Bushveld positioned to generate decent cash flows on back of unit cost improvement

Bushveld Minerals CEO Fortune Mojapelo on Friday described the London Aim-listed company that he leads as heading into a future that will be requiring a lot more vanadium for steel and energy.

To meet emerging demand, Bushveld has positioned itself for broad-based involvement.

“You will struggle to find a company that’s as positioned as Bushveld is across the entire value chain,” Mojapelo told Mining Weekly in a Zoom interview. (Also watch attached Creamer Media video.)

“As a business, we’re in a good place for the opportunities that are looking at us going forward,” Mojapelo added.

Mining Weekly readers will recall that Bushveld started on its journey to being a vanadium producer when it acquired Vametco between 2017 and 2018.

This was quite transformational in overnight taking Bushveld from being an exploration company with a tiny $20-million market capitalisation to being a producer and followed that up in 2019 with the acquisition of Vanchem.

With those two assets, it now owns two out of only four operational primary vanadium processing plants in the world.

These two plants last year produced 3 500 t, which is just over 3% of the global market, and it anticipates a run rate of over 5 000 t a year in the not too distant future.

These increases are largely on the back of the refurbishment work that has been done at Vanchem, where a much bigger kiln, similar in size to Vametco’s kiln, allows Vanchem to operate it at similar scale, which is important from a unit cost perspective.

“With all of this work done, we are in a really good position going forward to be generating decent cash flows on the back of improved unit cost performance. We hope that vanadium prices, that have seen significant improvements as well, will hold up going forward. We think there’s good reason for prices to hold up.

Downstream business is built across three main activities, which are:

construction of an electrolyte manufacturing plant, which is under way in partnership with the Industrial Development Corporation;
development of a hybrid minigrid at Vametco, which will initially supply about 10% of power requirements, utilising solar and vanadium flow batteries; and
investment into vanadium redox flow battery manufacturing.
These are some of the questions Mining Weekly put to Mojapelo:

Environmental, social and governance (ESG) has become quite topical for miners, how has Bushveld prepared itself to comply with this, especially given the huge contribution of the mining sector to South Africa’s economy?

Mojapelo: Our overall philosophy is one of ‘beyond compliance’. You’ve got to believe fundamentally in those values around those three elements. In terms of environment, being a responsible steward of the environment, and contributing positively.

In terms of your social stakeholders, meaningful partnerships with your stakeholders across the board, which represent shared value in a true sense of the word, and then adhering to the highest standards of governance.

We just recently completed a fairly detailed ESG strategy for our group underpinned by that philosophy of wanting to go beyond compliance.

One of the things that we will also be doing is putting ourselves through an independent verification process to ensure that we can develop an independently verified ESG scorecard that allows people who look at us as a company to know what our performance looks like. Another point I want to mention is from a sustainability point of view, especially when you’re thinking about the environment, it’s not just about how we mine and how we process.

Yes, we want to mine as responsibly as possible. We want to ensure that in our processing operations, we reduce our carbon footprint, we manage our emissions and put in place the minigrid certainly that also improves our carbon footprint significantly.

But beyond that, it’s also about making sure that the way our products are utilised, also itself drives decarbonisation. By that, I mean that when vanadium is used in steelmaking, it promotes strength of steel and reduces the carbon footprint of steel. The more you have high-strength steels that use vanadium, the more you’re improving the carbon footprint of steel.

Vanadium in redox flow batteries and its role in the energy transition, particularly in helping the integration of renewable energy, is a huge contributor to decarbonisation of our energy system. The fact that the electrolyte can be used over and over again speaks to circularity.

One of the key features around metals is to move away from single use. If you can use it over and over again, you start to actually promote greater sustainability and we think vanadium’s contribution in this regard is also particularly very strong. Regarding our social partners, I was very pleased that we concluded the five-year wage agreement with AMCU at Vametco recently, and that’s just also testament to relationships that have been improving and growing with our labour and it’s something that we certainly want to continue building on.

Similarly, when it comes to our local communities, we have put in a lot of human resources to ensure that we follow through on our commitments when it comes to our community partnerships. We have gone beyond what is just required in law in terms of compliance.

For example, setting up trusts to ensure that the economic interest of the local communities in our activities is improved, and is increased, and I’m very pleased with our record as far as that is concerned. As the company grows and this generate profits, I’m very confident that the value that is sitting within these trust structures that we have created will certainly be leveraged for the benefit of the local communities around us.

What, in your view, should be the main takeaway from this interview?

For me, the main takeaway is that we’ve come through a four- or five-year period, which has been very transformational for us as a business, acquiring assets, bedding them down, ensuring that they operate in a sustainable, stable way with cost positions that support cash generation.

That’s not been an easy road for us. It’s entailed significant investments, and it’s happened at a very difficult time with the Covid pandemic, with vanadium prices that have come off. But our convictions about the future of vanadium are very, very strong, and we’re very pleased that we have taken the actions that we have and today we have a set of assets which we are comfortable that by the end of the year will be supplying at an annual rate of over 5 000 t of vanadium, which is about 5% of the global market.

We also have a very clear roadmap for growing that production further up to as much as about 8 000 t/y in the coming years. We think just getting to that position as a company is a significant achievement, that I’m particularly proud of, and I think that bodes very well for us going into the future.

With Bushveld Energy, we’ve built significant critical mass with a number of partners along that value chain.

We announced that we can now look to allowing it to stand on its own and attract the kind of capital that it requires from energy-focused investors to give it the impetus that it needs at the kind of inflection point that it now has. We will continue to retain a significant shareholding in this company and retain that vertical integration model that we’ve so often talked about.

The key takeaway for me is that this is a company that is very well poised going forward into a future that’s going to require a lot more vanadium, both in terms of the steel sector and the energy sector, and I think you will struggle to find a company that’s as positioned as Bushveld is across the entire value chain.