Bushveld Minerals Limited (BMN) Earnings Call Transcript & Summary

Good afternoon, and welcome to our Operational Update for our First Quarter Results in 2024. Thank you for dialing in. In Q1 2024, we achieved group production of 855 mtV, weighted average production cash cost of $28.4 per kilogram and sales of 880 mtV. We had an impressive quarter to kick off the year at Vanchem, which saw a substantial increase of over 90% from Q1 2023 with production of 498 mtV. This was underpinned by better ore quality, improved online time and overall plant efficiencies. Our cash costs were also down 26% at $25.30 per kilogram compared to the same period last year. I'm delighted to report that production for Q1 2024 represents our best result in a single quarter since we purchased the asset in 2019. With March alone representing Vanchem's best production of 200 mtV, another new record. These production records and cash cost figures were achieved despite losing 11 days of production earlier in January due to the delayed settlement of funds. These results showcased the positive effect of our turnaround efforts and are as a direct result of the work that has been done to ensure stability at the asset before building towards further growth. Turning to Vametco, as previously communicated, during the quarter we conducted a 25-day planned kiln maintenance shutdown in January and February, which was completed in mid-February, resulting production at Vametco was 357 mtV in Q1 2024 and cash costs of $32.80 per kilogram during this period, owing to lower volumes. We're continuing to see significant improvement in our total Frequency Injury Rate, which stood at 0 for Q1 2024, supported by improved internal reporting of lead indicator analysis and the successful implementation of safety measures across both our operations. Moving on to the sale of 50% interest in Vanchem and the 64% interest in Mokopane to SPR, we announced this morning that approval from the South African Competition Commission, initially anticipated for February 2024, is now expected to be granted at the earliest in July 2024. Following this, the sale of the Vanchem and Mokopane will complete. Furthermore, as previously announced, Acacia was due to settle its subscription of $3.5 million on or before 28 February 2024. The company has not received the subscription monies from Acacia. Acacia continues to be in breach of the terms of the subscription letter which is signed with the company on 30 November 2023 we have instructed our lawyers to commence legal proceedings against Acacia. The delay in receiving funds, coupled with the lower realized vanadium price, now some 15% lower than we budgeted, has meant that our working capital position is extremely tight. With the completion of the sale of 50% of Vanchem and its share of the Mokopane to SPR being delayed, the company is dependent on a receipt of further funding to continue operations and is proactively engaging with stakeholders to find an appropriate and optimal solution, which would ensure operational continuity. Lastly, we will provide 2024 guidance once we have clarity on the funding position. Thank you for listening. I will now pause to take questions.

[Operator Instructions] We now take our first question from Sergey Raevskiy from SP Angel.

Craig, thank you for the update, and good to see the performance of Vanchem despite a challenging pricing environment. Can I ask you in terms of production at Vametco and Vanchem, are you sort of -- if we -- to think about the working capital constraints and assuming that the funding comes through, just ignoring that. Are you happy with the performance? Like after the maintenance being done? Are you happy with the performance of both operations?

Let me start with the easy one first, Vanchem. I certainly wasn't happy in the month of January when we were down for 11 days. We didn't have funding to buy raw materials. I was happier in February, and I'm content with March's performance. It's more than we budgeted. We assumed a phased approach where we'll get up to 200 mtV in Q2. So yes, I'm reasonably comfortable and happy with where we are with Vanchem. It's about sustainability. The test will be when we have a shutdown for Vanchem in May, and we've got -- and whether we've got sufficient funds available to do the appropriate maintenance because I've seen far too often where we are not funded sufficiently for the opportunity, and we don't have the opportunity to do a proper maintenance. So yes, I'm happy with Vanchem. The test will be whether we have sufficient funds to do the maintenance in May and then get off the starting blocks or guns blazing in June. But with the Vanchem result, which is nearly double what we did in Q1 last year, absolutely. Can we do more? We have to. So reasonably pleased with the overall quarter, lesser for January, but I'm very happy with the March. 200 mtV is a magic number. It's double what we've done in the first half of last year per month. So that's something with Vanchem, but it's pleasing. We're going to celebrate with the guys as soon as we can. Vametco, look, we did have nearly a month shutdown. You've got to build that into the equation. It was brought forward, which is never ideal. The budget was to have a shutdown of 17 days in March and 17 days in July, but not surprising. When you keep kicking the can down the road and you defer the maintenance, something's got to go. And of course, come January, we didn't have the funds that came in. So we again did the best we can, not an ideal position to do a 25-day shutdown to refurbish the kiln and refabricate the kiln when you don't have the funds. So what happens when you do that? You don't go to your preferred critical OEM supplier, you go to an alternative generic supplier who charges you more and does an inferior job. So we had to have this done, and we went to an alternative supplier. Guess what happens? In March, we discovered we're down for in excess of 7 days because a certain batch of the lining done on the cooling side, which is at the [ discharging ] side of the kiln was an inferior product. They going to be redone again. Yes, the supplier came and redid it. That's not ideal. That's a function of not having funds. You have downtime on the leach process. Guess, what? We've got 0 critical spares in stock because the funds didn't come through in time. Instead of losing 2 or 3 hours to replace a spare, you lose 3 days because the engineers are going to run off the town and go look for a generic part to replace the spares. So no, I'm not happy with Vametco. We haven't done the maintenance. I always said that if you looked at the plan, the funds were all supposed to come in end of December. We take the bulk of the funds. We address the long outstanding overdue creditors, which is generally the OEMs. Now we're in a good position to actually start engaging with the OEMs to get the maintenance done. We haven't attended to any of the maintenance requirements that we plan to do at Vametco because the funds come dribs and drabs, and that's far from ideal. So no, I'm not happy with Vametco at all and probably won't be until we can actually be in a position to get the funds to do the right maintenance. That's a hell of a long story, probably, more than you asked for, but I hope that answers your question.

That provides a good overview. And turning to the funding and the working capital. Two questions. First one is, do you have -- did the authorities provide you to the reasons behind the delay? It's quite a bit of a delay in the approval of the transaction. And another one is that, you mentioned that you are looking at further funding to address maintenance and to address the delays. Do you have an amount in mind, how much sort of you're looking?