Bushveld Minerals Limited (BMN) Earnings Call Transcript & Summary
October 21, 2021
Earnings Call Speaker Segments
Fortune Mojapelo
executiveGood morning, and welcome, everyone, to Bushveld's Third Quarter and 9 months 2021 Operational Update Call. I thank you all for dialing in. I am joined on this call today by Tanya Chikanza, our Finance Director; as well as Francois Naude, our Director of Operations. With a full quarter of stable production, this has been a solid 3 months for the company, proving the success of the operational improvements that we are implementing and the investments that we are making to sustain the operations. We are pleased to report a Total Injury Frequency Rate in this quarter of 8.74%, which is a marked improvement of 46% on Q2 2021, which had a TIFR of 16.10. And we'll continue to focus on improving safety -- and safety of our workers. South Africa is now coming out of the third lockdown and both industry and the economy are recovering remarkably well as from the impact of Covid. Importantly, given the group production figures for this quarter of 1,056 metric tons of vanadium, which is 19% up from Q2 2021. We are on track to meet our full year 2021 guidance of between 3,400 and 3,600 metric tons of vanadium. With group production for the first 9 months of 2021 standing at 2,629 MTV. The 9-month production for 2021 was marginally down 2% lower, to be exact, compared with the 9 months 2020 period. And this is owing to the lower production volumes at Vametco that we experienced in the first 4 months of the year. The work undertaken earlier this year has enabled a stable and sustainable run rate and an improved cash cost on the back of a higher production volume at Vametco. A cash cost of $22.40 per kgV, which is an improvement of 13% in that of Q2 2021. At one time, we saw an improvement of 3% to $27.30 per kgV, both helped by a 3% weaker rand to dollar exchange rate. The improved stability and safety, the increase in production and the cost controls are ample evidence of the work we as a company have done as part of our ongoing operational improvement plan and the investments we have made and continue to make in sustaining and growth -- in sustaining the growth capital. We have seen a solid quarter of production, and we entered Q4 on a strong footing and are on track to meet the guidance for the year. Despite the increased production volumes, however, those have been impacted by international logistics challenges due to the COVID-19 and disruptions in South Africa over the course of July and August, which were well publicized. Notwithstanding sales of 826 mtV for Q3 are still in line with the Q2 2021 figure of 820 MTV. We do expect sales to recover as warehouse stocks are replenished in our target markets. Bushveld's cash and cash equivalents at 30 September stood at $25 million, and this compares with $31.6 million as of 30 June 2021, providing us with sufficient funds to meet our payments. Cash was impacted by the lower sales and the consequential higher working capital, mainly in the form of the inventory financing as well as the ongoing capital expenditure during the quarter to continue supporting our growth and operational stability. We have made strong progress with our negotiations with Duferco and the conversion of remaining balance of $11.5 million of the convertible loan note to $5 million payable in November 2021 and the remaining $6.5 million to Bushveld shares. Demand for vanadium remains strong globally and the aggregate Ferrovanadium price for the quarter is up 6% higher than Q2, at $31.20 kgV. And 58% higher than the same quarter last year, we saw the pricing to levels of about $24.20 per kgV. Before I close, I will discuss key milestones we are targeting for the coming quarter. We have extended the scope of work of the Phase III PFS at Vametco in order to improve the upgrade in the concentrate section to a semi-autogenous grinding mill and life of mine of the open pit with higher production to supply both Vametco and Vanchem. We will, of course, provide further details once the PFS is completed in Q4. We anticipate the increase in production run rate at Vanchem from 1,100 to 2,600 metric tons of vanadium per annum by the close of 2022 as the Kiln3 comes online in H1 2022, delivering the same roasting capacities, Kilns 1 and 2 combined. Bushveld Upper Seam project, which has a reserve of 0.9 million tonnes in-situ ore and a total resource base of 16 million tonnes continues and has delivered initial ore to Vanchem already. The crushing units are now operational and the magnetic separator will be commissioned by the end of October 2021. To conclude, I am proud and pleased to report the numbers for Q3 2021 that demonstrate our stable production and the fact that Bushveld is on track to meet guidance for the year. We continue to invest in sustaining and growth capital to maintain stability and to provide the platform for growth to support the volume increases anticipated in 2022. I look forward to updating our shareholders and stakeholders as we continue to advance our growth strategy, aiming for a run rate of between 5,000 and 5,400 metric tons of vanadium per annum by the close of 2022. Thank you for your time, and I will stop here now and take questions.
Operator
operator[Operator Instructions ] We can now take our first question from John Meyer of SP Angel.
John Meyer
analystWell done on the Q3 production numbers.
Fortune Mojapelo
executiveThank you, John.
John Meyer
analystA couple of issues. South Africa always shuts down to some -- for the Christmas holidays because it's warmer in the Southern hemisphere than it is up here. Can you just give us a view on how that might impact production in December? And what also -- what do you expect to happen with sales because there's always a bit of a lag on sales this year, we've got a certain amount of logistical disruption as well. And then can you give us some idea of where -- which markets you'll be selling your ferrochrome into? I see that the ferrochrome prices in China are picking up very nicely, but Europe has softened a bit. So are you going to focus maybe more on the United States?
Fortune Mojapelo
executiveThank you, John, for the questions. I am going to split this question that got my team. The first question talks about the Christmas holidays and how that might impact production in December. And I will let Francois talk to what we do. Yes, you're right that people shut down, not operations shut down. We don't close our operations. But it's summer holidays this side and we need to make sure that we maintain the momentum of our production. But let me hand that to Francois, perhaps a lot of more color on how we ensure that we can maintain the momentum in production. Francois?
Francois Naude
executiveThank you very much. Yes, it's little bit different than the let's call it the mining industry of [indiscernible] our processing facilities do not close. It's a full-calendar operations, 365 days a year. The only component has been -- that's being closed with -- really the mine itself with the pit. But we're managing our stocks for the closures and we're building up stocks before the mining guys go on brake. And then we -- during January [indiscernible] facility to continue. So from [indiscernible] point of view that [indiscernible] pit. Obviously, during that period and starting up now, safely becomes quite a high priority for us. The so called solution is everybody's safe. So I'm more concerned around our safety performance and we've got serious campaigns and drives to make sure that people come healthy and fit to work and our focus to continue the work as planned. So I don't expect from an output point of view, that the holidays will have an effect for us.
John Meyer
analystThank you, Francois. On the question of sales, you're right, there's been a [ broken leg ], john. The things that have impacted on that as we stated it in the earnest. In addition to the COVID related disruptions to the logistics supply chains. I think it's safe to say that, that part is a bit of a new normal that everybody who is exporting and has got to do with the logistics has to turn around. And we've learned how to do that and taken that on board in terms of how we plan logistics. But in July, the disruptions that happened in KZN, those may not -- those are ones of, they're not foreseen. They did have an impact because we export most of our production, our product via the KZN ports. Now that, that is behind us, of course, we're working to make up for some lost ground there and replenishing our inventories. So I think the challenges associated with COVID, [ in fast ] logistics are concerned, we've had some time to work with that and adjust our planning around that. But the ones of disruptions like what happened with the unrest in KZN, there is nothing we could do about that at the time. But suffice to say that we got it behind, as I said, we are moving to try and replenish our inventories as much as possible. So we believe that we should be able to make up for some of that ground. One other comment I'll make to that point also is that, of course, those are important, particularly in terms of our income statement performance, et cetera. We want to make sure at the same time that we've got the product there. And I think as long as we have the product available to sell into market -- it's an easier problem to solution for from a working capital point of view than not having production. So I'm actually still quite pleased that the work that we've been doing in the plants to make sure that production is stable, that we have a product to sell that has taken the kind of importance and priority that we have given it, and then we see the kind of results that we are seeing there. You made the point I imagine you're taking Ferrovanadium not ferrochrome. We do sell into obviously Chinese market into the U.S. market. Very pleased to see the U.S. market holding up quite strongly actually in terms of prices. And we are, I think one [Technical Difficulty] Q2, one of the things that we did state was the fact that we were prioritizing operational stability at Vametco and at Vanchem. And I would just say that, I think building credibility is something that takes time. And one of the things that we did say amongst ourselves is that we need to put our head down, make sure that we get our operations delivering on a consistent basis. And as confident as we were at the time and as confident as we still are now. As far as the market is concerned, we -- we have to just produce those results on a consistent basis. So I'm pleased that with this Q3 results, we've built on from Q2, and we continue in Q4 to focus on ensuring that our production performance, our cost performance is great. And as we continue around that I'm trusting that I think the sense of confidence in us and in our production performance going forward will return. The only answer to the issues we had at the beginning of the year is to do exactly what we've just been doing and we certainly look forward to continuing doing that. And yes, on that note, I wanted to thank you all for your time -- and look forward to speaking with you on the Q4 results. In due course, just also one final point I want to just highlight is you will see a strong focus in our operations in this [ RNS ] that we put out. Work continues in our various energy initiatives. And in respect of which we will provide the market in due course with updates in the absence of mention of energy in this [ RNS ] should not be construed to mean, that nothing is going ahead, nothing is going on in that space. We are working hard as well there to ensure that we deliver on our objectives. And I look forward to providing an update to the market in due course on that. So thank you, and thank you for attending. Have a good afternoon. Have a good day ahead.
Operator
operatorThis concludes today's conference call. Thank you all for your participation. You may now disconnect.
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