Bushveld Minerals Limited (BMN) Earnings Call Transcript & Summary

No, that's not correct. The Lemur contract doesn't make any reference to receiving $2 million over the 5-year period. What it does do, it makes reference to the cancellation of our existing $2.5 million guarantee, and that's it. Thank you.

And then we've got one final presubmitted question before I hand over you to live ones. Given the high levels of debt and the fact that the company is currently producing vanadium product at a loss, how can you reassure investors that there is an actual viable business going forward?

Sure. I mean, the [ short ] is I can't guarantee a viable business going forward, especially at these prices. What I can assure investors is that we are actively managing the liquidity risk, ensuring the company has sufficient funds for the next 12 months, albeit based on those assumptions I've shared with you with estimated average vanadium price is expected to increase, we have measures in place to ensure funding requirements for it, making the business sustainable going forward. We're pursuing the sale of noncore assets, including Vanchem, Mokopane, implementing a number of cost-saving measures which should deliver annualized savings in the order of $8 million to $10 million annualized by the end of 2025. It's a journey we run. While we're not quite there yet, we have we continue to make appropriate strides in becoming the simpler, faster, more effective and stable company prime to benefit vanadium -- from the vanadium price increase in future. I mean it does feel a bit like we're treading water for longer than we should. At $35 a kilogram, we'll be swimming rather than treading water. We'll be swimming upstream, albeit at $35 a kilogram, given the legacy capital issues we've got to sort out. At $40 a kilogram, we'll be swimming with a strong current behind us, but we're doing everything we can to continue to tread water until the tide changes. Thank you.

Thanks very much for that, Craig. Obviously, we have received some live questions throughout today's presentation. So at this point, if I could hand over to you to read those out, that would be great, and then I'll pick up from you at the end.

Certainly. Thank you. The first question, if the prices remain static into 2025, how long do you forecast being before we run out of cash. I think I'm going to give Robbie the honors of doing it. But the answer is some time in Q4, we've got a real challenge if we don't do something differently. Robbie, do you want to add anything?

Yes. Thank you, Craig. In 2025, we've done our going concern assessment, and it was published in the results recently. We had a set of assumptions that we also put into that going concern assumption. And on that basis, we are good for the next 12 months, which takes us to September 2025. The details of all those going concern assumptions included things like price closing, the Mokopane sale production values and things like that, they are published on -- in that -- in our latest set of results. So -- sorry, September '25 is what we have for that, yes.

But I think to answer your question directly, the question is if the prices stay exactly where we are, there's no change to the current price, when do we run out of cash?

That's earlier than that then, Craig. Yes, because we've got a forecast, as we've said, based on the Project Blue numbers at $34.40 as we've said, and so if you keep the prices at $28, at our volumes, one could work out quite quickly what the drop in revenue would be, a price difference of $6 on 240 tonnes a month. it subtracts quite a lot of cash quite quickly. So I wouldn't want to say which month exactly because there are levers that we pull as we both have said, we'd reduce CapEx or we do [ stretch ] creditors would go -- would do various controllable mechanisms that we have under our control to try and stretch it out, but it would be a lot quicker than September '25, if the prices didn't go up.

Thank you. We will be very challenged, extremely challenged by the end of Q1 next year if the prices stay flat. Going on to the next question, what total cost of production and administrative costs do you expect to come down to after all the cost-cutting initiatives have been achieved per kilogram of vanadium.

Yes. I mean the answer is $8 million to $10 million. There are 4 initiatives underway, macro initiatives. One is the Vametco reduction in labor cost, that's $1.5 million. There is significant reduction at the CHQ Corporate Center, that's $1.25 million at least, halving the head count from where we are now. Moving from 62 in June last year, we are down to about 30 at the end of Q4 2023, and we'll be down to a dozen by the end of this year. That's a $1.25 million. That's in later. The other driver is ensuring we put long-term contracts in place with suppliers. That's a journey where we spent very little of our creditor spend via contracts, very inefficient, and there's reasons for that. We believe we can get our current low base up to around about 60% of our spend on contract by middle of next year and up to 90% by 2025. Based on those set of assumptions we mentioned earlier, that will derive between $2 million and $4 million of reduced cost by putting long-term contracts in place between June and December next year. The other initiative is around yield improvements, when we address certain issues at the SRP and the silica in Lemur, that will give us an improved yield we believe a 3% improvement in yield is very reasonable. That's $1.5 million at a price of $30 a kilogram. Obviously, the benefit becomes exponential, north of $30 a kilogram. And then we also believe very conservatively, we can reduce raw material consumption by 5%, and 5% of current raw material consumption is $1.25 million. But they are conditions to that. Every one of those needs certain interventions. I'm not going to go through every one of them unless somebody wants me to go specifically. But if I take raw material reduction consumption as an example, the SRP is in a very, very poor state. It's running very inefficiently. It's got a couple of purposes, and one of them is to produce [ NaCl ], which is a critical ingredient we put into the preservation process. and also to produce sulfur, which are put into the front of the kiln. It's producing nowhere near it should. On those 2 materials, we're purchasing about 80% of our needs from outside the organization by external suppliers, paying a premium for that, very inefficient. But I'm not going to get my SRP fixed up until I do basic maintenance, light heat exchanges. Those heat exchanges are just short of $1 million for the 2 of them. There's a 6-month lead time. So all these things need to happen. Another aspect of reducing raw material consumption is the reagent mix in the kiln. Currently, our silica contents are too high. We've got to get them down to 2.4%. They're running above 3% now. And when you have high silica, you've got to use significantly more ratio of sodium carbonate. The problem with that is sodium carbon is very expensive. And how do we get the silica content down? It's not difficult. In your mill, you've got to get the right quantity and quality of steel balls to make sure that you get -- the liberation is appropriate. So you your silica is down. We haven't got sufficient funds yet to have the right quantity and quality of steel balls in the mill. So when the funds come in, we'll be addressing those sort of issues. And all those initiatives will come to $8 million to $10 million, and that's about $4 a kilogram per unit. You'll see on cost go down immediately by $4 a kilogram. I hope that makes sense. Just having a look at another question. Assuming Vametco at 240 mtV by the end of this year, what do you envisage the all-inclusive cost will be in 2025. That's a brilliant question. Let me start with the breakeven EBITDA. So at that volume, 240, you're doing about 26502.7 per annum because you need a month shutdown. And that's when you're doing proper plant maintenance you should only be shutting the plant down once a year for a month. We've done it 3 times this year for reasons I already explained. Plants don't like to be shut down and start up again. So you do once a year, you do 240 per month and gives you just sort of around about 2.7 billion for the year. Your EBITDA breakeven is $30 to $31 a kilogram at Vametco, okay? But that's not going to save the day. Then you've got your CapEx, your CapEx should be in a normalized environment, $5 million. So you add another $2 per kilogram onto your cost. But because we got the legacy issues of the buttressing of the slimes down and we've got barren dam legacy issues, other environmental issues about water purification plant we do, we're spending in the order of $10 million in 2025. So that adds together -- that's another $4 a kilogram. So all of a sudden, you go from an EBITDA of $30, $31 to $35 with your CapEx. That's before the initiatives I've spoken about right now. The $8 million to $10 million is not going to happen throughout the year. It's a phased approach. You're probably going to get half of that on an annualized basis, given the lead -- the long lead item for SPR and things like that. So you're going to get down to about $33 -- $32 to $33 all-inclusive costs for 2025 based on the increased capital that we require for 2025. I know you didn't ask this question, but of course, that doesn't leave much to pay the debt to service the principal debt and the interest. You got to be getting closer to $40 a kilogram to make sure you can do EBITDA breakeven, you can do all inclusive cost break even including your capital and service the debt over the period of time. Now look, if you don't get a $40 a kilogram and you get a $37 or whatever may be, I -- there's always negotiation in room for everything in life. But if you wanted to do -- if you wanted to meet every single contractual agreement address every single capital legacy issue, closer to $40 a kilogram, we'll see you servicing everything, including all the significant deck we have on this balance sheet. That was more than you asked for, but I hope that makes sense. The next question is, what steps is Bushveld taking to regain market share, particularly in regions like the U.S. and Europe where vanadium demand has historically been strong. Yes, brilliant question. Look, there are contracts in place that you need to deliver on the minimum quantities okay? And Wogan are our agent, and they do an amazing job. They really do. We're currently doing about 62%, 63% of our nitro vanadium product from Vametco in the U.S. and the balance is elsewhere predominantly in Europe. Last year, this time, we were doing 67%, 68% of our product in the U.S. And the reason we're doing that was because we were getting a 10% to 15% premium. Currently, we're getting a very, very small premium, 1% or 2%. So Wogan, they sell everything we can produce. And where we can get a bigger margin historically in the U.S., we will try and take advantage of that and spend a bit more. But we do have contracts in place, we've got to provide some minimum quantities. When there's less of a margin, there's less of a need to actually sell [ maximum ] into the U.S. Wogan, I said you, they're doing a great job. They get a margin for doing this work. Make no mistake. So they have a vested interest to maximize the contribution in the areas between the U.S. and Europe. Historically, U.S. has been the best region, even today, albeit in slightly smaller margins than historically. Thank you. Are there any new potential opportunities for vanadium in military applications. Well, whenever there's steel, there's an opportunity. So yes, if the -- if there's an increase in demand in steel and whatever sector is then obviously, that requires more vanadium, and we'll produce as much as we can and will be sold into the market. This has never been an industry since I can recall, I've been here a short while, very short while. But if you look back in recent history, where there's been -- where you've had a problem to sell your product even if we were to go on an expansion project, and get up to [ 35 ], selling the product is not an issue. There's enough demand out there. That's the end of the questions. I'm just going to pause for a few more minutes to see if any further questions come in. There's nothing, no more questions coming in, so I'm going to hand back to facilitator.

Yes, Craig, thank you very much for answering those questions which came from investors. And of course, the company can't review all the questions submitted today, and we'll publish such responses out in the Investor Meet Company platform. Just before redirecting investors, provide [ your feedback ] which is particularly important to the company. Craig, could I just ask you for a few closing comments.

Yes. Firstly, thank you for joining us this afternoon. Bushveld has really experienced a challenging start to the financial year, given the severe funding constraints leading to our inability to run the assets effectively, particularly in Q1. And these challenges are reflected in the financial results at this stage. However, we are looking forward to progressing our asset rationalization process, the turnaround initiatives that I've shared with you, particularly at Vametco to position this company into a simple, fast and effective business for the future. I thank you.

Thank you once again for updating investors today. Could I please ask investors not to close this session, as you now it be automatically redirected to provide your feedback in order the management team can better understand your views and expectations. This won't take a few moments to complete but I'm sure will be greatly valued by the company. On behalf of the management team at Bushveld Minerals Limited, we'd like to thank you for attending today's presentation, and good afternoon to you all.