Bushveld Minerals Limited (LON:BMN) told investors on Wednesday that its plan to expand production capacity at the Vametco vanadium ore mining project in South Africa remains on track.
In an operational update for the first half, the company said phase two of the Vametco expansion project, which included the commissioning of the third primary mill and secondary crusher, was successfully completed on time and on budget.
Following the completion of the second phase of the expansion, the annual production rate now stands at 3,750 metric tonnes of vanadium (mtv), up from the 3,035 mtV reached in the first phase.
Bushveld said it expects to see gradual increases in output over the course of the second quarter as the operation ramps up to the 3,750 mtV rate.
The ramp up to this capacity was slower than expected due to industrial action in June related to previous compensation arrangements before Bushveld's involvement. A protest by members of the local community in July caused further disruption to production.
Vametco has, therefore, lowered its production guidance for the year down to between 2,850 and 3,000 mtV, though the upper range still represents a 13% increase on 2017.
“Notwithstanding the 2018 production guidance revision, we remain confident that the company's expansion efforts remain on track to grow Vametco's production capacity to 5,000 mtV per annum to further strengthen our competitive position in a favourable market environment,” said chief executive Fortune Mojapelo.
Mojapelo added that the company was "pleased" with recent drilling results at the Brits Vanadium project, which has shown similar mineralisation to Vametco with vanadium grades in magnetite of 1.54-2.09% vanadium pentoxide.
The second phase drilling at Brits started in June with an additional eight diamond drill holes completed so far and total metres drilled of 1,274.86 metres as of July 10.
In the first six months of the year, sales revenue jumped 139.1% to ZAR1.05bn and earnings (EBITDA) surged 429.6% to ZAR521mln, supported by higher vanadium prices.
Vanadium production from Vametco for the first half was 1,360 mtV, down 5.7% on the previous year due to a planned maintenance programme and the industrial action in June.
Phase Three of the expansion plan for Vametco aims to increase annualised production capacity to more than 5,000 mtV by the end of 2019.