SA’s largest vanadium producer, Bushveld Minerals, is raising up to R1.1bn towards expanding and refurbishing its two processing facilities despite a tough start to a year disrupted by the Covid-19 pandemic.
London-listed Bushveld, which has plans to join the Johannesburg bourse, said on Wednesday it has lost revenue of $9m (R150m) to the disruptions caused by the virus at its operations since the government ordered a hard lockdown of the economy at the end of March.
Bushveld CEO Fortune Mojapelo said the Johannesburg listing is still an important strategy for the company but he declined to say when this will take place.
Revenue dropped 45% year on year to $43m for the six months to end-June, with the production losses and a two-thirds drop in the received vanadium price over the period the main reasons for the reversal.
Bushveld lost production of 380 tonnes of vanadium, restricting its increase in output year on year to 18%. It generated 1,649 tonnes of vanadium in the six months to end-June.
It increased sales by more than half, selling 1,765 tonnes, with nearly a fifth of the steel ingredient going to China, up from just 3% in the same period a year ago.
Bushveld expects to produce up to 3,950 tonnes for the full year from its Vanchem and Vametco plants.
A definitive feasibility study into establishing a mine at Bushveld’s 64%-owned Mokopane deposit was delayed for a year.
SP Angel analyst John Meyer described Mokopane as one of the world’s largest primary sources of vanadium, with a 298-million tonnes resource at a grade of 1.4% vanadium pentoxide.
The Vanchem plant, which Bushveld bought in November 2019, has stockpiles and mined material from Vametco to process until the Mokopane mine is built.
Investment management group Orion Mine Finance (not to be confused with Orion Minerals building the mine in Prieska, Northern Cape) has agreed to inject $30m in Bushveld to fund the third expansion phase at Vametco to grow output to 4,200 tonnes a year and to repay debt.
The expansion will cost $26m, increasing output from the about 2,800 tonnes the plant will produce this year.
Orion has also agreed to participate in a $35m convertible loan note issuance by Bushveld, taking $10m-$20m of the notes. The loan will be used to refurbish the Vanchem plant, which had been undercapitalised for years by its previous owners.
The complete refurbishment cost of the plant is estimated to be $45m and will be conducted in three phases to bring output to 4,200 tonnes a year, about four times what it is now.
Nedbank, which has provided Bushveld with $22.2m of debt, must consent to both capital-raising exercises.
“We see the agreement with Orion, announced today [Wednesday], as good news as it takes some pressure off the balance sheet in the near term while allowing Bushveld to complete its Vametco growth plans as well as the Vanchem refurbishment,” said Peel Hunt analysts Tim Huff and Peter Mallin-Jones.
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