Bushveld Minerals, SA’s largest supplier of vanadium, hopes to complete a R1.73bn expansion programme to nearly triple output without calling on its shareholders to fund its plans.
Bushveld had delayed its listing on the JSE due to the need to conclude the $54m (R929.1m) purchase of the Vanchem assets and complete its full-year 2019 financial report coupled with the education of SA banks and financial institutions on vanadium, Fortune Mojapelo said in an interview.
Bushveld would list within the next 12 months, he said.
“There’s a real possibility the listing will roll over into 2021, but we are certainly trying to do it in this financial year,” he said.
Bushveld has three principle areas of spending over the next four to five years as it builds production up to 8,400 tonnes — and possibly a bit more — of vanadium a year.
At that level of production, Bushveld would supply a tenth of global vanadium, which is used primarily in steel production. It now supplies 3% of vanadium, which the US and Chinese governments consider a strategic mineral.
Bushveld, which is listed on London’s Alternative Investment Market (AIM), reported output of 2,931 tonnes of vanadium in 2019, up from 2,560 tonnes the year before.
For the year ahead, it has pegged output at about 4,000 tonnes.
Needs investment
Bushveld has two main production business units, Vametco and Vanchem near Witbank. It also has the Mokopane deposit where it will build a mine to supply the Vanchem plant, which will run on stockpiled material and fresh ore from Vametco until the mine is in production.
Vanchem, which was an asset in Highveld Steel, a company that ran into severe financial difficulties in 2015, needs an investment of $45m to refurbish the assets and raise output to 4,200 tonnes vanadium a year.
Vametco, near Brits in the North West, will similarly be a 4,200 tonnes a year vanadium operation.
Bushveld has two of the world’s four primary sources of vanadium, with the balance coming as a by-product from steel mills using iron ore that contains vanadium, and other processes.
The company was able to post an operating profit of $22m, a 77% decline from the previous year’s $95m, despite vanadium prices dropping three-quarters to $22/kg by the end of 2019.
Thanks to its high-quality reserves it could produce vanadium for about $18/kg, ensuring it maintained a profit margin, albeit slim.
The vanadium price was pushed down by lower-than-expected demand from China, substitution of the mineral by niobium and lower steel output from steel makers outside China, said Roskill, a metals analysis group.
Production of slag containing vanadium in China increased by nearly a fifth in 2019, contributing to downward pressure on prices, it said.
The chances of vanadium staying in the low $20-$30/kg band in the medium to longer term are slim because China has become a net importer of the mineral and existing vanadium producers are at or near full capacity, meaning it is difficult for them to ramp up production to meet higher demand growing at 2% a year from the steel sector, Mojapelo said.
Over the past 40 years, the vanadium price has averaged $33/kg.
The low-price environment makes it extremely difficult for other companies to bring new mines or production of vanadium into the market, he said.
“We see a deepening deficit in the vanadium market. If you take that into account, it’s hard to see the vanadium price staying in the $20 to $30 range,” he said.
Ferro vanadium delivered to China is fetching $30/kg.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.