Bushveld Minerals Limited (BMN) Earnings Call Transcript & Summary

As Vanchem now has a sub-$20 production cost, is it an option to close Vametco operations until the vanadium prices increase and just concentrate on Vanchem?

Yes. I must just emphasize that $20 was the month of March where we had a good month. Vametco's higher costs were due to lower production volumes. They had nearly a month shutdown. And the challenge is with certain suppliers at Vametco, impacting the supply of material impacted the production. So if we address the near-term funding needs, our focus will remain on effectively managing the creditors and suppliers. Once we can do that, we can then focus on improving the operational efficiency at Vametco. So currently, there are no plans to shut down Vametco or consider any care and maintenance.

Perfect. The next question here is, can SPR make a full payment for the sale of Mokopane and Vanchem to see SPR into completion?

I mean, that's a consideration. We're in conversations with SPR to explore all possible solutions, and we'll keep the market updated as soon as we land on an acceptably optimal solution.

Perfect. Turning to the next question here. Will you be claiming compensation of SPR for late payment of $12.5 million and lay application to the sale of Mokopane and Vanchem, as its therefore, we are in this situation?

Look, we're not planning to take any legal actions against SPR. We're working closely with it. We're collaborating with them in every way we can so that we can find a win-win situation together. We believe this is the most appropriate and beneficial course of action that will allow us to focus on what is so needed operational efficiency. And that's our plan of action.

Perfect. Another question here on SPR and asks if you have confidence SPR will conclude all the transactions?

We're working closely with SPR to complete all transactions. We believe that this is the most appropriate and beneficial course of action allow us to focus them on running the business. I think that's about as much as I can say.

Perfect. I've got another question here. There seems to be a clause in the Orion contract that you can defer the $7.1 million we had at the end of June, we defer the payment.

Sure. Well spotted. Yes, we are in conversations with the, right, it is an option. And with all my dealings with Orion, they've been very reasonable and pragmatic about things. They want to see us succeed. So of course, it's an option. And they've got IC committees. We all have various stakeholders that need to be brought along, but it's something that we're staying very close to Orion, with watch the space.

Perfect. Craig, I think that actually concludes the pre-submitted questions. And at this point, Craig, if I could just hand over to you to read out the live questions, that would be great. And then I'll pick up from you at the end.

Certainly. There's only one live question at the moment on my screen. It says, is there any way that Bushveld Minerals can borrow against the $12.5 million receipt from SPR or otherwise benefit from it in the short term? Well, I'm not -- so the $12.5 million -- and I think, the $12.5 million that has been referred to is the investment that SPR were putting first of all into TopCo in the listed entity. We've already received $12.5 million as an interest-free loan against that eventual equity injection. So there's no further opportunity to borrow against that. I presume that's what's been referred to when they talk about can they borrow against the $12.5 million. If I haven't understood or interpret the question correctly, can the author just rephrase it. But we've already received an interest-free loan of $12.5 million against the pending equity injection. Thank you. How can Bushveld last year's vanadium price doesn't tick up this year? That's a million-dollar question. We're down 15%, and we're hurting. I was reflecting the other day when I signed my contract in May last year. We've done 1/3 on price since May last year. We took a view when we did the budget, it was the mean of the October, November price, I think it was. It was an intelligent view based on a whole host of Intel. I got that one wrong. If the price doesn't come back, we will need further funding. So when I look historically about the price. So let's give an opinion about the future first, then we can focus on facts. There is a very strong sentiment amongst all the clever folk and the key investors and stakeholders in Bushveld that the price will turn. It can't continue like this. It won't continue like this. It's a matter of when rather than if. So if it does stay flat like it is right now, and only turns in the new year, it's a scenario. We will need further funding. It's as simple as that. And the shareholders have a vested interest. If they believe the share price -- the vanadium price will turn next year, they have a vested interest to provide further funding. So that's just an opinion. We never get it right. But if we get close enough to it, and we believe it will only turn next year, then it's the right thing to do for the shareholders to provide funds. One thing is for certain, somebody is going to make a lot of money from these assets. There's no doubt. If you look at the sensitivity at $40 a kilogram, we're printing money. Somebody is going to make a lot of money from these assets. It's the question of when rather than if. What I can tell you is, if you look at the average dollar per kilogram price in the last 7 years, it was $41 a kilogram, and that's the European price. The America -- in the U.S. has probably been 5% to 10% higher than that on average. We sell 2/3 of our product into the U.S. market. So the average price in the last 7 years, it's actually has been $41 a kilogram. And when it gets back to that, somebody is going to be reaping the benefits. I hope that answers your question. Just bear with me as I scroll down here. So the question is, what use are these manufacturing milestones? I presume, you're referring to the new production achievements at Vanchem. So what you saw, are these manufacturing milestones if Bushveld is going into administration and someone else gets to buy cheap and the shareholders lose out? Well, that will be a sad. When we achieve record production, turn this business around to now double what it was achieving in the first 6 months. And some of the shareholders buy it on the cheap. Then all that effort would have really been too little avail. So it would be a sad. As I said, somebody is going to print a lot of money and make a lot of money from these assets. It would be really sad, that everybody who played a part and stood by this company to watch this business Vanchem double our production and not see the fruits of all those efforts. It would be very sad. One can only believe that rational thinking will prevail and that the shareholders that have got the most to lose or the most to win, and the most to gain will see the benefit of putting in further funding because when the price turns, there's going to be huge upside for those that are still invested. I hope that answers your question. Thank you. The next question is what's happening in terms of the working credit facility with SPR? Can that funding be accessed soon? So we have already tapped into the $12 million interest-free loan. Can we get a further loan? Is that possible? I'd like to believe so, interest-free loan. But I can't comment to commit to anything until we've actually had thorough engagements with SPR and found the solution. So obviously, that can happen. But I'm not here to speak on behalf of SPR, but I can tell you, we liaising daily with SPR and others to find out what is the or the possible to make sure we keep this business flat, so that the existing stakeholders can reap the benefits of very, very lucrative cash flow positions when the price turns. I'm just scrolling down here. Why, after the operational update has been published, the directors are no longer in a close period, have none of them purchased shares in the company? Well, actually, we are still in a close period. Actually, the group company secondly sent an e-mail out this morning. We will be in a close period now, sadly, until the financials are presented, planned towards the end of May because there's a whole host of information that is sensitive that we are busy working on around potential funding solutions with various stakeholders. It's a matter of fact, we're having a session this often with the Board. So we're very much in a close period right now. And sadly, for those directors that want to purchase more shares can't do so. I was expecting this question. I was hoping it wasn't going to come from [indiscernible] Craig, how contrary are you about securing a financial solution? It's very difficult for me to commit to that. When I was asked in December last year, the middle of December, how confident are we were going to get this $12.5 million SPR injection? And I said 100% confident. I got that one wrong, didn't I? I mean, we had a binding agreement, and I was absolutely 100% confident to come. And then, I was asked how confident are you going to get the money then in January, and I said 100% confident. I got that one wrong again. So the best way I look at it is, I was in -- if I was in the shoes of these key stakeholders, and I say stakeholders because they are shareholders and they are lenders. And I believe that the price was going to turn by Q2 2025. Would I let this business going to enter administration? Absolutely not. I'm just putting so much resources, financial, and effort and time, and I've really seen the business production turn, albeit against a very, very negative price. I wouldn't let this happen to the business. I would put something in that, that made sure that I reap the fruits of all my efforts. But I can't speak on behalf of the likes of SPR and [indiscernible] I can only give you my view, if I was in their position. Whilst you are making every effort to raise funding, what is the risk of ceasing to be a going concern if funding remains an issue? I think, there's a very real risk. If funding isn't resolved imminently, it is a real, real risk because if you think of the funding per the agreement in terms of the requirement to have the competition commission approval, which is now earliest July sometime, that's too late. We need to get funding. Now you can't get an advance on that funding because that will be in contravention of the competition commission approval. So we're going to think of other ways to address that issue. Now the answer is yes, you're spot on. There's a very real risk associated with the going concern if we don't get the funding issues resolved immunity. How much is the offer for the coal asset? The short answer is upfront $1 or $100. And then there is a period of Robbie, he's the CFO, is on the line. If I get this wrong, please jump in. For 5 years of positive EBITDA, I think it's 20%, and our signed agreement some time , but it's a certain percentage of EBITDA that we get in terms of -- and it's not 5 consecutive years. It's any 5 years of positive EBITDA when it gets into production, we get 20% of that. But very importantly, we currently have a loan with the Development Bank of South Africa, well, the Lemur assets, which Bushveld are guarantors for. So we're in for $2.5 million as a liability. But the contract is such that the new owner takes over that $2.5 million liability comes off our books, our cash flow goes away. And that's the liability I referred to in terms of getting the investment committee of the development bank to see to the new owner. So you could sell it like $2.5 million we're benefiting from in terms of the sale plus this percentage, which I stand to be corrected, but I think it could be 20% of EBITDA for 5 years of profitability post the start-up of that new asset. I hope that gives you clarity in terms of what you're looking for. What is SPR's view on the current share price given they have invested $12.5 million at 3P? Firstly, very disappointed, but they are absolutely committed to this business. That's why they paid a premium at 3P. There's no indication from them to me that they're going anywhere fast. So, I think they all realize that the price is suppressed for various reasons, not only vanadium price, but the lack of cash flow coming in, but they haven't given me any indication that they're still not in it for the long haul. Let me keep on going down here. How do you see the next 12 months, both in terms of operations and financially? Well, they are interdependent those two variables operation and financially. So we've got -- I've said we've got to get additional financing given where we find ourselves. Without that, you can't get to operational efficiency. It really is tough. Let me share an example with you. So we've got these regular planned intervals for critical assets. I'll use the kiln at Vametco as an example. We surpassed the 15-month scheduled interval for the kiln brought towards the end of the year. We thought we'd keep on going. We were supposed to get all the money in the end of January -- sorry, end of December, the money doesn't flow. Guess what? We got a hotspot in the klin and we close it down. We get drip feed a bit of money coming in the end of January, sometime you all know the story how we got conscious towards end of January up until March. So here we are in a position, trying to fix up the operations. We haven't got the money we expected to do committed budget. We've got to fix the kiln. The preferred OEM -- for those OEMs the mining speak for the original equipment manufacturer. So our critical preferred supplier for the OEM will not touch us, and they will not refabricate the kiln with these heated kind of these bricks and concrete because we can't settle the outstanding debt. So we go to a -- we want of a bit an alternative supplier, where we don't own any money comes in, does the refabrication with generic parts. Guess what? 6 weeks later, it breaks down, and we've got operational inefficiencies again. Yes, they come and fix it up again at their own cost and things like that, but it just loses time and becomes operationally inefficient. So the two go hand-in-hand. And if we get the financial input that we had budgeted and converted, then we'll be able to address the operational issues, the very much needed planned maintenance for Vametco that I've been harping on for a long, long time. So I'm not answering your question the way you'd want it, giving you a commitment, how it's going to pan out. But what I can say is we need the funds to flow as budgeted to get the planned maintenance, fixed up at for Vametco in order to get the increased throughput that I put in my budget at Vametco. I've always said to you that we've got a plan to do 6 months' worth of focused improved plan maintenance with the OEM preferred supplier, I should have added, to get us to a position where we can get the increased reliability on the assets we're looking for, to get the increased operational performance at Vametco in particularly for the second half of the year. So I hope you can deduct from that yourself on the likelihood of that materializing. What's driving the lower vanadium price? Yes. So this is what the Intel I get is the expectation was always China, of course. The expectation was that China were going to provide a stimulus package to the construction industry. And particularly the sort of residential housing part of the construction industry. That hasn't materialized. They've actually channeled that stimulus package into the tech business. The understanding is that it's going to happen. It's a matter of when rather than if, but it's been significant delay. So a large part of that drop in the vanadium market is driven by the lack of steel demand in China, which in turn is impacted by the government's delay in providing the stimulus package for construction and particularly the sort of the residential housing. But there are various opinions out there. That's the most intelligent opinion that I've read. Sure. That was quite exhaustive. There are no more questions in front of my screen, but I'll just pause for a few more seconds to see if there are any last minute questions coming through. All right. If not, then let me conclude this bitter sweet quarter. There are a lot of positives that are showing in the production level. But I take the question one of the individuals ask, what's the purpose if we're not going to be around. But I look forward to continuing to updating our shareholders and stakeholders over the year ahead, including our forthcoming annual report. Whilst it's frustrating to have setbacks and funding delays, we believe that with a swift and effective resolution to these difficulties, we will continue to progress with our turnaround strategy and demonstrate more of the record production we saw at Vanchem in the first quarter of 2024. Thanks to all of you for dialing in. Bye now.

Perfect, Craig. Thank you for updating investors today. Could I please ask investors not to close the session? I would now be automatically redirected to provide your feedback in order the management team can better understand your views and expectations. It is going to take a few minutes to complete, but I'm sure it will be greatly valued by the company. On behalf of the management team of Bushveld Minerals, we'd like to thank you for attending today's presentation, and good morning to you.