Bushveld Minerals Limited (LON:BMN) has been initiated with a ‘buy’ rating and a 45p price target by analysts at Peel Hunt as the broker touted “solid near-term growth plans” as well as further upside to the shares.
In a note, analysts said a 3-phase growth plan at the company’s Vametco vanadium mine and processing plant in South Africa, which was currently in phase 2, would be “the first step” in better monetising its resources base and predicted the project producing 5,000 tonnes per annum by 2022.
Vanadium is a chemical element that is often added to steel in small amounts in order to increase its strength. These alloys containing vanadium are commonly used to make tools as well as surgical instruments and knives.
Peel Hunt also believed that as resource updates from the Vametco mine and Bushveld’s Brits vanadium project, located nearby, began to be delivered in the second quarter of 2019, the company could use its cash balance to acquire more downstream processing capacity to increase its share of the vanadium market and “even further monetise its growing resource base” in the medium-term.
Aside from the vanadium projects, the broker said Bushveld Energy, the company’s Africa-focused energy storage and component manufacturer, offered “longer-term upside” as it aimed to cover more of the vanadium supply chain by supplying vanadium redox-flow batteries (VRFBs), which are commonly used to store energy for power plants and electrical grids.
Bushveld is already moving to expand the use of VFRBs, having announced the development of a 1-megawatt mini-grid to supply its Vametco mine in late March.
Bushveld Energy has also recently completed a pilot scheme with South African electricity group Eskom for a VFRB system.
Eskom alone is expected to install 1,440 megawatt-hours (Mwh) of battery storage capacity by 2022 to help ease the problem of power shortages in South Africa, while a further 1bnMwh of opportunities have been identified across Africa.
Current share price at “base level”
Peel Hunt said the group’s current share price of around 33p, was a “base level” from which investors should look to build “longer-term positions”.
“We expect multiple developments in [Bushveld’s] resource base and its three-phase growth plans in the coming quarters”.
In late-morning trading on Tuesday, Bushveld’s shares were down 3.8% at 33.2p, a 36% discount to Peel Hunt’s target price.