Improved vanadium prices have given a lift to Bushveld Minerals Limited’s (LON:BMN) recently acquired associate, Vametco.
Bushveld, which acquired an effective around 27% stake in Vametco in April, said interim underlying profits at the South Africa-based vanadium miner climbed to 85.5mln rand (£4.9mln) or 80% more than the whole of 2016.
Revenues for the period were 439mln 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 said Bushveld due to ongoing shortages.
“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.
Fortune Mojapelo, Bushveld’s chief executive, said: "Vametco is a significant Vanadium producer, with extremely competitive production costs, that is now undergoing an expansion initiative to deliver increasing volumes into a structurally deficit supply market.
“We are extremely pleased to have concluded the Vametco joint-acquisition at the time we did.”
Bushveld paid US$16.5mln for its stake, a price negotiated at the bottom of the vanadium price cycle.
Expansion plan
It is run by Strategic Minerals Corporation, which owns 79% of the business and is itself a joint venture between Bushveld and South African firm Yellow Dragon (55%).
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, but this is likely to be revised after today’s news, said the broker.
Shares rose 4% to 10.4p.
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