Vertically integrated vanadium producer Bushveld Minerals, which has appointed Craig Coltman to succeed Fortune Mojapelo as CE from July 1, continues to undertake various initiatives to ensure profitability in the current financial year, improve the company's capital structure, secure a more stable power supply to support increased production, contain costs and crystallise value for the Bushveld Energy assets, chairperson Michael Kirkwood has told shareholders.

Reporting on the company's results for the financial year ended December 31, he pointed out that the company remains lossmaking, but was able to report free cash flow, which was used to pay down debt and partially fund the business’ other initiatives.

Bushveld's revenue increased to $148.4-million, from $106.9-million the year before. However, the company experienced various losses across different financial metrics.

It reported underlying earnings before interest, taxes, depreciation and amortisation of $22.3-million, but the adjusted Ebitda resulted in a loss of $1.7-million. For comparison, the figures for 2021 showed an underlying Ebitda loss of $7.5-million and an adjusted Ebitda loss of $9.9-million.

Bushveld Minerals also reported impairment losses of $24-million, a substantial increase from the previous year's $2.4-million. Out of the total impairment losses, $17.2-million was attributed to Vanchem, the company’s primary vanadium-processing facility with a beneficiation plant in eMalahleni, Mpumalanga.

It is worth noting that the company had recognised a gain on bargain purchase amounting to $60.6-million during the acquisition of Vanchem in 2019.

The net loss for the year amounted to $35.4-million, slightly higher than the previous year's loss of $34.2-million. Despite these challenges, the company managed to generate positive free cash flow of $14.6-million, indicating an improvement compared with the negative free cash flow of $19.3-million reported in the previous year.

“There is a natural tendency . . . to dwell on the positive aspects of a company’s performance and to understate or plead mitigation on the challenges and the negatives that impact results.

"In my view, this approach arguably discredits the overall content, and strains the credibility of what is, after all, the most important annual communication to the current and prospective owners of a company,” Kirkwood said on June 21.

As at year-end, Bushveld  held cash and cash equivalents of $10.9-million, a decrease from the previous year's $15.4-million. The company's net debt stood at $79.5-million, higher than the previous year's figure of $68.9-million. However, when excluding the Orion Production Financing Agreement, the net debt amounted to $44.4-million, compared with the previous year's $35.4-million.

“This is not the outcome we planned for, nor is it sustainable, and this is reflected in our significantly discounted share price, which more than halved in the year under review. The board and management fully recognise this and have [developed] plans to restore momentum in operational stability, revenue generation, cost constraint, profitability and cash generation,” Kirkwood said.

He added that the results for 2022 were impacted on negatively by a combination of external and internal factors.

Externally, the conflict in Ukraine triggered an energy price and supply crisis that, in turn, created an inflationary cycle that central banks around the world responded to with monetary policy actions.

Additionally, global supply chains were disrupted.

Within South Africa, where Bushveld primarily operates, electricity supply was constantly disrupted by loadshedding, the government logistics infrastructure and services deteriorated, and raised inflation impacted operating costs.

Internally, Kirkwood said, the company had faced issues with operational stability, particularly at its Vanchem plant. Production at the newly commissioned Kiln-3 was negatively impacted by the unreliable municipal power supply.

Moreover, the ore supply from Vametco was found to have a higher silica content than ideal, resulting in the need for system-clearing shutdowns. Therefore, although Vametco performed satisfactorily, Vanchem failed to hit its production target for the year, resulting in guidance misses and higher overall sustaining costs for the company.

He confirmed that the company’s vanadium electrolyte factory – Bushveld Electrolyte Company (Belco) – will be commissioned and begin production during the second half of the year.

Additionally, Kirkwood said the company was making progress with the Vametco mini-grid, which is expected to supply just under 10% of Vametco’s electrical energy. It is expected to come online during the second half of the year.

At Vanchem, an arrangement has been concluded with the local municipality to stabilise power supply, which Kirkwood notes has had a positive impact in the first quarter. Also, an ore supply contract has been concluded with a third-party operating in the Bushveld Complex for the supply of low-silica high-grade ore that is expected to improve productivity and lower costs at the plant.

Kirkwood also confirmed that plans were well advanced for energy company CellCube, one of Bushveld Energy’s assets, to be carved out into a listed vehicle on the LSE. Bushveld Minerals will retain a significant minority holding in CellCube and therefore keep a stake in the evolution of vanadium as an energy storage resource.

“This carve-out will help reduce central costs and permit greater focus on the residual core businesses. The devolved pure energy storage entity should also be able to attract capital, new investors, and a valuation aligned to that sector,” Kirkwood said.

NEW CE
Mojapelo, a co-founder of Bushveld, has led the business as CE for more than 11 years. Having helped build the company from an exploration company to a fully-fledged primary vanadium producer, Mojapelo and the board have agreed that it is an opportune time for a leadership transition to steer the company towards its further development.

He will work closely with Coltman during a transitional period to facilitate a smooth handover.

“Co-founding and leading Bushveld Minerals into an integrated vanadium platform . . . has been an immense privilege. While I recognise the challenging circumstances the company has had to navigate in recent years, my conviction in the potential and future success of this company remains,” Mojapelo comments.

“The board is appreciative of Mojapelo’s visionary entrepreneurship in building a significant new vanadium business and gives its sincere thanks for his dedicated service over the past years. The board and the company wish him well in his future endeavours,” Kirkwood said.

He adds that the board is “delighted” to have attracted an executive of Coltman’s experience and qualities to Bushveld.

“He is a strategically focused change-leader with a strong record across multiple disciplines. We look forward to supporting him in realising the embedded value within the group,” Kirkwood said.

Coltman has worked for De Beers Consolidated Mines in operational and commercial roles for 32 years. He is also the chairperson of the De Beers Pension Fund.

Coltman says he is excited to join the Bushveld team and to continue working in the mining industry, owing to his passion for the industry and its people.

Bushveld is one of only three operating primary vanadium producers and owns two of the world’s four operating primary vanadium processing facilities.