REG - Bushveld Minerals Ld - Final Results for the Year Ended 31 December 2021
30/06/2022 17:00
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RNS Number : 8985Q Bushveld Minerals Limited 30 June 2022
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30 June 2022
Bushveld Minerals Limited
("Bushveld Minerals" "Bushveld" or the "Company")
Full Year Results for the 12-month Period Ended 31 December 2021
Bushveld Minerals Limited (AIM: BMN), the AIM-quoted, integrated primary
vanadium producer and energy storage provider, with ownership of high-grade
assets in South Africa, is pleased to announce its full year results for the
year ended 31 December 2021.
FY2021 Operational and Financial Highlights:
· Group Revenue of US$106.9 million, a 18.8% increase over 2020 (2020:
US$90.0 million), supported by improved average realised price of vanadium.
· Group production of 3,592 mtV, at the upper end of 2021 revised
guidance of between 3,400mtV and 3,600mtV.
§ H2 2021 Group production of 2,018 mtV, a 28.2% increase over H1 2021 (H1
2021: 1,574 mtV), supported by operational improvements implemented from Q2
2021.
§ Operational stability has continued into H1 2022, resulting in 12 months of
stable production levels.
· Group Sales of 3,314 mtV, a 13.7% decrease over 2020 (2020: 3,842
mtV), as a result of international and domestic logistical challenges.
· Underlying Group EBITDA(1) loss of US$7.5 million an improvement of
US$7.4 million relative to 2020 (2020: EBITDA loss US$14.9 million).
§ H2 2021 underlying EBITDA profit of US$3.3 million, supported by strong
production levels, higher realised prices and continuing to trade on an
EBITDA positive basis in H1 2022.
§ The Group has been EBITDA positive for the past 12 months.
· Ended the year with cash and cash equivalents of US$15.4 million held
at 31 December 2021 (2020: US$50.5 million). Gross Debt of US$82.1 million
(2020: US$89.2 million).
§ Prioritised significant investments including: growth initiatives at
Vanchem (US$4.2 million), construction of BELCO electrolyte plant (US$4.9
million), investment in CellCube (US$10 million) and debt repayments (US$3.9
million).
· Successfully realised its investments in AIM-listed companies AfriTin
Mining Limited and Invinity Energy Systems Plc for approximately US$3.5
million and US$12.7 million respectively.
· Obtained an indirect shareholding of 25.25% into CellCube, a Vanadium
Redox Flow Battery original equipment manufacturer.
· Group Total Injury Frequency Rate ("TIFR") was recorded at 7.78 in
2021 representing a 52 per cent improvement from 2020 (2020: 16.06).
1. Adjusted EBITDA is EBITDA, excluding the Group's share of losses from
joint ventures and the remeasurement of financial liabilities. Underlying
EBITDA is Adjusted EBITDA excluding impairment charges.
2. ZAR14.8:US$ 2020: ZAR16.5:US$
Post period events
· Commissioning of Kiln 3 at Vanchem was completed in June 2022 within
budget with a production run rate of 2,600 mtVp.a. anticipated in Q4 2022.
· Secured the funding for the Engineering Procurement and Construction
of the Vametco hybrid mini grid.
· Staged growth plans announced to increase Group production to 8,000
mtVp.a., subject to:
§ The achievement of short-term performance objectives to deliver sustainable
cash generation at the production rate of 5,000 - 5,400 mtVp.a.; and
§ Sufficient funding secured
· Group unaudited cash and cash equivalents of US$12.7 million as
at 31 March 2022.
Priorities and outlook
· On track to meet 2022 Group production guidance of between 4,200 mtV
and 4,400 mtV, (weighted towards the second half of the year).
· Ramping up production to achieve an annualised steady state
production run rate of between 5,000 mtVp.a. and 5,400 mtVp.a. by the end of
2022.
o The volume increase will support further unit cost reduction and increase
the Group's ability to generate positive margins throughout the vanadium price
cycle.
· Commencing in 2022, implement the Group cost savings programme in
order to achieve costs savings of approximately US$2.5 million to US$4
million, over a 12 to 24 month period.
· Intention to carve-out of Bushveld Energy as a standalone company
focused on the VRFB value chain, Bushveld Minerals will maintain a strategic
investment in the company. This will enable Bushveld Energy to have the Board
and management team required for success, and it will be in a better position
to attract the appropriate institutional investors and market valuation.
· Progress construction of the BELCO electrolyte plant, anticipated
completion in H1 2023.
· Commence construction of the Vametco hybrid mini-grid, completion
expected in H1 2023.
Group Capital Expenditure
Expected capital expenditure for 2022 of approximately US$22.1 million, of
which we have already spent US$9.0 million as at 31 May 2022, with most of the
cost being Rand-denominated. The capital expenditure includes the following:
· Vametco US$5.5 million;
· Vanchem US$8.5 million;
· Bushveld Energy (BELCO) US$8.1 million
Analyst conference call and presentation
Bushveld Minerals Chief Executive Officer, Fortune Mojapelo and Finance
Director, Tanya Chikanza will host a conference call and presentation at
11:00 BST (12:00 SAST) on Monday 4th July 2022 to discuss the 2021 full year
results with analysts. Participants may join the call by dialling:
Tel: United Kingdom: +44 (0) 33 0551 0200;
South Africa: +27 800 980 512
Pin: 4157560
Alternatively, the presentation can be accessed as a webcast here:
https://webcasting.brrmedia.co.uk/broadcast/60d9897e0bb2806642d65b88
(https://webcasting.brrmedia.co.uk/broadcast/60d9897e0bb2806642d65b88)
https://stream.brrmedia.co.uk/broadcast/62a0bea519aa2a662fe17234
(https://stream.brrmedia.co.uk/broadcast/62a0bea519aa2a662fe17234)
Annual Report
The Annual Report for the year ended 31 December 2021 will be available on
the Company's website today at the following
link: http://www.bushveldminerals.com/financial-reports/
(http://www.bushveldminerals.com/financial-reports/) . Physical copies of the
Annual Report will be posted to shareholders who have elected to receive them,
during the week commencing the 11 July 2022. A further announcement will be
made by the Company once hard copies of the Annual Reports have been
dispatched to shareholders.
Fortune Mojapelo, CEO of Bushveld Minerals Limited, commented:
"I'm pleased that we finished 2021 strongly, generating positive EBITDA in the
second half of the year which has carried through into the first half of the
2022 year. This was a year of two halves, as we entered 2021 facing the
ongoing challenges of the Covid-19 pandemic, which were compounded by some
operational instabilities at Vametco in the first quarter. We adapted quickly
to changing conditions and government mandates to instill normal and
productive operating conditions and implemented several interventions which
included increasing investments in maintenance and sustaining capital and
implemented a rigorous and proactive maintenance programme. I am proud of
Bushveld's resilience throughout the year.
This approach has seen the Company produce solid successive quarterly
performances from the second quarter, enabling the Company to meet the upper
end of our revised production guidance for the Group in 2021. Production in
the second half of the year of 2,018 mtV was 28.2% higher than the first half,
illustrating our success in embedding improvements across all operations. I am
pleased to report that this has continued into the current year and am
delighted to announce the commissioning of Kiln-3 at Vanchem in June 2022,
which will deliver production growth and result in lower unit costs at
Vanchem.
.As we continue to pursue incremental operational improvements and further
embed our values and culture at Bushveld, we expect the effects will continue
to reflect in our production and profitability, helping us realise a
sustainable cash generating business. We have already seen an improvement in
our safety record, although this is from a very strong baseline.
The Group ended the fiscal year with revenue of US$106.9 million and an
underlying EBITDA loss of US$7.5 million (adjusted for a one-off impairment
loss of US$2.4 million), an improvement of US$7.4 million over the 2020 EBITDA
loss of US$14.9 million. During the course of the year, the strengthening of
the South African rand had a substantial effect on expenses. This resulted in
a net negative exchange impact of US$11.6 million on underlying EBITDA.
Excluding the negative impact of the exchange rate, we would have achieved a
positive underlying EBITDA profit of US$4.1 million for the year if the
exchange rate had been comparable to 2020. In the second half of the year, the
Group realised an underlying EBITDA profit of US$3.3 million due to strong
production performance as well as a higher realised price. We are pleased that
this profitable performance has continued into the first half of 2022.
Moving on to our energy platform, after incubating Bushveld Energy and
establishing the critical mass necessary for its success, we intend to
carve-out Bushveld Energy as a standalone company focused on the VRFB value
chain. We believe that this will help to crystallise the value of Bushveld
Energy and position it in the capital markets to attract the appropriate
energy-market focused institutional investors with an appetite and
understanding of the energy proposition, while retaining the vertical
integration proposition of Bushveld Minerals through a substantial strategic
shareholding in the stand-alone energy company.
Whilst still in its early stages, Bushveld Minerals has embarked on a journey
to define and implement a comprehensive sustainability strategy. At the heart
of this strategy is an overarching philosophy of going "Beyond Compliance",
which requires an understanding and commitment to sustainability as core to
our business and not a question of meeting regulatory requirements. The
philosophy underpins our approach to environment management and engaging with
social partners. Bushveld Minerals is well placed to make a meaningful
contribution to global decarbonisation efforts through its alloying products
that reduce the carbon footprint of steelmaking, and through our electrolyte
products used in large-scale long-duration energy storage systems that will
support the energy transition through, among others, supporting greater
penetration of renewable energy to the global energy mix.
We have successfully transitioned from an exploration company into a sizeable,
margin-positive primary vanadium producer with global distribution networks
and significant growth potential, an accomplishment we are proud of,
considering we began with a market capitalisation of US$20 million and we have
amassed an asset base with a net asset value of US$150 million, since 2017. We
accomplished this by investing more than US$185 million, which was funded with
a relatively heavy reliance on debt markets and a minimal reliance on equity
financing; since 2017, the Company has raised only approximately 25 percent of
our capital through direct equity financing.
So, our transformation journey continues. With two of the world's four
operating primary vanadium production facilities, a diverse product profile
and significant growth upside, we are well placed in a market that will
increasingly look to primary producers to meet its growing vanadium demand.
Our immediate short-term focus is to ensure that the production base continues
to be stable and sustainable, as we ramp up production towards the run rate of
5,000 - 5,400 mtVp.a.in the fourth quarter, following the commissioning of
Kiln 3 in June 2022. This positions Bushveld as one of the largest and most
significant primary vanadium producers with a low cost production base and
supplying approximately five per cent of the global market.
We recently announced the key findings of the feasibility and pre-feasibility
studies regarding the optimal path forward to increase Vametco and Vanchem's
production to 8,000 mtVp.a. The expansion will be conducted in phases and will
only be pursued once we have met our short-term performance goals of 5,000 -
5,400 mtVp.a. and secured the necessary funding.
We remain committed to achieving operational excellence at our Business and
generating positive margins through our low-cost production platform."
2021 summary
Year end 31.21.2021 Year ended 31.12.20 % change
Vanadium Production (mtV) 3,592 3,631 -1.1
Sales volumes (mtV) 3,314 3,842 -13.7
Average realised price (US$/kgV) 32.2 23.4 37.6
Revenue (US$ million) 106.9 90 18.8
Underlying EBITDA (7.5) (14.9) 49.7
Adjusted EBITDA (US$ million) (9.9) (14.9) 33.6
Net cash flow /(outflow) from operating activities (12.1) (17.1) 29.2
(Net debt) (66.7) (38.7) 72.4
Cash and cash equivalents 15.4 50.5 -69.5
Average Exchange rate (ZAR:USD) 14.8 16.5 10.3
ENDS
Enquiries: info@bushveldminerals.com
Bushveld Minerals Limited +27 (0) 11 268 6555
Fortune Mojapelo, Chief Executive Officer
Chika Edeh, Head of Investor Relations
SP Angel Corporate Finance LLP Nominated Adviser & Broker +44 (0) 20 3470 0470
Richard Morrison / Charlie Bouverat
Grant Baker / Richard Parlons
Joint Broker +44 (0) 20 7653 4000
RBC Capital Markets
Jonathan Hardy / Caitlin Leopold
Tavistock Financial PR
Charles Vivian / Gareth Tredway +44 (0) 207 920 3150
ABOUT BUSHVELD MINERALS LIMITED
Bushveld Minerals is a low-cost, vertically integrated primary vanadium
producer. It is one of only three operating primary vanadium producers, owning
2 of the world's 4 operating primary vanadium processing facilities. In 2020,
the Company produced more than 3,600 mtV, representing approximately three per
cent of the global vanadium market. With a diversified vanadium product
portfolio serving the needs of the steel, energy and chemical sectors, the
Company participates in the entire vanadium value chain through its two main
pillars: Bushveld Vanadium, which mines and processes vanadium ore; and
Bushveld Energy, an energy storage solutions provider. Bushveld Vanadium is
targeting to materially grow its vanadium production and achieve an annualised
steady state production run rate of between 5,000 mtVp.a. and 5,400 mtVp.a by
the end of 2022, from projects currently being implemented. Growth plans to
8,000 mtVp.a. will be pursued, subject to funding and market conditions.
Bushveld Energy is focused on developing and promoting the role of vanadium in
the growing global energy storage market through the advancement of
vanadium-based energy storage systems, specifically Vanadium Redox Flow
Batteries ("VRFBs").
Detailed information on the Company and progress to date can be accessed on
the website www.bushveldminerals.com (http://www.bushveldminerals.com/)
Chairman's Statement
Dear Stakeholders,
While 2020 was the year in which the COVID-19 pandemic plunged lives and
business into turmoil across the globe and saw the implementation of emergency
measures to keep businesses afloat, 2021 was the year in which those emergency
measures were put to the test. As the constant state of flux became the new
normal, it became apparent that companies had to adapt for unusual business
contingencies.
Restrictions are now lifting around the world, facilitating a return to
pre-pandemic life. Not only are we able to see loved ones and to cross
borders, and with less onerous restrictions global logistics are improving and
the productiveness of industries the world over has begun to escalate
considerably. I firmly believe that the last two years have proved our
resilience as a Company and made us stronger for the difficulties faced. We
continue to operate to the highest standards of business while being mindful
of ongoing global uncertainties and their impact on the sector. These include
but are not limited to the war in Ukraine, rising COVID-19 cases in China and
North Korea, and soaring inflation in the US and Europe.
I applaud our employees for their stalwart commitment to the Company and our
operations, ensuring that despite the ongoing impact of COVID-19 and the
operational challenges at Vametco, our staff remained safe, and Bushveld
adapted quickly and implemented several interventions, enabling the Group to
finish the year strongly and make the upper end of our revised guidance for
2021 at 3,592 mtV.
As a result of the improved performance in the second half of the year, the
Group generated a positive underlying EBITDA in the second half, but this was
not sufficient to offset the EBITDA loss in the H1, and the Group ended the
year with an underlying EBITDA loss of US$7.5 million and a loss before tax
for the year of US$46.8 million (2020: loss before tax of US$37.7 million).
The strengthening of the South African rand had a substantial effect on
expenses and on underlying EBITDA. We made an operating loss of US$29.3
million, similarly impacted by the significant ZAR:US$ exchange rate movements
and the net loss for the year was US$42.1 million, after net interest and
non-cash adjustments, as detailed in the Finance Directors Review.
Furthermore, as we have improved maintenance and ensured operational
stability, Bushveld is targeting to reach a Group production run rate of 5,000
- 5,400 mtVp.a, in the last quarter of 2022, following the commissioning of
Kiln 3 in June 2022, which is now undergoing stabilisation and optimization,
with ramping up expected to commence thereafter. Higher production, once the
Group is producing over 5,000 mtV p.a, will lead to lower unit costs,
resulting in Bushveld achieving sustainable profitable performance throughout
the cycle. As such, we anticipate Group production for the year to be in the
region of between 4,200 mtV and 4,400 mtV, between 17-23 per cent higher than
2021, with output weighted towards the second half.
We recently announced the key findings of the Vametco and Vanchem feasibility
and pre-feasibility studies, the objectives of which are to increase and
achieve a collective production of 8,000 mtVp.a. in the medium to long term.
In contrast to the last few years where production growth was necessary to
reach critical mass, we can be patient about this next stage.
Management intend to pursue the staged expansion plans, subject to the meeting
of short-term performance targets and in a phased manner, once sufficient
funding has been secured, accompanied by any necessary third-party validation
of associated project economics.
We remain committed to our responsibility to ensure sustainable growth and
provide returns to our investors, a consideration at the forefront of every
company decision and are proud of the trust you, our shareholders, have placed
in us to deliver this. I would like to thank Fortune Mojapelo, the Bushveld
management team, and all our staff for their efforts to progress the Company
and our operations over the course of the year.
I would like to pay tribute to Professor Morris Viljoen who sadly passed away
in August 2021. Alongside his twin brother Richard Viljoen, he was a technical
advisor to the Company and major contributor to the founding of Bushveld. His
knowledge and expertise were unparalleled in his field and he will be sorely
missed.
I have been privileged to have the responsibility of chairing the Board over
the last ten years. In this time, I have witnessed the Company go from
strength to strength, a small exploration company into a significant producer
of vanadium no small achievement.
We have come a long way, from our kick off in 2012 when we listed on AIM as an
exploration company with a diversified portfolio including vanadium, tin,
coal, titanium and iron ore assets, and raised £5.5 million. We established a
quality portfolio of tin assets, which we unbundled and listed as Afritin on
AIM, enabling Bushveld shareholders to unlock value from its tin platform.
In this time, Bushveld acquired two brownfield processing plants for a modest
acquisition cost, catapulting production over six years from zero in 2016, to
about 3,600 mtV in 2021. We have also been at the forefront of pioneering a
vertically-integrated vanadium value chain, including our ongoing construction
of what will be one of the largest vanadium electrolyte plants with a capacity
of 8 million litres of vanadium electrolyte (approximately 1,100 mtV). Our
other achievements include securing three large, high-grade opencast deposits,
with a primary resource base of ~548 Mt, one of the largest high-grade primary
vanadium resources in the world. This gives us the confidence to pursue
further growth in the years ahead, knowing that we have decades-long Life-of
Mine ahead. All this has been achieved at the modest acquisition cost of
approximately US$121 million, significantly less than the capital expenditure
it would have required to develop our operational footprint from a greenfield
state; plus further capital expenditure spent since acquisition.
On behalf of the Board I must thank Anthony Viljoen for his significant
contribution to Bushveld Minerals over more than a decade of service. Anthony
played a core part in the formation and shaping of the Company. I wish him all
the best as CEO of AfriTin Mining Limited, which is rapidly developing its
large-scale tin resources. In addition, I would like to I thank Jeremy
Friedlander for his significant contribution to Bushveld with over a decade of
service to the Company, helping provide vital guidance and leadership.
While I am sad to be leaving the Bushveld family, I welcome the new members of
the Board including Kevin Alcock, Mirco Bardella, Jacqueline Musiitwa and
David Noko. These Board appointments have been made to ensure that the Board's
composition meets the high standards of corporate governance expected of AIM
listed companies. I look forward to seeing the new heights to which I know
they will take the Company.
Ian Watson
Independent Non-Executive Chairman
Chief Executive Officer's Review
Dear Stakeholders,
I am pleased to present this annual review statement at a time coinciding with
the tenth anniversary of the listing of Bushveld Minerals Limited on the
Alternative Investment Market ("AIM") of the London Stock Exchange. In that
time, we have successfully transitioned from an exploration company into a
sizeable, margin-positive primary vanadium producer with global distribution
networks, and significant growth potential.
We have achieved this transition through a brownfield strategy that has seen
us acquire two of the only four operating primary vanadium processing plants
in the world in 2017 and 2019, respectively. We have now invested significant
refurbishment capital into the plants and their connection to some of the
world's largest and highest primary vanadium grade deposits has allowed our
assets to provide a low-cost production platform, with potential for further
cost improvements. While the vanadium market remains volatile, our cost
positioning in the market presents a sustainable cash generation opportunity
over the cycle, which will be more clearly demonstrated once the Group is
producing over 5,000 mtVp.a.
Since 2017, we have built an asset base with a net asset value of US$150
million, an achievement we are proud of as we started with a market
capitalisation of US$20 million. We have achieved this by investing in excess
of US$185 million in: 1) our acquisitions of Vametco and Vanchem, 2)
refurbishment and expansion initiatives at the two sites, including the
recently completed refurbishment of Kiln 3 at Vanchem and 3) investing in
sustainable growth of the Bushveld Energy assets. We have grown this
formidable asset base with a relatively heavy reliance on debt markets and
very limited call on shareholders for equity financing.
2021 Overview
2021 began with significant challenges for Bushveld, impacted by the continued
social and economic fallout from the COVID-19 pandemic.
The South African commercial sector was further affected by a range of
additional challenges, including periodical power supply shortages, and the
severe disruption to local supply chains caused by the unrest in South Africa
in July.
Operations
These contextual challenges compounded problems experienced at our operations,
particularly in the early part of 2021, which related to operational plant
stability on the back of no extensive annual maintenance shutdown being
undertaken in 2020 due to the COVID-19 pandemic. In March 2021, a slower than
expected ramp-up post a planned 35-day maintenance shutdown at Vametco
affected production, further exacerbated by an unprotected industrial action
that followed in April 2021.
Following the March 2021 annual shutdown at Vametco, the company has focused
on operational stability, which is being achieved through several
interventions. These include a rebasing of monthly production in line with
historical performance rather than aspirational targets, increasing
investments in maintenance and sustaining capital, and implementing a rigorous
and proactive maintenance programme.
We have also embarked on a Bushveld culture journey to boost our aspirations
towards operational excellence. This has entailed defining and cementing of
our values and culture across the business, focusing on a philosophy of Care,
Courage, Collaboration, Trust and Excellence.
This shift in approach has seen the Company produce solid successive quarterly
performances since the shutdown in March 2021. Production in the second half
of the year of 2,018 mtV was 28.2 per cent higher than the H1, illustrating
our success in embedding improvements across all operations. I am pleased to
report that this has continued into the current year and am delighted to
announce the commissioning of Kiln-3 at Vanchem which will deliver production
growth and result in lower unit costs at Vanchem.
We expect that as we continue to pursue incremental operational improvements
and further emphasise our values and culture at Bushveld over a sustained
period, the effects will begin to reflect in our guidance and production
numbers. We have already seen an improvement in our safety record, although
this is from a very strong baseline, as set out in the Safety section below.
Bushveld achieved production at the upper end of our revised guidance for the
year ended 31 December 2021, with total Group production of 3,592 mtV. The
higher throughput in the second half resulted in lower unit costs, with
production cash cost (C1) for the year of US$24.0/kgV at Vametco and
US$30.6/kgV at Vanchem, both in line with revised guidance.
While production performance improved, Group sales of 3,314 mtV were below
production levels, owing to the challenges in international logistics channels
arising from COVID-19, and the disruptions at local ports in July and August.
This resulted in a buildup of finished products inventory.
Unit 2021 12M 2021 vs 12M 2020
Group production mtV 3,592 -1.1%
Group sales mtV 3,314 -13.7%
While some of these logistical challenges have persisted into the 2022 year,
we expect to meet our client obligations for the year.
Financials
The operational improvements post Q1 also translated into an improved
financial performance, with a positive underlying EBITDA of US$3.3 million in
H2 2021, which has been maintained into the 2022 financial year, compared with
an H1 2021 underlying EBITDA loss of US$10.8 million.
The overall underlying EBITDA loss of US$7.5 million for the year, an
improvement on 2020, was affected by the exchange rate movements that saw the
Rand strengthen significantly from ZAR16.46/US$ to ZAR14.79/US$, resulting in
a negative impact on costs and on underlying EBITDA amounting to US$11.6
million for the year on a like for like exchange rate with 2020. I am pleased
to note that the trajectory of improved earnings has continued into 2022.
After depreciation of US$19.4 million, we made an operating loss of US$29.3
million (2020: loss of US$32.8 million), similarly impacted by the significant
ZAR:US$ exchange rate movements. Net loss for the year was US$42.1 million
after net interest of US$11.2 million and non-cash adjustments of US$6.2
million, as detailed in the Finance Directors Review.
The Group ended the year with a cash and cash equivalents position of US$15.4
million, as we prioritised significant investment including growth initiatives
at Vanchem, Bushveld Energy investments and debt repayments.
More details on the company's financial performance are set out in the Finance
Director's Review.
Safety
The Group recorded a 52 per cent improvement in the Total Injury Frequency
Rate to 7.8 relative to the previous year (2020: 16.1), as a result of
improved risk assessment and the implementation of mitigation measures. While
these improvements are welcome, safety will continue to be an area of focus
for Bushveld to ensure that we can sustain and continue a strong safety
record.
Sustainability
Bushveld Minerals has embarked on a journey to define and implement a
comprehensive sustainability strategy. At the heart of this strategy is an
overarching philosophy of going "Beyond Compliance", which requires an
understanding and commitment to sustainability as core to our business and not
a question of meeting regulatory requirements. The philosophy underpins our
approach to environment management and engaging with social partners.
Our sustainability journey is in its early stages, defined with short-term
(2021 - 2025) objectives to meet our regulatory compliance obligations and
ensuring alignment / standardisation of practices across the business,
followed by longer-term (2026 onwards ) objectives that give effect to our
"Beyond Compliance" ethos. Dedicated personnel have been brought into the
business with
executive leadership responsibility allocated for driving our ESG strategy
going forward.
Our approach to sustainability is also defined along two important dimensions:
(a) being clear about how we operate in a sustainable manner, and (b)
articulating how our products and related solutions contribute towards global
sustainability efforts.
In respect of the second, Bushveld Minerals is well placed to make a
meaningful contribution to global decarbonisation efforts through its alloying
products that reduce the carbon footprint of steelmaking, and through its
electrolyte products used in large-scale long-duration energy storage systems
that will support the energy transition through, among others, supporting
greater penetration of renewable energy to the global energy mix.
Growth
Through the acquisitions and investments in our plants we have significantly
increased our production by 36 per cent between 2017 to 2021 and Bushveld is
now positioned as a significant global vanadium producer. While our current
business model and production run rate is sustainable without the need for
additional growth, we are in the process of ramping up to a production run
rate of 5,000 - 5,400 mtV by the end of 2022, which will provide Bushveld
further cash generation potential.
As outlined in the recently announced technical studies, the full production
potential of our assets is much greater than the current production run rate,
particularly in the wake of the commissioning of Kiln 3 at Vanchem in the
second quarter of 2022. The studies provide a well-structured long-term
incremental growth path to a production rate of 8,000 mtV per annum, ensuring
a permanent and reliable feedstock to both Vametco and Vanchem while reducing
production unit costs.
The option to implement the growth path in phases that are each value
accretive substantially reduces the upfront capital requirements. We can
attain the incremental production more rapidly and generate additional cash
flows after each phase, which can be leveraged for the next phase. As we have
full flexibility in relation to this growth, any decision in this regard will
be dependent on market conditions and subject to capital availability.
Further detail on the findings of the studies can be found in the operating
assets section.
Bushveld Energy
The momentum of the energy transition away from fossil fuels to clean energy
continued to grow in 2021 and was, in fact, given further impetus by the
positive outcome of the COP26 climate change conference in Glasgow. Whilst
forecasts of stationary energy storage deployments growth vary among analysts,
they all point to substantial growth of the sector. Bloomberg New Energy
Finance, for example, forecast that deployed energy storage installations
around the world are will multiply by a factor of 122 to 2,850 GWh by 2040.
Furthermore, Guidehouse Insights expects global annual deployments of VRFBs to
grow at a compounded annual growth rate (CAGR) of 41 per cent over the next 10
years, reaching approximately 32.8 GWh in 2031.
The VRFB deployment forecast by Guidehouse Insights would equate to between
127,500 and 173,800 tons of new vanadium demand per year by 2031, according to
Vanitec calculations based off Guidehouse's projection. That would be more
than twice as much vanadium as is currently produced annually today.
This certainly presents a substantial opportunity for Bushveld Energy, the
company's energy storage focused subsidiary whose mission is the advancement
of VRFBs. Since inception in 2016, Bushveld Energy has made significant
inroads in establishing the case for VRFBs in the
growing energy storage market through its focus on key activities along the
VRFB value chain structured along three key areas:
§ Construction of the building for the vanadium electrolyte manufacturing
plant in East London, South Africa, was completed in April 2022 and the
Engineering, Procurement and Construction ("EPC") contract is underway. The
vanadium electrolyte manufacturing plant, targeting an initial capacity of 8
million litres, will be one of the largest plants outside of China.
§ VRFB Manufacturing: We invested US$10 million this year to acquire an
effective shareholding of 25.25 per cent into CellCube, a grid-scale and
micro-grid energy storage battery manufacturer, headquartered in Austria,
bringing our total investment to $12 million.
§ VRFB Projects Deployments: We completed the development and achieved
financial closing for a 3.5 MW solar photovoltaic (PV) generation farm and 4
MWh of VRFB energy storage pilot project at Vametco Mine ("the Vametco mini
grid"). Site clearing has
§ commenced and commissioning is targeted for H1 2023; 26 mtV of electrolyte
for the battery has been secured from Vametco. The Vametco mini-grid will
serve to demonstrate the technical and commercial viability of hybrid
mini-grids using solar PV and VRFB technology and in the process open up
opportunities for the deployment of such solutions in an environment that is
increasingly encouraging self-generation for large energy users.
In addition, we identified captive opportunities within the Group of up to 120
MW of solar and 180 MWh of VRFB storage. These projects will also reduce the
Group's reliance on Eskom, help control electricity cost increases and reduce
the carbon footprint of our vanadium production, as part of a broader
sustainability strategy.
We are pleased to have successfully defended the litigation initiated, during
2021, by Garnet Commerce Limited ("Garnet"), our partner in CellCube, against
VRFB Holdings Limited ("VRFB-H") and Enerox Holdings Limited ("EHL"),
concerning an alleged breach by VRFB-H of the joint venture agreement in
relation to EHL. Successfully defending this litigation which sought to
challenge the indirect investment by Mustang plc into EHL, means the indirect
investment by Mustang into EHL remains in place.
Notwithstanding the large opportunity presented by the energy transition for
energy storage solutions and significant progress made by Bushveld Energy as
summarised above, we recognise the complexity of a company spanning the
vanadium value chain with operations that belong in different industry sectors
and with different business models.
Having incubated Bushveld Energy and created the critical mass to ensure its
success, we intend to carve out Bushveld Energy as a stand-alone company
focused on the VRFB value chain. We believe that this will help to crystalise
the value of Bushveld Energy and to position it in the capital markets to
attract the appropriate energy-market focused institutional investors with an
appetite and understanding of the energy proposition, while retaining the
vertical integration proposition of Bushveld Minerals via a significant
shareholding in the stand-alone energy company.
Vanadium Market Outlook
We remain bullish on the vanadium market. We believe the vanadium market is
characterised by a structural deficit in the medium to long term, supported by
robust and growing demand amidst a concentrated supply base with limited scope
for meaningful supply growth.
Demand will continue to be anchored by the steel sector, underpinned by rising
intensity of the use of vanadium within high-strength low-alloy ("HSLA")
steel. Away from steel, significant upside potential is anticipated for
vanadium within VRFBs, as the requirement for energy storage applications for
renewable energy sources increases, with decarbonisation and the energy
transition fast becoming global themes set to remain relevant for the decades
to come.
Vanadium supply is concentrated and increasingly constrained in its ability to
respond to demand. Increasing utilisation levels of coproduction steel plants,
which account for more than 70 per cent of global vanadium supply, mean
decreasing scope for co-producers to
increase vanadium production, even in favourable steel market conditions,
which are the key drivers of supply movements among co-producers. Meanwhile
historical vanadium price volatility will, at least in the short term,
continue to limit the availability of capital for
developing greenfield vanadium projects.
This resulting structural deficit in the medium to long term points towards
vanadium price upside relative to historical averages. In the short term,
however, vanadium prices continue to be volatile, driven by the lingering
impacts of the COVID-19 pandemic, especially in China where hard lock downs
have continued to be imposed. The recent Russia-Ukraine conflict and global
recession fears have also added to volatility.
The price volatility seen in 2020, 2021 and now in 2022 underscores the
importance of being a low-cost vanadium producer and remains a core strategic
focus for us as a company. The Russia-Ukraine conflict puts a spotlight on the
geopolitics of global vanadium supply, given the geographical concentration of
supply with China and Russia accounting for 50 per cent and 17 per cent
respectively. This places South Africa in a favourable position, with its
massive high grade primary vanadium reserves. With two of the three
operational plants in South Africa and scope to grow production on these,
Bushveld has the opportunity to emerge as a key producer and supplier of
vanadium in a global market.
Outlook
We anticipate an encouraging 12 months ahead as we are on track to meet our
Group production and cash cost guidance at the operations. This is supported
by the commissioning of Kiln 3 at Vanchem which was completed in June 2022,
and we anticipate to achieve a production run rate of 2,600 mtV p.a during the
last quarter of 2022.
Overall, we expect Group production of between 4,200 mtV and 4,400 mtV in
2022, with volumes weighted towards the second half as Kiln 3 is ramped up by
year end, with lower production cash cost (C1) of: between US$22.7/kgV and
US$23.5/kgV at Vametco and between US$27.7/kgV and US$28.4/kgV at Vanchem.
Production guidance at Vametco is between 2,450 mtV and 2,550 mtV and at
Vanchem it is between 1,750 mtV and 1,850 mtV.
We reported a strong start to the 2022 financial year, with another solid set
of quarterly operating results in Q1 2022. Continuing on from the performance
in 2021 and the underlying EBITDA profit in H2 2021, we have now successfully
produced four quarters of consistent performance,
building on the operational improvements and enhanced safety initiatives.
We believe Bushveld Minerals is now a solid, sustainable, margin positive
business, and there still remains a large opportunity to continue our overall
growth programme.
Concluding Remarks
So, our transformation journey continues. With two of the world's four
operating primary vanadium production facilities, a diverse product profile
and significant growth upside, we are well placed in a market that will
increasingly look to primary producers to meet its growing vanadium demand.
While we remain committed to maximising the production capacity of our plants,
our immediate short-term focus is to ensure that the production base is
stable, sustainable and cash generating.
Following the commissioning of Kiln 3 and the expected resulting Group
production level of 5,000-5,400 mtV per annum by the end of 2022, the Company
is in a good position to generate cash and positive margins, as one of the
largest and most significant primary vanadium producers with a low cost
production base and supplying approximately five per cent of the global
market.
Our decision to carve out Bushveld Energy comes at a time when the business
has generated sufficient critical mass to stand alone, albeit still linked to
the upstream vanadium production platform. It also comes at a time of growing
momentum behind the energy transition and long duration energy storage in
particular. The positioning this will give Bushveld Energy in the market is
incredibly attractive while helping simplify Bushveld Minerals' investment
proposition as a vanadium producer. If the above sounds like a reset of sorts,
that is because it is - a reset aimed at:
§ consolidating our gains with the capital invested to date;
§ building organisational capacity to successfully manage our assets;
§ realising a sustainable cash generating business characterised by a stable
and predictable low-cost production base with a secure balance sheet; and
§ unlocking the value linked to a downstream, sound and growing energy
storage platform that is independently funded through energy focused public
capital markets. The importance of the simplicity of the resulting investment
proposition cannot be over-emphasised.
Supporting this reset are several important developments that I am pleased to
announce, which will provide much needed support in this phase. These include
the appointment of Lucas Msimanga as Director of Operations with effect from 1
June 2022, significant changes to our Board of Directors with four new
appointments who bring a diverse and complimentary skill and experience set,
and the appointment of Royal Bank of Canada ("RBC") as a broker and financial
advisor to the Company. I am delighted to welcome Lucas to the executive team.
Lucas brings more than 20 years of operational leadership experience in the
processing and metallurgy sector which is important for operations whose
downstream processing/metallurgical processing accounts for the vast majority
of our production processes. RBC brings breadth and depth of capital markets
advisory and support to the Company at a crucial time in our development.
Gratitude
Finally, I would like to sincerely thank each and every employee and
contractor. Each and every one of you is an invaluable cog in our business and
your care, courage and commitment has been fundamental in ensuring the
continued success and development of Bushveld Minerals in 2021. I am
privileged to work alongside you all and look forward to many years of
continued service.
I must also thank Jeremy Friedlander, Anthony Viljoen and of course, Ian
Watson, who have been serving on the Board since IPO and during which time
they played an important role through a transformative period of the company.
Their guidance and leadership over the last decade has been invaluable.
Michael Kirkwood will be appointed acting chairperson at the next Annual
General Meeting ("AGM"), while the company continues its search for a
permanent chairperson. We are pleased to welcome and look forward to working
with the new directors as the company continues its growth path and evolution.
Fortune Mojapelo
Chief Executive Officer
Finance Director's Review
Overview
The 2021 underlying result shows improvement from 2020, despite the
continuation of the pandemic as we delivered an underlying EBITDA loss of
US$7.5 million, up US$7.4 million from the 2020 underlying EBITDA loss of
US$14.9 million (underlying EBITDA is adjusted EBITDA excluding impairment
charges. Adjusted EBITDA is EBITDA, excluding the group's share of losses from
joint ventures and the remeasurement of financial liabilities).
Foreign exchange had a material impact on costs during the year, with the Rand
strengthening from ZAR16.46/US$ to ZAR14.79/US$ in that period. This gave rise
to a net adverse exchange impact of US$11.6 million on underlying EBITDA.
Excluding the adverse exchange rate impact then we would have achieved a
positive underlying EBITDA profit of US$4.1 million for the year on a like for
like exchange rate with 2020.
Our operational and financial performance in 2021 is however a story of two
halves. In the H1, underlying EBITDA amounted to a loss of US$10.8 million,
primarily due to a stronger ZAR: US$ exchange rate on costs and exacerbated by
weak production performance at Vametco in the first four months. In the second
half of the year, the Group achieved an underlying EBITDA profit of US$3.3
million on the back of a strong production performance at both Vametco and
Vanchem and a higher realised price. This positive profitability has been
maintained into the 2022 financial year to date.
Recognising the potential significant impact of the movement of the ZAR: USD
exchange rate on our results, we are constantly reviewing our hedging policy,
and we will be better placed to implement this once we attain steady state
production in 2023.
The Group reported revenue of US$106.9 million (2020: US$90.0 million), driven
by a higher average realised price of US$32.2/kgV (2020: US$23.4/kgV) and
offset by lower sales.
We made the decision to rebase our plans by reducing our production guidance
for the year, implementing the changes that were required to stabilize
production and provide the platform for growth. This entailed increasing
investment in maintenance and sustaining capital, to help our operations to
achieve stability and support the anticipated volume increase in the 2022
financial year.
Overall, we recorded a Group production for the year of 3,592 mtV, just shy of
the upper end of the 2021 guidance of between 3,400mtV and 3,600mtV.
Whilst continuing with the various cash conserving measures put in place to
protect the balance sheet during 2020, we remained firmly focused on our
strategy to sustainably increase production. As part of our capital allocation
process, we prioritised the refurbishment of Vanchem's Kiln 3 as it provided
the Group with the most rapid route to near term production growth. We
successfully negotiated with Orion Mine Finance ("Orion") to lift the
Production Finance Arrangement ("PFA") capital ringfence, allowing us to
reallocate US$17.8 million of the PFA funding from Vametco to finance the
refurbishment and expansion of Vanchem. Further details of the growth path are
set out in the section on Operating Assets and Operational Review.
The commissioning of Kiln 3 was completed within budget post year-end in June
2022, with focus now on plant stabilisation and optimization. The Group's
ability to achieve its future production profile is predicated on the Kiln 3's
successful increase in production during the first three to four months
following commissioning, as it ramps up. This will enable the Group to reach
its targeted steady state production run rate of 5000 - 5400 mtV p.a. in the
last quarter of the 2022 financial year. This is a significant increase from
our production of 3,592 mtVp.a. in 2021 and supports our guidance of between
4,200 - 4,400 mtVp.a. for the 2022 financial year.
During the year, the Duferco loan of US$11.5million was settled by way of
US$2.5 million in cash and US$9.0 million by the issue of shares.
Approximately US$12.7 million was realized in the H1 of 2021 from the sale of
the investment in Invinity Energy Systems Plc ("Invinity"), earning an overall
profit of approximately US$7.7 million on the original investment of US$5.0
million. We invested US$10 million of the proceeds to increase our investment
in VRFB manufacturer CellCube (previously referred to as Enerox GmbH), which
resulted in an indirect interest of 25.25 per cent in CellCube.
Unit H1 2021(1) H2 2021(1) FY2021 FY2020
Revenue US$m 47.0 59.9 106.9 90.0
Cost of sales US$m (43.3) (40.1) (83.4) (73.4)
Other operating and administration costs US$m (14.5) (18.9) (33.4) (31.5)
Adjusted EBITDA US$m (10.8) 0.9 (9.9) (14.9)
Impairment charges US$m - 2.4 2.4 -
Underlying EBITDA US$m (10.8) 3.3 (7.5) (14.9)
Average foreign exchange rate US$m 14.54 15.02 14.79 16.46
Group production mtV 1,574 2,018 3,592 3,631
Group sales mtV 1,608 1,706 3,314 3,842
All-In Sustaining Cost (AISC) US$/kgV 39.7 35.2 37.4 28.8
Average realized price US$/kgV 29.2 35.1 32.2 23.4
1. Unaudited
The Company sold its 4.76 per cent shareholding in AIM-listed Afritin Mining
Limited and realized a total of approximately US$3.5 million. The proceeds of
the sale were used for general corporate purposes.
Income Statement
Analysis of results
Income statement summary as adjusted from "statutory" Primary statement
presentation
US$ 2021 US$ 2020
Revenue 106,857,285 89,988,078
Cost of sales (83,387,087) (73,394,608)
Other operating and administration costs (33,357,130) (31,534,410)
Adjusted EBITDA (9,886,932) (14,940,940)
Depreciation (19,395,496) (17,866,153)
Operating loss (29,282,428) (32,807,093)
Remeasurement of financial liabilities (1,902,172)
Share of loss in joint venture (4,351,356)
Net financing expense (11,248,712) (4,654,258)
Other non-operating costs (206,066)
Loss before tax (46,784,668) (37,667,417)
Income tax charge 4,671,255 6,570,026
Loss after tax (42,113,413) (31,097,391)
Revenue
Group Sales of 3,314 mtV were 13.7 per cent lower than in 2020 due to
challenges in international logistics channels arising from COVID-19, the
unrest in South Africa and disruptions at local ports in July and August. Over
the course of 2021, we saw a recovery in the Vanadium price to the average
London Metal Bulletin of US$34.4/kgV, despite ongoing concerns about COVID-19.
This recovery meant that lower sales were offset by a higher average realised
price in 2021 of US$32.2/kgV (2020: US$23.4/kgV) resulting in higher revenue
for the Group of US$106.9 million 2020:US$90.0 million). The logistical
challenges resulted in the Company being unable to ship some of the product
produced during 2021, resulting in a build-up of inventory throughout the
logistics chain (stock at site, transit to Port, sea-borne and in-country
warehouses) of 278 mtV which is included in the cumulative inventory at year
end of 832 mtV.
The geographic split of Group sales in 2021 was 47 per cent (2020: 34 percent)
to the United States, 29 per cent to Europe, 3 per cent to China and 21 per
cent to the rest of the world. We expect the geographic mix to shift as Kiln 3
comes online in 2022 with the resultant wider product mix.
During the year, Bushveld took advantage of the robust vanadium demand and
higher prices in the United States by diverting a larger portion of its sales
to the Unites States. As a result, sales to the United States increased due to
increased vanadium demand from the North American steel and aerospace
industries on the easing of the pandemic lock down regulations and opening up
of economies. We are pleased to have been able to supply into our framed
contracts in the US despite these challenges.
Cost of sales
The cost of sales excluding depreciation for the period was US$83.4 million
(2020: US$73.4 million), primarily due to the negative impact amounting to
approximately US$8.5 million of the stronger ZAR: US$ exchange rate on costs
in 2021. The balance of the increase is largely attributable to an overall
increase in costs at both Vametco and Vanchem, as detailed below:
§ Increase in maintenance costs to US$16.5 million (2020: US$12.1 million) to
sustain the plants, production volumes and improve operational stability.
§ Increase in energy and raw material costs to US$40.7 million (2020:
US$38.5million).
§ Increase in mining costs due
§ to waste stripping of US$5.4 million (2020: US$3.2 million) associated with
bringing the Upper Seam project online in September 2021.
§ The Group cost per unit sold (including sustaining capex) of US$37.4/kgV
increased by 30 per cent (2020: US$28.8/kgV), mostly due to the cost factors
mentioned above and lower sales volumes.
The Group focused on the commissioning of Kiln 3 at Vanchem along with
associated downstream refurbishments. As a result, Vanchem production
personnel costs increased in line with expectation as we implemented the plan
in anticipation of the commissioning scheduled for May 2022. The time lag
between the upfront expenditure required ahead of the planned increase in
production was a contributing factor to the higher Group cost of US$37.4/kgV
(including sustaining capital) relative to 2020 (2020: US$28.8/kgV). We
continued with our cost-reduction measures as the Group maintained its focus
on embedding the synergies across Vametco and Vanchem to grow production
organically.
During the H1 of the year, we carried out a 35-day planned maintenance
shutdown at our main operating asset, Vametco, which was followed by a slower
than expected ramp up and a 10-day industrial action. The combination of these
factors and a step change in our approach to a more sustainable production
delivery resulted in a rebasing of our production profile for the year.
The rebasing of production had a negative impact on unit cost of production,
with the fixed costs, accounting for approximately 45 per cent of total costs,
being absorbed off a lower production volume.
Group production of 2,018 mtV in the second half was an improvement and 28.2
per cent higher than H1 2021 (H1 2021: 1,574 mtV) on the back of the
operational improvements implemented after the production target rebasing.
2021 2020
Total Cost
Cost of sales (direct) US$ (83,387,087) (73,394,607)
Operating costs and admin US$ (33,357,130) (31,534,411)
Other non-operating costs US$ - (206,066)
Total income statement cost excl. depreciation US$ (116,744,216) (105,135,084)
Total units sold (mtV) 3,314 3,842
Cost income statement per Unit sold (excl. Depreciation) US$/kgV 35.2 27.4
Sustaining capital US$ (7,192,393) (5,375,610)
Total cost including sustaining capital US$ (123,936,611) (110,510,694)
Cost per unit sold including sustaining capital US$/kgV 37.4 28.8
Average exchange rate ZAR:US$ 14.79 16.46
Total Revenue US$ 106,857,285 89,988,078
Average price realised US$/kgV 32.2 23.4
Cost-saving programme
We continued with the cost-savings programme ("CSP") introduced in 2020. The
CSP is aimed at ensuring continued competitiveness throughout the commodity
cycle while enhancing our product offering to markets across the geographies
and industries in which we compete. The Group performed a diagnostic analysis
for an addressable baseline procurement spend of around U$55.0 million. The
process was concluded in February 2022. The outcome was targeted annualised
cost savings of US$2.5 million - US$4.0 million over a 12 to 24 month period
from February 2022. While, going forward, growing production is expected to
contribute to further lowering of costs through fixed cost dilution,
management will continue to seek broader cost saving opportunities to improve
the company's unit cost performance even further.
Other operating and administration costs
Group administrative expenses increased by US$1.1 million at US$20.9 million
(2020: US$19.8 million). On a like for like exchange rate basis the costs
would have reduced by US$2.0 million, demonstrating the success of the cost
containment measures we initiated in 2020.
Administrative expenses included staff salaries of US$10.8 million (2020:
US$8.1 million) for both the operations and head office administration and
management staff. Since the costs are not directly attributable to the cost of
production, they are recoded under administrative expenditure based on
industry practice. The operation salaries amounted to US$4.8 million (2020:
US$4.7 million), whilst the shared service and change to head office division
(including directors 'fees), amounted to US$5.1 million (2020: US$3.5
million). The increase in head office staff costs is as a result of the
employment of key employees to manage the operations as part of shared
services. Professional fees were maintained at US$5.9 million (2020: US$6.0
million), Included in professional fees are costs incurred of US$1.1m for
legal fees for the litigation surrounding the Enerox Investment. On account of
the successful defense against the litigation a portion of the legal costs
have been recouped post year end.
Administrative expenses by nature December 2021 US$ December 2020 US$
Staff costs 10,746,322 8,146,473
Depreciation of property, plant & 392,669 256,929
equipment
Professional fees 5,860,976 6,017,782
Other 3,894,325 5,361,992
Total administrative expenses 20,894,282 19,783,176
Impairment losses of US$2.4million (2020:US$0) was a result of the impairment
of US$0.5million Intangible asset and US$1.9million plant and equipment.
Other mine operating costs include social commitments and obligations at both
Vametco and Vanchem costs decreased by US$1.5 million to US$3.2 million (2020:
US$ 4.7 million). The idle plant costs of US$3.4 million (2020:US$4.2 million)
mainly reflects the 35-day maintenance shut down during the Q1 of 2021.
Selling and distribution costs increased by US$1.6 million to US$6.4 million
(2020: US$4.8 million) as a result of increased commission paid which is a
consequence of increased revenue in 2021 compared to 2020. The distribution
costs also increased due to longer holding times as a result of logistical
issues experienced in 2021.
Adjusted EBITDA and Underlying EBITDA
The Underlying EBITDA reconciliation shown below illustrates the impact of the
increase in vanadium prices from prior year. Offset by the costs analysed
above.
US$
2020 Adjusted EBITDA (14,940,940)
Revenue changes 16,869,207
Operating cost changes (22,013,462)
Inventory movement 10,198,263
2021 Adjusted EBITDA (9,886,932)
Underlying EBITDA is a factor of volumes, prices and cost of production. This
is a measure of the underlying profitability of the Group, widely used in the
mining sector. Underlying EBITDA removes the effect of impairment charges and
remeasurement adjustments, foreign currency translation gains/losses and other
non-cash expenses.
Dec 2021 US$ Dec 2020 US$
Revenue 106,857,285 89,988,078
Cost of Sale (102,782,583) (91,260,760)
Other operating and administration (33,357,130) (31,534,411)
costs
Add Depreciation and Amortisation 19,395,496 17,866,153
Adjusted EBITDA (9,886,932) (14,940,940)
Add: impairment losses 2,438,889
Underlying EBITDA (7,448,045) (14,940,940)
Other non-cash costs
IFRS 9 - Remeasurement of financial liabilities
The PFA was subject to remeasurement under IFRS 9. This resulted in a non-cash
impact to the income statement of US$1.9 million (2020: US$ nil) remeasurement
adjustment and US$2.8 million (2020: US$ nil) notional interest and a
resultant increase in the loan of US$4.7 million.
Share of loss of VRFB JV
Our underlying investment in Cellcube, through VRFB holdings Limited (VRFB) is
accounted for as an investment in Joint Venture. As such we recognise our
portion of the loss recognised in Cellcube for 2021 which amounted to US$4.4
million.
Deferred Tax
Charges for deferred tax in 2021 amounted to a net deferred tax benefit of
US$5 million, compared to a net deferred tax benefit of US$6.6 million in 2020
(restated). The deferred tax benefit arises from the unwinding of the
liability over the life of the assets.
Deferred Tax on Vanchem acquisition
In 2019, the Group acquired assets in Vanchem which resulted in a recognition
of a gain on bargain purchase of some US$60,6 million in the Group accounts
and around US$85 million in the subsidiary accounts under IFRS 3 (Business
combination). Based on IAS 12-Income taxes, a deferred tax liability of R333
million (c.US$23.7 million) should have been raised with a corresponding
charge to tax on the income statement. The liability which has no cash impact
will unwind over the life of assets with a credit to 2020 income statement on
the tax line of R89 million (c.US$6.1 million) and a credit in the 2021 income
statement on the tax line of R76 million (c.US$4.8 included in the US$5
million mentioned above). The overall impact of the adjustment in the 2021
accounts is a deferred tax liability of R167 million (c.US$10.5 million), a
debit of retained earnings brought forward of R243m
(c.US$16.6 million) and a current year credit to the P&L of R76m (c.
US$5.2m). The prior years in the balance sheet have been restated to reflect
these changes and more details can be found in notes 15 and 35 of the
financial statements.
Balance Sheet Assets
Assets
Non-current assets related to intangibles and property, plant and equipment
remained broadly flat relative to 2020 and changes were mainly due to
depreciation in the year. Our investment in VRFB transferred from Current
assets (Refer to note 16 of the financial statements for further detail). A
deferred tax asset was raised for the assessed loss incurred during the year,
(refer to note 15 for further details).
The decrease in Group cash and cash equivalents was as a result of US$15.4
million (2020: US$50.5 million) was primarily due to the capital spend on
growth projects at Vanchem, VRFB investment and the construction of our plant
in East London.
The movement in fair value is as a result of the Group realising its
investments in AfriTin and Invinity. AfriTin realised approximately
US$3.5million and Invinity US$3.5million in 2021.
Equity and liabilities
Total current and non-current liabilities of US$149.9 million (2020 US$153.5
million) reduced by US$4.2 million from the prior year. The positive impact of
the settlement of the Duferco loan of US$11.5 million of which US$2.5 million
was cash and US$9 million settled through the issue of 66,892,037 shares,
partial repayment of Nedbank of US$2.2 million as well as Orion US$1.1
million, were offset by the US$4.76million IFRS9 impact on the Orion financing
loan, US$3.5million Orion convertible interest, and interest accrual on the
PFA for the Q4 2021 which was only due and payable in Q1 2022.
Net debt
The net debt reconciliation below outlines the Group's total debt and cash
position.
2021 US$ 2020 US$ Difference US$
Gross Cash and Cash Equivalent 15,432,852 50,540,672 (35,107,806)
Nedbank Revolving Credit Facility (5 821,082) (8,636,535) 2,815,453
Convertible Loan Notes - Duferco - (11,585,068) 11,585,068
Production Financing Agreement (33,511,742) (30,105,886) (3,405,856)
- Orion Mine Finance
Convertible Loan Notes Instrument (37,313,976) (33,073,699) (4,204,277)
- Orion Mine Finance
Other (999,950) (845,588) (154,362)
Leases (4,485,312) (5,002,144) 516,832
Net Debt (66,699,209) (38,708,248) (27,990,961)
Cash flow statement
The table below summarises the main components of cash flow during the year.
Year ended 31 Dec 2021 (audited) US$ Year ended 31 Dec 2020 (audited) US$
Operating loss (29,282,428) (32,807,093)
Impairments 2,438,890
Depreciation and amortisation 19,395,496 17,866,153
Changes in working capital and provisions (5,022,120) 1,253,029
Taxes paid 394,069 (3,452,492)
Cash (outflow) from operations (12,076,093) (17,140,404)
Sustaining capital (7,192,393) (5,375,610)
Free cashflow (19,268,491) (22,516,014)
Cash from other investing activities (9,965,907) (7,943,222)
Financing activities (7,049,147) 47,433,269
Cash (outflow) / inflow (36,283,545) 16,974,034
Opening net cashflow 50,540,672 34,011,557
Foreign exchange movement 1,175,725 (444,919)
Closing net cash 15,432,852 50,540,672
Net cash from operating activities was an outflow of US$12.1 million (2020:
US$17.1 million), an improvement from the previous year driven by Adjusted
EBITDA. Capital expenditure and investing activities for the year were US$17.2
million (2020: US$13.3 million), an increase of
US$3.9 million from 2020 mainly due to investing activities as explained
below. The Group ended the year with a cash balance of US$15.4 million, (2020:
US$50.5 million), the net outflow arising from, inter alia, higher capital
expenditure and repayment of loans.
Investing activities
Investing activities were driven by capital expenditure growth with property
plant and equipment expenditure of US$19.5 million, up US$9.3 million from
2020. This was mainly as a result of Kiln 3 capital expenditure of US$4.2
million and construction of the bushveld electrolyte plant of US$4.9million.
In addition to above, payments were made for the deferred consideration owed
to Evraz of US$1.7 million, Duferco deferred consideration of US$2.2million,
Investment in CellCube of US$10million. The costs were offset by finance
income to the value of US$1.0 million for the year as well as the disposal of
the US$12.7million investment in Invinity and US$3.5million investment in
Afritin.
Capital expenditure to sustain and grow our production
In line with our rebasing, we substantially increased sustaining capital at
Vametco, in order for our operations to achieve stability and support the
volume increase in the 2022 financial year as outlined below.
2021 US$(million) 2020 US$(million) Outlook
2022 US$ (million)
Vametco 4.5 4.4 5.5
Growth 0.6 2.6 -
Environmental/ 0.2 - 0.6
Legal Compliance
Sustaining 3.7 1.8 4.9
Vanchem 7.7 3.6 8.5
Growth 4.4 - 4.5
Environmental/ 2.6 3.4 2.4
Legal Compliance
Sustaining 0.7 0.2 1.6
Bushveld Energy 4.9 8.1
Growth 4.9 8.1
Total capital expenditure 17.1 8.0 22.1
§ The Group remained firmly focused on our strategy to sustainably increase
production, prioritising the refurbishment of Vanchem's Kiln 3. During 2021
the Group spent US$17.1 million 2020:US$8.0 million on sustaining and growth
capital. The total spend was comprised of the following:
§ US$3.9 million sustaining capital at Vametco, mainly comprised of medium-
and long-term maintenance capex.
§ US$4.2 million growth capital for the refurbishment of Kiln 3 at Vanchem.
Vanchem's production scale up to a run rate of 2,600 mtv per annum by the end
of the 2022 financial year. The balance to be incurred during 2022.
§ US$4.9 million growth capital for BELCO electrolyte plant.
Financing activities
Financing activities of US$7.0 million comprise of the loan repayments of
US$2.2 million on the Nedbank RCF and US$2.5 million Capital repayment of the
US$11.5 million unsecured convertible loan note held by Duferco as well as
US$1.7million interest on the Orion PFA. As explained above the balance of
US$9.0 million which was due for repayment was settled by the issue of
66,892,037 new Bushveld shares. This was offset by the receipt of
US$1.3million receipt from the Industrial Development Corporation(refer to
note 25) for BELCO.
Financial Risk
The main financial risks faced by the Group relate to the availability of
funds to meet business needs (liquidity risk), the risk of default by
counterparties to financial transactions (credit risk), fluctuations in
interest and foreign exchange rates and commodity prices (market risk). These
factors are more fully outlined in the notes to the accounts. They are
important aspects to consider when addressing the Group's going concern
status. We proactively manage the risks within our control. There are,
however, factors which are outside the control of management, specifically
volatility in the ZAR: US$ exchange rate as well as the vanadium price, which
we do not currently hedge, and which can have a significant impact on the
cashflows of the business. As mentioned earlier, implementation of a hedging
policy will be considered when we attain steady state production and have a
wider range of products for sale in 2023.
Going Concern And Outlook
We manage liquidity risk by ensuring that the Group has sufficient funds for
all ongoing operations. Our philosophy is to maintain a low level of financial
gearing, given exposure to the vanadium price and exchange rate fluctuations.
As part of the annual budgeting and long-term planning process, the Board
reviewed and approved the Group's budget and cashflow forecasting through to
2023. The forecast is amended in line with any material changes identified
during the year. Equally, where funding requirements are identified from the
cashflow forecast, appropriate measures are taken to ensure these requirements
can be satisfied. In particular, a capital allocation framework is applied
which prioritises maintenance and regulatory capital funding requirements.
We also closely monitor our working capital and regularly produce cash
forecasts and analyse sensitivities to different scenarios, including, but not
limited to, changes in commodity prices and different production profiles from
the Group's producing assets. We have a pricing committee which considers
commodity pricing outlook, taking into account industry analysts forecasts as
well as inhouse intelligence.
Our future production profile in our forecasts is predicated on Vanchem Kiln 3
being commissioned during the H1 of 2022. Kiln 3 has been commissioned and is
undergoing stabilisation and optimization, with ramping up expected to
commence thereafter. The annual production run rate is forecast to ramp up to
5,000 - 5,400 mtV p.a. in the last quarter of the 2022 financial year and we
remain comfortable that Kiln 3 will be at the forecast run rate by the end of
year.
The Nedbank Revolving Credit Facility (RCF) of ZAR125 million available to
Vametco is subject to financial covenants which are EBITDA-driven. The
application of IFRS 9 on the Orion PFA resulted in an increase in accounting
interest, over and above the actual interest paid which comprised the
calculation of the net interest to debt covenant. Nedbank has approved the
waiver of the covenants for the December 31, 2021, and we are confident of
passing the 30 June 2022 reporting period. The term of the RCF ends in
November 2022 and since August 2021, we have been paying approximately US$0.44
million (ZAR7.0 million) per month towards the RCF. of which approximately
US$2.,65 million (R42.0 million) has been paid post the year end.
Although the start of the 2022 financial year has been challenging for
Vanchem, as Kiln 1 battled with repairs and maintenance, we are encouraged by
the positive production run rate at Vametco and the profitability that is
coming through from that operation. The plant at Vametco is currently down for
its annual planned shutdown during June 2022 and has generally performed well
and is benefitting from the operational stability initiatives we embarked on
during 2021. Whilst we have experienced logistical challenges with our sales,
we have retained our customer relationships as the Group sells and distributes
around 85 per cent of its product as frame contracts.
We continue to prioritise financial stability through cost containment,
conserving cash and adhering to a clear capital allocation framework, to
ensure the Group's resilience through the operating cycle. Accordingly, the
Directors continue to adopt the going concern basis in preparing the
consolidated financial information. Further information on the Directors going
concern assessment is contained] in the accounting policies.
Tanya Chikanza
Finance Director
Bushveld Minerals Limited (Registration number 54506) Consolidated Financial
Statements for the year ended 31 December 2021
Consolidated Statement of Profit or Loss
2021 2020
Note Restated*
US$ US$
Continuing operations
Revenue 5 106,857,285 89,988,078
Cost of sales (102,782,583) (91,260,760)
Gross profit/(loss) 4,074,702 (1,272,682)
Other operating income 2,618,971 2,304,528
Impairment losses 12&13 (2,438,890) -
Selling and distribution costs (6,406,621) (4,828,710)
Other mine operating costs (3,224,407) (4,699,892)
Idle plant costs (3,386,899) (4,152,153)
Share-based payment 23 375,008 (375,008)
Administration expenses 7 (20,894,292) (19,783,176)
Operating loss (29,282,428) (32,807,093)
Finance income 8 935,347 1,077,991
Finance costs 9 (12,184,059) (5,732,249)
Remeasurement of financial liabilities 28 (1,902,172) -
Loss from Joint venture 17 (4,351,356) -
Movement in earnout estimate 26 - (206,066)
Loss before taxation (46,784,668) (37,667,417)
Taxation* 10 4,671,255 6,570,026
Loss for the year (42,113,413) (31,097,391)
Earnings per share
Loss per ordinary share
Basic (loss) / earnings per share (cents) 11 (3.39) (2.63)
Diluted (loss) / earnings per share (cents) 11 (3.39) (2.63)
- -
Loss attributable to:
Owners of the parent (40,779,853) (30,595,243)
Non-controlling interest (1,333,560) (502,148)
(42,113,413) (31,097,391)
*Refer to note 35 for details of restatement
Consolidated Statement of Comprehensive Loss
2021 2020
Note US$ US$
Loss for the year (42,113,413) (31,097,391)
Consolidated other comprehensive income:
Items that will not be reclassified to profit or loss:
(Losses) / gains on valuation of investments in equity instruments (3,771,367) 13,483,194
Other fair value movements 13,830 103,448
Total items that will not be reclassified to profit or loss (3,757,537) 13,586,642
Items that may be reclassified to profit or loss:
Currency translation differences (9,712,355) (9,660,609)
Other comprehensive income for the year net of taxation (13,469,892) 3,926,033
Total comprehensive loss (55,583,305) (27,171,358)
Total comprehensive loss attributable to:
Owners of the parent (55,918,489) (25,790,347)
Non-controlling interest 335,184 (1,381,011)
(55,583,305) (27,171,358)
All results relate to continuing activities.
The accounting policies on page 8 to 20 and the notes on pages 8 to 52 form an
integral part of the consolidated financial statements.
Statement of Financial Position
2021 2020 2019
Restated* Restated*
Note US$ US$ US$
Assets
Non-Current Assets
Intangible assets 12 59,254,372 59,003,825 59,408,821
Property, plant and equipment 13 153,110,702 167,579,993 185,269,063
Investment property 14 2,595,359 2,811,017 2,905,449
Financial assets at fair value 16 - - 4,420,891
Investment in joint venture 17 7,855,237 - -
Total Non-Current Assets 222,815,670 229,394,835 252,004,224
Current Assets
Inventories 18 41,646,156 34,081,625 35,082,342
Trade and other receivables 19 17,642,216 10,425,363 4,516,287
Restricted investment 20 2,868,886 3,111,465 6,605,465
Current tax receivable 275,017 814,067 493,178
Financial assets at fair value 16 - 22,452,877 1,952,227
Cash and cash equivalents 21 15,432,852 50,540,672 34,011,557
Total Current Assets 77,865,127 121,426,069 82,661,056
Total Assets 300,680,797 350,820,904 334,665,280
Equity and Liabilities
Share capital 22 16,797,180 15,858,428 15,357,271
Share premium 22 125,550,674 117,065,907 111,067,064
Retained income* 22 (1,265,040) 28,367,659 58,962,902
Share-based payment reserve 23 - 375,008 633,277
Convertible loan note reserve 54,814 54,814 -
Foreign currency translation reserve* 22 (20,851,187) (9,470,088) (2,289,138)
Fair value reserve 22 (1,938,397) 12,966,294 (620,349)
Equity attributable to owners of the parent 118,348,044 165,218,022 183,111,027
Non-controlling interest 32,481,896 32,146,712 33,527,723
Total Equity 150,829,940 197,364,734 216,638,750
Liabilities
Non-Current Liabilities
Retirement benefit obligation 24 1,905,739 2,076,023 2,331,325
Environmental rehabilitation liability 25 18,031,321 17,998,366 17,844,066
Deferred consideration 26 1,684,021 1,802,884 7,108,819
Loans 27 3,280,948 1,597,972 -
Borrowings 28 67,435,647 70,909,370 41,756,152
Lease liabilities 29 3,920,698 4,376,483 4,677,338
Deferred tax 15 6,014,244 11,549,862 24,278,644
Total Non-Current Liabilities 102,272,618 110,310,960 97,996,344
Statement of Financial Position
2021 2020 2019
Restated
Note US$ US$ US$
Current Liabilities
Trade and other payables 30 33,080,670 22,065,601 15,809,996
Provisions 31 3,721,853 3,296,894 3,432,619
Borrowings 28 10,211,102 13,337,406 -
Lease liabilities 29 564,614 625,661 787,571
Deferred consideration 26 - 3,819,648 -
Total Current Liabilities 47,578,239 43,145,210 20,030,186
Total Liabilities 149,850,857 153,456,170 118,026,530
Total Equity and Liabilities 300,680,797 350,820,904 334,665,280
The consolidated financial statements and the notes on pages 1 to 52, were
approved by the board of directors on the 22 June 2022 and were signed on its
behalf by:
Tanya Chikanza
Finance Director
The accounting policies on page 8 to 20 and the notes on pages 8 to 52 form an
integral part of the consolidated financial statements.
Bushveld Minerals Limited
(Registration number 54506)
Consolidated Financial Statements for the year ended 31 December 2021
Consolidated Statement of Changes in Equity
Share capital Share Foreign Share-based Convertible Fair Retained Total Non- Total equity
premium exchange payment loan note value income attributable to controlling
Translation reserve reserve reserve equity holders interest
reserve of the group /
company
US$ US$ US$ US$ US$ US$ US$ US$ US$ US$
Opening balance as previously reported 15,357,271 111,067,064 (1,655,861) - - (620,349) 83,415,438 207,563,563 33,527,723 241,091,286
Adjustments
Prior year adjustments - - - - - - (24,452,536) (24,452,536) - (24,452,536)
Balance at 01 January 2020 as restated 15,357,271 111,067,064 (1,655,861) - - (620,349) 58,962,902 183,111,027 33,527,723 216,638,750
Loss for the year - - - - - - (30,595,243) (30,595,243) (502,148) (31,097,391)
Other comprehensive income, net of tax: Currency translation differences
- - (7,814,227) - - - - (7,814,227) (878,863) (8,693,090)
Fair value movement on investments - - - - - 13,483,194 - 13,483,194 - 13,483,194
Other fair value movements - - - - - 103,449 - 103,449 - 103,449
Total comprehensive Loss for the year - - (7,814,227) - - 13,586,643 (30,595,243) (24,822,827) (1,381,011) (26,203,838)
Transaction with owners: Issue of shares
501,157 5,998,843 - - - - - 6,500,000 - 6,500,000
Share-based payment - - - 375,008 - - - 375,008 - 375,008
Equity component of convertible loan note - - - - 54,814 - - 54,814 - 54,814
Balance at 01 January 2021 15,858,428 117,065,907 (9,470,088) 375,008 54,814 12,966,294 28,367,659 165,218,022 32,146,712 197,364,734
Loss for the year - - - - - - (40,779,853) (40,779,853) (1,333,560) (42,113,413)
Other comprehensive income, net of tax: Currency translation differences
- - (11,381,099) - - - - (11,381,099) 1,668,744 (9,712,355)
Other fair value movements - - - - - (3,757,537) - (3,757,537) - (3,757,537)
Total comprehensive Loss for the year - - (11,381,099) - - (3,757,537) (40,779,853) (55,918,489) 335,184 (55,583,305)
Transaction with owners: Issue of shares
938,752 8,484,767 - - - - - 9,423,519 - 9,423,519
Share-based payment - - - (375,008) - - - (375,008) - (375,008)
Transfer between reserves - - - - - (11,147,154) 11,147,154 - - -
Balance at 31 December 2021 16,797,180 125,550,674 (20,851,187) - 54,814 (1,938,397) (1,265,040) 118,348,044 32,481,896 150,829,940
Note 22 22
The accounting policies on page 8 to 20 and the notes on pages 8 to 52 form an
integral part of the consolidated financial statements.
5
Consolidated Statement of Cash Flows 2021 2020
Note US$ US$
Cash flows from operating activities
Loss before taxation (46,784,668) (37,667,417)
Adjustments for:
Depreciation property, plant and equipment (including right-of-use assets) 13 19,395,496 17,866,153
Loss from joint venture 4,351,356 -
Movement in earnout estimate 26 - 206,066
Remeasurement of financial liabilities 28 1,902,172 -
Interest income 8 (935,347) (1,077,991)
Finance costs 9 12,184,059 5,732,249
Impairment losses 12 & 13 2,438,890 -
Changes in working capital (5,022,120) 1,253,029
Income taxes received / (paid) 394,069 (3,452,492)
Net cash outflow from operating activities (12,076,093) (17,140,403)
Cash flows from investing activities
Finance income 8 935,347 985,901
Purchase of property, plant and equipment 13 (19,449,657) (9,269,924)
Payment of deferred consideration 26 (3,874,449) (1,680,459)
Purchase of investments 16 (9,987,735) (1,883,208)
Purchase of exploration and evaluation assets 12 (928,960) (1,471,142)
Disposal of financial assets held at fair value 16,147,154 286,643
Net cash outflow from investing activities (17,158,300) (13,032,189)
Cash flows from financing activities
Proceeds from loans 27 1,335,735 1,597,972
Finance costs (2,947,577) (3,115,205)
Repayment of borrowings 28 (4,731,932) -
Proceeds from borrowings 28 - 49,417,161
Lease payments (705,373) (753,302)
Net cash (outflow)/inflow from financing activities (7,049,147) 47,146,626
Total cash movement for the year (36,283,540) 16,974,034
Cash and cash equivalents at the beginning of the year 50,540,672 34,011,557
Effect of translation of foreign rate 1, 175,720 (444,919)
Total cash and cash equivalents at end of the year 21 15,432,852 50,540,672
Reconciliation of net cash flow to movement in net debt 2021 2020
US$ US$
Net debt at 1 January (38,708,248) (7,744,604)
Decrease/(increase) in borrowings 4,731,932 (49,417,161)
Increase in loans (1,335,735) (1,597,972)
Net (decrease)/increase in cash and cash equivalents (36,283,540) 16,974,034
Decrease in lease liabilities 245,943 256,260
Effects of exchange rate changes 4,499,970 2,821,195
Net debt as at 31 December (66,849,678) (38,708,248)
Net cash and bank debt (62,213,897) (33,706,104)
Lease liabilities (4,635,781) (5,002,144)
Net debt as at 31 December (66,849,678) (38,708,248)
*Refer to note 35 for details of restatement
The accounting policies on page 8 to 20 and the notes on pages 8 to 52 form an
integral part of the consolidated financial statements.
Notes to the Consolidated Financial Statements
1. Corporate information and principal activities
Bushveld Minerals Limited ("Bushveld") was incorporated and domiciled in
Guernsey on 5 January 2012 and admitted to the AIM market in London on 26
March 2012.
The address of the Company's registered office is Oak House, Hirzel Street, St
Peter Port, Guernsey, GY1 3RH. The consolidated financial statements of the
Company as at and for the year ended 31 December 2021 comprise of the Company
and its subsidiaries (The "Group") and the Group's interest in equity
accounted investments.
As at 31 December 2021, the Bushveld Group comprised of:
Company Note Equity holding and voting rights Country of incorporatio n Nature of activities
Bushveld Minerals Limited N/A Guernsey Ultimate holding company
Bushveld Resources Limited 1 100% Guernsey Holding company
Ivanti Resources (Pty) Limited 2 100% South Africa Mining and manufacturing company
Pamish Investments No 39 (Pty) Limited 2 64.00% South Africa Mining right holder
Amaraka Investments No 85 (Pty) Limited 2 68.50% South Africa Vanadium and iron ore exploration
Bushveld Minerals SA (Pty) Limited 2 100% South Africa Group support services
Bushveld Vanchem (Pty) Limited 13 100% South Africa Processing company
Great 1 Line Invest (Pty) Limited 2 62.5% South Africa Vanadium and iron ore exploration
Gemsbok Magnetite (Pty) Limited 2 74% South Africa Vanadium and iron ore exploration
Caber Trade and Invest 1 (Pty) Limited 2 51% South Africa Vanadium and iron ore exploration
Bushveld Vanadium 2 (Pty) Limited 2 100% South Africa Holding company
Bushveld Energy Limited 1 84.00% Mauritius Holding company
Bushveld Energy Company (Pty) Limited 4 100% South Africa Energy development
Bushveld Vametco Hybrid Mini Grid Company (RF) 12 100% South Africa Energy development
(Pty) Limited
Bushveld Electrolyte Company (Pty) Ltd 12 55% South Africa Energy development
VRFB Holdings Limited 4 50.5% Guernsey Holding company
Vanadium Electrolyte Rental Limited 1&4 40% & 30% UK Energy development
Enerox Holdings Limited 14 50% Guernsey Holding company
Bushveld Vametco Limited 2 100% Guernsey Holding company
Strategic Minerals Connecticut LLC 7 100% United States Holding company
Bushveld Vanadium 1 (Pty) Limited 8 100% South Africa Holding company
Bushveld Vametco Holdings (Pty) Limited 11 74% South Africa Mining right holder
Bushveld Vametco Alloys (Pty) Limited 9 100% South Africa Mining and manufacturing company
Bushveld Vametco Properties (Pty) Limited 10 100% South Africa Property owning company
Lemur Holdings Limited 1 100% Mauritius Holding company
Coal Mining Madagascar SARL 5 99% Madagascar Coal exploration
Imaloto Power Project Limited 3 100% Mauritius Holding company
Imaloto Power Project Company SARL 6 99.00% Madagascar Power generation company
Lemur Investments Limited 3 100% Mauritius Holding company
Lemur SA (Pty) Ltd 3 100% South Africa Coal trading
1 Held directly by Bushveld Minerals Limited
2 Held by Bushveld Resources Limited
3 Held by Lemur Holdings Limited
4 Held by Bushveld Energy Limited
5 Held by Lemur Investments Limited
6 Held by Imaloto Power Limited
7 Held by Bushveld Vametco Limited
8 Held by Strategic Minerals Connecticut LLC
9 Held by Bushveld Vametco Holdings (Pty) Limited
10 Held by Vametco Alloys (Pty) Limited
11 Held by Bushveld Vanadium 1 (Pty) Limited
12 Held by Bushveld Energy Company (Pty) Limited
13 Held by Bushveld Vanadium 2 (Pty) Limited
14 Held by VRFB Holdings Limited
2. Adoption of New and Revised Standards Accounting standards and interpretations applied
In the current year, the Group has adopted the following standards and
interpretations that are effective for the current financial year and that are
relevant to its operations:
COVID-19-Related Rent Concessions (Amendments to IFRS 16) The new standard provides lessees with an exemption from assessing whether a
COVID-19-related rent concession is a lease modification
Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)- The new standard is aimed at resolving the potential effects the IBOR reform
Phase 2 could have on financial reporting.
The adoption of these Standards and Interpretations, which become effective
for annual periods beginning on or after 1 January 2021, had no material
impact on the financial statements of the Group.
Accounting standards and interpretations not applied
Standards, amendments and interpretations to existing standards that are not
yet effective and have not been early adopted by the Group:
Reference to the Conceptual Framework (Amendments to IFRS 3) The amendments update an outdated reference in IFRS 3 without significantly
changing its requirements.
Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37) The amendments address costs a company should include as the cost of
fulfilling a contract when assessing whether a contract is onerous.
Property, Plant and Equipment - Proceeds before Intended Use (Amendments to The amendments prohibit deducting from the cost of an item of property, plant
IAS 16) and equipment any proceeds from selling items produced while bringing that
asset to the location and condition necessary for it to be capable of
operating in the manner intended by management.
Classification of Liabilities as Current or Non-current (Amendments to IAS 1 The amendments provide a more general approach to the classification of
liabilities under IAS 1 based on the contractual arrangements in place at the
reporting date.
Subsidiary as a First-time Adopter (amendments to IFRS 1) The amendments simplified the application of IFRS 1 by a subsidiary that
becomes a first-time adopter after its parent. Subsidiary, associate or joint
venture can elect to apply exemption in par D16(a) to the cumulative
translation difference
Taxation in Fair Value Measurements (Amendments to IAS 41) The amendments removed the requirement to exclude cash flows for taxation when
measuring fair value.
Fees in the '10 per cent' for Derecognition of financial Liabilities The amendments clarify what is included in fees paid and fees received.
(Amendments to IFRS 9)
The Directors anticipate that the adoption of these Standards and
Interpretations, which become effective for annual periods beginning on or
after 1 January 2022, in future periods will have no material impact on the
financial statements of the Group.
3. Significant accounting policies Basis of accounting
In accordance with Section 244 of The Companies (Guernsey) Law 2008, the Group
confirms that the financial information for the year ended 31 December 2021 is
derived from the Group's audited financial statements and that this
preliminary announcement does not include the statutory accounts and, as such,
does not contain all information required to be disclosed in the financial
statements prepared in accordance with UK adopted International Accounting
Standards.
The statutory accounts for the year ended 31 December 2021 have been audited
and approved but have not yet been filed. The Group's audited financial
statements for the year ended 31 December 2021 received an unqualified audit
opinion and the auditor's report contained no statement under section 263(2)
or 263(3) of The Companies (Guernsey) Law 2008. The financial information
contained within this preliminary statement was approved and authorised for
issue by the Board on 30 June 2022.
The financial year covers the 12 months to 31 December 2021. The comparative
period covered the 12 month period to 31 December 2020. The notes to the
financial statements for the year ended 31 December 2019 have only been
presented where impacted by the restatement (see note 35). With the exception
of the amounts restated, the 2019 the 2020 amounts have been derived from the
audited statutory accounts for the years ended 31 December 2020 and December
2019.
The consolidated financial statements have been prepared under the historical
cost basis, except for the revaluation of certain financial instruments and
investment properties to fair value. Historical cost is generally based on the
fair value of the consideration given in exchange for the assets. The
principal accounting policies are set out below.
Going concern
The Group closely monitors and manages its liquidity risk and day to day
working capital requirements. The Group has a R125 million (around
$5.8million) Revolving Credit Facility with Nedbank at Vametco which is
subject to financial covenants. Cash forecasts are regularly produced, taking
into account the global logistical challenges around sales to ensure
sufficient cash within the Group to meet its obligations. The Group runs
sensitivities for different scenarios, including but not limited to changes in
commodity prices and exchange rates. The Group also routinely monitors the
covenants associated with the RCF and proactively engages with Nedbank, the
lender, where there is a risk of a breach. The accounting treatment of IFRS 9
on the Orion Product Finance Agreement led to an increase in accounting
interest, over and above the actual interest paid and resulted in a breach of
the net debt to EBITDA covenant as at 31 December 2021. The Group sought and
was granted a waiver for the interest cover covenant by Nedbank and as part of
that waiver, the definitions of the covenant have been clarified and amended
to exclude the impact of IFRS 9. There was no change to the presentation in
the financial statements due to breach, as the RCF facility is due for
repayment in November 2022 (the cash outflows for which are included within
the group forecasts) and was therefore already disclosed as a short term
liability. Through our regular monitoring, based on Vametco's actual
performance to 30 May 2022 and forecast to 30 June 2022, we are confident of
passing the 30 June 2022 covenant testing period.
The main sensitivities considered as part of management's going concern
assessment are production, vanadium prices and exchange rates. In terms of
production, the newly refurbished Kiln 3 at Vanchem has been commissioned and
is ramping up. The Group's ability to achieve its future production profile is
predicated on the Kiln's successfull increase in production during the first
three to four months following commissioning as this will result in the Group
reaching its target of steady state production run rate of 5,000 to 5,400mtv
per annum by the end of the 2022 financial year. This assumes forecast
production volumes at Vanchem of 222 mtV by December 2022. The pace of ramp up
of the kiln has been slower than planned, impacted by electricity loadshedding
and technical issues that are consistent with a ramp up. The June 2022
production for Vanchem was 108 mtV. As part of our assessment of going
concern, additional sensitivity analysis has been performed on the production
profile of Kiln 3, in particular over the next three to four months, where
production is assumed to remain at 108 mtV, before ramping up to the year-end
target of 222 mtV. We have not identified a cashflow shortfall at group level
as part of this sensitivity analysis. These forecasts assume that Vametco
continues to perform in line with historic levels and planned maintenance
shutdowns are undertaken annually, these shutdowns proceed in line with the
planned timetable and no unplanned shutdowns are experienced during the going
concern period. We have also stress tested the kiln's long term production
plan as well given its planned significant future contribution to the Group's
production profile and cashflows.
With regards to pricing, the short to medium term assumptions are that the
average price achieved by the Group will be $40.99 through to 31 December 2022
and average at $35.04 throughout 2023. The year to date average price achieved
by the group was $44.89. We have performed sensitivity analysis on the basis
of the prices falling 10% below those forecast and have not identified a cash
shortfall at this level.
The forecasts assume a ZAR / USD rate of 15. This compares to a current spot
rate of 15.89 and a 1 year forward rate of 15.29.
As noted above, the Nedbank RCF is due to be repaid in November 2022 and this
is modelled in the cashflow forecasts. In November 2023 the convertible loan
note with Orion of $35million plus interest is due for repayment. Although
this is beyond the 12 month going concern review period as considered by the
board, repayment of the convertible loan note is included in the group's long
term forecasts through to December 2023. Where additional funding may be
required, the Group believes it has several options available to it, including
but not limited to, use of the overdraft facility, restructuring of the debt,
cost reduction strategies as well as selling of non-core assets.
Based on the current Group finances, having considered group budgets and
cashflow forecasts, possible downside scenarios around commodity pricing and
exchange rate and in particular around Vanchem's Kiln production profile, the
cashflow forecasts demonstrate the Group will have sufficient headroom in its
liquid resource to meet its obligations in the ordinary course of business for
the next 12 months from the date of approval of the financial statements.
Accordingly, the Directors continue to adopt the going concern basis in
preparing the consolidated financial information.
Basis of consolidation
The consolidated financial statements present the statement of financial
position and changes therein, statement of profit or loss and cash flow
information of the Group. Where necessary, adjustments are made to the results
of subsidiaries to ensure the consistency of their accounting policies with
those used by the group. Intercompany transactions, balances and unrealised
profits and losses between group companies are eliminated on consolidation.
Subsidiaries
Subsidiaries are all entities (including structured entities) over which the
Group has control. The Group controls an entity when the Group is exposed to,
or has rights to, variable returns from its involvement with the entity and
has the ability to affect those returns through its power over the entity.
Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are deconsolidated from the date that control
ceases.
The Group applies the acquisition method to account for business combinations.
The consideration transferred for the acquisition of a subsidiary is the fair
values of the assets transferred, the liabilities incurred to the former
owners of the acquiree and the equity interests issued by the Group. The
consideration transferred includes the fair value of any asset or liability
resulting from a contingent consideration arrangement. Identifiable assets
acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition
date. The Group recognises any non-controlling interest in the acquiree on an
acquisition-by-acquisition basis, either at fair value or at the
non-controlling interest's proportionate share of the recognised amounts of
acquiree's identifiable net assets.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date
carrying value of the acquirer's previously held equity interest in the
acquiree is re-measured to fair value at the acquisition date; any gains or
losses arising from such re- measurement are recognised in profit or loss.
Subsequent transactions that do not result in the obtaining of control are
accounted for as equity transactions as follows:
· The carrying amounts of the controlling and non-controlling
interests are adjusted to reflect the changes in their relative interests in
the subsidiary
· Any difference between the amount by which the non-controlling
interests are adjusted and the fair value of the consideration paid is
recognised directly in equity and attributed to the owners of the parent
Any contingent consideration to be transferred by the Group is recognised at
fair value at the acquisition date. Subsequent changes to the fair value of
the contingent consideration that is deemed to be an asset or liability is
recognised in accordance with IFRS 9 in profit or loss. Contingent
consideration that is classified as equity is not re-measured, and its
subsequent settlement is accounted for within equity.
Disposal of subsidiaries
When the Group ceases to have control, any retained interest in the entity is
re-measured to its fair value at the date when control is lost, with the
change in carrying amount recognised in profit or loss. The fair value is the
initial carrying amount for the purposes of subsequently accounting for the
retained interest as an associate, joint venture or financial asset. In
addition, any amounts previously recognised in other comprehensive income in
respect of that entity are accounted for as if the Group had directly disposed
of the related assets or liabilities. This may mean that amounts previously
recognised in other comprehensive income are reclassified to profit or loss.
Joint Ventures
A joint venture is a joint arrangement whereby the parties that have joint
control of the arrangement have rights to the net assets of the arrangement.
Investments in joint ventures are accounted for using the equity method. Under
the equity method, the share of the profits or losses of the joint venture is
recognised in profit or loss and the share of the movements in equity is
recognised in other comprehensive income. Investments in joint ventures are
carried in the statement of financial position at cost plus post-acquisition
changes in the consolidated entity's share of net assets of the joint venture.
Goodwill relating to the joint venture is included in the carrying amount of
the investment and is neither amortised nor individually tested for
impairment. Income earned from joint venture entities reduce the carrying
amount of the investment.
Non-controlling interests
Non-controlling interests in subsidiaries are identified separately from the
Group's equity therein. Those interests of non- controlling shareholders that
present ownership interests entitling their holders to a proportionate share
of the net assets upon liquidation are initially measured at fair value.
Subsequent to acquisition, the carrying amount of non-controlling interests is
the amount of those interests at initial recognition plus the non-controlling
interests' share of subsequent changes in equity. Total comprehensive income
is attributed to non-controlling interests even if this results in the
non-controlling interests having a deficit balance.
Black Economic Empowerment ("BEE") interests are accounted for as
non-controlling interests on the basis that the Group does not control these
entities.
Segment reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision- maker. The chief operating
decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Board of
Directors, which makes strategic decisions.
Foreign currencies
Functional and presentational currency
The individual financial statements of each Group company are prepared in the
currency of the primary economic environment in which they operate (its
functional currency). For the purpose of the consolidated financial
statements, the results and financial position of each Group company are
expressed in US Dollars, which is the presentation currency for the
consolidated financial statements and functional currency of the parent
company.
Transactions and balances
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the dates of the transactions or
valuation where items are re-measured. Foreign exchange gains and losses
resulting from the settlement of such transactions and from the translation at
year-end exchange rates of monetary assets and liabilities denominated in
foreign currencies are recognised in the income statement.
Group companies
The results and financial position of all the Group entities (none of which
has the currency of a hyper-inflationary economy) that have a functional
currency different from the presentation currency are translated into the
presentation currency as follows:
a) assets and liabilities for each statement of financial position
presented are translated at the closing rate;
b) income and expenses for each income statement are translated at
average exchange rates (unless this average is not a reasonable approximation
of the cumulative effect of the rates prevailing on the transaction dates, in
which case income and expenses are translated at the rate on the dates of the
transactions); and
c) all resulting exchange differences are recognised in other
comprehensive income.
Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate. Exchange differences arising are recognised in
other comprehensive income.
Revenue recognition
Sale of goods/products
IFRS 15 requires revenue from contracts with customers to be recognised when
the separate performance obligations are satisfied, which is when control of
promised goods or services are transferred to the customer.
The Group satisfies a performance obligation by transferring control of the
promised goods/products to the customer. In the standard "control of an asset"
refers to the ability to direct the use of, and obtain substantially all of
the remaining benefits from, the asset. Control includes the ability to
prevent other entities from directing the use of, and obtaining the benefits
from, an asset.
The Group recognises revenue at the amount that reflects the consideration to
which the entity expects to be entitled in exchange for transferring goods or
services to a customer. Revenue with contract customers is generated from sale
of goods and is recognised upon delivery of the goods to the customer, at a
point in time and comprises the invoiced amount of goods to customers, net of
value added tax.
Cost of sales
When inventories are sold, the carrying amount of those inventories is
recognised as an expense in the period in which the related revenue is
recognised. The amount of any write-down of inventories to net realisable
value and all losses of inventories are recognised as an expense in the period
in which the write-down or loss occurs.
Share based payments
The fair value of bonus shares granted to employees for nil consideration
under the short-term incentive scheme is recognised as an expense over the
relevant service period, being the year to which the bonus relates and the
vesting period of the shares. The fair value is measured at the grant date of
the shares and is recognised in equity in the share-based payment reserve. The
number of shares expected to vest is estimated based on the non-market vesting
conditions.
Where shares are forfeited due to a failure by the employee to satisfy the
service conditions, any expenses previously recognised in relation to such
shares are reversed effective from the date of the forfeiture.
Finance income
Interest income is recognised when it is probable that economic benefits will
flow to the Group and the amount of income can be measured reliably. Interest
income is accrued on a time basis, by reference to the principal outstanding
and at the effective interest rate applicable, which is the rate that exactly
discounts estimated future cash receipts through the expected life of the
financial asset to that asset's net carrying amount on initial recognition.
Taxation
The tax expense represents the sum of the tax currently payable and deferred
tax.
The tax charge is based on taxable profit for the year. The Group's liability
for current tax is calculated by using tax rates that have been enacted or
substantively enacted by the reporting date.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amount of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit or loss, and is accounted for using the "balance sheet liability"
method.
Deferred tax liabilities are recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary
differences can be utilised. Deferred tax is calculated at the tax rates that
are expected to apply to the year when the asset is realised or the liability
is settled based upon rates enacted and substantively enacted at the reporting
date. Deferred tax is charged or credited to profit or loss, except when it
relates to items credited or charged to other comprehensive income, in which
case the deferred tax is also dealt with in other comprehensive income.
Intangible exploration and evaluation assets
All costs associated with mineral exploration and evaluation including the
costs of acquiring prospecting licences; mineral production licences and
annual licences fees; rights to explore; topographical, geological,
geochemical and geophysical studies; exploratory drilling; trenching, sampling
and activities to evaluate the technical feasibility and commercial viability
of extracting a mineral resource; are capitalised as intangible exploration
and evaluation assets and subsequently measured at cost.
If an exploration project is successful, the related expenditures will be
transferred at cost to property, plant and equipment and amortised over the
estimated life of the commercial ore reserves on a unit of production basis
(with this charge being taken through profit or loss). Where a project does
not lead to the discovery of commercially viable quantities of mineral
resources and is relinquished, abandoned, or is considered to be of no further
commercial value to the Group, the related costs are recognised impairment
loss in profit or loss.
The recoverability of capitalised exploration costs is dependent upon the
discovery of economically viable ore reserves, the ability of the Group to
obtain necessary financing to complete the development of ore reserves and
future profitable production or proceeds from the extraction or disposal
thereof.
Impairment of exploration and evaluation assets
Whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable, the asset is reviewed for impairment.
Assets are also reviewed for impairment at each reporting date in accordance
with IFRS 6. An asset's carrying value is written down to its estimated
recoverable amount (being the higher of the fair value less costs to sell and
value in use) if that is less than the asset's carrying value. Impairment
losses are recognised in profit or loss.
An impairment review is undertaken when indicators of impairment arise but
typically when one of the following circumstances applies:
· unexpected geological occurrences that render the resources
uneconomic; or
· title to the asset is compromised; or
· variations in mineral prices that render the project uneconomic;
or
· variations in the foreign currency rates; or
· the Group determines that it no longer wishes to continue to
evaluate or develop the field.
Property, plant and equipment (excluding right-of-use assets)
Property, plant and equipment are stated at historical cost less accumulated
depreciation, except for investment properties which are carried at fair
value.
Depreciation on assets commences when they are available for use by the group.
Depreciation for property, plant and equipment is charged on a systematic
basis over the estimated useful lives of the assets after deducting the
estimated residual value of the assets, using the straight-line method.
Depreciation for right-of-use assets is charged on the same basis except that
the period is the shorter of the useful life of the asset (in line with the
category of property, plant and equipment to which the asset is classified)
and the lease term, unless the title to the asset transfers at the end of the
lease term, in which case depreciation is over the useful life. The
depreciation method applied is reviewed at least at each financial year end,
with any changes accounted for as a change in accounting estimate to be
applied prospectively. The depreciation charge for each period is recognised
in the statement of profit or loss.
The useful life of an asset is the period of time over which the asset is
expected to be used. The estimated useful lives of assets and their residual
values are reassessed annually at the end of each reporting period, with any
changes in such accounting estimates being adjusted in the year of
reassessment and applied prospectively. The estimated useful lives of items of
property, plant and equipment are as follows
Buildings and other improvements 20-25 years
Plant and machinery 15-20 years
Motor vehicles, furniture and equipment 4-10 years
Decommissioning asset Life of mine
Waste stripping asset 21 months
Assets under construction are not depreciated.
Repairs and maintenance is generally charged in profit and loss during the
financial period in which it is incurred. However renovations are capitalised
and included in the carrying amount of the asset when it is probable that
future economic benefits will flow to the Group. Major renovations are
depreciated over the remaining useful life of the related asset.
An item of property, plant and equipment is derecognised upon disposal or when
no future benefits are expected from its use or disposal. Any gain or loss
arising from de-recognition of the asset (calculated as the difference between
the net disposal proceeds and the carrying amount of the asset) is included in
the income statement in the year the asset is derecognised.
Impairment losses
At each reporting date, the Group reviews the carrying amounts of its tangible
assets to determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent of the
impairment loss (if any). Where the asset does not generate cash flows that
are independent from other assets, the Group estimates the recoverable amount
of the cash-generating unit to which the asset belongs.
In assessing whether an impairment is required, the carrying value of the
asset or CGU is compared with its recoverable amount. The recoverable amount
is the higher of the CGU's fair value less costs of disposal (FVLCD) and value
in use (VIU). Given the nature of the Group's activities, information on the
fair value of an asset is usually difficult to obtain unless negotiations with
potential purchasers or similar transactions are taking place. Consequently,
the FVLCD for each CGU is estimated based on discounted future estimated cash
flows (expressed in real terms) expected to be generated from the continued
use of the CGUs using market-based commodity price and exchange assumptions,
estimated quantities of recoverable minerals, production levels, operating
costs and capital requirements, including any expansion projects, and its
eventual disposal, based on the CGU 30 year plans and latest life of mine
(LOM) plans. These cash flows were discounted using a real post- tax discount
rate that reflected current market assessments of the time value of money and
the risks specific to the CGU.
Estimates of quantities of recoverable minerals, production levels, operating
costs and capital requirements and sourced from out planning process,
including the LOM plans, two-year budgets and CGU-specific studies.
The determination of FVLCD for each CGU are considered to be Level 3 fair
value measurements in both years, as they are derived from valuation
techniques that include inputs that are not based on observable market data.
The Group considers the inputs and the valuation approach to be consistent
with the approach taken by market participants.
Key assumptions
The determination of FVLCD is most sensitive to the following key assumptions
· Production volumes
· Commodity prices
· Discount rates
· Exchange rates
Production volumes: In calculating the FVLCD, the production volumes
incorporated into the cash flow models were 2 694 mtVpa for Vametco and 1 610
mtVpa for Vanchem in 2022 for a base case scenario. For a full growth case in
a steady state, production volumes for Vametco is 3 400 mtVpa and for Vanchem
is 4 600 mtVpa taking the total Group production to 8 000 mtVpa. Estimated
production volumes are based on detailed life-of-mine plans and take into
account development plans for the mines agreed by management as part of the
long-term planning process. Production volumes are dependent on a number of
variables, such as: the recoverable quantities; the production profile; the
cost of the development of the infrastructure necessary to extract the
reserves; the production costs; the contractual duration of mining rights; and
the selling price of the commodities extracted. As each producing mine has
specific reserve characteristics and economic circumstances, the cash flows of
the mines are computed using appropriate individual economic models and key
assumptions established by management. The production profiles used were
consistent with the reserves and resource volumes approved as part of the
Group's process for the estimation of proved and probable reserves, resource
estimates and in certain circumstances, include expansion projects. These are
then assessed to ensure they are consistent with what a market participant
would estimate.
Commodity prices: Forecast commodity prices are based on management's
estimates and are derived from forward price curves and long-term views of
global supply and demand, building on past experience of the industry and
consistent with external sources. These prices were adjusted to arrive at
appropriate consistent price assumptions for the different qualities and type
of commodities, or, where appropriate, contracted prices were applied. These
prices are reviewed at least annually. Estimated long-term FeV price for the
current year and the comparative year that have been used to estimate future
revenues, are as follows:
2021 2020
Long term (2027+) Long term (2024+)
Assumptions 2022 2023 2021 2022 2023
Fev US$ per KgV US$ 41.35 US$ 35.15 US$ 40.00 US$ 28.80 US$ 36.00 US$ 35.50 US$ 35.00
Discount rates: In calculating the FVLCD, a real post-tax discount rate of
7.70% (2020: 7.09%) was applied to the post-tax cash flows expressed in real
terms. This discount rate is derived from the Group's post-tax weighted
average cost of capital (WACC), with appropriate adjustments made to reflect
the risks specific to the CGU and to determine the pre-tax rate. The WACC
takes into account both debt and equity. The cost of equity is derived from
the expected return on investment by the Group's investors. The cost of debt
is based on its interest- bearing borrowings the Group is obliged to service.
Segment- specific risk is incorporated by applying individual beta factors.
The beta factors are evaluated annually based on publicly available market
data.
Exchange rates: Foreign exchange rates are estimated with reference to
external market forecasts and updated at least annually. The rates applied for
the first five years of the valuation are based on observable market data
including spot and forward values, thereafter the estimate is interpolated to
the long term assumption, which involves market analysis including equity
analyst estimates. The assumed long-term US dollar/Rand is estimated to be
15.00 (2020:16.00)
Investment property
Investment property is initially measured at cost and subsequently at fair
value with any change therein recognised in profit or loss. Any gain or loss
on disposal of investment property (calculated as the difference between the
net proceeds from disposal and the carrying amount of the item) is recognised
in profit or loss.
Inventories
Inventories are valued at the lower of cost or estimated net realisable value.
Cost is determined on the following basis:
Raw materials weighted average cost
Consumable stores weighted average cost
Work in progress weighted average cost
Finished product weighted average cost
The cost of finished product and work in progress comprises of raw materials,
direct labour, other direct costs, and related production overheads (based on
normal operating capacity) but excludes borrowing costs.
Net realisable value is the estimated selling price in the ordinary course of
business, less costs of completion and selling expenses.
Financial assets and liabilities
Financial assets and financial liabilities are recognised in the Group's
statement of financial position when the Group becomes a party to the
contractual provisions of the instrument. Financial instruments are classified
into specified categories dependent upon the nature and purpose of the
instruments at the time of initial recognition.
Financial assets Measurement
At initial recognition, the Group measures all financial assets at fair value
plus, in the case of a financial asset not at fair value through profit or
loss, transaction costs. Transaction costs of financial assets carried at fair
value through profit or loss are expensed in profit or loss.
Financial assets are classified at initial recognition and subsequently
measured at amortised cost, fair value though other comprehensive income
(FVOCI) or fair value through profit or loss (FVPL).
The classification of financial assets at initial recognition depends on the
financial asset's contractual cash flow characteristics and the Group's
business model for managing them.
Debt instruments
In order for a financial asset to be classified and measured at amortised cost
or FVOCI, it needs to give rise to cash flows that are 'solely payments of
principal and interest' (SPPI) on the principal amount outstanding. This
assessment is referred to as the SPPI test and is performed at an instrument
level.
The Group's business model for managing financial assets refers to how it
manages its financial assets in order to generate cash flows.
The business model determines whether cash flows will result from collecting
contractual cash flows, selling the financial assets, or both.
Financial assets that do not meet the criteria for amortised cost or FVOCI are
measured at FVPL. A gain or loss on a debt investment that is subsequently
measured at FVPL is recognised in profit or loss and presented net within
other gains/(losses) in the period in which it arises.
Equity instruments
The Group subsequently measures all equity investments at fair value. Where
the Group's management has elected to present fair value gains and losses on
equity investments in OCI (however, the cumulative gain/loss on disposal is
represented within equity), there is no subsequent reclassification of fair
value gains and losses to profit or loss following the derecognition of the
investment. Dividends from such investments continue to be recognised in
profit or loss as other income when the Group's right to receive payments is
established.
Changes in the fair value of financial assets at FVPL are recognised in other
gains/(losses) in the statement of profit or loss as applicable. Impairment
losses (and reversal of impairment losses) on equity investments measured at
FVOCI are not reported separately from other changes in fair value.
Derecognition
Financial assets are derecognised when the rights to receive cash flows from
the financial assets have expired or have been transferred and the Group has
transferred substantially all the risks and rewards of ownership.
Impairment
The Group assesses on a forward-looking basis, the expected credit losses
associated with its debt instruments carried at amortised cost and FVOCI. The
impairment methodology applied depends on whether there has been a significant
increase in credit risk.
Trade and other receivables
Trade receivables are recognised initially at the amount of consideration that
is unconditional unless they contain significant financing components, when
they are recognised at fair value. The Group holds the trade receivables with
the objective to collect the contractual cash flows and therefore measures
them subsequently at amortised cost using the effective interest method, less
any allowance for expected credit losses.
To determine the expected credit loss allowance for trade and other
receivables, the Group applies the simplified approach permitted by IFRS 9,
which requires expected lifetime losses to be recognised from initial
recognition of the receivables, see note 32 for further details.
Other receivables consist of prepayments and deposits, which are initially
recognised as non-financial assets and realised over time.
Restricted investment
Restricted investment comprises of short-term deposits with an original
maturity of three months or less and an investment in an investment fund.
These funds are dedicated towards future rehabilitation expenditure on the
mine property.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits held at call with
financial institutions, other short-term, highly liquid investments with
original maturities of three months or less that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of
changes in value.
Investments and other financial assets
Investments are equity instruments which the Group intends to hold for the
foreseeable future and has irrevocably elected to classify them at FVOCI at
inception.
Convertible loan
Interest-bearing loans are recorded initially at their fair value, net of
direct transaction costs. Such instruments are subsequently carried at their
amortised cost and finance charges, including premiums payable on settlement,
redemption or conversion, are recognised in profit or loss over the term of
the instrument using the effective rate of interest.
Instruments where the holder has the option to redeem for cash or convert into
a pre-determined quantity of equity shares are classified as compound
instruments and presented partly as a liability and partly as equity.
Instruments where the holder has the option to redeem for cash or convert into
a variable quantity of equity shares are classified separately as a loan and a
derivative liability.
Where conversion results in a fixed number of equity shares, the fair value of
the liability component at the date of issue is estimated using the prevailing
market interest rate for a similar non-convertible instrument. The difference
between the proceeds of issue and the fair value assigned to the liability
component, representing the embedded option to convert the liability into
equity of the Group, is included in equity. Where conversion is likely to
result in a variable quantity of equity shares the related derivative
liability is valued and included in liabilities.
The interest expense on the liability component is calculated by applying the
prevailing market interest rate for similar
non-convertible debt to the instrument. The difference between this amount and
the interest paid is added to the carrying value of the convertible loan note.
Derivative liabilities are revalued at fair value at the reporting date, and
changes in the valuation amounts are credited or charged to the profit or
loss.
Leases
The Group assesses whether a contract is or contains a lease, at inception of
a contract. The Group recognises a right-of-use asset and a corresponding
lease liability with respect to all lease agreements in which it is the
lessee, except for short-term leases (defined as leases with a lease term of
12 months or less) and leases of low value assets. For these leases, the Group
recognises the lease payments as an operating expense on a straight-line basis
over the term of the lease unless another systematic basis is more
representative of the time pattern in which economic benefits from the leased
asset are consumed.
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted by using the
rate implicit in the lease. If this rate cannot be readily determined, the
Group uses its incremental borrowing rate. The discount rate used ranges
between 10% - 11% depending on the nature of the underlying asset.
Lease payments included in the measurement of the lease liability comprise:
· fixed lease payments (including in-substance fixed payments),
less any lease incentives;
· variable lease payments that depend on an index or rate,
initially measured using the index or rate at the commencement date;
· the amount expected to be payable by the lessee under residual
value guarantees;
· the exercise price of purchase options, if the lessee is
reasonably certain to exercise the options; and
· payments of penalties for terminating the lease, if the lease
term reflects the exercise of an option to terminate the lease.
The lease liability is presented as a separate line in the Statement of
Financial Position. The lease liability is subsequently measured by increasing
the carrying amount to reflect interest on the lease liability (using the
effective interest method) and by reducing the carrying amount to reflect the
lease payments made.
The Group remeasures the lease liability (and makes a corresponding adjustment
to the related right-of-use asset) whenever:
· the lease term has changed or there is a change in the assessment
of exercise of a purchase option, in which case the lease liability is
remeasured by discounting the revised lease payments using a revised discount
rate.
· the lease payments change due to changes in an index or rate or a
change in expected payment under a guaranteed residual value, in which cases
the lease liability is remeasured by discounting the revised lease payments
using the initial discount rate (unless the lease payments change is due to a
change in a floating interest rate, in which case a revised discount rate is
used).
· a lease contract is modified and the lease modification is not
accounted for as a separate lease, in which case the lease liability is
remeasured by discounting the revised lease payments using a revised discount
rate.
The Group did not make any such adjustments during the periods presented.
The right-of-use assets comprise the initial measurement of the corresponding
lease liability, lease payments made at or before the commencement day and any
initial direct costs.
They are subsequently measured at cost less accumulated depreciation and
impairment losses.
Whenever the Group incurs an obligation for costs to dismantle and remove a
leased asset, restore the site on which it is located or restore the
underlying asset to the condition required by the terms and conditions of the
lease, a provision is recognised and measured under IAS 37. The costs are
included in the related right-of-use asset, unless those costs are incurred to
produce inventories.
Right-of-use assets are depreciated over the shorter period of lease term and
useful life of the underlying asset. If a lease transfers ownership of the
underlying asset or the cost of the right-of-use asset reflects that the Group
expects to exercise a purchase option, the related right-of-use asset is
depreciated over the useful life of the underlying asset. The depreciation
starts at the commencement date of the lease. The Group applies IAS 36
Impairment of Assets to determine whether a right-of- use asset is impaired
and accounts for any identified impairment loss.
Provisions
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the
obligation. Where the Group expects some or all of a provision to be
reimbursed, for example under an insurance contract, the reimbursement is
recognised as a separate asset but only when the reimbursement is virtually
certain. The expense relating to any provision is presented in the statement
or comprehensive income, provisions are discounted using a current pre-tax
rate that reflects, where appropriate, the risks specific to the liability.
Where discounting is used the increase in the provision due to the passage of
time is recognised as a finance cost.
i. Environmental rehabilitation liability
The Group is exposed to environmental liabilities relating to its operations.
Full provision for the cost of environmental and other remedial work such as
reclamation costs, close down and restoration costs and pollution control is
made based on the estimated cost as per the Environmental Management Program
Report. Annual increases in the provisions relating to change in the net
present value of the provision are shown in the statement of comprehensive
income as a finance cost. Changes in estimates of the provision are accounted
for in the year the change in estimate occurs, and is charged to either the
statement of comprehensive income or the decommissioning asset in property,
plant and equipment, depending on the nature of the liability.
ii. Post-retirement medical liability
The liability in respect of the defined benefit medical plan is the present
value of the defined benefit obligation at the reporting date together with
adjustments for actuarial gains/losses. Any actuarial gains or losses are
accounted for in other comprehensive income. The defined benefit obligation is
calculated annually by independent actuaries using the projected unit of
credit method.
iii. Provident fund contributions
The Group's contributions to the defined contribution plan are charged to
profit and loss in the year to which they relate.
Use of estimates and judgements
In the application of the Group's accounting policies, the directors are
required to make judgements, estimates and assumptions about the carrying
amounts of assets and liabilities that are not readily apparent from other
sources. The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. Actual
results may differ from these estimates. In particular, information about
significant areas of estimation uncertainty considered by management in
preparing the financial statements is described below:
i. Decommissioning and rehabilitation obligations
Estimating the future costs of environmental and rehabilitation obligations is
complex and requires management to make estimates and judgements as most of
the obligations will be fulfilled in the future and contracts and laws are
often not clear regarding what is required. The resulting provisions are
further influenced by changing technologies, political, environmental, safety,
business and statutory considerations.
ii. Asset lives and residual values
Property, plant and equipment are depreciated over its useful life taking into
account residual values, where appropriate. The actual lives of the assets and
residual values are assessed annually and may vary depending on a number of
factors. In reassessing asset lives, factors such as technological innovation,
product life cycles and maintenance programmes are taken into account.
Residual value assessments consider issues such as future market conditions,
the remaining life of the asset and projected disposal values.
iii. Post-retirement employee benefits
Post-retirement medical aid liabilities are provided for certain existing
employees. Actuarial valuations are based on assumptions which include
employee turnover, mortality rates, the discount rate, health care inflation
costs and rates of increase in costs. Sensitivities have been disclosed in
note 24.
iv. Revaluation of investment properties
The Group carries its residential investment properties at fair value. The
Group engaged an independent valuation specialist to assess the fair value as
at 31 December 2021 for residential properties. For residential properties, it
measures land and buildings at revalued amounts with changes in fair value
being recognised in other comprehensive income. Land and buildings were valued
by reference to market-based evidence, using comparable prices adjusted for
specific market factors such as nature, location and condition of the
property.
v. Impairment of financial assets
The loss allowances for financial assets are based on assumptions about risk
of default and expected loss rates. The Group uses judgement in making these
assumptions and selecting the inputs to the impairment calculation, based on
the Group's past history, existing market conditions as well as forward
looking estimates at the end of each reporting period. Details of the key
assumptions and inputs used are disclosed in note 32.
vi. Impairment of non-current assets
Determining whether an exploration and evaluation asset is impaired requires
an assessment of whether there are any indicators of impairment, including by
reference to specific impairment indicators prescribed in IFRS 6. If there is
any indication of potential impairment, an impairment test is required based
on value in use of the asset. The valuation of intangible exploration assets
is dependent upon the discovery of economically recoverable deposits which, in
turn, is dependent on future vanadium and iron ore prices, future capital
expenditures and environmental and regulatory restriction.
The Group also reviews and tests the carrying value of tangible assets when
events or changes in circumstances indicate that the carrying amount may not
be recoverable. Assets are grouped at the lowest level for which identifiable
cash flows are largely independent of cash flows of other assets, which is
generally at the individual operating asset level. If there are indications
that impairment may have occurred, estimates are prepared of expected future
cash flows for each group of assets. Expected future cash flows used to
determine the recoverable amount of tangible assets are inherently uncertain
and could materially change over time and impact the recoverable amounts. The
cash flows and recoverable amount are significantly affected by a number of
factors including published reserves, resources, exploration potential and
production estimates, together with economic factors such as spot and future
metal prices, discount rates, foreign currency exchange rates, estimates of
costs to produce products and future capital expenditure. At the reporting
date the Group assesses whether any of the indicators which gave rise to
previously recognised impairments have changed such that the impairment loss
no longer exists or may have decreased. The impairment loss is then assessed
on the original factors for reversal and if indicated, such reversal is
recognised.
An impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of
an asset's fair value less costs to sell and value in use. The recoverable
amount is estimated based on the positive indicators. If an impairment loss
has decreased, the carrying amount is recorded at the recoverable amount as
limited in terms of IAS 36 Impairment of Assets.
The directors performed an impairment review on tangible assets at 31 December
2021. No reasonable changes in the key assumptions or inputs would lead to an
impairment charge over the next 12 month period.
vii. Impairment of exploration and evaluation assets
As disclosed in note 12, the Mokopane license held by the Group requires that
mining operations commence prior to the end of January 2021. As at 31 December
2021 no mining has taken place at the site. An application for an extension to
requirement to commence mining activities has been submitted to the Department
of Mineral Resources and Energy ("DMRE"), however a response has not yet
received. The directors are confident that the extension will be forthcoming
and the license therefore remains valid. Consequently, the directors have made
a judgment that no impairment of the related intangible asset is required.
viii. Borrowing costs
IAS 23 requires that borrowing costs that are directly attributable to the
acquisition, construction or production of a qualifying asset form part of the
cost of that asset. It is the judgement of the directors that due to the
insubstantial period of time over which assets have been constructed, that no
assets meet the definition of a qualifying asset and therefore no borrowing
costs have been capitalised.
ix. Assessment of control
The group's investment in VRFB Holdings Limited has been accounted for as a
joint venture on the basis that the directors have concluded that under IFRS
10 the group does not have the ability to use its power over the investee
entity to influence its returns. This conclusion has been reached on the basis
of specific terms of the joint venture agreement with the other investors to
VRFB Holdings Limited and represents a significant management judgement.
4. Segmental reporting
Bushveld Minerals Limited's operating segments are identified by the Chief
Executive Officer and the Executive Committee, collectively named as the Chief
Operating Decision Makers (CODM). The operating segments are identified by the
way the Group's operations are organised. As at 31 December 2021 the Group
operated within three operating segments, vanadium mining and production,
energy and mineral exploration activities for vanadium and coal exploration.
Activities take place in South Africa (iron ore, vanadium and energy),
Madagascar (coal), other African countries (energy project development) and
global (battery investment, vanadium sales).
Segment revenue and results
The following is an analysis of the Group's revenue and results by reportable
segment.
Vanadium
mining and
Year ended 31 December 2021 production Energy Total
Results US$ US$ US$
Segment revenue 106,857,285 - 106,857,285
Segment costs (123,442,467) (882,453) (124,324,920)
Segmental loss (16,585,182) (882,453) (17,467,635)
Vanadium
mining and
Year ended 31 December 2020 production Energy Total
Results US$ US$ US$
Segment revenue 89,920,958 67,120 89,988,078
Segment costs (110,750,141) (1,050,735) (111,800,876)
Segmental loss (20,829,183) (983,615) (21,812,798)
During the year there were no costs incurred for the exploration of vanadium
and coal exploration. Costs attributable to both segments were of a capital
nature.
The reconciliation of segmental loss to the Group's loss before tax is as
follows:
Year ended Year ended
31 December 31 December
2021 2020
Segmental loss (17,467,635) (21,812,798)
Unallocated costs (11,814,793) (10,994,295)
Remeasurement of financial liabilities (1,902,172) -
Share of loss in joint venture (4,351,356) -
Movement in earnout estimate - (206,066)
Finance income 935,347 1,077,991
Finance costs (12,184,059) (5,732,249)
(46,784,668) (37,667,417)
Unallocated costs relate primarily to corporate costs and parent company
overheads not attributable to a specific segment.
Other segmental information
Vanadium Vanadium
and iron ore mining and Coal Bushveld
31 December 2021 exploration production exploration Energy Total
US$ US$ US$ US$ US$
Intangible assets - exploration and 47,374,076 6,481,542 5,398,754 - 59,254,372
evaluation
Total reportable segmental net assets 47,374,076 94,923,233 5,398,754 17,034,295 164,730,358
Unallocated net assets - - - - (13,900,418)
Total consolidated net assets - - - - 150,829,940
Vanadium Vanadium
and iron ore mining and Coal Bushveld
31 December 2020 exploration production exploration Energy Total
US$ US$ US$ US$ US$
Intangible assets - exploration and 54,950,331 - 4,053,494 - 59,003,825
evaluation
Total reportable segmental net assets 54,950,331 168,285,858 4,053,494 21,388,618 248,678,301
Unallocated net liabilities - - - - (34,678,551)
Total consolidated net assets - - - - 213,999,750
Unallocated assets and liabilities relate to corporate and parent company
assets and liabilities not attributable to a specific segment.
5. Revenue
2021 2020
US$ US$
Revenue from contracts with customers
Sale of goods 106,857,285 89,920,958
Bushveld Energy services rendered - 67,120
106,857,285 89,988,078
Disaggregation of revenue from contracts with customers
The Group disaggregates revenue from customers as follows:
Sale of goods
Local sales of vanadium - NV12 5,089,815 2,161,420
Local sales of vanadium - NV16 1,606,027 1,055,785
Local sales of vanadium - MVO * (140,385) 370,686
Export sales of vanadium - NV12 21,720,633 16,452,321
Export sales of vanadium - NV16 71,713,328 61,537,773
Export sales of vanadium - VCM - 230,248
Export sales of vanadium - AMV 6,867,867 8,112,725
106,857,285 89,920,958
Rendering of services
Bushveld Energy services rendered - 67,120
Total revenue from contracts with customers 106,857,285 89,988,078
Revenue with contract customers is generated from sale of goods and is
recognised upon delivery of the goods to the customer, at a point in time and
comprises the invoiced amount of goods to customers, net of value added tax.
*The negative sales amount is due to the return of MVO sold during the 2020
financial year.
6. Staff costs
Details of directors' remuneration are included in note 34 (related party
transactions) and the Remuneration Report on page 77.
7. Administrative expenses by nature
2021 2020
US$ US$
Staff costs 10,746,322 8,146,473
Depreciation of property, plant and equipment 392,669 256,929
Professional fees 5,860,976 6,017,782
Other 3,894,325 5,361,992
Total administrative expenses 20,894,292 19,783,176
8. Finance income
2021 2020
US$ US$
Bank interest 935,347 1,077,991
9. Finance costs
2021 2020
US$ US$
Interest on unsecured convertible loan notes 4,706,184 1,614,577
Interest on rehabilitation liability 1,781,584 1,663,602
Interest on borrowings 4,984,532 1,749,386
Interest on lease liabilities 459,430 466,032
Other finance costs 252,329 238,652
Total administrative expenses 12,184,059 5,732,249
10. Taxation
The tax expense represents the sum of the tax currently payable and the
deferred tax adjustment for the year.
Current
6. Taxation
Current
Current income tax
charge
370,437 3,265,229
Local income tax - recognised in current tax for prior periods (13,246) -
357,191 3,265,229
Deferred
2021 2020
US$ US$
Prior year adjustment 82,573 -
Deferred tax movement (5,111,019) (9,835,255)-
(5,028,446) (9,835,255)
(4,671,255) (6,570,026)
The tax expense represents the sum of the tax currently payable and the
deferred tax adjustment for the year.
Loss before tax (46,784,668) (37,667,417)
Tax at the effective tax rate of 11.6% (2020: 18.6%) (5,422,632) (7,023,575)
Tax effect on non-deductible items 602,895 353,652
Origination and reversal of temporary differences 1,400,229 737,127
Deferred tax asset not recognised 3,704,257 9,270,466
Recognised deferred tax assets - initial recognition (4,956,004) (9,907,696)
Taxation expense for the year (4,671,255) (6,570,026)
11. Loss per share from continuing operations
Basic loss per share
The calculation of a basic loss per share of 3.39 cents (December 2020: 2.63
cents restated), is calculated using the total loss for the year attributable
to the owners of the company of US$40,779,853 (December 2020: Restated loss of
US$30,595,243) and 1,201,683,206 shares (2020: 1,164,710,352) being the
weighted average number of share in issue during the year.
Diluted loss per share
Due to the Group being loss making for the year, instruments are not
considered dilutive and therefore the diluted loss per share is the same as
basic loss per share for both financial years.
12. Intangible assets
2021 2020
Cost / Valuation Carrying Cost / Valuation Carrying
US$ value US$ US$ value US$
Vanadium and Iron ore 53,855,618 53,855,618 54,950,331 54,950,331
Coal 5,398,754 5,398,754 4,053,494 4,053,494
Total 59,254,372 59,254,372 59,003,825 59,003,825
Reconciliation of intangible assets - 2021
Foreign exchange
Opening Impairment
balance Additions movements loss* US$ Total US$
US$ US$ US$
Vanadium and Iron ore 54,950,331 162,621 (715,974) (541,360) 53,855,618
Coal 4,053,494 766,339 578,921 - 5,398,754
59,003,825 928,960 (137,053) (541,360) 59,254,372
*The directors performed an impairment review on intangible assets at 31
December 2021, and impaired assets that will not produce economically
recoverable deposits based on planned future development of the projects,
current and forecast commodity prices.
Reconciliation of intangible assets - 2020
Foreign exchange
Opening Impairment
balance Additions movements loss US$ Total US$
US$ US$ US$
Vanadium and Iron ore 56,827,085 89,764 (1,966,518) - 54,950,331
Coal 2,581,736 1,381,378 90,380 - 4,053,494
59,408,821 1,471,142 (1,876,138) - 59,003,825
Vanadium and Iron Ore
The Company's subsidiary, Bushveld Resources Limited has a 64% interest in
Pamish Investment No 39 (Proprietary) Limited ("Pamish") which holds an
interest in Prospecting right 95 ("Pamish 39").
The Department of Mineral Resources and Energy ("DMRE") granted a mining right
to Pamish Investments No. 39 (Pty) Ltd ("Pamish") on the 28th of August 2019,
in respect of the five farms Vliegekraal 783 LR, Vogelstruisfontein 765 LR,
Vriesland 781 LR, Schoonoord 786 LR and Bellevue 808 LR situated in the
District of Mogalakwena, Limpopo, which make up the Mokopane Project.
Mokopane is a vanadium resource. On 29 January 2020, the DMRE executed a
30-year mining right in favour of the Company, over five farms:
Vogelstruisfontein 765 LR; Vriesland 781 LR; Vliegekraal 783 LR; Schoonoord
786 LR; and Bellevue 808 LR. The Mining Right required Pamish to commence
mining activities, including in-situ activities associated with the Definitive
Feasibility Study ("DFS") by end of January 2021. The COVID-19 pandemic
resulted in a significant delay in the commencement of the DFS and the
necessary engagement with local communities required to finalise Land Use
arrangements and, consequently, this deadline was not met. Application to the
DMRE for an extension of 18 months to commence mining activities has been
submitted. Engagement has begun with communities to reach agreement for access
to the project areas and secure a Land Use Arrangement.
The mining right allows for the extraction of several other minerals over the
entire Mokopane project resource area, including, titanium, phosphate,
platinum Group metals, gold, cobalt, copper, nickel and chrome.
Brits Vanadium Project
Bushveld Minerals Limited has been granted Section 11 of the Mineral and
Petroleum Resources Development Act (MPRDA) for acquiring control of Sable
Platinum Mining (Pty) Ltd for NW 30/5/1/1/2/11124 PR, held through Great Line
1 Invest (Pty) Ltd and was executed in May 2021. The company has also applied
for Section 102 of the Mineral and Petroleum Resources Development Act (MPRDA)
and waiting for approval to incorporate NW 30/5/1/1/2/11069 PR into NW
30/5/1/1/2/11124 PR.
Bushveld Minerals Limited has applied for a prospecting right which has been
accepted and environmental authorisation has been granted under GP
30/5/1/1/2/10576 PR held by Gemsbok Magnetite (Pty) Ltd.
A renewal application for Prospecting Right NW 30/5/1/1/2/11124 PR was granted
for Great 1 Line on Farm Uitvalgrond 431 JQ Portion 3.
Coal
Coal Exploration licences have been issued to Coal Mining Madagascar SARL a
99% subsidiary of Lemur Investments Limited.
The exploration is in South West Madagascar covering 11 concession blocks in
the Imaloto Coal basin known as the Imaloto Coal Project and Extension.
13. Property, plant and equipment
Buildings and Plant and Motor Decommissi Right of use Waste Assets under Total
other machinery Vehicles ning assets asset stripping construction
improvements furniture and asset
equipment
US$ US$ US$ US$ US$ US$ US$ US$
Cost
At 1 January 2020 8,196,521 166,369,583 1,474,110 2,597,288 5,735,890 3,920,684 10,668,778 198,962,854
Additions - 2,256,794 62,665 - - - 6,950,465 9,269,924
Disposals (336,491) (2,490,766) (192,023) - - - - (3,019,280)
Transfers 190,930 11,645,072 121,070 - - - (11,957,072) -
Revaluations - - - (695,244) - - - (695,244)
Foreign exchange differences (344,926) (6,179,154) (559,874) 33,180 (231,619) (156,242) (718,321) (8,156,956)
At 31 December 2020 7,706,034 171,601,529 905,948 1,935,224 5,504,271 3,764,442 4,943,850 196,361,298
Additions - 5,156,605 24,024 (207,189) 396,239 - 14,079,978 19,449,657
Disposals - (1,916,158) (78,119) - - (3,723,494) - (5,717,771)
Impairments of obsolete assets - (2,263,063) - - - - - (2,263,063)
Assets under construction capitalised - 5,373,628 57,148 - - - (5,430,776) -
Foreign exchange differences (426,162) (3,323,601) (108,315) (73,658) (834,539) (40,948) (996,705) (5,803,928)
At 31 December 2021 7,279,872 174,628,940 800,686 1,654,377 5,065,971 - 12,596,347 202,026,193
Depreciation
At 1 January 2020 (1,022,284) (9,384,009) (535,710) (954,588) (628,963) (1,168,237) - (13,693,791)
Disposals 336,491 2,407,463 248,586 - - - - 2,992,540
Depreciation charge for the year (385,785) (14,468,628) (175,976) (53,233) (434,768) (2,347,763) - (17,866,153)
Foreign exchange differences 3,367 301,705 (151,754) 31,352 (150,129) (248,442) - (213,901)
At 31 December 2020 (1,068,211) (21,143,469) (614,854) (976,469) (1,213,860) (3,764,442) - (28,781,305)
Depreciation charge for the year (354,785) (18,087,039) (266,419) (46,321) (640,932) - - (19,395,496)
Disposals - 1,777,899 89,424 - - 3,723,494 - 5,590,817
Impairment of obsolete assets - 365,533 - - - - - 365,533
Foreign exchange differences 79,596 (7,221,073) 34,257 76,847 294,385 40,948 - (6,695,040)
At 31 December 2021 (1,343,400) (44,308,149) (757,592) (945,943) (1,560,407) - - (48,915,491)
Net Book Value
At 31 December 2020 6,637,823 150,458,060 291,094 958,755 4,290,411 - 4,943,850 167,579,993
At 31 December 2021 5,936,472 130,320,791 43,094 708,434 3,505,564 - 12,596,347 153,110,702
The right of of use asset of $3.5million relates to land and buildings of
$3.4million and plant and machinery of $0.09million. Refer to note 3(vi) on
management's assumptions for the impairment of non-current assets. The net
impairment charge of
$1.8m recognised during the year relates to items of property, plant and
equipment that were identified as being either obsolete, or no longer in use
14. Investment property
2021 2020
Opening Fair value Closing Opening Fair value Closing
balance movements balance balance movements balance
US$ US$ US$ US$ US$ US$
Investment properties 2,811,017 (215,658) 2,595,359 2,905,449 (94,432) 2,811,017
Investment properties comprise residential housing in Brits and Elandsrand,
North West Province.
Investment properties are stated at fair value, which has been determined
based on valuations performed by Domus Estate Management, an accredited
independent valuer, as at 31 December 2021. Fair value is the price that would
be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
The following valuation techniques and key inputs were used in the valuation
of the investment properties:
i. Physical inspection of each property;
ii. Consultation with estate agencies to discuss current sales market
trends; and
iii. Comparative sales reports for locations where properties are
situated were obtained from South Africa.
2021 2020 2019
Restated* Restated*
US$ US$ US$
15. Deferred tax
Deferred tax liability
Residential properties (577,502) (624,978) (644,691)
Property plant and equipment (25,721,549) (29,267,614) (32,182,666)
Prepayments (24,092) (144,472) (187,898)
Doubtful debt allowance (11) (332) -
Total deferred tax liability (26,323,154) (30,037,396) (33,015,255)
Deferred tax asset
Provisions 3,813,396 3,926,545 3,674,640
Inventory - 356,194 1,082,620
Environmental rehabilitation liability 1,976,545 2,009,660 2,004,422
Leases - Lease liability 165,925 178,783 86,793
Assessed loss 13,819,438 11,435,066 1,235,365
Post-retirement medical liability 533,607 581,286 652,771
Deferred tax balance from temporary differences other than unused tax losses 20,308,911 18,487,534 8,736,611
Total deferred tax asset 20,308,911 18,487,534 8,736,611
15. Deferred tax (continued)
Deferred tax liability (26,323,154) (30,037,396) (33,015,255)
Deferred tax assets 20,308,911 18,487,534 8,736,611
Total net deferred tax liability (6,014,243) (11,549,862) (24,278,644)
The evidence supporting recognition of a deferred tax liability is forecasts
for the component to which the losses relate which indicate with reasonable
certainty the availability of sufficient future taxable profits in the next 3
years against which the losses can be utilised.
Refer to note 35 on a detailed explanation on the restatement.
Reconciliation of deferred tax asset / (liability)
At beginning of year (11,549,862) (24,278,644) 265,025
Transfer from statement of profit or loss and other comprehensive 5,028,446 9,835,225 (23,077,361)
income
Revaluation through other comprehensive income (2,916) (34,919) (35,941)
Other movements (72,442) (72,442) -
Foreign exchange difference 582,530 2,856,004 (1,430,367)
(6,014,244) (11,549,862) (24,278,644)
2021 2020
US$ US$
16. Financial assets at fair value
At 1 January 22,452,877 1,952,227
Additions 9,987,735 7,304,099
Disposals (16,147,154) (286,643)
Fair value movement (3,771,367) 13,483,194
Transfer to interest in joint venture (12,291,834) -
Foreign exchange (230,257) -
As at 31 December - 22,452,877
During the year the Group made further investment in VRFB Holdings Limited and
in April 2021 the investment became a joint venture. Further details are
included in note 17.
AfriTin Mining Limited
The Group measures the fair value of the investment in AfriTin Mining Limited
using the quoted price in an active market for that instrument. A market is
regarded as active if transactions for the asset or liability take place with
sufficient frequency and volume to provide pricing information on an ongoing
basis. The investment in AfriTin was disposed in 2021.
Invinity Energy Systems
The investment in Invinity was realised, resulting in capital appreciation.
The proceeds of the sale were used towards Bushveld Energy's 2021 projects.
17. Interests in joint ventures
2021 2020
US$ US$
Transfer from financial assets held at fair value 12,291,834 -
Loss on joint venture undertaking (4,351,356) -
Foreign exhange (85,241) -
7,855,237 -
VRFB Holdings Limited
The investment in VRFB Holding Limited is in line with Bushveld Minerals'
strategy of partnering with Vanadium Redox Flow Battery ("VRFB") companies.
VRFB is a company incorporated as a special purpose vehicle consisting of
various shareholders including Bushveld Energy Limited (BE), a majority owned
subsidiary of Bushveld Minerals. In 2021, Bushveld acquired a 50.5% interest
in VRFB Holdings Limited (VRFB). VRFB is the holding company for the Group's
investment in CellCube ("Enerox").
Bushveld accounts for its 50.5% shareholding in VRFB as an investment in joint
venture as it does not meet the requirements of control under IFRS10.
The VRFB investment is part of Bushveld Minerals' strategy of partnering with
VRFB Original Equipment Manufacturers ("OEMs") that includes supply of
vanadium and electrolyte, deployments and investment into the rapidly growing
energy storage market.
18. Inventories
2021 2020
US$ US$
Finished goods 18,058,022 12,070,061
Work in progress 9,323,360 7,454,987
Raw materials 3,159,418 1,761,551
Consumable stores 11,105,356 12,795,026
Total inventories 41,646,156 34,081,625
The amount of write-down of inventories due to net realisable value provision
requirement is nil (2020: nil).
2021 2020
US$ US$
19. Trade and other receivables
Trade receivables 6,129,311 3,854,461
Other receivables 5,861,661 1,610,261
Loss allowance (76,704) (32,826)
Non-financial instruments:
VAT 5,727,948 4,993,467
Total trade and other receivables 17,642,216 10,425,363
Categorisation of trade and other receivables
Trade and other receivables are categorised as follows in accordance with IFRS
9: Financial Instruments:
At amortised cost 11,914,268 5,431,896
Non-financial instruments 5,727,948 4,993,467
17,642,216 10,425,363
Trade receivables are amounts due from customers for goods sold or services in the ordinary as current. course of
performed business. They are generally due for settlement within 15-90 days
and therefore are all classified
Other receivables consist of prepayments and deposits, which are realised
overtime.
Due to the short-term nature of the current receivables, their carrying amount
is considered to be the same as their fair value.
Impairment and risk exposure
Information about the impairment of trade receivables and the Group's exposure
to credit risk, foreign currency risk and interest rate risk can be found in
note 32.
20. Restricted investment
Rehabilitation trust fund and insurance fund 2,868,886 3,111,465
The Group is required by statutory law in South Africa to hold these
restricted investments in order to meet decommissioning liabilities on the
statement of financial position (refer to note 25 and 33 for further details).
21. Cash and cash equivalents
2021 2020
US$ US$
Cash at hand and in bank 15,432,852 50,540,672
Cash and cash equivalents (which are presented as a single class of assets on
the face of the Statement of Financial Position) comprise cash at bank and
other short-term highly liquid investments with an original maturity of three
months or less. Short-term deposits include funds received from Orion Mine
Finance ("Orion") under the Production Financing Agreement (PFA) and
Convertible Loan Notes Instrument (CLN).
The total cash and cash equivalents denominated in South African Rand amount
to US$14,883,820 (2020: US$34,165,671).
The directors consider that the carrying amount of cash and cash equivalents
approximates to their fair value.
Refer to Note 28 for further information in relation to the Production
Financing Agreement and Convertible Loan Notes Instrument.
22. Share capital and share premium Total share
Share capital and
Shares Share capital premium premium
Number US$ US$ US$
At 1 January 2020 1,153,642,682 15,357,271 111,067,064 126,424,335
Shares issued - Duferco 37,115,210 501,157 5,998,843 6,500,000
At 1 January 2021 1,190,757,892 15,858,428 117,065,907 132,924,335
Shares issued - PMDR 1,473,651 18,910 203,281 222,191
Shares issued - PMDR 1,335,277 17,134 184,194 201,328
Shares issued - Duferco 66,892,037 902,708 8,097,292 9,000,000
At 31 December 2021 1,260,458,857 16,797,180 125,550,674 142,347,854
The Board may, subject to Guernsey Law, issue shares or grant rights to
subscribe for or convert securities into shares. It may issue different
classes of shares ranking equally with existing shares. It may convert all or
any classes of shares into redeemable shares. The Company may also hold
treasury shares in accordance with the law. Dividends may be paid in
proportion to the amount paid up on each class of shares.
As at the 31 December 2021 the Company owns 670,000 (2020: 670,000) treasury
shares with a nominal value of 1 pence.
Shares issued
Duferco Participations Holding S.A. ("Duferco")
In settlement of US$6.5million of the convertible loan notes issued to Duferco
on the acquisition of Vanchem, Bushveld Minerals Limited issued 37,115,210 new
shares on 18 December 2020. The shares issued had a conversion price of
12.97p, which was a 5 per cent discount to the prevailing 10-day volume
weighted average Bushveld Minerals share price leading up to conversion.
Refer to note 28 for details on the Convertible Loan Note details.
Persons Discharging Managerial Responsibilities (PMDRs)
The Company issued 1,473,651 and 1,335,277 new ordinary shares of 1 pence each
in the Company ("Ordinary Shares") in respect of the Bonus Awards announced on
21 July 2020.
Nature and purpose of other reserves Share premium
The share premium reserve represents the amount subscribed for share capital
in excess of nominal value.
Share-based payment reserve
The share-based payment reserve represents the cumulative fair value of share
options granted to employees.
Convertible loan note reserve
This reserve represents the equity portion of a convertible loan.
Foreign exchange translation reserve
The translation reserve comprises all foreign currency differences arising
from the translation of financial statements of foreign operations.
Fair value reserve
The fair value reserve comprises the cumulative net change in the fair value
of financial assets at fair value through other comprehensive income until the
assets are derecognised or impaired.
Retained income reserve
The retained income reserve represents other net gains and losses and
transactions with owners (e.g. dividends) not recognised elsewhere
23. Share based payments Short Term Incentive (STI)
Bushveld Minerals Limited issued bonus shares to the employees under the STI
scheme. The shares had a grant date of 5 August 2021 and vesting dates aligned
to the STI scheme rules being, 12 months and 18 months from the financial year
end to which they relate, for the first and second half of the settlement,
respectively. The vesting of shares is dependent on the employees still be
employed on the respective vesting dates.
All bonus shares are settled directly by Bushveld Mineral Limited, in its own
shares.
The fair value of the rights at grant date US$955 451 was estimated by taking
the market price of the company's shares and the reporting exchange rate on
that date.
The following table shows the bonus shares granted and outstanding at the
beginning and end of the reporting period:
2021 2020
Number of Number of
shares shares
As at 1 January - -
Granted during the year 5,204,396 -
Vested during the year - -
Forfeited during the year - -
As at 31 December 5,204,396 -
Long Term Incentive (LTI)
On 31 December 2021, 4,002 812 shares vested. These shares remained part of
Bushveld's equity as at 31 December 2021 because they where issued under the
STI scheme rules in February 2022.
Bushveld Minerals awarded a number of performance shares to employees on 28
November 2019 under its Long Term Incentive Plan. The grant vests over a
period of three years. The vesting of the awards is subject to both employment
and performance conditions.
The performance condition is measured over a period of three years i.e. 1
January 2019 to 31 December 2021.
The market condition states that 60% of the number of shares awarded would
vest based on the performance of Bushveld Ltd's Total Shareholder Return
("TSR"), per annum, over the performance period.
The non-market condition states that 40% of the number of shares awarded will
vest based on the performance of Bushveld Ltd's Free Cash Flow Margin ("FCF"),
per annum, over the performance period.
As at 31 December 2021, it is assumed that 0% of the conditional share awards
made to participants during 2019 will vest. This is based on Bushveld's
performance on both TSR and FCF being below the threshold.
22. Share based payments (continued) 2021 2020
Number of Number of
shares shares
As at 1 January 2,458,443 2,458,443
Granted during the year - -
Vested during the year - -
As at 31 December 2,458,443 2,458,443
24. Post-retirement medical liability
Benefit liability
2021 2020
US$ US$
Present value of the defined benefit obligation-wholly unfunded 2,076,023 2,331,325
Present value of the defined benefit obligation-partially or wholly funded (170,284) (255,302)
Balance at 31 December 1,905,739 2,076,023
The benefit comprises medical aid subsidies provided to qualifying retired
employees. Actuarial valuations are made annually, and the most recent
valuation was made on 31 December 2021.
Key assumptions used
Actual age 77.3 years 77.3 years
Discount rates 10.90% 10.60%
Health care cost inflation 7.90% 7.30%
Duration of liability 9.3 years 9.1 years
A one percentage point change in the assumed rate of healthcare costs would
have the following effect on the present value of the unfunded obligation:
Plus 1% - US$2.07 million; Less 1% - US$1.76 million.
A one percentage point change in the assumed interest rate would have the
following effect on the present value of the unfunded obligation; Plus 1% -
US$0.21 million; Less 1% - US$0.18 million
25. Environmental rehabilitation liability
2021 2020
US$ US$
Opening balance 17,998,366 17,844,066
Unwinding of discount rate 1,781,584 1,872,634
Fair value adjustment (315,434) (1,007,237)
Foreign Exchange (1,433,195) (711,097)
At 31 December 2021 18,031,321 17,998,366
The Group makes full provision for the future cost of rehabilitating mine
sites and related production facilities on a discounted basis at the time of
developing the mine and installing and using those facilities.
The rehabilitation provision represents the present value of rehabilitation
costs relating to mine sites, which are expected to be incurred up to 2037,
which is when the producing mine properties are expected to cease operations.
These provisions have been created based on the Group's internal estimates.
Assumptions based on the current economic environment have been made, which
management believes are a reasonable basis upon changes to the assumptions.
However, actual rehabilitation costs will ultimately depend upon future market
prices for the necessary rehabilitation works required that will reflect
market conditions at the relevant time. Furthermore, the timing of
rehabilitation is likely to depend on when the mines cease to produce at
economically viable rates. This, in turn, will depend upon future vanadium
prices, which are inherently uncertain.
The discount rate used in the calculation of the provision as at 31 December
2021 was 10.76% (2020: 10.93%).
26. Deferred consideration
2021 2020
US$ US$
Opening balance 5,622,532 7,108,819
Cash payment (3,723,980) (1,680,459)
Interest 90,617 -
Movement in earnout estimate - 206,066
Foreign exchange (305,148) (11,894)
1,684,021 5,622,532
Split between non-current and current portions
Non-current 1,684,021 1,802,884
Current - 3,819,648
1,684,021 5,622,532
At the year-end management have updated their estimate of the earnout payable
to EVRAZ on the acquisition of the Vametco Group, which is based on the
expected EBITDA for the year ended 31 December 2021, to a maximum of US$1.68
million. The consideration attributable to the acquisition of Vanchem was
settled in November 2021.
27. Loans
Industrial Development Corporation 3,280,948 1,597,972
The loan represents The Industrial Development Corporation's contribution and
is governed by the tripartite agreement between Bushveld Energy Company (Pty)
Ltd, Bushveld Electrolyte Company (Pty) Ltd and The Industrial Development
Corporation of South Africa Limited. The loan represents the initial
capitalised costs of US$260 366 plus the subscription amount of US$3 020 582
of the total US$3 821 028 to be advanced to Bushveld Electrolyte Company Pty
Ltd. Bushveld Electrolyte Company is a South African producer of vanadium
electrolyte. The company is jointly owned by Bushveld Energy and the IDC, with
shareholding of 55% and 45% respectively. Its first manufacturing facility is
under construction and located in East London, South Africa.
The loan is interest free, unsecured, subordinated in favour of Bushveld
Electrolyte Company's creditors and has no fixed term of repayment in the next
12 months.
Split between non-current and current portions
Non-current liabilities 3,280,948 1,597,972
28. Borrowings
2021 2020
US$ US$
Development Bank of Southern Africa 999,950 845,588
Nedbank Term Loan and Revolving Credit Facility 5,821,082 8,636,535
Convertible Loan Notes - Duferco - 11,585,068
Production Financing Agreement - Orion Mine Finance 33,511,742 30,105,886
Convertible Loan Notes Instrument - Orion Mine Finance 37,313,976 33,073,699
77,646,750 84,246,776
Split between non-current and current portions
Non-current 67,435,647 70,909,370
Current 10,211,102 13,337,406
77,646,749 84,246,776
Development Bank of Southern Africa - Facility Agreement
Lemur Holdings Limited, a subsidiary undertaking, entered into a US$1 000 000
facility agreement with the Development Bank of Southern Africa Limited in
March 2019. The purpose of the facility is to assist with the costs associated
with delivering the key milestones to the power project. The repayment is
subject to the successful bankable feasibility study of the project at which
point the repayment would be the facility value plus an amount equal to an IRR
of 40% capped at 2.5 times which ever is lower. As at 31 December 2021, US$999
950 (2020: US$845 588) was drawn down.
Nedbank Term Loan and Revolving Credit Facility
In November 2019, Bushveld Minerals Limited secured R375 million
(approximately US$25 million) in debt facilities through its subsidiary
Bushveld Vametco Alloys Proprietary Limited ("the Borrower") with Nedbank
Limited (acting through its Nedbank Corporate and Investment Banking
division), a South African based financial institution, in the form of a R250
million loan and a R125 million revolving credit facility.
The Nedbank term loan was repaid in December 2020.
Key highlights of the R125 million revolving credit facility, which was drawn
in March 2020:
· Three-year term - Repayment due in November 2022;
· Interest rate calculated using the three year or six months
JIBAR1 as selected by the Company plus a 3.85% margin;
· Interest payments are due semi-annually with first payment due in
six months from financial close.
The security provided is customary for a secured financing of this nature,
including cession of shares in the Borrower, security over the assets of the
Borrower, and a parent guarantee.
Financial Covenants undertaken
The Borrower shall ensure that for so long as any amount is outstanding under
a Finance Document or any Commitment is in force, in respect of each
Measurement Period:
· the Net Interest Cover Ratio; and
· the Net Debt to EBITDA Ratio at a Borrower level shall not exceed
4.0 times.
As reported in the going concern policy, the net debt to EBITDA ratio was
breached at 31 December 2021 following the remeasurement of the Orion Mine
Finance PFA liability. This covenant has been retrospectively waived by
Nedbank.
Convertible Loan Note - Duferco
On 27 October 2021, Bushveld met the final repayment terms of the remaining
US$11.5 million unsecured convertible notes held by Duferco the previous owner
of Vanchem, effective on 8 November 2021. US$2.5 million of the amount due, as
well as the accrued interest of US$0.512 million, was satisfied in cash and
the balance of US$9 million with the issue of 66,892,037 new ordinary shares
of Bushveld, using a conversion price of 9.97p, which was a 5 per cent
discount to the prevailing 10-day volume weighted average Bushveld Minerals
share price leading up to conversion. There is no lock in or orderly marketing
period for the shares issued.
Production Financing Agreement - Orion Mine Finance
In December 2020, Bushveld Minerals Limited signed a long-term Production
Financing Agreement of US$30 million (or the "PFA") with mining-focused
investment business Orion Mine Finance ("Orion"), primarily to finance its
expansion plans at Bushveld Vametco Alloys (Pty) Ltd and debt repayment.
Exchange control authorization from the South Africa Reserve Bank Financial
Surveillance Department was granted in October 2020. A first amendment was
issued to the agreement on 6 August 2021.
PFA Transaction Details
The Company will repay the principal amount and pay interest via quarterly
payments determined initially as the sum of:
Ÿ a gross revenue rate (set at 1.175 per cent for 2020 and 2021 and 1.45
per cent from 2022 onwards, subject to adjustment based on applicable
quarterly vanadium prices) multiplied by the gross revenue for the quarter;
and
Ÿ a unit rate of US$0.443/kgV multiplied by the aggregate amount of
vanadium sold for the quarter.
Once the Company reaches vanadium sales of approximately 132,020 mtV during
the term of the facility, the gross revenue rate and unit rate will reduce by
75 per cent (i.e. to 25 per cent of the applicable rates).
On each of the first three loan anniversaries, the Company has the option to
repay up to 50 per cent of both constituent loan parts (each may only be
repaid once). If the Company utilises the loan repayment option, the gross
revenue rate and/or the unit rate will reduce accordingly.
The PFA capital will provide funding to continue to grow production at Vametco
to more than 4,200 mtV per annual production level and debt repayment. Part of
the proceeds of the Instrument were used by the Company to prepay in full the
Nedbank ZAR250 million term loan. In addition, the following amendments will
be applied to the financial covenants:
· Removing the cumulative DSCR covenant;
· Increasing the defaut level on the group net debt to Group EBITDA
ratio to 4.0 times
· Changing the gross interest cover ratio to net interest cover
ratio
First Amendment Agreement dated 6 August 2021
In terms of the Amended Agreement with Orion, $17.8million of the funds
ringfenced for the Vametco Phase 3 Expansion was re-allocated to Vanchem
mainly for capital expenditure on kiln 3. Kiln 3 is expected to achieve a
steady state production run rate of 2,600 mtVp.a by the end of 2022.
Impact of Amended Agreement on future cashflows of the debt instrument
The original PFA had a cap of 1'075mtV per quarter. This amounted to 4300mtV
per annum expected from 2024 onwards following the completion of the Vametco
Phase 3 expansion project
The amended agreement, with the addition of the Vanchem production volumes
from 1 July 2021 resulted in the initial cap of 4'300mtV being reached
earlier, from 1 July 2022 instead of from 2024.
Accounting for non-substantial modifications
IFRS 9 requires the amortised cost of the liability to be recalculated by
discounting the modified contractual cash flows (excluding costs and fees)
using the original effective interest rate. Any change to the amortised cost
of the financial liability is required to be recognised within profit or loss
at the date of the modification.
The carrying amount of the liability is then further revised for any costs or
fees incurred. The effective interest rate is also revised accordingly, so the
costs are amortised over the remaining term of the modified liability.
As a result of the increased production volumes from Vanchem and the cap of
4'300mtV being reached earlier, this resulted in a non-substantial
modification to the contractual terms. The amortised cost was recalculated and
the adjustment was recognised within profit or loss:
IFRS 9 fair value adjustment US$ 1,902,172
Contractual and legal balances vs IFRS 9 accounting balances The contractual
and legal accounting differ from IFRS 9 accounting.
Below table illustrates the differences in the carrying values, interest and
capital of the contractual PFA and IFRS 9 accounting for the 2021 financial
year.
2021 2020
US$ US$
Reconciliation of Production Finance Agreement - Orion Mine Finance
Opening balance 30,105,886 -
Loan received - 30,000,000
Interest accrued 4,058,488 105,886
- Contractual interest 1,198,919 105,886
- Notional interest (IFRS 9) 2,859,569 -
Repayments made (2,554,804) -
Remeasurement (IFRS 9) 1,902,172 -
Closing balance 33,511,742 30,105,886
Convertible Loan Notes Instrument - Orion Mine Finance
Bushveld Minerals Limited, through an affiliate of Orion Mine Finance, agreed
to subscribe for US$35 million convertible loan notes instrument (the
"Instrument"). The conversion price of the convertible loan notes was set at
17pence. The Instrument's proceeds will go towards the first phase of
Vanchem's critical refurbishment programme and debt repayment.
Financing terms of the Instrument and convertible loan notes
· A fixed 10 per cent per annum coupon with a three year maturity
date from the drawdown date.
· All interest will accrue and be capitalised on a quarterly basis
in arrears but compounded annually.
· Accumulated capitalised and accrued interest is convertible into
Bushveld ordinary shares. All interest and principal, to the extent not
converted into ordinary shares, is due and payable at maturity date.
· Funds raised are to be used for capital investment purposes for
the first phase of Vanchem's critical refurbishment programme, and the balance
for debt repayment purposes.
Conversion feature
Between drawdown and the Instrument's maturity date Orion may, at their
option, convert an amount of the outstanding debt, including capitalised and
accrued interest, into Bushveld's ordinary shares as follows:
· First six months: Up to one third of the outstanding amount;
· Second six months: Up to two thirds of the outstanding amount
(less any amount previously converted);
· From the anniversary of drawdown until the maturity date: the
outstanding amount under the Instrument may be converted;
· Bushveld also has the option to convert all, but not some, of the
amount outstanding under the Instrument, if its volume weighted average share
price is more than 200 per cent of the conversion price over a continuous 15
trading day period, a trading day being a day on which the AIM market is open
for the trading of securities.
At any time until the convertible maturity date, Orion may convert the debt as
above mentioned into an amount of ordinary shares equal to the total amount
available for conversion under the Instrument divided by the conversion price
of 17 pence.
The Orion and Nedbank borrowings are secured against certain group companies
and associated assets.
29. Lease liabilities
A reconciliation of total operating lease commitments to the IFRS 16 lease
liability at 31 December 2021 is as follows:
2021 2020
US$ US$
As at 1 January 5,002,144 5,464,909
Additions 127,964 -
Accretion of interest 459,430 497,042
Payments (705,373) (753,302)
Foreign exchange (398.853) (206,505)
4,485,312 5,002,144
Non-current lease liabilities 3,920,698 4,376,483
Current lease liabilities 564,614 625,661
4,485,312 5,002,144
30. Trade and other payables
Financial instruments:
Trade payables 28,329,519 17,074,422
Trade payables - related parties 107,026 -
Accruals and other payables 4,644,125 4,991,179
33,080,670 22,065,601
Trade and other payables principally comprise amounts outstanding for trade
purchases and on-going costs. The average credit period taken for trade
purchases is 30 days.
The Group has financial risk management policies in place to ensure that all
payables are paid within the pre-arranged credit terms. No interest has been
charged by any suppliers as a result of late payment of invoices during the
year.
The directors consider that the carrying amount of trade and other payables
approximates to their fair value.
The total trade and other payables denominated in South African Rand amount to
US$20,622,241 (2020: US$15,895,209).
31. Provisions
Reconciliation of provisions - 2021
Utilised
Opening during the Foreign
balance Additions year exchange Total
US$ US$ US$ US$ US$
Leave pay 1,655,457 50,519 - (77,252) 1,628,724
Performance bonus 1,375,147 881,920 (333,724) - 1,923,343
Other 266,290 157,152 (253,656) - 169,786
3,296,894 1,089,591 (587,380) (77,252) 3,721,853
Reconciliation of provisions - 2020
Utilised
Opening during the Foreign
balance Additions year exchange Total
US$ US$ US$ US$ US$
Leave pay 1,193,630 504,394 - (42,567) 1,655,457
Performance bonus 2,098,565 1,602,991 (2,290,117) (36,292) 1,375,147
Other 140,424 221,983 (92,680) (3,437) 266,290
3,432,619 2,329,368 (2,382,797) (82,296) 3,296,894
Leave pay and bonus
Leave pay represents employee leave days due multiplied by their cost to the
company employment package. The bonus represents the estimated amount due to
employees based on their approved bonus scheme.
Performance bonus
The performance bonus represents an incentive bonus due to senior employees,
calculated in terms of an approved scheme based on the company's operating
results.
Other
The other provisions represents estimates for Group tax, legal and consulting
fees to be charged.
32. Financial instruments
The Group is exposed to the risks that arise from its use of financial
instruments. This note describes the objectives, policies and processes of the
Group for managing those risks and the methods used to measure them. Further
quantitative information in respect of these risks is presented throughout
these financial statements.
Capital risk management
The Group manages its capital to ensure that entities in the Group will be
able to continue as going concerns while maximising returns to shareholders.
In order to maintain or adjust the capital structure, the Group may issue new
shares or arrange debt financing. At the reporting date, the Group had
borrowings of US$77,646,750 (2020: US$84,246,776).
The capital structure of the Group consists of cash and cash equivalents,
equity and borrowings. Equity comprises of issued capital and retained
profits.
The Group is not subject to any externally imposed capital requirements.
Principal financial instruments
The principal financial instruments used by the Group, from which financial
instrument risk arises, are as follows:
· Trade and other receivables
· Cash at bank
· Trade and other payables
· Borrowings
· Investments
· Lease liabilities
2021 2020
US$ US$
Categories of financial instruments
The Group holds the following financial assets:
Financial assets at amortised cost
Trade and other receivables 11,914,268 10,451,736
Restricted investment 2,868,886 3,111,465
Cash and cash equivalents 15,432,852 50,540,672
Financial assets - Investment - 2,785,507
Total financial assets at amortised cost 30,216,006 66,889,380
Financial assets at fair value - 20,439,565
Total financial assets 30,216,006 87,328,945
The Group holds the following financial liabilities:
Financial liabilities at amortised cost
Trade and other payables 33,080,670 23,853,676
Lease liabilities 4,485,312 5,002,144
Deferred consideration 1,684,021 5,416,466
Loans 3,280,948 1,597,972
Borrowings 77,646,750 84,246,776
Total financial liabilities 120,177,701 120,117,034
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group's risk
management objectives and policies. The Board receives reports through which
it reviews the effectiveness of the processes put in place and the
appropriateness of the objectives and policies it sets.
The overall objective of the Board is to set policies that seek to reduce risk
as far as possible without unduly affecting the Group's competitiveness and
flexibility. Further details regarding these policies are set out below:
Price risk
The Group's exposure to commodity price risk is dependent on the fluctuating
price of the various commodities that it mines, processes and sells.
The average market price of each of the following commodities was:
2021 2020
Vametco US$/kgV US$/kgV
NV 34.10 23.56
MVO 17.18 17.18
AMV - 17.53
FEV - 22.33
2021 2020
Vanchem US$/kgV US$/kgV
Vanadium Pentoxide Flake (FVP) 25.04 19.86
Vanadium Pentoxide Chemical (VCM) 32.73 22.79
Sodium Ammonium Vanadate (SAV) 51.22 32.97
Ammonium Metavanadate (AMV) 35.19 26.79
Ferro Vanadium (FEV) 31.53 22.56
Vanadyl Oxalate Solution (VOX) 195.41 -
Potassium Metavanadate 35.31 -
Nitrovan 30.60 -
If the average price of each of these commodities increased/decreased by 10%
the total sales related to each of these commodities would have
increased/decreased as follows:
Effect on Effect on
2021 2021
Vametco revenue net income
US$ US$
NV 8,431,404 6,069,757
AMV (14,352) (10,334)
8,417,052 6,059,423
Effect on Efect on
2020 2020
Vametco revenue net income
US$ US$
NV 7,733,450 5,568,084
MVO 25,272 18,196
AMV 14,352 10,334
FEV 32,194 23,180
7,805,268 5,619,794
Effect on Effect on
2021 2021
revenue net income
Vanchem US$ US$
Vanadium Pentoxide Flake (FVP) 610,815 439,787
Vanadium Pentoxide Chemical (VCM) 298,089 214,624
Sodium Ammonium Vanadate (SAV) 71,954 51,807
Ammonium Metavanadate (AMV) 27,320 19,670
Ferro Vanadium (FEV) 1,637,211 1,178,792
Vanadyl Oxalate Solution (VOX) 137,723 99,160
Potassium Metavanadate 46,810 33,703
Nitrovan 483,666 348,239
3,313,588 2,385,782
Effect on Effect on
2020 2020
revenue net income
Vanchem US$ US$
Vanadium Pentoxide Flake (FVP) 831,607 598,757
Vanadium Pentoxide Chemical (VCM) 114,420 82,382
Sodium Ammonium Vanadate (SAV) 5,246 3,777
Ammonium Metavanadate (AMV) 12,704 9,147
Ferro Vanadium (FEV) 994,299 715,896
1,958,276 1,409,959
Credit risk
Credit risk is the risk that the counterparty fails to repay its obligation to
the Group in respect of the amounts owed.
Credit risk arises from cash and cash equivalents, contractual cash flows of
debt investments carried at amortised cost, at fair value through other
comprehensive income (FVOCI) and at fair value through profit or loss (FVPL),
as well as credit exposures to customers, including outstanding receivables.
Risk management
Credit risk is managed on a Group basis. Credit verification procedures are
undertaken for all customers with whom we trade on credit. Otherwise, if there
is no independent rating, risk control assesses the credit quality of the
customer, taking into account its financial position, past experience and
other factors. Individual risk limits are set based on internal or external
ratings in accordance with limits set by the board. The compliance with credit
limits by customers is regularly monitored by line management.
Trade account receivables comprise a limited customer base. Ongoing credit
evaluation of the financial position of customers is performed and granting of
credit is approved by directors.
The Group's investments in debt instruments are considered to be low risk
investments. The credit ratings of the investments are monitored for credit
deterioration.
Security
At 31 December 2021, the company held no collateral as security against any
financial asset. The carrying amount of financial assets recorded in the
financial statements, net of any allowances for losses, represents the
company's maximum exposure to credit risk without taking account of the value
of any collateral obtained. At 31 December 2021 and at 31 December 2020, no
financial assets were past their due date. An allowance for impairment is made
where there is an identified loss event which, based on previous experience,
is evidence of a reduction in the recoverability of the cash flows. Management
considers the above measures to be sufficient to control the credit risk
exposure.
Impairment of financial assets
The Group's only financial assets that are subject to the expected credit loss
model are third party trade receivables.
Trade receivables
The Group applies the IFRS 9 simplified approach to measure expected credit
losses which uses a lifetime expected loss allowance for all trade receivables
and contract assets.
To measure the expected credit losses, trade receivables have been grouped
based on shared credit risk characteristics and the days past due.
The expected loss rates are based on the payment profiles of sales over a
period of 36 month before 31 December 2021 and the corresponding historical
credit losses experienced within this period. The historical loss rates are
adjusted to reflect current and forward-looking information on macroeconomic
factors affecting the ability of the customers to settle the receivables. The
Group has identified the GDP and the unemployment rate of the countries in
which it sells its goods and services to be the most relevant factors, and
accordingly adjusts the historical loss rates based on expected changes in
these factors.
On that basis, the loss allowance as at 31 December 2021 and 31 December 2020
was determined as follows for trade receivables:
2021
Subsidiary Gross
Expected carrying Loss
credit loss amount allowance
rate US$ US$
Bushveld Vametco Alloys (Pty) Ltd 0.11 % 87,076 96
Bushveld Vametco Limited 0.13 % 4,197,730 5,457
Bushveld Vanchem (Pty) Ltd 0.13 % 1,274,756 1,657
Ivanti Resources (Pty) Ltd 0.43 % 609,197 2,620
Bushveld Minerals SA (Pty) Ltd 0.19 % 7,743 15
Bushveld Energy Company (Pty) Ltd 100.00 % 66,866 66,866
6,243,368 76,711
2020 Gross
Expected carrying Loss
credit loss amount allowance
Subsidiary rate US$ US$
Bushveld Vametco Alloys (Pty) Ltd 0.95 % 312,230 2,966
Bushveld Vanchem (Pty) Ltd 1.94 % 38,169 740
Bushveld Minerals SA (Pty) Ltd 1.94 % 69,189 1,342
Bushveld Energy Company (Pty) Ltd 1.94 % 72,651 1,409
Bushveld Vametco Limited 0.93 % 2,835,340 26,369
3,327,579 32,826
Trade receivables are written off when there is no reasonable expectation of
recovery. Indicators that there is no reasonable expectation of recovery
include, amongst others, the failure of a debtor to engage in a repayment plan
with the Group, and a failure to make contractual payments for a period of
greater than 120 days past due.
Impairment losses on trade receivables are presented as net impairment losses
within operating profit. Subsequent recoveries of amounts previously written
off are credited against the same line item. There were no impairment losses
on trade receivables for the 2021 and 2020 financial year.
It is the Group's policy that all customers who wish to trade on credit terms
are subject to credit verification procedures. Credit risk arises from credit
exposure to customers, including outstanding receivables and committed
transactions.
The Group's credit risk is considered by counterparty, geography and by
currency. The Group has a significant concentration of cash held on deposit
with large banks in South Africa, Mauritius and the United Kingdom and America
with A ratings and above (Standard and Poors).
The concentration of credit risk by currency was as follows:
2021 2020
US$ US$
Currency
Pound Sterling 10,272 663,914
Euro 47 -
South African Rand 14,942,559 34,165,671
United States Dollar 479,974 15,711,087
15,432,852 50,540,672
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting
its financial obligations as they fall due. Ultimate responsibility for
liquidity risk management rests with the Board of directors. The Board manages
liquidity risk by regularly reviewing the Group's gearing levels, cash-flow
projections and associated headroom and ensuring that excess banking
facilities are available for future use.
The Group maintains good relationships with its banks, which have high credit
ratings and its cash requirements are anticipated via the budgetary process.
At 31 December 2021, the Group had US$15,432,852 (2020: US$50,540,672) of cash
reserves and borrowings of US$77,646,750 (2020: US$84,246,776). The Group will
maintain its ability to service its borrowings over the next 12 months.
Market risk
The Group's activities expose it primarily to the financial risk of changes in
foreign currency exchange rates and interest rates.
Interest rate risk
The Group has interest bearing assets and liabilities, the Group's income and
operating cash flows are dependent of changes in market interest rates.
As part of the process of managing the Group's interest rate risk, interest
rate characteristics of new borrowings and the refinancing of existing
borrowings are positioned according to expected movements in interest rates.
Interest increase by
2021 100 basis
Interest bearing instruments Value of loan points Effect
Borrowings (77,646,750) 1 % (776,468)
Cash and cash equivalents 852,547 1 % 8,525
(767,943)
Interest increase by 100 basis
2020
Interest bearing instruments Value of loan points Effect
Borrowings (84,246,776) 1 % (842,468)
Cash and cash equivalents 40,260,188 1 % 402,602
(439,866)
Foreign exchange risk
As highlighted earlier in these financial statements, the functional currency
of the Group is US Dollars. The Group also has foreign currency denominated
assets and liabilities. Exposure to exchange rate fluctuations therefore
arise. The carrying amount of the Group's foreign currency denominated
monetary assets and liabilities, all in US Dollars, are shown below:
2021 2020
US$ US$
Cash and cash equivalents 15,134,842 34,829,585
Other receivables 12,696,364 4,818,931
Trade and other payables (20,752,795) (17,715,850)
7,078,411 21,932,666
The Group has transactional foreign exchange exposures, which arise from sales
or purchases by an operating unit in currencies other than the unit's
functional currency. The Vanadium market is predominately priced in US dollars
which exposes the Group to the risk of fluctuations in the SA rand/US dollar.
The Group monitors and manages risk via the newly established internal audit
function.
The Group does not enter into any derivative financial instruments to manage
its exposure to foreign currency risk.
Fair value
The directors are of the opinion that the book value of those financial
instruments carried at amortised cost approximates fair value. The carrying
value less impairment provision of trade receivables and payables are assumed
to approximate their fair values.
The Group used the following hierarchy for determining and disclosing the fair
value of financial instruments which are measured at fair value by valuation
technique:
Ÿ Level 1: Quoted (unadjusted) market prices in active markets for
identical assets or liabilities.
Ÿ Level 2: Other techniques for which all inputs which have a significant
effect on the recorded fair value are observable, either directly or
indirectly.
Ÿ Level 3: Techniques which use inputs that have a significant effect on
the recorded fair value that are not based on observable market data.
Of the Group's financial assets at fair value as described in note 16, US$Nil
(2020: US$20,148,778) is measured using level 1 techniques and US$Nil (2020:
US$2,304,099) is measured using level 3 valuation techniques. There have been
no transfers between level 2 and level 3 of the fair value hierarchy during
the the year ended 31 December 2021 and 31 December 2020.
2021 2020
Financial assets Book value Fair value Book value Fair value
Trade and other receivables 11,914,268 11,914,268 6,692,165 6,692,165
Restricted investments 2,868,886 2,868,886 3,111,465 3,111,465
Financial assets - investments - - 2,785,507 2,785,507
Financial assets at fair value - - 20,439,565 20,439,565
Cash and cash equivalents 15,432,852 15,432,852 50,540,672 50,540,672
2021 2020
Financial liabilities Book value Fair value Book value Fair value
Trade and other payables 33,080,670 33,080,670 22,065,601 22,065,601
Borrowings 77,646,749 77,646,749 84,246,776 84,246,776
Deferred consideration 1,684,021 1,684,021 5,416,466 5,416,466
Loans 3,280,948 3,280,948 1,597,972 1,597,972
Lease liabilities 4,485,312 4,485,312 - -
*Management assessed that the fair values of cash and cash equivalents,
restricted investment, trade and other receivables and trade and other
payables, borrowings, loans and lease liabilities approximate their carrying
amounts largely due to the short-term maturities of these instruments.
33. Contingent liabilities Bank guarantee
As required by the Minerals and Petroleum Resources Act (South Africa), a
guarantee amounting to US$12,762,752 (2020: US$6,204,018) before tax and
US$11,098,045 (2020: US$4,446,893) after tax was issued in favour of the
Department of Mineral Resources for the unscheduled closure of the Bushveld
Vametco Alloys mine. This guarantee was issued on condition that a portion be
deposited in cash with Guard Risk Insurance Company Ltd with restricted use by
the Group, as per the below.
34. Related parties
`
Relationships
Balances and transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not disclosed
in this note.
VM Investment Company (Pty) Ltd is a related party due to the Directors
Fortune Mojapelo and Anthony Viljoen being majority shareholders of VM
Investments. VM Investments owns the offices rented by Bushveld Minerals
Limited. The rent paid in 2021 financial period is US$162,897 (2020:
US$159,651).
Services rendered by Ondra LLP for the amount of US$200,000 (2020: US$566,056)
is classified as a related party transaction due to a non executive director
(Michael Kirkwood) being a partner at the firm.
The company paid on behalf of Mr Fortune Mojapelo, tax on historic shares to
the value of $439 094. The tax arises from historic shares issued to Mr
Mojapelo. The company had an obligation to settle the tax on behalf of Mr
Fortune Mojapelo. The amount is reflected as a debtor.
The remuneration of key management personnel, being the directors and other
executive committee members, is set out below. Further information about the
remuneration of individual directors is provided in the Directors'
remuneration report.
2021 2020
US$ US$
Salaries and fees 2,181,500 2,181,022
Short-term incentives 166,190 144,055
Long-term incentives - 564,420
2,145,438 2,889,497
35. Restatements
Bushveld Vanchem acquired the business of Vanchem Vanadium Products (Pty) Ltd
and South African Japan Vanadium (Pty) Ltd on 7 November 2019.
The transaction was accounted for as a business combination as prescribed by
IFRS 3.
In the preparation of the 2019 annual financial statements, the gain on
bargain purchase of R1.2billion (c.$60million) that arose from the business
combination was treated as a permanent tax difference and no deferred tax was
provided in relation to the uplift in the fair value of the property, plant
and equipment acquired. It was subsequently identified that the accounting
treatment in the 2019 annual financial audited statements was incorrect and a
deferred tax liability should have been recognised as part of the net assets
acquired. The adjustment impacts on the deferred tax balances at 31 December
2019 and 31 December 2020 and the income tax charge in those periods.
The information in the following tables show the effect of the restatement on
each affected financial statement line item:
Previously reported at 31 December
2020 Restated at 31 December
Consolidated Statement of Financial Position Adjustment 2020
Deferred tax asset/(liability) 5,085,154 (16,635,016) (11,549,862)
Retained earnings (46,734,823) 18,367,164 (28,367,659)
Foreign exchange translation reserve 11,202,236 (1,732,148) 9,470,088
No impact on cashflows as reported for the year ended 31 December 2020 were
noted.
Previously reported at 31 December
2019 Restated at 31 December
Consolidated Statement of Financial Position Adjustment 2019
Deferred tax asset/(liability) 173,892 (24,452,536) (24,278,644)
Retained earnings (83,415,438) 24,452,536 (58,962,902)
Foreign exchange translation reserve 1,655,861 633,277 2,289,138
Previously reported at 31 December
2019 Restated at 31 December
Consolidated Statement of Financial Position Adjustment 2019
Taxation 484,654 6,085,372 6,570,026
Basic loss per share (3.00) 0.37 (2.63
36. Events after the reporting period
Mustang Convertible Loan Note
On 27 April 2021, Bushveld Minerals Limited ("the Company") announced an
investment by Mustang Energy Plc ("Mustang") into VRFB Holdings Limited
("VRFB-H") to acquire an indirect interest of 11.05 per cent in Enerox GmbH
("Enerox"). Mustang invested approximately US$7.5 million to subscribe for a
22.10 per cent interest in VRFB-H ("Mustang Subscription Shares") which was
deployed into Enerox through its holding company, Enerox Holdings Limited
("EHL"). Mustang funded its investment by way of an issue of US$8 million
unsecured convertible loan notes ("CLNs") bearing a 10 per cent coupon to
certain investors ("Mustang Capital Raise"). This was captured in an
investment agreement ("the Investment Agreement").
A condition of the Investment Agreement was that Mustang's shares be
readmitted to trading on the Standard List of the Main Market of the London
Stock Exchange ("Readmission") by 31 December 2021 (the "Maturity Date"),
failing which Mustang would have had the right, by serving written notice on
Bushveld within 5 Business Days following the Maturity Date ("the Notice
Date"), to require that Bushveld, in return for Mustang transferring to
Bushveld Energy Limited all of the Mustang Subscription Shares and payment of
a backstop fee ("Backstop Fee"), must:
Ÿ issue to each CLN holder by 28 January 2022 such number of new Bushveld
Minerals shares (at a price equal to the 20-day volume weighted average prior
to the date of issue, and rounded down to the nearest share) as is equivalent
to the par value of the noteholders' CLNs together with accrued and unpaid
interest; and
Ÿ procure that such Bushveld shares are admitted to trading on the AIM
market of the London Stock Exchange plc within five Business Days thereafter
("Backstop").
As at 31 December 2021, the directors have concluded that the fair value of
the option right is immaterial for recognition.
Post completion of the investment, on 14 July 2021, the Company announced that
Garnet Commerce Limited ("Garnet"), a shareholder in Enerox through its
holding in EHL, issued a claim form in the High Court of Justice: Business and
Property Courts of England and Wales (Chancery Division) against VRFB-H and
EHL ("the Litigation"). Garnet's claim form sought declarations against VRFB-H
concerning alleged breaches of the joint venture agreement in relation to EHL,
in respect of the indirect investment into EHL through VRFB-H by Mustang
Energy Plc. The Mustang Capital Raise and the concurrent acquisition by
Mustang of shares in the capital of VRFB-H constitutes a reverse takeover
under the Financial Conduct Authority's Listing Rules and requires the
publication of a prospectus. Due to the uncertainty of the Litigation at the
time it precluded Mustang from issuing a prospectus which is a precursor for
Readmission.
On 19 January 2022:
Ÿ One of the CLN holders, Primorus Investment Plc ("Primorus") elected to
sell US$1.0 million of its CLNs to other CLN noteholders. In addition, the
Company granted an option to Primorus to sell its residual CLNs (nominal value
of US$1.5 million plus accrued interest thereon) to the Company. The Company
could elect, at its discretion, as consideration for the exercise of the
option, to pay cash or to issue new Bushveld Minerals convertible loan notes
("BMN CLNs");
Ÿ The parties to the Investment Agreement updated the terms of that
agreement as follows ("Updated Terms"):
o The requirement for the publication of a prospectus by Mustang and
Readmission was to occur by no later than 28 February 2022;
o In circumstances where Readmission did not take place by 28
February 2022, assuming Mustang cannot redeem the CLNs:
· Mustang will give notice to Bushveld to exercise the Backstop and
to the CLNs holders that it has done so, with a request that the CLN holders
advise of their election to convert their CLNs into Bushveld or VRFB-H shares
by the end of March 2022;
50
36. Events after the reporting period (continued)
· Bushveld will issue the new Bushveld shares under the Backstop in
return for the transfer of the Mustang Subscription Shares; and
· Mustang will transfer the Mustang Subscription Shares to
Bushveld. In terms of the Investment Agreement, certain of the CLNs holders,
on exercise of the Backstop, have the discretion to elect not to receive new
Bushveld Minerals shares and instead receive shares directly in the capital of
VRFB-H.
o The Backstop Fee payable by Mustang to Bushveld will be reduced
from 5.0% to 2.0% of the amount of any
CLNs converted to Bushveld shares, to be satisfied by the issue of Mustang
shares at a price of 20 pence each.
o In the event that the Litigation is resolved such that Mustang can
continue to hold the VRFB-H shares and the
Backstop has been exercised, then Mustang has the option to buy back the
Mustang Subscription Shares that would have been transferred to Bushveld in
terms of the Backstop and Bushveld would have the option to put the Mustang
Subscription Shares to Mustang at the original subscription price.
o Bushveld provided Mustang with a working capital loan of US$220
000 at no interest ("Loan"), repayable in the
event the Litigation is settled or determined such that Mustang can hold
shares directly or indirectly in VRFB-
H. Mustang repay the Loan in cash, or in shares (together with a warrant for
every two shares), in full on the earlier of 31 December 2023 or Mustang
completing a capital raise. The Loan shall be waived in full in the event that
the Litigation is settled or determined such that Bushveld Energy cannot hold
shares directly or indirectly in VRFB-H and the Backstop arrangements have
been implemented.
o Sixty per cent of the Backstop Fee has been waived in the event
the Litigation does not result in Mustang being able to hold shares in VRFB-H.
Primorus elected to exercise the option and on 28 March 2022:
Ÿ the Company issued the BMN CLNs to Primorus;
Ÿ Mustang cancelled the Mustang CLNs issued to Primorus on 26 April 2021
and issued US$1,500,000 10 per cent convertible loan notes to Bushveld,
subject to and with the benefit of the provisions contained in the Loan Note
Instrument entered into by Mustang on 26 April 2021 as amended and restated on
18 January 2022 and as further amended and restated between Mustang and the
CLNs noteholders on 28 March 2022. The conversion price of the Mustang CLNs is
£0.18;
Ÿ Mustang paid Bushveld a Backstop Fee of US$32,737; and
Ÿ the Updated Terms were further updated and supplemented as follows:
o The nominal amount of the BMN CLNs is £1,208,988, being the
nominal value of the Mustang CLNs issued to Primorus of US$1.5 million plus
interest accrued thereon as at 28 March 2022 of US$136,849.32 (being an
aggregate amount of US$1,636.849.32), converted at an exchange rate of
US$1.3539/GBP;
o Unless previously redeemed by the Company, and subject to a
conversion notice being received by the
Company at least three business days prior to the relevant conversion date, a
tranche consisting of one sixth of the aggregate amount of the BMN CLNs may be
converted by Primorus into BMN shares at any time within a conversion period
(the six conversion periods being: 28 February 2022 to 14 April 2022; 15 April
2022 to 14
July 2022; 15 July 2022 to 14 October 2022; 15 October 2022 to 16 January
2023; 17 January 2023 to 14 April 2023;15 April 2023 to 14 July 2023) at a
conversion price of £0.098987, being the volume weighted average price of a
share as shown on Bloomberg over the 20 trading days prior to (and excluding)
28 February 2022.
Primorus issued conversion notices in the first two conversion periods and has
accordingly converted one third of the BMN CLNs.
Enerox Legal Matter
Garnet Commerce Limited ("Garnet") issued a claim form in the English High
court against VRFB Holdings Limited ("VRFB- H") and Enerox Holdings Limited
("EHL"). EHL owns a 100 per cent interest in Enerox GmbH ("Enerox"), a
Vanadium Redox Flow Battery manufacturer, providing grid scale and micro-grid
energy storage solutions.
Garnet's claim form sought declarations against VRFB-H concerning an alleged
breach of the joint venture agreement in relation to EHL. The alleged breach
was in respect of the indirect investment, announced on 27 April 2021, into
EHL by Mustang Energy Plc through VRFB-H, in terms of which Mustang acquired a
22.1 percent shareholding in VRFB-H in return for an investment of US$7,5
million.
The judgement was made on 7 March 20222 in the High Court of Justice: Business
and Property Courts of England and Wales (Chancery Division) in the matter
between Garnet Commerce Limited (Claimant), VRFB Holdings Limited and Enerox
Holdings Limited (Defendants) and 2289609 Alberta Limited (Third Party) [Claim
No. BL-2021-001153].
The judgement outcome vindicated the position that the investment by VRFB
Holdings Limited ("VRFB-H") into Enerox Holdings Limited ("EHL"), funded as it
were partly from an investment by Mustang plc ("Mustang"), was entirely
appropriate and not in violation of any agreements. Accordingly, the
investment by Mustang into VRFB-H, and the investment by VRFB- H into EHL,
continue to be in place. As previously announced, Mustang's investment into
VRFB-H constitutes a reverse takeover according to the AIM Rules. As such,
Mustang shares remained suspended while it prepares a prospectus on its
investment into VRFB-H.
36. Events after the reporting period (continued)
The judgement outcome vindicated the position that the investment by VRFB
Holdings Limited ("VRFB-H") into Enerox Holdings Limited ("EHL"), funded as it
were partly from an investment by Mustang plc ("Mustang"), was entirely
appropriate and not in violation of any agreements. Accordingly, the
investment by Mustang into VRFB-H, and the investment by VRFB- H into EHL,
continue to be in place. As previously announced, Mustang's investment into
VRFB-H constitutes a reverse takeover according to the AIM Rules. As such,
Mustang shares remained suspended while it prepares a prospectus on its
investment into VRFB-H.
Kiln 3
In June 2022 the refurbishment of Kiln 3 was successfully commissioned at
Vanchem. The commissioning was completed on time and within budget, with focus
now on plant optimization and ramp-up. The kiln is currently ramping up. Refer
to note Going concern note 3.
Bushveld Minigrid
In June 2022 Bushveld Minerals Limited secured funding for the engineering,
procurement and construction ("EPC") of the Vametco hybrid mini-grid, which is
owned by its 84%-owned energy subsidiary, Bushveld Energy Limited ("Bushveld
Energy").
Bushveld Energy has completed the development and achieved financial closing
for a 3.5 MW solar PV plus a 1 MW / 4 MWh Vanadium Redox Flow Battery ("VRFB")
hybrid mini-grid project for Vametco, which will operate as a funded
independent power producer ("IPP").
Bushveld Energy and NESA Investment Holdings, a South African investment firm,
have signed a shareholders agreement as strategic equity partners in the
project's development and financing, with the project being housed in a
separate special purpose vehicle ("SPV"). NESA has provided 60% of the equity,
while Bushveld Energy has provided 40%. Bushveld Energy will recognise a
development fee of ZAR5.6 million as revenue from the project upon financial
close.
ABSA Relationship Banking has approved a ZAR64 million (approximately US$4.1
million) loan to part fund the construction of the mini-grid project.
The project's total cost is estimated to be ZAR113 million (approximately
US$7.1 million).It will be built on a turnkey basis by NESA Power, who have
already executed an Engineering, Procurement and Supply (EPC) Agreement
alongside the SPV., The project's 1 MW/4 MWh VRFB will be supplied by
CellCube, a VRFB original equipment manufacturer in which Bushveld owns an
indirect 25.25% interest.
Site preparation for construction began in Q1 2022. The project is now fully
funded and is expected to be completed in H1 2023.
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