REG - Bushveld Minerals Ld - Final Results for Year Ended 31 December 2023
28/06/2024 17:30
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RNS Number : 4538U Bushveld Minerals Limited 28 June 2024
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
28 June 2024
Bushveld Minerals Limited
("Bushveld Minerals" "Bushveld" or the "Company")
Full Year Results for the 12-month Period Ended 31 December 2023
Bushveld Minerals Limited (AIM: BMN), the integrated primary vanadium
producer is pleased to announce its full year results for the year ended 31
December 2023.
FY2023 Financial Highlights
· Revenue of US$137.5 million (2022: US$148.4 million).
· Underlying EBITDA(1) loss of US$7.5 million and adjusted EBITDA(1)
loss of US$66.1 million (2022 Underlying EBITDA loss of US$22.3 million and
adjusted EBITDA loss of US$1.7 million).
· Impairment losses of US$58.6 million (2022: US$24.0 million). US$49.6
million of the impairment losses pertain to Mokopane and US$8.2 million to
Vanchem.
· Net loss of US$104 million (2022: US$35.4 million).
· Free cash flow(2) of negative US$9.4 million (2022: negative US$14.6
million).
· Cash and cash equivalents of US$1.3 million (2021: US$10.9 million).
· Net debt of US$105.8 million (2022: US$79.5 million).
· The Group conducted, during the end of 2023, an equity raise and
entered into agreements with Southern Point Resources ("SPR") for a cumulative
proposed investment of US$69.5 - US$77.5 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.
Group Priorities and Outlook
· Complete outstanding conditions of the Vanchem sale
· Drawdown on additional funding from SPR
· Optimising operations and right-sizing the organisation to ensure
that Vametco is a cash-generating asset
· Increasing the capacity of the Barren Dam at Vametco
· Ensure constant monitoring of the slimes dam
· Attaining Sustainable production at Vametco of 240mtV per month by Q4
2024.
· Complete the sale of Bushveld's non-core assets - Cellcube, Lemur and
the electrolyte facility
Investor Session
Bushveld Minerals Chief Executive Officer, Craig Coltman and Chief Financial
Officer, Robbie Taylor will host an investor session on Tuesday 2 July 2024 at
14:00 UK (15:00 SAST) via the Investor Meet Company platform to discuss the
2023 full year results.
The session is open to all existing and potential shareholders. Investors can
submit questions via Investor Meet Company dashboard up until 9:00am the day
before the meeting. Pre-submitted questions will be prioritised.
Investors can sign up to Investor Meet Company for free and register for the
event via:
https://www.investormeetcompany.com/bushveld-minerals-limited/register-investor
Investors who already follow Bushveld Minerals on the Investor Meet Company
platform will automatically be invited.
Annual Report
The Annual report and accounts will be available on the Company's website
shortly and physical copies of the Annual Report and Notice of Annual General
Meeting ("AGM") will be posted to shareholders who have elected to receive
them, on 11 July 2024.
Enquiries: info@bushveldminerals.com
Bushveld Minerals Limited +27 (0) 11 268 6555
Craig Coltman, Chief Executive Officer
SP Angel Corporate Finance LLP Nominated Adviser & Joint Broker +44 (0) 20 3470 0470
Richard Morrison / Charlie Bouverat
Grant Barker / Abigail Wayne
Hannam and Partners Joint Broker +44 (0) 20 7653 4000
Andrew Chubb, Matt Hasson, Jay Ashfield
Tavistock Communications Financial PR
Gareth Tredway / Tara Vivian-Neal / James Whitaker +44 (0) 207 920 3150
ENDS
ABOUT BUSHVELD MINERALS LIMITED
Bushveld Minerals is a primary vanadium producer. It is one of the world's
three primary vanadium producers, offering compelling exposure to vanadium
through its upstream asset.
Detailed information on the Company and progress to date can be accessed on
the website www.bushveldminerals.com
Chairman's Statement
Stabilising business foundations for future growth
DEAR SHAREHOLDERS,
It would be remiss of me not to begin this letter with an acknowledgment of
the unprecedented state of flux that has characterised Bushveld's performance
during the period under review.
Over the last 15 months, the Company has experienced a significant change in
Executive Management and a restructuring of its head office, evolved its
strategy to reflect financial realities, navigated funding hurdles,
implemented necessary austerity measures, and intensified efforts to improve
the operational performance of its assets. All of this at a time when vanadium
prices have been subdued and unsupportive, with the geopolitical arena
becoming increasingly unstable and complex.
A key event of the year was the change in leadership of the Company with the
departure of Fortune Mojapelo at the end of June 2023. Having co-founded
Bushveld Minerals back in 2012, Fortune led Bushveld Minerals' evolution from
explorer to producer. The Company wishes him well in his future endeavours.
Sadly, the Company also had to engage in right-sizing measures to reduce costs
and overheads. A number of staff had to be let go in this process and we also
wish them well going forward.
Since stepping into the role of CEO in July 2023, Craig Coltman has done a
highly commendable job under challenging circumstances. Under his leadership,
much progress has been made in overhauling and simplifying the Company's
operations and strategy to refocus on the fundamentals of the business, being
the mining and beneficiation of vanadium. This progress will be vital to the
future performance of the Company. Whilst not yet reflected in the financial
outcomes, the overhaul implemented by the Management team will become clearer
when there is a rebound in the price of our commodity.
This has been a significant change for Bushveld. The strategic switch in
direction to being a pure vanadium play has not only been undertaken with the
objective of simplifying the business model but in recognition that the
Company did not have sufficient financial strength to build a vertically
integrated mining and energy entity. While vanadium may well have a future as
an energy mineral, Bushveld was unable to attract or generate the capital to
be a pioneer in executing this long-term opportunity. Following the sale of
Vanchem, Bushveld will continue to move towards operating in an agile and lean
manner by focusing on getting the Vametco plant and its long-life mine into an
efficient, sustainable, cash-producing asset. Consequently, the Company is
engaged in the disposal of its investments in the sectors unrelated to the
production of vanadium.
Under the new leadership, realistic production targets have been set involving
the strengthening of core operations. Management has also endeavoured to
stabilise and improve the Company's financial resilience, notably through the
restructuring of the Orion convertible loan note, the commitment of US$18.4
million additional equity, of which US$14.9 million has been received, as well
as the pending sale of the Vanchem facility.
The Board recognises Craig's candid engagement with his colleagues and
shareholders in providing a realistic and frank assessment of the business and
what actions have been and still are required to be taken to facilitate the
restoration of long-term value. While there is still a way to go on some of
the restructuring and operational initiatives announced, the Group looks
forward to achieving a potentially more deliverable proposition and a
refocused business model geared towards the efficient production and sale of
vanadium from its South African production asset, Vametco.
We thank shareholders for supporting the conditional sale of Vanchem, an
action that allows us to rectify the Group's overdue creditor balances as well
as providing adequate working capital to fund ongoing operations at Vametco.
During the year, Southern Point Resources ("SPR") became a new major
shareholder and supporter. The multi-pronged agreement with SPR, which
includes a working capital facility, the purchase of Vanchem and our 64%
interest Mokopane, an equity subscription and a new sales and marketing
arrangement has all helped infuse much-needed capital into the turnaround
strategy that the Executive Management team have devised.
I would also like to particularly thank those shareholders who participated in
the fundraising exercise we initiated at the end of 2023, which helped raise
the funds to strengthen our working capital and invest in some of the
maintenance projects required to support our assets. The Board and Executive
Management team hope that all shareholders will increasingly see the potential
of the business and provide the necessary support to re-rate the shares of the
Company to a level that appropriately reflects its underlying value.
We would like to welcome Robbie Taylor who recently joined as Interim Chief
Financial Officer replacing Tanya Chikanza. He brings with him over 27 years'
experience as a Finance Executive in various sectors and has extensive
experience working with listed entities and multinationals. Robbie and the
Finance team have made significant strides in addressing capital allocation,
creditor management, cost control and overall financial discipline.
The coming months will see a number of changes to your Board:
· David Noko is not standing for re-election at the AGM in order to
permit him to focus on his many other commitments. He has served the Company
assiduously, particularly in his role as Chair of the ESG Committee. He
departs with our thanks and best wishes.
· Further, it is my intention to stand down from the Board and as
Chairman once a replacement has been appointed. I have served for over six
years and now is the time for a new Chair to lead the Board and the Company
forward. The Company will shortly initiate a search process to identify a
suitable candidate.
· Subject to completion of regulatory due diligence, replacing David
Noko as a Non-Executive Director, Mathews Senosi has been invited to join the
Board. We will welcome his involvement and look forward to benefitting from
his significant sectoral experience.
The Bushveld Board stands resolutely in support of management's turnaround
strategy and focus for 2024. This is to build on the progress made in the
second half of 2023 to become a simple, fast and effective mining company.
Continued improvement in operational performance, the disposal of the energy
assets, and the further reduction of debt will facilitate a strengthening of
our investment proposition during the course of the current financial year. A
recovery in the price of vanadium will, of course, also be vital and most
welcome.
In closing, I must recognise the commitment, support, and dedication of my
Board colleagues who have been unstintingly generous with their time and have
provided much wise counsel during this pivotal period in the Company's
development. Collectively, we also recognise the huge effort of the Executive
Management team under Craig's leadership for their steady hand and commitment
to restoring Bushveld Minerals' intrinsic value for its shareholders.
Michael J. Kirkwood
Chairman
28 June 2024
Chief Executive Officer's Review
Refocusing our business objectives
DEAR STAKEHOLDERS,
I am pleased to be writing to you in my first letter as CEO of Bushveld
Minerals.
I joined the Company at a critical juncture in its history, heavily beset as
it was by a confluence of financial, operational and broader contextual
challenges. While I have been at the helm for a relatively short time, just 11
months at the time of writing, I can report that the team has worked
incredibly hard, under difficult circumstances, to turn this ship around.
In this, our priority has been the overhaul of Bushveld's strategy. We have
moved away from the objective of vertical integration to refocus on the
original fundamentals of the business as an efficient miner of vanadium that
can deliver a sustained value to all stakeholders. Such has been the result of
our hard work that, today, we present you with a pure-play, focused vanadium
producer, capable of producing sustainable free cash flow within the right
market conditions.
Of course, prior to my joining mid-year, on 1 July 2023, work refocusing our
business objectives had already started on some of the issues facing the
business. At an operational level, the load curtailment solution between
Vanchem and the Emalahleni Municipality was agreed early in 2023 providing a
far more stable, predictable power feed to the kiln. On the financial front,
the initial Investment Committee approved the term sheet for the Orion loan
restructuring which was announced in May 2023 with the deal finalised in
February 2024; and while the proposed listing never crystallised for various
reasons, there was an attempt to get the energy assets unbundled into their
own listed vehicle.
This review focuses on the initiatives pursued, including the key transactions
announced and hard operational and restructuring decisions taken in my first
six months with the Company, and into the current financial year.
STABILISING THE BUSINESS
Within days of arriving at Bushveld, the uphill task we had ahead of us was
quite clear. Beyond the long-term debt position with Orion that had become
current, we also owed creditors large sums of money, the majority of the
balance being long outstanding, and it was apparent that we had to reduce
these creditor balances in order to improve the steady supply of raw materials
that would in turn facilitate consistent output from both our production
facilities. To do this, we had to bolster our cash balance and improve our
working capital situation quickly, to ensure our credit period days were
reduced and suppliers were more confident they would be paid timeously on
supply of goods. A big contributor to achieving the funding boost, was the
comprehensive proposed investment by Southern Point Resources ("SPR")
announced in September 2023. There is no doubt that the immediate
US$8.0 million (ZAR150.0 million) working capital loan under the SPR
agreement provided an immediate boost to our bank balance and breathing room
as we proceeded with the other transactions within the overall US$69.5-77.5
million funding package. In December 2023, we also successfully concluded the
definitive agreements for the sale of 50% of Vanchem and our 64% interest in
Mokopane for a total price of US$25 million. This transaction was altered in
May 2024 to include 100% of our share in Vanchem. During the period, we also
concluded a sales and marketing agreement with SPR, part of which will see
them provide Bushveld with a provisional working capital facility of US$25-30
million, to replace our existing working capital facilities. We also pushed
the button on a much-needed equity raising, which, including the previously
agreed US$12.5 million injection from SPR, saw us raise a commitment of a
total of US$18.4 million in fresh capital for the business of which US$14.9
million has been received. While there have been some post-year-end delays on
the flow of some of these funds, we have made great strides with SPR in
executing the various parts of our broad agreement and are continually
engaging on the remaining transactions.
REFOCUSING OUR BUSINESS OBJECTIVE
From an operational perspective we identified that, in order to improve
Vanchem's performance, it was vital we implement various initiatives during
the month of July 2023 to get that facility into a sustainable positive cash
flow position in the short term and achieve stable production levels of
approximately 180 mtV per month. Initiatives pursued included: Changing the
re-agent mix from 100% sodium sulphate to a mix of sodium carbonate and sodium
sulphate, which reduces the silica build up at the kiln and hence increases
the kiln availability. Deploy a team from Vametco to Vanchem to improve
knowledge sharing.
• 24/7 shift managers for supervision to ensure immediate
decision-making. Annual Report and Financial Results 2023
After familiarising myself with the business as a whole, I realised that there
were several legacy and non-core assets that were using management time and
Company funds to maintain and develop, while not contributing any near- to
medium-term returns. Once identified, we initiated the process of disposing of
those assets to focus on our main business, namely the production of vanadium.
Toughest of all the decisions was the one we had to make towards the end of
the financial year where, having right-sized the business, and taken into
account our financial constraints, we had no choice but to make redundant a
number of our Group Head Office employees. The office restructuring will
result in a cost saving of US$1.5 million per year. While it is never easy
letting people go, we knew these measures were essential for navigating the
current market conditions and ensuring the Company's continued competitiveness
throughout the commodity cycle.
FINANCIALS
The 2023 financial results were affected by lower vanadium prices and higher
operating costs which resulted in an underlying EBITDA¹ loss of US$7.5
million. We used cash generated from operating activities of US$6.2 million
and ended the year with a cash and cash equivalent balance of US$1.3 million.
At the beginning of 2024, the Company completed the refinancing of the
unsecured convertible loan notes issued to Orion as follows:
• US$4.7 million of the convertible debt obligations capitalised
into a subscription for 124,747,016 new ordinary shares.
• A new convertible loan note of US$14.1 million maturing on 30 June
2028.
• A term loan of US$28.3 million maturing on 30 June 2026.
• Supplemental royalty at not more than 0.264% of Bushveld's gross
revenues and reducing by 80% at the term loan maturity.
The announcement of the 100% sale of Vanchem made post the financial year end,
has provided working capital to fund ongoing operations and allows the Group
to reduce its overdue creditor balance.
ASSET RATIONALISATION
In our efforts to reduce costs and simplify our business, the Company has also
initiated processes on disposing of several of its assets.
Within the scope of the SPR transaction, the Company has conditionally sold
Vanchem to SPR and our 64% interest in the Mokopane development project for
US$40-45 million. Definitive agreements have been signed for both of these
transactions and we await final conditions around regulatory approvals to be
met. Advisors have also been hired to manage the sale process of CellCube and
the Bushveld Electrolyte production plant.
We also reassessed the merits of pursuing the mining right application
associated with the Brits Project, neighbouring Vametco, and concluded that it
should be discontinued. Discussions over the disposal of Lemur, a thermal coal
asset in Madagascar, are also underway.
OPERATIONS
It was clear early on in my tenure that while Vametco was largely reliable and
in suitable operating condition (save for the Barren Dam constraints), it was
Vanchem which required further improvements and consistency in order to stand
on its own two feet.
After spending some time at the assets, I took the difficult decision to
revise guidance to a realistic and achievable target of between 3,700 mtV and
3,900 mtV (previously between 4,200 mtV and 4,500 mtV). The good news is that
the turnaround plan implemented and described above helped us achieve the
targeted production rates, with Vanchem achieving its highest production level
since the asset was acquired by Bushveld.
At Vanchem, we saw a significant improvement in our safety performance with
a total recordable injury frequency rate of 2.31 (2022: 10.32). The
improvement is a result of the implementation of a safety diagnostic
assessment action plan, with special focus on the leading indicators, namely,
visible felt leadership, planned task observations, inspections and addressing
all the audit results.
OUTLOOK
Our immediate focus for the remainder of 2024 is to build on the
aforementioned achievements. We aim to ensure that Vametco realises
operational stability and achieves a sustainable monthly production of circa
240 mtV by Q4 2024. In addition to commencing with the project to buttress the
slimes dam, increasing the capacity of the Barren Dam at Vametco remains an
important debottlenecking project that needs to be resolved.
We will continue to reduce debt and implement cost saving measures in line
with our asset rationalisation.
The low vanadium price has continued into 2024 with the commodity trading
around US$26/kgV. As a Group, we will continue to prioritise sales into higher
value markets, such as the aerospace application, speciality alloy and
chemicals, and higher price markets, such as nitro vanadium in North America.
I must thank Orion, SPR and all other shareholders for their support through
this difficult time. As mentioned at the start of this letter, we have taken
big strides in focusing this business on the efficient production of vanadium
for global markets.
I look forward to updating you on our progress to becoming a simple, fast and
effective company during the course of the current financial year.
Craig Coltman
Chief Executive Officer
Chief Financial Officer's Review
1. OVERVIEW
Unit FY 2023 FY 2022
Revenue US$m 137.5 148.4
Cost of sales US$m (122.1) (108.3)
Other operating income and costs US$m (77.2) (40.0)
Administrative costs US$m (20.8) (20.3)
Adjusted EBITDA US$m (66.1) (1.7)
Impairment charges US$m (58.6) (24.0)
Underlying EBITDA US$m (7.5) 22.3
Average foreign exchange rate US$/ZAR 18.46 16.35
Group production mtv 3,714 3,842
Group sales mtv 4,051 3,584
All-in sustaining costs ("AISC") US$/kgV 51.0 43.7
Average realised price US$/kgV 33.9 41.4
The 2023 financial results were affected by lower vanadium prices and higher
operating costs to stabilise the assets. The operational initiatives to
prioritise operational stability paid off with Vanchem achieving its highest
yearly production since the asset was acquired by Bushveld. Our turnaround
efforts, which resulted in us achieving this record production and stabilising
the operation, allowed us to achieve meaningful value for this asset when an
agreement was reached to sell 100% of Vanchem post financial year end.
In 2023, we recorded an underlying EBITDA loss of US$7.5 million and adjusted
EBITDA loss of US$66.1 million. The operating loss also included impairment
losses of US$58.6 million (2022: U$24.0 million). US$49.6 million of the
impairment losses pertain to Mokopane and US$8.2 million to Vanchem. The
refinancing of the Orion Mine Finance ("Orion") US$35 million convertible loan
notes and capitalised interest into a revised capital structure was completed
at the beginning of 2024. The Group also conducted, during the end of 2023, an
equity raise and entered into agreements with Southern Point Resources ("SPR")
for cumulative proposed investment of US$69.5 - US$77.5 million.
2. INCOME STATEMENT
Analysis of results
The income statement summary below is adjusted from the "statutory" primary
statement presentation:
Year ended Year ended
In US$'000 31-Dec-23 % change 31-Dec-22
Revenue 137,471 -7% 148,448
Cost of sales excluding depreciation (106,097) 18% (90,268)
Other operating income and costs (18,567) 16% (15,985)
Other operating income 2,059 -25% 2,733
Selling and distribution costs (8,825) -5% (9,270)
Other mine operating costs (2,838) 4% (2,723)
Idle plant costs (8,963) 33% (6,725)
Administration costs excluding depreciation (20,266) 2% (19,889)
Underlying EBITDA (7,459) -133% 22,306
Impairment losses (58,637) 145% (23,965)
Adjusted EBITDA (66,096) 3884% (1,659)
Depreciation (16,491) -11% (18,475)
Operating loss (82,587) 310% (20,134)
Other losses (3,378) 313% (818)
Share of loss from joint venture (4,242) -17% (5,112)
Fair value gain on derivative liability 32 -99% 2,934
Net financing expenses (14,864) 9% (13,654)
Loss before tax (105,039) 186% (36,784)
Income tax (1,730) -229% 1,345
Net loss for the year (106,769) 201% (35,439)
Revenue
Year ended Year ended
31-Dec-23 31-Dec-22
Group sales (mtV) 4,051 3,584
Average realised price (US$/kgV) 33.9 41.4
Revenue (US$'000) 137.5 148.4
Revenue of US$137.5 million for the Group was 7 percent lower than in the
previous year, due to an 18 percent decrease in the average realised price to
US$33.9/kgV, partially offset by a 13 percent increase in Group sales to 4,051
mtV.
The geographic split of Group sales in 2023 was 44 percent to the USA, 27
percent to Europe, nine percent to Asia, seven percent to South Africa, and 13
percent to the rest of the world. During the year we continued to prioritise
sales into the higher value markets (aerospace application, speciality alloy
and chemicals) and higher price markets (Nitro Vanadium in North America).
Cost analysis
Year ended Year ended
In US$'000 31-Dec-23 31-Dec-22
Cost of sales excluding depreciation (106,097) (90,268)
Other operating income and costs (77,204) (39,950)
Administration costs excluding depreciation (20,266) (19,889)
Total income statement operting cost excluding depreciation (203,567) (150,107)
Total units sold (mtV) 4,051 3,584
Cost per income statement per unit sold (excluding depreciation) (US$/kgV) 50.3 41.9
Sustaining capital (3,202) (6,589)
Total cost including sustaining capital (206,769) (156,696)
Cost per unit sold including sustaining capital (US$/kgV) 51.0 43.7
Cost of sales
The cost of sales, excluding depreciation, for the year was US$106.1 million,
18 percent higher than the prior year primarily due to higher costs at both
Vametco and Vanchem. The cost increases included:
· Reduction in finished goods as the Group sold 340 mtV more than
what was produced in the year;
· Increase in raw material prices from suppliers;
· Increase in energy and staff costs due to cost escalation;
· Increase in inventory write-downs at Vanchem which included a net
realisable value write-down of US$1.8 million as well as a $1.8 million
write-down of work-in-progress and raw materials; and
· These costs increases were partially offset by a decrease in the
ZAR:USD exchange rate.
Other operating income and costs
Other operating income and costs increased to US$77.2 million primarily due
to:
· A US$34.7 million increase in impairment losses to US$58.6
million. US$49.6 million of the impairment losses pertain to the Mokopane
Project in order to reduce the carrying amount of the Project to the sales
price agreed with SPR of US$3.7 million. US$8.2 million impairment loss was
recognised for Vanchem to align the carrying amount with the agreed sales
price for the initial 50% sale of Vanchem. After year-end, this transaction
was altered to sell a 100% of our share in Vanchem. Following the closing of
the sale, we will derecognise the assets and liabilities of Vanchem and any
difference between the net assets and the consideration received will be
recorded as a gain or loss on disposal.
· A $2.2 million increase in idle plant costs to US$9.0 million due
to additional downtime at Vanchem and Vametco, partially offset by a decrease
in the ZAR:USD exchange rate; and
· Selling and distribution costs decreased by US$0.4 million
primarily due to lower commissions paid driven by lower average realised
prices partially offset by higher distribution costs.
Cost per unit sold
The Group cost per unit sold for the year (including sustaining capital
expenditure) was US$51.0/kgV. This represents a 17 percent increase relative
to the prior year primarily as a result of the cost factors noted above,
offset by higher sales volumes and a weaker ZAR:US$ exchange rate.
Administration costs
Administration costs, excluding depreciation charges for the year were US$20.3
million. Below is a breakdown of the key items included in administration
costs:
Year ended Year ended
(In thousands US$) 31-Dec-23 31-Dec-22
Staff costs 9,048 9,327
Professional fees 7,051 6,007
Share-based payments (254) 315
Other (including IT and security expenses) 4,421 4,240
20,266 19,889
Professional fees increased by 17 percent to US$7.1 million primarily driven
by higher legal fees and consulting fees incurred as a result of the
agreements entered into by SPR and Orion.
Adjusted and underlying EBITDA
Adjusted EBITDA is a factor of volumes, prices and cost of production. This is
a measure of the underlying profitability of the Group, which is widely used
in the mining sector. Underlying EBITDA removes the effect of impairment
charges.
Year ended Year ended
In US$'000 31-Dec-23 31-Dec-22
Revenue 137,471 148,448
Cost of sales (122,068) (108,304)
Other operating costs and income (77,204) (39,950)
Administration costs (20,786) (20,328)
Add: Depreciation 16,491 18,475
Adjusted EBITDA (66,096) (1,659)
Add: Impairment losses 58,637 23,965
Underlying EBITDA (7,459) 22,306
The Group delivered an adjusted EBITDA loss of US$66.1 million, a US$64.4
million reduction compared 2022, primarily driven by impairment losses, lower
realised prices and higher operating costs. The Group generated an underlying
EBITDA loss of US$7.5 million, US$29.8 million less than 2022.
Net financing expenses
Net financing expenses were US$14.9 million, US$1.2 million higher than in the
prior year. The increase was primarily due to interest on the Orion production
facility agreement ("Orion PFA") and Orion convertible loan notes. Below is a
breakdown of net financing expenses:
Year ended Year ended
(In thousands US$) 31-Dec-23 31-Dec-22
Finance income (523) (494)
Interest on borrowings 12,151 11,189
Unwinding of discount rate 1,873 1,726
Interest on lease liabilities 724 974
Other finance costs 639 259
14,864 13,654
Interest on borrowings mainly reflected the finance costs on the Orion
convertible loan notes of US$7.1 million (2022: US$6.4 million), interest on
the Orion PFA of US$4.4 million (2022: US$4.4 million), and interest on
interim working capital facility from SPR of US$0.4 million (2022: US$ nil).
Other non-cash costs
The share of loss from investments in joint ventures of US$4.2 million (2022:
US$5.1 million) is the Group's share of the loss from its investment in
VRFB-H.
Other losses of US$3.4 million include a write-down of the Mustang Energy Plc
("Mustang") convertible loan notes of US$1.7 million following the exercise of
the backstop agreement, a write-down of $0.4 million on the conversion of the
Mustang working capital loan as well as US$1.3 million of additional funding
provided to Cellcube.
3. BALANCE SHEET
Assets
Intangible assets decreased compared to the previous year as the Mokopane
intangible asset was impaired by US$49.6 million to reflect a recoverable
amount of US$3.7 million. The Mokopane intangible asset was reclassified to
asset held for sale as the sale was considered highly probably at year end.
Property, plant and equipment decreased by US$27.7 million due to depreciation
of US$16.5 million, impairment losses of US$9.0 million and weaker ZAR:USD
exchange rate, partially offset by capital expenditure of US$5.7 million.
Inventories decreased by US$12.7 million compared to the previous year
primarily due to a decrease in finished goods as the Group sold more than what
was produced, a decrease in the ZAR:USD exchange rate and an increase in the
write-offs recorded partially offset by an increase in the weighted average
production cost.
Trade and other receivables increased by US$15.5 million compared to the prior
year primarily due to the recognition of subscription receivables of US$13.9
million which was received subsequent to year end.
The decrease in other financial assets is due to the write-down of the Mustang
convertible loan notes following the exercise of the backstop agreement.
The decrease in cash and cash equivalents to US$1.3 million was primarily due
to cash used from operations (US$6.2 million), capital expenditures incurred
(US$5.7 million), repayment of finance costs and borrowings (US$5.5 million),
partially offset by net proceeds received from the interim working capital
facility (US$7.5 million) and net proceeds received from the equity raise
(US$0.8 million).
Equity
The increase in share capital and share premium was due to the shares issued
to the Mustang convertible loan note holders following the exercise of the
backstop agreement, the shares issued in order to acquire the minority
interest in Bushveld Vametco Holdings and the shares issued in the equity
raise completed at the end of the year
Liabilities
Total borrowings (excluding lease liabilities) of US$98.58 million increased
by US$15.5 million compared to the prior year due to the capitalisation of
finance costs of US$12.7 million and additional funding provided of US$9.0
million, partially offset by the repayment of Orion PFA of US$3.9 million and
repayment of Primorus convertible loan note of US$1.2 million.
The net debt reconciliation below outlines the Group's total debt and cash
position:
Year ended Year ended
(In thousands US$) 31-Dec-23 31-Dec-22
Orion Production Financing Arrangement (35,635) (35,146)
Orion Convertible Loan Note (46,766) (39,742)
Industrial Development Corporation Loans (6,238) (5,480)
SPR interim working capital facility (7,812) -
Other (2,124) (2,762)
Lease liabilities (8,428) (7,283)
Total debt (107,003) (90,413)
Cash and cash equivalents 1,281 10,874
Net debt (105,722) (79,539)
Net debt increased by US$26.2 million compared to the prior year due to
capitalised interest of US$7.1 million on the Orion convertible loan notes,
the SPR interim working capital of US$7.8 million and an increase in lease
liabilities of US$1.1 million and the decrease in the cash and cash
equivalents balance of US$9.6 million.
We completed the refinancing of the unsecured Orion convertible loan notes at
the beginning of 2024 as follows:
· US$4.7 million of the convertible debt obligation capitalised
into a subscription for 124,747,016 new ordinary shares;
· A new convertible loan note of US$14.1 million maturity on 30
June 2028;
· A term loan of US$28.3 million maturity on 30 June 2026; and
· Supplemental royalty not more than 0.264% of Bushveld's gross
revenues reducing by 80% at the term loan maturity.
4. CASH FLOW STATEMENT
The table below summarises the main components of cash flow during the year:
Year ended Year ended
(In thousands US$) 31-Dec-23 31-Dec-22
Operating loss (82,587) (20,134)
Impairment losses 58,637 23,965
Depreciation 16,491 18,475
Other non-cash items (3,213) (6,629)
Changes in working capital and provisions 7,151 6,154
Taxes paid (2,705) (648)
Cash inflow/(outflow) from operations (6,226) 21,183
Sustaining capital expenditures (3,202) (6,589)
Free cash flow (9,428) 14,594
Cash used in other investing activities (2,478) (13,000)
Cash generated from / (used in) financing activities 2,941 (5,346)
Cash outflow (8,965) (3,752)
Opening cash and cash equivalents 10,874 15,433
Foreign exchange movement (628) (807)
Closing cash and cash equivalents 1,281 10,874
Operating activities
The Group used cash from operating activities of US$6.2 million, compared to
cash generated from operations of US$21.2 million in the prior year. The
change is primarily drive by the decrease in adjusted EBITDA.
Investing activities
Cash used in investing activities (including sustaining capital expenditure)
of US$6.3 million was primarily driven by capital expenditure on property,
plant and equipment of US$5.7 million.
Capital Expenditure (US$' million)
Year ended Year ended
In millions US$ 31-Dec-23 31-Dec-22
Vametco 2.4 6.5
Growth - -
Sustaining 2.4 6.5
Vanchem 0.9 4.5
Growth 4.4
Sustaining 0.9 0.1
Bushveld Energy 2.4 7.1
Growth 2.4 7.1
Total capital expenditures 5.7 18.2
Financing activities
Cash generated from financing activities of US$2.9 million comprised of the
US$9.0 million proceeds received from borrowings mainly from the interim
working capital facility and the net proceeds of US$0.8 million received from
the equity raise, partially offset by the repayment of Orion PFA of US$3.9
million, repayment of Primorus convertible loan note of US$1.2 million, the
repayment of lease liabilities of US$0.7 million and the amount paid in cash
to acquire the minority interest in Bushveld Vametco Holdings of US$0.6
million.
5. FINANCIAL RISK
The primary financial risks faced by the Group relate to the availability of
funds to meet business needs due to the historically low vanadium prices
(liquidity risk), the risk of default by counterparties to financial
transactions (credit risk), fluctuations in interest and foreign exchange
rates, and commodity prices (market risk). These factors are more fully
outlined in the notes to the consolidated financial statements. They are
important aspects to consider when addressing the Group's going concern
status. We proactively manage the risks within our control.
There are, however, factors outside the control of management. These are
volatility in the ZAR:US$ exchange rate, as well as the vanadium price, which
have a significant impact on the cash flows of the business. We have a hedging
policy and assess 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 30 June 2025. 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 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, the working capital requirements, capital expenditure
commitments and forecasts, expected proceeds from the sale of Vanchem and
Mokopane and outstanding equity proceeds. Additionally, we factored in the
favourable relationship with Orion, demonstrated by the restructuring of
agreements to accommodate market conditions and constructive engagement in
relevant matters.
The Group's ability to continue as a going concern is dependent on its ability
to complete the sale of Vanchem and Mokopane and the timing of those sales
proceeds, complete the refinance of the Orion senior term loan and the timing
of receiving the additional funding, the continuing support of Orion, and
achieving the planned production levels at the estimated average sales prices.
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 2023 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.
Robbie Taylor
Interim Chief Financial Officer
28 June 2024
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.
Consolidated Statement of Profit or Loss
Figures in thousands of US$ Notes 2023 2022
Revenue 5 137,471 148,448
Cost of sales (122,068) (108,304)
Gross profit 15,403 40,144
Other operating income 2,059 2,733
Impairment losses 13, 14 (58,637) (23,965)
Selling and distribution costs (8,825) (9,270)
Other mine operating costs (2,838) (2,723)
Idle plant costs (8,963) (6,725)
Administration expenses 7 (20,786) (20,328)
Operating loss (82,587) (20,134)
Finance income 8 523 494
Finance costs 9 (15,387) (14,148)
Other losses 10 (3,378) (818)
Fair value gain on derivative liability 28 32 2,934
Share of loss from investments in associate and joint venture 18 (4,242) (5,112)
Loss before taxation (105,039) (36,784)
Taxation 11 (1,730) 1,345
Loss for the year (106,769) (35,439)
Loss attributable to
Owners of the parent (103,927) (38,968)
Non-controlling interest (2,842) 3,529
(106,769) (35,439)
Loss per ordinary share
Basic loss per share (cents) 12 (7.43) (3.07)
Diluted loss per share (cents) 12 (7.43) (3.07)
Consolidated Statement of Comprehensive Loss
Figures in thousands of US$ Notes 2023 2022
Loss for the year (106,769) (35,439)
Consolidated other comprehensive income/(loss) Items that will not be
reclassified to profit or loss
Other fair value movements 15 140
Items that may be reclassified to profit or loss
Currency translation differences (12,673) (15,712)
Other comprehensive loss for the year net of taxation (12,658) (15,572)
Total comprehensive loss (119,427) (51,011)
Total comprehensive loss attributable to
Equity holders (115,732) (53,323)
Non-controlling interest (3,695) 2,312
(119,427) (51,011)
Consolidated Statement of Financial Position
Figures in thousands of US$ Notes 2023 2022
Assets
Non-current assets
Intangible assets 13 - 53,469
Property, plant and equipment 14 99,744 127,409
Investment property 15 2,173 2,412
Deferred tax asset 16 464 -
Investments in associate and joint venture 18 2,360 3,151
Restricted investment 21 2,881 2,710
Total non-current assets 107,622 189,151
Current assets
Inventories 19 42,273 54,990
Trade and other receivables 20 25,018 9,498
Other financial assets 17 24 3,075
Cash and cash equivalents 22 1,281 10,874
68,596 78,437
Asset held for sale 13 3,700 -
Total current assets 72,296 78,437
Total assets 179,918 267,588
Equity and liabilities
Share capital 23 26,944 17,122
Share premium 23 140,272 127,702
Accumulated loss 23 (118,006) (39,147)
Share-based payment reserve 24 261 515
Foreign currency translation reserve 23 (47,166) (35,346)
Fair value reserve 23 (1,783) (1,798)
Attributable to equity holders 522 69,048
Non-controlling interest 288 36,583
Total equity 810 105,631
Liabilities
Non-current liabilities
Post-retirement medical liability 25 1,577 1,675
Environmental rehabilitation liabilities 26 16,633 16,610
Deferred consideration 27 306 1,527
Borrowings 28 38,008 35,272
Lease liabilities 29 7,746 6,721
Deferred tax liability 16 - 1,191
Total non-current liabilities 64,270 62,996
Current liabilities
Trade and other payables 30 46,295 45,896
Provisions 31 1,944 1,714
Borrowings 28 60,567 47,858
Lease liabilities 29 682 561
Deferred consideration 27 2,304 901
Current tax payable 3,046 2,031
Total current liabilities 114,838 98,961
Total liabilities 179,108 161,957
Total equity and liabilities 179,918 267,588
Consolidated Statement of Changes in Equity
Foreign Total
attributable
Share Share currency translation Share-based Fair value Accumulated to equity holders of Non- controlling Total
payment
Figures in thousands of US$ capital premium reserve reserve reserve loss the Group interest equity
Balance at 1 January 2022 16,797 125,551 (20,851) - (1,938) (179) 119,380 32,482 151,862
Loss for the - - - - - (38,968) (38,968) 3,529 (35,439)
year
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 28) - - - - - - - 1,789 1,789
Balance at 1 January 2023 17,122 127,702 (35,346) 515 (1,798) (39,147) 69,048 36,583 105,631
Loss for the year - - - - - (103,927) (103,927) (2,842) (106,769)
Other comprehensive income,
net of tax:
Currency translation differences - - (11,820) - - - (11,820) (853) (12,673)
Other fair value movements - - - - 15 - 15 - 15
Total comprehensive loss for
the year - - (11,820) - 15 (103,927) (115,732) (3,695) (119,427)
Transaction with owners:
Issue of shares 6,874 9,977 - - - - 16,851 - 16,851
Share issue costs (945) (945) (945)
Share-based payment - - - (254) - - (254) - (254)
Acquisition of non-controlling
interest 2,948 3,538 - - - 25,068 31,554 (33,036) (1,482)
Contribution from non-controlling
interest (note 28) - - - - - - - 436 436
Balance at 31 December 2023 26,944 140,272 (47,166) 261 (1,783) (118,006) 522 288 810
Consolidated Statement of Cash Flows
Figures in thousands of US$ Notes 2023 2022
Cash flows from operating activities
Loss before taxation (105,039) (36,784)
Adjustments for:
Depreciation property, plant and equipment (including right-of-use assets) 14 16,491 18,475
Share of loss from investments in associate and joint venture 18 4,242 5,112
Fair value gain on derivative liability 28 (32) (2,934)
Finance income 8 (523) (494)
Finance costs 9 15,387 14,148
Impairment losses 13, 14 58,637 23,965
Loss on financial instruments and conversion of loan 2,052 -
Other non-cash movements 2,415 1,138
Foreign exchange differences (4,302) (6,949)
Changes in working capital 7,151 6,154
Income taxes paid (2,705) (648)
Net cash generated from/(used in) operating activities (6,226) 21,183
Cash flows from investing activities
Finance income 367 336
Purchase of property, plant and equipment (5,725) (18,197)
Purchase of investments 18 - (1,211)
Purchase of exploration and evaluation assets 13 (322) (517)
Net cash used in investing activities (5,680) (19,589)
Cash flows from financing activities
Repayment of borrowings 28 (2,232) (5,623)
Proceeds from borrowings 28 8,990 4,222
Finance costs 28 (3,265) (3,217)
Lease payments 29 (703) (728)
Purchase of non-controlling interest 23 (643) -
Equity proceeds (net) 23 794 -
Net cash generated from/(used in) financing activities 2,941 (5,346)
Total cash and cash equivalents movement for the year (8,965) (3,752)
Cash and cash equivalents at the beginning of the year 10,874 15,433
Effect of translation of foreign exchange rates (628) (807)
Total cash and cash equivalents at end of the year 22 1,281 10,874
From Note 3 of the Accounts
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 preliminary announcement does not constitute financial statements for the
years ended 31 December 2023 and 31 December 2022.
The financial information for the year ended 31 December 2023 has been
extracted from the Group's audited financial statements which were approved by
the Board of Directors on 28 June 2024. The report of the auditor on the 31
December 2023 financial statements was unqualified but contained a material
uncertainty paragraph relating to going concern.
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$106.77 million for the year
ended 31 December 2023 of which US$58.64 million related to
impairment losses (31 December 2022: US$23.97 million). As at 31 December 2023
the Group had cash and cash equivalents of US$1.28 million (31 December 2022:
US$10.87 million) and total borrowings of US$98.58 million (31 December 2021:
US$83.13 million).
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 30 June
2025. 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 met.
The Group has entered into a revised sales agreement with SPR, which was
approved by the shareholders, whereby the Group will sell 100% of Vanchem. The
closing of the Vanchem sale remains conditional upon approval by the
Competition Tribunal. The Group also entered into revised agreements with
Orion whereby the Group will receive additional funding of up to US$10 million
under the senior term loan facility and the repayment of interest and capital
are extended to 31 December 2025. The drawdown of the additional facility is
subject to SARB approval.
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
annual consolidated financial statement. 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, its working
capital requirements, capital expenditure commitments and forecasts, expected
proceeds from the sale of Vanchem and Mokopane and outstanding equity
proceeds. Additionally the Directors factored in the favourable relationship
with Orion, demonstrated by the restructuring of agreements to accommodate
market conditions and constructive engagement in relevant matters.
The cashflow forecast for Vametco takes into consideration production levels
achieved to date, annual planned maintenance shutdowns are undertaken, 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, which are based
on external forecasts, are that the average price achieved by the Group will
be US$27.73/kgV through to 31 December 2024 and an average of US$34.40/kgV
throughout 2025. The year-to-date average price achieved by the Group was
circa US$26/kgV.
The Group's ability to continue as a going concern is dependent on its ability
to complete the sale of Vanchem and Mokopane and the timing of those sales
proceeds, complete the refinance of the Orion senior term loan and the timing
of receiving the additional funding, the continuing support of Orion, and
achieving the planned production levels at the estimated average sales prices.
These conditions indicate the existence of material uncertainties that may
cast significant doubt on the Group's ability to continue as a going concern.
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 2023 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 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%, 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.
Associates and joint ventures
An associate is an entity over which the Group has significant influence but
neither control nor joint control. 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 associates and joint
ventures are accounted for using the equity method. Under the equity method,
the share of the profits or losses of the associate and joint
venture is recognised in profit or loss and the share of the movements in
other comprehensive income is recognised in other comprehensive
income. Investments in associates and 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 associate and joint venture.
Goodwill relating to the associate and joint venture is included in the
carrying amount of the investment and is neither amortised nor individually
tested for impairment. Income earned from associate or joint venture entities
reduces the carrying amount of the investment.
Non-controlling interests
Non-controlling interests in subsidiaries are identified separately from the
Group's shareholders 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. The Company acquired the 26% interest in Bushveld Vametco Holdings
on 20 December 2023 (see note 23).
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% 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 on delivery of the goods. 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 in which 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.
Assets held for sale
Non-current assets and disposal groups are classified as held for sale if
their carrying value will be recovered principally through a sale transaction
rather than through continuing use. The criteria for held for sale
classification is regarded as met only when the sale is highly probable and
the asset or disposal group is available for immediate sale in its present
condition. Actions required to complete the sale should indicate that it is
unlikely that significant changes to the sale will be made or that the
decision to sell will be withdrawn. Management must be committed to the plan
to sell the asset or disposal group and the sale expected to be completed
within one year from the date of the classification.
Non-current assets and disposal groups classified as held for sale are
measured at the lower of their carrying amount and fair value less costs of
disposal ("FVLCD"). If the FVLCD is lower than the carrying amount, an
impairment loss is recognised in the consolidated statement of profit or loss.
Non-current assets are not depreciated or amortised once classified as held
for sale. Assets and liabilities classified as held for sale are presented
separately as current items in the consolidated statement of financial
position.
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 expenditure 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"). In the absence of market-related information or similar
transactions, the FVLCD is estimated based on discounted future estimated cash
flows (expressed in real terms) expected to be generated from the continued
use of the CGU 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 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.
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
Work in progress and finished goods are measured at the lower of weighted
average production cost and net realisable value. Raw materials and
consumables are measured at the lower of average purchase cost and net
realisable value.
Production costs include cost of raw materials, direct labour, other direct
costs and related production overheads, but exclude borrowing costs.
Production overheads are allocated to inventory based on the normal operating
capacity of the production facilities.
Net realisable value is the estimated selling price in the ordinary course of
business, less the estimated cost of completion and the estimated selling
expenses. Any write-down to net realisable value is recognised as an expense
in the period in which the write-down occurs. Any reversal is recognised in
the consolidated statement of profit or loss in the period in which the
reversal occurs. Provision is made, if necessary, for slow-moving, obsolete or
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 other comprehensive income ("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. This is classified as a financial asset and measured at
amortised costs.
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 capitalised 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. Capitalisation 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% to 11% depending on the nature of the underlying asset.
Lease payments included in the measurement of the lease liability comprise:
· fixed lease payments (including in-substance fixed payments),
less any lease incentives;
· variable lease payments that depend on an index or rate,
initially measured using the index or rate at the commencement date;
· the amount expected to be payable by the lessee under residual
value guarantees;
· the exercise price of purchase options, if the lessee is
reasonably certain to exercise the options; and
· payments of penalties for terminating the lease, if the lease
term reflects the exercise of an option to terminate the lease.
The lease liability is presented as a separate line in the 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 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 Programme
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 the
UK-adopted International Accounting Standards requires management to make
judgements, estimates and assumptions that affect the reported amount 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 an indication of impairment or reversal of a previous impairment charge
exists an estimate of a CGU's recoverable amount is calculated. The
recoverable amount is based on the higher of FVLCD and VIU using a discounted
cash flow methodology taking into account assumptions that would be made by
market participants, unless there is a market price available based on a
recent purchase or sale.
If the recoverable amount is based using a discounted cash flow methodology,
expected future cash flows used 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.
The Group entered into sales agreements with Southern Point Resources ("SPR")
to sell 50% of Bushveld Vanchem ("Vanchem") for a consideration of between
US$20.0 million and US$21.3 million and to sell its interest in the Mokopane
Project for a consideration of US$3.7 million. The sales price for Vanchem is
dependent on if the Mokopane sale close within one year following the closing
of the Vanchem sale. As the completion of either sale is not dependent upon
the other, the directors are satisfied that the consideration for each
reflects the fair value. The directors determined that the premium paid on the
equity subscription price did not represent additional consideration for the
disposal of Vanchem or Mokopane as the price payable was equivalent to other
investors.
The recoverable amount of Vanchem CGU was based on the minimum sales price
offered of US$20.0 million as the increase in the sales price to US$21.3
million is dependent on the closing of Mokopane which does not form part of
the Vanchem CGU. An impairment loss of US$8.22 million was recognised in the
consolidated statement of profit and loss to align the carrying value of the
CGU with the recoverable amount of US$39.75 million, which is US$40.0 million
less cost of disposal of US$0.25 million (see note 14). The directors have
determined that the agreement to dispose of the remaining 50% of Vanchem (see
note 36) for an undiscounted sales price of between US$15-20 million does not
alter this valuation as it is considered a non-adjusting subsequent event.
The recoverable amount of the Mokopane Project was based on the sales price
offered of US$3.7 million (see note 13). An impairment loss of
US$49.62 million was recognised in the consolidated statement of profit or
loss to align the carrying value with the recoverable amount.
II. Assessment of control
Judgement made in relation to accounting policies
The Group needs to determine if it will continue to control its investment in
Vanchem following the closing of the transaction. The Group will initially
have the right to appoint half of the board of Vanchem (the "Board"),
including the Chairman, who will have a casting vote. The Chairman of the
Board will rotate between the shareholders every three years, unless SPR has
the right to appoint a director on the Board of the Group which would remove
the requirement for the Chairman rotate. The Board has the authority to manage
and direct the business and affairs of Vanchem and there are no limitations on
the Board's authority. All matters required to be approved by the Board,
including capital investment, operating, and financing decisions and annual
budgets will be made by a simple majority vote. In case there is a deadlock on
these decisions, the Chairman will have a casting vote in addition to his/her
deliberation vote. There is no limitations on the Chairman's casting vote.
The Group controls an entity when it 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. Based on the ability to
appoint the initial Chairman of the board and the expectation that the
Chairman will continue to be a Group appointee because SPR would have
representation on the Group's Board, the directors have made a significant
judgement that the Group will continue to control its investment in Vanchem.
As the reduction in the level of ownership of Vanchem will not result in a
loss of control the assets and liabilities have not been classified as held
for sale.
Subsequent to year-end (see note 36), the Group amended the agreement with SPR
whereby it will acquire the entire Vanchem asset. This is
considered a non-adjusting subsequent event and does not impact the above
assessment.
Other judgement and estimates
I. 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 (see note 26).
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 2023, 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 (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
2023 (Figures in thousands of US$) Administrative Impairment Operating
Revenues Cost of sales1 Other costs2 expenses3 losses loss
Vanadium mining and production 137,471 (122,068) (18,815) (6,139) (9,017) (18,568)
Exploration - - - (4) (49,620) (49,624)
Energy - - 25 (924) - (899)
Corporate - - 223 (13,719) - (13,496)
Total 137,471 (122,068) (18,567) (20,786) (58,637) (82,587)
1 Includes depreciation of US$15.97 million.
2 Other costs include other operating income, other mine operating
costs, selling and distribution costs and idle plant costs.
3 Includes depreciation of US$0.11 million for Vanadium mining and
production, US$0.28 million for Energy and US$0.13 million for Corporate.
Consolidated statement of profit or loss
2022 (Figures in thousands of US$) Impairment Operating
Revenues Administrative expenses3 losses loss
Cost of sales1 Other costs2
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 Includes 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 Includes depreciation of US$0.15 million for Vanadium mining and
production, US$0.10 million for Energy and US$0.18 million for Corporate.
2023 2022
Figures in thousands of US$ Total assets Total liabilities Total assets Total liabilities
Vanadium mining and production 139,018 107,662 186,460 104,351
Exploration 4,114 141 53,679 38
Energy 19,094 13,189 17,432 10,836
Corporate 17,692 58,116 10,017 46,732
Total 179,918 179,108 267,588 161,957
5. Revenue
Figures in thousands of US$ 2023 2022
Revenue from contracts with customers
Sale of goods 137,471 148,446
Other - 2
137,471 148,448
Disaggregation of revenue from contracts with customers The Group
disaggregates revenue from customers as follows: Sale of goods
Local sales of vanadium - NV12
4,514 5,503
Local sales of vanadium - NV16 1,973 2,650
Local sales of vanadium - MVO 128 4
Total local sales 6,615 8,157
Export sales of vanadium - NV12 34,861 34,939
Export sales of vanadium - NV16 83,439 99,672
Export sales of vanadium - AMV 12,556 5,678
Total export sales 130,856 140,289
Other - 2
Total revenue from contract with customers 137,471 148,448
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.
6. Staff costs
Figures in thousands of US$ 2023 2022
Production staff 24,055 25,799
Administrative staff 7,212 7,259
Key management personnel 1,836 2,068
33,103 35,126
Details of directors' remuneration are included in note 35 (related-party
transactions).
7. Administrative expenses by nature
Figures in thousands of US$ 2023 2022
Key management personnel 1,836 2,068
Staff costs 7,212 7,259
Depreciation of property, plant and equipment 520 439
Professional fees 7,051 6,007
Share-based payments (254) 315
Other 4,421 4,240
20,786 20,328
8. Finance income
Figures in thousands of US$ 2023 2022
Bank interest 149 206
Interest on restricted investment 218 127
Other finance income 156 161
523 494
9. Finance costs
Figures in thousands of US$ Notes 2023 2022
Interest on borrowings 28 12,151 11,189
Unwinding of discount on environmental rehabilitation liabilities 26 1,873 1,726
Interest on lease liabilities 29 724 974
Other finance costs 639 259
15,387 14,148
10. Other losses
Figures in thousands of US$ Notes 2023 2022
Movement in earnout estimate 27 6 693
Loss on financial instrument 17 1,700 125
Loss on conversion of loan 17 352 -
Write-off loan 1,320 -
3,378 818
The Group provided a working capital loan to Mustang Energy Plc ("Mustang") of
US$0.42 million which was repaid by issuing equity in the
capital of Mustang. The difference between the loan amount and the fair value
of the equity received was recognised as a loss in the consolidated statement
of profit or loss.
The Group provided additional funding to Enerox GmbH of US$1.32 million which
were written-off as the loan is not repayable.
11. Taxation
Figures in thousands of US$ 2023 2022
Current
Current income tax on profits for the year 3,196 3,294
Deferred
Deferred income tax movement for current year (1,456) (4,659)
Prior year adjustment (10) 20
(1,466) (4,639)
Income tax expense/(recovery) 1,730 (1,345)
The income tax expense/(recovery) represents the sum of the tax currently for the year.
payable and the deferred tax adjustment
2023 2022
Loss before tax (105,039) (36,784)
Tax at the applicable tax rate of 27% (2022: 28%)1 (28,361) (10,300)
Tax effect on non-deductible items 13,697 1,423
Origination and reversal of temporary differences 3,979 (2,045)
Deferred tax asset (recognised)/not recognised 7,376 7,916
Recognised deferred tax assets - initial recognition - (17)
Tax rate change - (210)
Foreign jurisdictions subject to a different tax rate 5,039 1,888
Taxation recovery for the year 1,730 (1,345)
1 Based on South African tax rate as it is the primary economic environment
in which the Group operates.
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.
Figures in thousands of US$ 2023 2022
Numerator
Net loss attributable to equity holders (103,927) (38,968)
Denominator (in thousands)
Weighted average number of common shares 1,399,650 1,270,637
Basic loss per share attributable to equity holders (cents) (7.43) (3.07)
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
Figures in thousands of US$ Iron Ore Coal Total
Balance, 1 January 2022 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
Capitalised expenditures 322 - 322
Impairment loss (49,620) - (49,620)
Exchange differences (471) - (471)
Transfer to asset held for sale (3,700) - (3,700)
Balance, 31 December 2023 - - -
Mokopane Vanadium and Iron Ore Project
The Group has 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 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 awaiting a response.
The Group entered into a sale of shares agreement with SPR on 14 December 2023
to sell its interest in the Mokopane Project for US$3.7 million. The
transaction is subject to certain regulatory approvals as well as other
customary closing conditions. The Competition Commission approved the sale
subsequent to year end.
At 31 December 2023, the Mokopane intangible asset met the criteria to be
classified as held for sale and has been classified as a current asset held
for sale on the consolidated statement of financial position. During the year
ended 31 December 2023, an impairment charge of US$49.62 million was
recognised in the consolidated statements of profit or loss to align the
carrying value of the asset with the sales price. The intangible asset forms
part of the exploration segment.
Brits Vanadium Project
The Group re-evaluated the Brits Vanadium Project and after careful
consideration it was concluded that the Project should be discontinued.
There was no loss recognised as the costs were not previously capitalised.
Coal Project
Coal exploration licences have been issued to Coal Mining Madagascar SARL, a
99% subsidiary of Lemur Investments Limited. The exploration is in south west
Madagascar covering 11 concession blocks in the Imaloto Coal basin known as
the Imaloto Coal Project and Extension. The Imaloto Coal Project was impaired
in 2023 as no further expenditures were budgeted. All further expenditures on
the Imaloto Coal Project was expensed as incurred. Subsequent to year-end, the
Group entered into an agreement to sell its interest in the Imaloto Coal
Project.
14. Property, plant and equipment
Motor vehicles,
Buildings and
other Plant and furniture and Right of use Waste Assets under
Figures in thousands of US$ improvements machinery* equipment asset stripping asset construction Total
Cost
At 1 January 2022 6,957 169,484 1,374 5,066 - 19,147 202,028
Additions - 691 138 2,989 1,850 15,988 21,656
Transfers within PPE 63 19,376 34 - - (19,473) -
Changes in environmental rehabilitation
liabilities - (1,705) - - - - (1,705)
Exchange differences (445) (9,298) (92) (435) (68) (1,098) (11,436)
At 31 December 2022 6,575 178,548 1,454 7,620 1,782 14,564 210,543
Additions - - 245 1,729 616 5,454 8,044
Changes in environmental rehabilitation
liabilities - (336) - - - - (336)
Scrapping of obsolete assets (34) (4,443) (192) (424) - - (5,093)
Transfers within PPE 264 2,106 - - - (2,370) -
Exchange differences (556) (12,055) (119) (664) (157) (1,301) (14,852)
At 31 December 2023 6,249 163,820 1,388 8,261 2,241 16,347 198,306
Accumulated depreciation
At 1 January 2022 (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) (932) (1,741) (382) - (83,134)
Depreciation charge for the year (331) (14,120) (185) (433) (1,422) - (16,491)
Scrapping of obsolete assets 32 3,651 191 424 - - 4,298
Impairment (421) (7,750) (14) - - (37) (8,222)
Exchange differences 198 4,530 73 144 42 - 4,987
At 31 December 2023 (2,908) (91,384) (867) (1,605) (1,761) (37) (98,562)
Net Book Value
At 31 December 2022 4,189 100,853 522 5,880 1,401 14,564 127,409
At 31 December 2023 3,341 72,436 521 6,656 480 16,310 99,744
* Include decommissioning assets.
The right of use asset of US$6.65 million relates to land and buildings of
US$6.62 million and plant and machinery of US$0.03 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)
An impairment loss of US$8.22 million was 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 to align the carrying value of the Vanchem CGU
with the recoverable amount of US$39.75 million (see note 3).
Other
The Group also recognised an impairment charge of US$0.79 million in the
consolidated statement of profit or loss related to items of property, plant
and equipment that were identified as being no longer in use.
15. Investment property
Figures in thousands of US$ 2023 2022
Balance, beginning of the year 2,412 2,595
Fair value movement (32) (17)
Exchange differences (207) (166)
Balance, end of the year 2,173 2,412
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
hierarchy), which has been determined based on valuations performed by Domus
Estate Management, an accredited independent valuer, as at 31 December 2023.
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 were obtained for locations where properties
are situated in South Africa.
16. Deferred tax asset/(liability)
Figures in thousands of US$ 2023 2022
Deferred tax liability
Investment properties (371) (517)
Property, plant and equipment (15,167) (17,925)
Prepayments (16) (15)
Expected credit losses (64) (18)
Total deferred tax liability (15,618) (18,475)
Deferred tax asset
Provisions 895 (642)
Environmental rehabilitation liabilities 4,491 4,549
Lease liabilities 1,373 1,521
Non-deductible expenses 1,360 1,029
Post-retirement medical liability 426 460
Deferred tax balance from temporary differences other than unused tax losses 8,545 6,917
Unused tax losses 7,537 10,367
Total deferred tax asset 16,082 17,284
Deferred tax liability (15,618) (18,475)
Deferred tax assets 16,082 17,284
Total net deferred tax asset/(liability) 464 (1,191)
The evidence supporting recognition of a deferred tax asset is forecast for
Vametco 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.
Other
Beginning Statement of comprehensive
2023 (Figures in thousands of US$) balance profit or loss income differences Ending balance
Deferred tax liability
Investment properties (517) 7 - 139 (371)
Property, plant and equipment (17,925) 1,223 - 1,535 (15,167)
Prepayments (15) (3) - 2 (16)
Expected credit losses (18) (48) - 2 (64)
Deferred tax asset
Provisions (642) 1,491 - 46 895
Non-deductible expenses 1,029 422 - (91) 1,360
Environmental rehabilitation liabilities 4,550 336 - (395) 4,491
Lease liabilities 1,521 (17) - (131) 1,373
Post-retirement medical liability 459 5 2 (40) 426
Unused tax losses 10,367 (1,950) - (880) 7,537
(1,191) 1,466 2 187 464
Other
2022 (Figures in thousands of US$) Beginning balance Statement of profit or loss comprehensive Exchange differences Ending balance
income
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)
17. Financial assets
Figures in thousands of US$ Notes 2023 2022
Balance, beginning of the year 3,075 -
Additions 24 2,923
Loss on financial instrument (1,700) -
Finance income 138 159
Transfer to investments in joint ventures 18 (987) -
Exchange differences (526) (7)
Balance, end of the year 24 3,075
The Group subscribed in 2022 for two convertible loan notes issued by Mustang
Energy Plc ("Mustang") with a principle amount of US$2.93 million bearing 10%
interest per annum in exchange for a convertible loan note issued to Primorius
and share capital issued to Lind Partners (see note 23 and 28).
The convertible loan notes were cancelled upon the exercise of the Mustang
backstop agreement and the Group received Mustang's interest in VRFB (see note
18 and 23). The difference between the fair value of the convertible loan
notes and the fair value of Mustang's interest in VRFB was recognised as a
loss on financial instrument in the consolidated statement of profit or loss.
18. Investments in associate and joint ventures
Figures in thousands of US$ VRFB Mini-Grid Total
Balance, 1 January 2022 7,855 - 7,855
Transfer from financial assets - 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
Additional investment on issue of shares 1,886 - 1,886
Transfer from financial assets 987 - 987
Share of loss (4,242) - (4,242)
Exchange differences 678 (100) 578
Balance, 31 December 2023 1,301 1,059 2,360
VRFB Holdings Limited ("VRFB") - Associate
The Group acquired a 50.5% interest in VRFB in April 2021, which is the
holding company for the Group's 50% investment in Enerox GmbH
("CellCube"). Upon the exercise of the Mustang backstop agreement (see note
23), Mustang transferred its 22.1% interest in VRFB to the Group. The Group
did not participate in the fund raisings of CellCube and its investment in
CellCube was diluted from 50% to 30.58%.
The Group accounts for its effective shareholding in CellCube through VRFB as
an investment in associate.
Figures in thousands of US$ 2023 2022
Summarised financial information in respect of VRFB is set out below:
Revenue 2,923 11,183
Net loss (11,744) (20,389)
Other comprehensive income - 275
Comprehensive loss (11,744) (20,114)
Hybrid Mini-Grid Company Proprietary Limited ('Mini-Grid") - Joint Venture
The Group entered into a shareholders' agreement with NESA Investment
Holdings, whereby it holds a 40% interest in Mini-Grid.
The Group accounts for its 40% shareholding as an investment in joint venture
as the relevant decisions require unanimous consent.
19. Inventories
Figures in thousands of US$ 2023 2022
Finished goods 12,702 23,511
Work in progress 15,566 14,740
Raw materials 2,510 4,435
Consumable stores 11,495 12,304
Total inventories 42,273 54,990
The cost of inventories recognised as an expense during the year was US$104.97
million (2022: US$88.60 million).
The Group recognised a net realisable value write-down of finished goods
amounting to US$0.84 million (31 December 2022: US$0.33 million)
and work in progress amounting to US$0.94 million (31 December 2022: US$0.19
million). The Group recognised a write-down of raw materials and work in
progress for US$1.19 million (31 December 2022: US$ nil).
20. Trade and other receivables
Figures in thousands of US$ Notes 2023 2022
Financial assets:
Trade receivables 7,590 3,134
Other receivables 525 2,856
Expected credit losses (116) (78)
Subscription receivables 23 13,917 -
Non-financial assets:
Value-added taxes 2,510 3,163
Deposits 133 19
Prepaid expenses 459 404
Total trade and other receivables 25,018 9,498
Categorisation of trade and other receivables
Trade and other receivables are categorised as follows in accordance with IFRS
9: Financial Instruments:
Figures in thousands of US$ 2023 2022
At amortised cost 21,916 5,912
Non-financial instruments 3,102 3,586
25,018 9,498
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
Figures in thousands of US$ 2023 2022
Rehabilitation insurance fund 2,881 2,710
Split between non-current and current portions
Non-current assets 2,881 2,710
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 (see note 26 and 34 for further details).
22. Cash and cash equivalents
Figures in thousands of US$ 2023 2022
Cash and cash equivalents consist of: Bank balances
1,280 8,348
Short-term deposits 1 2,526
1,281 10,874
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.
The total cash and cash equivalents denominated in South African Rand amount
to US$0.78 million (2022: US$6.72 million).
The fair value of cash and cash equivalents approximates the carrying value
due to the short maturity.
23. Share capital, share premium and reserves
Total share
Figures in thousands of US$ Number of shares Share capital Share premium capital and premium
Balance, 1 January 2022 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
Shares issued - Mustang backstop agreement 270,393,578 1,886 - 1,886
Shares issued - Acquisition of minority interest 232,836,255 2,948 3,538 6,486
Shares issued - Equity raise (net of cost) 395,897,277 4,988 9,032 14,020
Balance, 31 December 2023 2,186,945,391 26,944 140,272 167,216
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 2023, the Company owns 670,000 (31 December 2022:
670,000) treasury shares with a nominal value of 1 pence.
Shares issued
Directors and staff
The Company issued in 2022 2,324,842 new ordinary shares of 1 pence each in
the Company in respect of the short-term incentive plans.
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 one pence each to Lind in
accordance with the Investment Agreement between the
Company and Mustang.
Mustang backstop agreement
The Company entered into an investment agreement with Mustang whereby the
holders of the Mustang convertible loan notes ("CLN") would
be able to request the issuance of new shares if Mustang's shares had not been
readmitted to trading on the LSE by 31 July 2023.
In August 2023, each of the CLN holders had elected to redeem their CLNs and
were issued 270,393,578 new ordinary shares of one pence each in Bushveld.
Acquisition of minority interest
The Company acquired on 20 December 2023, the 26% minority interest in
Bushveld Vametco Holdings owned by a Black Economic
Empowerment ("BEE") consortium in return for the issue of 232,836,255 shares
in the Company, cash payment of ZAR18 million and the
cancellation of a US$0.51 million loan.
Equity raise
The Company completed an equity raised on 27 December 2023 whereby it issued
395,897,277 new ordinary shares at a price of three pence per share for gross
proceeds of US$14.97 million. The Company incurred transaction costs of
US$0.95 million of which US$0.25 million was paid. The Company received
US$0.79 million in net proceeds and recorded a receivable of US$13.92 million
for the proceeds received subsequent to year end.
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 and actuarial changes recognised on the
post retirement medical aid liability.
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 2023 2022
Balance, beginning of the year - 1,212,360
Vested - (1,099,404)
Forfeited - (112,956)
Balance, end of the year - -
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 12 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 in 2022 2,324,842 new ordinary shares of one pence each in
respect to the STI (see note 23) and 2,788,222 shares are still to be issued
to certain employees being in a closed period.
Long-term incentive ("LTI")
Number of shares
Performance awards 2023 2022
Balance, beginning of the year - 2,458,443
Granted 16,750,860 -
Vested - -
Forfeited (6,599,110) -
Lapsed - (2,458,443)
Balance, end of the year 10,151,750 -
The Remuneration Committee approved performance awards in 2022, which were
awarded in 2023. The performance awards vest over a period of three years (1
January 2022 - 31 December 2024) and is subject to both employment and
performance conditions. The performance conditions states that 60% of the
number of performance awards will vest based on the performance of the
Company's total shareholder return ("TSR") and 40% of the performance awards
will vest based on the performance of the Group's normalised cash return on
equity ("nCROE"). Based on the Group's performance on both TSR and nCROE being
below the threshold, it is expected that the performance awards will not vest.
The Group awarded performance awards to certain employees in 2019 and at
vesting date it was determined that zero percent of the performance awards
vested as the performance conditions were not met.
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 2023. 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
recognised 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.
Figures in thousands of US$ 2023 2022
Balance, beginning of the year 1,675 1,906
Net expense recognised in profit or loss 3 13
Actuarial changes recognised in other comprehensive income or loss 44 (126)
Exchange differences (145) (118)
Balance, end of the year 1,577 1,675
The principal assumptions used for the purposes of the actuarial valuation was
as follows:
2023 2022
Actual age 77.8 years 77.3 years
Discount rates 11.70% 11.60%
Health care cost inflation 7.70% 7.80%
Duration of liability 8.62 years 8.8 years
A one percent change in the assumed rate of healthcare costs inflation would
have the following effect on the present value of the unfunded
obligation: Plus one percent - US$0.12 million (2022: US$0.13 million); Less
one percent - US$0.11 million (2022:US$0.12 million).
A one percent change in the assumed interest rate would have the following
effect on the current service cost and interest cost: Plus one percent -
US$0.18 million (2022: US$0.20 million); Less one percent - US$0.16 million
(2022: US$0.17 million).
26. Environmental rehabilitation liabilities
Figures in thousands of US$ Notes 2023 2022
Balance, beginning of the year 16,610 18,031
Unwinding of discount 9 1,873 1,726
Change in estimates charged to profit or loss (75) (291)
Change in estimates capitalised to property, plant and equipment 14 (336) (1,705)
Exchange differences (1,439) (1,151)
Balance, end of the year 16,633 16,610
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:
2023 2022
Inflation rate 11.26% 10.41%
Discount rate 12.26% 11.41%
A one percent change in the assumed discount rate would have the following
effect on the present value of the provision: Plus one percent -
decrease of US$3.77 million; Less one percent - increase of US$4.93 million.
A one percent change in the assumed inflation rate would have the following
effect on the present value of the provision: Plus one percent -
increase of US$4.93 million; Less one percent - decrease of US$3.83 million.
27. Deferred consideration
Figures in thousands of US$ Notes 2023 2022
Balance, beginning of the year 2,428 1,684
Finance costs 176 51
Movement in earnout estimate 10 6 693
Balance, end of the year 2,610 2,428
Split between non-current and current portions
Current deferred consideration 2,304 901
Non-current deferred consideration 306 1,527
2,610 2,428
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$5.55 million.
Management updated their estimated earnout payment to reflect actual
production and price for the year ended 31 December 2023 and estimated
production and price for future years which resulted in an increase of US$0.06
million in the estimated earnout payment.
28. Borrowings
Figures in thousands of US$ 2023 2022
Orion production financing agreement ("PFA") 35,635 35,146
Orion convertible loan notes ("CLN") 46,766 39,742
Southern Point Resources ("SPR") interim working capital facility 7,812 -
Industrial Development Corporation ("IDC") shareholder loan 2,664 1,999
IDC property, plant and equipment loan 3,574 3,481
Other 2,124 2,762
98,575 83,130
Split between non-current and current portions
Non-current 38,008 35,272
Current 60,567 47,858
98,575 83,130
SPR interim
working capital
Figures in thousands of US$ Orion PFA Orion CLN facility IDC loans Other Total
Balance, 1 January 2022 33,512 36,282 - 3,282 6,821 79,897
Cash changes:
Proceeds from borrowings - - - 3,416 806 4,222
Repayment of principle and interest (2,906) - - - (5,934) (8,840)
Non-cash changes:
Convertible loan note in exchange
for financial assets - - - - 1,636 1,636
Conversion of convertible loan notes - - - - (530) (530)
Finance costs 4,420 6,394 - 470 375 11,659
Fair value gain on derivative liability - (2,934) - - - (2,934)
Adjustment to reflect market value of loan - - - (1,789) - (1,789)
Exchange differences 120 - - 101 (412) (191)
Balance, 1 January 2023 35,146 39,742 - 5,480 2,762 83,130
Cash changes:
Proceeds from borrowings - - 7,505 942 543 8,990
Repayment of principle and interest (3,859) - (263) - (1,375) (5,497)
Non-cash changes:
Finance costs1 4,450 7,056 420 590 225 12,741
Fair value gain on derivative liability - (32) - - - (32)
Remeasurement of financial liabilities - - - (436) - (436)
Exchange differences (102) - 150 (338) (31) (321)
35,635 46,766 7,812 6,238 2,124 98,575
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 authorisation 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% for 2020 and 2021 and 1.45%
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% (i.e. to 25% of the applicable rates).
On each of the first three loan anniversaries, the Group had the option to
repay up to 50% 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 4,300 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.
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 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% of the conversion price over a continuous 15
trading day period, a trading day being a day on which the AIM market is open
for the trading of securities.
At any time until the convertible maturity date, Orion may convert the debt as
above mentioned into an amount of ordinary shares equal to the total amount
available for conversion under the Instrument divided by the conversion price
of 17 pence.
The Company entered into an agreement on 27 November 2023 with Orion to extend
the maturity date of the Instrument to 31 January 2024 and subsequently
refinanced the Instrument (see note 36).
Figures in thousands of US$ Loan liability Total
Balance, 01 January 2022 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
Finance costs and fair value gain 7,056 (32) 7,024
Balance, 31 December 2023 46,766 - 46,766
The Orion borrowings are secured against certain group companies and
associated assets.
SPR Interim Working Capital Facility
Bushveld Vanchem ("Vanchem") entered into a loan agreement with SPR on 19
September 2023 whereby SPR borrowed ZAR150.0 million to Vanchem.
The loan bears interest, which is payable in cash every two weeks, in the
following amount:
· If the Vanadium Price is less than US$35/kgV, an amount equal to
0.54% of ZAR150,000,000;
· If the Vanadium Price is equal to or more than US$35/kgV but less
than US$40/kgV, an amount equal to 0.58% of ZAR150,000,000; and
· If the Vanadium Price is equal to or more than US$40/kgV, an
amount equal to 0.62% of ZAR150,000,000.
The loan is repayable in full on the maturity date, which is the first of:
· The date on which the lender gives a step-in notice (this is when
an event of default continues for more than 30 days); or
· The date on when the Vanchem and Mokopane Acquisition have been
fully implemented; or
· First anniversary of the advance date (22 September 2024).
The loan is secured by a Mortgage Bond of ZAR750 million over the movable
property of Vanchem and Notarial Bond of ZAR750 million over the immovable
property of Vanchem.
The Group incurred transaction costs of US$0.41 million which have been
capitalised and offset against the carrying amount of the loan and are being
amortised using the effective interest rate method.
Industrial Development Corporation Shareholder Loan
Bushveld Electrolyte Company ("BELCO") is 55% owned by Bushveld Energy Company
("BEC") and 45% by the Industrial Development Corporation ("IDC"). The loan
represents the IDC's contribution to BELCO and consists of the initial
capitalised cost of ZAR4.38 million (US$0.24 million; 31 December 2022:
ZAR4.38 million (US$0.26 million)) and the subsequent subscription amount of
ZAR72.71 million (US$3.91 million; 31 December 2022: ZAR55.31 million (US$3.26
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%, which is the
estimated prevailing market rate. The difference between the fair value and
the nominal amount of US$0.43 million (31 December 2022:
US$1.79 million) was recognised as a capital contribution from the
non-controlling interest.
A general notarial bond for a minimum amount of ZAR140 million plus an
additional sum of 30% 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% margin and is repayable in 84 equal
monthly installments starting in July 2024.
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 Internal Rate of Return
("IRR") of 40% capped at 2.5 times, which ever is lower. As at 31 December
2023, US$1.0 million (31 December 2022: US$1.0 million) was drawn down.
Primorius
The Company issued a convertible loan note to Primorus for the nominal amount
of 1.20 million bearing interest at 10% 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. Primorus converted 0.41 million of the
principal amount and was issued a total of 4,157,645 Bushveld ordinary shares.
The Company and Primorus agreed on 14 July 2023 to amend the terms of
repayment whereby the Company will make the following payments:
· An initial payment of US$150,000, followed by bi-weekly payments
of US$125,000 with the final payment to be made prior to the 30 November 2023.
The Company settled the outstanding amount.
NESA Investment Holdings ("NESA")
The Group entered into a loan agreement with Nesa to fund US$0.81 million
(ZAR12.08 million) bearing interest at South African prime rate plus 3.5%
margin. The maturity date of the loan was extended from 30 August 2023 to 30
August 2024 and the repayments will consist of the following:
· Accrued interest up to 31 August 2023 repaid on 31 August 2023;
· ZAR2.00 million capital repayment on 21 September 2023; and
· Thereafter 10 consecutive monthly payments starting from 30
November 2023.
The Group entered into a second loan agreement with Nesa to fund US$0.54
million (ZAR10.0 million) bearing interest at South African prime rate plus 4%
margin. The maturity date of the loan was extended to 31 August 2026 and the
repayments will consist of the following:
· Accrued interest up to 31 October 2023 repaid on 31 October 2023;
· ZAR0.53 million capital and interest repayment on 30 November
2023; and
· Thereafter 11 consecutive quarterly payments starting from 29
February 2024.
29. Lease liabilities
Figures in thousands of US$ Notes 2023 2022
Balance, beginning of the year 7,282 4,485
Additions 1,762 2,989
Finance cost 9 724 974
Payments (703) (728)
Exchange differences (637) (438)
Balance, end of the year 8,428 7,282
Non-current lease liabilities 7,746 6,721
Current lease liabilities 682 561
8,428 7,282
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
Figures in thousands of US$ 2023 2022
Financial liabilities:
Trade payables 41,784 40,573
Trade payables - related parties 10 61
Accruals and other payables 4,461 5,257
Non-financial liabilities:
Value-added taxes 40 5
46,295 45,896
Financial liabilities and non-financial liabilities components of trade and
other payables
46,255 45,891
At amortised cost
Non-financial instruments 40 5
46,295 45,896
Trade and other payables principally comprise amounts outstanding for trade
purchases and on-going costs. The average credit period taken for trade
purchases is 120 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 is
approximate to their fair value.
The total trade and other payables denominated in South African Rand amount to
US$33.73 million (2022: US$29.78 million).
31. Provisions
Reconciliation of provisions - 2023
Figures in thousands of US$ Opening balance Additions Utilised during Exchange differences Total
the year
Leave pay 1,588 10 (98) (136) 1,364
Other 126 467 - (13) 580
1,714 477 (98) (149) 1,944
Reconciliation of provisions - 2022
Opening balance Utilised during Exchange differences
Figures in thousands of US$ Additions the year Total
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
Leave pay
Leave pay represents employee leave days due multiplied by their cost to the
company employment package.
Other
The other provisions represents estimates for retrenchment costs.
32. Non-controlling interest
Selected summarised financial information of subsidiaries that have material
non-controlling interest are provided below:
Figures in thousands of US$ 2023 2022
Bushveld Vametco Holdings
Percentage of voting rights held by non-controlling interest - 26%
Current assets - 85,598
Non-current assets - 80,228
Current liabilities - (25,517)
Non-current liabilities - (45,311)
Net assets - 94,998
Revenues 83,727 117,226
Net earnings/(loss) for the year 2,396 21,401
Net earnings/(loss) attributable to non-controlling interest 623 5,564
Net cash generated from/(used in) operating activities (5,027) 14,270
Net cash used in investing activities (3,111) (10,649)
Net cash used in financing activities - (6,020)
Net increase/(decrease) in cash and cash equivalents (8,138) (2,398)
The Company acquired the 26% interest in Bushveld Vametco Holdings on 20
December 2023 (see note 23).
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
· Other financial assets
· Lease liabilities
· Deferred consideration
The Group holds the following financial assets and financial liabilities:
Figures in thousands of US$ 2023 2022
Financial assets at amortised cost
Trade and other receivables 21,916 5,912
Restricted investment 2,881 2,710
Cash and cash equivalents 1,281 10,874
26,078 19,496
Financial assets at fair value
Other financial assets at fair value through profit or loss 24 3,075
Total financial assets 26,102 22,571
Financial liabilities at amortised cost
Trade and other payables 46,255 45,891
Borrowings 98,575 83,098
Lease liabilities 8,428 7,282
153,258 136,271
Financial liabilities at fair value
Borrowings - derivative liability - 32
Deferred consideration 2,610 2,428
2,610 2,460
Total financial liabilities 155,868 138,731
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 2023, the Group had
borrowings of US$98.58 million (2022: US$83.13 million).
The capital structure of the Group consists of cash and cash equivalents,
equity and borrowings. Equity comprises of issued capital and
retained income.
Figures in thousands of US$ 2023 2022
Cash and cash equivalents 1,281 10,874
Borrowings 98,575 83,130
Equity 810 105,631
100,666 199,635
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
price of the various commodities that it mines, processes and sells.
The average market price of each of the following commodities was:
2023 2022
Vametco US$/kgV US$/kgV
Ferro Vanadium (FEV) - 50.17
Nitrovan (NV) 36.39 44.45
Ammonium Metavanadate (AMV) - 30.05
Modified Vanadium Oxide (MVO) 28.69 -
2023 2022
Vanchem US$/kgV US$/kgV
Vanadium Pentoxide Flake (FVP) 29.15 31.82
Vanadium Pentoxide Chemical (VCM) 31.15 35.85
Sodium Ammonium Vanadate (SAV) 42.91 55.07
Ammonium Metavanadate (AMV) 23.11 52.80
Ferro Vanadium (FEV) 31.69 35.73
Vanadyl Oxalate Solution (VOX) 188.30 197.79
Potassium Metavanadate 29.45 42.41
If the average price of each of these commodities increased/decreased by 10%,
assuming the same levels of production, the total sales related to each of
these commodities would have increased/decreased as follows:
Effect on Effect on Effect on Effect on
Vametco (Figures in thousands of US$) 2023 2023 2022 2022
revenue net loss revenue net loss
Ferro Vanadium (FEV) - - 358 258
Nitrovan (NV) 8,505 6,123 11,568 8,329
Ammonium Metavanadate (AMV) - - 81 58
Modified Vanadium Oxide (MVO) 13 10 - -
8,518 6,133 12,007 8,645
Effect on Effect on Effect on Effect on
2023 2023 2022 2022
Vanchem (Figures in thousands of US$) revenue net loss revenue net loss
Vanadium Pentoxide Flake (FVP) 1,175 858 494 356
Vanadium Pentoxide Chemical (VCM) 514 375 329 237
Sodium Ammonium Vanadate (SAV) 116 85 182 131
Ammonium Metavanadate (AMV) 73 53 34 25
Ferro Vanadium (FEV) 2,524 1,842 2,391 1,721
Vanadyl Oxalate Solution (VOX) 48 35 63 45
Potassium Metavanadate 116 85 157 113
4,566 3,333 3,650 2,628
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 and lenders, which have high credit ratings and its cash requirements
are anticipated via the budgetary process.
At 31 December 2023, the Group had US$1.28 million (2022: US$10.87 million) of
cash and cash equivalents. At 31 December 2023, the Group
had borrowings of US$98.58 million (2022: US$83.13 million), lease liabilities
of US$8.43 million (2022: US$7.28 million) and trade and other
payables of US$46,30 million (2022: US$45.90 million).
2023 (Figures in thousands of US$) Carrying amount Contractual cash flows <1 year 1-2 years 3-4 years >4 years
*Orion PFA 35,635 135,482 4,130 8,748 8,951 113,653
Orion CLN 46,766 47,154 47,154 - - -
SPR interim working capital facility 7,812 8,944 8,944 - - -
IDC shareholder loan 2,664 4,148 - - - 4,148
IDC property, plant and equipment loan 3,574 5,981 427 1,709 1,709 2,136
Development Bank of South Africa 1,000 1,000 1,000 _- - -
Other 1,124 1,270 889 381 - -
Lease liabilities 8,428 22,752 750 1,048 1,596 19,358
Trade and other payables 46,255 46,255 46,255 - - -
Carrying Contractual
2022 (Figures in thousands of US$) amount cash flows <1 year 1-2 years 3-4 years >4 years
*Orion PFA 35,146 139,795 4,181 8,626 8,833 118,155
Orion CLN 39,742 46,585 46,585 - - -
IDC shareholder loan 1,999 3,515 - - - 3,515
IDC property, plant and equipment loan 3,481 5,725 477 1,636 1,636 1,976
Development Bank of South Africa 1,000 1,000 - 1,000 - -
Other 1,762 1,794 1,794 - - -
Lease liabilities 7,282 22,577 704 901 1,348 19,624
Trade and other payables 45,891 45,891 45,891 - - -
* 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 other 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 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:
The concentration of credit risk by currency was as follows:
Figures in thousands of US$ 2023 2022
Pound Sterling 436 20
Euro 4 -
South African Rand 785 6,702
United States Dollar 56 4,152
1,281 10,874
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 2023 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 2023 and 31 December 2022
was determined as follows for trade receivables:
Subsidiary - 2023 (Figures in thousands of US$) Expected credit Gross carrying Loss allowance
loss rate amount
Bushveld Vametco Alloys (Pty) Ltd 0.22% 1,183 3
Bushveld Vametco Limited -% 1,760 -
Bushveld Vanchem (Pty) Ltd 0.99% 4,409 45
Ivanti Resources (Pty) Ltd 1.07% 156 2
Other Group Companies 81.08% 82 66
7,590 116
Expected credit Gross carrying
Subsidiary - 2022 (Figures in thousands of US$) loss rate amount Loss allowance
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
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 2023 and 2022 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 managing the Group's interest rate risk,
interest rate characteristics of new borrowings and the refinancing of
existing borrowings are positioned according to expected movements in interest
rates.
As at 31 December 2023, the majority of the Groups' borrowings was at fixed
rates. A one 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 2023.
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:USD exchange rate. The carrying amount of the
Groups foreign currency denominated monetary assets and liabilities, all in
US$, are shown below:
Figures in thousands of US$ 2023 2022
Cash and cash equivalents 1,224 6,723
Trade and other receivables 23,214 11,226
Trade and other payables (36,888) (32,652)
(12,450) (14,703)
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 categorises 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).
· Level 1 inputs are quoted prices (unadjusted) in active markets
for identical assets or liabilities which the entity can access at the
measurement date.
· 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.
· 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.
(A) financial assets and liabilities measured at fair value on a recurring
basis
Carrying Total
2023 (Figures in thousands of US$) amount Level 1 Level 2 Level 3 fair value
Assets
Other financial assets 24 - - 24 24
Liabilities
Derivative liability - conversion option on Orion CLN - - - - -
Deferred consideration 2,610 - - 2,610 2,610
Carrying Total
2022 (Figures in thousands of US$) amount Level 1 Level 2 Level 3 fair value
Assets
Other 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
(B) financial assets and liabilities measured at amortised costs
2023 2022
Financial assets (Figures in thousands of US$) Book value Fair value Book value Fair value
Trade and other receivables 21,916 21,916 5,912 5,912
Restricted investments 2,881 2,881 2,710 2,710
Cash and cash equivalents 1,281 1,281 10,874 10,874
2023 2022
Financial assets (Figures in thousands of US$) Book value Fair value Book value Fair value
Trade and other payables 46,255 46,255 45,891 45,891
34. Contingent liabilities
Bank guarantee
As required by the Minerals and Petroleum Resources Development Act (South
Africa), a guarantee amounting to US$10.91 million (2022: US$11.94 million)
before tax and US$7.97 million (2022: US$8.60 million) after tax was issued in
favour of the DMRE 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$2.88 million (2022: US$2.71 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 former Director, Fortune Mojapelo, being majority shareholder of VM
Investments. VM Investments owns the offices rented by Bushveld Minerals
Limited. The rent paid in 2023 financial period was US$144,237 (2022:
US$206,209). The outstanding balance owned to VM Investments was US$nil as at
31 December 2023.
The Company paid on behalf of Mr Fortune Mojapelo, tax on historic shares to
the value of US$351,649. The tax arises from historic shares issued to Mr
Mojapelo. The Company had an obligation to settle the tax on behalf of Mr
Fortune Mojapelo. The amount was previously reflected as a debtor but was
written-off during the year as the Company agreed the amount is not repayable.
The remuneration of key management personnel, being the Directors and other
Executive Committee members, is set out below. Further
information about the remuneration of individual directors is provided in the
Directors' Remuneration Report.
Figures in thousands of US$ 2023 2022
Salaries and fees 1,911 1,866
Short-term incentives 32 95
Long-term incentives (107) 107
1,836 2,068
36. Events after the reporting period
Orion mine finance convertible loan note refinancing
The Company completed the refinancing of its convertible loan notes issued to
Orion Mine Finance on 31 January 2024. The convertible debt
obligations were refinanced as follows:
· US$4.7 million of the convertible debt obligations were
capitalised into a subscription for 124,747,016 new ordinary shares;
· A new convertible loan note of US$14.1 million maturing on 30
June 2028;
· A term senior loan of US$28.3 million maturing on 30 June 2026;
and
· Supplemental royalty at not more than 0.264% of the Group's gross
revenues and reducing by 80% at the term loan maturity.
In June 2024, the Company entered into revised agreements with Orion Mine
Finance whereby the Company will receive additional funding of up to US$10
million under the term senior loan facility. The repayment of interest and
capital on the term senior loan was also amended whereby the repayment of both
interest and capital will only start on 31 December 2025 and will consist of
equal quarterly instalments with the final payment on 31 December 2029. The
drawdown of the additional facility is subject to SARB approval.
In addition to the changes in the term senior loan, the supplemental royalty
agreement was also amended to increase the royalty rate from 0.264% up to 0.5%
depending on the amount of the additional drawdown on terms senior loan
facility and reducing by 50% at the term loan maturity.
Sale of Vanchem
The Group has entered into a binding term sheet with SPR to conditionally sell
the entire Vanchem asset for a total consideration of up to US$41.3 million,
comprising an initial consideration of up to US$21.3 million and a deferred
consideration of between US$15 million and US$20 million (the "Disposal"). The
proposed terms of the Disposal replace those announced on 20 November 2023 for
the sale of a 50% interest in Vanchem. The Disposal is conditional upon
consent of Orion and Competition Commission approval. The shareholders
approved the Disposal on 31 May 2024. The Disposal is expected to close in the
second half of 2024.
The Vanchem CGU was written-down to its recoverable amount during the year
(see note 14). As at 31 December 2023, the Vanchem asset did not meet the
criteria for held for sale accounting in line with IFRS 5. Following the
closing of the Disposal, the assets and liabilities of Vanchem will be
derecognised and no longer form part of the consolidated results of the Group.
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