production levels in May 2020.

Vametco integrated mine and processing facility (74% ownership)

Table 2: Vametco operational overview (on a 100% basis)1

Description

 

Unit

H1 2020

H1 2019

H1 2020 vs

H1 2019

Vanadium (Nitrovan plus FeV) produced

mtV2

1,218

1,392

-12.5%

Vanadium sold3

mtV2

1,777

1,115

59.4%

Average realised price

US$/kgV

24.60

70.00

-64.9

Production cash cost (C1)4

ZAR/kgV

285.90

274.30

4.2%

Production cash cost (C1)4

US$/kgV

17.20

19.30

-10.9%

Total cash cost5

US$/kgV

23.90

28.80

-17.0%

 

1.     Based on provisional, unaudited figures. Bushveld's net attributable interest of the above figures is approximately 74 per cent.

2.     mtV = metric tonnes of vanadium.

3.     Sales of 1,777 mtV includes intercompany sales of 281 mtV. Of the 281 mtV of intercompany sales, 251 mtV have been converted into sales to external customers during Q3 2020.

4.     Excludes depreciation, royalties, movement in finished goods inventories, sales commissions, selling, general & administrative expenses, social expenses, sustaining capex and cost associated with Covid-19.  

5.     Excludes depreciation, movements in finished goods inventories and sales commissions.

Production for H1 2020 was 1,218 mtV (100 per cent basis) in the form of Nitrovan and Ferrovanadium. Production was 13 per cent below H1 2019 production (H1 2019: 1,392 mtV) as Vametco lost 300 mtV of production due to the Covid-19 nationwide lockdown.  Vametco sold 1,777 mtV, (includes intercompany sales of 281 mtV, of which 251 mtV  have been converted into sales to external customers during Q3 2020), 59 per cent more than a year earlier. Production cash cost (C1) in the period was US$17.20/kgV, 11 per cent below H1 2019, supported by a weaker ZAR:USD. Total cash cost was US$23.90/kgV.

A Kiln-Off Gas project was initiated in 2018 to comply with environmental regulations relating to air emissions and further increase kiln feed throughput. Commissioning of the Kiln-Off Gas project was planned to be completed during the first half of 2020. As previously communicated, due to the Covid-19 lockdown, increase in social distancing measures and a Covid-19 outbreak at the manufacturer's facility, commissioning was postponed to the end of Q3 2020. Kiln-Off Gas was commissioned in September 2020, the total capital expenditure of the project for 2020 was US$2.3 million.

As announced in the H1 Operational Update, the impact on operating conditions due to an increase in positive Covid-19 cases and a delay in the commissioning of the Kiln-Off Gas project led to Vametco's guidance being revised to between 2,700 mtV and 2,850 mtV (previously between 3,000 mtV and 3,200 mtV) and production cash cost (C1) guidance to between ZAR295/kgV and ZAR300/kgV (US$17.50/kgV and US$17.90/kgV).

Vanchem processing facility (100% ownership)

Table 3: Operational highlights for Vanchem

Description

 

Unit

H1 CY20

Chemicals

mtV1

69

Flake

mtV1

200

FeV

mtV1

162

Total production

mtV1

431

Chemicals

mtV1

24

Flake

mtV1

97

FeV

mtV1

147

Total sales

mtV

269

Average realised price

US$/kgV

23.80

Weighted average production cash cost (C1)2

ZAR/kgV

272.30

Weighted average production cash cost (C1)2

US$/kgV

16.40

Total cash cost3

US$/kgV

22.50

 

1.     mtV = metric tonnes of vanadium.

2.     Excludes depreciation, royalties, movement in finished goods inventories, sales commissions, selling, general & administrative expenses, social expenses, sustaining capex and cost associated with Covid-19.  

3.   Excludes depreciation, movements in finished goods inventories and sales commissions.

 

Having acquired Vanchem at the end of 2019, we are pleased with the operational performance of the facility to date and its contribution to the Group, despite a challenging six-month period dealing with the Covid-19 pandemic and Eskom's power rationing. During the period, Vanchem produced a total of 431 mtV. We estimate that Vanchem suffered a loss of 80 mtV due to the Covid-19 nationwide lockdown in H1 2020. Vanchem sold 269 mtV of vanadium products in the first half year under Bushveld's ownership. Production cash cost in the period was US$16.40/kgV, and total cash cost of US$22.50/kgV.

Processing activities recommenced at the end of April 2020 and ramped-up to pre-lockdown levels during May 2020 in accordance with the Government's "risk-adjusted strategy for economic activity". We were particularly pleased that during May 2020 and June 2020 Vanchem achieved record monthly production of 119 mtV and 97 mtV respectively.

As a result of the rise in Covid-19 cases in South Africa in Q2 2020 and the impact on operating conditions, Vanchem now expects to meet the lower end of its production guidance of between 960 mtV  and 1,100 mtV and the higher end of its production cash cost (C1) guidance of between ZAR310/kgV and ZAR320/kgV (US$18.40/kgV and US$19.0/kgV).

Vanchem has sufficient stockpiled ore supply to support current levels of production until H1 2021, after which the Group has the optionality to supply magnetite concentrates from Vametco to Vanchem.

Brits resource (62.5% ownership)

The Brits Project is located in Portion 3 of the farm Uitvalgrond 431 JQ, near the town of Brits in the North West Province of South Africa and is directly along strike from the Bushveld Vametco Alloys Mine (Bushveld-Vametco).  

The Company's interest in the asset ranges between 51 per cent and 74 per cent through three different companies, one of which is Caber Trade Mining and Invest 1 (Pty) Ltd ("Caber Trade"), the mining right applicant, and in which the Company holds an interest of 51 per cent.

The Caber Trade mining right application was recently refused by the DMRE due to not fulfilling certain conditions that had been set out in the 2012 letter of acceptance. Caber Trade has subsequently lodged an appeal against the decision on the grounds that the process followed in taking the refusal decision was administratively flawed.

A JORC compliant Competent Person's Report ("CPR") for the Maiden Mineral Resource was published on the Company's website on 30 January 2020. It is noted that the Caber Trade properties were not included in the CPR and the mining right refusal therefore has no impact.  

Brits has an Indicated and Inferred Resource of 66.8 Mt (100 per cent Gross Basis) at an average grade of 1.6 per cent V2O5 in magnetite for 175,400 tonnes of contained vanadium across the three seams. Pleasingly, the Indicated Mineral Resource tonnages account for 67 per cent of the total combined Mineral Resource and stand at 44.9Mt with an average grade of 1.6 per cent V2O5 in magnetite for 115,600 tonnes of contained vanadium across the three seams. Brits provides the optionality for additional ore feed for the Vametco plant, and, if required, feed for the Vanchem plant.

Mokopane project (64% ownership)

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 1.41 per cent in-situ and 1.75 per cent in magnetite.

Mokopane is positioned to become a primary source of feedstock for Vanchem, creating a fully integrated vanadium producing business in a shorter time frame and at a lower cost, as opposed to a standalone operation. The expedited Mokopane development, as a possible primary feedstock supply to Vanchem, does not remove the optionality of supplying ore to other primary or secondary producers worldwide, and/or to develop Mokopane into an integrated mine and processing plant.

A definitive feasibility study ("DFS") to mine the Main Magnetite Layer, to provide a resources and reserves assessment with a focus on Mokopane as a primary feedstock supplier to Vanchem has been deferred by a year as part of the Group's cash preservation measures to manage near-term liquidity. When restarted, we estimate the study will take between nine to12 months to complete.

The deferral of the DFS does not affect Vanchem's processing ability as it has sufficient ore supply to support current levels of production until H1 2021 and the Company retains the optionality to supply magnetite concentrates from Vametco to the Vanchem Plant.

Bushveld Energy (86% ownership)

Bushveld Energy, launched in 2016, is focused on developing and promoting the role of vanadium in the growing global energy storage market through the application of VRFBs. Bushveld Energy brings the energy storage value chain to South Africa by leveraging the Company's South African-mined and beneficiated vanadium.

Our business model embraces a number of activities along the VRFB value chain, including: electrolyte manufacturing, investment in VRFB manufacturing, battery deployment and project development.

Manufacturing

During the period, AR Process Projects ("ARPP"), a South African EPC company, was awarded the EPC contract for the electrolyte plant. ARPP is an engineering contracting company comprising sales, engineering, project management, project services, quality and commercial services. Since its inception in 1973, the company has delivered over 150 chemical projects, including evaporators, crystallisers, polymer, distillation, drying and effluent treatment plants. An EPC Agreement was finalised and signed during the second quarter.

ARPP has since commenced on the engineering phase of the EPC contract.

In Q2 2020, the DTIC approved the electrolyte plant project,  allocating funding to the East London Industrial Development Zone to construct the building and civil works to house the electrolyte plant.

Investment

On 1 April 2020, redT merged with Avalon, the merged entity, in which Bushveld took an 8.71 per cent stake, was named Invinity.

Bushveld entered into a Joint Venture agreement with redT on 9 March 2020 to form a Vanadium Financing Partnership to supply vanadium electrolyte to be used in third party owned VRFBs projects developed by redT. The Joint Venture agreement was transferred to Invinity.

Invinity appointed Rajat Kohli, as a Non-Executive Director in June 2020, as Bushveld's nominated director according to the agreement announced between the companies on 1 November 2019. 

In addition, post period the Company announced the acquisition by Enerox Holdings Limited ("EHL") of a further 65.1 per cent of the share capital of Enerox, as anticipated in its announcement on 19 December 2019. EHL is a newly incorporated investment vehicle formed by a consortium of investors, including Bushveld Energy Limited.

Deployment

Bushveld Energy's project development team continues to advance the Vametco solar PV and VRFB mini-grid project. During the quarter, key achievements included signing of the surface sublease agreement, the power purchase agreement ("PPA") and obtaining a term-sheet to provide debt financing for the project. The team is finalising a turnkey EPC Agreement for the project, which should be completed in the coming quarter.

In addition to the initial mini-grid project at Vametco, Bushveld Energy has been tasked with devising self-generation options for all of Bushveld's existing and future electrical energy needs at its operations in South Africa. With current aggregate loads of 21MW that are expected to increase to over 50MW after the expansion and refurbishment programmes, this need has the potential of more than 125MW of solar PV and 180MWh of battery energy storage systems within Bushveld's facilities. 

As previously announced, the UniEnergy Technology ("UET") system at Eskom completed site acceptance testing in May 2019. As UET shifted its strategy to a new, modular VRFB product, it was no longer able to continue monitoring and servicing the system. As a result, UET shut down the system in October 2019 and an agreement was reached among Bushveld, IDC, UET and Rongke Power Integration Co., Ltd ("RPI"), UET's sister company in China, to supply a replacement system that would be manufactured and maintained by RPI. The RPI battery of similar power and energy capability was delivered in Q1 2020; however, due to the Covid-19 pandemic lockdowns, first in China and then South Africa, the system is yet to be commissioned.

Board appointment

In March 2020 we announced the appointment of Ms Dolly Mokgatle as an Independent Non-Executive Director of the Company.

Ms Mokgatle is an established business leader in South Africa who has held various significant leadership positions within several of South Africa's state-owned enterprises, as well as within the private sector. Her leadership roles in the state-owned enterprises sector has seen her accumulate extensive commercial and policy-making experience in the Energy Sector.  As a senior advisor to the government on electricity-related matters, Ms Mokgatle has made contributions that have shaped the country's energy policy. 

Vanadium market

At the start of the year the vanadium price started to recover from the lows seen in 2019, however, the global Covid-19 pandemic resulted in the price contracting and flattening. Due to the pandemic, global steel demand in H1 2020 fell by six per cent to 873 Mt (H1 2019: 928 Mt). The global contraction in steel production (excluding China) was offset by an increase in Chinese steel production during the period to 499 Mt, 1.4 per cent higher than H1 2019 (H1:2019 492Mt). The increase in Chinese steel production was a result of the fiscal levers that the government introduced in late March to stimulate and fast-track an economic recovery. These measures included increased infrastructure spending via a RMB3.75 trillion (approximately US$500 billion) plan to encourage infrastructure investments.

China has emerged from the lockdown ahead of most countries. China's official Purchase Managers' Index of the month of August came in at 51.0,  showing that the policy stimulus is helping in its domestic recovery from the pandemic, with August marking the fourth straight month of expansion, although export demand remains constrained. 

Other major countries had gradually started to reopen their respective economies by the end of Q2 2020 and announced substantial stimulus to support growth. For example, the European Union agreed a €1.8 trillion (approximately US$2.1 trillion) budget and coronavirus recovery fund in July 2020, to aid a post pandemic economic recovery, expected to include significant infrastructure spend.

The increased infrastructure spending in China has resulted in higher steel production, supporting vanadium demand, with China been a net vanadium importer during the months of June and July. The boost in vanadium demand from China has resulted in a price premium relative to rest of the world. Robust demand from China is expected for the rest of the year albeit prices may soften due to more non-Chinese producers redirecting excess production to China in order to benefit from the greater spot liquidity and higher prices, thereby weighing down domestic prices.

Vanadium demand from the North American and European steel and aerospace industries declined during the period due to the pandemic and associated plant shutdowns. Demand from these regions is expected to remain constrained for the rest of the year due to the economic slowdown.

The Group has taken advantage of the robust vanadium demand and higher price from China compared to other jurisdictions and increased its sales to the region. As at the end of H1 2020, Bushveld Minerals sales to China made up 18 per cent of the group total, compared to just 3 per cent in H1 2019. However, The Covid-19 pandemic has increased the delivery period to customers due to logistics constraints at ports. The increase in transit time has affected overall sales volumes during the H1 2020 and is expected to continue for the rest of the year.

Increased deployment of VRFBs and demand is likely to rise as governments focus on accelerating the energy transition to a low-carbon energy future, which will increase vanadium demand. In addition, large, multinational power companies are starting to deploy VRFB technology in their projects, including ENEL in Spain and EDF in Oxford, United Kingdom.

Vanadium's unique characteristics as a key element of rebar production and energy storage technology ensure it will form part of stimulus plans that countries announce in order to revive their respective economies in a post-Covid-19 world and accelerate the transition to a low-carbon energy future.

 

Financial performance  

The results reflect a period of weak vanadium prices of during the first half the year as well as lost production due to the Covid-19 pandemic. The London Metal Bulletin Ferrovanadium price averaged US$25.70/kgV in H1 2020, 54 per cent lower than H1 2019 (H1 2019: US$56.30/kgV).

Income statement

Revenue

Bushveld Minerals generated a revenue of US$43.1 million, representing a decrease of 45 per cent  relative to the prior corresponding period, due to a 65 per cent decline in the average realised sales price (H1 2020: US$24.20/kgV vs H1 2019: US$70.0/kgV). The decline was partly offset by a 58 per cent increase in Group sales as a result of higher sales from Vametco as well as the inclusion of sales from Vanchem.

Vametco sold a total of 1,777 mtV which includes intercompany sales of 281 mtV. Of the 281 intercompany sales have 251 mtV been converted into sales to customers during Q3 2020. Vanchem sold a total of 269 mtV.

Cost of sales

Group cost of sales for the period was US$39.0 million (H1 2019: U$$22.9 million), the increase is primarily due to the inclusion of Vanchem and the additional sales units for the H1 2020 compared to prior year. The cost of sales also includes depreciation on the Vanchem assets, the fair value of which includes an excess of US$60.5 million over the amount paid which amounted to additional depreciation of US$4.0 million when compared to prior period of nil.

Table 4: Production and cash costs

H1 costs

 

 

Vametco production cash cost (C1)1

US$/KgV

17.20

Vametco total cash cost2

US$/KgV

23.90

Vanchem production cash cost (C1)1

US$/KgV

16.40

Vanchem total cash cost2

US$/KgV

22.50

 

1.     Excludes depreciation, royalties, movement in finished goods inventories, sales commissions, selling, general & administrative expenses, social expenses, sustaining capex and cost associated with Covid-19.  

2.     Excludes depreciation, movements in finished goods inventories and sales commissions.

 

Selling and distribution costs

Selling and distribution costs for the period were US$2.5 million (H1 2019: US8.5 million). The decrease is due to reduced sales commission costs as a result of the lower realised price at Vametco of US$24.60/kg, relative to the corresponding prior period of US$70.00/kgV.

Idle plant costs

Idle plant costs for the period were US$3.1 million (H12019: US$284,266). The increase is due to the Covid-19 nationwide lockdown during the months of March 2020 and April 2020.

Administrative expenses

Administrative expenses were US$7.6 million, in line with the corresponding prior period (H12019: US$ 7.7 million), despite the inclusion of Vanchem as well as the additional Covid-19 monitoring and control costs which were unplanned. Administrative expenses included: US$3.7 million in employee costs, US$2 million in professional fees, approximately US$1 million in administrative costs.

Balance sheet

As at 30 June 2020 the carrying value of property plant and equipment was US$154.6 million, an increase of US$96 million from 30 June 2019, as a result of the inclusion of the Vanchem assets, which were acquired in November 2019. This is however, a reduction from the balance recognised in December 2019 of US$185.3 million, mainly as a result of  the weaker ZAR at 30 June 2020 on conversion of the ZAR based balance sheet to USD. The ZAR:USD exchange rate as at 30 June 2020 devalued by almost 20 per cent when compared to the exchange rate as at 31 December 2019.

As at 30 June 2020 total non-current and current liabilities were US$71.8 million (31 December 2019: US$73.7 million) and US$19.3 million (31 December 2019: US$19.9 million) respectively. The non-current liabilities include the Nedbank debt facilities of ZAR375 million (US$21.9 million) and the Duferco convertible loan notes of US$23.7 million. Further details can be found in Note 11.

The Group's cash and cash equivalent as at 30 June 2020 was US$24.6 million, relative to US$34.0 million as at 31 December 2019.

As at 30 June 2020 the environmental rehabilitation liability was US$14.7 million, relative to US$6.9 million as at 30 June 2019 and US$17.8 million as at 31 December 2019. The increase relative to 30 June 2019 was due to the inclusion of Vanchem's environmental rehabilitation liability which was recognised at the end of 2019. The decrease relative to 31 December 2019 was due to the weaker ZAR as at 30 June 2020 on conversion of the ZAR based balance sheet to USD. The ZAR USD exchange rate as at 30 June 2020 devalued by almost 20 per cent when compared to the exchange rate as at 31 December 2019.

As announced, we are in discussion with Nedbank, on the outstanding term loan and revolving credit facilities, including discussions on the potential pre-payment of the outstanding debt facilities on completion of the PFA. The outstanding balance of the Nedbank facilities is ZAR375 million approximately US$21.9 million.

In addition, Duferco,  the previous owner of Vanchem, has agreed to accept an early repayment of US$11.5 million of their US$23 million convertible loan notes. US$6.5 million will be repaid through the issue of new Bushveld shares and the remaining balance of US$5 million of the loan notes, plus interest of US$1.15 million will be settled as a cash payment.

Cash flow

Due to a subdued price environment the net cash outflow from operating activities was (US$2.7 million), relative to an inflow of US$34.7 million from the corresponding prior period.

The investing activities of the business resulted in an outflow of US$5.0 million, a reduction of US$6.4 million relative to the corresponding prior period (H1 2019: US$11.4 million). This is in line with the Group's cash preservation measures, to prioritise critical and regulatory capital expenditure during this uncertain operating conditions and subdued price environment.

Capital expenditure

The Company will continue to adhere to the cash preservation measures through its capital prioritisation framework,  implemented at the beginning of the year, in light of the uncertain market conditions due to the Covid-19 pandemic. The Group's 2020 capital expenditure guidance remains unchanged to ZAR135 million of which ZAR96 million is allocated as sustaining capital, ZAR35 million as regulatory capital and ZAR4 million as growth capital.

Vametco

Phase III expansion project

In Q4 2020, we will commence a pre-feasibility study, estimated to cost ZAR4 million (circa US$240,000) for phase III of the expansion for Vametco to achieve a steady state production run-rate of 4,200 mtV per annum. The preliminary capital expenditure for phase III is estimated at approximately ZAR430 million (circa US$26 million), with most of the cost being Rand-denominated. The capital expenditure and production profile will be finalised after prefeasibility and feasibility studies are concluded.

Vanchem

Phase I of the critical refurbishment programme

Tenders for pre-feasibility studies for the prioritised refurbishment programme projects have been issued with closing dates towards the end of September 2020. The 2020 capital expenditure is estimated to be less than ZAR85 million (circa US$5 million) of critical refurbishment, focused on extending the calcine dump and commence the upgrade of the electrical reticulation system and the storm water treatment. Construction and site supervision contracts for the Waste Disposal Facility extension project were finalised in August 2020 and site work commenced at the end of August 2020. This  project is now expected to be completed during H1 2021, with part of the associated capital expenditure now falling into the associated financial year, the delay, will not compromise the expected  production for 2021.

 

 

 

 

 

 

Outlook

Operational

The Group will continue to prioritise operational performance, cost efficiencies and synergies across Vametco and Vanchem, and will maintain a disciplined approach towards managing capital expenditure and optimising operating margins. As announced in the H1 2020 Operational Update, Due to the Covid-19 nationwide lockdown we have restated the Group production guidance to between 3,660 mtV and 3,950 mtV, previously between 3,960 mtV and 4,300 mtV. The revised guidance is subject to no further Covid-19 related disruption for the rest of the year, while continuing to monitor the situation in light of the Covid-19 virus driven risks and their potential resultant impact on our operations.

On 21 September 2020, the South African government moved the lockdown status to a level 1, under such, the majority of the economy will be allowed to operate with minimal restrictions. The Group will continue to monitor the economic outlook as it moves towards recovery.

Financial

The Group manages liquidity risk by ensuring that it has sufficient funds to facilitate all ongoing operations. As part of the annual budgeting and long-term planning process, the Group's budget and cashflow forecasting is reviewed and approved by the Board. The cashflow forecast is amended in line with any material changes identified during the year. Equally, where funding requirements are identified from the cashflow forecast, appropriate measures are taken to ensure these requirements can be satisfied. In particular, a capital allocation framework is applied which prioritises maintenance, critical and regulatory capital funding requirements.

The Group also closely monitors its liquidity risk. It regularly produces cash forecasts and analyses sensitivities for different scenarios, including, but not limited to, changes in commodity prices and different production profiles from the Group's producing assets.

The impact of Covid-19 has been assessed by the Group and, although the operations are producing again, near-term operating conditions remain uncertain. Management continues to run various scenarios and sensitivities to provide the Board with possible outcomes to direct the strategy in the best interest of the business and its shareholders.

Consequently, the Group continues to take a prudent and proactive approach towards managing liquidity and taking cash preservation measures necessary to navigate this uncertain and unprecedented period.

The US$30 million PFA and the convertible loan notes of up to US$35 million, will allow the Group to recommence its growth initiatives which were under review as part of the Group's cash preservation measures implemented to manage the near-term uncertainty. Furthermore,  it will allow the Group to repay part of its debt and refinance current borrowing arrangements.

Finally, I am proud of the measures we have taken to protect our people and the business. Bushveld Minerals is now in an even stronger position to execute on its strategy to be the leading vertically integrated primary vanadium producer by growing its production to 8,400 mtV per annum and build Bushveld Energy into the key energy storage player.

I thank you for your support.

Fortune Mojapelo

Chief Executive Officer.

 

 

 

 

 

6 months

ended

6 months

ended

12 months

ended

30 June

30 June

31 December

 

 

Notes

2020

Unaudited

$

2019

Unaudited

$

2019

audited

$

 

Continuing operations

 

 

 

 

Revenue

 

43,050,652

78,001,182

116,514,112

Cost of sales

 

(38,987,345)

(22,879,458)

(56,198,919)

Gross profit

 

4,063,307

55,121,724

60,315,193

Other operating income

 

771,383

412,905

922,385

Selling and distribution costs

 

(2,454,724)

(8,451,397)

(7,556,687)

Other mine operating costs

 

(1,620,053)

(1,565,719)

(3,865,303)

Idle plant costs

 

(3,076,313)

(284,266)

(2,893,286)

Administrative expenses

 

(7,602,956)

(7,687,433)

(24,668,491)

Operating (loss)/profit

 

(9,919,356)

37,545,814

22,253,811

Finance income

 

601,074

2,679,963

3,593,142

Finance costs

 

(1,414,509)

(1,448,801)

(1,669,456)

Gain on bargain purchase

 

-

-

60,586,633

Movement in earnout estimate

 

-

5,912,435

(1,510,572)

(Loss) / profit before taxation

 

(10,732,791)

44,689,411

83,253,558

Taxation

 

410,263

(13,877,341)

(14,005,965)

(Loss) / profit for the period

 

(10,322,528)

30,812,070

69,247,593

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

 

3,268,931

(2,679)

(359,045)

Other fair value movements

 

-

-

110,175

Total items that will not be reclassified to profit or loss

 

3,268,931

(2,679)

(248,870)

 

Items that may be reclassified to profit or loss:

 

 

 

 

Currency translation differences

 

(25,438,821)

3,687,039

6,413,737

Other comprehensive income for the period net of taxation

 

(22,169,890)

3,684,360

6,164,867

Total comprehensive (loss) / income for the period

 

(32,492,418)

34,496,430

75,412,460

 

(Loss) / profit attributable to:

 

 

 

 

Owners of the parent

 

(10,764,522)

21,542,145

61,968,301

Non-controlling interest

 

441,994

9,269,925

7,279,292

 

 

(10,322,528)

30,812,070

69,247,593

 

Total comprehensive (loss) / income attributable to:

 

 

 

 

Owners of the parent

 

(29,383,559)

24,267,874

67,136,957

Non-controlling interest

 

(3,108,859)

10,228,556

8,275,503

 

 

(32,492,418)

34,496,430

75,412,460

 

Consolidated Statement of Profit or Loss and Other Comprehensive Income

 

 

6 months

ended

6 months

ended

12 months

ended

30 June

30 June

31 December

2020

2019

2019

Unaudited

Unaudited

audited

 

Note(s)

$

$

$

 

Earnings per share

 

 

 

 

(loss) / Profit per ordinary share

Basic earnings per share (in cents)

 

3

 

(0.92)

 

1.92

 

5.51

Diluted earnings per share (in cents)

3

(0.92)

1.92

5.45

 

 

-

-

-

 

All results relate to continuing activities.

 

 

 

 

The accounting policies on pages 7 to 8 and the notes on pages 7 to 17 form an integral part of the consolidated interim financial statements.

 

 

Statement of Financial Position

 

 

 

30 June

31 December

 

 

Note

2020

Unaudited

$

2019

audited

$

 

Assets

 

 

 

Non-Current Assets

 

 

 

Intangible assets - exploration and evaluation

4

56,588,428

59,408,821

Property, plant and equipment

5

154,629,309

185,269,063

Investment properties

 

2,354,005

2,905,449

Deferred tax

 

1,739,745

173,892

Financial assets - investments

 

1,259,254

4,420,891

Total Non-Current Assets

 

216,570,741

252,178,116

Current Assets

 

 

 

Inventories

6

34,148,850

35,082,342

Trade and other receivables

7

7,813,472

4,427,793

Restricted investment

 

5,479,753

6,605,465

Current tax receivable

 

918,793

493,178

Financial assets at fair value

8

10,221,158

1,952,227

Cash and cash equivalents

9

24,605,511

34,011,557

Total Current Assets

 

83,187,537

82,572,562

Total Assets

 

299,758,278

334,750,678

Equity and Liabilities

 

 

 

 

Share capital

 

10

 

15,357,271

 

15,357,271

Share premium

10

111,067,064

111,067,064

Retained income

 

72,650,916

83,415,438

Foreign currency translation reserve

 

(23,543,829)

(1,655,861)

Fair value reserve

 

2,648,582

(620,349)

Equity attributable to owners of the parent

 

178,180,004

207,563,563

Non-controlling interest

 

30,418,864

33,527,723

Total Equity

 

208,598,868

241,091,286

Liabilities

 

 

 

Non-Current Liabilities

 

 

 

Retirement benefit obligation

 

1,918,263

2,331,325

Environmental rehabilitation liability

 

14,746,631

17,844,066

Deferred consideration

 

5,207,923

7,108,819

Borrowings

11

46,229,579

41,756,152

Lease liabilities

 

3,713,871

4,677,338

Total Non-Current Liabilities

 

71,816,267

73,717,700

Current Liabilities

 

 

 

Trade and other payables

12

16,108,622

15,721,502

Provisions

 

2,288,741

3,432,619

Borrowings

11

266,698

-

Lease liabilities

 

679,082

787,571

Total Current Liabilities

 

19,343,143

19,941,692

Total Liabilities

 

91,159,410

93,659,392

Total Equity and Liabilities

 

299,758,278

334,750,678

 

 

 

 

 

 

 

Statement of Changes in Equity

 

 

Share capital

Share

Foreign

Fair value

Retained

Total

Non-

Total equity

 

 

 

$

premium

 

 

$

exchange

translation reserve

 

$

reserve

 

 

$

income

 

 

$

attributable to

equity holders of the group / company

$

controlling

interest

 

 

$

 

 

 

$

Balance at 1 January 2019

14,921,079

101,003,256

(7,073,387)

(371,479)

21,447,137

129,926,606

29,712,446

159,639,052

Profit for the period

-

-

-

-

21,542,145

21,542,145

9,269,925

30,812,070

Other comprehensive income, net of tax: Currency translation differences

 

-

 

-

 

2,728,408

 

-

 

-

 

2,728,408

 

958,631

 

3,687,039

Fair value movement on investments

-

-

-

(2,679)

-

(2,679)

-

(2,679)

Other fair value movements

-

-

-

-

-

-

-

-

Total comprehensive income for the period

-

-

2,728,408

(2,679)

21,542,145

24,267,874

10,228,556

34,496,430

Unaudited Balance at 30 June 2019

14,921,079

101,003,256

(4,344,979)

(374,158)

42,989,282

154,194,480

39,941,002

194,135,482

Profit for the period

-

-

-

-

40,426,156

40,426,156

(1,990,633)

38,435,523

Other comprehensive income, net of tax: Currency translation differences

 

-

 

-

 

2,689,118

 

-

 

-

 

2,689,118

 

37,580

 

2,726,698

Fair value movement on investments

-

-

-

(356,366)

-

(356,366)

-

(356,366)

Other fair value movements

-

-

-

110,175

-

110,175

-

110,175

Total comprehensive income for the period

-

-

2,689,118

(246,191)

40,426,156

42,869,083

(1,953,053)

40,916,030

Issue of shares

436,192

10,063,808

-

-

-

10,500,000

-

10,500,000

Dividends paid to non-controlling interest

-

-

-

-

-

-

(4,460,226)

(4,460,226)

Audited Balance at 31 December 2019

15,357,271

111,067,064

(1,655,861)

(620,349)

83,415,438

207,563,563

33,527,723

241,091,286

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 investments

-

-

-

3,268,931

-

3,268,931

-

3,268,931

Total comprehensive Loss for the period

-

-

(21,887,968)

3,268,931

(10,764,522)

(29,383,559)

(3,108,859)

(32,492,418)

Unaudited Balance at 30 June 2020

15,357,271

111,067,064

(23,543,829)

2,648,582

72,650,916

178,180,004

30,418,864

208,598,868

Note

10

10

 

 

 

 

 

 

 

 

 

4

 

Consolidated Statement of Cash Flows

 

 

 

 

 

2020

Unaudited

2019

Unaudited

2019

audited

Note(s)

$

$

$

 

Cash flows (used in) / from operating activities

 

 

 

 

(Loss) / Profit before taxation

 

(10,732,791)

44,689,411

83,253,558

Adjustments for:

Depreciation property, plant and equipment

 

5

 

8,912,034

 

3,483,155

 

10,388,145

Gain on bargain purchase

 

-

-

(60,586,633)

Movement in earnout estimate

 

-

(5,912,435)

1,510,572

Finance income

 

(601,074)

(2,679,963)

(3,593,142)

Finance costs

 

1,414,509

1,448,801

1,669,456

Changes in working capital

 

(2,065,067)

4,803,162

4,586,737

Income taxes paid

 

410,263

(11,147,542)

(8,767,312)

Net cash (used in) / from operating activities

 

(2,662,126)

34,684,589

28,461,381

 

Cash flows (used in) / from investing activities

 

 

 

 

Finance income

 

509,622

2,679,963

3,593,142

Acquisition of business

 

-

(6,800,000)

(30,713,500)

Purchase of property, plant and equipment

5

(996,844)

(5,807,169)

(13,320,897)

Payment of deferred consideration

 

(1,680,459)

(600,000)

(3,600,000)

Purchase of investments

 

(2,004,375)

-

(4,420,891)

Purchase of exploration and evaluation assets

4

(816,962)

(895,402)

(1,268,697)

Net cash from investing activities

 

(4,989,018)

(11,422,608)

(49,730,843)

 

Cash flows (used in) / from financing activities

 

 

 

 

Payment on lease liabilities

 

(416,207)

(305,688)

(726,668)

Finance costs

Net proceeds from issue of shares and warrants

 

10

(709,664)

-

(1,448,801)

-

(108,596)

-

Net proceeds from capital raised

 

-

-

-

Net proceeds / (repayment) of borrowings

 

8,203,686

-

18,582,864

Dividends paid

 

-

-

(4,460,226)

Net cash from financing activities

 

7,077,815

(1,754,489)

13,287,374

 

Total cash movement for the period

 

 

(573,329)

 

21,507,492

 

(7,982,088)

Cash at the beginning of the period

 

34,011,557

42,019,123

42,019,123

Effect of translation of foreign rate

 

(8,832,717)

2,604,102

(25,478)

Total cash at end of the period

9

24,605,511

66,130,719

34,011,557

 

Notes to the Consolidated Interim 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 2020 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 International Financial Reporting Standards ('IFRS") as adopted by the EU 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 IFRS, it cannot be construed as being in full compliance with IFRS. The financial information contained in this announcement does not constitute statutory accounts as defined by the Companies (Guernsey) Law 2008.

 

On the instructions of the directors, the Group's auditor has performed specific procedures in accordance with International Standard on Related Services ('ISRS') 4400 'Engagements to Perform Agreed-upon Procedures Regarding Financial Information', on the  financial information, solely for the purpose of providing a report of factual findings in respect of the  financial information to the directors. The specific procedures performed do not constitute either an audit or a review.

 

The audited financial information for the period ended 31 December 2019 is based on the statutory accounts for the financial period ended 31 December 2019. The auditors 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.

 

 

 

Notes to the Consolidated Interim Financial Statements

 

2.      SIGNIFICANT ACCOUNTING POLICIES (continued)

 

iv. Surface rights liabilities

 

The group has provided for surface lease costs that would accrue to the owners of the land on which the mine is built. The quantum of the amounts due post implementation of the Mineral and Petroleum Resources Development Act (MPRDA) and the granting of the new order mining right to the group is somewhat uncertain, and need to be negotiated with such owners. The group has conservatively accrued for possible costs in this regard, but the actual obligation may be materially different when negotiations with the relevant parties are completed.

 

v. 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 2019 for residential properties. For residential properties, it measures land and buildings at revalued amounts with changes in fair value being recognised in other comprehensive income. 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.

 

vi. Impairment of exploration and evaluation assets

 

Determining whether an exploration and evaluation asset is impaired requires an assessment of whether there are any indicators of impairment, including by reference to specific impairment indicators prescribed in IFRS 6 - Exploration for and Evaluation of Mineral Resources. If there is any indication of potential impairment, an impairment test is required based on  value in use of the asset. The valuation of intangible exploration assets is dependent upon the discovery of economically recoverable deposits which, in turn, is dependent on future vanadium and iron ore prices, future capital expenditures and environmental and regulatory restrictions. The directors have concluded that there are no indications of impairment in respect   of the carrying value of intangible assets at 30 June 2020 based on planned future development of the projects and current and forecast commodity prices. See note 4 for details of exploration and evaluation assets.

 

vii. IFRS 3 Business combination

 

In accounting for the acquisition of a business, the company assesses whether a business combination met the IFRS 3 definition of "a business". IFRS 3 states that "a business consists of inputs and processes applied to those inputs that can  create outputs".

 

IFRS 3 requires an acquirer to measure the cost of the acquisition at the fair value of the consideration paid, and measure acquired identifiable assets and liabilities at their fair values, with any excess of acquired assets and liabilities over the consideration paid (a 'bargain purchase') recognised in profit or loss immediately. The company engages an independent valuation expert to value the assets acquired using the most appropriate fair value measurement technique given the nature of the assets acquired and the circumstances of the acquisition.

 

Where a business combination results in a bargain purchase, IFRS 3 requires that the acquiror to reassess whether it has correctly identified all the assets and liabilities acquired and to review the procedures used to measure the fair values recognised at the acquisition date.

 

3.      Profit/(loss) per share

 

FROM CONTINUING OPERATIONS

 

Basic earnings per share

 

The calculation of a basic earnings per share of (0.92) cents (December 2019: 5.51 cents), is calculated using the total loss for the year attributable to the owners of the company of $10,322,528 (December 2019: Profit of $61,968,301) and 1,125,562,148 shares (2019:1,125,562,148) 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.

 

 

 

 

 

3.      Intangible assets - exploration and evaluation

 

 

30 June 2020
(unaudited)

 

 

31 December 2021
(audited)

 

Cost / Valuation

Accumulated amortization

Carrying value

Cost / Valuation

Accumulated amortization

Carrying value

$

$

$

$

$

$

Vanadium and Iron ore

53,497,689

-

53,497,689

54,245,349

-

54,245,349

Coal

3,090,739

-

3,090,739

5,163,472

-

5,163,472

Total

56,588,428

-

56,588,428

59,408,821

-

59,408,821

 

Reconciliation of intangible assets - exploration and evaluation - 30 June 2020

 

 

Opening

balance at 1

Additions

Exchange

differences

Total

January 2020

$

 

$

 

$

 

$

Vanadium and Iron ore

56,827,085

72,919

(3,402,315)

53,497,689

Coal

2,581,736

744,043

(235,040)

3,090,739

 

59,408,821

816,962

(3,637,355)

56,588,428

 

Reconciliation of intangible assets - exploration and evaluation - 31 December 2019

 

 

Opening

balance at 1

Additions

Exchange

differences

Total

January 2019

$

 

$

 

$

 

$

Vanadium and Iron ore

55,639,067

198,319

989,699

56,827,085

Coal

1,511,358

1,070,378

-

2,581,736

 

57,150,425

1,268,697

59,408,821

 

Vanadium and Iron Ore

 

 

 

 

 

The Company's subsidiary, Bushveld Resources Limited has a 64% 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% 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"), 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 orebody 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.

 

Under the agreements to acquire the licences within Bushveld Resources, the group is required to fully fund the exploration activities up to the issue of the corresponding mining licences. As the non-controlling interest party retains their equity interest, the funding of their interest is accounted as deemed purchase consideration and is included in the additions in the year to exploration activities. A corresponding increase is credited to non-controlling interest.

 

 

4.      Intangible assets - exploration and evaluation (continued) 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. 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 prospecting 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

 

Coal

 

Coal Exploration licences have been issued to Coal Mining Madagascar SARL a 99% 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.

 

 

 

 

 

Notes to the Consolidated Interim Financial Statements

 

 

5.      Property, plant and equipment

 

 

 

other

improvements

machinery

furniture and

equipment

ng assets

asset

stripping asset

construction

 

$

$

$

$

$

$

$

$

 

Cost

 

 

 

 

 

 

 

 

At 01 January 2019

1,259,049

42,878,860

241,295

1,575,895

-

-

7,455,662

53,410,761

Additions

6,714,835

113,453,458

1,371,514

942,121

5,727,902

3,920,684

11,883,121

144,013,635

Disposals and scrappings

(414,250)

(2,134,666)

(239,102)

-

-

-

-

(2,788,018)

Transfers from capital work

268,304

8,992,207

48,833

-

-

-

(9,309,344)

-

in progress

 

 

 

 

 

 

 

 

Foreign exchange

368,583

3,179,724

51,571

79,271

7,988

-

639,339

4,326,476

movements

 

 

 

 

 

 

 

 

At 31 December 2019 (audited)

8,196,521

166,369,583

1,474,111

2,597,287

5,735,890

3,920,684

10,668,778

198,962,854

Additions

-

47,834

8,517

-

-

-

940,493

996,844

Transfers

-

70,857

-

-

(70,857)

-

-

-

Foreign Exchange differences

(1,555,670)

(18,826,472)

(279,781)

(453,182)

(1,020,360)

(744,132)

(2,101,682)

(24,981,279)

At 30 June 2020 (unaudited)

6,640,851

147,661,802

1,202,847

2,144,105

4,644,673

3,176,552

9,507,589

174,978,419

Depreciation

 

 

 

 

 

 

 

 

At 01 January 2019

(237,758)

(5,028,852)

(179,873)

(83,106)

-

-

-

(5,529,589)

Disposals

414,251

1,804,752

234,711

-

-

-

-

2,453,714

Depreciation

(1,177,756)

(5,947,944)

(617,794)

(848,939)

(627,475)

(1,168,237)

-

(10,388,145)

Foreign exchange

(21,021)

(211,965)

27,246

(22,543)

(1,488)

-

-

(229,771)

movements

 

 

 

 

 

 

 

 

At 31 December 2019 (audited)

(1,022,284)

(9,384,009)

(535,710)

(954,588)

(628,963)

(1,168,237)

-

(13,693,791)

Depreciation charge for the year

(217,617)

(7,104,791)

(90,243)

-

(286,533)

(1,212,850)

-

(8,912,034)

Disposals

-

-

766

-

-

-

-

766

Foreign exchange

189,435

1,292,463

120,565

181,178

152,752

319,556

-

2,255,949

At 30 June 2020 (unaudited)

(1,050,466)

(15,196,337)

(504,622)

(773,410)

(762,744)

(2,061,531)

-

(20,349,110)

 

Net Book Value

 

 

 

 

 

 

 

 

At 31 December 2019 (audited)

7,174,237

156,985,574

938,400

1,642,700

5,106,927

2,752,447

10,668,778

185,269,063

 

 

 

 

 

 

 

 

 

At 30 June 2020 (unaudited)

5,590,385

132,465,465

698,225

1,370,695

3,881,929

1,115,021

9,507,589

154,629,309

 

 

 

 

 

6.      Inventories

 

  30 June 2020
 (unaudited)

31 December

2019

(audited

Finished goods

12,591,525

17,062,028

Work in progress

7,642,416

4,544,303

Raw materials

1,498,412

1,702,062

Consumable stores

12,416,497

11,773,949

Inventories

34,148,850

35,082,342

 

The amount of write-down of inventories due to net realisable value provision requirement is nil (2019: nil).

 

7.      Trade and other receivables

 

Trade receivables

3,895,067

2,762,448

Other receivables

1,571,492

1,665,345

Deposits

1,924

-

Non-financial instruments:

VAT

 

2,344,989

 

-

Total trade and other receivables

7,813,472

4,427,793

 

Trade receivables are non-interest bearing and are generally on 15-90 day terms. There were no indicators of impairment at the year end. At 30 June 2020 the group had one customer which accounted for approximately 90% of trade receivables.

 

The directors consider that the carrying amount of trade and other receivables approximates to their fair value due to their short-term nature. As at the 30 June 2020, no receivables are past their due date, hence no allowance for doubtful receivables is provided on the basis that expected credit losses are nil.

 

8.      Financial assets at fair value

 

 

30 June 2020 (unaudited)

31 December

2019

(audited)

$

$

Opening balance

1,952,227

2,311,272

Additions

5,000,000

-

Fair value movement

3,268,931

(359,045)

Closing balance

10,221,158

1,952,227

 

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.

 

 

8.      Financial assets at fair value (continued) Invinity Energy Systems

On 1 November 2019, Bushveld announced it had agreed to support the Merger with funding of US$5 million through a convertible loan to Avalon. In accordance with the terms of the convertible loan, on successful completion of the Merger in March 2020, the loan was convert into shares in Invinity. 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. The shares issued to Bushveld are not subject to a  lock-in  arrangement. In addition to the funding from Bushveld, Invinity has raised £7.9 million through an equity placing at 1.65 pence per share.

 

Under the agreement, following the completion of the Merger, Bushveld has a right to nominate a director to the Board of Invinity, subject to Bushveld retaining at least 5 per cent of the issued share capital of Invinity. Rajat Kohli was appointed as a Non-Executive Director in June 2020, as Bushveld's nominated director. Bushveld will retain that right after one year provided it beneficially owns at least 10 per cent of Invinity. In addition, for so long as Bushveld beneficially owns at least 20 per cent of Invinity, it shall have a right to nominate two members of the board of Invinity. The investment is in line with Bushveld's strategy of partnering with VRFB companies and part of the VRFB Investment Platform ("VIP"), as announced  on 1 November 2019.

 

 

9.      Cash and cash equivalents

 

 

30 June 2020
(unaudited)

31 December 2021
(audited)

 

$

$

Cash at hand and in bank

24,605,511

34,011,557

 

 

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. The directors consider that the carrying amount of cash and cash equivalents approximates their fair value.

 

 

10. Share capital and share premium

 

 

Shares Number

 

 

Share capital

 

 

Share premium

 

Total share capital and premium

 

 

$

$

$

At 1 January 2019

1,119,727,953

14,921,079

101,003,256

115,924,335

Shares issued - Yellow Dragon Holdings

33,914,729

436,192

10,063,808

10,500,000

At 1 January 2020

1,153,642,682

15,357,271

111,067,064

126,424,335

At 30 June 2020

1,153,642,682

15,357,271

111,067,064

126,424,335

 

 

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 2020 the Company owns 670,000 (2019: 670,000) treasury shares with a nominal value of 1 pence.

 

 

 

30 June 2020 (unaudited)

31 December

2019

(audited)

$

$

 

11. Borrowings

 

 

Development Bank of Southern Africa

845,588

511,522

NedBank Term Loan and Revolving Credit Facility

21,903,977

18,071,342

Convertible Loan Notes

23,746,712

23,173,288

 

46,496,277

41,756,152

 

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% capped at 2.5 times which ever is lower. As at 30 June 2020, only US$845,588 was drawn down.

 

NedBank Term Loan and Revolving Credit Facility

 

Bushveld Minerals Limited secured ZAR375 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 ZAR250 million loan and a ZAR125 million revolving credit facility.

 

Key highlights of the ZAR250 million loan which was drawn in November 2019:

Ÿ  Five-year amortising loan;

Ÿ  Interest rate calculated using the three year or six months JIBAR1 as selected by the Company plus a 3.4% margin;

Ÿ  Interest payments are due semi-annually with first payment due in six months from financial close;

Ÿ  Principal repayments will be made semi-annually in arrears over four years in eight equal instalments, with first payment due 18 months after financial close.

 

Key highlights of the ZAR125 million revolving credit facility, which was undrawn for the financial year 2019 and drawn in March 2020:

Ÿ  Three-year term;

Ÿ  Interest rate calculated using the three year or six months JIBAR1 as selected by the Company plus a 3.6% margin;

Ÿ  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.

 

 

 

Notes to the Consolidated Interim Financial Statements

 

11.    Borrowings (continued) 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:

Ÿ  the Cumulative DSCR exceeds 1.4 times;

Ÿ  the Interest Cover Ratio exceeds 4 times; and

Ÿ  the Net Debt to EBITDA Ratio at a Borrower level shall not exceed 2 times.

 

Convertible Loan

 

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):

Ÿ  Interest at a coupon of 5% per annum payable annually in arrears or on conversion or redemption;

Ÿ  Repayable in cash after the second anniversary of Transaction Closure, plus any accrued interest;

Ÿ  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% discount to the prevailing 10-day volume weighted average Bushveld Minerals share price leading up to conversion;

Ÿ  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% of the early redemption amounts into Bushveld Minerals shares on the same terms set out above;

Ÿ  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 the 12 month period after Transaction Closure;

Ÿ  Obligation to repay an amount equal to 40% of any cash received on a new share issue which raises more than US$30 million, provided no more than 50% of the Loan Notes have already been paid, redeemed or converted;

Ÿ  Obligation to repay an amount equal to 50% of any debt raised over US$15 million, provided no more than 50% of the Loan Notes have been repaid, redeemed or converted;

Ÿ  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.

 

12. Trade and other payables

 

Financial instruments:

30 June 2020 (unaudited)

31 December

2019

(audited)

Trade payables

$

$

Accruals and other payables

2,158,490

3,069,751

Non-financial instruments:

 

 

VAT

243,999

-

 

16,108,622

15,721,502

 

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.

 

 

 

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