Bushveld Minerals Limited (BMN) Earnings Call Transcript & Summary

I hope you're well. I wonder if you could elaborate a little bit on the new supply agreement for lower-silica ore for Vanchem. Can you confirm, is that supplemental to Upper seam ore -- or is it replacing it? And if the latter, how long does the term last for? And what's the sort of cost comparison between buying that material and shipping material and from Vanchem -- from Vametco rather...

Thanks, Nick, for that question. So the first point I would make about the -- I had said, but also by you'll recall that we've always talked about the fact that we saw supply of ore into Vanchem coming from 3 sources. One being internal with the Vametco Upper seam as well as the Kiln spillage stockpile, which is essentially at Highveld and was derived from the Mapochs mine. We've also mentioned that we were always going to be looking at bringing in some third-party supply. The Bushveld complex has got plenty of good quality of vanadium resources that will need a processing home and having the processing facilities that we have with the natural home for those resources. And indeed, we have looked at multiple deposits around the Bushveld complex. I'm pleased that we could reach an agreement with VTM for supply. We like that particular ore body because it is quite consistent with Mapochs in terms of mineralogy. It is materially lower in silica levels compared to what we've seen in the Upper Seam project. And based on the work that we have seen in Vanchem running, for example, just on the [ KSS ] alone during the month of March that manifested in substantial improvements in our recoveries, which was responsible for the kind of improved performance that we saw. During the month of April, we still ran a combination of the Kiln spillage stockpile and the Upper seam, albeit with a different ratio to try and reduce as much as possible the average silicon levels that we are fitting into our kilns. And again, there, we saw material improvements to our production with the number that I mentioned earlier on. Now the question you specifically asked is do we see the -- this new source supplementing or replacing the Upper Seam altogether. Our view is to replace the Upper Seam altogether. So we anticipate that going forward, particularly from about June onwards, that we will be blending the kiln spillage stockpile together with this third-party source. We signed a contract that will run for more than 2 years and will certainly allow us to see much improvement. We continue to look at securing greater tonnages, but we have every confidence that the VTM deposit will be able to support Vanchem for much longer periods of time, and we'll continue to develop that relationship. -- so we will be discontinuing our Upper Seam, and we will be running with the Kiln spillage stockpile and this third-party material. We have tested it. We are comfortable that the recoveries, characteristics that its demonstrates will play themselves out in the coming months as we introduce it.

Thanks. And in terms of the cost of purchasing that material, is that comparable with your own cost of mining and trucking Vametco Upper Seam.

Well, the good news is that actually the VTM ore body that we are mining relative to, for example, the Upper Seam project is -- it will deliver the ore, which is better quality, but it will deliver ore also at a better price level compared to the cost that we were incurring with the Upper Seam project. So we get a double benefit of better priced ore with better quality and with better operational metrics in terms of recoveries, which means we extract more vanadium units out of every ton of material that we're processing.

[Operator Instructions] Our next question comes from Sergey Raevskiy from SP Angel.

Thank you for the update. The question is regarding Vanchem electricity curtailment solution that you've introduced last year. Could you just explain what it is? And also another question, again, apologies if you've covered that before, but on the power supply through April, did you have any load shedding recorded? Or did you have any effect on the production at Vanchem or Vametco during month?

So when we talk about the curtailment power solution, what we mean is the following: whenever there is load shedding and there are certain periods of time that certain sections of the population will not have access to power, with high energy users and with industrial players, particularly, if you've got a curtailment contract, and that can be with Eskom directly, which is the best scenario, or it can still be with the municipality. What it means is that in terms of load shedding, the utility will typically ask you to reduce your consumption levels by x percent. And so far, that's been up to about 20% at the peak of load shedding. So as an operator, you will appreciate that if you don't have to shut off power completely and you have to reduce consumption, you can work with that within a continuous operation and you can optimize still. But if you have to shut off completely, then it's very disruptive. That's why at Vanchem we've hedged to run with standby generators, which also is quite expensive. So shifting to a curtailment solution with the municipality, albeit, has meant that we don't experience load shedding, which means we don't get cut off completely, but we will have moments where we're asked to reduce our consumption by x percent, up to about 20%. And -- so far, since that solution has been implemented. Now we haven't had an experience of load shedding. There has been instances of power dips, but that is unrelated to -- that is not specifically a load shedding issue, and they haven't been material for us. And -- but that's another reason why when we think about the curtailment solution, we have -- we're appreciative of the relationship and the contract we have with the municipality. But we still are of the view that the best solution will always be to be on a curtailment solution with the utility directly.

And on the -- just the power supply through the month of April, how was it?

It's been consistent. So in the month of April, we are on track with produce the levels that we planned for and expected. So we simply hope that, that does continue. Of course, winter is coming up, and everybody in South Africa will be a little apprehensive about what remained for the grid as a whole. But if you think about the kind of extent of load shedding we saw in Q4 last year, if we see any of that happening in winter this year, Vametco managed through that period, in fact, producing above what was guidance. We would think that with Vanchem, we should still be able to meet our production targets. But again, I think one does need to caution that there's no total grid collapse. We definitely don't are not of the view. You can never say never. And we certainly are hopeful that the efforts of the government to stabilize the national grid, et cetera, are going to bear fruit and that we are not going to see some of the worst case scenarios that some people have predicted.

Thank you. And as there are no further questions in the queue. I would like to hand the call back over to Fortune for any additional or closing remarks. Over to you, sir.

Thank you very much. My concluding remarks are at several levels. The first one being just to take listeners back about 18 or so months ago when we experienced operational stability issues at Vametco, -- and at the time, we indicated that we were rebasing production, and we're going to focus on making sure that we get Vametco at a stable production level. I'm pleased to say that through 2022, I was starting a lot of parts of 2021 and through 2022, we have seen a great deal of operational stability at Vametco. And I think it's a lot of credit to the hard work of the team there. We are taking the same kind of focused approach to Vanchem. Two major risk factors to Vanchem: one, power; and two, the ore supply issue power because it stopped us from being able to commission Kiln-3 properly and then ore because it impacted on the recoveries that we achieved with a determined solution in place and with consistent power in place and with the contract that we signed with [ VTM ] for supply of ore, we have the platform to ensure that we get on Vanchem to its potential, and that potential is still Vanchem to get operating at 2,500-plus mtV per annum. And with this in place, we're comfortable that we can certainly work hard and drive towards that target. I'm encouraged by what we've seen to date. And again, Tanya has been working very hard under challenging circumstances. And I'm hopeful that when we talk again in the next quarter update, that we'll be able to demonstrate the results of this focused work on getting Vanchem to stable operations. With stable operations, of course, comes more predictable cost and the cost themselves also come down because you've got less stoppages, and you get more throughput, which means you get more fixed cost dilution. So it becomes a virtual cycle, which we certainly hope to be reporting on going forward. Finally, I am also very pleased to see the progress with the Mini grid. We've always said that the Mini grid is a financial pilot which will support from Vametco's power requirements, at the same time, demonstrating the commercial viability of PV solar and storage using VRFBs. So I'm quite excited to be able to bring people to come see this solution in place when we complete and we commission it. It's coming at a very appropriate time. For the first time last year, we saw VRFBs increase their contribution to the vanadium demand to become the second largest source of vanadium demand. And certainly, we look at the projects that are being announced to world over, we expect to see that trend and that growth continuing, which we expect is going to further support the vanadium market and with positive upsides in terms of the vanadium price, notwithstanding the kind of volatility that we've seen in the short term. So all in all, I think there's a reason to be optimistic looking forward. And I look forward to be providing an update to you in the next quarter. Well, certainly before that, we will be presenting the annual results of the company. I look at to engaging with you on that as well. So thank you all for your time and for your patience.

Thank you. This concludes today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.