REG - Bushveld Minerals Ld - Final Results for the Year Ended 31 December 2022
21/06/2023 07:15
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RNS Number : 3620D Bushveld Minerals Limited 21 June 2023
Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have been deemed
inside information for the purposes of Article 7 of Regulation (EU) No
596/2014 until the release of this announcement
21 June 2023
Bushveld Minerals Limited
("Bushveld Minerals" "Bushveld" or the "Company")
Full Year Results for the 12-month Period Ended 31 December 2022
Bushveld Minerals Limited (AIM: BMN), the integrated primary vanadium
producer and energy storage solutions provider, is pleased to announce its
full year results for the year ended 31 December 2022.
FY2022 Financial Highlights
· Revenue of US$148.4 million (2021: US$106.9 million).
· Underlying EBITDA(1) of US$22.3 million and adjusted EBITDA(1) loss
of US$1.7 million (2021: Underlying EBITDA loss US$7.5 million and adjusted
EBITDA loss of US$9.9 million).
· Impairment losses of US$24.0 million (2021: US$2.4 million) of which
US$$17.2 million relates to Vanchem. The Group previously recognised US$60.6
million gain on bargain purchase on the acquisition of Vanchem in 2019.
· Net loss of US$35.4 million (2021: US$34.2 million).
· Free cash flow(2) of US$14.6 million (2021: negative US$19.3
million).
· Cash and cash equivalents of US$10.9 million (2021: US$15.4 million).
· Net debt of US$79.5 million (2021:US$68.9 million).
· Net debt excluding the Orion Production Financing Agreement US$44.4
million (2021:US$35.4 million).
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. Free cash flow defined as operating cash flow less sustaining
capital.
Management Changes
· In a separate announcement published today, the Board announced that
Craig W. Coltman will be appointed as Chief Executive and will join the Board
of the Company with effect from 01 July 2023, the date on which Fortune
Mojapelo will step down as Chief Executive.
Group Priorities and Outlook
· The Group has made significant progress with the legal documentation
to refinance its existing convertible loan note with Orion Mine Finance
("Orion") of c.US$45 million (capital plus interest).
· On track to meet 2023 production guidance of between 4,200 mtV and
4,500 mtV, and weighted average production cash cost (C1) guidance of between
US$26.1kgV and US$27.0/kgV, (ZAR447/kgV and 438/kgV).
· Bushveld Electrolyte plant (BELCO) and the Vametco hybrid mini-grid
to be fully operational during the second half of 2023.
· Complete the Bushveld Energy carve-out.
Analyst conference call and presentation
Bushveld Minerals' Chairman, Michael Kirkwood, Chief Executive
Officer, Fortune Mojapelo, Finance Director, Tanya Chikanza and Chief
Executive designate, Craig W. Coltman will host a conference call and
presentation today at 12:00 PM BST (13:00 SAST), to discuss the 2022 full year
results and management changes with analysts. Participants may join the call
by dialling:
Tel: United Kingdom: +44 (0) 33 0551 0200; South Africa: +27 800 980 512;
USA Local: +1 786 697 3501
Password: Quote Bushveld - Full Year when prompted by the operator
Alternatively, the presentation can be accessed as a webcast here:
https://stream.brrmedia.co.uk/broadcast/6426b8b94b959ac1b1e40d18
(https://stream.brrmedia.co.uk/broadcast/6426b8b94b959ac1b1e40d18)
Annual Report
The Annual Report for the year ended 31 December 2022 will be available on
the Company's website on Friday 23 June 2023 at the following
link: http://www.bushveldminerals.com/financial-reports/
(http://www.bushveldminerals.com/financial-reports/) . A further announcement
will be made by the Company once hard copies of the Annual Reports have been
dispatched to shareholders.
ENDS
Enquiries: info@bushveldminerals.com
Bushveld Minerals Limited +27 (0) 11 268 6555
Fortune Mojapelo, Chief Executive
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
Gareth Tredway / Tara Vivian-Neal +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 2022,
the Company produced more than 3,800 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.
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
Abundant opportunity constrained by several challenges
TO OUR SHAREHOLDERS,
I am pleased to preface this Annual Report for the first time, having assumed
the role of Chair from Ian Watson during the course of the year under review.
There is a natural tendency for communications such as this to dwell on the
positive aspects of a company's performance and to understate or plead
mitigation on the challenges and the negatives that impact results. In my
view, this approach arguably discredits the overall content, and strains the
credibility of what is, after all, the most important annual communication to
the current and prospective owners of a company.
FINANCIAL AND OPERATIONAL PERFORMANCE
The Company remained loss-making, although it was able to report free cash
flow, which was used to pay down debt and partially fund the Business' other
initiatives. The quick ratio approximately halved, gearing increased, and
equity accounts declined. This is not the outcome we planned for, nor is it
sustainable, and this is reflected in our significantly discounted share price
which more than halved in the year under review. The Board and management
fully recognise this and have evolved plans to restore momentum in operational
stability, revenue generation, cost constraint, profitability and cash
generation.
The results for 2022 were, admittedly, impacted negatively by a combination of
external and internal factors.
Externally, the conflict in Ukraine triggered an energy price and supply
crisis that in turn created an inflationary cycle that central banks around
the world responded to with monetary policy actions. Additionally, global
supply chains were disrupted. Within South Africa, where the Company primarily
operates, electricity supply was constantly disrupted by loadshedding, the
government logistics infrastructure and services deteriorated, and raised
inflation impacted operating costs.
Internally, the Company faced issues with operational stability, particularly
at its Vanchem plant. Production at the newly commissioned Kiln-3 was
negatively impacted by the unreliable municipal power supply. The ore supply
from Vametco was found to have a higher silica content than ideal resulting in
the need for system clearing shutdowns. Thus, although Vametco performed well,
Vanchem failed to hit its production target for the year resulting in guidance
misses and higher Group overall sustaining costs.
GOING FORWARD AND FINDING SOLUTIONS
I prefaced my remarks by stating that the challenges Bushveld has faced, and
the consequential disappointing financial results, mask the abundant
opportunity that can be realised as the Company stabilises, and in the
mid-term optimises, its operations and financial platform. Your Board believes
this is eminently achievable and is underway.
In the face of these challenges, management has and continues to undertake
various initiatives to ensure profitability in the current year, to improve
the Company's capital structure, to secure a more stable power supply to
support increased production, to contain costs and to crystallise value for
the Bushveld Energy assets. The BELCO electrolyte plant will be commissioned
and commence production during the second half of 2023, making Bushveld a
fully-fledged vanadium electrolyte producer. Additionally, we are making good
progress with the Vametco mini-grid, which is expected to supply just under 10
percent of Vametco's electrical energy and also be online during the second
half of 2023.
At Vanchem, an arrangement has been concluded with the municipality to
stabilise power supply and this has already had a positive impact in the first
quarter of 2023. Also, an ore supply contract has been concluded with a
third-party operating in the Bushveld Complex for the supply of low-silica
high-grade ore that will have a positive impact on productivity and costs at
the plant.
As previously announced, plans are well advanced for CellCube, one of Bushveld
Energy's assets, to be carved out into a listed vehicle on the London Stock
Exchange (LSE). Your Company will retain a significant minority holding in
this vehicle and therefore keep a stake in the evolution of vanadium as an
energy storage resource. This carve-out will help reduce central costs and
permit greater focus on the residual core businesses. The devolved pure energy
storage entity should also be able to attract capital, new investors, and a
valuation aligned to that sector.
We have previously announced that we are negotiating a restructuring of the
financing provided by Orion. The objective of the proposed arrangements is to
extend debt maturities and to reduce the equity dilution overhang from the
convertible loan note. We are grateful to Orion for their continuing support.
The refinancing will be conditional on a number of factors being worked on and
also upon shareholder approval which we expect will be sought at this year's
General Meeting.
GOVERNANCE
During the year under review the Board of Directors has been materially
reconstituted. Ian Watson, who chaired the Company since its inception,
retired. Ian oversaw the early development of Bushveld and its transformation
into an integrated vanadium producer. His long service and guiding hand
deserve our full appreciation and we wish him well for the future.
On Ian's retirement I assumed the role of Interim Chair and subsequently the
Board has seen fit to confirm my appointment as Chairman on an ongoing basis.
I thank my fellow Directors for placing their trust in me and look forward to
working with them as a team to the benefit of all our stakeholders.
Additionally, two of our longest serving Directors, Anthony Viljoen (a
co-founder) and Jeremy Friedlander retired from the Board. Their wise counsel
and engagement in the development of Bushveld should similarly be recognised.
We have been fortunate to attract a new slate of very capable Directors to the
Board with the appointments over the last 18 months of Kevin Alcock, Mirco
Bardella and David Noko. They bring relevant and valuable experience to the
Board and are playing a key role in guiding Bushveld in its next stage of
development.
During the year we also welcomed Jacqueline Musiitwa as a Non-Executive
Director but unfortunately, she was obliged to step down upon accepting a role
within the United States Agency for International Development (USAID) that
precluded her from remaining in private sector roles. We wish her success in
this important engagement.
Further to this, we have announced that co-founder and Chief Executive,
Fortune Mojapelo, has decided to step down from his role as of 01 July 2023.
He has led the Company for over 11 years and has, through his vision and
dedication to the Company, built Bushveld Minerals from an exploration
business to a multi-asset vanadium producer, owning and operating two of four
global primary vanadium processing facilities. We sincerely appreciate all
that Fortune has done to make Bushveld what it is today and wish him every
success in his future endeavours.
We are delighted that Craig Coltman is taking up the position as CEO. Having
worked with De Beers Consolidated Mines for over 32 years in various
operational and commercial roles, and most recently as Chief Financial Officer
and Executive Director of the group, Craig is well qualified to take up the
leadership mantle and steer the Company going forward.
We look forward to working with him during a short period of transition and
thereafter.
CONCLUSION
We reinforce to our shareholders that our strategic aims are robust and
achievable. The foundations are laid, the edifice is progressing but remains
work in progress. The focus of the Board and the Management is to deliver
value and returns to our owners through, and I am being intentionally
repetitive, achieving our operational targets, managing costs, generating free
cash flow, strengthening our balance sheet, and investing capital prudently.
The Board has been incredibly engaged and supportive as we tackle our
challenges and it remains only for me, on their behalf, to thank the entire
Bushveld team for their efforts, resilience and dedication during a
challenging year and wish them well for fairer winds ahead.
Michael J. Kirkwood
Chairman
Chief Executive Officer's Review
Progress with more potential in the pipeline
DEAR STAKEHOLDERS,
I am pleased to present the report on Bushveld Minerals' performance over the
past financial year. The year 2022 marks 10 years since the Company's listing
on AIM as a junior mineral exploration company. It also marks five years since
we embarked on our transformative journey from an explorer into a vanadium
producer, first with the acquisition of Vametco, and later Vanchem. This
allowed us to produce a broad range of vanadium products that enable the
production of more environmentally friendly steel and support the global
energy transition to green renewable energy through the application of
long-duration VRFBs.
In that time the Company has invested substantially to establish a
vertically-integrated primary vanadium production platform comprising (a) two
of only four operating primary-processing plants in the world, supplying more
than three percent of the global vanadium market, with scope to grow this into
the future and (b) a VRFB platform that is positioned to play a meaningful
role in the growing stationary energy storage market.
While 2022 started with optimism on the back of a receding COVID-19 pandemic,
several factors in the geopolitical developments continued to plague the
global economy and specifically the vanadium market. Consequently, between
2021 and 2022, vanadium demand in steel making dropped by 0.41 percent which
was fortunately mitigated by a 79 percent increase in vanadium demand from the
energy storage sector, resulting in an overall increase of 0.48 percent in
vanadium demand.
This global backdrop was exacerbated by unique local challenges, most notably
the national electricity crisis that saw Vanchem without a steady flow of
electrical supply at a pivotal time when it was commissioning and optimising
Kiln-3 after the refurbishment programme.
THE YEAR IN REVIEW
If external factors paint a bleak operating environment for the Company in the
past three years, they also cast a spotlight on its resilience, as it
continued to invest in its producing assets to grow production and lower unit
costs (particularly at the recently refurbished and ramping up Vanchem) as
well as continuing to develop its vanadium energy storage platform.
The Group production increase from 3,592 mtV in 2021 to 3,842 mtV in 2022, was
underpinned by Vametco's operational performance. Having achieved operational
stability during the second half of 2021, its consistent production rates
enabled it to report full-year production of 2,705 mtV, exceeding the upper
end guidance of 2,550 - 2,650mtV.
In contrast to stable production at Vametco, Vanchem production missed
guidance for an overall production of 1,137mtV. Consequently, Group
production, at 3,842 mtV, was below the lower end of the revised guidance of
3,900- 4,100 mtV. Lower recovery rates from Kiln-1 at Vanchem as it was taken
out of service, a slower-than-anticipated ramp-up of Kiln-3 post
commissioning, higher silica content in the ore supply, and the impact of
loadshedding which affected our ability to optimise output, meant production
levels were considerably lower than anticipated. Details on the Group's
operational performance can be found in the Operating Assets and Operational
Review section of the Annual Report.
Although we did not achieve our Group production run rate target of 5,000 -
5,400 mtV by the end of 2022, we remain committed to meeting this target by
attaining similar levels of operational stability at Vanchem as Vametco -
centred around securing supply of suitable ore, stable power supply and
improved post commissioning operations - all three areas that the Company has
made progress in resolving.
Specifically, in November 2022, an agreement was reached with the Emalahleni
Local Municipality putting Vanchem on a load- curtailment contract plan. This
arrangement has resulted in reduced/curtailed power supply rather than an
outright loss of power during periods of loadshedding. While this has resulted
in a marked improvement in power security for Vanchem so far in 2023, we
continue to pursue a direct contract with Eskom, in line with Vametco's power
supply arrangements. In addition to this, the access to low-silica,
third-party feedstock will also contribute to improved production and less
downtime at Vanchem.
Group production cash cost of US$27.7/kgV was higher than in 2021 and above
our guidance of between US$22.7/kgV and US$23.5/kgV, driven by significantly
higher price inflation across most inputs and energy prices as well as a
higher fixed cost base not matched by expected higher production at Vanchem.
Next to stable production performance, cost containment is an area receiving
intense focus across several areas of the business. Details on our cost
initiatives can be found in the Finance Director's Review.
BUSHVELD ENERGY
Progress continues in advancing both the development of the BELCO electrolyte
plant in East London and the mini-grid at Vametco. We have concluded that the
full value and potential of Bushveld Energy as a subsidiary business will be
constrained and for this reason we have been preparing its carve-out into a
stand-alone business.
As previously announced, we have entered into a conditional agreement to sell
our entire interest in CellCube to Mustang, and, in exchange, we will receive
shares in Mustang. The sale is an important part of the carve-out process, as
it effectively gives Bushveld a significant stake in a London-listed energy
storage business. The transaction provides CellCube with direct access to
capital markets, allowing it to attain a transparent market value and attract
specialist investors looking to participate in this exciting growth sector.
As we have communicated, it is the right time for this emerging energy storage
story to take on a life of its own, while we retain an interest in the
business through Mustang and, most importantly, maintain our
vertically-integrated business model. Subject to various regulatory consents
and capitalisation, we expect to complete the carve-out during the second half
of 2023.
FINANCIAL PERFORMANCE AND CONVERTIBLE LOAN NOTE
Despite the operational challenges we faced during the year under review,
higher prices and sales meant we generated Revenue of US$148.4 million,
underlying EBITDA of US$22.3 million and a reduced adjusted EBITDA loss of
US$1.7 million. During the year we repaid the entire Nedbank revolving credit
facility of US$5.9 million. We generated free cash flow of US$14.6 million and
ended the year with a cash and cash equivalent balance of US$10.9 million.
A large proportion of our capital investment over the last five years was
funded by debt, which includes a US$35 million convertible loan note held by
Orion. With an advancing maturity date of November 2023, the convertible loan
note was putting pressure on our balance sheet and creating a potentially
dilutive overhang on the share price. We are in advanced discussions with
Orion for the convertible loan note to be restructured so as to substantially
reduce the pressure on the Company's balance sheet. Details of the revised
structure are provided in Note 37 of the Financial Statements.
An extensive assessment of the financial position indicates that the Group
requires additional liquidity in order to meet its obligations and activities
over the next 12 months. We are exercising levers within our control to
improve the Group's liquidity. In addition to these internal mechanisms under
our control we are pursuing various financing alternatives to increase our
liquidity and capital resources. Details on the Group's Going Concern can be
found in the Finance Director's Review and in Note 3 of the Financial
Statements.
SUSTAINABILITY AND SAFETY
Long-term sustainability depends on securing and maintaining a solid social
licence to operate by nurturing strong partnerships with all our stakeholders,
especially our communities.
We also acknowledge that sustainability, for all companies, is a journey. In
2022, we made notable progress in our sustainability journey, highlighted by
the establishment of an Environment Social and Governance (ESG) Committee to
oversee and monitor the implementation of our ESG strategy. Our longer-term
ambitions remain unchanged, the details of which can be found in the
Sustainability section of this report. The safety and well-being of our
employees and contractors is an absolute priority and we remain committed to
the objective of zero harm in our workplace. We had no fatalities during the
current reporting period, however, the Group's 2022 Total Injury Frequency
Rate (TIFR) of 10.32 was 33 percent higher than 2021. For this reason, in the
year under review, we commissioned an audit of our safety procedures and
performance. We understand what the gaps are and I am heartened to report that
this has started yielding results, as evidenced by the 50 percent improvement
in the TIFR in the last quarter of 2022.
CONCLUSION
I extend my heartfelt thanks to every one of Bushveld Minerals' employees. In
spite of the many challenges we face, your visible commitment to ensuring the
success of this Company in 2022 was greatly appreciated by myself, senior
management, and the Board. I would like to thank our shareholders for their
patience, commitment, and faith in the Company.
I am confident in the opportunities that lie in the future for the Business
and firmly believe that the efforts of the past, position the Company well to
capture these going forward.
Finally, the Company and I announced today that after more than 10 years as
the founding CEO of Bushveld Minerals, I will be stepping down and will not
seek re-election to the board of the Company. Simultaneously announced today
is the appointment of Craig Coltman as CEO of the Company with effect from 01
July 2023.
Co-founding and leading Bushveld Minerals into an integrated vanadium platform
positioned to play an ever increasing role in the growing vanadium industry
has been an immense privilege. While recognising the challenging circumstances
the Company has had to navigate in recent years, my conviction in the
potential and future success of this Company remains.
To our shareholders and stakeholders, thank you for your trust; and to the
team at Bushveld under the leadership of Craig, I wish you the success that
all your hard work and the trust of our stakeholders deserves.
Fortune Mojapelo
Chief Executive Officer
Finance Director's Review
Positive Underlying EBITDA as Vametco attains target production
1. OVERVIEW
Unit FY 2022 FY 2021
Revenue US$m 148.4 106.9
Cost of sales US$m (108.3) (102.8)
Other operating costs and income US$m (40.0) (12.8)
Administrative costs US$m (20.3) (20.5)
Adjusted EBITDA(1) US$m (1.7) (9.9)
Impairment charges US$m (24.0) (2.4)
Underlying EBITDA(2) US$m 22.3 (7.5)
Operating loss US$m (20.1) (29.3)
Average foreign exchange rate US$:ZAR 16.35 14.79
Group production mtV 3,842 3,592
Group sales mtVw 3,584 3,314
All-in sustaining cost US$/kgV 43.7 37.4
Average realised price US$/kgV 41.4 32.2
The 2022 financial results show an improvement on the prior year in a number
of line items although we remained loss making. Our strategy to prioritise
operational stability and increase investment in maintenance paid off as
Vametco achieved consistent and stable operational performance which was
reflected in the financial numbers.
We recorded an underlying EBITDA of US$22.3 million and adjusted EBITDA loss
of US$1.7 million. While an operating loss of US$20.1 million was incurred,
this was a US$9.2 million positive change from the prior year, as realised
prices rose and we continued with our cost management measures to mitigate any
inflationary pressures and electricity challenges. We realised savings of
US$1.5 million owing to initiatives related to procurement. The operating loss
also included impairment losses of US$24.0 million, U$21.5 million higher than
the prior year. US$17.2 million of the impairment losses pertain to Vanchem.
Two years of volatile prices, operational challenges and the impact of the
COVID-19 pandemic have restricted our ability to pay down the rest of the debt
on our balance sheet. To this end we recently announced a proposed refinancing
of the Orion US$35 million convertible loan notes and capitalised interest
into a revised capital structure. Details on the proposed refinancing are
included in note 37 in the annual consolidated financial statements. The
refinancing will be conditional on several items, including due diligence,
shareholder approval at a general meeting and definitive documentation. We
have made significant progress with the legal documentation of the
restructuring.
The restructure of the convertible loan notes is expected to remove the risk
of a large cash outflow, which has been putting pressure on our balance sheet
and cash position. The new structure will enable the Group to repay the debt
over a longer time period and in line with the Group's planned internally
generated cash flows.
2. INCOME STATEMENT
Analysis of results
The income statement summary below is adjusted from the "statutory" primary
statement presentation:
Year ended Year ended
31-Dec-22 31-Dec-21
US$'000 US$'000
Revenue 148,448 106,857
Cost of sales excluding depreciation (90,268) (83,780)
Other operating costs and income(3) (39,950) (12,837)
Administration costs excluding depreciation (19,889) (20,125)
Adjusted EBITDA (1,659) (9,885)
Depreciation (18,475) (19,395)
Operating loss (20,134) (29,280)
Other losses (818) (1,902)
Share of loss from joint ventures (5,112) (4,351)
Fair value gain on derivative liability 2,934 9,010
Net financing expenses(4) (13,654) (12,373)
Loss before tax (36,784) (38,896)
Income tax 1,345 4,671
Net loss for the year (35,439) (34,225)
Revenue
Year ended Year ended
31-Dec-22 31-Dec-21
Group sales (mtV) 3,584 3,314
Average realised price (US$/kgV) 41.4 32.2
Revenue (US$'000) 148,448 106,857
Revenue
Revenue of US$148.4 million for the Group was 39 percent higher than in the
previous year, underpinned by the improved average realised price of
US$41.4/kgV (2021: US$32.2/kgV) and increased Group sales volumes of 3,584
mtV, following record production of 3,842 mtV.
The geographic split of Group sales in 2022 was 44 percent to the USA, 27
percent to Europe, 9 percent to Asia, 7 percent to South Africa, and 13
percent to the rest of the world.
During the year, nitro vanadium sales into North America were prioritised due
to the higher vanadium prices realised in this region and we maximised
worldwide sales into the aerospace and speciality chemical products sectors,
which attract price premiums.
Cost analysis
Year ended Year ended
31-Dec-22 31-Dec-21
Cost of sales excluding depreciation (90, 268) (83,780)
Other operating costs and income (39,950) (12,837)
Administrative costs excluding depreciation (19,889) (20,125)
Total income statement operating cost excluding depreciation (150,107) (116,742)
Total units sold (mtV) 3,584 3,314
Cost per income statement per unit sold (excluding depreciation) (US$/kgV) 41.9 35.2
Sustaining capital (6,589) (7,192)
Total cost including sustaining capital (156,696) (123,934)
Cost per unit sold including sustaining capital (US$/kgV) 43.7 37.4
Cost of sales
The cost of sales, excluding depreciation, for the year was US$90.3 million,
contained to an inflationary 8 percent increase year-on-year, primarily due to
higher costs at both Vametco and Vanchem. The cost increases included:
· Higher personnel costs at Vanchem associated with the commissioning
and ramp-up of Kiln-3 in order to seek to achieve the anticipated production
run rate of 2,600 mtVp.a which was not attained in the financial year due to
ore quality and electricity supply issues;
· Inflationary increases in raw material prices from suppliers;
· Higher energy costs due to the increase in oil and diesel prices as
well as an increase in diesel usage during periods of loadshedding at Vanchem;
· Higher maintenance costs, mainly at Vanchem, due to the additional
maintenance required on Kiln-1, as well as maintenance costs to sustain the
plants, production volumes and improve operational stability; and
· Higher mining costs at Vametco, primarily due to increased activity
associated with mining the Upper Seam.
Other operating costs and income
Other operating costs and income increased to US$40.0 million due to:
· A US$2.9 million increase in selling and distribution costs to US$9.3
million, primarily driven by the higher commissions paid which are a
consequence of the increased revenue as well as increased shipping and
warehouse costs;
· A US$3.3 million increase in idle plant costs to US$6.7 million,
primarily due to the unplanned downtime at Vanchem associated with Kiln-1
during the first half of the year, unplanned downtime due to loadshedding and
higher than anticipated silica content in the ore;
· A US$21.5 million increase in impairment losses to US$24.0 million,
due to an impairment loss of US$17.2 million recognised for Vanchem given the
slower than expected ramp up, impairment loss of US$5.1 million in respect of
the Imaloto Coal Project as there are no further planned expenditures for this
project, and an impairment loss of US$1.6 million recognised for property,
plant and equipment. The Group recognised in 2019 a gain on bargain purchase
of US$60.6 million on the acquisition of Vanchem being the difference between
the fair value of the consideration paid and the fair value of the acquired
assets and liabilities; and
· Other operating income of US$2.7 million was unchanged relative the
prior year.
Cost per unit sold
The Group cost per unit sold for the year (including sustaining capital
expenditure) was US$43.7/kgV. This represents a 17 percent increase relative
to the prior year primarily as a result of the cost factors noted above,
offset by the cost containment measures we implement; higher sales volumes and
a weaker ZAR:US$ exchange rate.
Administration costs
Administration costs, excluding depreciation charges for the year were US$19.9
million. Below is a breakdown of the key items included in administration
costs:
Year ended Year ended
31-Dec-22 31-Dec-21
US$'000 US$'000
Staff costs 9,327 10,746
Professional fees 6,007 5,861
Share-based payments 315 (375)
Other (incl. IT and security expenses) 4,240 3,893
19,889 20,125
Cost-saving programme
We continued with our cost-reduction measures, as previously announced, and
realised savings of US$1.5 million owing to procurement initiatives for the
2022 financial year. We re-estimated the projected savings for 2023, in light
of inflationary pressures, lingering product shortages, wage escalations,
shipping challenges and surging commodity prices, to US$1.3 million. The total
expected savings will be US$2.8 million over the two-year period, which is
still within the US$2.5 million to US$4.0 million cost-savings target we had
previously provided, despite the negative impact of factors outside of our
control such as inflation. While production volume growth is expected to
contribute the most to reducing unit costs, we will continue to seek broader
cost- saving opportunities to improve the Group's unit cost performance even
further. These efforts are focused on procurement, payroll, administration
costs and maintenance.
Adjusted and underlying EBITDA
Adjusted EBITDA is a factor of volumes, prices and cost of production. This is
a measure of the underlying profitability of the Group, which is widely used
in the mining sector. Underlying EBITDA removes the effect of impairment
charges.
Year ended Year ended
31-Dec-22 31-Dec-21
US$'000 US$'000
Revenue 148,448 106,857
Cost of sales (108,304) (102,782)
Other operating costs and income (39,950) (12,837)
Administration costs (20,328) (20,518)
Add: Depreciation and amortisation 18,475 19,395
Adjusted EBITDA (1,659) (9,885)
Add: Impairment losses 23,965 2,439
Underlying EBITDA 22,306 (7,446)
US$'000
2021 Underlying EBITDA (7,446)
Revenue changes 41,591
Operating costs changes (20,163)
Inventory movement 8,324
2022 Underlying EBITDA 22,306
The Group delivered an adjusted EBITDA loss of US$1.7 million, an improvement
of US$8.2 million compared to 2021, primarily driven by the higher average
realised price and higher sales volumes, and partially offset by the increase
in cost of sales and other operating and administration costs. The Group
generated an underlying EBITDA of US$22.3 million, which was an improvement of
US$29.8 million compared to the previous year.
Net financing expenses
Net financing expenses were US$13.7 million, US$1.3 million higher than in the
prior year. The increase was primarily due to interest on the Orion PFA and
Orion convertible loan notes. Below is a breakdown of net financing expenses:
Year ended Year ended
31-Dec-22 31-Dec-21
US$'000 US$'000
Finance income (494) (935)
Interest on borrowings 11,189 10,687
Unwinding of discount 1,726 1,915
Interest on lease liabilities 974 459
Other finance costs 259 247
13,654 12,373
Interest on borrowings mainly reflected the finance cost on the Orion
convertible loan notes of US$6.4 million (2021: US$5.4 million), interest on
the Orion PFA of US$4.4 million (2021: US$4.3 million), and interest on the
Nedbank revolving credit facility of US$0.2 million (2021: US$0.6 million).
Refer to note 36 in the annual consolidated financial statements for details
of the change in the accounting treatment for the Orion convertible loan notes
and its impact on finance costs.
Other non-cash costs
The share of loss from investments in joint ventures of US$5.1 million (2021:
US$4.4 million) is the Group's share of the loss from its investment in
VRFB-H.
The fair value gain on the derivative liability on the Orion convertible loan
notes was US$2.9 million, a decrease from the US$9.0 million in the prior
year, as restated. The decrease was primarily driven by the decrease in the
Company's share price compared to the conversion price on the Orion
convertible loan notes of 17 pence.
3. BALANCE SHEET
Assets
Non-current assets related to intangibles and property, plant and equipment
decreased compared to the previous year due to impairment losses recognised,
depreciation, and exchange rate differences arising from a weaker ZAR:US$
exchange rate, partially offset by capital expenditures.
Investment in joint ventures of US$3.2 million represents the Group's equity
investments in VRFB-H and the Vametco mini-grid. The investment in joint
ventures decreased from 2021 owing to the recognition of the Group's share of
the losses amounting to US$5.1 million, partly offset by the US$1.2 million
investment into Vametco's mini-grid.
Inventories of US$55.0 million increased by US$13.4 million compared to the
prior year, primarily due to an increase in work in progress at Vanchem as a
result of continued loadshedding. This impacted the conversion of work in
progress to finished goods.
The decrease in cash and cash equivalents to US$10.9 million was primarily due
to capital expenditures incurred (US$18.2 million), the repayment of the
Nedbank revolving credit facility (US$5.9 million), the payment of finance
costs on the Orion PFA (US$2.9 million), partially offset by cash generated
from operations (US$21.2 million), and the proceeds received from funding
provided by the IDC to build the BELCO electrolyte plant (US$3.4 million).
Equity
The increase in the share capital and share premium was primarily due to the
conversion of the convertible loan notes issued to Primorus Investments Plc
and the shares issued to Lind Global Macro Fund, in accordance with the
backstop agreement between the Mustang convertible loan notes holders (see RNS
dated 29 March 2022). These transactions were entered into in the process of
carving out Bushveld Energy.
Liabilities
Total borrowings (excluding lease liabilities) of US$83.1 million increased by
US$3.2 million compared to the previous year, due to capitalised finance costs
of US$11.7 million and funding provided by the IDC of US$3.4 million in
respect of Belco, partially offset by the repayment of the Nedbank revolving
credit facility of US$5.9 million, repayment of finance costs on the Orion PFA
of US$2.9 million and the fair value gain on the derivative liability of
US$2.9 million. Current borrowings increased in 2022 to US$47.9 million, as
the Orion convertible loan notes is due by the end of 2023.
The net debt reconciliation below outlines the Group's total debt and cash
position:
Year ended Year ended Change
31-Dec-22 31-Dec-21 US$'000
US$'000 US$'000
Nedbank revolving credit facility - (5,821) 5,821
Orion Production Financing (PFA) Arrangement (35,146) (33,512) (1,634)
Orion convertible loan notes (39,742) (36,282) (3,460)
Industrial Development Corporation (IDC) loans (5,480) (3,282) (2,198)
Other (2,762) (1,000) (1,762)
Lease liabilities (7,283) (4,485) (2,798)
Total debt (90,413) (84,382) (6,031)
Total debt excluding PFA (55,267) (50,870) (4,397)
Cash and cash equivalents 10,874 15,433 (4,559)
Net debt (79,539) (68,949) (10,590)
Net debt excluding PFA (44,393) (35,437) (8,956)
Net debt increased by US$10.6 million compared to the prior year due to
capitalised interest of US$3.4 million on the Orion convertible loan notes,
increase in lease liabilities of US$2.8 million due to additional leases and
extension of lease terms and the decrease in the cash and cash equivalents
balance of US$4.6 million.
The Group expects to repay the Orion debt obligations from internally
generated cash flows.
4. CASH FLOW STATEMENT
The table below summarises the main components of cash flow during the year:
Year ended Year ended
31-Dec-22 31-Dec-21
US$'000 US$'000
Operating loss (20,134) (29,280)
Impairment losses 23,965 2,439
Depreciation and amortisation 18,475 19,395
Other non-cash items (6,630) -
Changes in working capital and provisions 6,154 (5,022)
Taxes received/(paid) (648) 394
Cash inflow/(outflow) from operations 21,183 (12,074)
Sustaining capital expenditures (6,589) (7,192)
Free cash flow 14,594 (19,266)
Cash used in other investing activities (13,000) (9,967)
Cash used in financing activities (5,346) (7,049
Cash outflow (3,752) (36,282)
Opening cash and cash equivalents 15,433 50,541
Foreign exchange movement (807) 1,174
Closing cash and cash equivalents 10,874 15,433
Operating activities
The Group generated cash from operating activities of US$21.2 million, an
increase of US$33.3 million from the previous year, primarily driven by the
improvement in adjusted EBITDA.
Investing activities
Cash used in investing activities (including sustaining capital expenditure)
of US$19.6 million was primarily driven by capital expenditure on property,
plant and equipment of US$18.2 million and an equity investment into the
Vametco mini-grid of US$1.2 million.
Capital Expenditure
2022 marks the end of a substantive capital investment phase, during which we
undertook extensive refurbishment and optimisation of Vametco and Vanchem and
constructed the BELCO electrolyte plant. In addition, following the
commissioning of Vanchem's Kiln-3, the Company's capital expenditure rate has
halved compared to 2021 as spend has been limited mainly to sustaining
capital, which is expected to support positive cash generation.
Capital Expenditure (US$' million)
2022 2023
Vametco
- Growth -
- Sustaining 6.5 3.7-3.9
Vanchem
- Growth 4.5 -
- Sustaining 0.1 3.2-3.4
Bushveld Energy
- Growth 7.1 2.3-2.4*
- Sustaining - -
Total 18.2 9.2-9.7
* Most of the spending will be on BELCO
Financing activities
Cash used in financing activities of US$5.3 million comprised the repayment of
the Nedbank revolving credit facility (including interest) of US$5.9 million,
repayment of finance cost on the Orion PFA of US$2.9 million and repayment of
lease liabilities of US$0.7 million, partially offset by the proceeds received
from borrowings of US$4.2 million, primarily from the IDC (US$3.4 million).
5. FINANCIAL RISK
The primary financial risks faced by the Group relate to the availability of
funds to meet business needs (liquidity risk), the risk of default by
counterparties to financial transactions (credit risk), fluctuations in
interest and foreign exchange rates, and commodity prices (market risk). These
factors are more fully outlined in the notes to the consolidated financial
statements. They are important aspects to consider when addressing the Group's
going concern status. We proactively manage the risks within our control.
There are, however, factors outside the control of management. These are
volatility in the ZAR:US$ exchange rate, as well as the vanadium price, which
we do not currently hedge, and which can have a significant impact on the cash
flows of the business. The slower than planned ramp up in production at
Vanchem has hampered our ability to introduce a hedging policy. However, we
remain committed to considering a hedging policy and assessing the potential
to implement a strategy to address the fluctuations in the ZAR:US$ exchange
rate when we attain steady state production at our operations.
6. GOING CONCERN AND OUTLOOK
We closely monitor and manage liquidity risk by ensuring that the Group has
sufficient funds for all ongoing operations. As part of the annual budgeting
and long-term planning process, the Directors reviewed the approved Group
budget and cashflow forecast through to 31 December 2024. The current cashflow
forecast has been 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.
We entered into a non-binding term sheet with Orion subsequent to year-end to
refinance the convertible loan notes. The closing of the transaction is still
subject to certain conditions, including South Africa Reserve Bank approval,
shareholders' approval at the general meeting which we urge shareholders to
support and the finalisation of definitive binding documentation. We have made
significant progress with the legal documentation of the restructuring.
We have performed an assessment of whether the Group would be able to continue
as a going concern for at least twelve months from the date of the annual
consolidated financial statement. We took into account the financial position,
expected future performance of the operations, the debt facilities and debt
service requirements, including those of the proposed refinancing of the Orion
convertible loan notes, the working capital and capital expenditure
commitments and forecasts.
Current cashflow forecast indicates that the Group requires additional
liquidity to fund its obligations and activities during the next twelve
months. We have identified and are proactively exercising levers within our
control which will improve the Group's liquidity. Importantly, we are also
actively pursuing various financing alternatives including raising capital to
increase liquidity and capital resources. We believe shareholders will support
the capital raising endeavours to ensure the growth the Company is positioned
for, can be delivered.
The Group's ability to continue as a going concern is dependent on its ability
to complete the refinance of the Orion convertible loan notes and obtain the
necessary additional funding required through a capital raise or alternative
funding sources. These conditions indicate the existence of material
uncertainties that may cast significant doubt on the Group's ability to
continue as a going concern.
The consolidated financial statements for the year ended 31 December 2022 have
been prepared on a going concern basis as, in the opinion of the Directors,
the Group will be in a position to continue to meet its operating and capital
costs requirements and pay its debts as and when they fall due for at least
twelve months from the date of this report. The going concern note included in
the accounting policies provides further information.
Tanya Chikanza
Finance Director
1. Adjusted EBITDA is EBITDA excluding the Group's share of losses from
joint ventures, fair value gain on derivative liability and other losses.
2. Underlying EBITDA is Adjusted EBITDA excluding impairment losses.
3. Other operating costs and income include other operating income,
impairment losses, selling and distribution costs, other mine operating costs
and idle plant costs.
4. Finance income less finance costs
5. Other operating costs and income include other operating income,
selling and distribution costs, other mine operating costs and idle plant
costs
6. Finance income less finance costs
Bushveld Minerals Limited (Registration number 54506) Consolidated Financial
Statements for the year ended 31 December 2022
Consolidated Statement of Profit or Loss
2022 2021
Restated* US$ '000
Notes US$ '000
Revenue 5 148,448 106,857
Cost of sales (108,304) (102,782)
Gross profit 40,144 4,075
Other operating income 2,733 2,619
Impairment losses 13, 14 (23,965) (2,439)
Selling and distribution costs (9,270) (6,406)
Other mine operating costs (2,723) (3,224)
Idle plant costs (6,725) (3,387)
Administration expenses 7 (20,328) (20,518)
Operating loss (20,134) (29,280)
Finance income 8 494 935
Finance costs* 9 (14,148) (13,308)
Other losses 10 (818) (1,902)
Fair value gain on derivative liability* 28 2,934 9,010
Share of loss from investments in joint ventures 18 (5,112) (4,351)
Loss before taxation (36,784) (38,896)
Taxation 11 1,345 4,671
Loss for the year (35,439) (34,225)
Loss attributable to:
Owners of the parent (38,968) (32,892)
Non-controlling interest 3,529 (1,333)
(35,439) (34,225)
Loss per ordinary share
Basic loss per share (cents) 12 (3.07) (2.74)
Diluted loss per share (cents) 12 (3.07) (2.74)
The accounting policies and the notes form an integral part of the
consolidated financial statements.
Refer to note 36 for details of restatement
Consolidated Statement of Comprehensive Loss
2022 2021
Restated* US$ '000
Notes US$ '000
Loss for the year (35,439) (34,225)
Consolidated other comprehensive income / (loss):
Items that will not be reclassified to profit or loss:
Losses on valuation of investments in equity instruments - (3,772)
Other fair value movements 140 14
Total items that will not be reclassified to profit or loss 140 (3,758)
Items that may be reclassified to profit or loss:
Currency translation differences (15,712) (9,713)
Other comprehensive loss for the year net of taxation (15,572) (13,471)
Total comprehensive loss (51,011) (47,696)
Total comprehensive loss attributable to:
Equity holders (53,323) (48,031)
Non-controlling interest 2,312 335
(51,011) (47,696)
The accounting policies and the notes form an integral part of the
consolidated financial statements.
Consolidated Statement of Financial Position
2022 2021 2020
Restated* US$ '000 Restated* US$ '000
Notes US$ '000
Assets
Non-current assets
Intangible assets 13 53,469 59,254 59,004
Property, plant and equipment 14 127,409 153,113 167,580
Investment properties 15 2,412 2,595 2,811
Investments in joint ventures 18 3,151 7,855 -
Restricted investment 21 2,710 - -
Total non-current assets 189,151 222,817 229,395
Current assets
Inventories 19 54,990 41,646 34,082
Trade and other receivables 20 9,498 17,642 10,425
Restricted investment 21 - 2,869 3,111
Current tax receivable - 275 814
Financial assets 17 3,075 - 22,453
Cash and cash equivalents 22 10,874 15,433 50,541
Total current assets 78,437 77,865 121,426
Total assets 267,588 300,682 350,821
Equity and liabilities
Share capital 23 17,122 16,797 15,858
Share premium 23 127,702 125,551 117,066
(Accumulated loss)/retained income* 23 (39,147) (179) 21,567
Share-based payment reserve 24 515 - 375
Foreign currency translation reserve 23 (35,346) (20,851) (9,470)
Fair value reserve 23 (1,798) (1,938) 12,966
Attributable to equity holders 69,048 119,380 158,362
Non-controlling interest 36,583 32,482 32,147
Total equity 105,631 151,862 190,509
Liabilities
Non-current liabilities
Post retirement medical liability 25 1,675 1,906 2,076
Environmental rehabilitation liabilities 26 16,610 18,031 17,998
Deferred consideration 27 1,527 1,684 1,803
Borrowings* 28 35,272 69,686 79,362
Lease liabilities 29 6,721 3,921 4,377
Deferred tax liabilities 16 1,191 6,014 11,550
Total non-current liabilities 62,996 101,242 117,166
Current liabilities
Trade and other payables 30 45,896 33,081 22,066
Provisions 31 1,714 3,722 3,297
Borrowings* 28 47,858 10,211 13,337
Lease liabilities 29 561 564 626
Deferred consideration 27 901 - 3,820
Current tax payable 2,031 - -
Total current liabilities 98,961 47,578 43,146
Total liabilities 161,957 148,820 160,312
Total equity and liabilities 267,588 300,682 350,821
The consolidated financial statements and the notes were approved by the Board
of Directors on the 20th of June 2023 and were signed on its behalf by:
Tanya Chikanza Finance Director
The accounting policies and the notes form an integral part of the
consolidated financial statements.
Refer to note 36 for details of restatement
Bushveld Minerals Limited
(Registration number 54506)
Consolidated Financial Statements for the year ended 31 December 2022
Consolidated Statement of Changes in Equity
Share capital Share premium Foreign currency translation reserve Share-based payment reserve Convertible loan note reserve Fair value reserve (Accumulated loss)/retained income Total attributable to equity holders of the Group Non- controlling interest Total equity
US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
Opening balance as previously reported 15,858 117,066 (9,470) 375 55 12,966 28,367 165,217 32,147 197,364
Adjustments
Restatement (note 36) - - - - (55) - (6,800) (6,855) - (6,855)
Restated balance at 1 January 2021* 15,858 117,066 (9,470) 375 - 12,966 21,567 158,362 32,147 190,509
Restated loss for the year* - - - - - - (32,892) (32,892) (1,333) (34,225)
Other comprehensive income, net of tax:
Currency translation differences - - (11,381) - - - - (11,381) 1,668 (9,713)
Other fair value movements - - - - - (3,758) - (3,758) - (3,758)
Total comprehensive loss for the year - - (11,381) - - (3,758) (32,892) (48,031) 335 (47,696)
Transaction with owners:
Issue of shares 939 8,485 - - - - - 9,424 - 9,424
Share-based payment - - - (375) - - - (375) - (375)
Transfer between reserves - - - - - (11,146) 11,146 - - -
Balance at 1 January 2022 16,797 125,551 (20,851) - - (1,938) (179) 119,380 32,482 151,862
Loss for the year - - - - - - (38,968) (38,968) 3,529 (35,439)
Other comprehensive income, net of tax:
Currency translation differences - - (14,495) - - - - (14,495) (1,217) (15,712)
Other fair value movements - - - - - 140 - 140 - 140
Total comprehensive loss for the year - - (14,495) - - 140 (38,968) (53,323) 2,312 (51,011)
Transaction with owners:
Issue of shares 325 2,151 - - - - - 2,476 - 2,476
Share-based payment - - - 515 - - - 515 - 515
Contribution from non-controlling interest (note - - - - - - - - 1,789 1,789
28)
Balance at 31 December 2022 17,122 127,702 (35,346) 515 - (1,798) (39,147) 69,048 36,583 105,631
*Refer to note 36 for details of restatement
Consolidated Statement of Cash Flows
2022 2021
Restated* US$ '000
Note US$ '000
Cash flows from operating activities
Loss before taxation (36,784) (38,896)
Adjustments for:
Depreciation property, plant and equipment (including right-of-use assets) 14 18,475 19,395
Share of loss from joint ventures 18 5,112 4,351
Remeasurement of financial liabilities 28 - 1,902
Fair value gain on derivative liability* 28 (2,934) (9,010)
Finance income 8 (494) (935)
Finance costs* 9 14,148 13,308
Impairment losses 13, 14 23,965 2,439
Other non-cash movements 1,138 -
Foreign exchange differences (6,949) -
Changes in working capital 6,154 (5,022)
Income taxes (paid)/received (648) 394
Net cash generated from / (used in) operating activities 21,183 (12,074)
Cash flows from investing activities
Finance income 336 935
Purchase of property, plant and equipment (18,197) (19,450)
Payment of deferred consideration 27 - (3,874)
Purchase of investments 18 (1,211) (9,988)
Purchase of exploration and evaluation assets 13 (517) (929)
Disposal of financial assets held at fair value - 16,147
Net cash used in investing activities (19,589) (17,159)
Cash flows from financing activities
Finance costs 28 (3,217) (2,948)
Repayment of borrowings 28 (5,623) (4,732)
Proceeds from borrowings 28 4,222 1,336
Lease payments 29 (728) (705)
Net cash used in financing activities (5,346) (7,049)
Total cash and cash equivalents movement for the year (3,752) (36,282)
Cash and cash equivalents at the beginning of the year 15,433 50,541
Effect of translation of foreign exchange rates (807) 1,174
Total cash and cash equivalents at end of the year 22 10,874 15,433
The accounting policies and the notes form an integral part of the
consolidated financial statements.
*Refer to note 36 for details of restatement
Notes to the Consolidated Financial Statements
1. General information and principal activities
Bushveld Minerals Limited ("Bushveld" or the "Company") and its subsidiaries
and interest in equity accounted investments (together the "Group") are an
integrated primary vanadium producer and energy storage solutions provider.
The Company 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.
As at 31 December 2022, the Bushveld Group comprised of:
Equity holding Country of incorporation
Company Note and voting rights 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 Processing company
Pamish Investments No 39 (Pty) Limited 2 64% South Africa Mining right holder
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% Mauritius Holding company
Bushveld Energy Company (Pty) Limited 4 100% South Africa Energy development
Bushveld Vametco Hybrid Mini-Grid Company (RF) 12 40% 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 Sales of vanadium
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% Madagascar Power generation company
Lemur Investments Limited 3 100% Mauritius Holding company
Lemur SA (Pty) Ltd 3 100% South Africa Coal exploration
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:
Amendments to IFRS 1 First time adoption of International Financial Reporting The amendments simplified the application of IFRS 1 by a subsidiary that
Standards ("IFRS"): Subsidiary as a first-time adopter 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.
Amendments to IFRS 9 Financial Instruments: Fees in the '10 per cent' test for The amendments clarify what is included in the fees paid and fees received.
derecognition of financial liabilities
Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets: The amendments address costs a company should include as the cost of
Cost of fulfilling a contract fulfilling a contract when assessing whether a contract is onerous.
Amendments to IAS 16 Property, Plant and Equipment: Proceeds before intended The amendments prohibit deducting from the cost of an item of property, plant
use 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.
Amendments to IFRS 3 Business Combinations: Reference to the conceptual The amendments update an outdated reference in IFRS 3 without significantly
framework changing its requirements
The adoption of these Standards and Interpretations, which become effective
for annual periods beginning on or after 1 January 2022, had no material
impact on the consolidated 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:
Amendments to IAS 12 Income Taxes: Deferred tax related to assets and The amendments provide recognition exemption and no longer applies to
liabilities arising from a single transaction transactions that, on initial recognition, give rise to equal taxable and
deductible temporary differences.
Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and The amendments include the definition of accounting estimates to help entities
Errors: Definition of accounting estimates to distinguish between accounting policies and accounting estimates.
Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice The amendments intend to help preparers in deciding which accounting policies
Statement 2: to disclose in their financial statements.
Amendments to IAS 1 Presentation of Financial Statements: Classification of
liabilities as current or non- current and non-current liabilities with
covenants The amendments may change the classification of certain liabilities as current
or non-current, for example convertible debt. Entities may need to provide new
disclosures for liabilities subject to covenants.
IFRS 16 Leases: Lease liability in a sale and leaseback The amendments specify how a seller-lessee should apply the subsequent
measurement requirements in IFRS 16 to the lease liability that arises in the
sale and leaseback transaction.
The Directors anticipate that the adoption of these Standards and
Interpretations, which become effective for annual periods beginning on or
after 1 January 2023, in future periods will have no material impact on the
consolidated financial statements of the Group, except for the adoption of
Amendments to IAS 1 Presentation of Financial Statements: Classification of
liabilities as current or non-current and non-current liabilities with
covenants.
3. Significant accounting policies
The principal accounting policies applied in the preparation of the
consolidated financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.
Basis of preparation
The consolidated financial statements of the Company and its subsidiaries and
interest in equity accounted investments as at and for the year ended 31
December 2022 have been prepared in accordance with the UK-adopted
International Accounting Standards.
The consolidated financial statements have been prepared under the historical
cost basis, except for certain financial instruments and investment properties
measured at fair value. Historical cost is generally based on the fair value
of the consideration given in exchange for the assets.
Going concern
The consolidated financial statements have been prepared on the going concern
basis, which contemplates continuity of normal business activities and the
realisation of assets and discharge of liabilities in the normal course of
business.
The Group recorded a net loss after tax of US$35.44 million for the year ended
31 December 2022 (31 December 2021: US$34.22 million) and as at 31 December
2022 had cash and cash equivalents of US$10.87 million (31 December 2021:
US$15.43 million) as well as total borrowings of US$83.13 million, of which
US$47.85 million is due within 12 months most of which comprised of the Orion
convertible loan notes (31 December 2021: total borrowing of US$79.90
million). In recent years, the Group has been loss making due to a combination
of weaker vanadium prices and losses incurred whilst the refurbishment work at
Vanchem was completed. The refurbished Kiln-3 was commissioned in June 2022,
later than initially planned. However, due to unreliable municipal power
supply and higher silica content in the ore supply, the production ramp up was
slower than expected and had not reached its targeted run rate at the end of
2022.
The Orion convertible loan notes are due to mature in November 2023 and given
that the current share price is lower than the conversion price, the
convertible loan notes will likely require repayment or refinancing (see note
28). The Company entered into a non-binding term sheet with Orion subsequent
to year-end to refinance the convertible loan notes (see note 37). The closing
of the transaction is still subject to certain conditions, including South
Africa Reserve Bank approval, shareholders' approval at the general meeting
which the Directors urge shareholders to support and the finalisation of
definitive binding documentation.
The Directors closely monitor and manage the liquidity risk of the Group by
ensuring that the Group has sufficient funds for all ongoing operations. As
part of the annual budgeting and long-term planning process, the Directors
reviewed the approved Group budget and cashflow forecast through to 31
December 2024. The current cashflow forecast has been 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.
The Directors have performed an assessment of whether the Group would be able
to continue as a going concern for at least twelve months from the date of
this report. In their assessment, the Group has taken into account its
financial position, expected future performance of its operations, its debt
facilities and debt service requirements, including those of the proposed
refinancing of the Orion convertible loan notes, its working capital and
capital expenditure commitments and forecasts.
The cashflow forecast assumes that Vametco continues to perform in line with
historical levels, 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.
The cashflow forecast for Vanchem takes into consideration the production
levels achieved to date, the expected improvements from the arrangement
concluded with the municipality to stabilise power supply as well as the
arrangement concluded with a third party for the supply of low-silica
high-grade ore. This forecast assumes an annual planned maintenance shutdown
and these shutdowns proceed in line with the planned timetable and no
unplanned shutdowns are experienced during the going concern period.
With regards to pricing, the short to medium term assumptions are that the
average price achieved by the Group will be US$36.2 through to 31 December
2023 and average at US$35.5 throughout 2024. The year to date average price
achieved by the group was US$37.99.
Current cashflow forecast indicates that the Group requires additional
liquidity to fund its obligations and activities during the next twelve
months. The Group is actively pursuing various financing alternatives to
increase its liquidity and capital resources including raising capital,
refinancing of debt facilities, securing additional working capital
facilities, as well as disposing of assets and/or an interest therein and/or
joint-venture partnerships. The Directors believe shareholders will support
the capital raising endeavours to ensure the growth the Group is positioned
for, can be delivered.
The Group's ability to continue as a going concern is dependent on its ability
to complete the refinance of the Orion convertible loan note, and obtain the
necessary additional funding required through a capital raise or alternative
funding sources. Although the Group has been successful in the past in
obtaining additional liquidity, there is no assurance that it will be able to
do so in the future or that such arrangements will be on terms advantageous to
the Group.
These conditions indicate the existence of material uncertainties that may
cast significant doubt on the Group's ability to continue as a going concern.
The consolidated financial statements for the year ended 31 December 2022 have
been prepared on a going concern basis as, in the opinion of the Directors,
the Group will be in a position to continue to meet its operating and capital
costs requirements and pay its debts as and when they fall due for at least
twelve months from the date of this report. Accordingly, these consolidated
financial statements do not include adjustments to the recoverability and
classification of recorded assets and liabilities and related expenses that
might be necessary should the Group be unable to continue as a going concern.
Basis of consolidation
The consolidated financial statements present the consolidated statement of
financial position and changes therein, consolidated statement of profit or
loss, consolidated statement of comprehensive loss and consolidated statement
of cash flows for the Group. Where necessary, adjustments are made to the
results of subsidiaries and equity accounted investments 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. Where the Group's interest in a subsidiary is less than 100 percent,
the Group recognises a non-controlling interest.
Disposal of subsidiaries
When the Group ceases to have control, any retained interest in the entity is
remeasured 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.
Business combinations
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 remeasured to fair value at the acquisition date; any gains or
losses arising from such remeasurement 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 remeasured and its
subsequent settlement is accounted for within equity.
Segment reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision maker ("CODM"). The CODM,
who is responsible for allocating resources and assessing performance of the
operating segments, has been identified as the Chief Executive Officer and the
Executive Committee. Operating segments whose revenues, net earnings or losses
or assets exceed 10 percent of the total consolidated revenues, net earnings
or losses or assets, are reportable segments.
In order to determine the reportable operating segments, various factors are
considered, including geographical location and managerial structure.
Functional and presentational currency
The functional currency of each entity in the Group is determined as the
currency of the primary economic environment in which it operates. For the
purpose of the consolidated financial statements, the results and financial
position of each entity within the Group are expressed in US Dollars, which is
the presentation currency for the consolidated financial statements.
Transactions denominated in foreign currencies are translated into the
entity's functional currency as follows:
· Monetary assets and liabilities are translated at the exchange
rate in effect at the balance sheet date;
· Non-monetary assets and liabilities are translated at historical
exchange rates prevailing at each transaction date;
· Deferred tax assets and liabilities are translated at the
exchange rate in effect at the balance sheet date with translation gains and
losses recorded in income tax expense; and
· Revenues and expenses are translated at the average exchange
rates throughout the reporting period, except depreciation, which is
translated at the rates of exchange applicable to the related assets, and
share-based compensation expense, which is translated at the rates of exchange
applicable at the date of grant of the share- based compensation.
Exchange gains or losses on translation of transactions are included in the
consolidated statement of profit or loss.
The results and financial position of all entities within the Group that have
a functional currency different from the presentation currency are translated
into the presentation currency as follows:
· assets and liabilities for each statement of financial position
presented are translated at the closing rate;
· 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
· all resulting exchange differences are recognised in other
comprehensive income and accumulated in foreign currency translation reserve.
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.
On disposal of a foreign operation, the cumulative exchange differences
recognised in the foreign currency translation reserve relating to that entity
up to the date of disposal are transferred to the consolidated statement of
profit or loss as part of the profit or loss on disposal.
Revenue recognition - sale of goods
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 or services to the customer. 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
transferring control 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 ("STI") 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.
The fair value of the performance shares issued under the long-term incentive
scheme ("LTI") is recognised as an expense over the vesting period.
Non-vesting conditions and market vesting conditions are factored into the
fair value of the performance shares granted. An option pricing model is used
to measure the fair value of the performance shares.
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.
Current and deferred income tax
The tax expense represents the sum of the tax currently payable and deferred
income tax.
The current income tax charge is calculated based on the tax laws enacted or
substantively enacted at the reporting date in the countries where the Group's
subsidiaries operate and generate taxable income.
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 as an
impairment loss in the consolidated statement of 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 of disposal
and value in use) if that is less than the asset's carrying value. Impairment
losses are recognised in the consolidated statement of 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 and accumulated impairment losses, except for investment
properties which are carried at fair value. Cost comprises the aggregate
amount paid and the fair value of any other consideration given to acquire the
asset and includes costs directly attributable to making the asset capable of
operating as intended.
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. The
depreciation method applied, the estimated useful lives of assets and their
residual values are 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
consolidated 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 items of property, plant
and equipment are as follows:
• Buildings and other improvements 20-25 years
• Plant and machinery 5-20 years
• Motor vehicles, furniture and equipment 3-10 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 derecognition of the asset (calculated as the difference between
the net disposal proceeds and the carrying amount of the asset) is included in
the consolidated statement of profit or loss 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 ("CGU") 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 are sourced from the 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.
Investment property
Investment property is initially measured at cost and subsequently at fair
value with any change therein recognised in the consolidated statement of
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 the consolidated statement of
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.
Provision is made, if necessary, for slow-moving, obsolete and defective
inventory.
Financial assets and liabilities
Financial assets and financial liabilities are recognised in the Group's
consolidated 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 ("FVTPL"), transaction costs. Transaction costs of financial assets
carried at FVTPL are expensed in the consolidated statement of profit or loss.
Financial assets are classified at initial recognition and subsequently
measured at amortised cost, fair value though other comprehensive income
("FVOCI") or FVTPL.
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 FVTPL. A gain or loss on a debt investment that is subsequently
measured at FVTPL is recognised in the consolidated statement of profit or
loss and presented net within other income/(expenses) 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 FVTPL are recognised in other
income/(expenses) in the consolidated 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.
Trade and other receivables
Trade receivables are recognised initially at the amount of consideration that
is unconditional unless they contain significant financing components, then
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 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 33.6 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 an investment in an insurance 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.
Financial liabilities
Accounts payable, accrued liabilities and borrowings are accounted for at
amortised cost, using the effective interest rate method.
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.
Borrowings
Borrowings are initially recognised at fair value, net of transaction costs
incurred. Borrowings are subsequently measured at amortised cost. Any
difference between the proceeds (net of transaction costs) and the redemption
amount is recognised in profit or loss over the period of the borrowings using
the effective interest method. Fees paid on the establishment of loan
facilities are recognised as transaction costs of the loan to the extent that
it is probable that some or all of the facility will be drawn down.
Borrowings are removed from the balance sheet when the obligation specified in
the contract is discharged, cancelled or expired. The difference between the
carrying amount of a financial liability that has been extinguished or
transferred to another party and the consideration paid, including any
non-cash assets transferred or liabilities assumed, is recognised in profit or
loss as other income or finance costs.
Borrowings are classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at least 12
months after the reporting period.
Borrowing costs are capitalized and allocated specifically to qualifying
assets when funds have been borrowed, either to specifically finance a project
or for general borrowings during the period of construction. Qualifying assets
are defined as assets that require more than a year to be brought to the
location and condition intended by management. Capitalization of borrowing
costs ceases when such assets are ready for their intended use.
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 percent to 11 percent 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 consolidated
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
consolidated statement of profit or loss, 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 liabilities
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 consolidated statement of
profit or loss 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 consolidated statement of profit or loss 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
The preparation of consolidated financial statements in conformity with
UK-adopted International Accouting Standards requires management to make
judgements, estimates and assumptions that affect the reported amounts of
assets, liabilities and contingent liabilities at the date of the consolidated
financial statements and reported amounts of revenues and expenses during the
reporting period. Estimates and assumptions are continuously evaluated and are
based on management's experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances.
Assumptions about the future and other major sources of estimation uncertainty
at the end of the reporting period have a significant risk of resulting in a
material adjustment to the carrying amounts of assets and liabilities, within
the next financial year. The most significant judgements and sources of
estimation uncertainty that the Group believes could have a significant impact
on the amounts recognised in its consolidated financial statements are
described below.
i. Impairment of non-current assets
Judgements made in relation to accounting policies
Both internal and external sources of information are required to be
considered when determining the presence of an impairment indicator or an
indicator of reversal of a previous impairment. Judgement is required around
significant adverse changes in the business climate which may be indicators of
impairment such as a significant decline in the asset's market value, decline
in resources and/or reserves including as a result of geological reassessment
or change in timing of extraction of resources and/or reserves which would
result in a change in the discounted cash flow, and lower commodity prices or
higher input cost prices than would have been expected since the most recent
valuation. Judgement is also required when considering whether significant
positive changes in any of these items indicate a previous impairment may have
reversed.
Key sources of estimation uncertainty
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 commodity prices, discount rates, foreign currency
exchange rates, estimates of costs to produce products and future capital
expenditure. Refer to Note 14 for key assumptions.
ii. Impairment of exploration and evaluation assets
Judgements made in relation to accounting policies
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.
As disclosed in note 13, the Mokopane license held by the Group requires that
mining operations commence prior to the end of January 2021. As at 31 December
2022 no mining has taken place at the site. Based on the conditions included
in the mining right, the Group has the right to apply for an extension to the
requirements to commence mining activities and an application has been
submitted to the Department of Mineral Resources and Energy ("DMRE"), however
a response has not yet been received.
Based on the mining right conditions, including that the Minister has to give
written notice regarding a potential suspension or cancellation of the mining
right and that the Group has the opportunity to provide reasons to the
Minister on why this should not occur and the remedies put in place, 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 with a carrying amount of
US$53.47 million is required.
iii. Environmental rehabilitation liabilities
Key sources of estimation uncertainty
Estimating the future costs of environmental and rehabilitation obligations is
complex and requires management to make estimates and judgements as most of
the obligations will be fulfilled in the future and contracts and laws are
often not clear regarding what is required. The resulting provisions are
further influenced by changing technologies, political, environmental, safety,
business and statutory considerations. Refer to note 26.
iv. Valuation of derivative liability
Key sources of estimation uncertainty
The conversion option (embedded derivative liability) in connection with the
Orion Mine Finance convertible loan note are carried at fair value. The Group
engaged an independent valuation specialist which calculated the fair value of
the conversion option using a Monte-Carlo simulation. The Monte-Carlo
simulation captured the impact of movements in the US$/GBP exchange rate and
the price per ordinary share over the life of the convertible loan note.
4. Segmental reporting
Bushveld Minerals Limited's operating segments are identified by the Chief
Executive Officer and the Executive Committee, collectively named as the CODM.
The operating segments are identified by the way the Group's operations are
organised. As at 31 December 2022, the Group operated within three operating
segments, vanadium mining and production, which consists of the Vametco and
Vanchem operations; energy and mineral exploration activities for vanadium and
coal exploration (together "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). Corporate includes the remaining balances within the Group.
Segment revenue and results
The following is an analysis of the Group's revenue and results by reportable
segment.
Consolidated statement of profit or loss
Revenues Cost of Other costs(2) Administrative expenses(3) Impairment Operating
losses loss
sales(1)
31 December 2022 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
Vanadium mining and production 148,446 (108,304) (16,525) (8,435) (18,454) (3,272)
Exploration - - - (21) (5,137) (5,158)
Energy 2 - 171 (952) (374) (1,153)
Corporate - - 369 (10,920) - (10,551)
Total 148,448 (108,304) (15,985) (20,328) (23,965) (20,134)
(1)Include depreciation of US$18.04 million.
(2)Other costs include other operating income, other mine operating costs,
selling and distribution costs and idle plant costs.
(3)Include depreciation of US$0.15 million for Vanadium mining and production,
US$0.10 million for Energy and USD$0.18 million for Corporate.
Consolidated statement of profit or loss
Revenues Costs of sales(1) Other costs(2) Administrative expenses(3) Impairment losses Operating loss
31 December 2021 US$ '000 US$ '000 US$ '000 US$ '000 US$' 000 US$' 000
Vanadium and mining production 106,857 (102,782) (10,695) (7,171) (1,694) (15,485)
Exploration - - - 26 (340) (314)
Energy - - - (808) (405) (1,213)
Corporate - - 297 (12,565) - (12,268)
Total 106,857 (102,782) (10,398) (20,518) (2,439) (29,280)
(1)Include depreciation of US$19.00 million.
(2)Other costs include other operating income, other mine operating costs,
selling and distribution costs and idle plant costs.
(3)Include depreciation of US$0.13 million for Vanadium mining and production
and US$0.26 for Corporate.
Other segmental information
31 December 2022 31 December 2021
Total assets US$ '000 Total Total Total liabilities US$ '000
liabilities assets
US$ '000 US$ '000
Vanadium mining and production 186,460 104,351 221,704 70,927
Exploration 53,679 38 59,340 54
Energy 17,432 10,836 8,448 5,839)
Corporate 10,017 46,732 11,190 72,000
Total 267,588 161,957 300,682 148,820
2022 2021
US$ '000 US$ '000
5. Revenue
Revenue from contracts with customers
Sale of goods 148,446 106,857
Other 2 -
148,448 106,857
Disaggregation of revenue from contracts with customers
The Group disaggregates revenue from customers as follows:
Sale of goods
Local sales of vanadium - NV12 5,503 5,090
Local sales of vanadium - NV16 2,650 1,606
Local sales of vanadium - MVO 4 (140)*
Export sales of vanadium - NV12 34,939 21,721
Export sales of vanadium - NV16 99,672 71,713
Export sales of vanadium - AMV 5,678 6,867
148,446 106,857
Other 2 -
148,448 106,857
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
Production staff 25,799 24,613
Administrative staff 7,259 8,601
Key management personnel 2,068 2,145
35,126 35,359
Details of directors' remuneration are included in note 35 (related party
transactions) and the Remuneration Report on page 58.
7. Administrative expenses by nature
Key management personnel 2,068 2,145
Staff costs 7,259 8,601
Depreciation of property, plant and equipment 439 393
Professional fees 6,007 5,861
Share-based payments 315 (375)
Other 4,240 3,893
20,328 20,518
8. Finance income
Bank interest 206 827
Interest on restricted investment 127 106
Other finance income 161 2
494 935
9. Finance costs*
Interest on borrowings 28 11,189 10,687
Unwinding of discount 26 1,726 1,915
Interest on lease liabilities 29 974 459
Other finance costs 259 247
14,148 13,308
*Refer to note 36 for details of restatement
10. Other losses
Movement in earnout estimate 27 693 -
Loss on financial instrument Remeasurement of financial liabilities 125 - 1,902
28 -
818 1,902
11. Taxation
Current income taxes
Current income tax on profits for the year 3,294 370
Current income tax recognised for prior years - (13)
3,294 357
Deferred income taxes
Deferred income tax movement for current year (4,659) (5,111)
Prior year adjustment 20 83
(4,639) (5,028)
Income tax recovery (1,345) (4,671)
The income tax expense represents the sum of the tax currently payable and the
deferred tax adjustment for the year.
Loss before tax (36,784) (38,896)
Tax at the applicable tax rate of 28% (2021: 28%) (10,300) (10,891)
Tax effect on non-deductible items 1,423 606
Origination and reversal of temporary differences (2,045) 1,477
Deferred tax asset (recognised)/not recognised 7,916 8,841
Recognised deferred tax assets - initial recognition (17) (5,028)
Tax rate change (210) -
Foreign jurisdictions subject to a different tax rate 1,888 324
Taxation recovery for the year (1,345) (4,671)
12. Loss per share Basic loss per share*
Basic loss per share is calculated by dividing the net loss attributable to
equity holders of the Company by the weighted average number of ordinary
shares in issue during the year excluding ordinary shares purchased by the
Company and held as treasury shares.
Numerator
Net loss attributable to equity holders (38,968) (32,892)
Denominator (in thousands)
Weighted average number of common shares 1,270,637 1,201,683
Basic loss per share attributable to equity holders (cents) (3.07) (2.74)
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.
13. Intangible assets
Vanadium
and Iron Ore Coal Total
US$ '000 US$ '000 US$ '000
Balance, 1 January 2021 54,950 4,054 59,004
Capitalised expenditures 163 766 929
Impairment loss (541) - (541)
Exchange differences (716) 578 (138)
Balance, 31 December 2021 53,856 5,398 59,254
Capitalised expenditures 174 343 517
Impairment loss - (5,137) (5,137)
Exchange differences (561) (604) (1,165)
Balance, 31 December 2022 53,469 - 53,469
Mokopane Vanadium and Iron Ore Project
The Group has a 64 per cent interest in Pamish Investment No 39 Proprietary
Limited ("Pamish") which holds an interest in Prospecting right 95.
The Department of Mineral Resources and Energy ("DMRE") executed a 30-year
mining right on 29 January 2020 in favour of Pamish, over five farms:
Vogelstruisfontein 765 LR; Vriesland 781 LR; Vliegekraal 783 LR; Schoonoord
786 LR; and Bellevue 808 LR (the "Mining Right") situated in the District of
Mogalakwena, Limpopo, which make up the Mokopane Project. 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.
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 to commence
mining activities has been submitted and Pamish is waiting on a response.
Engagement has begun with communities to reach agreement for access to the
project areas and secure a land use arrangement.
*Refer to note 36 for details of restatement
Brits Vanadium Project
The Group 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 Group has also applied for Section 102 of the
MPRDA and waiting for approval to incorporate NW 30/5/1/1/2/11069 PR into NW
30/5/1/1/2/11124 PR.
The Group 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
per cent 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. The Imaloto Coal Project was
impaired during the year as no further expenditures were budgeted.
Notes to the Consolidated Financial Statements
14. Property, plant and equipment
Buildings and Plant and Motor Right of use Waste Assets under Total
other improvements machinery* vehicles, furniture and equipment US$ '000 asset stripping construction
asset
US$ '000 US$ '000
US$ '000 US$ '000 US$ '000 US$ '000
Cost
At 1 January 2021 7,559 180,623 1,466 5,504 3,764 7,117 206,033
Additions - 240 25 - - 19,450 19,715
Disposals - (3,912) (55) - (3,723) - (7,690)
Impairment of obsolete assets - (475) - - - - (475)
Transfers within PPE - 5,374 57 - - (5,431) -
Changes in environmental rehabilitation liabilities - (199) - - - - (199)
Exchange differences (602) (12,167) (119) (438) (41) (1,989) (15,356)
At 31 December 2021 6,957 169,484 1,374 5,066 - 19,147 202,028
Additions - 691 138 2,989 1,850 15,988 21,656
Changes in environmental rehabilitation liabilities - (1,705) - - - - (1,705)
Transfers within PPE 63 19,376 34 - - (19,473) -
Exchange differences (445) (9,298) (92) (435) (68) (1,097) (11,435)
At 31 December 2022 6,575 178,548 1,454 7,620 1,782 14,564 210,543
Accumulated depreciation
At 1 January 2021 (1,032) (31,828) (615) (1,214) (3,764) - (38,453)
Depreciation charge for the year (355) (18,146) (277) (618) - - (19,396)
Disposals - 2,239 53 - 3,723 - 6,015
Exchange differences 107 2,417 80 272 41 - 2,917
At 31 December 2021 (1,280) (45,318) (759) (1,560) - - (48,917)
Depreciation charge for the year (330) (17,233) (219) (297) (396) - (18,475)
Impairment (898) (17,920) (10) - - - (18,828)
Exchange differences 122 2,776 56 117 14 - 3,085
At 31 December 2022 (2,386) (77,695) (930) (1,741) (382) - (83,134)
Net Book Value
At 31 December 2021 5,677 124,168 617 3,505 - 19,146 153,113
At 31 December 2022 5,038 100,008 523 5,873 1,401 14,566 127,409
*Include decommissioning assets.
The right of use asset of US$5.87 million relates to land and buildings of
US$5.77 million and plant and machinery of US$0.1 million.
Impairment disclosure
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 exist, the recoverable
amount of the asset is estimated in order to determine the extent of the
impairment loss (if any).
Vanchem Cash generating unit (CGU)
The newly refurbished Kiln-3 at Vanchem was commissioned in June 2022 however
due to various issues including loadshedding and ore feed supply, the
production ramp up was slower than expected and had not reached its targeted
run rate by the end of 2022. The lower than expected performance was
considered by the Group to be an indicator of impairment for the Vanchem CGU,
which consists of Bushveld Vanchem (Pty) Limited and Ivanti Resources (Pty)
Limited. The Vanchem CGU forms part of the vanadium mining and production
reportable segment.
The recoverable amount of the CGU was determined by calculating the fair value
less cost of disposal ("FVLCD"). The FVLCD was determined by calculating the
net present value of the estimated future cash flows. The determination of
FVLCD is considered to be Level 3 fair value measurement as the FVLCD is
derived from valuation techniques that include inputs that are not based on
observable market data. The Group considered the inputs and the valuation
approach to be consistent with the approach taken by market participants.
Estimates of quantities of recoverable minerals, production levels, operating
costs and capital requirements are sourced from the planning process,
including the LOM plans, two-year budgets and CGU-specific studies.
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 model was 1,500 mtVpa for 2023, 2,300 mtVpa
for 2024 and increasing to 2,500 mtVpa thereafter. 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; and the selling price of the commodities extracted. The cash
flows are computed using appropriate individual economic models and key
assumptions established by management. 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.
Estimated long-term FeV price for the current year and the comparative year
that have been used to estimate future revenues, are as follows:
2022
Long term (2028+)
Assumptions 2023 2024 2025 2026 2027
Fev US$ per KgV 36.10 36.05 36.00 37.00 38.00 40.00
2021
Assumptions 2022 2023 Long term (2024+)
Fev US$ per KgV 41.35 35.15 40.00
Discount rates: In calculating the FVLCD, a real post-tax discount rate of
9.70 percent (2021: 7.70 percent) 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. Segment-specific
risk is incorporated by applying individual beta factors. The beta factors are
evaluated annually based on publicly available market data. The WACC also
includes an appropriate small capital premium.
Exchange rates:Foreign exchange rates are estimated with reference to external
market forecasts. 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 15.75 (2021:15.00).
The impairment test determined that the recoverable amount of US$66.32
million, representing the CGU's FVLCD, was below the carrying amount. This
resulted in an impairment charge of US$17.27 million being recognised in the
consolidated statement of profit and loss within impairment losses and in the
consolidated statement of financial position as a reduction to property, plant
and equipment.
Any change in the key assumptions above may result in a further impairment
write down or partial reversal of the recognised impairment charge.
Other
The Group also recognised an impairment charge of US$1.56 million in the
consolidated statement of profit or loss related to items of property, plant
and equipment that were identified as being no longer in use.
15. Investment properties
2022 2021
US$ '000 US$ '000
Balance, beginning of the year 2,595 2,811
Fair value movement (17) (216)
Exchange differences (166) -
Balance, end of the year 2,412 2,595
Investment properties comprise residential housing in Brits and Elandsrand,
North West Province.
Investment properties are stated at fair value (level 3 of the fair value
hierachy), which has been determined based on valuations performed by Domus
Estate Management, an accredited independent valuer, as at 31 December 2022.
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.
16. Deferred tax liabilities
Deferred tax liability
Investment properties (517) (577)
Property, plant and equipment (17,925) (25,722)
Prepayments (15) (24)
Expected credit losses (18) -
Total deferred tax liability (18,475) (26,323)
Deferred tax asset
Provisions (642) 711
Environmental rehabilitation liabilities 4,549 5,049
Lease liabilities 1,521 195
Non-deductible expenses 1,029 -
Post-retirement medical liability 460 534
Deferred tax balance from temporary differences other than unused tax losses 6,917 6,489
Unused tax losses 10,367 13,820
Total deferred tax asset 17,284 20,309
Deferred tax liability (18,475) (26,323)
Deferred tax assets 17,284 20,309
Total net deferred tax liability (1,191) (6,014)
The evidence supporting recognition of a deferred tax asset is forecasts for
the component to which the losses relate which indicate with reasonable
certainty the availability of sufficient future taxable profits and the
existence of corresponding deferred tax liabilities against which the losses
can be utilised.
Beginning balance Statement of profit or loss Other comprehensive income Exchange differences Ending balance
2022 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
Deferred tax liability
Investment properties (577) 24 - 36 (517)
Property, plant and equipment (25,722) 6,374 - 1,423 (17,925)
Prepayments (24) 8 - 1 (15)
Expected credit losses - (19) - 1 (18)
Deferred tax asset
Provisions 711 (1,358) - 5 (642)
Non-deductible expenses - 1,068 - (39) 1,029
Environmental rehabilitation liabilities 5,049 (181) - (318) 4,550
Lease liabilities 195 1,389 - (63) 1,521
Post-retirement medical liability 534 - (34) (41) 459
Unused tax losses 13,820 (2,666) - (787) 10,367
(6,014) 4,639 (34) 218 (1,191)
Other
Beginning Statement of Comprehensive Exchange Ending
balance Profit or loss Income differences balance
2021 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
Deferred tax liability
Investment properties (625) (2) - 50 (577)
Property, plant and equipment (29,268) 1,306 - 2,240 (25,722)
Prepayments (144) 117 - 3 (24)
Deferred tax asset
Provisions 856 (82) - (63) 711
Inventories 356 (352) - (4) -
Environmental rehabilitation liabilities 5,040 441 - (432) 5,049
Lease liabilities 219 (7) - (17) 195
Post-retirement medical liability 581 - (1) (46) 534
Unused tax losses 11,435 3,607 - (1,222) 13,820
(11,550) 5,028 (1) 509 (6,014)
17. Financial assets
2022 2021
US$ '000 US$ '000
Balance, beginning of the year - 22,453
Additions 2,923 9,988
Disposals(1) - (16,147)
Fair value movement - (3,771)
Finance income 159 - (12,292)
Transfer to investments in joint ventures(2) -
Exchange differences (7) (231)
Balance, end of the year 3,075 -
(1)The Group disposed of its investment in AfriTin during 2021.
(2)The Group's investment in VRFB Holdings Limited ("VRFB") became an
investment in joint venture in April 2021. Refer to note 18.
The Group subscribed for two convertible loan notes issued by Mustang Energy
Plc ("Mustang") with a principle amount of US$2.93 million bearing 10 percent
interest per annum in exchange for a convertible loan note issued to Primorius
and share capital issued to Lind Partners. See note 23 and 28.
2022 2021
US$ '000 US$ '000
18. Investments in joint ventures
VRFB US$ '000 Mini-Grid US$ '000 Total US$' 000
Balance, 1 January 2021 - - -
Transfer from financial assets 12,292 - 12,292
Share of loss (4,351) - (4,351)
Exchange differences (86) - (86)
Balance, 31 December 2021 7,855 - 7,855
Acquisition of investment in joint ventures - 1,211 1,211
Share of loss (5,112) - (5,112)
Exchange differences (751) (52) (803)
Balance, 31 December 2022 1,992 1,159 3,151
VRFB Holdings Limited ("VRFB")
The Group acquired a 50.5 percent interest in VRFB in April 2021, which is the
holding company for the Group's investment in Enerox GmbH ("Cellcube"). The
investment in VRFB is in line with the Group's strategy of partnering with
Vanadium Redox Flow Battery ("VRFB") companies. The Group accounts for its
50.5 percent shareholding in VRFB as an investment in joint venture as it does
not meet the requirements of control.
Summarised financial information in respect of VRFB is set out below:
Revenue 11,183 1,008
Net loss (20,389) (8,484)
Other comprehensive income 275 (1,941)
Comprehensive loss (8,931) (9,417)
The Group entered into a conditional agreement on 25 November 2022 to sell its
entire 50.5 percent interest in VRFB to Mustang. The transaction remains
subject to the fulfilment of a number of conditions precedent, including
Mustang completing a reserve takeover and obtaining the relevant approvals
from its shareholders, the FCA and the Takeover Panel.
Hybrid Mini-Grid Company Proprietary Limited ("Mini-Grid")
The Group entered into a shareholders' agreement with NESA Investment
Holdings, whereby it holds a 40 percent interest in Mini-Grid. The Group
accounts for its 40 percent shareholding as an investment in joint venture as
the relevant decisions require unanimous consent.
19. Inventories
Finished goods 23,511 18,058
Work in progress 14,740 9,323
Raw materials 4,435 3,160
Consumable stores 12,304 11,105
Total inventories 54,990 41,646
The cost of inventories recognised as an expense during the year was US$88.60
million (2021: US$82.49 million).
The Group recognised a net realisable value write down of finished goods
amounting to US$0.33 million (31 December 2021: US$0.48 million) and work in
progress amounting to US$0.19 million (31 December 2021: US$nil).
20. Trade and other receivables
Financial instruments:
Trade receivables 3,134 6,129
Other receivables 2,856 5,034
Expected credit losses (78) (77)
Non-financial instruments:
Value-added taxes 3,163 5,728
Deposits 19 -
Prepaid expenses 404 828
Total trade and other receivables 9,498 17,642
Categorisation of trade and other receivables
Trade and other receivables are categorised as follows in accordance with IFRS
9: Financial Instruments:
At amortised cost 5,912 11,086
Non-financial instruments 3,586 6,556
9,498 17,642
Trade receivables are amounts due from customers for goods sold or services
performed in the ordinary course of business. They are generally due for
settlement within 15-90 days and therefore are all classified as current.
The fair value of trade and other receivables approximate the carrying value
due to the short maturity.
Impairment and risk exposure
Information about the impairment of trade receivables and the Group's exposure
to credit risk, interest rate risk and foreign currency risk can be found in
note 33.
21. Restricted investment
Rehabilitation insurance fund 2,710 2,869
Split between non-current and current portions
Current assets - 2,869
Non-current assets 2,710 -
2,710 2,869
The Group is required by statutory law in South Africa to hold this restricted
investment in order to meet environmental rehabilitation liabilities on the
statement of financial position (refer to note 26 and 34 for further details).
22. Cash and cash equivalents
Cash at bank and on hand 8,347 7,336
Short-term deposits 2,527 8,097
10,874 15,433
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$6.72 million (2021: US$14.88 million).
The fair value of cash and cash equivalents approximates the carrying value
due to the short maturity.
23. Share capital, share premium and reserves
Share premium Total share capital and premium
Number of Share capital
shares US$ '000 US$ '000 US$ '000
Balance, 1 January 2021 1,190,757,892 15,858 117,066 132,924
Shares issued - Directors and staff 2,808,928 36 388 424
Shares issued - Duferco 66,892,037 903 8,097 9,000
Balance, 31 December 2021 1,260,458,857 16,797 125,551 142,348
Shares issued - Directors and staff 2,324,842 29 494 523
Shares issued - Primorus Convertible 4,157,645 54 476 530
Shares issued - Lind 20,876,937 242 1,181 1,423
Balance, 31 December 2022 1,287,818,281 17,122 127,702 144,824
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 2022 the Company owns 670,000 (31 December 2021:
670,000) treasury shares with a nominal value of 1 pence.
Shares issued Directors and staff
The Company issued 2,324,842 new ordinary shares of 1 pence each in the
Company in respect of the short-term incentive plans (2021: 2,808,928 ordinary
shares).
Duferco Participations Holdings S.A. ("Duferco")
The Group settled the unsecured convertible notes held by Duferco on 8
November 2021. US$2.50 million of the amount due, as well as the accrued
interest of US$0.51 million, was satisfied in cash and the balance of US$9.0
million was satisfied with the issue of 66,892,037 new ordinary shares of 1
pence, using a conversion price of 9.97 pence, which was a 5 percent discount
to the prevailing 10-day volume weighted average share price leading up to
conversion. There was no lock in or orderly marketing period for the shares
issued.
Primorus Investments Plc ("Primorus")
The Company issued a convertible loan note to Primorus. The Company issued a
total of 4,157,645 new ordinary shares of 1 pence each in accordance with the
conversion provisions.
Lind Global Macro Fund, LP ("Lind")
The Company issued 20,876,937 new ordinary shares of 1 pence each to Lind in
accordance with the Investment Agreement between the Company and Mustang.
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.
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
24. Share-based payments
Short-Term Incentive ("STI")
Number of shares
Deferred share awards 2022 2021
Balance, beginning of the year 1,212,360 -
Granted - 5,226,020
Vested (1,099,404) (4,013,660)
Forfeited (112,956) -
Balance, end of the year - 1,212,360
The Group awarded 2,424,720 deferred share awards to certain employees on 5
August 2021 under its short-term incentive plan. The deferred share awards
vested in equal tranches after twelve months (31 December 2021) and 18 months
(30 June 2022). The vesting of the deferred share awards is dependent on the
employees still being employed on the respective vesting dates. The deferred
share awards are settled directly by the Company, in its own shares. The fair
value of the deferred share awards was US$0.42 million which is the market
price of the Company's share at grant date (£0.13) and the exchange rate on
that date.
The Group awarded 2,801,300 deferred share awards to certain employees on 5
August 2021 in lieu of a cash bonus. These deferred share awards vested on 31
December 2021. The vesting of the deferred share awards is dependent on the
employees still being employed on the vesting date. The deferred share awards
are settled directly by the Company, in its own shares. The fair value of the
deferred share awards was US$0.50 million which is the market price of the
Company's share at grant date (£0.13) and the exchange rate on that date.
The Company issued 2,324,842 new ordinary shares of 1 pence each in respect to
the STI (note 23) and 2,788,222 shares are still to be issued to certain
employees being in a closed period.
Long-Term Incentive ("LTI")
Performance
awards
Number of shares
2022 2021
Balance, beginning of the year 2,458,443 2,458,443
Granted - -
Vested - -
Lapsed (2,458,443) -
Balance, end of the year - 2,458,443
The Group awarded performance awards to certain employees on 28 November 2019
under its long-term incentive plan. The performance awards vest over a period
of three years and is subject to both employment and performance conditions.
The performance conditions contain both a market condition and a non-market
condition.
The market condition states that 60 percent of the number of performance
shares awarded would vest based on the performance of the Company's total
shareholder return ("TSR"), per annum, over the performance period. The
non-market condition states that 40percent of the number of performance shares
awarded will vest based on the performance of the Group's free cash flow
margin ("FCF"), per annum, over the performance period.
As at 31 December 2021, it was assumed that 0 percent of the performance
shares awarded to participants during 2019 will vest. This was based on the
Group's performance on both TSR and FCF being below the threshold. At vesting
date, 28 November 2022, it was determined that 0 percent of the performance
shares awarded vested as the thresholds on both TSR and FCF not being
achieved.
The remuneration committee approved performance awards in 2022, which were
awarded in 2023. The performance awards vest over a period of three years and
is subject to both employment and performance conditions. The performance
conditions contain both a market condition and a non-market condition.
25. Post-retirement medical liability
The benefit comprises medical aid subsidies provided to qualifying retired
employees. Actuarial valuations are made annually with the most recent
valuation on 31 December 2022. The present value of the post-retirement
medical liability were measured using the projected unit credit method.
The following table summarises the components of the net benefit expense
recognized in the consolidated statement of profit or loss and the
consolidated statement of comprehensive income or loss and the amounts
recognised in the consolidated statement of financial position.
Balance, beginning of the year 1,906 2,076
Net expense recognised in profit or loss 13 5
Actuarial changes recognized in other comprehensive income or loss (126) (10)
Exchange differences (118) (165)
Balance, end of the year 1,675 1,906
The principal assumptions used for the purposes of the actuarial valuation was
as follows:
Actual age 77.3 years 77.3 years
Discount rates 11.60% 10.90%
Health care cost inflation 7.80% 7.90%
Duration of liability 8.8 years 9.3 years
A 1 percent change in the assumed rate of healthcare costs inflation would
have the following effect on the present value of the unfunded obligation:
Plus 1 percent - US$0.13 million (2021: US$0.16 million); Less 1 percent -
US$0.12 million (2021:US$0.14 million).
A 1 percent change in the assumed interest rate would have the following
effect on the current service cost and interest cost; Plus 1 percent - US$0.20
million (2021: US$0.21 million); Less 1 percent - US$0.17 million (2021:
US$0.18 million).
26. Environmental rehabilitation liabilities
Balance, beginning of the year 18,031 17,998
Unwinding of discount 9 1,726 1,915
Change in estimates charged to profit or loss (291) (140)
Change in estimates capitalized to property, plant and equipment 14 (1,705) (199)
Exchange differences (1,151) (1,543)
Balance, end of the year 16,610 18,031
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 2052,
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 provision is calculated using the following key assumptions:
Inflation rate 10.41 % 9.76 %
Discount rate 11.41 % 10.76 %
A 1 percent change in the assumed discount rate would have the following
effect on the present value of the provision: Plus 1 percent - decrease of
US$3.91 million; Less 1 percent - increase of US$5.16 million.
A 1 percent change in the assumed inflation rate would have the following
effect on the present value of the provision: Plus 1 percent - increase of
US$5.16 million; Less 1 percent - decrease of US$3.97 million.
27. Deferred consideration
Balance, beginning of the year 1,684 5,623
Payment - (3,724)
Finance costs 51 91
Movement in earnout estimate Exchange differences 10 693 - (306)
-
2,428 1,684
Split between non-current and current portions
Current deferred consideration 901 -
Non-current deferred consideration 1,527 1,684
2,428 1,684
The Group is required to pay an earnout amount to EVRAZ on the acquisition of
the Vametco Group which is based on the annual percentage of additional
revenue ascribed to Bushveld Vametco Alloys as a result of the prevailing
price being above the trigger price in respect of each financial year
commencing on 1 January 2018 and ending on 31 December 2025, up to a maximum
amount of US$5.54 million.
Management updated their estimated earnout payment to reflect actual
production and price for the year ended 31 December 2022 and estimated
production and price for future years which resulted in an increase of US$0.69
million in the estimated earnout payment.
28. Borrowings*
Production financing agreement 35,146 33,512
Orion convertible loan notes 39,742 36,282
Nedbank revolving credit facility - 5,821
Industrial Development Corporation shareholder loan 1,999 3,282
Industrial Development Corporation property, plant and equipment loan 3,481 -
Development Bank of South Africa 1,000 1,000
Other 1,762 -
83,130 79,897
Split between non-current and current portions
Non-current 35,272 69,686
Current 47,858 10,211
83,130 79,897
*Refer to note 36 for details of restatement
Nedbank Industrial
Product Orion revolving Development
financing convertible credit Corporation
agreement loan notes facility loans Other Total
US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
Balance, beginning of the year 33,512 36,282 5,821 3,282 1,000 79,897
Cash changes:
Proceeds from borrowings - - - 3,416 806 4,222
Repayments of principle and (2,906) - (5,885) - (49) (8,840)
Interest
Non-cash changes:
Convertible loan note in - - - - 1,636 1,636
exchange for financial assets
Conversion of convertible loan - - - - (530) (530)
notes
Finance costs(1) 4,420 6,394 232 470 143 11,659
Fair value gain on derivative - (2,934) - - - (2,934)
Liability
Adjustment to reflect market - - - (1,789) - (1,789)
value of loan
Exchange differences 120 - (168) 101 (244) (191)
35,146 39,742 - 5,480 2,762 83,130
(1)Finance costs include capitalised finance costs of US$0.47 million to
property,plant and equipment.
Orion Mine Finance Production Financing Agreement
The Group signed a long-term production financing agreement ("PFA") of US$30
million with Orion Mine Finance ("Orion) in December 2020, primarily to
finance its expansion plans at Bushveld Vametco Alloys Proprietary Limited and
debt repayment. Exchange control authorization from the South Africa Reserve
Bank Financial Surveillance Department was granted in October 2020.
PFA Details
The Group will repay the principal amount and pay interest via quarterly
payments determined initially as the sum of:
· 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
· a unit rate of US$0.443/kgV multiplied by the aggregate amount of
vanadium sold for the quarter.
Once the Group 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 Group has the option to
repay up to 50 per cent of both constituent loan parts (each may only be
repaid once). If the Group 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 were used by the Group to prepay in full the Nedbank ZAR250
million term loan.
First Amendment
The Group entered into a first amendment to the agreement on 6 August 2021. In
terms of the amendment, US$17.8 million of the funds ringfenced for the
Vametco Phase 3 Expansion was reallocated to Vanchem mainly for capital
expenditure on Kiln-3.
The original PFA had a cap of 1,075 mtV per quarter. This amounted to 4,300
mtV 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
4,300 mtV being brought forward, from 1 July 2022 instead of from 2024.
Accounting impact of amendment
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 brought forward, this resulted in a non-substantial
modification to the contractual terms. The amortised cost was recalculated and
loss on remeasurement of financial liabilities of US$1.90 million was
recognised in the consolidated statement of profit or loss for the year ended
31 December 2021.
Orion Mine Finance Convertible Loan Notes Instrument
The Company subscribed to a US$35 million convertible loan notes instrument in
December 2020 (the "Instrument") with Orion Mine Finance ("Orion"). The
Instrument's proceeds were used towards the first phase of Vanchem's critical
refurbishment programme and debt repayment.
The terms of the Instrument are:
· A fixed 10 per cent per annum coupon with a three year maturity
date from the drawdown date.
· All interest will accrue and be capitalised on a quarterly basis
in arrears but compounded annually.
· Accumulated capitalised and accrued interest is convertible into
Bushveld ordinary shares. All interest and principal, to the extent not
converted into ordinary shares, is due and payable at maturity date.
· Conversion price set at 17 pence.
The conversion features are:
Between drawdown and the Instrument's maturity date Orion may, at their
option, convert an amount of the outstanding debt, including capitalised and
accrued interest, into Bushveld's ordinary shares as follows:
· First six months: Up to one third of the outstanding amount;
· Second six months: Up to two thirds of the outstanding amount
(less any amount previously converted);
· From the anniversary of drawdown until the maturity date: the
outstanding amount under the Instrument may be converted;
· The Company also has the option to convert all, but not some, of
the amount outstanding under the Instrument, if its volume weighted average
share price is more than 200 per cent of the conversion price over a
continuous 15 trading day period, a trading day being a day on which the AIM
market is open for the trading of securities.
At any time until the convertible maturity date, Orion may convert the debt as
above mentioned into an amount of ordinary shares equal to the total amount
available for conversion under the Instrument divided by the conversion price
of 17 pence.
Refer to note 36 for the restatement associated with the change in accounting
treatment.
Derivative liability
Loan Total
US$ '000 US$ '000 US$ '000
Balance, 01 January 2021 27,952 11,976 39,928
Finance costs and fair value gain 5,364 (9,010) (3,646)
Balance, 31 December 2021 33,316 2,966 36,282
Finance costs and fair value gain 6,394 (2,934) 3,460
Balance, 31 December 2022 39,710 32 39,742
The Orion and Nedbank borrowings are secured against certain group companies
and associated assets.
Nedbank Term Loan and Revolving Credit Facility
The Group secured R375 million (approximately US$25 million) in debt
facilities through its subsidiary Bushveld Vametco Alloys Proprietary Limited
(the "Borrower") in November 2019 with Nedbank Limited in the form of a R250
million term loan and a R125 million revolving credit facility.
The Nedbank term loan was repaid in December 2020.
The Group had drawn the R125 million revolving credit facility in March 2020
which have the following key terms:
· Three-year term - Repayment due in November 2022;
· Interest rate calculated using the three year or six months JIBAR
as selected by the Company plus a 3.85 percent margin;
· Interest payments are due semi-annually.
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.
The following financial covenants are in place for the Borrower for so long as
any amount is outstanding, in respect of each reporting period:
· the Net Interest Cover Ratio; and
· the Net Debt to EBITDA Ratio at a Borrower level shall not exceed
4.0 times.
The Nedbank revolving credit facility was repaid in November 2022, except for
R1.
Industrial Development Corporation Shareholder Loan
Bushveld Electrolyte Company ("BELCO") is 55 percent owned by Bushveld Energy
Company ("BEC") and 45 percent by the Industrial Development Corporation
("IDC"). The loan represents the IDC's contribution to BELCO and consists of
the initial capitalized cost of R4.38 million (US$0.26 million; 31 December
2021: R4.38 million (US$0.26 million)) and the subsequent subscription amount
of R55.31 million (US$3.26 million; 31 December 2021: R55.31 million (US$3.82
million)).
The loan is interest free, unsecured, subordinated in favour of BELCO's
creditors and has no fixed term of repayment and shall only be repaid from
free cash flow when available. BELCO has the unconditional right to defer
settlement until it has sufficient free cash flow to settle the outstanding
amount, which is estimated at the end of 2028. The loan has been classified as
non-current.
The shareholder loan is measured at the present value of the future cash
payments discounted using an interest rate of 8.5 percent, which is the
estimated prevailing market rate. The difference between the fair value and
the nominal amount of US$1.79 million was recognised as non-controlling
interest.
A general notarial bond for a minimum amount of R140 million plus an
additional sum of 30 percent for ancillary costs and expenses was registered
over all the movable assets owned by BELCO.
Industrial Development Corporation Property, Plant and Equipment Loan
The IDC provided a property, plant and equipment loan to BELCO as part of the
funding for the construction of the electrolyte plant. The loan bears interest
at the South African prime rate plus 2.5 percent margin and is repayable in 84
equal monthly instalments starting in July 2023.
Development Bank of Southern Africa - Facility Agreement
Lemur Holdings Limited entered into a US$1.0 million 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 percent capped at
2.5 times, which ever is lower. As at 31 December 2022, US$1.0 million (31
December 2020: US$1.0 million) was drawn down.
Primorius
The Company issued a convertible loan note to Primorius for the nominal amount
of £1,20 million bearing interest at 10 percent per annum. The convertible
loan note may be converted into Bushveld ordinary shares at any time within
the 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. Primorius converted £0.41 million of the principal amount and was
issued a total of 4,157,645 Bushveld ordinary shares.
Nesa Investment Holdings ("Nesa")
The Group entered into a loan agreement with Nesa to fund US$0.81 million
(R12.08 million) bearing interest at South African prime rate plus 3.5 percent
margin and is repayable on 30 October 2023.
29. Lease liabilities
Balance, beginning of the year 4,485 5,002
Additions 2,989 128
Finance cost 9 974 459
Payments (728) (705)
Exchange differences (438) (399)
Balance, end of the year 7,282 4,485
Non-current lease liabilities 6,721 3,921
Current lease liabilities 561 564
7,282 4,485
Leases are entered into and exist to meet specific business requirements,
considering the appropriate term and nature of the leases asset. The Group
leases relate to land leases, office leases and equipment lease.
Extension options
Some property leases contain extension options exercisable by the Group. The
Group assesses at the lease commencement date whether it is reasonably certain
to exercise the extension options. The Group reassesses whether it is
reasonably certain to exercise its options if there is a significant event or
significant changes within its control.
30. Trade and other payables
Financial instruments:
Trade payables 40,573 28,330
Trade payables - related parties 61 107
Accruals and other payables 5,257 4,644
Non-financial instruments:
Value-added taxes 5 -
45,896 33,081
Financial instrument and non-financial instrument components of trade and
other payables
At amortised cost 45,891 33,081
Non-financial instruments 5 -
45,896 33,081
Trade and other payables principally comprise amounts outstanding for trade
purchases and on-going costs. The average credit period taken for trade
purchases is 90 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$29.78 million (2021: US$20.62 million).
31. Provisions
Reconciliation of provisions - 2022
Opening balance Additions Utilised during the Foreign exchange Total
year US$ '000
US$ '000 US$ '000
US$ '000 US$ '000
Leave pay 1,629 80 (40) (81) 1,588
Performance bonus 1,923 - (1,923) - -
Other 170 - (13) (31) 126
3,722 80 (1,976) (112) 1,714
Reconciliation of provisions - 2021
Opening balance Additions Utilised during the Foreign exchange Total
year US$ '000
US$ '000 US$ '000
US$ '000 US$ '000
Leave pay 1,655 51 - (77) 1,629
Performance bonus 1,375 882 (334) - 1,923
Other 267 157 (254) - 170
3,297 1,090 (588) (77) 3,722
Leave pay
Leave pay represents employee leave days due multiplied by their cost to the
company employment package.
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. Non-controlling interest
Selected summarized financial information of subsidiaries that have material
non-controlling interest are provided below:
2022 2021
US$ '000 US$ '000
Bushveld Vametco Holdings
Percentage of voting rights held by non-controlling interest 26 % 26 %
Current assets 85,598 66,820
Non-current assets 80,228 77,916
Current liabilities (25,517) (22,944)
Non-current liabilities (45,311) (42,376)
Net assets 94,998 79,416
Revenues 117,226 83,114
Net earnings / (loss) for the year 21,401 (2,451)
Net earnings / (loss) attributable to non-controlling interest 5,564 (637)
Net cash generated from / (used in) operating activities 14,270 (917)
Net cash used in investing activities (10,649) (15,097)
Net cash used in financing activities (6,020) (2,364)
Net increase / (decrease) in cash and cash equivalents (2,398) (18,378)
33. 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 consolidated financial statements.
33.1. Categories of financial instruments 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 and cash equivalents
- Restricted investments
- Trade and other payables
- Borrowings
- Financial assets
- Lease liabilities
- Deferred consideration
The Group holds the following financial assets and financial liabilities:
2022 2021
US$ '000 US$ '000
Financial assets at amortised cost
Trade and other receivables 5,912 11,086
Restricted investment 2,710 2,869
Cash and cash equivalents 10,874 15,433
19,496 29,388
Financial assets at fair value
Financial assets at fair value through profit or loss 3,075 -
Total financial assets 22,571 29,388
Financial liabilities at amortised cost
Trade and other payables 45,891 33,081
Borrowings - loan 83,098 76,931
Lease liabilities 7,282 4,485
136,271 114,497
Financial liabilities at fair value
Borrowings - derivative liability 32 2,966
Deferred consideration 2,428 1,684
2,460 4,650
Total financial liabilities 138,731 119,147
33.2. 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:
33.3. 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 31 December 2022, the Group had
borrowings of US$83.13 million (2021: US$79.90 million).
The financial covenants for the Nedbank revolving credit facility are
continuously monitored by management and the Group is compliant.
The capital structure of the Group consists of cash and cash equivalents,
equity and borrowings. Equity comprises of issued capital and retained income.
2022 2021
US$ '000 US$ '000
Cash and cash equivalents 10,874 15,433
Borrowings 83,130 79,897
Equity 105,677 142,169
199,681 237,499
The Group is not subject to any externally imposed capital requirements.
33.4. Price risk
The Group's exposure to commodity price risk is dependent on the fluctuating various commodities that it
price of the mines, processes and sells.
The average market price of each of the following commodities was:
2022 2021
Vametco US$/kgV US$/kgV
Ferro Vanadium (FEV) 50.17 -
Nitrovan (NV) 44.45 34.10
Ammonium Metavanadate (AMV) 30.05 -
Modified Vanadium Oxide (MVO) - 17.18
2022 2021
Vanchem US$/kgV US$/kgV
Vanadium Pentoxide Flake (FVP) 31.82 25.04
Vanadium Pentoxide Chemical (VCM) 35.85 32.73
Sodium Ammonium Vanadate (SAV) 55.07 51.22
Ammonium Metavanadate (AMV) 52.80 35.19
Ferro Vanadium (FEV) 35.73 31.53
Vanadyl Oxalate Solution (VOX) 197.79 195.41
Potassium Metavanadate 42.41 35.31
Nitrovan - 30.60
If the average price of each of these commodities increased/decreased by 10
per cent the total sales related to each of these commodities would have
increased/decreased as follows: 10 percent is the sensitivity used when
reporting commodity prices internally to management.
Effect on 2022 revenue Effect on 2022 net loss Effect on 2021 revenue Effect on 2021 net loss
Vametco US$ '000 US$ '000 US$ '000 US$ '000
Ferro Vanadium (FEV) 358 258 - -
Nitrovan (NV) 11,568 8,329 8,431 6,071
Ammonium Metavanadate (AMV) 81 58 (14) (10)
12,007 8,645 8,417 6,061
Effect on Effect on Effect on Effect on
2022 revenue 2022 net loss 2021 revenue 2021 net loss
Vanchem US$ '000 US$ '000 US$ '000 US$ '000
Vanadium Pentoxide Flake (FVP) 494 356 611 440
Vanadium Pentoxide Chemical (VCM) 329 237 298 215
Sodium Ammonium Vanadate (SAV) 182 131 72 52
Ammonium Metavanadate (AMV) 34 25 27 20
Ferro Vanadium (FEV) 2,391 1,721 1,637 1,179
Vanadyl Oxalate Solution (VOX) 63 45 138 99
Potassium Metavanadate 157 113 47 34
Nitrovan (NV) - - 484 348
3,650 2,628 3,314 2,387
33.5. 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. 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 2022, the Group had US$10.9 million (2021: US$15.4 million) of
cash and cash equivalents. At 31 December 2022, the Group had borrowings of
US$83.13 million (2021: US$79.90 million), lease liabilities of US$7.28
million (2021: US$4.49 million) and trade and other payables of US$45.90
million (2021: US$33.08 million).
Carrying amount Contractual cash flows
<1 year 1 - 2 years 3 - 4 years >4 years
2022 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
*Production financing agreement 35,146 139,795 4,181 8,626 8,833 118,155
Orion convertible loan notes 39,742 46,585 46,585 - - -
Industrial Development Corporation 1,999 3,515 - - - 3,515
shareholder loan
Industrial Development Corporation 3,481 5,725 477 1,636 1,636 1,976
property, plant and equipment loan
Development Bank of South Africa 1,000 1,000 - 1,000 - -
Other 1,762 1,794 1,794 - - -
Lease liabilities 7,283 22,577 704 901 1,348 19,624
Trade and other payables 45,891 45,891 45,891 - - -
Carrying Contractual
amount cash flows <1 year 1 - 2 years 3 - 4 years >4 years
2021 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
*Production financing agreement 33,512 145,435 4,123 8,868 9,012 123,432
Orion convertible loan notes 36,282 46,585 - 46,585 - -
Nedbank revolving credit facility 5,821 5,885 5,885 - - -
Industrial Development Corporation 3,281 3,515 - - - 3,515
shareholder loan
Development Bank of South Africa 1,000 1,000 - 1,000 - -
Lease liabilities 4,485 9,771 614 501 902 7,754
Trade and other payables 33,081 33,081 33,081 - - -
*The contractual cash flows are based on estimated principal and interest
payments calculated as the sum of the gross revenue rate multiplied by the
gross revenue for the quarter and the unit rate multiplied by the aggregate
amount of vanadium sold for the quarter.
33.6. Credit risk
Credit risk is the risk that one party to a financial instrument will cause a
financial loss for the other party by failing to discharge an obligation. The
maximum amount of credit risk is equal to the balance of cash and cash
equivalents, restricted investments, trade and other receivables and financial
assets.
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.
The Group holds cash and cash equivalents and restricted investments in
creditworthy financial institutions that comply with the Company's credit risk
parameters. The Group has a significant concentration of cash held on deposit
with large banks in South Africa, Mauritius, United States of America and the
United Kingdom with A ratings and above (Standards and Poors).
The concentration of credit risk by currency was as follows:
2022 2021
US$ '000 US$ '000
Pound Sterling 20 10
South African Rand 6,702 14,943
United States Dollar 4,152 480
10,874 15,433
Impairment of financial assets
The Group's only financial assets that are subject to the expected credit loss
model are third party 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 2022 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 2022 and 31 December 2021
was determined as follows for trade receivables:
Gross carrying
Expected credit loss amount Loss allowance
Subsidiary - 2022 rate US$ '000 US$ '000
Bushveld Vametco Alloys (Pty) Ltd 0.15 % 1,135 2
Bushveld Vanchem (Pty) Ltd 0.27 % 1,487 4
Ivanti Resources (Pty) Ltd 7.74 % 121 9
Bushveld Energy Company (Pty) Ltd 100.00 % 63 63
2,806 78
Gross
Expected carrying Loss
credit loss amount allowance
Subsidiary - 2021 rate US$' 000 US$ '000
Bushveld Vametco Alloys (Pty) Ltd 0.11 % 87 -
Bushveld Vametco Limited 0.13 % 4,198 5
Bushveld Vanchem (Pty) Ltd 0.13 % 1,275 2
Ivanti Resources (Pty) Ltd 0.43 % 609 3
Bushveld Minerals SA (Pty) Ltd 0.19 % 8 -
Bushveld Energy Company (Pty) Ltd 100.00 % 67 67
6,244 77
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 2022 and 2021 financial year.
33.7. Interest rate risk
Interest rate risk is the risk that the fair values and future cash flows of
the Group's financial instruments will fluctuate because of changes in market
interest rates. The Group has interest bearing financial assets and
borrowings. As part of the process of management 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.
As at 31 December 2022, the majority of the Groups' borrowings was at fixed
rates. A 1 percent increase or decrease in the interest rates would result in
a nominal increase or decrease in the Group's earnings in respect of
borrowings held at variable rates. There was no significant change in the
Group's exposure to interest rate risk during the year ended 31 December 2022.
33.8. Foreign exchange risk
The presentation currency of the Group is United States Dollar and the
functional currency of its major subsidiaries are South African Rand. The
Group has foreign currency denominated assets and liabilities. Exposure to
exchange rate fluctuations therefore arise. The Group has transactional
foreign exchange exposures, which arise from sales or purchases by the
subsidiaries in currencies other than their functional currency. The vanadium
market is predominately priced in US$ which exposes the Group to the risk of
fluctuations in the ZAR/US$ exchange rate. The carrying amount of the Groups
foreign currency denominated monetary assets and liabilities, all in US$, are
shown below:
2022 2021
US$ '000 US$ '000
Cash and cash equivalents 6,723 15,135
Other receivables 11,226 12,696
Trade and other payables (32,652) (20,753)
(14,703) 7,078
The Group does not enter into any derivative financial instruments to manage
its exposure to foreign currency risk.
33.9. Fair value
The fair value hierarchy categorizes into three levels the inputs to valuation
techniques used to measure fair value. The fair value hierarchy gives the
highest priority to quoted prices (unadjusted) in active markets for identical
assets or liabilities (Level 1 inputs) and the lowest priority to unobservable
inputs (Level 3 inputs).
Ÿ Level 1 inputs are quoted prices (unadjusted) in active markets for
identical assets or liabilities which the entity can access at the measurement
date.
Ÿ Level 2 inputs are inputs other than quoted prices included within Level
1 which are observable for the asset or liability, either directly or
indirectly such as those derived from prices.
Ÿ Level 3 inputs are unobservable inputs for the asset or liability.
There have been no changes in the classification of the financial instruments
in the fair value hierarchy since 31 December 2021.
(a) Financial assets and liabilities measured at fair value on a recurring
basis
Carrying amount Total fair
Level 1 Level 2 Level 3 value
2022 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
Assets
Financial assets 3,075 - - 3,075 3,075
Liabilities
Derivative liability - conversion option on 32 - 32 - 32
Orion CLN
Deferred consideration 2,428 - - 2,428 2,428
Carrying amount Total fair
Level 1 Level 2 Level 3 value
2021 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
Assets Financial assets Liabilities - 2,966 - 2,966 - 2,966
Derivative liability - conversion option on - -
- -
Orion CLN
Deferred consideration 1,684 - - 1,684 1,684
(b) Financial assets and liabilities measured at amortised costs
2022 2021
Book value US$ '000 Fair value US$ '000 Book value US$ '000 Fair value US$ '000
Financial assets
Trade and other receivables 5,912 5,912 11,086 11,086
Restricted investments 2,710 2,710 2,869 2,869
Cash and cash equivalents 10,874 10,874 15,433 15,433
2022 2021
Book value US$ '000 Fair value US$ '000 Book value US$ '000 Fair value US$ '000
Financial liabilities
Trade and other payables 45,891 45,891 33,081 33,081
The directors are of the opinion that the book value of financial instruments
measured at amortised costs approximates fair value due to the short-term
maturities of these instruments. The carrying value less impairment provision
of trade receivables and payables are assumed to approximate their fair
values.
The directors consider that sufficient information to understand the
borrowings of the Group is disclosed in note 28.
34. Contingent liabilities Bank guarantee
As required by the Minerals and Petroleum Resources Act (South Africa), a
guarantee amounting to US$11.94 million (2021: US$12.76 million) before tax
and US$8.60 million (2021: US$9.19 million) 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 Centriq Insurance Company Ltd with
restricted use by the Group. The restricted cash consists of US$2.71 million
(2021: US$2.87 million) held by Centriq Insurance Company.
35. 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 ("VM Investments") is a related party due to
the Director, Fortune Mojapelo being majority shareholder of VM Investments.
VM Investments owns the offices rented by Bushveld Minerals Limited. The rent
paid in 2022 financial period was US$206,209 (2021: US$162,897).
Services rendered by Ondra LLP for the amount of US$61,900 (2021: US$200,000)
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 US$439 094. The tax arises from historic shares issued to Mr
Mojapelo. The company had an obligation to settle the tax on behalf of Mr
Fortune Mojapelo. The amount is reflected as a debtor.
The remuneration of key management personnel, being the directors and other
executive committee members, is set out below. Further information about the
remuneration of individual directors is provided in the Directors'
remuneration report.
2022 2021
US$ '000 US$ '000
Salaries and fees 1,866 1,979
Short-term incentives 95 166
Long-term incentives 107 -
2,068 2,145
36. Restatements
The Company subscribed to a US$35 million convertible loan notes instrument in
December 2020 with a fixed 10 percent per annum coupon, a three year maturity
date and a conversion price of 17 pence (the "Instrument") (refer to note 28).
At inception the Instrument was accounted for as a compound instrument and was
partly presented as a loan (US$34.95 million) and partly as equity (US$0.05
million). The equity component was not subsequently remeasured. The loan
component was subsequently measured at amortized cost.
During the preparation of the annual consolidated financial statements for the
year ended 31 December 2022, it was determined that the Instrument should have
been accounted for at inception as a loan and a derivative liability as the
conversion will result in a variable amount of shares. Subsequently the
derivative liability is remeasured to fair value at each reporting date with
fair value movements recorded in the consolidated statement of profit or loss.
The amount allocated to the loan continues to be measured at amortized cost.
The information in the following tables show the effect of the restatement on
each affected financial statement line item:
Previously reported at 31 December
Restated at 31 December
2021 Adjustment US$ '000 2021
Consolidated Statement of Financial Position US$ '000 US$ '000
Convertible loan note reserve 55 (55) -
Retained earnings (1,265) 1,086 (179)
Total equity 150,831 1,031 151,862
Borrowings - non-current portion 70,717 (1,031) 69,686
Borrowings - current portion 10,211 - 10,211
Total liabilities 149,849 (1,031) 148,818
No impact on total cashflows as reported for the year ended 31 December 2021
were noted as these adjustments were non- cash. The add backs for finance
costs and fair value gain on derivative liability were adjusted.
Previously reported at 31
Restated at
December 31 December
2021 Adjustment 2021
Consolidated Statement of Profit or Loss US$ '000 US$ '000 US$ '000
Finance costs 12,184 1,124 13,308
Fair value gain on derivative liability - (9,010) (9,010)
Loss before taxation 46,782 (7,886) 38,896
Loss for the year 42,113 (7,886) 34,227
Basic loss per share (3.39) 0.65 (2.74)
Previously reported at 31
Restated at
December 31 December
2020 Adjustment 2020
Consolidated Statement of Financial Position US$ '000 US$ '000 US$ '000
Convertible loan note reserve 55 (55) -
Retained earnings 28,367 (6,800) 21,567
Total equity 197,364 (6,855) 190,509
Borrowings - non-current portion 72,507 6,855 79,362
Borrowings - current portion 13,337 - 13,337
Total liabilities 153,457 6,855 160,312
37. Events after the reporting period
The Company entered into a non-binding term sheet with Orion Mine Finance
("Orion") on 5 May 2023. The term sheet, which were approved by the Orion
Investment Committee, envisages that the Orion convertible loan notes which
are due in November 2023 will be refinanced into the following components:
· A three-year secured term loan ("Term Loan") totaling
approximately US$27 million, bearing interest at 6 percent plus the greater of
(i) 3-month secured overnight financing rate and (ii) 3.0 percent per annum,
payable quarterly in cash in arears. 25 percent of the facility is repayable
in June 2024, 30 percent repayable in June 2025 and 45 percent repayable in
June 2026.
· A new convertible loan note of approximately US$13.5 million,
bearing interest at 12 percent per annum, conversion price of 8 pence and a
maturity date of June 2028. The Company shall have a one-time right to redeem
50 percent (in whole and not in part) of the New CLN in June 2026, subject to
the right of Orion to elect for conversion of the same for a 30-day period.
· Conversion of approximately US$4.5 million of existing
convertible loan notes into shares at 6 pence per share.
· Supplemental production financing agreement ("PFA") on the same
terms as the existing PFA during the tenure of the Term Loan, except for the
PFA rate being 0.22 percent with a realized kgV price of less than US$47/kgV
or the PFA rate being 0.18 percent with a realized kgV price of more than
US$47/kgV. Once the Term Loan has matured in June 2027, the top-up PFA rate
will reduce by a further 80 percent for the life of mine
The transaction is conditional on several items, including due diligence,
shareholder approval at a general meeting and definitive documentation.
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