Bushveld Minerals Limited (BMN) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Bushveld Minerals Corporate Investor presentation. [Operator Instructions] And I'd now like to hand over to Fortune Mojapelo, CEO. Good morning, sir.

Good morning. Thank you very much for hosting us and for the opportunity to make this presentation. I would like to also just welcome everybody who's dialed into this presentation, I simply look forward to engaging with you all, provide an update and take questions that you may have. So the way we're going to run the presentation is that I am going to go through a series of slides. I'm going to try not to spend too much time just to allow for an opportunity for Q&A at the end. So I'm going to try to do this in the next 20 minutes. Just to also acknowledge that I'm joined on this call by Ms. Tanya Chikanza, our Group FD; as well as Ms. Chika Edeh, who is our Head of Investor Relations. If I may start off by just acknowledging the disclaimers, which are necessary that we note them, and that takes us on to this slide, really just introductory, snapshot view of the company today with about 1.2 billion shares and a share market cap of GBP 62 million, something we'll come back to when we talk about our share register. I think what is quite clear is still a strong presence of retail shareholders. I think it's fair to say that retail shareholders have carried this company through its transformation to where we are today, something that we truly appreciate. Also just to highlight here that we do have analyst coverage from SP Angel, Peel Hunt, as well as Alternative Resource Capital, with all the analysts with target prices for Bushveld that are significantly above where we are today. And of course, we will talk a little bit later today about that disconnect between the value of the company and the current share price. Again, if I may start off by just laying the groundwork, setting this in, describing the company as we have set it up, a vertically integrated primary vanadium producer, which is vertically integrated from upstream; 2 key parts, upstream, which is mining and processing and which combines downstream with Bushveld Energy platform, which is driving the adoption of vanadium redox flow batteries in the growing energy storage market. We'll talk a little bit about the assets we have, which essentially comprise high-grade primary vanadium assets with a combined resource base of about 550 million tons, grading at about 1.6% to 2.0% V2O5, which certainly puts it in the Tier 1 of primary vanadium deposits. Three deposits that are well serviced with logistics infrastructure, combined with 2 of the world's 4 operating primary vanadium production processing facilities. Very significant point here because as we have often said, and we will talk to this when we talk about the market, we see primary producers as holding the key for future vanadium supply growth going forward. And not only that, we believe that South Africa is uniquely positioned, and within that, we see Bushveld Minerals being very well placed in that growing market. Then downstream, of course, we will talk about our energy platform, comprising electrolyte manufacturing and sales and rentals, the VRFB manufacturing through CellCube as well as the deployment of VRFB project through our deployments platform. This slide just gives you a geographic overview of where our assets are. Most of them, of course, in South Africa on the famous Bushveld complex, where we have Vametco, which is an integrated mine and processing facility with a life of mine of over 30 years. Production in 2022 estimated at 2,550 to 2,650 metric tons of vanadium. And then you've got Vanchem, which is located in Emalahleni, which is just a processing facility with production for '22 estimated at 1,350 to 1,450 mtV. Adjacent to Vametco, we've got the Brits project, which is outcropping, strike extension of the Vametco mine, which has the potential for adding additional ore feed for Vametco and for Vanchem. Of course, the Mokopane project was a flagship when we anchored and decided to focus on vanadium. And that project remains quite an important project with a large resource base of about 300 million tons with fantastic grades also of about 1.75% V2O5. BELCO, which is the electrolyte manufacturing plant, 8 million liters capacity, that is under construction in East London and the Eastern Cape in South Africa. The Vametco Mini Grid, which we are constructing, a 3.5 megawatt solar PV, combined with a 4-megawatt-hour VRFB. This is at the Vametco operations, and Gareth will talk to you how significant that development is. And finally, our 25.25% effective interest in the VRFB manufacturing company, CellCube, which based in Austria. This is just a quick peek of the Vametco and the Vanchem plants, just giving you some perspective of the scale of operations that we do have. I often say that when you talk mining, and this is an interesting thing about our location in the mining sector of the LSE, that mining accounts for about 10% to 15% of our activities. The rest of it is really processing and manufacturing. Fairly complex set of operations. But within that, we're privileged, I'd say, to have 2 assets, which we consider absolutely key in the growing vanadium market. I also want to highlight the points that we have said several times in the past about the significance of Vanchem as a complementary asset to Vametco. Between the 2 assets, we have this core common processing methodology. Yes, there are tweaks at the tail end of that processing. But you've got plants that are very synergistic and complementary, producing a broad range of vanadium products for the market, which also allows us some flexibility in terms of responding to the market in terms of which specific products are attracting good price margin opportunities for us. So the fact that we can increase production of ferrovanadium or Nitrovan or V2O5 in response to the market, I think, puts us in a really unique position amongst vanadium players. Of course, again, that comes with some complexity, but we are very clear that the advantages of that flexibility are fantastic and steadily worth it. Let me also just take you a step back in terms of where we've come from in terms of the transformation of the company. 2017, the start of the year, Bushveld was an exploration company with a mining right to develop the Mokopane project. And in that year, we acquired Vametco, and in 2019 November, we acquired Vanchem, and you can see subsequent to all of that, the growth in production that we have seen, 40% growth between 2018 and 2021, and with '22 production guidance of 3,900 mtV to 4,100 mtV, which means effectively that by the end of 2022, we're talking a significant growth in our production beyond that 40% increase. We're looking at a production run rate of 5,000 mtV to 5,400 mtV by the end of 2022, which is double the production that we started off with in 2018. I think as we will talk very candidly about what this growth has meant and also the challenges we've faced as a company, I always wants to urge parties and individuals to sort of step back and look at this growth, which, in my view, is very, very significant and has placed us in a really good position as a significant player in the vanadium market overall. We have also outlined a clear path for growing production beyond 5,000 mtV to 5,400 mtV, all the way to 8,000 mtV. We shared earlier on, releasing the results of the feasibility studies that we did, which show the capital requirements and the economics associated with that production volume growth. We certainly think, again, in a world that is going to require a lot more vanadium going forward, that Bushveld Minerals is really uniquely positioned in terms of being able to respond quickly with new vanadium units, and also that we know we can do it, from a capital perspective, much cheaper than anybody trying to do this on a greenfield basis. So these studies really position us well for the growth that we think is going to come. I should highlight, however, that at 5,000 mtV to 5,400 mtV level of production, we believe that we've got a sustainable business production base that is supportive of positive margin and cash generation. And we think that, that is very important. That's why the refurbishment of Kiln 3 was particularly critical so that we get to a place where, even without that additional growth we're talking about, we have a business that we think is fundamentally very attractive. Now I'm going to talk very briefly about the downstream assets, which is the Bushveld Energy platform, again split into those 3 critical elements, electrolyte manufacturing and deployments. And I want to also take you back to 2015, when we launched Bushveld Energy, that our view was that we saw significant opportunity for vanadium redox flow batteries in the stationary energy storage market. We saw this transition from a way off, and we believe that we have, as a company, played a very important leadership role, leading the charge for VRFBs. We also identified that there were 2 critical hurdles that VRFBs would need to overcome if they're going to have a share of this exciting market. And those specific hurdles dealt with the security of supply of vanadium and the security of the cost of vanadium as a contribution to the cost of the VRFB system. I highlight this to make the point that at the start, we are also clear that the way you solution for those 2 is through a vertically integrated platform with a scalable, low-cost primary production base. And it's on that basis that Bushveld Energy was set up, the way we did, with activities across the entire value chain comprising electrolyte manufacturing and sales and rentals, the production of vanadium redox flow batteries themselves, as well as the deployment of the project involving VRFBs. In terms of the electrolyte plant, you now know about our plant that we're constructing in East London, which is more than 80% complete now and expected to enter into operations in the first half of 2023, and we're pretty excited about that. We've started product qualification process with customers. One of the most significant aspects about this plant is demonstrating that we can produce electrolyte from our ore bodies, which is of sufficiently high purity for deployment in the global VRFB market. Then second point in respect of electrolyte is the rental, which we see as playing a catalytic role in the deployments of VRFBs. And here, the focus is scaling up the product that we have already developed and, in fact, have implemented in the market. Some of you may be familiar with the Oxford super-hub Pivot Power project, which is a 5 megawatt-hour VRFB battery that was supplied by Invinity and delivered to Pivot Power's project. The electrolyte there was produced using high-purity vanadium pentoxide sourced from our facility and the rental contract that is there is based on our design. And so it is good to see that these rentals do work and they can be deployed successfully. And of course, the point going forward now being to just scale this going forward. In respect of manufacturing, we have a 25.25% interest in CellCube based in Austria, certainly one of the most mature and quality VRFB manufacturers out there. And again, with the product that is in commercial deployments, the focus is ensuring that we can scale up production to meet what is really an accelerating demand. In addition to that, we have started and nearing conclusion of a study to investigate manufacturing of the VRFBs in South Africa as part of our Cooperation Agreement with Industrial Development Cooperation. The significance of that particular cooperation is, of course, in the importance of local content in the deployments of these systems, which we think will position us very well in a market that is in itself growing to be one of the top energy storage markets globally, which is South Africa. Deployments. I will talk briefly again about the mini-grid. You are aware of it, 3.5 megawatts of solar PV, 4 megawatt-hour VRFB. This particular project had a cost of about $7 million. We reached financial close, funded 60% with commercial debt and 40% with equity, including third-party equity providers. Why is this particularly important? It's important because it demonstrates that today these projects are bankable. This mini-grid has got an arms-length power purchase agreement with Vametco, which will see Vametco pay no more than what it is currently paying to Eskom for power. And yet here you have a project with solid economics and certainly bankable. In a country which has now relaxed the regulatory requirements for self-generation and we're seeing substantial take-up of self-generation opportunities, we think that this project provides an important proof of concept, which will support the rollout of such solutions beyond our own operations. Talking about our own operations, we have started developing self-generation options, taking advantage of that relaxation of those regulatory requirements. And we see an opportunity here of as much as 125 megawatts of solar PV and about 180 megawatt hours of energy storage. So we can create a demand. But again, I want to make the point that this is not subsidized demand. This is demand that is entirely meetable on an arms-length basis with a solution that combines solar and storage. We announced about a year ago now that we had taken the decision to carve out Bushveld Energy. Just again, to reiterate the context of that, when we set out, I explained earlier on that we sought to ensure that we solve for the 2 key risks for VRFB deployments, which is security of vanadium supply and the cost of the vanadium and how the vertical integration solved for these 2 key elements. And we've seen, over the last 4, 5 years, how doing this has effectively been able to do that. Not only in the case of Bushveld, we have also, in my view, been able to inspire similar developments within the vanadium industry as we've seen many other primary vanadium companies follow the road to develop downstream VRFB-based energy storage platforms. As we have developed those elements I talked about earlier on, they have grown and so has the capital requirements, particularly as we get into scale-up phases going forward. Invariably, that does mean capital allocation tensions within the group. At the same time, we have a company that is structured and located in the capital markets as a mining company, which means that our coverage comes primarily from mining focused analysts and our investor base is also an investor base that is typically exposed to the resources space. That does mean that invariably, we have limited access to energy-focused investors, limited coverage by energy-focused analysts with appropriate valuation methodologies and approaches for the assets. We see that resulting in an underrepresentation or rather a lack of recognition of Bushveld Energy's value in the overall company's share price. So in carving out Bushveld Energy, what we're seeking to do is to position the company within an appropriate energy-focused capital market sector, leverage the capital investment that we've done in a single vehicle to create a scalable investment platform. We will retain the vertical integration through a significant shareholding in Bushveld Energy so carved out. We think that this is the best path forward to allow Bushveld Energy the kind of capacity that it requires to scale up very quickly in a market that is growing at a fast pace. Now if I can just talk very briefly again about our financial performance as a company. In this presentation, I presented the numbers going back to 2018 for a reason, which is to try and give a high-level view about what we have achieved in the last 4, 5 years. We have, in that period, generated a cumulative EBITDA of about $124 million. 2020, '21 were highly disrupted years, thanks to COVID, and years in which, as a company, we generated combined minus $25 million in EBITDA. But apart from that, we have seen a company that is EBITDA positive every year. And it's a time in which we have been investing in acquiring, consolidating our interest in our assets, spending capital in respect of necessary compliance-related CapEx as well as growth CapEx. And we have done that and gotten the business to a place now where, by the end of this year, we have a production base of 5,000 mtV to 5,400 mtV going forward. Of course, one point is we have done that, and I must make the point again going forward that we do not anticipate spending significant -- any capital in fact in terms of growth CapEx. We are comfortable that we've built this business to a place where it is sustainable and any further growth capital would only be committed to when it is funded. And we're comfortable that as a business, we are sustainable in our current format. We see opportunities, of course, going forward to reduce our costs and ensure that we have an even more cost competitive, and therefore, an even more margin positive and cash-generative business. If I can draw your attention to the second last row of our gross debt. You will see that our debt in that same period, however, has grown significantly. And the reason for that is because we've grown this business, acquired the assets that we have invested in the critical capital expenditure from an environmental perspective as well as growth CapEx. We funded all of that from a combination of internal cash, limited equity, but predominantly we have funded it through debt instruments. I should draw your attention to the fact that even though about 25% of the funding of that $180-odd million was equity instruments, in the past 4 or 5 years, we have only ever done a single placing when we raised $22 million in 2018. The additional amounts that are reflected in the equity instruments speaks to convertible notes when they are converted into equity or warranty instruments when they were exercised. And that's quite important to make that point because that means that effectively, we have grown with not only a heavy reliance on debt, but also, it also means that where we have called on equity, a significant portion of that has been conversion of convertible instruments as well as warrant instruments, and that does have a consequence, which talks to the long-term horizon or short-term horizon of those instruments, something which presents an interesting -- not an interesting but something which presents a challenge for us as a company, which I will address in a little while. Our focus then going forward is really, now that we have grown our asset base, and we're looking at producing on a sustainable basis, I'm very pleased with the production that Vametco has done, which has shown quarter-on-quarter very solid performance. With Kiln 3 commissioning at Vanchem completed and with Vanchem on track to get into the 2,600 mtV level on an annualized basis, we have a good production base. One of the next areas of focus for us as a company is resolving our balance share. And this slide just shows you the make-up of that net debt position. The Nedbank revolving credit facility, we have been paying it down, and we expect to have it fully repaid by the end of November. The Orion convertible notes of $33.8 million, which has got a fixed 10% coupon that's capitalized. That matures in November 2023. It is not lost on us that, that means it matures in 12 months. And it is something given that its convergent price or exercise price is 17p, which is substantially not where our share price is today. I think that it is only appropriate and fair to acknowledge that, that creates some level of angst perhaps in the market and something that we as a company and as a management team are entirely focused on solutioning for. I should also make the point that we are fairly confident that we will be able to do that. Now if I can turn my attention to the vanadium market fundamentals for a few minutes. Our market proposition as far as vanadium is concerned is one that we have repeated consistently over the last 5 years. And essentially, it talks to a demand profile, which is robust, which is anchored in steel applications that have continued to be the bedrock for demand for essentially plus. We expect this anchor to continue in the future. Even in a world of muted steel production growth, we do see a significant step change upside from the long-duration energy storage applications. And I will share some interesting developments with you that underpin our confidence in this upside. Supply on the other hand is concentrated, it's constrained with primary producers being well positioned to meet growing demand. And the point here is that co-producers that are mostly located in China and Russia, accounting for 73% of global supply, are fundamentally steel plants operating increasingly close to capacity, and that particular point to think is one that must be noted. While new steel capacity in China will come from scrap and hematite processing facilities, which doesn't have any vanadium co-production associated with it. Secondary production is expected to grow in the short to medium term, but ultimately, it will be constrained in the peak oil production scenario, which is why we see large high-grade primary resources in South Africa being ideally placed to meet the coming vanadium deficit. And I should mention also that the incentive price for new primary production also points to significant vanadium price upside. One only has to look at the feasibility studies of different primary producers that have been announced recently to see the point that the economics of those projects requires vanadium prices that are significantly north of where we are today. I'm not going to dwell too much on the steel side because that is generally well understood. Again, as I said, even in a world of flat or muted steel production growth, the implementation of standards will continue to support a growing vanadium intensity of use of vanadium, which in turn will continue to support vanadium demand growth. But as we said earlier, it is the application in the VRFBs where we see a game change. Demand from VRFBs is expected to grow at about 56% through to 2030. If you look at what the International Energy Association's long-term scenarios talk about, they see as much as 130,000 to 210,000 metric tons of vanadium being required to support energy applications by 2040. Even on the lower end of this, we are talking about more than the entire current market for vanadium. The World Bank also, in its own scenarios, came with numbers that are not exactly the same, but still points to an excess of about 190,000 mtV of vanadium demand from storage going forward. I think the point is that this is very, very transformative for the vanadium demand outlook. Now how real is that is a fair question that people would ask. And I think we've always been of the view that firstly, the stationary energy storage market -- forget VFRBs, let's just talk stationary energy storage market, that it is a real market. And the forecasts that we have seen are very, very impressive, whether it's Bloomberg New Energy forecasting [ 122 ] for the increase in stationary deployments for batteries. Of course, there will be multiple technologies that play in this space. Lithium-ion, largely because of applications and the short duration, frequency regulation, et cetera, has got a match on everybody else and still enjoys the largest share of deployments to date. What is important to note, however, it is long-duration energy storage going forward that's going to be important, accounting for as much as 90% of stationary applications. Why is that important? It's important because that's really the sweet spot for VFRBs. Now all of that, generally speaking, is understood, but I think the question then has to be when do we expect to see this demand materialize? And this chart here gives just a snippet of some of the recent developments in respect of that. In China alone, in 2022, we have seen the successful commissioning of a 100-megawatt/400 megawatt-hour VRFB by Dalian, which is now fully operational. We have seen a 1,000 megawatt-hour project starting construction, which will be completed end of 2023. In addition to all of this, 3,700 megawatt-hours of VRFB projects have been announced in China just over the last 18 months. And in a recent paper, as indicated here, you can see the kind of demand we're talking about, 2.3 gigawatts or 2,300 megawatts by 2025, growing almost twice that number by 2030. What's important here is that what does it mean for the vanadium requirements over the next 10 years? Well, it's as much as 400,000 tons, if you take just some of this forecast. Of course, that number is over the next 10 years. It's not an annual number. But you can see how significant it is even if you take into account that that's going to be in the second half of the decade. Another point that I would also just want to highlight here is the developments within the supply chain ecosystem for VRFBs. Why is that important is because, again, we have seen it with the lithium-ion industry, we've seen the commitments of the Chinese to build these value chains to a point where today, more than 90% of the production capacity for cathodes and for significant aspect for the lithium-ion batteries is sitting in China. And here we are seeing, again, very bold steps forward in developing this value chain in China. A joint venture between Pangang, which is one of the largest VRFB manufacturers, with Rongke Power for electrolyte production, which is intended to target 60 million liters by 2025. Just to put it in perspective, that's almost 8x the electrolyte manufacturing plant we build in BELCO in East London. China's second largest producer is also just constructing 1,000 mtV high purity vanadium and electrolyte production line. Because there are companies that are linked to the government, when you see these types of developments, I think it's fair to say that there is very strong policy support for the development of the VRFB ecosystem in China, which tells us that we believe this opportunity is real and is starting to pick up momentum. But it's not only in China, this is happening, if you look at South Africa, we've also seen significant developments there with Eskom's best project, which is currently under procurement. What has been not worthy particularly, however, is the news that has come beyond that. Eskom's latest power system plan highlights as much as 8,500 megawatts of energy storage being needed through 2035. For the utility to be making these particular statements is encouraging. Again, we do not necessarily expect that these are all going to be VRFBs, but we do note that they are, for the most part, going to be long-duration applications, which means as VRFB industry picks up scale, we believe that we'll be able to capture a share of that interesting market. I talked about the supply picture earlier on. I just want to make one point on this slide. If you look at the top right column chart, China's production versus capacity, and you also look at Russia's production versus capacity. I single out these 2 because they account predominantly for pretty much most, if not all, of the co-production capacity. For a long time that production was significantly less than the production capacity. Why is that significant? If you look at the historic vanadium price chart, you will see that most of the price shocks that we experienced were largely supply related, which means that when there was a cutback in supply, you saw spikes. Of course, co-producers are driven predominantly by steel economics, not by vanadium economics. So it means that when steel prices are great, they have an incentive to increase production of steel with the result that you got more vanadium supply than at that time might be required. I think what is significant and is an important structural shift is that we get into a point where these co-producers are operating at near capacity. That means that even in an environment of high steel prices, we do not see significant increases in vanadium supply from co-producers, and this is why we make the argument that ultimately, it's primary producers that are going to need to step up. But of course, to produce vanadium from a primary perspective, you need grade, and the distribution of the grade is the reason why there's the level of concentration we see in primary producers with 3 of these plants situated in South Africa on the Bushveld complex. I should make the point there is plenty more vanadium on the Bushveld complex. And certainly, we do believe that there will be a lot more operations like Vametco that can be built on the Bushveld complex to meet this growing need. Of course, in the first instance, in our view is going to be the quickest response. And I want to emphasize again the point why we went as aggressively as we did to acquire the 2 uses that we have, Vametco and Vanchem. Now of course, the medium to long-term fundamentals themselves are sound, we believe, but the volatility in the market remains a feature in the short term and it's something we have to deal with as a company. Market balance is expected to be affected by the realization of several rental projects under development. However, as a company, we retain our in-house view that supply will continue to be concentrated and constrained with limited new supply from primary greenfield projects. We do need to note a few short-term market factors, one being a softer steel market, the global economic slowdown driven by high energy prices and this impact on the steel market, which is still the biggest source of demand for vanadium. The global geopolitics, particularly the Russia-Ukraine conflict cannot be ignored in terms of its impact not only on the global macroeconomic factors, but also on the geopolitics of vanadium itself. Russia accounts for about 17% of supply, as we indicated. Together with China, they both account for about 78% of vanadium supply. We have seen Europe, we've seen the U.S. produce lists of what they consider critical raw materials and those lists include vanadium. And we think that in that context, in the context of the geopolitics I just described, again, South Africa has got a very, very unique opportunity that it can take advantage of. There has been also secondary production assets that are under development and the supply coming on stream, we think also could have short to medium-term impact on the market. I've been encouraged though that even though we have seen the headwinds in terms of macroeconomic factors in terms of the global economy, we have not seen vanadium prices retract to levels we've seen historically. If anything, in the U.S., we've seen vanadium prices hold very steady, north of $40 per kgV, and in Europe, while they may have fallen over the year, we've seen them bottom out in the first half of the 30s per kilogram vanadium. We think that in itself is a positive that we welcome. Just talking about near-term catalysts in terms of our outlook, the positive EBITDA and free cash flow, we expect it to continue into the second half of 2022. Capital expenditure will be limited mainly to sustaining capital from 2023 going forward. We, of course, are pushing to ensure that we can meet our production guidance of 3,900 mtV to 4,100 mtV, also to get a production run rate of 5,000 mtV to 5,400 mtV by the end of 2022. BELCO coming online in the first half of 2023, as well as the completion of the construction of the Vametco hybrid mini-grid in the first half of 2023 are all developments we can look forward to, as well as the carveout of Bushveld Energy, which we have announced, which we are busy with and will allow us, as I indicated earlier on, to position Bushveld Energy to get the kind of support that it requires and the focus that is requires to capture the opportunity in front of it. Allow me in the last few minutes to just give some concluding remarks. I note that today our market cap as a company is about GBP 63 million, which is just over 3x what it was at the beginning of 2017. The difference between those 2 points is that in 2017 at the beginning, we had just the Mokopane project with the mining right and with the prefeasibility study completed. Fast-forward, today we have built an asset base that I believe is enviable. We've acquired and refurbished 2 primary processing facilities with total capital expenditure of about $160 million, including growth CapEx. We've grown our production to a level where we are comfortable with a 5,000 mtV, 5,400 mtV annualized run rate by the end of this year. We have defined very clearly, with feasibility studies, the growth path to 8,000 mtV. In that process, we've generated cumulative EBITDA of about $124 million, included within that number 2 years that, as we all know, were highly disrupted by the COVID pandemic. We have developed a Bushveld Energy platform, leveraging about $20 million in investments by Bushveld to raise about $70 million across that value chain, which has seen us get our mini-grid to financial close with construction of our manufacturing plant for electrolyte underway, the acquisition and funding of our stake in CellCube, as well as, while we're doing all of this, establishing organizational capacity for what is really a complex multi-site operation. And I must say here, I'm particularly proud of the work that the team has done. It's the work that is not very visible to everybody. We acquired assets from groups, and in acquiring these assets, we had to invest capital; we had to, at the same time, build organizational capacity. I often say, we've had to build this airplane while it is flying and we have been able to do that. There has been challenges, which we do need to acknowledge. The revisions to our guidance in 2020 at Vametco and in 2021 at Vametco and Vanchem are not something that any management team would be proud of. I am pleased, however, to highlight that with the focus on operational stability at Vametco, we have been able to get to a level where, in fact, for Vametco, our guidance revision has been upwards with production targeting towards the upper end of that guidance. I'll talk also about our cost position as a company. We have been in building mode. We have been in expansion mode. It is important that we focus our attention going forward on cost reduction to ensure that we improve on our EBITDA generation and our cash flow generation capacity, particularly at Vanchem. As those increased volumes come through, we expect to see the unit costs come further down to allow us to get towards our target, ultimately, of an AISC of less than $30 per kgV. The other challenge I should highlight is the lack of institutional investor presence on our register. As I shared at the beginning of this presentation, we have a register that is predominantly retail. We are thankful for the support that retail shareholders have given this company through what has been a very, very trying time, but it is fair to say also that we do want to get to a level where we have a balanced register that includes institutional shareholders and it's something that we continue to pursue. Fourth point I'd highlight is the gearing on our balance sheet with more than 50% maturing in 12 months. And finally, the reliance on convertible debt instruments does mean that we have resulted in creating some overhang when those convertible notes are converted into shares. I think it's important that we are candid about these challenges. We are aware of them as a management team and as a Board, and our focus is very much on addressing those so that the full value that we have created can start to show through our share price and our market cap. I'll reiterate some of the analysts' target prices that they've put on the company. And you'll see that in all respects, they are materially substantially higher than where we are today in terms of our share price. Now finally, the reason I shared those concluding remarks was to make the point that at times, yes, we do get angst around short-term developments in the market, in the company, but it is quite important that they don't detract from what we think is a very, very compelling investment proposition, which we summarized, as we always do, across those 4 key dimensions. We have a green commodity for the future. We just got very good fundamentals and which, in our view, is set to contribute significantly to global decarbonization efforts. We have demonstrated the place of VRFBs in this space. And today, we are talking about scale up. And we think that, that positions Bushveld -- and that positions vanadium sorry, right in the middle of the energy transition narrative. In addition, of course, to its important contribution to decarbonization of steel through its alloying applications. We've built a solid asset base, large long mine life, high-grade opencast deposits, some of the largest in the world, and Tier 1 grades of 1.6% to 2% V2O5 in-magnetite. We have 2 of the world's 4 operating primary facilities, and we have a platform with a divest range of vanadium products that provides production flexibility to maximize sales and market demand. I've talked about vertical integration and the unique positioning it gives us as a company to capture value across that entire value chain. And then, of course, the growth proposition. We have transitioned successfully from an explorer to a producer, seeing production growth significantly over the last 4, 5 years. We have a sustainable steady production run rate of 5,000 mtV to 5,400 mtV by the end of this year, with well-defined growth paths to 8,000 mtV per annum. And even though, again, while that is attractive at 5,000 mtV to 5,400 mtV, we have seen significant growth, and we have a business, we believe, is sustainable and well positioned for what's coming tomorrow. I'm going to stop here, and thank you all for your attention. And now we'll turn our attention to some questions.

[Operator Instructions] I'd like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A will be available via your Investor Meet company dashboard. Fortune, we did receive quite a considerable number of questions ahead of today's event and during today's meeting. So thank you to everybody for your engagement. And perhaps we could start off with the first one, which relates to the carve-out. And please, could you provide shareholdings in Bushveld Energy post the spin-off, including existing shareholders, BMN and Makao. Timing of carveout, is that still the year-end?

Thank you for that question. I think I'm not going to reiterate the motivations for the carveout, which we have outlined. If I understand the question correctly, it's more around the time lines. We still have a good -- at least to the end of the year, we have been working hard behind the scenes to ensure that we have a successful carveout, again, critical that we do this in a way that positions the new Bushveld Energy for success. That means ensuring that it is in the right market, ensuring that it is funded sufficiently, and it's got the right level of adviser and support from the capital markets. Unfortunately, I'm not able to give you specifics just because this is something we have not yet shared to the market. Suffice to say that there is a lot of progress and we do expect to provide an update to the market in due course, certainly before the end of this year. Will the carveout be completed by the end of the year. The answer to it is that is the target and that is very much what we're still working to. If that changes, we will again also update the market. I am sitting where I am fairly confident that we will be able to achieve a successful carveout for Bushveld Energy.

That's great. Received a number of questions, and I think your team has tried to put these into some kind of consistent order for you around the next thing being VRFB deployments. What is the status of the Eskom tender process? Can you give a bit of color to that?

So the Eskom process is an ongoing process. You will note that it was structured in 3 different packages. And the first one was announced and those were awarded mostly, if not all of them, to lithium pyrophosphate batteries. There is more sites that are still being tendered. We expect one possibly before the end of the year. We can share, I think, some more details on that. We, of course, are working hard to ensure that VRFBs can participate in this. I think I do need to make a point, however, with most of these tenders and the scale of these tenders, one of the hurdles or constraints that VRFB, at least at this stage, still has to contend with is the ability to manufacture these batteries at scale and in the time lines that are required. We think that, that is something that's going to be something of the past as VRFB companies scale up production capacity. And that's why those supply chain developments in China, the work that we are doing as Bushveld Energy, the scale-up of manufacturing capacity of CellCube and the developments of the other VRFBs are particularly important because VRFBs are ideally suited to large-scale deployment. And because of that reason, they need to scale up manufacturing capacity pretty quickly. The good news is that, that scale up of capacity can be done very quickly, and it does not require the sort of levels of capital, for example, that the lithium-ion industry would require to scale up manufacturing, which means that we're also able to capture economies of scale fairly quickly. And that's really the focus we see with most VRFB companies. And I've been very encouraged by also the level of interest that we have seen across VRFB players by large industrials that are suddenly waking up to the proposition of VRFBs. And we think that the impact of all of that will be to support VRFB OEMs to successfully tender for some of these opportunities. We're just at the starting blocks of this thing. We're going to see a lot more. For our part, as Bushveld Energy, we are driving and promoting as much VRFBs as we can in these tenders. But I have to say, the constraint is manufacturing capacity, which is something that is being addressed across the entire VRFB industry.

That's great. And as I said, we have received so many questions, it's going to be difficult to answer all the questions, but I am of the understanding that any questions that we don't get through, where we can, we'll provide written responses. So thank you to everybody. So apologies if I don't read out your specific question. If I can just turn to BELCO, a number of questions around BELCO. Can you provide more details and time lines for completion and to the ramp-up of production at BELCO. How much financial support will be needed do you think going forward?

Thank you for that. Look, the construction of the BELCO electrolyte plant is more than 80% complete. We expect it to enter operations in the first half of '23, with an eventual ramp up to 8 million liters per annum, that's the capacity that we're starting with. However, the ramp-up period, and also I should make a point, the ramp-up period can be accelerated to meet short-term market demand. But we designed this ramp-up to be very conservative. So we do not necessarily anticipate selling 8 million liters of electrolyte in the first year. And as I indicated earlier on, we are currently engaged with market sort of with a qualification process for the electrolyte with different VRFB companies in preparation for electrolyte cells next year. Because we didn't build this plant anchored by offtake agreements. We needed to, as a consequence, be very conservative in terms of the uptick in sales that we expect in the first year. And we have provided for that in the funding plan for BELCO.

That's great, Fortune. Let's talk around the vanadium. When do you see Vanchem Kiln 3 monthly production rates exceeding 216 mtV per month, which will put us right on target?

Look, I think our commissioning challenges that we experienced at Vanchem are common knowledge now. And we have indicated in previous ops updates that the mechanical challenges that were associated with that, we have resolved, which has seen the availability of the Kiln improve to the sort of levels we expect of it. Because you do need that to then solve for the next piece in any commissioning, which is ensuring that you achieve the expected yields and recoveries and that has been the focus of the team. I must say they've been doing well with production at Vanchem growing. However, the challenge with Vanchem continues to be the impact of load shedding. Not sooner had we put out our ops update, we experienced in September the worst load shedding period as a country that we've ever had for more than 5 years plus. And when you look at the number of incidents and the severity thereof, it is an issue that affects Vanchem differently than Vametco. I mean, it's not worthy that we have increased our guidance for Vametco in a year in which we've seen the same level of load shedding. But the difference is because at Vametco we are on a curtailment contract, which means that in times of load shedding, we are asked to just reduce our consumption as opposed to having to stop production altogether -- sorry, as opposed to being cutoff altogether, whereas at Vanchem, we do get cut off during load shedding, and then we have to rely on generators of limited capacity. We are hopeful that this will be resolved with a move by Vanchem to a similar model of curtailment. And we think that with that resolved, we should see Vanchem able to meet the targets that we've set for it of 2,600 mtV per annum.

That's great. A number of questions around strategic corporates and financials. And as I said, we will get around to reviewing those with time permitting. But maybe we can talk around this one. What is happening with the Lemur Power project. I think we've got a couple of questions in the live chat here as well. What is happening with the Lemur Power project. With any coal project now politically very difficult, what are Bushvelds' plans for Lemur? And how realistic are they given the political environment worldwide?