Bushveld Minerals Limited (BMN) Earnings Call Transcript & Summary

[Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However, the company review all questions submitted today and, where appropriate, publish responses. These will be available via your Investor Meet Company dashboard. And again, we'll notify you by e-mail when they're ready for your review. I would also like to remind you that this presentation is being recorded. Before we begin, we would like to submit the following poll. And if you could give that to your kind attention, we would be most grateful. And I'd now like to hand over to Fortune Mojapelo from Bushveld Minerals. Good morning to you, sir.

Good morning, and thank you very much for hosting us today. Good morning to everyone, and welcome to this presentation of our 2020 financial results. Some of you are familiar with the Bushveld story already and others are new to the story. So this presentation, I will attempt to give a very quick overview of the company, our strategy, our vision and what we do. And then we will talk to the results that we released recently. And then later on, we will spend some few minutes talking about the vanadium market and the outlook thereof as well as talking to what our near-term plans as a company and what you can look forward to. I am assisted in today's presentation by our Finance Director, Tanya Chikanza, who will be presenting alongside with me. If I may start by just getting rid of -- getting through the legalities for the disclaimers, which I will take as read. This slide shows a quick high-level overview of our capital structure. We are listed on AIM, have been listed there since 2012. Share prices of the 6th of July of 12.8p come from -- it's come down from highest of north of 40p a couple of years ago. But with a market cap of GBP 153 million, our share register highlights a growing interest of institutional investors, although it's still very much a retail-heavy share register. We are covered by Peel Hunt, SP Angel and Alternative Resource Capital. And by all means, do take time to read their analysis of the company. And what you will see on the chart on the right there is the strong correlation of Bushveld share price with the fair vanadium price because we are vanadium-focused company, which is to be expected. An overview of the company. So we are a vertically integrated vanadium platform. What we mean by a vertically integrated -- and not only a vanadium company. We have a primary vanadium platform, and that's an important distinction to make. What that means is there are 2 parts to our business. On the upstream, we've got mining assets and processing facilities. Downstream, we've got Bushveld Energy, which is focused on the application of vanadium through vanadium redox-flow batteries in the storage sector. The upstream piece on the mining side, 3 deposits that combined for 549 million tons of resource base grading between 1.6% and 2% V2O5, which is certainly Tier 1 vanadium grades. The deposits are served very well with logistics infrastructure, and they are connected with 2 processing plants, low cost and scalable primary vanadium processing plants. There is only 4 operating primary processing plants for vanadium in the world, 3 of them are in South Africa, 1 in Brazil. And of the 3 in South Africa, we own 2 of those. And then in terms of the energy platform, we integrated through 3 main activities the electrolyte manufacturing and sales. We're currently building a 200-megawatt hour capacity electrolyte plant, which we'll expect to commission next year. The plant itself will be the largest plant for electrolyte and electrolyte manufacturing outside of China. And then the second aspect to our business is our investments and interest in the manufacturing capacity itself through our 25.25% shareholding in Cellcube, which is based in Austria and manufactures top-quality vanadium redox-flow battery systems. Then the third aspect is the deployments where we play a very active role in developing opportunities for the deployment of vanadium redox-flow batteries. And in the process, we create a market for our own product. So in terms of our investor proposition, 4 key elements to talk to. On one hand, we are a green commodity for the future in vanadium. It's a compelling commodity. Demand is anchored in steelmaking, where it is used to strengthen steel and by so doing actually helps reduce the carbon footprint of steel as well. Because if you add 0.2% vanadium to 1 ton of steel, you double its tensile strength, which means that you need to use less tons of steel to achieve the same impact. But also significant upside for the commodity in the energy storage, particularly with the energy transition to green energy picking up. Vanadium redox-flow batteries are set to play quite a significant role in the stationary energy storage sector. And then we have a solid foundation, as I said, with 2 of the world's 4 operating primary vanadium processing facilities, combined with long life mines, open cost deposits with Tier 1 vanadium grades. We are a producing company, and that's quite significant to highlight, which means that we are a revenue generator with near-term targets of reaching production run rate of between 5,000 and 5,400 metric tons of vanadium per annum by 2022. That's up from 3,600 metric tons of production last year, which is equivalent to about 3.5% of the global vanadium market. Studies underway will see us increase production further to between 6,400 to 6,800 metric tons of vanadium per annum in the medium term. And we retain plans to still further grow this to 8,400 in the longer term, still based on the 2 assets that we have, which is Vametco and Vanchem. And then the last point to highlight is, of course, the role we play in the energy storage space. We are a key player in that value chain. And we aim to be the preferred vertically integrated primary vanadium supplier into this space. Just to give you some quick overview of where our assets are located in South Africa and the world-famous Bushveld complex, which has hosted the world's largest primary, so the world's largest platinum resources and chrome resources. It is also host to the world's largest primary vanadium resources. We have a lot of these deposits at scale and at high grade. And we own 3 deposits, the Mokopane project, which is on the northern limb, Vametco deposits and the Brits deposit, which is an extension of the Vametco resource. And then the 2 plants, Vametco and Vanchem, are well connected to these deposits through logistics infrastructure, which is quite well established. And that logistics infrastructure itself is quite important when you consider the way our plants are set to operate together. In fact, the picture you see there is a picture of Vametco and which is in Brits. And this one is the picture of of Vanchem, which is in Witbank. Those 2 plants are connected well with logistics infrastructure. Why is that important? It's important because they are, from a processing point of view, very similar metallurgical processes that we follow. There's a lot of synergies between the 2 plants. So in some ways, you can look at them as a single operation that is just geographically dispersed. And Vametco is sourced -- is serviced in terms of ore by its own mine, Vametco mine, as well as the Brits deposit, which is adjoining it. And we see that Brits deposit as a future source of ore for Vametco. And then what we do is we process that to produce Nitrovan, AMV as well as MVO. But the concentrate we produce at Vametco can also be processed at Vanchem, which is located some 150-odd kilometers away. And Vanchem is a processing plant that doesn't have its own resource base, but can process material from Vametco. Also, we intend to supply it with material from the Mokopane deposit and also from third-party sources, which are available and which we're always exploring. Vanchem's production, a broad range of vanadium products, V2O5, ferro-vanadium, vanadium chemicals. And in time, also, vanadium trioxide. So when you combine that together with our electrolyte plants that we're building, we have a very broad suite of vanadium products that we can supply the global vanadium market. Now I will take a few minutes to just talk about the -- our 2020 performance and our 2021 guidance. We released our results last week. 2020 production of about 3,600 tons of vanadium. And we -- key highlights I'll just highlight here in terms of 2020 is that, that 3,600 production was a 24% increase on production in 2019. Our sales were up 61%, which is very good to see. And our group cost per unit sold at $29 per kilogram V. What is particularly important to highlight is that as we increase our production volumes through our plant through fixed cost dilution. We expect to see the cost per unit sold to continue declining going forward. Average prices for vanadium in the year were quite low at about $23.40 per kilogram V. And that contributed to the company making a modest loss of $15 million in EBITDA loss there. Very, very pleased that we were able to draw down financing of $65 million towards the end of last year from Orion Mine Finance, which is a good vote of confidence in what we are doing. Consequent to which, our cash and cash equivalent position was about $50 million, with a net debt position of $33.7 million. We have funded our business with significant contribution from debt. And we've done this during a time when the capital markets were quite disrupted by the COVID pandemic, also a very low vanadium price in 2019. So we're very fortunate to be able to have raised the capital we did to continue driving forward our growth agenda. In terms of guidance and outlook, we are looking to strengthen our balance sheet going forward to increase cash flow through margin expansion as well as debt reduction. We have a cost-savings program underway, and we expect that to reduce our costs during the course of 2022. In terms of production, we're looking at 3,400 to 3,600 production for 2021. We -- our current refurbishment program underway at Vanchem, we anticipate by the end of 2022 to be in a place of a steady-state production run rate of between 5,000 and 5,400 metric tons of vanadium per annum. Improving operational stability in H2, particularly at Vametco, is a key priority of ours and also continuing to implement synergies between Vametco and Vanchem. In terms of vanadium prices, they're currently at about $40 per kilogram V across all markets. It's good to see that kind of improvement from the average of $23.40 of last year. Year-to-date, we've seen vanadium prices of about $33, so we hope to see a continuing trending up of the vanadium price, which will certainly be helpful to our cash generation going forward. In terms of operational highlights, 3,631 metric tons of production. And what you'll see on the right there is the profile from 2019. Obviously, in 2020, what we had there was -- for the first -- we had a full year of Vanchem contributing to our production volumes. Because of the COVID shutdown, we lost about 380 metric tons of production. This year, we have guided 3,400 to 3,600 metric tons of vanadium, and we will discuss that guidance a little later. In terms of our costs, you will see there that our costs have come down in terms of group costs, including sustaining capital coming down from $37 to $29. And again, that's just emphasizing the impact of fixed cost dilution as we increase throughput. And that's why it's quite important for us to continue increasing our throughput through our plants. In terms of Push Forward Energy 2020 key achievements, to highlight, we established BELCO, the Bushveld Electrolyte Company, as the operating entity for the electrolyte manufacturing business. You will recall that we have partnered there with the Industrial Development Corporation. We've broken ground on this plant construction in East London, and we expect to commission this plant during 2022. We also made important investments in Invinity, which was quite profitable for us, and also Cellcube in Austria, where we own 25.25%. We have sold down our interest in Invinity, as we announced to the market not so long ago. And have used those proceeds to make our investment into Cellcube. We also signed an electrolyte rental contract between Pivot Power, which is part of the EDF Renewables and Vanadium Electrolyte Rental Limited. And third, that's a joint venture partnership with Invinity Energy Systems. So we -- it's a collaboration that we continue to develop with them. And then finally, we have Cellcube, which won that contract to supply a 4-megawatt hour VRFB for the Mini Grid project at Vametco. Post year-end development, as I mentioned, we monetized our investments in Invinity and realized $13 million. which is a good performance considering we invested $5 million, which has allowed us then to direct those proceeds towards Bushveld Energy's 2021 projects. In a way, that still allows, obviously, Invinity to now continue as a listed company that's well funded and which is doing great work in the energy storage space. 25.25% interest into Cellcube, which is now funded to grow its production capacity. And we look forward similarly to positive developments in that respect. We have a right of first refusal for supply of ore to these 2 important VRFB companies, and we have commenced the construction of our electrolyte plant in June in East London, which is quite exciting. Talking about Cellcube. Cellcube is obviously a company that we have known for a long time, 20-plus year development and production history, more than 130 systems deployed to date, and we own 25.25% interest in this business. In H2, the company secured 13-megawatt hours in signed orders for its systems. It has raised capital of $30 million recently to scale up production to 30 megawatts. We participated in that financing. And also, I just want to point out that this is a very good demonstration of our strategy to leverage what capital we have and bring in third-party financing to support scaling up capacity in VRFB manufacturing. Because out of that $30 million, as Bushveld, our contribution was about a quarter, with some $22-odd million coming from other investors. So that's a success already, and the company is now funded. And we look forward to seeing it grow and emulate, if not exceed, the successes we've seen with the likes of Invinity. I'm going to now hand over to Tanya Chikanza to just talk us through the full year results and talk to the financial results that we released last week. Thank you, Tanya.

Thanks, Fortune, and good morning, everybody. I'm pleased to give you an overview of the company's financial position for 2020 as also just to look at what we are looking to do in the current year. As you can see from the table in the EBITDA order on this slide, 2020 was a challenging year for the company, predominantly given the weakness that we saw in the vanadium prices primarily. As Fortune mentioned, production was up 24% at 3,631 MTV over 2019. And sales were healthy at 3,842, a 61% higher than the 2019 levels. And yet still, we saw EBITDA fall significantly to -- we saw EBITDA fall significantly to just under $15 million. I'd just like to unpack a little bit the waterfall on your right-hand side in terms of some of these movements. From an operating perspective, operating cost perspective, we see the increase in cost of sales there from $47 million to $73.4 million. It reflects Vanchem's first full year of production 12 months compared to 2019 when it produced for a month. You will recall that Vanchem joined Bushveld [indiscernible] in November 2019. In addition to that, we saw an increase in maintenance costs and energy costs and for medical. At -- energy costs in South Africa, they tend to go up annually, and that's an increase -- that is a given increase. And from the maintenance cost, when we saw those levels of maintenance prevailing through [indiscernible] to decide on timing around the food maintenance, maintenance that would be required for the operations, which then led to the 5-day shutdown that we recently did in March this year. The other component of cost in there is operating costs and admin costs. And I'd like to just unpack that movement of $36 million to $31.5 million. From an operating cost perspective, it includes selling and distribution costs and other mining costs as well as a idle plant costs. The idle plant cost increased because in South Africa in 2020 March there was a lockdown, a national lockdown. And so Vanchem, in particular, did not operate for some days, and that was a major contributor to that increase in cost. Vametco was deemed an essential service have partially through the lockdown, and so it was noticeably impacted. Other mining costs in there are also COVID-related. We increased the level of diligence to show protection of our operations and of our employees, and that required us to introduce new ways of working, which reduced our efficiencies. From a selling and distribution costs, this went down from $7.6 million to $4.8 million. And we just think about it, some of these costs are actually predominantly related to the value of sales. So the reduction in the prices that we saw vanadium coming through also impacted -- and had positive impact on selling and distribution. From an admin cost perspective, they fell by $5 million, which is pleasing. Part of that for us because the staff costs decreased. In 2019, we had some legacy costs from our acquisition of Vametco. And 2019 was the final year that we were paying those. Also, in 2020, we saw those numbers now for down to about $8 million a year. It's important for me to highlight that this staff cost actually relates to the cost of anyone who's not directly linked with the production, so that's head office costs as well as management costs of the operations, both in Vanchem and at Vametco. Okay. If I just now look at terms of cost and the unit cost of our operations, you see we've really talked about this that the cost of sales actually went up. But I think this slide, what I'm trying to illustrate here is that, by bringing on board Vanchem, we are able to actually share the cost, the fixed cost that we have in the operations as our production increases. So the increase in production in the units sold that you see there coming up from the 2,392 to 3,842 in the 2020 had the benefit of actually spreading those fixed costs. And we see the unit costs falling from $36 in 2019 to $27. And on a total basis, that unit costs fell from $37 per MTV from KGV to $29 per KGV. And I think this really talks to the benefit of the strategy that we have around continuing our growth strategy to make sure that Vanchem and Vametco can continue to grow and be prepared to produce the additional ounces that Fortune was talking about. If I now turn to -- just looking at the balance sheet initiatives. Fortune already alluded to the $65 million that we raised with Orion Finance. That $65 million is made up of a $35 million convertible, which is a 3-year term, as well as a $30 million PFA financing for the growth of our operations, primarily for Vametco Phase III. We use some of those proceeds to retire the Nedbank term loan, which -- because the rand was so strong by the time we did this, the ZAR 250 million facility actually costs $17 million in terms of paying off. We were also able to retire some of the Duferco convertible, the $11.5 million, which was due payable for 2020, we successfully negotiated for $6.5 million of it to be converted due to Bushveld shares, and the remaining $5 million we paid as cash. And so at the end of the year, we had a net debt position of $33.7 million. Looking into 2021, we have proactively renegotiated the revolving credit facility at Nedbank around the covenant testing's that we have. As you will be aware, that Vametco, where this covenant test is done at, had some challenges earlier in the year over and above the plant maintenance scheduling that we had of 35 days. And so we've renegotiated those facilities and are pleased that we have a waiver for June testing period and also relaxed covenants for December. We've also started our negotiations with Duferco, around the $11.5 million convertible, which is due at the end of this year. And we anticipate that $5 million of it will be payable as cash and $6.5 million of it will be converted into equity. Apologies I'm just having some challenges with my -- Okay. Here we go. Okay. From a capital expenditure perspective, we are planning to spend about $26.8 million this year. Most of that will be spent on Vanchem as we ramp up on the production at Vanchem. We've spent about $8.6 million of it to date in the current financial year. And also the other initiatives we're taking for this current year is also -- we're really pleased with the reduction of the unit cost that we already see as we integrate Vanchem and Vametco and see the synergies coming through from that. We are expecting to gain some cost savings from 2022 of between $2.5 million to $4 million per annum and that will be through just looking at our procurement and how we procure from our suppliers and getting some gains from that. Pleasingly as well, as of the 27th of June 2021, our cash balance was at $31 million. I will now hand back to Fortune to take us through the guidance and the market outlook.

Thank you, Tanya. So talking to the vanadium market. Again, most of you are familiar with the vanadium market in terms of how -- what vanadium is used for 2 main applications as an alloying element for strengthening steel as well as its applications in the chemical space, particularly in the growing VRFB space where it is used in the energy storage sector. The steel sector remains the underpin for vanadium demand. We expect it to continue to be -- still accounts for north of 90% of demand for vanadium. I think what's important when we're talking about demand for vanadium is the role that China will continue to play in that respect as a big steel producer implementing standards to phase out poor-quality rebar and introduce higher-quality, higher-strength rebar in its sector. It is those standards that have resulted in the intensity of use of steel in China growing over the last few years and is expected to continue growing. I think what's quite interesting is that a few years ago you would have had us say that, even if steel production maintained a flat outlook, the demand for vanadium in steel would expect it to continue growing on account of that increasing intensity of use of vanadium. Well, the good news in that respect is that actually steel production while globally it has been relatively flat, in China particularly, it has been fairly robust. We have seen steel production grow by 5% between 2019 and 2020. Now China produces more than 1 billion tons of steel. And this year already, we're seeing the steel market continues to be fairly robust in terms of production. And that will continue to support vanadium demand going forward. Roskill expects the demand from the steel sector to be in the order of 2.7% CAGR through to 2030. So that's a good underwriter of demand. The application of vanadium in VRFBs and energy storage itself is going to also contribute significantly to demand according to a study by the World Bank looking at different commodities and how demand is impacted by the energy transition. You'll see that there's an expectation here that vanadium demand will grow by as much as 189% through to 2015. If you look a little bit closer in terms of time, Navigant forecast that by 2027 we should see about 100 gigawatt hours of new energy storage applications -- deployments, sorry, per annum. And an 18% penetration by VRFBs of this market will require us to almost double global production of vanadium. So the demand from this space is going to be quite significant and, we think, potentially a game changer. What gives us a lot of confidence and hope in this respect is the fact that, by far, the most deployments of stationary energy storage are expected to be in the long-duration space, which is ideally suited for vanadium redox-flow batteries. In terms of supply, you will see that supply is still obviously dominated by core production accounting for about 72% of production. That is quite significant and important because when we talk about the outlook for vanadium and vanadium prices, while demand is solid, the question is -- and while demand is growing, the question is what is happening on the supply picture. Now if you look on the top right, you'll see the production versus capacity for core production, which is mainly China and Russia. The important point to highlight here is that, with iron ore prices of about $200 per ton, core producers have every incentive to rely exclusively on their own feedstock for production of steel. And as you know, their feedstock is where they produce vanadium's lag from. The incentive to blend that used to be there when iron ore prices were in the order of $55 doesn't exist anymore. With steel prices north of $1,000, also the incentive for core producers to produce as much as they can. So what we have seen is we've seen them operating at close to full capacity. What does that mean for vanadium supply going forward? It means that they are unlikely to be able to respond to the growing demand. And in that context, we believe that the parties that are best positioned to respond to the growing demand are going to be primary producers. Now when we talk primary producers, the next question one has to then ask is, what is the incentive price that is required to incentivize new supply to come on stream? And I think it is in respect of this that we believe that there remains some upside in the vanadium price. Because if you look at the projects under development out there, if they are in Australia and they are for primary production nature, the vanadium prices then need just to justify the economics of those projects are significantly north of the current vanadium prices that we are seeing. So the increases in the price that we've seen are not surprising to us. We certainly welcome them. We still think there is more upside than downside in terms of vanadium prices on account of the need to incentivize new supply, as I've mentioned. And for that reason, by the way, these views that we have just explained are supported well by Roskill in terms of their view on the market balance, which is illustrated on the bottom right-hand corner there. Important to highlight that, in terms of the supply focus that are used in this chart, there is some assumptions around new supply that is going to be developed. Within that, it's not only primary production. There's also some potential secondary production as well as some core production supply assumptions. When we get to look at those numbers in a much more granular view, we typically, as a company, take our own views around which of those projects we think have a greater chance of success to come on stream. And depending on which assumptions you make, that deficit picture could actually be even more severe than it looks right now. Talking about VRFBs, the question is always how real is this opportunity. And I'd say here, I think, in the last few years, we have seen an acceleration of the energy transition. We have seen policies being put in place to promote the shift towards greener sources of energy. We've shared before with you a chart that talks to the growing importance of electricity in terms of its contribution towards energy demand, with the world consuming energy in the form of electricity more and more. But important point to highlight here being that, going forward, most of this electricity generation is going to be coming from renewable sources. And within that, energy storage is going to play a significant role. In that context, it's good to see the growing momentum in terms of deployments of vanadium redox-flow batteries, whether in China or the rest of the world, as illustrated in this chart. In China, particularly, we're seeing projects of hundreds of megawatt hours in scale, which is really what you want to see to build the kind of momentum that you need for the technology. Now I'm going to take the next few minutes to just talk about our outlook in terms of production. I said at the beginning that we're prioritizing at Vametco stability. At the beginning of this year, particularly, we experienced some stability issues, which affected our production significantly. You have seen this in our Q1 production update that we presented. We have had to make a few changes. But most notably, I'm pleased to say that we have now put in place senior operations leadership team at head office, which is led by our Operations Director, Francois Naude, who started at the beginning of January of this year. And he's got a full team of engineering head, business analytics, quality control. And with his full team, they are able to provide the kind of support that Vametco, Vanchem and BELCO will require. Now one of the outcomes already of his leadership is a real look at how we do our guidance and we provide our guidance to the market. And here, I want to just be candid and make the point that, in the past, we've tended to give our guidance based on aspiration, based on what we wanted to see the plant produce. Of course, it was based on some decent analysis. But I think an important change going forward is that we are prioritizing predictable, stable production and have decided that we will set our monthly production run rate at Vametco and at Vanchem based on what we have seen the plant deliver sustainably continuously. And that is why when you take a 240 metric tons vanadium production run rate for the rest of the year, it necessitated us downgrading our guidance to 2,300, 2,400. The decision that we took here, what is also important about it is that it allows the plant to operate with discipline around things like maintenance. Proactive maintenance is very, very important for a plant of the age of Vametco and Vanchem. And it also allows us, as we implement improvement initiatives, to ensure that we realize those gains and those improvements on a sustained basis before we bake them into our guidance numbers. And so while disappointing that we've had to revise our guidance, I'm very confident that it was the right thing to do. And certainly, following the 35-day maintenance shutdown that we did at the beginning in Q1, we are starting to see very, very solid improvements. And I believe that Vametco has turned the corner in that respect and is well on its way to meeting its guidance and its targets going forward. On that basis, the other points that I would highlight is that it then influences the way we think about how we sequence our capital initiatives to grow production. We're currently refurbishing Kiln 3 at Vanchem, which we expect to commission at the end of this year, towards the end of this year. That kiln is similar in dimensions to Vametco, and it will see Vanchem operating at about 2,600 metric tons of production on an annualized basis. Taking into account ramp-up, we anticipate it producing at this level by the end of 2022. At Vametco, as I said, there are improvement opportunities that we will pursue. And please do note that when you look at the number that we provided there for 2022 of 5,000 to 5,400, this is not to be taken as the official guidance for the year, but just to give an indication of the production capacity that we expect from our facilities next year going forward. Important to also point out that at Vametco we anticipate supplying ore from Vametco. We have an upstream project that we are busy with there, which will supply at least initially 18 months' worth of ore supply to Vanchem, with scope to increase that going forward.

That's great. Thank you very much, indeed, Fortune.

Apologies for that interruption. In terms of Vanchem, our guidance, we revised the production to 1,100 to 1,200. Vanchem has been producing quite consistently on a monthly basis. The reason for the guidance is really down to the delay in the commissioning of the Kiln 3 that we are refurbishing at the moment. And that delay was occasioned by, among other things, delays in the sourcing and securing of steel supplies for that refurbishment program. Brits will continue to be an important part of our ore supply feature -- as a potential future ore source for Vametco and Vanchem. And also, Mokopane, as we indicated, we expect it to also continue to be a source of ore in the longer term for Vanchem. I think what I'm very pleased with in respect of our upstream project is because this is our deposit, it's our resource base. And the reserve and the resource within the upper seam is sufficient to support Vanchem for a much more extended period of time, which means that there isn't as much pressure to get Mokopane into production tomorrow. But that said, we certainly still have plans to get Mokopane into production. In the medium term, I did talk about our expectation to grow production to 6,400 to 6,800 and ultimately to 8,400 as we bring all the other phases of our refurbishment at Vametco and at Vanchem on board. Okay. On Bushveld Energy, just very quickly, we anticipate progressing our construction of the 200-megawatt hour electrolyte plant, scaling up our electrolyte rental product with the new contracts, which will be quite important to support deployments of VRFBs. We look forward to supporting and continuing the growth of Cellcube together with other shareholders. And then at Vametco, hybrid mini grid. We're looking to get to financial close and commence construction of this very important project. The Mini high-grade project, the mini-grid project, as we've said before, it's really important in that it is -- it provides a proof of concept. It proves the business case for self-generation projects. And we think that it's going to be particularly important in South Africa, where the government is more going to encourage large energy users to embark on self-generation projects. What this shows is that you can do that in a cost-effective way. And in fact, you can actually reduce your power consumption cost by going this pathway. So we think it's going to open up significant opportunities for VRFBs. Let me just draw to a close now. Near-term objectives in terms of financial, we're looking to strengthen our balance sheet, increase cash flow through margin expansion and debt reduction, the cost savings initiatives are going to be important as we continue to drive our costs down. Production-wise, growing vanadium production to achieve that run rate of 5,000 to 5,400 by end of 2022 is a near-term target of ours. Technical studies underway to increase production further to 6,400 and 6,800 will be completed this year and will provide a clear sequencing on how we're going to do that, with 8,400 still in the longer term being a target. I talked about the project and 900,000 ton reserve there and a resource of about 16 million tons. So as I indicated, it is quite significant, substantial inflection to support Vanchem. And we're investigating the potential to extend that supply beyond the initial 18 months, as I indicated. And then in terms of Bushveld Energy is the electrolyte plant and the mini-hybrids that are very near-term objectives for the company. This chart is a chart I just want to take a few seconds just talking to. If you step back from all the developments and all the work that we have been doing and you cast your eyes back to 2016, when we were a company with just the Mokopane project, have done a pre-feasibility study for this project, and we're looking at $298 million to build a primary processing plant and the mine that would produce 5,300 tons MTV. So that's what we were, and we had a market cap for about GBP 17 million. Fast forward to where we are today, we have spent about $150 million, $120 million of which was acquiring Vametco and Vanchem and about $30 million in terms of capital expenditure. We have funded this through internal cash, through some equity financing of about $61 million. And within that, we include all the convertible notes that we converted, placings that we did or warrants that we executed and net debt of about $73 million. And so external financing about $134 million to build a platform that is for 3 deposits, 2 out of 4 existing primary processing facilities in the world, producing 3,600-plus metric tons today and from close to 5,000, 5,400 by the end of 2022, building a 200-megawatt electrolyte facility -- manufacturing facility, an effective 25.25% interest in Cellcube self-generation opportunities. So here, this is the platform we have built over this period of time. It is a good illustration of the kind of strategy we outlined back then of developing our future on a brownfield platform. That meant that we could acquire production assets, that meant that we could leverage cash flows from those assets, that meant that we could access debt facilities because we are revenue-generating and in the process built a platform which we believe is significantly worth much, much more than our current market capitalization. And importantly, I have done it at about 1/3 of the cost of building a new plant. I hope that you can appreciate just the value that has been created in that time. And this, as I talked about earlier on, is what over that 5-year period we have put together. In conclusion, what do we have? It's a leading primary vanadium producer and energy storage solutions provider. 2 of the world's 4 operating primary vanadium processing facilities, large, long-life mines, hybrid open cost deposits and on our way to becoming one of the largest producers of vanadium. We provide investors with access to fast-growing energy storage sector. And we have a strong vanadium market outlook in the near and medium term with energy storage obviously providing significant upside opportunities. Our focus is to deliver on our growth and our investment strategy. We have put together, we think, a fantastic platform. Our challenge and our responsibility today is to now execute and demonstrate that we can not only produce a vanadium, but we can produce it cheaply and that we can unlock the value in the downstream energy storage space. I believe that we are well on our way to doing that. I want to thank you for your time, and I would like to pause here now to take questions.

Fortune, thank you very much, indeed, for updating investors this morning. [Operator Instructions] I just wanted the company take a few moments to review those questions that have come in during the meeting itself. I'd like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, can be accessed via your Investor Meet Company dashboard. I'd also like to remind you that your feedback is important to the company. And immediately after the presentation has ended, you'll be redirected for the opportunity to provide feedback in order the company can better understand your views and expectations. Fortune and Tanya, obviously, we've got a good number of investors on today's call, and you received a considerable amount of questions ahead of today's meeting. So I think what we've done here is we've tried to condense those questions into themes. And hopefully, that will address a number of questions in one go. So thank you to those investors that took the time to submit those questions. If I may begin on those before looking at those that are coming in the live event, the first one around really the mining operations. Can you advise on the recent production revision for 2021 and how you'll get your long-term target of 8,400 MTV?

Yes. Thank you for that question. And look, I think we can be -- as I said earlier on, be candid about the fact that we have not met the expectations we set on Vametco in terms of production. We have revised guidance a couple of times. And it is something that we're not particularly proud of. However, I would like to just make a few points. In 2020, we had to shut down operations for a month because of the COVID shutdown. And we did not undertake the standard annual shutdown in an effort to try and make up time for that lost production. The result of that has been significant operational instability at Vametco with several unscheduled stoppages during Q1. Our Q1 performance was not good at all. But what we did do, as I said, again, with establishment of an operations leadership team, we decided to go on and extend our maintenance shutdown of 35 days. And we decided also to change a few things in the way in which our team in the operations are set up. In the past, we had a general manager who would have responsibilities for not only production, not only cost, but it would also have some P&L responsibilities and a whole lot of other focus areas. We've narrowed that very, very sharply to ensure that our business unit managers in the plant are focused primarily on producing vanadium, are focused primarily on keeping costs down and with the broader responsibilities sitting with our Operations Director. So those kind of changes, plus the rebasing of our monthly production, which is anchored in what the plant has achieved consistently in the past as opposed to what we hope it can achieve. We think that both of those are very important to getting the plant operating on a stable basis. Operationally, when you don't do that and then the plant misses targets, the next month, they try to make up for the targets that they have missed. And what you end up with sometimes is behaviors that can compromise the plant because you're not chasing -- making up for lost tons. We think that the reset that we have done in this plant on a path to success, we are due to release our quarterly update for Q2 this month. We can certainly say we think that we have turned the corner. We monitor our production on a daily, weekly basis. we can see the impact of the initiatives that we have put in place going forward. So we could have taken the view to try and make up for the loss production in Q1. I think would have just continued to put more pressure on the plant. We took the hard decision to revise guidance and to operate in this new philosophy going forward. So that's with Vametco. But what it also means is that when we think about our growth, we've got a Phase 3 expansion at the Vametco that we're doing a PFS on, we've got at Vanchem a 3-phase refurbishment program that we're running. We're not doing all of those at once. The PFS studies for Vanchem are currently underway as well. We decided that what we needed to do is to actually think about how we sequence this. And the way we sequence will take into account the imperative for operational stability at Vametco, but also will take into account the need to make sure that the next ton that we're bringing in is the cheapest ton. And all indications suggest that Vanchem will be more prioritized on both accounts. And so our commitment to growing our production remains there, but it needs to be executed off a base of operations that are stable, that are meeting their production guidance. And for Vametco, in the near term, at least, we decided that, that is what we want to see it achieve.

Before moving on to Bushveld Energy, there was a question around the Mokopane definitive feasibility study and really what progress is being made there.

Yes. Look, the -- we -- in 2020, we executed the mining right. Of course, in 2020, because of the pandemic that also impacted significantly the commencement of the DFS and the necessary engagement with the local communities that is required in order to finalize land use arrangements. We have made an application to the DMR for an extension of 18 months to commence manning activities. And we have begun engagements with our local communities, and we are quite encouraged by the progress we're making there, which will see us then secure a land use arrangement, which then paves the way for a number of these other activities that are part of the definitive feasibility study. I will highlight again the point I made earlier on that Mokopane project is important, but these delays in the Mokopane project itself do not pose a meaningful risk to Vanchem because of the fact that we can supply Vanchem's ore requirements from Vametco in terms of the [indiscernible] project that we talked about earlier.

Obviously, the next few questions relating to Bushveld Energy. One of those was around highlighting the key achievements, which I think you did through the presentation. I think you went through the slide there. There was a question that related and reads as follows: given the large expectation around the vanadium redox-flow batteries market, why you're only building a 200-megawatt electrolyte plant?

Look, the electrolyte plant, we actually secured an EIA for 800-megawatt hours, so we can upsize it as necessary. But we decided it would start off with 200-megawatt hours because we think it is the right level for where the market is at today. Look, it is still relatively nascent. I think we can be honest about that. But it's good that we're seeing demand and growing. We're seeing a lot more inquiries for electrolyte supply, so we're comfortable that the level that we set it at is the right level. And also consider that a 200-megawatt hours, it will be consuming about 1,100 tons of vanadium. That is -- at 5,000 tons production, that is about 20% of our production. We still need to service the steel sector. We still need to service that bedrock of vanadium demand. So for those considerations that we started it the way we did. But as I said, it can be scaled up to 800-megawatt hours relatively quickly. The long lead items, the EIA have been secured on an 800-megawatt hour basis.

The next question kind of reads as follows: Given the President's recent announcement for raising the threshold for companies to produce their own electricity from 1 megawatt to 100, what are Bushveld doing to prepare for the growing demand in the private renewable energy market?

I think I saw a question about the progress Bushveld Energy has made. Since we launched Bushveld Energy, we were clear that a big chunk of the work with Bushveld Energy would be doing is advocacy, advocating for VRFBs within the energy mix. And in South Africa, particularly, we did quite a lot of work and including making contributions to the integrated resource plan that was being developed, making sure that the powers that we understand that VRFBs are not sitting -- not in a lag under development somewhere, but they are in commercial deployment in their viable solution for long-duration energy storage. I think that if you think about when we started to where we are today, just from a policy environment point of view, we are pleased to see that in South Africa, particularly, we have an integrated resource plan, one that has made very bold commitments to renewable energy going forward in terms of new renewable energy capacity. It has made very explicit allocations for battery energy storage 2,000 megawatts. We're expecting 500-odd megawatts of battery energy storage tender to actually go out. The Department of Mineral Resources announced this a few months ago. The push to increase the threshold for companies to generate their own electricity from 1 megawatt to 100 megawatts, that is a very, very big development. Because obviously, it opens up in thousands of megawatts of opportunities for energy storage, which is required to pair with renewable energy. What we are doing to position ourselves in respect of that, we started the Vametco mini-grid project at a time when the cap was still 1 megawatt. And that's why we sized it the way we did it, 3.5 megawatts of PV and 4-megawatt hours of VRFB. What we're pleased with is that the project economics are good. There is interest from third-party funders to fund that project. But from a Vametco perspective, this project will supply power to Vametco at a cost that is equal or less than what we are paying to the local utility. So that project is very, very important in improving the business case for these very same sort of generation opportunities that are now being opened up with the scale they are today. So it positions us really well as a company, but also for VRFBs, plus renewable energy propositions.

The final question around Bushveld Energy relates to reporting. And will you be releasing both Q1 and Q2 reports together?

Yes. Look, the latest update on Bushveld Energy's developments, we provided in the company's annual report. We will provide Bushveld Energy updates when there are key milestones to report on. We have announced a number of developments in Q2, which includes the Cellcube, Enerox investment update, commencement of the construction of the electrolyte plant. Look, Unlike vanadium production, where every day we are producing vanadium, right, I think you need to appreciate that with Bushveld Energy, it's projects that are being developed and a lot of our updates are going to be milestone-based. And as we meet those milestones and we have something material to report, we will soon be reporting to the market.

That's great. Just moving on to non-core assets. And we've had a number of questions that have come in during the live meeting all around Lamar. So what is generally happening with Lamar?