Bushveld Minerals Limited (BMN) Earnings Call Transcript & Summary

What time scale is expected for the BELCO plant to be fully operational, supplying customers with electrolyte after samples have now been sent? And as and when the battery storage economy improves, will expansion of BELCO be considered to meet demand?

From the design, BELCO's plant was designed to ramp up in terms of its production volume. We will be in a better position to provide more information on the scale once we've secured some long-term contracts.

Why is the company so constrained in January, given that it received $8.1 million from SPR and another $6 million in the fund raise? Please, can there be an explanation of the cash burn from end of September to now?

Yes. Thank you. It's a fair question. That's a good question. The $8.1 million we received from SPR was used predominantly to service long outstanding creditors in September as the operations generated severe negative cash flows in the first half of the year, which resulted in creditors not being paid or settled on time. At that point, the creditors aging was such that more than 1/3 of our creditors aging was outstanding for more than 90 days. That $8 million we received was used majority, not all, but the majority to go and resolve the long outstanding creditors more than 90 days. I must say we didn't receive $6 million. We've received probably $4.5 million because of the $18.5 million we've received so far, $2.5 million of the equity raise we've got, that's from Orange Trust, the directors in the primary bid. The company has received the other $2 million. That's the interest-free loan out of the $12.5 million, with the balance expected at the end of February. The $2 million interest-free loan we received, we used in January largely to settle some long outstanding creditors' balances and make a contribution to much needed raw material purchases in January. And of course, the company will be receiving Acacia's funds of $3.5 million at the end of February.

Perfect. Does the company have any view on vanadium prices? There seems to be no upward pressure on prices despite a number of positive predictions. Where is the competition coming from that is keeping prices low?

The general near-term view from various research houses is that any price downside from where we are now is very limited. And the vanadium price will rebound over the next few months. Much of this will depend on the effectiveness of China's economic stimulus measures, of course, and the impact of the struggling domestic construction sector. What we have seen is December was really low. We've seen a very, very marginal, flat mostly in January. So that rebound, hopefully will come soon. We haven't seen a further diminish in price in January versus what we experienced in December.

Being honest, does the company realistically expect to receive the outstanding monies from the last equity fund raise? If so, in what time scale and why?

We've received the $2.5 million from Orange Trust directors in the primary bid. We've now received the $2 million interest-free loan out of the $12.5 million with a balance we still expect the end of February. We've got something in writing that SPR have said, they've now committed to resolving this and funding by the end of February. As previously announced, we're going to get this -- the balance from our Acacia funding by the end of February.

Perfect. And maybe just following on from that, how likely is the company to seek a further fund raise in the short term, i.e., in the next 3 months?

Look, assuming we receive the entire equity raise as planned, we do not expect to tap into the equity market in the near term.

That's great. That's great, Craig. Can Craig expand any more on the statement in the RNS that BELCO has started the process of looking for additional investors in its plant?

Yes. BELCO is looking for additional investors to invest in the project and assist with the project's financial needs as Bushveld is prioritizing and focusing on its mining assets.

Perfect. Craig, thanks very much. That is the end of the pre-submitted questions. We have had some live questions come through. There is some repetition there, but I don't know if you just want to have a scan through at this point and take those where appropriate to do so, and then I'll pick up from you at the end. Over to you, Craig.

Thank you. First question is what progress is there on the disposal of Lemur and CellCube shares? Let me deal with CellCube first. We have signed an agreement with the broker who has been tasked to shortlist potential buyers. That's been done early this year. And they are now soliciting with each of those potential buyers opportunities with a prospectus. That is about as much as I can say. I don't know yet to what extent that's going to be any fruit, but we'll get an update from the brokers in due course. Lemur, very, very recently, I've got an agreement, which there are conditions to, which has been signed by a consortium. It's sitting with myself at the moment. I've just got Board approval for it. and I'm going to sign that agreement based on certain conditions. And as soon as that agreement is signed and those conditions are clear, we'll update the market accordingly. Next question is where do you see Bushveld in 24 months? Well, let's just start with the proviso that the binding agreements we have with the subscription deal and the sale of Vanchem materialize. That's important to get us -- to get some traction. And it is also important that the assumptions we have in the next 24 months bear fruit, the dollar per kilogram we've got in the plan for this year; the exchange rate, which we've used ZAR 19 to the dollar, which is where we're hovering around. We've used the same in 2025. If all that pans out, we'll be in a really, really good position in 2025. The positive EBITDA based on those assumptions in 2025, with only incremental production input, nothing severe. We've been in a really, really good position with noticeable, respectable EBITDA sufficient to cover all capital requirements and some. But for me, what is potentially even more exciting, if you look at any upside on the '25 base, I think, I've shared this before, but it's worthwhile doing again. If you take the 2025 base, so that's from now to 18 months' time, if you take a 10% improvement on revenue on that pace, you add another $20 million EBITDA under the free cash flow, and that's through price, just either through exchange rate or price per kilogram, not through increased throughput. If you get increased throughput, you get the equivalent of about $10 million, $11 million free cash flow. I see a world where we've now got sufficient free cash flow after funding our accelerated CapEx to catch up with the bow wave, where we've got some opportunities to take decisions around respectable dividends or look at expanding some opportunities. For example, Kiln 1 at Vanchem, where I'm told in the heyday could do 100 mtV to 120 mtV. And if you think of 100 mtV, 120 mtV, that's 50% on the current throughput at Vanchem with a very small incremental cost. There is one provisor, we've got to make sure that the capital that's required to make that investment is a wise one. So I see a position where we're doing really well. We're covering more than our requirement for extended cash flow, and we're looking in a position certainly post December 25 at dividends. and funding internal capital growth if those assumptions pan out the way -- and there's a very real likelihood they could. I mean I remind myself and/or a month before I got here, we were running at $40 a kilogram. It's not inconceivable that we could get to that in the early part of 2026. We're a top line business. I've said this before, we're very revenue-sensitive. We're not going to save our way by cost reductions. That doesn't mean to say I'm not going to do that. We've done that at the corporate center. The next step is to move on to Vametco. We've got to make sure we run a tighter ship as possible. But with the throughput that we're seeing in '25 and the potential recovery of the vanadium price, we're in a really good position. I hope that gives some flavor to the question. Does Craig have any organic cash-generating solutions instead of relying on further asset sales in the near future? Well I'd like -- I've covered a little bit of that before. We've got -- we are -- I mean, it's no secret. I want to get out of the energy business. I'm not going to put any more money into that. If BELCO isn't going to show a remarkable demonstration of take-off order soon, I'm not going to put further funds into that neither. The organic growth that I can do is ensuring that I debottleneck some of the constraints that I've got, at particular, Vametco to get up to the $2.7 million -- it's 2.7 -- 2,007 in metric tons. And of course, some, I think, low-hanging fruit with relatively limited capital injection for Kiln 1 at Vanchem. Currently, what is the biggest risk factor facing Bushveld in 2024? Yes. That's a very good question. So let's assume we mitigate the risk and we get over the funding issue, and that's all sorted. There are quite a few risks. One is we have an election coming up in South Africa, and you just don't know what ruling party may be in place and what local party might be in charge of various things, licenses, regulation to operate, power supply, et cetera, et cetera. If I think of Vanchem's challenges they had with the power supply in H1 2023, that's all been resolved because there's a really good relationship and a really good understanding with the local municipality that we're off the grid. They won't put that in writing, but that's the way authorities in the municipality work. But the relationship is so sound that we have not had one incident where we've been part of the load shedding. So that's a really good position to be in. And I foresee that continuing for a long time. But it's not inconceivable, although I think unlikely, with the change in the ruling party, you could have a change in the local leadership at the municipality. And it's not inconceivable that, that relationship could be very different. So there's a risk, I think, of load shedding. I think it's small post elections. Another risk, of course, is the Barren Dam at Vametco. The Barren Dam is full. We just can't evaporate quick enough. We can't build a new one quick enough. We're going to build a new one starting -- depending on the funds coming in, in April to finish it in December, and then we can debottleneck the production capacity for 2025. But we -- in the summer months, we're largely very, very dependent on the rainfall. I mean I think we only budgeted about 170-odd thereabout mtV for January at Vametco because we get a lot of rain. So we -- if we get less rain than we plan, we'll do more. If we do more rain, then we plan, we do it a lot less. So in the rainy season, we're very, very vulnerable for production because you stop production where the dam is full. And we've had 8 days in January where we stopped production, which was more or less in line what we expected, but we can't influence the rainfall. So the first sort of 3, 4 months of this year, and the last 3 months of the year, we're very vulnerable in terms of rainfall at the Barren Dam. Then I suppose another risk, and I can't quantify the risk until I've done the assurance review. We're spending a lot more money on focused areas in various parts of the value chain, but particularly at the Kiln, the leach process, to some extent, the refinery to get our levels of asset utilization at acceptable levels. We need to get that Kiln up to 80%. I think we did in the order of just below 70% this year. We've got to get it up 80% to get respectable throughput. Now the team have done their work. They've provided me with the detail, but I think it's prudent, and it's the right thing to do from a governance perspective to get an external assurance review done. That is starting next week. I've got an individual, a gray beard, who has spent many decades on plants in the mining industry. He's been a foreman. He's managed plants. He's been an engineering manager. He's then worked for companies that have built plants. He's done plant optimization. I've got to get that individual in to give me an assurance review that the money being spent on the maintenance is in the right area, and we're going to get to the right levels of production. I'm sort of cautiously optimistic that we will, but it's the right thing to do. And then on the capital, we're spending an enormous amount of capital. $20 million this year or the bulk of that -- 2/3 of that at Vametco, the Barren Dam, the buttressing at the slimes, the same assurance review needs to be done because if I don't do the Barren Dam properly, I'm not going to debottleneck by production going forward to have a sustainable business. So this same individual is a guru in the mining industry for the execution of capital projects, He's got to provide me with assurance that my capital projects meet the minimum requirement in terms of time, quality and cost that I can deliver on the requirement for this business. That's a hell of a long story, but I wanted to give you some detailed flavor about the sort of level of detail we're thinking about in terms of the risks. Those are the risks we can control. But of course, the -- or can influence, shall we say -- well, control and influence to an extent. But of course, there's always a risk and an opportunity for the exchange rate and the sales price per kilogram. Those 2 particularly have a huge impact on our cash flow and EBITDA, and they can go either way. They're very, very sensitive. I think I'll pause there. Those are probably the most significant risks that, I think, warrant sharing with you. Let's have a look. What is Bushveld's plan to improve share price to reflect true valuation? Well, the first thing I want to say is, I can't -- and I'm not going to mine the share price. I mine vanadium. I believe that most shareholders are smart and they will see the value when the value comes through. And the value will come through when SPR's funding comes through, and we demonstrate a few consecutive months of sustainable production, delivering positive EBITDA, and we start executing on our planned maintenance and our capital projects. Investors are smart. They'll pick it up, and the share price will naturally reflect accordingly. I mentioned earlier about a 10% sensitivity in price. That adds $20 million onto the free cash flow. You know how that reflects as a percentage of EBITDA. The investors will do the assessment themselves, and the share price will follow accordingly. There's no more questions I can see on the board.

Perfect. Craig, thank you very much for answering those questions from investors. And of course, the company can review all the questions submitted today, and we'll publish certain responses on the Investor Meet Company platform. But just before redirecting investors to provide you with their feedback, which is particularly important to the company, craig, could I just ask you for a few closing comments?

Yes. Before I forget, let me thank all the investors for their time and listening to me today. I reflect on last year, it was a very, very difficult year for all staff. But we've done the long yards. We've taken the pain. Now we have a plan. I feel as if we're on a runway about to take off, but we don't have enough fuel. It's imperative that SPR come to the party so that we can refuel and take off to start our new journey. I look forward to updating Bushveld shareholders and stakeholders on our progress in addition to providing an update on guidance for production and costs for 2024 in our Q1 report. I understand the delay is frustrating. And we are actively engaging constructively with SPR, and I hope to have a resolution to the outstanding funds shortly. 4:00 p.m. South African time is another hour call with SPR, we are pushing them from all angles. I really hope to share something positive with all in an RNS update soon. Thank you very much for your time, everyone.

Perfect, Craig. Thank you once again for updating investors today. [Operator Instructions]. On behalf of the management in Bushveld Minerals Limited, we'd like to thank you for attending today's update, and good afternoon to you all.