TIDMBMN
RNS Number : 8985Q
Bushveld Minerals Limited
30 June 2022
Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have
been deemed inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 until the release of this
announcement
30 June 2022
Bushveld Minerals Limited
("Bushveld Minerals" "Bushveld" or the "Company")
Full Year Results for the 12-month Period Ended 31 December
2021
Bushveld Minerals Limited (AIM: BMN), the AIM-quoted, integrated
primary vanadium producer and energy storage provider, with
ownership of high-grade assets in South Africa, is pleased to
announce its full year results for the year ended 31 December
2021.
FY2021 Operational and Financial Highlights:
-- Group Revenue of US$106.9 million, a 18.8% increase over 2020
(2020: US$90.0 million), supported by improved average realised
price of vanadium.
-- Group production of 3,592 mtV, at the upper end of 2021
revised guidance of between 3,400mtV and 3,600mtV.
-- H2 2021 Group production of 2,018 mtV, a 28.2% increase over
H1 2021 (H1 2021: 1,574 mtV), supported by operational improvements
implemented from Q2 2021.
-- Operational stability has continued into H1 2022, resulting
in 12 months of stable production levels.
-- Group Sales of 3,314 mtV, a 13.7% decrease over 2020 (2020:
3,842 mtV), as a result of international and domestic logistical
challenges.
-- Underlying Group EBITDA(1) loss of US$7.5 million an
improvement of US$7.4 million relative to 2020 (2020: EBITDA loss
US$14.9 million).
-- H2 2021 underlying EBITDA profit of US$3.3 million, supported
by strong production levels, higher realised prices and continuing
to trade on an EBITDA positive basis in H1 2022.
-- The Group has been EBITDA positive for the past 12
months.
-- Ended the year with cash and cash equivalents of US$15.4
million held at 31 December 2021 (2020: US$50.5 million). Gross
Debt of US$82.1 million (2020: US$89.2 million).
-- Prioritised significant investments including: growth
initiatives at Vanchem (US$4.2 million), construction of BELCO
electrolyte plant (US$4.9 million), investment in CellCube (US$10
million) and debt repayments (US$3.9 million).
-- Successfully realised its investments in AIM-listed companies
AfriTin Mining Limited and Invinity Energy Systems Plc for
approximately US$3.5 million and US$12.7 million respectively.
-- Obtained an indirect shareholding of 25.25% into CellCube, a
Vanadium Redox Flow Battery original equipment manufacturer.
-- Group Total Injury Frequency Rate ("TIFR") was recorded at
7.78 in 2021 representing a 52 per cent improvement from 2020
(2020: 16.06).
1. Adjusted EBITDA is EBITDA, excluding the Group's share of losses from joint ventures and the remeasurement of financial liabilities. Underlying EBITDA is Adjusted EBITDA excluding impairment charges.
2. ZAR14.8:US$ 2020: ZAR16.5:US$
Post period events
-- Commissioning of Kiln 3 at Vanchem was completed in June 2022
within budget with a production run rate of 2,600 mtVp.a.
anticipated in Q4 2022.
-- Secured the funding for the Engineering Procurement and
Construction of the Vametco hybrid mini grid.
-- Staged growth plans announced to increase Group production to 8,000 mtVp.a., subject to:
-- The achievement of short-term performance objectives to
deliver sustainable cash generation at the production rate of 5,000
- 5,400 mtVp.a.; and
-- Sufficient funding secured
-- Group unaudited cash and cash equivalents of US$12.7 million as at 31 March 2022.
Priorities and outlook
-- On track to meet 2022 Group production guidance of between
4,200 mtV and 4,400 mtV, (weighted towards the second half of the
year).
-- Ramping up production to achieve an annualised steady state
production run rate of between 5,000 mtVp.a. and 5,400 mtVp.a. by
the end of 2022.
o The volume increase will support further unit cost reduction
and increase the Group's ability to generate positive margins
throughout the vanadium price cycle.
-- Commencing in 2022, implement the Group cost savings
programme in order to achieve costs savings of approximately US$2.5
million to US$4 million, over a 12 to 24 month period.
-- Intention to carve-out of Bushveld Energy as a standalone
company focused on the VRFB value chain, Bushveld Minerals will
maintain a strategic investment in the company. This will enable
Bushveld Energy to have the Board and management team required for
success, and it will be in a better position to attract the
appropriate institutional investors and market valuation.
-- Progress construction of the BELCO electrolyte plant, anticipated completion in H1 2023.
-- Commence construction of the Vametco hybrid mini-grid, completion expected in H1 2023.
Group Capital Expenditure
Expected capital expenditure for 2022 of approximately US$22.1
million, of which we have already spent US$9.0 million as at 31 May
2022, with most of the cost being Rand-denominated. The capital
expenditure includes the following :
-- Vametco US$5.5 million;
-- Vanchem US$8.5 million;
-- Bushveld Energy (BELCO) US$8.1 million
Analyst conference call and presentation
Bushveld Minerals Chief Executive Officer, Fortune Mojapelo and
Finance Director, Tanya Chikanza will host a conference call and
presentation at 11:00 BST (12:00 SAST) on Monday 4th July 2022 to
discuss the 2021 full year results with analysts. Participants may
join the call by dialling:
Tel: United Kingdom: +44 (0) 33 0551 0200; South Africa: +27 800 980 512
Pin: 4157560
Alternatively, the presentation can be accessed as a webcast
here:
https://webcasting.brrmedia.co.uk/broadcast/60d9897e0bb2806642d65b88
https://stream.brrmedia.co.uk/broadcast/62a0bea519aa2a662fe17234
Annual Report
The Annual Report for the year ended 31 December 2021 will be
available on the Company's website today at the following link:
http://www.bushveldminerals.com/financial-reports/ . Physical
copies of the Annual Report will be posted to shareholders who have
elected to receive them, during the week commencing the 11 July
2022. A further announcement will be made by the Company once hard
copies of the Annual Reports have been dispatched to
shareholders.
Fortune Mojapelo, CEO of Bushveld Minerals Limited,
commented:
" I'm pleased that we finished 2021 strongly, generating
positive EBITDA in the second half of the year which has carried
through into the first half of the 2022 year. This was a year of
two halves, as we entered 2021 facing the ongoing challenges of the
Covid-19 pandemic, which were compounded by some operational
instabilities at Vametco in the first quarter. We adapted quickly
to changing conditions and government mandates to instill normal
and productive operating conditions and implemented several
interventions which included increasing investments in maintenance
and sustaining capital and implemented a rigorous and proactive
maintenance programme. I am proud of Bushveld's resilience
throughout the year.
This approach has seen the Company produce solid successive
quarterly performances from the second quarter, enabling the
Company to meet the upper end of our revised production guidance
for the Group in 2021. Production in the second half of the year of
2,018 mtV was 28.2% higher than the first half, illustrating our
success in embedding improvements across all operations. I am
pleased to report that this has continued into the current year and
am delighted to announce the commissioning of Kiln-3 at Vanchem in
June 2022, which will deliver production growth and result in lower
unit costs at Vanchem.
.As we continue to pursue incremental operational improvements
and further embed our values and culture at Bushveld, we expect the
effects will continue to reflect in our production and
profitability, helping us realise a sustainable cash generating
business. We have already seen an improvement in our safety record,
although this is from a very strong baseline.
The Group ended the fiscal year with revenue of US$106.9 million
and an underlying EBITDA loss of US$7.5 million (adjusted for a
one-off impairment loss of US$2.4 million), an improvement of
US$7.4 million over the 2020 EBITDA loss of US$14.9 million. During
the course of the year, the strengthening of the South African rand
had a substantial effect on expenses. This resulted in a net
negative exchange impact of US$11.6 million on underlying EBITDA.
Excluding the negative impact of the exchange rate, we would have
achieved a positive underlying EBITDA profit of US$4.1 million for
the year if the exchange rate had been comparable to 2020. In the
second half of the year, the Group realised an underlying EBITDA
profit of US$3.3 million due to strong production performance as
well as a higher realised price. We are pleased that this
profitable performance has continued into the first half of
2022.
Moving on to our energy platform, after incubating Bushveld
Energy and establishing the critical mass necessary for its
success, we intend to carve-out Bushveld Energy as a standalone
company focused on the VRFB value chain. We believe that this will
help to crystallise the value of Bushveld Energy and position it in
the capital markets to attract the appropriate energy-market
focused institutional investors with an appetite and understanding
of the energy proposition, while retaining the vertical integration
proposition of Bushveld Minerals through a substantial strategic
shareholding in the stand-alone energy company.
Whilst still in its early stages, Bushveld Minerals has embarked
on a journey to define and implement a comprehensive sustainability
strategy. At the heart of this strategy is an overarching
philosophy of going "Beyond Compliance", which requires an
understanding and commitment to sustainability as core to our
business and not a question of meeting regulatory requirements. The
philosophy underpins our approach to environment management and
engaging with social partners. Bushveld Minerals is well placed to
make a meaningful contribution to global decarbonisation efforts
through its alloying products that reduce the carbon footprint of
steelmaking, and through our electrolyte products used in
large-scale long-duration energy storage systems that will support
the energy transition through, among others, supporting greater
penetration of renewable energy to the global energy mix.
We have successfully transitioned from an exploration company
into a sizeable, margin-positive primary vanadium producer with
global distribution networks and significant growth potential, an
accomplishment we are proud of, considering we began with a market
capitalisation of US$20 million and we have amassed an asset base
with a net asset value of US$150 million, since 2017. We
accomplished this by investing more than US$185 million, which was
funded with a relatively heavy reliance on debt markets and a
minimal reliance on equity financing; since 2017, the Company has
raised only approximately 25 percent of our capital through direct
equity financing.
So, our transformation journey continues. With two of the
world's four operating primary vanadium production facilities, a
diverse product profile and significant growth upside, we are well
placed in a market that will increasingly look to primary producers
to meet its growing vanadium demand. Our immediate short-term focus
is to ensure that the production base continues to be stable and
sustainable, as we ramp up production towards the run rate of 5,000
- 5,400 mtVp.a.in the fourth quarter, following the commissioning
of Kiln 3 in June 2022. This positions Bushveld as one of the
largest and most significant primary vanadium producers with a low
cost production base and supplying approximately five per cent of
the global market.
We recently announced the key findings of the feasibility and
pre-feasibility studies regarding the optimal path forward to
increase Vametco and Vanchem's production to 8,000 mtVp.a. The
expansion will be conducted in phases and will only be pursued once
we have met our short-term performance goals of 5,000 - 5,400
mtVp.a. and secured the necessary funding.
We remain committed to achieving operational excellence at our
Business and generating positive margins through our low-cost
production platform."
2021 summary
Year end 31.21.2021 Year ended 31.12.20 % change
Vanadium Production
(mtV) 3,592 3,631 -1.1
--------------------------------- -------------------- ---------
Sales volumes (mtV) 3,314 3,842 -13.7
--------------------------------- -------------------- ---------
Average realised
price (US$/kgV) 32.2 23.4 37.6
--------------------------------- -------------------- ---------
Revenue (US$ million) 106.9 90 18.8
--------------------------------- -------------------- ---------
Underlying EBITDA (7.5) (14.9) 49.7
--------------------------------- -------------------- ---------
Adjusted EBITDA
(US$ million) (9.9) (14.9) 33.6
--------------------------------- -------------------- ---------
Net cash flow /(outflow)
from operating activities (12.1) (17.1) 29.2
--------------------------------- -------------------- ---------
(Net debt) (66.7) (38.7) 72.4
--------------------------------- -------------------- ---------
Cash and cash equivalents 15.4 50.5 -69.5
--------------------------------- -------------------- ---------
Average Exchange
rate (ZAR:USD) 14.8 16.5 10.3
--------------------------------- -------------------- ---------
S
Enquiries: info@bushveldminerals.com
+27 (0) 11 268
Bushveld Minerals Limited 6555
Fortune Mojapelo, Chief Executive
Officer
Chika Edeh, Head of Investor
Relations
SP Angel Corporate Finance Nominated Adviser +44 (0) 20 3470
LLP & Broker 0470
Richard Morrison / Charlie
Bouverat
Grant Baker / Richard Parlons
RBC Capital Markets +44 (0) 20 7653
Jonathan Hardy / Caitlin Leopold Joint Broker 4000
Tavistock Financial PR
+44 (0) 207 920
Charles Vivian / Gareth Tredway 3150
ABOUT BUSHVELD MINERALS LIMITED
Bushveld Minerals is a low-cost, vertically integrated primary
vanadium producer. It is one of only three operating primary
vanadium producers, owning 2 of the world's 4 operating primary
vanadium processing facilities. In 2020, the Company produced more
than 3,600 mtV, representing approximately three per cent of the
global vanadium market. With a diversified vanadium product
portfolio serving the needs of the steel, energy and chemical
sectors, the Company participates in the entire vanadium value
chain through its two main pillars: Bushveld Vanadium, which mines
and processes vanadium ore; and Bushveld Energy, an energy storage
solutions provider. Bushveld Vanadium is targeting to materially
grow its vanadium production and achieve an annualised steady state
production run rate of between 5,000 mtVp.a. and 5,400 mtVp.a by
the end of 2022, from projects currently being implemented. Growth
plans to 8,000 mtVp.a. will be pursued, subject to funding and
market conditions.
Bushveld Energy is focused on developing and promoting the role
of vanadium in the growing global energy storage market through the
advancement of vanadium-based energy storage systems, specifically
Vanadium Redox Flow Batteries ( " VRFBs " ).
Detailed information on the Company and progress to date can be
accessed on the website www.bushveldminerals.com
Chairman's Statement
Dear Stakeholders,
While 2020 was the year in which the COVID-19 pandemic plunged
lives and business into turmoil across the globe and saw the
implementation of emergency measures to keep businesses afloat,
2021 was the year in which those emergency measures were put to the
test. As the constant state of flux became the new normal, it
became apparent that companies had to adapt for unusual business
contingencies.
Restrictions are now lifting around the world, facilitating a
return to pre-pandemic life. Not only are we able to see loved ones
and to cross borders, and with less onerous restrictions global
logistics are improving and the productiveness of industries the
world over has begun to escalate considerably. I firmly believe
that the last two years have proved our resilience as a Company and
made us stronger for the difficulties faced. We continue to operate
to the highest standards of business while being mindful of ongoing
global uncertainties and their impact on the sector. These include
but are not limited to the war in Ukraine, rising COVID-19 cases in
China and North Korea, and soaring inflation in the US and
Europe.
I applaud our employees for their stalwart commitment to the
Company and our operations, ensuring that despite the ongoing
impact of COVID-19 and the operational challenges at Vametco, our
staff remained safe, and Bushveld adapted quickly and implemented
several interventions, enabling the Group to finish the year
strongly and make the upper end of our revised guidance for 2021 at
3,592 mtV.
As a result of the improved performance in the second half of
the year, the Group generated a positive underlying EBITDA in the
second half, but this was not sufficient to offset the EBITDA loss
in the H1, and the Group ended the year with an underlying EBITDA
loss of US$7.5 million and a loss before tax for the year of
US$46.8 million (2020: loss before tax of US$37.7 million). The
strengthening of the South African rand had a substantial effect on
expenses and on underlying EBITDA. We made an operating loss of
US$29.3 million, similarly impacted by the significant ZAR:US$
exchange rate movements and the net loss for the year was US$42.1
million, after net interest and non-cash adjustments, as detailed
in the Finance Directors Review.
Furthermore, as we have improved maintenance and ensured
operational stability, Bushveld is targeting to reach a Group
production run rate of 5,000 - 5,400 mtVp.a, in the last quarter of
2022, following the commissioning of Kiln 3 in June 2022, which is
now undergoing stabilisation and optimization, with ramping up
expected to commence thereafter. Higher production, once the Group
is producing over 5,000 mtV p.a, will lead to lower unit costs,
resulting in Bushveld achieving sustainable profitable performance
throughout the cycle. As such, we anticipate Group production for
the year to be in the region of between 4,200 mtV and 4,400 mtV,
between 17-23 per cent higher than 2021, with output weighted
towards the second half.
We recently announced the key findings of the Vametco and
Vanchem feasibility and pre-feasibility studies, the objectives of
which are to increase and achieve a collective production of 8,000
mtVp.a. in the medium to long term. In contrast to the last few
years where production growth was necessary to reach critical mass,
we can be patient about this next stage.
Management intend to pursue the staged expansion plans, subject
to the meeting of short-term performance targets and in a phased
manner, once sufficient funding has been secured, accompanied by
any necessary third-party validation of associated project
economics.
We remain committed to our responsibility to ensure sustainable
growth and provide returns to our investors, a consideration at the
forefront of every company decision and are proud of the trust you,
our shareholders, have placed in us to deliver this. I would like
to thank Fortune Mojapelo, the Bushveld management team, and all
our staff for their efforts to progress the Company and our
operations over the course of the year.
I would like to pay tribute to Professor Morris Viljoen who
sadly passed away in August 2021. Alongside his twin brother
Richard Viljoen, he was a technical advisor to the Company and
major contributor to the founding of Bushveld. His knowledge and
expertise were unparalleled in his field and he will be sorely
missed.
I have been privileged to have the responsibility of chairing
the Board over the last ten years. In this time, I have witnessed
the Company go from strength to strength, a small exploration
company into a significant producer of vanadium no small
achievement.
We have come a long way, from our kick off in 2012 when we
listed on AIM as an exploration company with a diversified
portfolio including vanadium, tin, coal, titanium and iron ore
assets, and raised GBP5.5 million. We established a quality
portfolio of tin assets, which we unbundled and listed as Afritin
on AIM, enabling Bushveld shareholders to unlock value from its tin
platform.
In this time, Bushveld acquired two brownfield processing plants
for a modest acquisition cost, catapulting production over six
years from zero in 2016, to about 3,600 mtV in 2021. We have also
been at the forefront of pioneering a vertically-integrated
vanadium value chain, including our ongoing construction of what
will be one of the largest vanadium electrolyte plants with a
capacity of 8 million litres of vanadium electrolyte (approximately
1,100 mtV). Our other achievements include securing three large,
high-grade opencast deposits, with a primary resource base of 548
Mt, one of the largest high-grade primary vanadium resources in the
world. This gives us the confidence to pursue further growth in the
years ahead, knowing that we have decades-long Life-of Mine ahead.
All this has been achieved at the modest acquisition cost of
approximately US$121 million, significantly less than the capital
expenditure it would have required to develop our operational
footprint from a greenfield state; plus further capital expenditure
spent since acquisition.
On behalf of the Board I must thank Anthony Viljoen for his
significant contribution to Bushveld Minerals over more than a
decade of service. Anthony played a core part in the formation and
shaping of the Company. I wish him all the best as CEO of AfriTin
Mining Limited, which is rapidly developing its large-scale tin
resources. In addition, I would like to I thank Jeremy Friedlander
for his significant contribution to Bushveld with over a decade of
service to the Company, helping provide vital guidance and
leadership.
While I am sad to be leaving the Bushveld family, I welcome the
new members of the Board including Kevin Alcock, Mirco Bardella,
Jacqueline Musiitwa and David Noko. These Board appointments have
been made to ensure that the Board's composition meets the high
standards of corporate governance expected of AIM listed companies.
I look forward to seeing the new heights to which I know they will
take the Company.
Ian Watson
Independent Non-Executive Chairman
Chief Executive Officer's Review
Dear Stakeholders,
I am pleased to present this annual review statement at a time
coinciding with the tenth anniversary of the listing of Bushveld
Minerals Limited on the Alternative Investment Market ("AIM") of
the London Stock Exchange. In that time, we have successfully
transitioned from an exploration company into a sizeable,
margin-positive primary vanadium producer with global distribution
networks, and significant growth potential.
We have achieved this transition through a brownfield strategy
that has seen us acquire two of the only four operating primary
vanadium processing plants in the world in 2017 and 2019,
respectively. We have now invested significant refurbishment
capital into the plants and their connection to some of the world's
largest and highest primary vanadium grade deposits has allowed our
assets to provide a low-cost production platform, with potential
for further cost improvements. While the vanadium market remains
volatile, our cost positioning in the market presents a sustainable
cash generation opportunity over the cycle, which will be more
clearly demonstrated once the Group is producing over 5,000
mtVp.a.
Since 2017, we have built an asset base with a net asset value
of US$150 million, an achievement we are proud of as we started
with a market capitalisation of US$20 million. We have achieved
this by investing in excess of US$185 million in: 1) our
acquisitions of Vametco and Vanchem, 2) refurbishment and expansion
initiatives at the two sites, including the
recently completed refurbishment of Kiln 3 at Vanchem and 3)
investing in sustainable growth of the Bushveld Energy assets. We
have grown this formidable asset base with a relatively heavy
reliance on debt markets and very limited call on shareholders for
equity financing.
2021 Overview
2021 began with significant challenges for Bushveld, impacted by
the continued social and economic fallout from the COVID-19
pandemic.
The South African commercial sector was further affected by a
range of additional challenges, including periodical power supply
shortages, and the severe disruption to local supply chains caused
by the unrest in South Africa in July.
Operations
These contextual challenges compounded problems experienced at
our operations, particularly in the early part of 2021, which
related to operational plant stability on the back of no extensive
annual maintenance shutdown being undertaken in 2020 due to the
COVID-19 pandemic. In March 2021, a slower than expected ramp-up
post a planned 35-day maintenance shutdown at Vametco affected
production, further exacerbated by an unprotected industrial action
that followed in April 2021.
Following the March 2021 annual shutdown at Vametco, the company
has focused on operational stability, which is being achieved
through several interventions. These include a rebasing of monthly
production in line with historical performance rather than
aspirational targets, increasing investments in maintenance and
sustaining capital, and implementing a rigorous and proactive
maintenance programme.
We have also embarked on a Bushveld culture journey to boost our
aspirations towards operational excellence. This has entailed
defining and cementing of our values and culture across the
business, focusing on a philosophy of Care, Courage, Collaboration,
Trust and Excellence.
This shift in approach has seen the Company produce solid
successive quarterly performances since the shutdown in March 2021.
Production in the second half of the year of 2,018 mtV was 28.2 per
cent higher than the H1, illustrating our success in embedding
improvements across all operations. I am pleased to report that
this has continued into the current year and am delighted to
announce the commissioning of Kiln-3 at Vanchem which will deliver
production growth and result in lower unit costs at Vanchem.
We expect that as we continue to pursue incremental operational
improvements and further emphasise our values and culture at
Bushveld over a sustained period, the effects will begin to reflect
in our guidance and production numbers. We have already seen an
improvement in our safety record, although this is from a very
strong baseline, as set out in the Safety section below.
Bushveld achieved production at the upper end of our revised
guidance for the year ended 31 December 2021, with total Group
production of 3,592 mtV. The higher throughput in the second half
resulted in lower unit costs, with production cash cost (C1) for
the year of US$24.0/kgV at Vametco and US$30.6/kgV at Vanchem, both
in line with revised guidance.
While production performance improved, Group sales of 3,314 mtV
were below production levels, owing to the challenges in
international logistics channels arising from COVID-19, and the
disruptions at local ports in July and August. This resulted in a
buildup of finished products inventory.
Unit 2021 12M 2021 vs 12M
2020
Group production mtV 3,592 -1.1%
------ ------ ----------------
Group sales mtV 3,314 -13.7%
------ ------ ----------------
While some of these logistical challenges have persisted into
the 2022 year, we expect to meet our client obligations for the
year.
Financials
The operational improvements post Q1 also translated into an
improved financial performance, with a positive underlying EBITDA
of US$3.3 million in H2 2021, which has been maintained into the
2022 financial year, compared with an H1 2021 underlying EBITDA
loss of US$10.8 million.
The overall underlying EBITDA loss of US$7.5 million for the
year, an improvement on 2020, was affected by the exchange rate
movements that saw the Rand strengthen significantly from
ZAR16.46/US$ to ZAR14.79/US$, resulting in a negative impact on
costs and on underlying EBITDA amounting to US$11.6 million for the
year on a like for like exchange rate with 2020. I am pleased to
note that the trajectory of improved earnings has continued into
2022.
After depreciation of US$19.4 million, we made an operating loss
of US$29.3 million (2020: loss of US$32.8 million), similarly
impacted by the significant ZAR:US$ exchange rate movements. Net
loss for the year was US$42.1 million after net interest of US$11.2
million and non-cash adjustments of US$6.2 million, as detailed in
the Finance Directors Review.
The Group ended the year with a cash and cash equivalents
position of US$15.4 million, as we prioritised significant
investment including growth initiatives at Vanchem, Bushveld Energy
investments and debt repayments.
More details on the company's financial performance are set out
in the Finance Director's Review.
Safety
The Group recorded a 52 per cent improvement in the Total Injury
Frequency Rate to 7.8 relative to the previous year (2020: 16.1),
as a result of improved risk assessment and the implementation of
mitigation measures. While these improvements are welcome, safety
will continue to be an area of focus for Bushveld to ensure that we
can sustain and continue a strong safety record.
Sustainability
Bushveld Minerals has embarked on a journey to define and
implement a comprehensive sustainability strategy. At the heart of
this strategy is an overarching philosophy of going "Beyond
Compliance", which requires an understanding and commitment to
sustainability as core to our business and not a question of
meeting regulatory requirements. The philosophy underpins our
approach to environment management and engaging with social
partners.
Our sustainability journey is in its early stages, defined with
short-term (2021 - 2025) objectives to meet our regulatory
compliance obligations and ensuring alignment / standardisation of
practices across the business, followed by longer-term (2026
onwards ) objectives that give effect to our "Beyond Compliance"
ethos. Dedicated personnel have been brought into the business
with
executive leadership responsibility allocated for driving our
ESG strategy going forward.
Our approach to sustainability is also defined along two
important dimensions: (a) being clear about how we operate in a
sustainable manner, and (b) articulating how our products and
related solutions contribute towards global sustainability
efforts.
In respect of the second, Bushveld Minerals is well placed to
make a meaningful contribution to global decarbonisation efforts
through its alloying products that reduce the carbon footprint of
steelmaking, and through its electrolyte products used in
large-scale long-duration energy storage systems that will support
the energy transition through, among others, supporting greater
penetration of renewable energy to the global energy mix.
Growth
Through the acquisitions and investments in our plants we have
significantly increased our production by 36 per cent between 2017
to 2021 and Bushveld is now positioned as a significant global
vanadium producer. While our current business model and production
run rate is sustainable without the need for additional growth, we
are in the process of ramping up to a production run rate of 5,000
- 5,400 mtV by the end of 2022, which will provide Bushveld further
cash generation potential.
As outlined in the recently announced technical studies, the
full production potential of our assets is much greater than the
current production run rate, particularly in the wake of the
commissioning of Kiln 3 at Vanchem in the second quarter of 2022.
The studies provide a well-structured long-term incremental growth
path to a production rate of 8,000 mtV per annum, ensuring a
permanent and reliable feedstock to both Vametco and Vanchem while
reducing production unit costs.
The option to implement the growth path in phases that are each
value accretive substantially reduces the upfront capital
requirements. We can attain the incremental production more rapidly
and generate additional cash flows after each phase, which can be
leveraged for the next phase. As we have full flexibility in
relation to this growth, any decision in this regard will be
dependent on market conditions and subject to capital
availability.
Further detail on the findings of the studies can be found in
the operating assets section.
Bushveld Energy
The momentum of the energy transition away from fossil fuels to
clean energy continued to grow in 2021 and was, in fact, given
further impetus by the positive outcome of the COP26 climate change
conference in Glasgow. Whilst forecasts of stationary energy
storage deployments growth vary among analysts, they all point to
substantial growth of the sector. Bloomberg New Energy Finance, for
example, forecast that deployed energy storage installations around
the world are will multiply by a factor of 122 to 2,850 GWh by
2040. Furthermore, Guidehouse Insights expects global annual
deployments of VRFBs to grow at a compounded annual growth rate
(CAGR) of 41 per cent over the next 10 years, reaching
approximately 32.8 GWh in 2031.
The VRFB deployment forecast by Guidehouse Insights would equate
to between 127,500 and 173,800 tons of new vanadium demand per year
by 2031, according to Vanitec calculations based off Guidehouse's
projection. That would be more than twice as much vanadium as is
currently produced annually today.
This certainly presents a substantial opportunity for Bushveld
Energy, the company's energy storage focused subsidiary whose
mission is the advancement of VRFBs. Since inception in 2016,
Bushveld Energy has made significant inroads in establishing the
case for VRFBs in the
growing energy storage market through its focus on key
activities along the VRFB value chain structured along three key
areas:
-- Construction of the building for the vanadium electrolyte
manufacturing plant in East London, South Africa, was completed in
April 2022 and the Engineering, Procurement and Construction
("EPC") contract is underway. The vanadium electrolyte
manufacturing plant, targeting an initial capacity of 8 million
litres, will be one of the largest plants outside of China.
-- VRFB Manufacturing: We invested US$10 million this year to
acquire an effective shareholding of 25.25 per cent into CellCube,
a grid-scale and micro-grid energy storage battery manufacturer,
headquartered in Austria, bringing our total investment to $12
million.
-- VRFB Projects Deployments: We completed the development and
achieved financial closing for a 3.5 MW solar photovoltaic (PV)
generation farm and 4 MWh of VRFB energy storage pilot project at
Vametco Mine ("the Vametco mini grid"). Site clearing has
-- commenced and commissioning is targeted for H1 2023; 26 mtV
of electrolyte for the battery has been secured from Vametco. The
Vametco mini-grid will serve to demonstrate the technical and
commercial viability of hybrid mini-grids using solar PV and VRFB
technology and in the process open up opportunities for the
deployment of such solutions in an environment that is increasingly
encouraging self-generation for large energy users.
In addition, we identified captive opportunities within the
Group of up to 120 MW of solar and 180 MWh of VRFB storage. These
projects will also reduce the Group's reliance on Eskom, help
control electricity cost increases and reduce the carbon footprint
of our vanadium production, as part of a broader sustainability
strategy.
We are pleased to have successfully defended the litigation
initiated, during 2021, by Garnet Commerce Limited ("Garnet"), our
partner in CellCube, against VRFB Holdings Limited ("VRFB-H") and
Enerox Holdings Limited ("EHL"), concerning an alleged breach by
VRFB-H of the joint venture agreement in relation to EHL.
Successfully defending this litigation which sought to challenge
the indirect investment by Mustang plc into EHL, means the indirect
investment by Mustang into EHL remains in place.
Notwithstanding the large opportunity presented by the energy
transition for energy storage solutions and significant progress
made by Bushveld Energy as summarised above, we recognise the
complexity of a company spanning the vanadium value chain with
operations that belong in different industry sectors and with
different business models.
Having incubated Bushveld Energy and created the critical mass
to ensure its success, we intend to carve out Bushveld Energy as a
stand-alone company focused on the VRFB value chain. We believe
that this will help to crystalise the value of Bushveld Energy and
to position it in the capital markets to attract the appropriate
energy-market focused institutional investors with an appetite and
understanding of the energy proposition, while retaining the
vertical integration proposition of Bushveld Minerals via a
significant shareholding in the stand-alone energy company.
Vanadium Market Outlook
We remain bullish on the vanadium market. We believe the
vanadium market is characterised by a structural deficit in the
medium to long term, supported by robust and growing demand amidst
a concentrated supply base with limited scope for meaningful supply
growth.
Demand will continue to be anchored by the steel sector,
underpinned by rising intensity of the use of vanadium within
high-strength low-alloy ("HSLA") steel. Away from steel,
significant upside potential is anticipated for vanadium within
VRFBs, as the requirement for energy storage applications for
renewable energy sources increases, with decarbonisation and the
energy transition fast becoming global themes set to remain
relevant for the decades to come.
Vanadium supply is concentrated and increasingly constrained in
its ability to respond to demand. Increasing utilisation levels of
coproduction steel plants, which account for more than 70 per cent
of global vanadium supply, mean decreasing scope for co-producers
to
increase vanadium production, even in favourable steel market
conditions, which are the key drivers of supply movements among
co-producers. Meanwhile historical vanadium price volatility will,
at least in the short term, continue to limit the availability of
capital for
developing greenfield vanadium projects.
This resulting structural deficit in the medium to long term
points towards vanadium price upside relative to historical
averages. In the short term, however, vanadium prices continue to
be volatile, driven by the lingering impacts of the COVID-19
pandemic, especially in China where hard lock downs have continued
to be imposed. The recent Russia-Ukraine conflict and global
recession fears have also added to volatility.
The price volatility seen in 2020, 2021 and now in 2022
underscores the importance of being a low-cost vanadium producer
and remains a core strategic focus for us as a company. The
Russia-Ukraine conflict puts a spotlight on the geopolitics of
global vanadium supply, given the geographical concentration of
supply with China and Russia accounting for 50 per cent and 17 per
cent respectively. This places South Africa in a favourable
position, with its massive high grade primary vanadium reserves.
With two of the three operational plants in South Africa and scope
to grow production on these, Bushveld has the opportunity to emerge
as a key producer and supplier of vanadium in a global market.
Outlook
We anticipate an encouraging 12 months ahead as we are on track
to meet our Group production and cash cost guidance at the
operations. This is supported by the commissioning of Kiln 3 at
Vanchem which was completed in June 2022, and we anticipate to
achieve a production run rate of 2,600 mtV p.a during the last
quarter of 2022.
Overall, we expect Group production of between 4,200 mtV and
4,400 mtV in 2022, with volumes weighted towards the second half as
Kiln 3 is ramped up by year end, with lower production cash cost
(C1) of: between US$22.7/kgV and US$23.5/kgV at Vametco and between
US$27.7/kgV and US$28.4/kgV at Vanchem. Production guidance at
Vametco is between 2,450 mtV and 2,550 mtV and at Vanchem it is
between 1,750 mtV and 1,850 mtV.
We reported a strong start to the 2022 financial year, with
another solid set of quarterly operating results in Q1 2022.
Continuing on from the performance in 2021 and the underlying
EBITDA profit in H2 2021, we have now successfully produced four
quarters of consistent performance,
building on the operational improvements and enhanced safety
initiatives.
We believe Bushveld Minerals is now a solid, sustainable, margin
positive business, and there still remains a large opportunity to
continue our overall growth programme.
Concluding Remarks
So, our transformation journey continues. With two of the
world's four operating primary vanadium production facilities, a
diverse product profile and significant growth upside, we are well
placed in a market that will increasingly look to primary producers
to meet its growing vanadium demand. While we remain committed to
maximising the production capacity of our plants, our immediate
short-term focus is to ensure that the production base is stable,
sustainable and cash generating.
Following the commissioning of Kiln 3 and the expected resulting
Group production level of 5,000-5,400 mtV per annum by the end of
2022, the Company is in a good position to generate cash and
positive margins, as one of the largest and most significant
primary vanadium producers with a low cost production base and
supplying approximately five per cent of the global market.
Our decision to carve out Bushveld Energy comes at a time when
the business has generated sufficient critical mass to stand alone,
albeit still linked to the upstream vanadium production platform.
It also comes at a time of growing momentum behind the energy
transition and long duration energy storage in particular. The
positioning this will give Bushveld Energy in the market is
incredibly attractive while helping simplify Bushveld Minerals'
investment proposition as a vanadium producer. If the above sounds
like a reset of sorts, that is because it is - a reset aimed
at:
-- consolidating our gains with the capital invested to
date;
-- building organisational capacity to successfully manage our
assets;
-- realising a sustainable cash generating business
characterised by a stable and predictable low-cost production base
with a secure balance sheet; and
-- unlocking the value linked to a downstream, sound and growing
energy storage platform that is independently funded through energy
focused public capital markets. The importance of the simplicity of
the resulting investment proposition cannot be over-emphasised.
Supporting this reset are several important developments that I
am pleased to announce, which will provide much needed support in
this phase. These include the appointment of Lucas Msimanga as
Director of Operations with effect from 1 June 2022, significant
changes to our Board of Directors with four new appointments who
bring a diverse and complimentary skill and experience set, and the
appointment of Royal Bank of Canada ("RBC") as a broker and
financial advisor to the Company. I am delighted to welcome Lucas
to the executive team.
Lucas brings more than 20 years of operational leadership
experience in the processing and metallurgy sector which is
important for operations whose downstream processing/metallurgical
processing accounts for the vast majority of our production
processes. RBC brings breadth and depth of capital markets advisory
and support to the Company at a crucial time in our
development.
Gratitude
Finally, I would like to sincerely thank each and every employee
and contractor. Each and every one of you is an invaluable cog in
our business and your care, courage and commitment has been
fundamental in ensuring the continued success and development of
Bushveld Minerals in 2021. I am privileged to work alongside you
all and look forward to many years of continued service.
I must also thank Jeremy Friedlander, Anthony Viljoen and of
course, Ian Watson, who have been serving on the Board since IPO
and during which time they played an important role through a
transformative period of the company. Their guidance and leadership
over the last decade has been invaluable. Michael Kirkwood will be
appointed acting chairperson at the next Annual General Meeting
("AGM"), while the company continues its search for a permanent
chairperson. We are pleased to welcome and look forward to working
with the new directors as the company continues its growth path and
evolution.
Fortune Mojapelo
Chief Executive Officer
Finance Director's Review
Overview
The 2021 underlying result shows improvement from 2020, despite
the continuation of the pandemic as we delivered an underlying
EBITDA loss of US$7.5 million, up US$7.4 million from the 2020
underlying EBITDA loss of US$14.9 million (underlying EBITDA is
adjusted EBITDA excluding impairment charges. Adjusted EBITDA is
EBITDA, excluding the group's share of losses from joint ventures
and the remeasurement of financial liabilities).
Foreign exchange had a material impact on costs during the year,
with the Rand strengthening from ZAR16.46/US$ to ZAR14.79/US$ in
that period. This gave rise to a net adverse exchange impact of
US$11.6 million on underlying EBITDA. Excluding the adverse
exchange rate impact then we would have achieved a positive
underlying EBITDA profit of US$4.1 million for the year on a like
for like exchange rate with 2020.
Our operational and financial performance in 2021 is however a
story of two halves. In the H1, underlying EBITDA amounted to a
loss of US$10.8 million, primarily due to a stronger ZAR: US$
exchange rate on costs and exacerbated by weak production
performance at Vametco in the first four months. In the second half
of the year, the Group achieved an underlying EBITDA profit of
US$3.3 million on the back of a strong production performance at
both Vametco and Vanchem and a higher realised price. This positive
profitability has been maintained into the 2022 financial year to
date.
Recognising the potential significant impact of the movement of
the ZAR: USD exchange rate on our results, we are constantly
reviewing our hedging policy, and we will be better placed to
implement this once we attain steady state production in 2023.
The Group reported revenue of US$106.9 million (2020: US$90.0
million), driven by a higher average realised price of US$32.2/kgV
(2020: US$23.4/kgV) and offset by lower sales.
We made the decision to rebase our plans by reducing our
production guidance for the year, implementing the changes that
were required to stabilize production and provide the platform for
growth. This entailed increasing investment in maintenance and
sustaining capital, to help our operations to achieve stability and
support the anticipated volume increase in the 2022 financial
year.
Overall, we recorded a Group production for the year of 3,592
mtV, just shy of the upper end of the 2021 guidance of between
3,400mtV and 3,600mtV.
Whilst continuing with the various cash conserving measures put
in place to protect the balance sheet during 2020, we remained
firmly focused on our strategy to sustainably increase production.
As part of our capital allocation process, we prioritised the
refurbishment of Vanchem's Kiln 3 as it provided the Group with the
most rapid route to near term production growth. We successfully
negotiated with Orion Mine Finance ("Orion") to lift the Production
Finance Arrangement ("PFA") capital ringfence, allowing us to
reallocate US$17.8 million of the PFA funding from Vametco to
finance the refurbishment and expansion of Vanchem. Further details
of the growth path are set out in the section on Operating Assets
and Operational Review.
The commissioning of Kiln 3 was completed within budget post
year-end in June 2022, with focus now on plant stabilisation and
optimization. The Group's ability to achieve its future production
profile is predicated on the Kiln 3's successful increase in
production during the first three to four months following
commissioning, as it ramps up. This will enable the Group to reach
its targeted steady state production run rate of 5000 - 5400 mtV
p.a. in the last quarter of the 2022 financial year. This is a
significant increase from our production of 3,592 mtVp.a. in 2021
and supports our guidance of between 4,200 - 4,400 mtVp.a. for the
2022 financial year.
During the year, the Duferco loan of US$11.5million was settled
by way of US$2.5 million in cash and US$9.0 million by the issue of
shares.
Approximately US$12.7 million was realized in the H1 of 2021
from the sale of the investment in Invinity Energy Systems Plc
("Invinity"), earning an overall profit of approximately US$7.7
million on the original investment of US$5.0 million. We invested
US$10 million of the proceeds to increase our investment in VRFB
manufacturer CellCube (previously referred to as Enerox GmbH),
which resulted in an indirect interest of 25.25 per cent in
CellCube.
Unit H1 2021(1) H2 2021(1) FY2021 FY2020
Revenue US$m 47.0 59.9 106.9 90.0
--------- ----------- ----------- ------- -------
Cost of sales US$m (43.3) (40.1) (83.4) (73.4)
--------- ----------- ----------- ------- -------
Other operating
and administration
costs US$m (14.5) (18.9) (33.4) (31.5)
--------- ----------- ----------- ------- -------
Adjusted EBITDA US$m (10.8) 0.9 (9.9) (14.9)
--------- ----------- ----------- ------- -------
Impairment charges US$m - 2.4 2.4 -
--------- ----------- ----------- ------- -------
Underlying EBITDA US$m (10.8) 3.3 (7.5) (14.9)
--------- ----------- ----------- ------- -------
Average foreign
exchange rate US$m 14.54 15.02 14.79 16.46
--------- ----------- ----------- ------- -------
Group production mtV 1,574 2,018 3,592 3,631
--------- ----------- ----------- ------- -------
Group sales mtV 1,608 1,706 3,314 3,842
--------- ----------- ----------- ------- -------
All-In Sustaining
Cost (AISC) US$/kgV 39.7 35.2 37.4 28.8
--------- ----------- ----------- ------- -------
Average realized
price US$/kgV 29.2 35.1 32.2 23.4
--------- ----------- ----------- ------- -------
1. Unaudited
The Company sold its 4.76 per cent shareholding in AIM-listed
Afritin Mining Limited and realized a total of approximately US$3.5
million. The proceeds of the sale were used for general corporate
purposes.
Income Statement
Analysis of results
Income statement summary as adjusted from "statutory" Primary
statement presentation
US$ 2021 US$ 2020
Revenue 106,857,285 89,988,078
------------- -------------
Cost of sales (83,387,087) (73,394,608)
------------- -------------
Other operating and
administration costs (33,357,130) (31,534,410)
------------- -------------
Adjusted EBITDA (9,886,932) (14,940,940)
------------- -------------
Depreciation (19,395,496) (17,866,153)
------------- -------------
Operating loss (29,282,428) (32,807,093)
------------- -------------
Remeasurement of
financial liabilities (1,902,172)
------------- -------------
Share of loss in
joint venture (4,351,356)
------------- -------------
Net financing expense (11,248,712) (4,654,258)
------------- -------------
Other non-operating
costs (206,066)
------------- -------------
Loss before tax (46,784,668) (37,667,417)
------------- -------------
Income tax charge 4,671,255 6,570,026
------------- -------------
Loss after tax (42,113,413) (31,097,391)
------------- -------------
Revenue
Group Sales of 3,314 mtV were 13.7 per cent lower than in 2020
due to challenges in international logistics channels arising from
COVID-19, the unrest in South Africa and disruptions at local ports
in July and August. Over the course of 2021, we saw a recovery in
the Vanadium price to the average London Metal Bulletin of
US$34.4/kgV, despite ongoing concerns about COVID-19. This recovery
meant that lower sales were offset by a higher average realised
price in 2021 of US$32.2/kgV (2020: US$23.4/kgV) resulting in
higher revenue for the Group of US$106.9 million 2020:US$90.0
million). The logistical challenges resulted in the Company being
unable to ship some of the product produced during 2021, resulting
in a build-up of inventory throughout the logistics chain (stock at
site, transit to Port, sea-borne and in-country warehouses) of 278
mtV which is included in the cumulative inventory at year end of
832 mtV.
The geographic split of Group sales in 2021 was 47 per cent
(2020: 34 percent) to the United States, 29 per cent to Europe, 3
per cent to China and 21 per cent to the rest of the world. We
expect the geographic mix to shift as Kiln 3 comes online in 2022
with the resultant wider product mix.
During the year, Bushveld took advantage of the robust vanadium
demand and higher prices in the United States by diverting a larger
portion of its sales to the Unites States. As a result, sales to
the United States increased due to increased vanadium demand from
the North American steel and aerospace industries on the easing of
the pandemic lock down regulations and opening up of economies. We
are pleased to have been able to supply into our framed contracts
in the US despite these challenges.
Cost of sales
The cost of sales excluding depreciation for the period was
US$83.4 million (2020: US$73.4 million), primarily due to the
negative impact amounting to approximately US$8.5 million of the
stronger ZAR: US$ exchange rate on costs in 2021. The balance of
the increase is largely attributable to an overall increase in
costs at both Vametco and Vanchem, as detailed below:
-- Increase in maintenance costs to US$16.5 million (2020:
US$12.1 million) to sustain the plants, production volumes and
improve operational stability.
-- Increase in energy and raw material costs to US$40.7 million
(2020: US$38.5million).
-- Increase in mining costs due
-- to waste stripping of US$5.4 million (2020: US$3.2 million)
associated with bringing the Upper Seam project online in September
2021.
-- The Group cost per unit sold (including sustaining capex) of
US$37.4/kgV increased by 30 per cent (2020: US$28.8/kgV), mostly
due to the cost factors mentioned above and lower sales
volumes.
The Group focused on the commissioning of Kiln 3 at Vanchem
along with associated downstream refurbishments. As a result,
Vanchem production personnel costs increased in line with
expectation as we implemented the plan in anticipation of the
commissioning scheduled for May 2022. The time lag between the
upfront expenditure required ahead of the planned increase in
production was a contributing factor to the higher Group cost of
US$37.4/kgV (including sustaining capital) relative to 2020 (2020:
US$28.8/kgV). We continued with our cost-reduction measures as the
Group maintained its focus on embedding the synergies across
Vametco and Vanchem to grow production organically.
During the H1 of the year, we carried out a 35-day planned
maintenance shutdown at our main operating asset, Vametco, which
was followed by a slower than expected ramp up and a 10-day
industrial action. The combination of these factors and a step
change in our approach to a more sustainable production delivery
resulted in a rebasing of our production profile for the year.
The rebasing of production had a negative impact on unit cost of
production, with the fixed costs, accounting for approximately 45
per cent of total costs, being absorbed off a lower production
volume.
Group production of 2,018 mtV in the second half was an
improvement and 28.2 per cent higher than H1 2021 (H1 2021: 1,574
mtV) on the back of the operational improvements implemented after
the production target rebasing.
2021 2020
Total Cost
-------------- --------------
Cost of sales (direct)
US$ (83,387,087) (73,394,607)
-------------- --------------
Operating costs and admin
US$ (33,357,130) (31,534,411)
-------------- --------------
Other non-operating costs
US$ - (206,066)
-------------- --------------
Total income statement
cost excl. depreciation
US$ (116,744,216) (105,135,084)
-------------- --------------
Total units sold (mtV) 3,314 3,842
-------------- --------------
Cost income statement per
Unit sold (excl. Depreciation)
US$/kgV 35.2 27.4
-------------- --------------
Sustaining capital US$ (7,192,393) (5,375,610)
-------------- --------------
Total cost including sustaining
capital US$ (123,936,611) (110,510,694)
-------------- --------------
Cost per unit sold including
sustaining capital US$/kgV 37.4 28.8
-------------- --------------
Average exchange rate ZAR:US$ 14.79 16.46
-------------- --------------
Total Revenue US$ 106,857,285 89,988,078
-------------- --------------
Average price realised
US$/kgV 32.2 23.4
-------------- --------------
Cost-saving programme
We continued with the cost-savings programme ("CSP") introduced
in 2020. The CSP is aimed at ensuring continued competitiveness
throughout the commodity cycle while enhancing our product offering
to markets across the geographies and industries in which we
compete. The Group performed a diagnostic analysis for an
addressable baseline procurement spend of around U$55.0 million.
The process was concluded in February 2022. The outcome was
targeted annualised cost savings of US$2.5 million - US$4.0 million
over a 12 to 24 month period from February 2022. While, going
forward, growing production is expected to contribute to further
lowering of costs through fixed cost dilution, management will
continue to seek broader cost saving opportunities to improve the
company's unit cost performance even further.
Other operating and administration costs
Group administrative expenses increased by US$1.1 million at
US$20.9 million (2020: US$19.8 million). On a like for like
exchange rate basis the costs would have reduced by US$2.0 million,
demonstrating the success of the cost containment measures we
initiated in 2020.
Administrative expenses included staff salaries of US$10.8
million (2020: US$8.1 million) for both the operations and head
office administration and management staff. Since the costs are not
directly attributable to the cost of production, they are recoded
under administrative expenditure based on industry practice. The
operation salaries amounted to US$4.8 million (2020: US$4.7
million), whilst the shared service and change to head office
division (including directors 'fees), amounted to US$5.1 million
(2020: US$3.5 million). The increase in head office staff costs is
as a result of the employment of key employees to manage the
operations as part of shared services. Professional fees were
maintained at US$5.9 million (2020: US$6.0 million), Included in
professional fees are costs incurred of US$1.1m for legal fees for
the litigation surrounding the Enerox Investment. On account of the
successful defense against the litigation a portion of the legal
costs have been recouped post year end.
Administrative expenses December 2021 US$ December 2020 US$
by nature
Staff costs 10,746,322 8,146,473
------------------ ------------------
Depreciation of property,
plant &
equipment 392,669 256,929
------------------ ------------------
Professional fees 5,860,976 6,017,782
------------------ ------------------
Other 3,894,325 5,361,992
------------------ ------------------
Total administrative
expenses 20,894,282 19,783,176
------------------ ------------------
Impairment losses of US$2.4million (2020:US$0) was a result of
the impairment of US$0.5million Intangible asset and US$1.9million
plant and equipment.
Other mine operating costs include social commitments and
obligations at both Vametco and Vanchem costs decreased by US$1.5
million to US$3.2 million (2020: US$ 4.7 million). The idle plant
costs of US$3.4 million (2020:US$4.2 million) mainly reflects the
35-day maintenance shut down during the Q1 of 2021. Selling and
distribution costs increased by US$1.6 million to US$6.4 million
(2020: US$4.8 million) as a result of increased commission paid
which is a consequence of increased revenue in 2021 compared to
2020. The distribution costs also increased due to longer holding
times as a result of logistical issues experienced in 2021.
Adjusted EBITDA and Underlying EBITDA
The Underlying EBITDA reconciliation shown below illustrates the
impact of the increase in vanadium prices from prior year. Offset
by the costs analysed above.
US$
2020 Adjusted EBITDA (14,940,940)
-------------
Revenue changes 16,869,207
-------------
Operating cost changes (22,013,462)
-------------
Inventory movement 10,198,263
-------------
2021 Adjusted EBITDA (9,886,932)
-------------
Underlying EBITDA is a factor of volumes, prices and cost of
production. This is a measure of the underlying profitability of
the Group, widely used in the mining sector. Underlying EBITDA
removes the effect of impairment charges and remeasurement
adjustments, foreign currency translation gains/losses and other
non-cash expenses.
Dec 2021 US$ Dec 2020 US$
Revenue 106,857,285 89,988,078
-------------- -------------
Cost of Sale (102,782,583) (91,260,760)
-------------- -------------
Other operating and
administration
costs (33,357,130) (31,534,411)
-------------- -------------
Add Depreciation and
Amortisation 19,395,496 17,866,153
-------------- -------------
Adjusted EBITDA (9,886,932) (14,940,940)
-------------- -------------
Add: impairment losses 2,438,889
-------------- -------------
Underlying EBITDA (7,448,045) (14,940,940)
-------------- -------------
Other non-cash costs
IFRS 9 - Remeasurement of financial liabilities
The PFA was subject to remeasurement under IFRS 9. This resulted
in a non-cash impact to the income statement of US$1.9 million
(2020: US$ nil) remeasurement adjustment and US$2.8 million (2020:
US$ nil) notional interest and a resultant increase in the loan of
US$4.7 million.
Share of loss of VRFB JV
Our underlying investment in Cellcube, through VRFB holdings
Limited (VRFB) is accounted for as an investment in Joint Venture.
As such we recognise our portion of the loss recognised in Cellcube
for 2021 which amounted to US$4.4 million.
Deferred Tax
Charges for deferred tax in 2021 amounted to a net deferred tax
benefit of US$5 million, compared to a net deferred tax benefit of
US$6.6 million in 2020 (restated). The deferred tax benefit arises
from the unwinding of the liability over the life of the
assets.
Deferred Tax on Vanchem acquisition
In 2019, the Group acquired assets in Vanchem which resulted in
a recognition of a gain on bargain purchase of some US$60,6 million
in the Group accounts and around US$85 million in the subsidiary
accounts under IFRS 3 (Business combination). Based on IAS
12-Income taxes, a deferred tax liability of R333 million
(c.US$23.7 million) should have been raised with a corresponding
charge to tax on the income statement. The liability which has no
cash impact will unwind over the life of assets with a credit to
2020 income statement on the tax line of R89 million (c.US$6.1
million) and a credit in the 2021 income statement on the tax line
of R76 million (c.US$4.8 included in the US$5 million mentioned
above). The overall impact of the adjustment in the 2021 accounts
is a deferred tax liability of R167 million (c.US$10.5 million), a
debit of retained earnings brought forward of R243m
(c.US$16.6 million) and a current year credit to the P&L of
R76m (c. US$5.2m). The prior years in the balance sheet have been
restated to reflect these changes and more details can be found in
notes 15 and 35 of the financial statements.
Balance Sheet Assets
Assets
Non-current assets related to intangibles and property, plant
and equipment remained broadly flat relative to 2020 and changes
were mainly due to depreciation in the year. Our investment in VRFB
transferred from Current assets (Refer to note 16 of the financial
statements for further detail). A deferred tax asset was raised for
the assessed loss incurred during the year, (refer to note 15 for
further details).
The decrease in Group cash and cash equivalents was as a result
of US$15.4 million (2020: US$50.5 million) was primarily due to the
capital spend on growth projects at Vanchem, VRFB investment and
the construction of our plant in East London.
The movement in fair value is as a result of the Group realising
its investments in AfriTin and Invinity. AfriTin realised
approximately US$3.5million and Invinity US$3.5million in 2021.
Equity and liabilities
Total current and non-current liabilities of US$149.9 million
(2020 US$153.5 million) reduced by US$4.2 million from the prior
year. The positive impact of the settlement of the Duferco loan of
US$11.5 million of which US$2.5 million was cash and US$9 million
settled through the issue of 66,892,037 shares, partial repayment
of Nedbank of US$2.2 million as well as Orion US$1.1 million, were
offset by the US$4.76million IFRS9 impact on the Orion financing
loan, US$3.5million Orion convertible interest, and interest
accrual on the PFA for the Q4 2021 which was only due and payable
in Q1 2022.
Net debt
The net debt reconciliation below outlines the Group's total
debt and cash position.
2021 US$ 2020 US$ Difference US$
Gross Cash and
Cash Equivalent 15,432,852 50,540,672 (35,107,806)
------------- ------------- ---------------
Nedbank Revolving
Credit Facility (5 821,082) (8,636,535) 2,815,453
------------- ------------- ---------------
Convertible Loan
Notes - Duferco - (11,585,068) 11,585,068
------------- ------------- ---------------
Production Financing
Agreement
- Orion Mine Finance (33,511,742) (30,105,886) (3,405,856)
------------- ------------- ---------------
Convertible Loan
Notes Instrument
- Orion Mine Finance (37,313,976) (33,073,699) (4,204,277)
------------- ------------- ---------------
Other (999,950) (845,588) (154,362)
------------- ------------- ---------------
Leases (4,485,312) (5,002,144) 516,832
------------- ------------- ---------------
Net Debt (66,699,209) (38,708,248) (27,990,961)
------------- ------------- ---------------
Cash flow statement
The table below summarises the main components of cash flow
during the year.
Year ended 31 Dec Year ended 31 Dec
2021 (audited) US$ 2020 (audited) US$
Operating loss (29,282,428) (32,807,093)
-------------------- --------------------
Impairments 2,438,890
-------------------- --------------------
Depreciation and amortisation 19,395,496 17,866,153
-------------------- --------------------
Changes in working
capital and provisions (5,022,120) 1,253,029
-------------------- --------------------
Taxes paid 394,069 (3,452,492)
-------------------- --------------------
Cash (outflow) from
operations (12,076,093) (17,140,404)
-------------------- --------------------
Sustaining capital (7,192,393) (5,375,610)
-------------------- --------------------
Free cashflow (19,268,491) (22,516,014)
-------------------- --------------------
Cash from other investing
activities (9,965,907) (7,943,222)
-------------------- --------------------
Financing activities (7,049,147) 47,433,269
-------------------- --------------------
Cash (outflow) / inflow (36,283,545) 16,974,034
-------------------- --------------------
Opening net cashflow 50,540,672 34,011,557
-------------------- --------------------
Foreign exchange movement 1,175,725 (444,919)
-------------------- --------------------
Closing net cash 15,432,852 50,540,672
-------------------- --------------------
Net cash from operating activities was an outflow of US$12.1
million (2020: US$17.1 million), an improvement from the previous
year driven by Adjusted EBITDA. Capital expenditure and investing
activities for the year were US$17.2 million (2020: US$13.3
million), an increase of
US$3.9 million from 2020 mainly due to investing activities as
explained below. The Group ended the year with a cash balance of
US$15.4 million, (2020: US$50.5 million), the net outflow arising
from, inter alia, higher capital expenditure and repayment of
loans.
Investing activities
Investing activities were driven by capital expenditure growth
with property plant and equipment expenditure of US$19.5 million,
up US$9.3 million from 2020. This was mainly as a result of Kiln 3
capital expenditure of US$4.2 million and construction of the
bushveld electrolyte plant of US$4.9million. In addition to above,
payments were made for the deferred consideration owed to Evraz of
US$1.7 million, Duferco deferred consideration of US$2.2million,
Investment in CellCube of US$10million. The costs were offset by
finance income to the value of US$1.0 million for the year as well
as the disposal of the US$12.7million investment in Invinity and
US$3.5million investment in Afritin.
Capital expenditure to sustain and grow our production
In line with our rebasing, we substantially increased sustaining
capital at Vametco, in order for our operations to achieve
stability and support the volume increase in the 2022 financial
year as outlined below.
2021 US$(million) 2020 US$(million) Outlook
2022 US$ (million)
Vametco 4.5 4.4 5.5
------------------ ------------------ --------------------
Growth 0.6 2.6 -
------------------ ------------------ --------------------
Environmental/
Legal Compliance 0.2 - 0.6
------------------ ------------------ --------------------
Sustaining 3.7 1.8 4.9
------------------ ------------------ --------------------
Vanchem 7.7 3.6 8.5
------------------ ------------------ --------------------
Growth 4.4 - 4.5
------------------ ------------------ --------------------
Environmental/
Legal Compliance 2.6 3.4 2.4
------------------ ------------------ --------------------
Sustaining 0.7 0.2 1.6
------------------ ------------------ --------------------
Bushveld Energy 4.9 8.1
------------------ ------------------ --------------------
Growth 4.9 8.1
------------------ ------------------ --------------------
Total capital expenditure 17.1 8.0 22.1
------------------ ------------------ --------------------
-- The Group remained firmly focused on our strategy to
sustainably increase production, prioritising the refurbishment of
Vanchem's Kiln 3. During 2021 the Group spent US$17.1 million
2020:US$8.0 million on sustaining and growth capital. The total
spend was comprised of the following:
-- US$3.9 million sustaining capital at Vametco, mainly
comprised of medium- and long-term maintenance capex.
-- US$4.2 million growth capital for the refurbishment of Kiln 3
at Vanchem. Vanchem's production scale up to a run rate of 2,600
mtv per annum by the end of the 2022 financial year. The balance to
be incurred during 2022.
-- US$4.9 million growth capital for BELCO electrolyte
plant.
Financing activities
Financing activities of US$7.0 million comprise of the loan
repayments of US$2.2 million on the Nedbank RCF and US$2.5 million
Capital repayment of the US$11.5 million unsecured convertible loan
note held by Duferco as well as US$1.7million interest on the Orion
PFA. As explained above the balance of US$9.0 million which was due
for repayment was settled by the issue of 66,892,037 new Bushveld
shares. This was offset by the receipt of US$1.3million receipt
from the Industrial Development Corporation(refer to note 25) for
BELCO.
Financial Risk
The main financial risks faced by the Group relate to the
availability of funds to meet business needs (liquidity risk), the
risk of default by counterparties to financial transactions (credit
risk), fluctuations in interest and foreign exchange rates and
commodity prices (market risk). These factors are more fully
outlined in the notes to the accounts. They are important aspects
to consider when addressing the Group's going concern status. We
proactively manage the risks within our control. There are,
however, factors which are outside the control of management,
specifically volatility in the ZAR: US$ exchange rate as well as
the vanadium price, which we do not currently hedge, and which can
have a significant impact on the cashflows of the business. As
mentioned earlier, implementation of a hedging policy will be
considered when we attain steady state production and have a wider
range of products for sale in 2023.
Going Concern And Outlook
We manage liquidity risk by ensuring that the Group has
sufficient funds for all ongoing operations. Our philosophy is to
maintain a low level of financial gearing, given exposure to the
vanadium price and exchange rate fluctuations.
As part of the annual budgeting and long-term planning process,
the Board reviewed and approved the Group's budget and cashflow
forecasting through to 2023. The forecast is amended in line with
any material changes identified during the year. Equally, where
funding requirements are identified from the cashflow forecast,
appropriate measures are taken to ensure these requirements can be
satisfied. In particular, a capital allocation framework is applied
which prioritises maintenance and regulatory capital funding
requirements.
We also closely monitor our working capital and regularly
produce cash forecasts and analyse sensitivities to different
scenarios, including, but not limited to, changes in commodity
prices and different production profiles from the Group's producing
assets. We have a pricing committee which considers commodity
pricing outlook, taking into account industry analysts forecasts as
well as inhouse intelligence.
Our future production profile in our forecasts is predicated on
Vanchem Kiln 3 being commissioned during the H1 of 2022. Kiln 3 has
been commissioned and is undergoing stabilisation and optimization,
with ramping up expected to commence thereafter. The annual
production run rate is forecast to ramp up to 5,000 - 5,400 mtV
p.a. in the last quarter of the 2022 financial year and we remain
comfortable that Kiln 3 will be at the forecast run rate by the end
of year.
The Nedbank Revolving Credit Facility (RCF) of ZAR125 million
available to Vametco is subject to financial covenants which are
EBITDA-driven. The application of IFRS 9 on the Orion PFA resulted
in an increase in accounting interest, over and above the actual
interest paid which comprised the calculation of the net interest
to debt covenant. Nedbank has approved the waiver of the covenants
for the December 31, 2021, and we are confident of passing the 30
June 2022 reporting period. The term of the RCF ends in November
2022 and since August 2021, we have been paying approximately
US$0.44 million (ZAR7.0 million) per month towards the RCF. of
which approximately US$2.,65 million (R42.0 million) has been paid
post the year end.
Although the start of the 2022 financial year has been
challenging for Vanchem, as Kiln 1 battled with repairs and
maintenance, we are encouraged by the positive production run rate
at Vametco and the profitability that is coming through from that
operation. The plant at Vametco is currently down for its annual
planned shutdown during June 2022 and has generally performed well
and is benefitting from the operational stability initiatives we
embarked on during 2021. Whilst we have experienced logistical
challenges with our sales, we have retained our customer
relationships as the Group sells and distributes around 85 per cent
of its product as frame contracts.
We continue to prioritise financial stability through cost
containment, conserving cash and adhering to a clear capital
allocation framework, to ensure the Group's resilience through the
operating cycle. Accordingly, the Directors continue to adopt the
going concern basis in preparing the consolidated financial
information. Further information on the Directors going concern
assessment is contained] in the accounting policies.
Tanya Chikanza
Finance Director
Bushveld Minerals Limited (Registration number 54506)
Consolidated Financial Statements for the year ended 31 December
2021
Consolidated Statement of Profit or Loss
----------------------------------------------- --------------------------------------------------
2021 2020
Note Restated*
US$ US$
----------------------------------------------- ---------- ------------------- -----------------
Continuing operations
Revenue 5 106,857,285 89,988,078
Cost of sales (102,782,583) (91,260,760)
------------------- -----------------
Gross profit/(loss) 4,074,702 (1,272,682)
Other operating income 2,618,971 2,304,528
Impairment losses 12&13 (2,438,890) -
Selling and distribution costs (6,406,621) (4,828,710)
Other mine operating costs (3,224,407) (4,699,892)
Idle plant costs (3,386,899) (4,152,153)
Share-based payment 23 375,008 (375,008)
Administration expenses 7 (20,894,292) (19,783,176)
------------------- -----------------
Operating loss (29,282,428) (32,807,093)
Finance income 8 935,347 1,077,991
Finance costs 9 (12,184,059) (5,732,249)
Remeasurement of financial liabilities 28 (1,902,172) -
Loss from Joint venture 17 (4,351,356) -
Movement in earnout estimate 26 - (206,066)
------------------- -----------------
Loss before taxation (46,784,668) (37,667,417)
Taxation* 10 4,671,255 6,570,026
------------------- -----------------
Loss for the year (42,113,413) (31,097,391)
------------------- -----------------
Earnings per share
Loss per ordinary share
Basic (loss) / earnings per share (cents) 11 (3.39) (2.63)
Diluted (loss) / earnings per share (cents) 11 (3.39) (2.63)
------------------- -----------------
- -
------------------- -----------------
Loss attributable to:
Owners of the parent (40,779,853) (30,595,243)
Non-controlling interest (1,333,560) (502,148)
------------------- -----------------
(42,113,413) (31,097,391)
------------------- -----------------
*Refer to note 35 for details of restatement
Consolidated Statement of Comprehensive Loss
----------------------------------------------- --------------------------------------------------
2021 2020
Note US$ US$
----------------------------------------------- ---------- ------------------- -----------------
Loss for the year (42,113,413) (31,097,391)
Consolidated other comprehensive income:
Items that will not be reclassified to profit
or loss:
(Losses) / gains on valuation of investments
in equity instruments (3,771,367) 13,483,194
Other fair value movements 13,830 103,448
------------------- -----------------
Total items that will not be reclassified to
profit or loss (3,757,537) 13,586,642
------------------- -----------------
Items that may be reclassified to profit or
loss:
Currency translation differences (9,712,355) (9,660,609)
------------------- -----------------
Other comprehensive income for the year net
of taxation (13,469,892) 3,926,033
------------------- -----------------
Total comprehensive loss (55,583,305) (27,171,358)
------------------- -----------------
Total comprehensive loss attributable to:
Owners of the parent (55,918,489) (25,790,347)
Non-controlling interest 335,184 (1,381,011)
------------------- -----------------
(55,583,305) (27,171,358)
------------------- -----------------
All results relate to continuing activities.
The accounting policies on page 8 to 20 and the notes on pages 8
to 52 form an integral part of the consolidated financial
statements.
Statement of Financial Position
--------------------------------------- ------------------------------------------------------------------
2021 2020 2019
Restated* Restated*
Note US$ US$ US$
--------------------------------------- ------ ------------------- ----------------------- ------------
Assets
Non-Current Assets
Intangible assets 12 59,254,372 59,003,825 59,408,821
Property, plant and equipment 13 153,110,702 167,579,993 185,269,063
Investment property 14 2,595,359 2,811,017 2,905,449
Financial assets at fair value 16 - - 4,420,891
Investment in joint venture 17 7,855,237 - -
------------------- ----------------------- ------------
Total Non-Current Assets 222,815,670 229,394,835 252,004,224
------------------- ----------------------- ------------
Current Assets
Inventories 18 41,646,156 34,081,625 35,082,342
Trade and other receivables 19 17,642,216 10,425,363 4,516,287
Restricted investment 20 2,868,886 3,111,465 6,605,465
Current tax receivable 275,017 814,067 493,178
Financial assets at fair value 16 - 22,452,877 1,952,227
Cash and cash equivalents 21 15,432,852 50,540,672 34,011,557
------------------- ----------------------- ------------
Total Current Assets 77,865,127 121,426,069 82,661,056
------------------- ----------------------- ------------
Total Assets 300,680,797 350,820,904 334,665,280
------------------- ----------------------- ------------
Equity and Liabilities
Share capital 22 16,797,180 15,858,428 15,357,271
Share premium 22 125,550,674 117,065,907 111,067,064
Retained income* 22 (1,265,040) 28,367,659 58,962,902
Share-based payment reserve 23 - 375,008 633,277
Convertible loan note reserve 54,814 54,814 -
Foreign currency translation reserve* 22 (20,851,187) (9,470,088) (2,289,138)
Fair value reserve 22 (1,938,397) 12,966,294 (620,349)
------------------- ----------------------- ------------
Equity attributable to owners
of the parent 118,348,044 165,218,022 183,111,027
Non-controlling interest 32,481,896 32,146,712 33,527,723
------------------- ----------------------- ------------
Total Equity 150,829,940 197,364,734 216,638,750
------------------- ----------------------- ------------
Liabilities
Non-Current Liabilities
Retirement benefit obligation 24 1,905,739 2,076,023 2,331,325
Environmental rehabilitation liability 25 18,031,321 17,998,366 17,844,066
Deferred consideration 26 1,684,021 1,802,884 7,108,819
Loans 27 3,280,948 1,597,972 -
Borrowings 28 67,435,647 70,909,370 41,756,152
Lease liabilities 29 3,920,698 4,376,483 4,677,338
Deferred tax 15 6,014,244 11,549,862 24,278,644
------------------- ----------------------- ------------
Total Non-Current Liabilities 102,272,618 110,310,960 97,996,344
------------------- ----------------------- ------------
Statement of Financial Position
---------------------------------- ------ ------------------- ----------------- -----------
2021 2020 2019
Restated
Note US$ US$ US$
---------------------------------- ------ ------------------- ----------------- -----------
Current Liabilities
Trade and other payables 30 33,080,670 22,065,601 15,809,996
Provisions 31 3,721,853 3,296,894 3,432,619
Borrowings 28 10,211,102 13,337,406 -
Lease liabilities 29 564,614 625,661 787,571
Deferred consideration 26 - 3,819,648 -
------------------- ----------------- -----------
Total Current Liabilities 47,578,239 43,145,210 20,030,186
------------------- ----------------- -----------
Total Liabilities 149,850,857 153,456,170 118,026,530
------------------- ----------------- -----------
Total Equity and Liabilities 300,680,797 350,820,904 334,665,280
------------------- ----------------- -----------
The consolidated financial statements and the notes on pages 1
to 52, were approved by the board of directors on the 22 June 2022
and were signed on its behalf by:
Tanya Chikanza
Finance Director
The accounting policies on page 8 to 20 and the notes on pages 8
to 52 form an integral part of the consolidated financial
statements.
Bushveld Minerals Limited
(Registration number 54506)
Consolidated Financial Statements for the year ended 31 December
2021
Consolidated Statement of Changes in Equity
Share Share Foreign Share-based Convertible Fair Retained Total Non- Total
capital equity
--------------
premium exchange payment loan note value income attributable controlling
to
--------------
Translation reserve reserve reserve equity interest
holders
reserve of the
group /
company
US$ US$ US$ US$ US$ US$ US$ US$ US$ US$
-------------- ---------- ------------- -------------- --------------- ------------ ------------- -------------- -------------- --------------- ----------------
Opening
balance as
previously
reported 15,357,271 111,067,064 (1,655,861) - - (620,349) 83,415,438 207,563,563 33,527,723 241,091,286
Adjustments
Prior year
adjustments - - - - - - (24,452,536) (24,452,536) - (24,452,536)
---------- ------------- -------------- --------------- ------------ ------------- -------------- -------------- --------------- ----------------
Balance at 01
January 2020
as restated 15,357,271 111,067,064 (1,655,861) - - (620,349) 58,962,902 183,111,027 33,527,723 216,638,750
---------- ------------- -------------- --------------- ------------ ------------- -------------- -------------- --------------- ----------------
Loss for the
year - - - - - - (30,595,243) (30,595,243) (502,148) (31,097,391)
Other
comprehensive
income,
net of tax:
Currency
translation
differences - - (7,814,227) - - - - (7,814,227) (878,863) (8,693,090)
Fair value
movement on
investments - - - - - 13,483,194 - 13,483,194 - 13,483,194
Other fair
value
movements - - - - - 103,449 - 103,449 - 103,449
---------- ------------- -------------- --------------- ------------ ------------- -------------- -------------- --------------- ----------------
Total
comprehensive
Loss
for the year - - (7,814,227) - - 13,586,643 (30,595,243) (24,822,827) (1,381,011) (26,203,838)
---------- ------------- -------------- --------------- ------------ ------------- -------------- -------------- --------------- ----------------
Transaction
with owners:
Issue
of shares 501,157 5,998,843 - - - - - 6,500,000 - 6,500,000
Share-based
payment - - - 375,008 - - - 375,008 - 375,008
Equity
component of
convertible
loan note - - - - 54,814 - - 54,814 - 54,814
---------- ------------- -------------- --------------- ------------ ------------- -------------- -------------- --------------- ----------------
Balance at 01
January 2021 15,858,428 117,065,907 (9,470,088) 375,008 54,814 12,966,294 28,367,659 165,218,022 32,146,712 197,364,734
---------- ------------- -------------- --------------- ------------ ------------- -------------- -------------- --------------- ----------------
Loss for the
year - - - - - - (40,779,853) (40,779,853) (1,333,560) (42,113,413)
Other
comprehensive
income,
net of tax:
Currency
translation
differences - - (11,381,099) - - - - (11,381,099) 1,668,744 (9,712,355)
Other fair
value
movements - - - - - (3,757,537) - (3,757,537) - (3,757,537)
---------- ------------- -------------- --------------- ------------ ------------- -------------- -------------- --------------- ----------------
Total
comprehensive
Loss
for the year - - (11,381,099) - - (3,757,537) (40,779,853) (55,918,489) 335,184 (55,583,305)
---------- ------------- -------------- --------------- ------------ ------------- -------------- -------------- --------------- ----------------
Transaction
with owners:
Issue
of shares 938,752 8,484,767 - - - - - 9,423,519 - 9,423,519
Share-based
payment - - - (375,008) - - - (375,008) - (375,008)
Transfer
between
reserves - - - - - (11,147,154) 11,147,154 - - -
---------- ------------- -------------- --------------- ------------ ------------- -------------- -------------- --------------- ----------------
Balance at 31
December 2021 16,797,180 125,550,674 (20,851,187) - 54,814 (1,938,397) (1,265,040) 118,348,044 32,481,896 150,829,940
---------- ------------- -------------- --------------- ------------ ------------- -------------- -------------- --------------- ----------------
Note 22 22
The accounting policies on page 8 to 20 and the notes on pages 8
to 52 form an integral part of the consolidated financial
statements.
5
Consolidated Statement of Cash Flows 2021 2020
Note US$ US$
Cash flows from operating activities
Loss before taxation (46,784,668) (37,667,417)
Adjustments for:
Depreciation property, plant and equipment
(including right-of-use assets) 13 19,395,496 17,866,153
Loss from joint venture 4,351,356 -
Movement in earnout estimate 26 - 206,066
Remeasurement of financial liabilities 28 1,902,172 -
Interest income 8 (935,347) (1,077,991)
Finance costs 9 12,184,059 5,732,249
Impairment losses 12 & 13 2,438,890 -
Changes in working capital (5,022,120) 1,253,029
Income taxes received / (paid) 394,069 (3,452,492)
Net cash outflow from operating activities (12,076,093) (17,140,403)
Cash flows from investing activities
Finance income 8 935,347 985,901
Purchase of property, plant and equipment 13 (19,449,657) (9,269,924)
Payment of deferred consideration 26 (3,874,449) (1,680,459)
Purchase of investments 16 (9,987,735) (1,883,208)
Purchase of exploration and evaluation assets 12 (928,960) (1,471,142)
Disposal of financial assets held at fair value 16,147,154 286,643
Net cash outflow from investing activities (17,158,300) (13,032,189)
Cash flows from financing activities
Proceeds from loans 27 1,335,735 1,597,972
Finance costs (2,947,577) (3,115,205)
Repayment of borrowings 28 (4,731,932) -
Proceeds from borrowings 28 - 49,417,161
Lease payments (705,373) (753,302)
Net cash (outflow)/inflow from financing activities (7,049,147) 47,146,626
Total cash movement for the year (36,283,540) 16,974,034
Cash and cash equivalents at the beginning
of the year 50,540,672 34,011,557
Effect of translation of foreign rate 1, 175,720 (444,919)
Total cash and cash equivalents at end of
the year 21 15,432,852 50,540,672
Reconciliation of net cash flow to movement 2021 2020
in net debt US$ US$
Net debt at 1 January (38,708,248) (7,744,604)
Decrease/(increase) in borrowings 4,731,932 (49,417,161)
Increase in loans (1,335,735) (1,597,972)
Net (decrease)/increase in cash and cash equivalents (36,283,540) 16,974,034
Decrease in lease liabilities 245,943 256,260
Effects of exchange rate changes 4,499,970 2,821,195
Net debt as at 31 December (66,849,678) (38,708,248)
Net cash and bank debt (62,213,897) (33,706,104)
Lease liabilities (4,635,781) (5,002,144)
Net debt as at 31 December (66,849,678) (38,708,248)
*Refer to note 35 for details of restatement
The accounting policies on page 8 to 20 and the notes on pages 8
to 52 form an integral part of the consolidated financial
statements.
Notes to the Consolidated Financial Statements
1. Corporate information and principal activities
Bushveld Minerals Limited ("Bushveld") was incorporated and
domiciled in Guernsey on 5 January 2012 and admitted to the AIM
market in London on 26 March 2012.
The address of the Company's registered office is Oak House,
Hirzel Street, St Peter Port, Guernsey, GY1 3RH. The consolidated
financial statements of the Company as at and for the year ended 31
December 2021 comprise of the Company and its subsidiaries (The
"Group") and the Group's interest in equity accounted
investments.
As at 31 December 2021, the Bushveld Group comprised of:
Company Note Equity holding Country Nature of activities
and voting of incorporatio
rights n
------------------------------------ ---- -------------- ----------------- -------------------------
Bushveld Minerals Limited N/A Guernsey Ultimate holding company
Bushveld Resources Limited 1 100% Guernsey Holding company
Mining and manufacturing
Ivanti Resources (Pty) Limited 2 100% South Africa company
Pamish Investments No 39 (Pty)
Limited 2 64.00% South Africa Mining right holder
Amaraka Investments No 85 (Pty) Vanadium and iron ore
Limited 2 68.50% South Africa exploration
Bushveld Minerals SA (Pty) Limited 2 100% South Africa Group support services
Bushveld Vanchem (Pty) Limited 13 100% South Africa Processing company
Vanadium and iron ore
Great 1 Line Invest (Pty) Limited 2 62.5% South Africa exploration
Vanadium and iron ore
Gemsbok Magnetite (Pty) Limited 2 74% South Africa exploration
Caber Trade and Invest 1 (Pty) Vanadium and iron ore
Limited 2 51% South Africa exploration
Bushveld Vanadium 2 (Pty) Limited 2 100% South Africa Holding company
Bushveld Energy Limited 1 84.00% Mauritius Holding company
Bushveld Energy Company (Pty)
Limited 4 100% South Africa Energy development
Bushveld Vametco Hybrid Mini
Grid Company (RF) 12 100% South Africa Energy development
(Pty) Limited
Bushveld Electrolyte Company
(Pty) Ltd 12 55% South Africa Energy development
VRFB Holdings Limited 4 50.5% Guernsey Holding company
Vanadium Electrolyte Rental 1&4 40% & 30% UK Energy development
Limited
Enerox Holdings Limited 14 50% Guernsey Holding company
Bushveld Vametco Limited 2 100% Guernsey Holding company
Strategic Minerals Connecticut
LLC 7 100% United States Holding company
Bushveld Vanadium 1 (Pty) Limited 8 100% South Africa Holding company
Bushveld Vametco Holdings (Pty)
Limited 11 74% South Africa Mining right holder
Bushveld Vametco Alloys (Pty) Mining and manufacturing
Limited 9 100% South Africa company
Bushveld Vametco Properties
(Pty) Limited 10 100% South Africa Property owning company
Lemur Holdings Limited 1 100% Mauritius Holding company
Coal Mining Madagascar SARL 5 99% Madagascar Coal exploration
Imaloto Power Project Limited 3 100% Mauritius Holding company
Imaloto Power Project Company
SARL 6 99.00% Madagascar Power generation company
Lemur Investments Limited 3 100% Mauritius Holding company
Lemur SA (Pty) Ltd 3 100% South Africa Coal trading
==================================== ==== ============== ================= =========================
1 Held directly by Bushveld
Minerals Limited
2 Held by Bushveld Resources
Limited
3 Held by Lemur Holdings Limited
4 Held by Bushveld Energy Limited
5 Held by Lemur Investments
Limited
6 Held by Imaloto Power Limited
7 Held by Bushveld Vametco Limited
8 Held by Strategic Minerals
Connecticut LLC
9 Held by Bushveld Vametco Holdings
(Pty) Limited
10 Held by Vametco Alloys (Pty)
Limited
11 Held by Bushveld Vanadium
1 (Pty) Limited
12 Held by Bushveld Energy Company
(Pty) Limited
13 Held by Bushveld Vanadium
2 (Pty) Limited
14 Held by VRFB Holdings Limited
2. Adoption of New and Revised Standards Accounting standards and interpretations applied
In the current year, the Group has adopted the following
standards and interpretations that are effective for the current
financial year and that are relevant to its operations:
COVID-19-Related The new standard provides lessees with an exemption
Rent Concessions from assessing whether a COVID-19-related rent concession
(Amendments to is a lease modification
IFRS 16)
------------------------ ------------------------------------------------------------
Interest Rate Benchmark The new standard is aimed at resolving the potential
Reform (Amendments effects the IBOR reform could have on financial reporting.
to IFRS 9, IAS
39 and IFRS 7)-
Phase 2
------------------------ ------------------------------------------------------------
The adoption of these Standards and Interpretations, which
become effective for annual periods beginning on or after 1 January
2021, had no material impact on the financial statements of the
Group.
Accounting standards and interpretations not applied
Standards, amendments and interpretations to existing standards
that are not yet effective and have not been early adopted by the
Group:
Reference to the The amendments update an outdated reference in IFRS
Conceptual Framework 3 without significantly changing its requirements.
(Amendments to
IFRS 3)
----------------------------- -----------------------------------------------------------
Onerous Contracts The amendments address costs a company should include
- Cost of Fulfilling as the cost of fulfilling a contract when assessing
a Contract (Amendments whether a contract is onerous.
to IAS 37)
----------------------------- -----------------------------------------------------------
Property, Plant The amendments prohibit deducting from the cost of
and Equipment - an item of property, plant and equipment any proceeds
Proceeds before from selling items produced while bringing that asset
Intended Use (Amendments to the location and condition necessary for it to
to IAS 16) be capable of operating in the manner intended by
management.
----------------------------- -----------------------------------------------------------
Classification The amendments provide a more general approach to
of Liabilities the classification of liabilities under IAS 1 based
as Current or Non-current on the contractual arrangements in place at the reporting
(Amendments to date.
IAS 1
----------------------------- -----------------------------------------------------------
Subsidiary as a The amendments simplified the application of IFRS
First-time Adopter 1 by a subsidiary that becomes a first-time adopter
(amendments to after its parent. Subsidiary, associate or joint
IFRS 1) venture can elect to apply exemption in par D16(a)
to the cumulative translation difference
----------------------------- -----------------------------------------------------------
Taxation in Fair The amendments removed the requirement to exclude
Value Measurements cash flows for taxation when measuring fair value.
(Amendments to
IAS 41)
----------------------------- -----------------------------------------------------------
Fees in the '10 The amendments clarify what is included in fees paid
per cent' for Derecognition and fees received.
of financial Liabilities
(Amendments to
IFRS 9)
----------------------------- -----------------------------------------------------------
The Directors anticipate that the adoption of these Standards
and Interpretations, which become effective for annual periods
beginning on or after 1 January 2022, in future periods will have
no material impact on the financial statements of the Group.
3. Significant accounting policies Basis of accounting
In accordance with Section 244 of The Companies (Guernsey) Law
2008, the Group confirms that the financial information for the
year ended 31 December 2021 is derived from the Group's audited
financial statements and that this preliminary announcement does
not include the statutory accounts and, as such, does not contain
all information required to be disclosed in the financial
statements prepared in accordance with UK adopted International
Accounting Standards.
The statutory accounts for the year ended 31 December 2021 have
been audited and approved but have not yet been filed. The Group's
audited financial statements for the year ended 31 December 2021
received an unqualified audit opinion and the auditor's report
contained no statement under section 263(2) or 263(3) of The
Companies (Guernsey) Law 2008. The financial information contained
within this preliminary statement was approved and authorised for
issue by the Board on 30 June 2022.
The financial year covers the 12 months to 31 December 2021. The
comparative period covered the 12 month period to 31 December 2020.
The notes to the financial statements for the year ended 31
December 2019 have only been presented where impacted by the
restatement (see note 35). With the exception of the amounts
restated, the 2019 the 2020 amounts have been derived from the
audited statutory accounts for the years ended 31 December 2020 and
December 2019.
The consolidated financial statements have been prepared under
the historical cost basis, except for the revaluation of certain
financial instruments and investment properties to fair value.
Historical cost is generally based on the fair value of the
consideration given in exchange for the assets. The principal
accounting policies are set out below.
Going concern
The Group closely monitors and manages its liquidity risk and
day to day working capital requirements. The Group has a R125
million (around $5.8million) Revolving Credit Facility with Nedbank
at Vametco which is subject to financial covenants. Cash forecasts
are regularly produced, taking into account the global logistical
challenges around sales to ensure sufficient cash within the Group
to meet its obligations. The Group runs sensitivities for different
scenarios, including but not limited to changes in commodity prices
and exchange rates. The Group also routinely monitors the covenants
associated with the RCF and proactively engages with Nedbank, the
lender, where there is a risk of a breach. The accounting treatment
of IFRS 9 on the Orion Product Finance Agreement led to an increase
in accounting interest, over and above the actual interest paid and
resulted in a breach of the net debt to EBITDA covenant as at 31
December 2021. The Group sought and was granted a waiver for the
interest cover covenant by Nedbank and as part of that waiver, the
definitions of the covenant have been clarified and amended to
exclude the impact of IFRS 9. There was no change to the
presentation in the financial statements due to breach, as the RCF
facility is due for repayment in November 2022 (the cash outflows
for which are included within the group forecasts) and was
therefore already disclosed as a short term liability. Through our
regular monitoring, based on Vametco's actual performance to 30 May
2022 and forecast to 30 June 2022, we are confident of passing the
30 June 2022 covenant testing period.
The main sensitivities considered as part of management's going
concern assessment are production, vanadium prices and exchange
rates. In terms of production, the newly refurbished Kiln 3 at
Vanchem has been commissioned and is ramping up. The Group's
ability to achieve its future production profile is predicated on
the Kiln's successfull increase in production during the first
three to four months following commissioning as this will result in
the Group reaching its target of steady state production run rate
of 5,000 to 5,400mtv per annum by the end of the 2022 financial
year. This assumes forecast production volumes at Vanchem of 222
mtV by December 2022. The pace of ramp up of the kiln has been
slower than planned, impacted by electricity loadshedding and
technical issues that are consistent with a ramp up. The June 2022
production for Vanchem was 108 mtV. As part of our assessment of
going concern, additional sensitivity analysis has been performed
on the production profile of Kiln 3, in particular over the next
three to four months, where production is assumed to remain at 108
mtV, before ramping up to the year-end target of 222 mtV. We have
not identified a cashflow shortfall at group level as part of this
sensitivity analysis. These forecasts assume that Vametco continues
to perform in line with historic levels and planned maintenance
shutdowns are undertaken annually, these shutdowns proceed in line
with the planned timetable and no unplanned shutdowns are
experienced during the going concern period. We have also stress
tested the kiln's long term production plan as well given its
planned significant future contribution to the Group's production
profile and cashflows.
With regards to pricing, the short to medium term assumptions
are that the average price achieved by the Group will be $40.99
through to 31 December 2022 and average at $35.04 throughout 2023.
The year to date average price achieved by the group was $44.89. We
have performed sensitivity analysis on the basis of the prices
falling 10% below those forecast and have not identified a cash
shortfall at this level.
The forecasts assume a ZAR / USD rate of 15. This compares to a
current spot rate of 15.89 and a 1 year forward rate of 15.29.
As noted above, the Nedbank RCF is due to be repaid in November
2022 and this is modelled in the cashflow forecasts. In November
2023 the convertible loan note with Orion of $35million plus
interest is due for repayment. Although this is beyond the 12 month
going concern review period as considered by the board, repayment
of the convertible loan note is included in the group's long term
forecasts through to December 2023. Where additional funding may be
required, the Group believes it has several options available to
it, including but not limited to, use of the overdraft facility,
restructuring of the debt, cost reduction strategies as well as
selling of non-core assets.
Based on the current Group finances, having considered group
budgets and cashflow forecasts, possible downside scenarios around
commodity pricing and exchange rate and in particular around
Vanchem's Kiln production profile, the cashflow forecasts
demonstrate the Group will have sufficient headroom in its liquid
resource to meet its obligations in the ordinary course of business
for the next 12 months from the date of approval of the financial
statements. Accordingly, the Directors continue to adopt the going
concern basis in preparing the consolidated financial
information.
Basis of consolidation
The consolidated financial statements present the statement of
financial position and changes therein, statement of profit or loss
and cash flow information of the Group. Where necessary,
adjustments are made to the results of subsidiaries to ensure the
consistency of their accounting policies with those used by the
group. Intercompany transactions, balances and unrealised profits
and losses between group companies are eliminated on
consolidation.
Subsidiaries
Subsidiaries are all entities (including structured entities)
over which the Group has control. The Group controls an entity when
the Group is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those
returns through its power over the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the
Group. They are deconsolidated from the date that control
ceases.
The Group applies the acquisition method to account for business
combinations. The consideration transferred for the acquisition of
a subsidiary is the fair values of the assets transferred, the
liabilities incurred to the former owners of the acquiree and the
equity interests issued by the Group. The consideration transferred
includes the fair value of any asset or liability resulting from a
contingent consideration arrangement. Identifiable assets acquired
and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the
acquisition date. The Group recognises any non-controlling interest
in the acquiree on an acquisition-by-acquisition basis, either at
fair value or at the non-controlling interest's proportionate share
of the recognised amounts of acquiree's identifiable net
assets.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the
acquisition date carrying value of the acquirer's previously held
equity interest in the acquiree is re-measured to fair value at the
acquisition date; any gains or losses arising from such re-
measurement are recognised in profit or loss.
Subsequent transactions that do not result in the obtaining of
control are accounted for as equity transactions as follows:
-- The carrying amounts of the controlling and non-controlling
interests are adjusted to reflect the changes in their relative
interests in the subsidiary
-- Any difference between the amount by which the
non-controlling interests are adjusted and the fair value of the
consideration paid is recognised directly in equity and attributed
to the owners of the parent
Any contingent consideration to be transferred by the Group is
recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration that is
deemed to be an asset or liability is recognised in accordance with
IFRS 9 in profit or loss. Contingent consideration that is
classified as equity is not re-measured, and its subsequent
settlement is accounted for within equity.
Disposal of subsidiaries
When the Group ceases to have control, any retained interest in
the entity is re-measured to its fair value at the date when
control is lost, with the change in carrying amount recognised in
profit or loss. The fair value is the initial carrying amount for
the purposes of subsequently accounting for the retained interest
as an associate, joint venture or financial asset. In addition, any
amounts previously recognised in other comprehensive income in
respect of that entity are accounted for as if the Group had
directly disposed of the related assets or liabilities. This may
mean that amounts previously recognised in other comprehensive
income are reclassified to profit or loss.
Joint Ventures
A joint venture is a joint arrangement whereby the parties that
have joint control of the arrangement have rights to the net assets
of the arrangement. Investments in joint ventures are accounted for
using the equity method. Under the equity method, the share of the
profits or losses of the joint venture is recognised in profit or
loss and the share of the movements in equity is recognised in
other comprehensive income. Investments in joint ventures are
carried in the statement of financial position at cost plus
post-acquisition changes in the consolidated entity's share of net
assets of the joint venture. Goodwill relating to the joint venture
is included in the carrying amount of the investment and is neither
amortised nor individually tested for impairment. Income earned
from joint venture entities reduce the carrying amount of the
investment.
Non-controlling interests
Non-controlling interests in subsidiaries are identified
separately from the Group's equity therein. Those interests of non-
controlling shareholders that present ownership interests entitling
their holders to a proportionate share of the net assets upon
liquidation are initially measured at fair value. Subsequent to
acquisition, the carrying amount of non-controlling interests is
the amount of those interests at initial recognition plus the
non-controlling interests' share of subsequent changes in equity.
Total comprehensive income is attributed to non-controlling
interests even if this results in the non-controlling interests
having a deficit balance.
Black Economic Empowerment ("BEE") interests are accounted for
as non-controlling interests on the basis that the Group does not
control these entities.
Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision- maker.
The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Board of Directors, which
makes strategic decisions.
Foreign currencies
Functional and presentational currency
The individual financial statements of each Group company are
prepared in the currency of the primary economic environment in
which they operate (its functional currency). For the purpose of
the consolidated financial statements, the results and financial
position of each Group company are expressed in US Dollars, which
is the presentation currency for the consolidated financial
statements and functional currency of the parent company.
Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions or valuation where items are re-measured. Foreign
exchange gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange rates of
monetary assets and liabilities denominated in foreign currencies
are recognised in the income statement.
Group companies
The results and financial position of all the Group entities
(none of which has the currency of a hyper-inflationary economy)
that have a functional currency different from the presentation
currency are translated into the presentation currency as
follows:
a) assets and liabilities for each statement of financial
position presented are translated at the closing rate;
b) income and expenses for each income statement are translated
at average exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on
the transaction dates, in which case income and expenses are
translated at the rate on the dates of the transactions); and
c) all resulting exchange differences are recognised in other comprehensive income.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate. Exchange
differences arising are recognised in other comprehensive
income.
Revenue recognition
Sale of goods/products
IFRS 15 requires revenue from contracts with customers to be
recognised when the separate performance obligations are satisfied,
which is when control of promised goods or services are transferred
to the customer.
The Group satisfies a performance obligation by transferring
control of the promised goods/products to the customer. In the
standard "control of an asset" refers to the ability to direct the
use of, and obtain substantially all of the remaining benefits
from, the asset. Control includes the ability to prevent other
entities from directing the use of, and obtaining the benefits
from, an asset.
The Group recognises revenue at the amount that reflects the
consideration to which the entity expects to be entitled in
exchange for transferring goods or services to a customer. Revenue
with contract customers is generated from sale of goods and is
recognised upon delivery of the goods to the customer, at a point
in time and comprises the invoiced amount of goods to customers,
net of value added tax.
Cost of sales
When inventories are sold, the carrying amount of those
inventories is recognised as an expense in the period in which the
related revenue is recognised. The amount of any write-down of
inventories to net realisable value and all losses of inventories
are recognised as an expense in the period in which the write-down
or loss occurs.
Share based payments
The fair value of bonus shares granted to employees for nil
consideration under the short-term incentive scheme is recognised
as an expense over the relevant service period, being the year to
which the bonus relates and the vesting period of the shares. The
fair value is measured at the grant date of the shares and is
recognised in equity in the share-based payment reserve. The number
of shares expected to vest is estimated based on the non-market
vesting conditions.
Where shares are forfeited due to a failure by the employee to
satisfy the service conditions, any expenses previously recognised
in relation to such shares are reversed effective from the date of
the forfeiture.
Finance income
Interest income is recognised when it is probable that economic
benefits will flow to the Group and the amount of income can be
measured reliably. Interest income is accrued on a time basis, by
reference to the principal outstanding and at the effective
interest rate applicable, which is the rate that exactly discounts
estimated future cash receipts through the expected life of the
financial asset to that asset's net carrying amount on initial
recognition.
Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax.
The tax charge is based on taxable profit for the year. The
Group's liability for current tax is calculated by using tax rates
that have been enacted or substantively enacted by the reporting
date.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amount of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit or loss, and is accounted for
using the "balance sheet liability" method.
Deferred tax liabilities are recognised for all taxable
temporary differences and deferred tax assets are recognised to the
extent that it is probable that taxable profits will be available
against which deductible temporary differences can be utilised.
Deferred tax is calculated at the tax rates that are expected to
apply to the year when the asset is realised or the liability is
settled based upon rates enacted and substantively enacted at the
reporting date. Deferred tax is charged or credited to profit or
loss, except when it relates to items credited or charged to other
comprehensive income, in which case the deferred tax is also dealt
with in other comprehensive income.
Intangible exploration and evaluation assets
All costs associated with mineral exploration and evaluation
including the costs of acquiring prospecting licences; mineral
production licences and annual licences fees; rights to explore;
topographical, geological, geochemical and geophysical studies;
exploratory drilling; trenching, sampling and activities to
evaluate the technical feasibility and commercial viability of
extracting a mineral resource; are capitalised as intangible
exploration and evaluation assets and subsequently measured at
cost.
If an exploration project is successful, the related
expenditures will be transferred at cost to property, plant and
equipment and amortised over the estimated life of the commercial
ore reserves on a unit of production basis (with this charge being
taken through profit or loss). Where a project does not lead to the
discovery of commercially viable quantities of mineral resources
and is relinquished, abandoned, or is considered to be of no
further commercial value to the Group, the related costs are
recognised impairment loss in profit or loss.
The recoverability of capitalised exploration costs is dependent
upon the discovery of economically viable ore reserves, the ability
of the Group to obtain necessary financing to complete the
development of ore reserves and future profitable production or
proceeds from the extraction or disposal thereof.
Impairment of exploration and evaluation assets
Whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable, the asset is
reviewed for impairment. Assets are also reviewed for impairment at
each reporting date in accordance with IFRS 6. An asset's carrying
value is written down to its estimated recoverable amount (being
the higher of the fair value less costs to sell and value in use)
if that is less than the asset's carrying value. Impairment losses
are recognised in profit or loss.
An impairment review is undertaken when indicators of impairment
arise but typically when one of the following circumstances
applies:
-- unexpected geological occurrences that render the resources uneconomic; or
-- title to the asset is compromised; or
-- variations in mineral prices that render the project uneconomic; or
-- variations in the foreign currency rates; or
-- the Group determines that it no longer wishes to continue to evaluate or develop the field.
Property, plant and equipment (excluding right-of-use
assets)
Property, plant and equipment are stated at historical cost less
accumulated depreciation, except for investment properties which
are carried at fair value.
Depreciation on assets commences when they are available for use
by the group. Depreciation for property, plant and equipment is
charged on a systematic basis over the estimated useful lives of
the assets after deducting the estimated residual value of the
assets, using the straight-line method. Depreciation for
right-of-use assets is charged on the same basis except that the
period is the shorter of the useful life of the asset (in line with
the category of property, plant and equipment to which the asset is
classified) and the lease term, unless the title to the asset
transfers at the end of the lease term, in which case depreciation
is over the useful life. The depreciation method applied is
reviewed at least at each financial year end, with any changes
accounted for as a change in accounting estimate to be applied
prospectively. The depreciation charge for each period is
recognised in the statement of profit or loss.
The useful life of an asset is the period of time over which the
asset is expected to be used. The estimated useful lives of assets
and their residual values are reassessed annually at the end of
each reporting period, with any changes in such accounting
estimates being adjusted in the year of reassessment and applied
prospectively. The estimated useful lives of items of property,
plant and equipment are as follows
Buildings and other improvements 20-25 years
Plant and machinery 15-20 years
Motor vehicles, furniture 4-10 years
and equipment
Decommissioning asset Life of mine
Waste stripping asset 21 months
Assets under construction are not depreciated.
Repairs and maintenance is generally charged in profit and loss
during the financial period in which it is incurred. However
renovations are capitalised and included in the carrying amount of
the asset when it is probable that future economic benefits will
flow to the Group. Major renovations are depreciated over the
remaining useful life of the related asset.
An item of property, plant and equipment is derecognised upon
disposal or when no future benefits are expected from its use or
disposal. Any gain or loss arising from de-recognition of the asset
(calculated as the difference between the net disposal proceeds and
the carrying amount of the asset) is included in the income
statement in the year the asset is derecognised.
Impairment losses
At each reporting date, the Group reviews the carrying amounts
of its tangible assets to determine whether there is any indication
that those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated
in order to determine the extent of the impairment loss (if any).
Where the asset does not generate cash flows that are independent
from other assets, the Group estimates the recoverable amount of
the cash-generating unit to which the asset belongs.
In assessing whether an impairment is required, the carrying
value of the asset or CGU is compared with its recoverable amount.
The recoverable amount is the higher of the CGU's fair value less
costs of disposal (FVLCD) and value in use (VIU). Given the nature
of the Group's activities, information on the fair value of an
asset is usually difficult to obtain unless negotiations with
potential purchasers or similar transactions are taking place.
Consequently, the FVLCD for each CGU is estimated based on
discounted future estimated cash flows (expressed in real terms)
expected to be generated from the continued use of the CGUs using
market-based commodity price and exchange assumptions, estimated
quantities of recoverable minerals, production levels, operating
costs and capital requirements, including any expansion projects,
and its eventual disposal, based on the CGU 30 year plans and
latest life of mine (LOM) plans. These cash flows were discounted
using a real post- tax discount rate that reflected current market
assessments of the time value of money and the risks specific to
the CGU.
Estimates of quantities of recoverable minerals, production
levels, operating costs and capital requirements and sourced from
out planning process, including the LOM plans, two-year budgets and
CGU-specific studies.
The determination of FVLCD for each CGU are considered to be
Level 3 fair value measurements in both years, as they are derived
from valuation techniques that include inputs that are not based on
observable market data. The Group considers the inputs and the
valuation approach to be consistent with the approach taken by
market participants.
Key assumptions
The determination of FVLCD is most sensitive to the following
key assumptions
-- Production volumes
-- Commodity prices
-- Discount rates
-- Exchange rates
Production volumes: In calculating the FVLCD, the production
volumes incorporated into the cash flow models were 2 694 mtVpa for
Vametco and 1 610 mtVpa for Vanchem in 2022 for a base case
scenario. For a full growth case in a steady state, production
volumes for Vametco is 3 400 mtVpa and for Vanchem is 4 600 mtVpa
taking the total Group production to 8 000 mtVpa. Estimated
production volumes are based on detailed life-of-mine plans and
take into account development plans for the mines agreed by
management as part of the long-term planning process. Production
volumes are dependent on a number of variables, such as: the
recoverable quantities; the production profile; the cost of the
development of the infrastructure necessary to extract the
reserves; the production costs; the contractual duration of mining
rights; and the selling price of the commodities extracted. As each
producing mine has specific reserve characteristics and economic
circumstances, the cash flows of the mines are computed using
appropriate individual economic models and key assumptions
established by management. The production profiles used were
consistent with the reserves and resource volumes approved as part
of the Group's process for the estimation of proved and probable
reserves, resource estimates and in certain circumstances, include
expansion projects. These are then assessed to ensure they are
consistent with what a market participant would estimate.
Commodity prices: Forecast commodity prices are based on
management's estimates and are derived from forward price curves
and long-term views of global supply and demand, building on past
experience of the industry and consistent with external sources.
These prices were adjusted to arrive at appropriate consistent
price assumptions for the different qualities and type of
commodities, or, where appropriate, contracted prices were applied.
These prices are reviewed at least annually. Estimated long-term
FeV price for the current year and the comparative year that have
been used to estimate future revenues, are as follows:
2021 2020
------------------------------------------------------------------------
Long
term Long term
Assumptions 2022 2023 (2027+) 2021 2022 2023 (2024+)
------------------- --------- ----------- --------------------- ---------- ---------- ------------
Fev US$ per 35.15 36.00 35.50
KgV US$ 41.35 US$ US$ 40.00 US$ 28.80 US$ US$ US$ 35.00
---- ------------- --------- ----------- ----- -------------- ---------- ---------- ------------
Discount rates: In calculating the FVLCD, a real post-tax
discount rate of 7.70% (2020: 7.09%) was applied to the post-tax
cash flows expressed in real terms. This discount rate is derived
from the Group's post-tax weighted average cost of capital (WACC),
with appropriate adjustments made to reflect the risks specific to
the CGU and to determine the pre-tax rate. The WACC takes into
account both debt and equity. The cost of equity is derived from
the expected return on investment by the Group's investors. The
cost of debt is based on its interest- bearing borrowings the Group
is obliged to service. Segment- specific risk is incorporated by
applying individual beta factors. The beta factors are evaluated
annually based on publicly available market data.
Exchange rates: Foreign exchange rates are estimated with
reference to external market forecasts and updated at least
annually. The rates applied for the first five years of the
valuation are based on observable market data including spot and
forward values, thereafter the estimate is interpolated to the long
term assumption, which involves market analysis including equity
analyst estimates. The assumed long-term US dollar/Rand is
estimated to be 15.00 (2020:16.00)
Investment property
Investment property is initially measured at cost and
subsequently at fair value with any change therein recognised in
profit or loss. Any gain or loss on disposal of investment property
(calculated as the difference between the net proceeds from
disposal and the carrying amount of the item) is recognised in
profit or loss.
Inventories
Inventories are valued at the lower of cost or estimated net
realisable value. Cost is determined on the following basis:
Raw materials weighted average cost
Consumable stores weighted average cost
Work in progress weighted average cost
Finished product weighted average cost
The cost of finished product and work in progress comprises of
raw materials, direct labour, other direct costs, and related
production overheads (based on normal operating capacity) but
excludes borrowing costs.
Net realisable value is the estimated selling price in the
ordinary course of business, less costs of completion and selling
expenses.
Financial assets and liabilities
Financial assets and financial liabilities are recognised in the
Group's statement of financial position when the Group becomes a
party to the contractual provisions of the instrument. Financial
instruments are classified into specified categories dependent upon
the nature and purpose of the instruments at the time of initial
recognition.
Financial assets Measurement
At initial recognition, the Group measures all financial assets
at fair value plus, in the case of a financial asset not at fair
value through profit or loss, transaction costs. Transaction costs
of financial assets carried at fair value through profit or loss
are expensed in profit or loss.
Financial assets are classified at initial recognition and
subsequently measured at amortised cost, fair value though other
comprehensive income (FVOCI) or fair value through profit or loss
(FVPL).
The classification of financial assets at initial recognition
depends on the financial asset's contractual cash flow
characteristics and the Group's business model for managing
them.
Debt instruments
In order for a financial asset to be classified and measured at
amortised cost or FVOCI, it needs to give rise to cash flows that
are 'solely payments of principal and interest' (SPPI) on the
principal amount outstanding. This assessment is referred to as the
SPPI test and is performed at an instrument level.
The Group's business model for managing financial assets refers
to how it manages its financial assets in order to generate cash
flows.
The business model determines whether cash flows will result
from collecting contractual cash flows, selling the financial
assets, or both.
Financial assets that do not meet the criteria for amortised
cost or FVOCI are measured at FVPL. A gain or loss on a debt
investment that is subsequently measured at FVPL is recognised in
profit or loss and presented net within other gains/(losses) in the
period in which it arises.
Equity instruments
The Group subsequently measures all equity investments at fair
value. Where the Group's management has elected to present fair
value gains and losses on equity investments in OCI (however, the
cumulative gain/loss on disposal is represented within equity),
there is no subsequent reclassification of fair value gains and
losses to profit or loss following the derecognition of the
investment. Dividends from such investments continue to be
recognised in profit or loss as other income when the Group's right
to receive payments is established.
Changes in the fair value of financial assets at FVPL are
recognised in other gains/(losses) in the statement of profit or
loss as applicable. Impairment losses (and reversal of impairment
losses) on equity investments measured at FVOCI are not reported
separately from other changes in fair value.
Derecognition
Financial assets are derecognised when the rights to receive
cash flows from the financial assets have expired or have been
transferred and the Group has transferred substantially all the
risks and rewards of ownership.
Impairment
The Group assesses on a forward-looking basis, the expected
credit losses associated with its debt instruments carried at
amortised cost and FVOCI. The impairment methodology applied
depends on whether there has been a significant increase in credit
risk.
Trade and other receivables
Trade receivables are recognised initially at the amount of
consideration that is unconditional unless they contain significant
financing components, when they are recognised at fair value. The
Group holds the trade receivables with the objective to collect the
contractual cash flows and therefore measures them subsequently at
amortised cost using the effective interest method, less any
allowance for expected credit losses.
To determine the expected credit loss allowance for trade and
other receivables, the Group applies the simplified approach
permitted by IFRS 9, which requires expected lifetime losses to be
recognised from initial recognition of the receivables, see note 32
for further details.
Other receivables consist of prepayments and deposits, which are
initially recognised as non-financial assets and realised over
time.
Restricted investment
Restricted investment comprises of short-term deposits with an
original maturity of three months or less and an investment in an
investment fund. These funds are dedicated towards future
rehabilitation expenditure on the mine property.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits held
at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or less
that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value.
Investments and other financial assets
Investments are equity instruments which the Group intends to
hold for the foreseeable future and has irrevocably elected to
classify them at FVOCI at inception.
Convertible loan
Interest-bearing loans are recorded initially at their fair
value, net of direct transaction costs. Such instruments are
subsequently carried at their amortised cost and finance charges,
including premiums payable on settlement, redemption or conversion,
are recognised in profit or loss over the term of the instrument
using the effective rate of interest.
Instruments where the holder has the option to redeem for cash
or convert into a pre-determined quantity of equity shares are
classified as compound instruments and presented partly as a
liability and partly as equity.
Instruments where the holder has the option to redeem for cash
or convert into a variable quantity of equity shares are classified
separately as a loan and a derivative liability.
Where conversion results in a fixed number of equity shares, the
fair value of the liability component at the date of issue is
estimated using the prevailing market interest rate for a similar
non-convertible instrument. The difference between the proceeds of
issue and the fair value assigned to the liability component,
representing the embedded option to convert the liability into
equity of the Group, is included in equity. Where conversion is
likely to result in a variable quantity of equity shares the
related derivative liability is valued and included in
liabilities.
The interest expense on the liability component is calculated by
applying the prevailing market interest rate for similar
non-convertible debt to the instrument. The difference between
this amount and the interest paid is added to the carrying value of
the convertible loan note.
Derivative liabilities are revalued at fair value at the
reporting date, and changes in the valuation amounts are credited
or charged to the profit or loss.
Leases
The Group assesses whether a contract is or contains a lease, at
inception of a contract. The Group recognises a right-of-use asset
and a corresponding lease liability with respect to all lease
agreements in which it is the lessee, except for short-term leases
(defined as leases with a lease term of 12 months or less) and
leases of low value assets. For these leases, the Group recognises
the lease payments as an operating expense on a straight-line basis
over the term of the lease unless another systematic basis is more
representative of the time pattern in which economic benefits from
the leased asset are consumed.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted by using the rate implicit in the lease. If this rate
cannot be readily determined, the Group uses its incremental
borrowing rate. The discount rate used ranges between 10% - 11%
depending on the nature of the underlying asset.
Lease payments included in the measurement of the lease
liability comprise:
-- fixed lease payments (including in-substance fixed payments), less any lease incentives;
-- variable lease payments that depend on an index or rate,
initially measured using the index or rate at the commencement
date;
-- the amount expected to be payable by the lessee under residual value guarantees;
-- the exercise price of purchase options, if the lessee is
reasonably certain to exercise the options; and
-- payments of penalties for terminating the lease, if the lease
term reflects the exercise of an option to terminate the lease.
The lease liability is presented as a separate line in the
Statement of Financial Position. The lease liability is
subsequently measured by increasing the carrying amount to reflect
interest on the lease liability (using the effective interest
method) and by reducing the carrying amount to reflect the lease
payments made.
The Group remeasures the lease liability (and makes a
corresponding adjustment to the related right-of-use asset)
whenever:
-- the lease term has changed or there is a change in the
assessment of exercise of a purchase option, in which case the
lease liability is remeasured by discounting the revised lease
payments using a revised discount rate.
-- the lease payments change due to changes in an index or rate
or a change in expected payment under a guaranteed residual value,
in which cases the lease liability is remeasured by discounting the
revised lease payments using the initial discount rate (unless the
lease payments change is due to a change in a floating interest
rate, in which case a revised discount rate is used).
-- a lease contract is modified and the lease modification is
not accounted for as a separate lease, in which case the lease
liability is remeasured by discounting the revised lease payments
using a revised discount rate.
The Group did not make any such adjustments during the periods
presented.
The right-of-use assets comprise the initial measurement of the
corresponding lease liability, lease payments made at or before the
commencement day and any initial direct costs.
They are subsequently measured at cost less accumulated
depreciation and impairment losses.
Whenever the Group incurs an obligation for costs to dismantle
and remove a leased asset, restore the site on which it is located
or restore the underlying asset to the condition required by the
terms and conditions of the lease, a provision is recognised and
measured under IAS 37. The costs are included in the related
right-of-use asset, unless those costs are incurred to produce
inventories.
Right-of-use assets are depreciated over the shorter period of
lease term and useful life of the underlying asset. If a lease
transfers ownership of the underlying asset or the cost of the
right-of-use asset reflects that the Group expects to exercise a
purchase option, the related right-of-use asset is depreciated over
the useful life of the underlying asset. The depreciation starts at
the commencement date of the lease. The Group applies IAS 36
Impairment of Assets to determine whether a right-of- use asset is
impaired and accounts for any identified impairment loss.
Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation. Where the
Group expects some or all of a provision to be reimbursed, for
example under an insurance contract, the reimbursement is
recognised as a separate asset but only when the reimbursement is
virtually certain. The expense relating to any provision is
presented in the statement or comprehensive income, provisions are
discounted using a current pre-tax rate that reflects, where
appropriate, the risks specific to the liability. Where discounting
is used the increase in the provision due to the passage of time is
recognised as a finance cost.
i. Environmental rehabilitation liability
The Group is exposed to environmental liabilities relating to
its operations. Full provision for the cost of environmental and
other remedial work such as reclamation costs, close down and
restoration costs and pollution control is made based on the
estimated cost as per the Environmental Management Program Report.
Annual increases in the provisions relating to change in the net
present value of the provision are shown in the statement of
comprehensive income as a finance cost. Changes in estimates of the
provision are accounted for in the year the change in estimate
occurs, and is charged to either the statement of comprehensive
income or the decommissioning asset in property, plant and
equipment, depending on the nature of the liability.
ii. Post-retirement medical liability
The liability in respect of the defined benefit medical plan is
the present value of the defined benefit obligation at the
reporting date together with adjustments for actuarial
gains/losses. Any actuarial gains or losses are accounted for in
other comprehensive income. The defined benefit obligation is
calculated annually by independent actuaries using the projected
unit of credit method.
iii. Provident fund contributions
The Group's contributions to the defined contribution plan are
charged to profit and loss in the year to which they relate.
Use of estimates and judgements
In the application of the Group's accounting policies, the
directors are required to make judgements, estimates and
assumptions about the carrying amounts of assets and liabilities
that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results may
differ from these estimates. In particular, information about
significant areas of estimation uncertainty considered by
management in preparing the financial statements is described
below:
i. Decommissioning and rehabilitation obligations
Estimating the future costs of environmental and rehabilitation
obligations is complex and requires management to make estimates
and judgements as most of the obligations will be fulfilled in the
future and contracts and laws are often not clear regarding what is
required. The resulting provisions are further influenced by
changing technologies, political, environmental, safety, business
and statutory considerations.
ii. Asset lives and residual values
Property, plant and equipment are depreciated over its useful
life taking into account residual values, where appropriate. The
actual lives of the assets and residual values are assessed
annually and may vary depending on a number of factors. In
reassessing asset lives, factors such as technological innovation,
product life cycles and maintenance programmes are taken into
account. Residual value assessments consider issues such as future
market conditions, the remaining life of the asset and projected
disposal values.
iii. Post-retirement employee benefits
Post-retirement medical aid liabilities are provided for certain
existing employees. Actuarial valuations are based on assumptions
which include employee turnover, mortality rates, the discount
rate, health care inflation costs and rates of increase in costs.
Sensitivities have been disclosed in note 24.
iv. Revaluation of investment properties
The Group carries its residential investment properties at fair
value. The Group engaged an independent valuation specialist to
assess the fair value as at 31 December 2021 for residential
properties. For residential properties, it measures land and
buildings at revalued amounts with changes in fair value being
recognised in other comprehensive income. Land and buildings were
valued by reference to market-based evidence, using comparable
prices adjusted for specific market factors such as nature,
location and condition of the property.
v. Impairment of financial assets
The loss allowances for financial assets are based on
assumptions about risk of default and expected loss rates. The
Group uses judgement in making these assumptions and selecting the
inputs to the impairment calculation, based on the Group's past
history, existing market conditions as well as forward looking
estimates at the end of each reporting period. Details of the key
assumptions and inputs used are disclosed in note 32.
vi. Impairment of non-current assets
Determining whether an exploration and evaluation asset is
impaired requires an assessment of whether there are any indicators
of impairment, including by reference to specific impairment
indicators prescribed in IFRS 6. If there is any indication of
potential impairment, an impairment test is required based on value
in use of the asset. The valuation of intangible exploration assets
is dependent upon the discovery of economically recoverable
deposits which, in turn, is dependent on future vanadium and iron
ore prices, future capital expenditures and environmental and
regulatory restriction.
The Group also reviews and tests the carrying value of tangible
assets when events or changes in circumstances indicate that the
carrying amount may not be recoverable. Assets are grouped at the
lowest level for which identifiable cash flows are largely
independent of cash flows of other assets, which is generally at
the individual operating asset level. If there are indications that
impairment may have occurred, estimates are prepared of expected
future cash flows for each group of assets. Expected future cash
flows used to determine the recoverable amount of tangible assets
are inherently uncertain and could materially change over time and
impact the recoverable amounts. The cash flows and recoverable
amount are significantly affected by a number of factors including
published reserves, resources, exploration potential and production
estimates, together with economic factors such as spot and future
metal prices, discount rates, foreign currency exchange rates,
estimates of costs to produce products and future capital
expenditure. At the reporting date the Group assesses whether any
of the indicators which gave rise to previously recognised
impairments have changed such that the impairment loss no longer
exists or may have decreased. The impairment loss is then assessed
on the original factors for reversal and if indicated, such
reversal is recognised.
An impairment loss is recognised for the amount by which the
asset's carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset's fair value less
costs to sell and value in use. The recoverable amount is estimated
based on the positive indicators. If an impairment loss has
decreased, the carrying amount is recorded at the recoverable
amount as limited in terms of IAS 36 Impairment of Assets.
The directors performed an impairment review on tangible assets
at 31 December 2021. No reasonable changes in the key assumptions
or inputs would lead to an impairment charge over the next 12 month
period.
vii. Impairment of exploration and evaluation assets
As disclosed in note 12, the Mokopane license held by the Group
requires that mining operations commence prior to the end of
January 2021. As at 31 December 2021 no mining has taken place at
the site. An application for an extension to requirement to
commence mining activities has been submitted to the Department of
Mineral Resources and Energy ("DMRE"), however a response has not
yet received. The directors are confident that the extension will
be forthcoming and the license therefore remains valid.
Consequently, the directors have made a judgment that no impairment
of the related intangible asset is required.
viii. Borrowing costs
IAS 23 requires that borrowing costs that are directly
attributable to the acquisition, construction or production of a
qualifying asset form part of the cost of that asset. It is the
judgement of the directors that due to the insubstantial period of
time over which assets have been constructed, that no assets meet
the definition of a qualifying asset and therefore no borrowing
costs have been capitalised.
ix. Assessment of control
The group's investment in VRFB Holdings Limited has been
accounted for as a joint venture on the basis that the directors
have concluded that under IFRS 10 the group does not have the
ability to use its power over the investee entity to influence its
returns. This conclusion has been reached on the basis of specific
terms of the joint venture agreement with the other investors to
VRFB Holdings Limited and represents a significant management
judgement.
4. Segmental reporting
Bushveld Minerals Limited's operating segments are identified by
the Chief Executive Officer and the Executive Committee,
collectively named as the Chief Operating Decision Makers (CODM).
The operating segments are identified by the way the Group's
operations are organised. As at 31 December 2021 the Group operated
within three operating segments, vanadium mining and production,
energy and mineral exploration activities for vanadium and coal
exploration. Activities take place in South Africa (iron ore,
vanadium and energy), Madagascar (coal), other African countries
(energy project development) and global (battery investment,
vanadium sales).
Segment revenue and results
The following is an analysis of the Group's revenue and results
by reportable segment.
Vanadium
mining and
Year ended 31 December 2021 production Energy Total
Results US$ US$ US$
------------- ----------- -------------
Segment revenue 106,857,285 - 106,857,285
Segment costs (123,442,467) (882,453) (124,324,920)
------------- ----------- -------------
Segmental loss (16,585,182) (882,453) (17,467,635)
------------- ----------- -------------
Vanadium
mining and
Year ended 31 December 2020 production Energy Total
Results US$ US$ US$
------------- ----------- -------------
Segment revenue 89,920,958 67,120 89,988,078
Segment costs (110,750,141) (1,050,735) (111,800,876)
------------- ----------- -------------
Segmental loss (20,829,183) (983,615) (21,812,798)
------------- ----------- -------------
During the year there were no costs incurred for the exploration
of vanadium and coal exploration. Costs attributable to both
segments were of a capital nature.
The reconciliation of segmental loss to the Group's loss before
tax is as follows:
Year ended Year ended
31 December 31 December
2021 2020
Segmental loss (17,467,635) (21,812,798)
Unallocated costs (11,814,793) (10,994,295)
Remeasurement of financial liabilities (1,902,172) -
Share of loss in joint venture (4,351,356) -
Movement in earnout estimate - (206,066)
Finance income 935,347 1,077,991
Finance costs (12,184,059) (5,732,249)
------------ -------------
(46,784,668) (37,667,417)
------------ -------------
Unallocated costs relate primarily to corporate costs and parent
company overheads not attributable to a specific segment.
Other segmental information
Vanadium Vanadium
and iron mining Coal Bushveld
ore and
31 December 2021 exploration production exploration Energy Total
US$ US$ US$ US$ US$
----------- ----------- ----------- ---------- ------------
Intangible assets - exploration
and 47,374,076 6,481,542 5,398,754 - 59,254,372
evaluation
Total reportable segmental
net assets 47,374,076 94,923,233 5,398,754 17,034,295 164,730,358
Unallocated net assets - - - - (13,900,418)
----------- ----------- ----------- ---------- ------------
Total consolidated net
assets - - - - 150,829,940
----------- ----------- ----------- ---------- ------------
Vanadium Vanadium
and iron mining Coal Bushveld
ore and
31 December 2020 exploration production exploration Energy Total
US$ US$ US$ US$ US$
----------- ----------- ----------- ---------- ------------
Intangible assets - exploration
and 54,950,331 - 4,053,494 - 59,003,825
evaluation
Total reportable segmental
net assets 54,950,331 168,285,858 4,053,494 21,388,618 248,678,301
Unallocated net liabilities - - - - (34,678,551)
----------- ----------- ----------- ---------- ------------
Total consolidated net
assets - - - - 213,999,750
----------- ----------- ----------- ---------- ------------
Unallocated assets and liabilities relate to corporate and
parent company assets and liabilities not attributable to a
specific segment.
5. Revenue
2021 2020
US$ US$
------------------ ----------------
Revenue from contracts with customers
Sale of goods 106,857,285 89,920,958
Bushveld Energy services rendered - 67,120
------------------ ----------------
106,857,285 89,988,078
------------------ ----------------
Disaggregation of revenue from contracts with customers
The Group disaggregates revenue from customers as follows:
Sale of goods
Local sales of vanadium - NV12 5,089,815 2,161,420
Local sales of vanadium - NV16 1,606,027 1,055,785
Local sales of vanadium - MVO * (140,385) 370,686
Export sales of vanadium - NV12 21,720,633 16,452,321
Export sales of vanadium - NV16 71,713,328 61,537,773
Export sales of vanadium - VCM - 230,248
Export sales of vanadium - AMV 6,867,867 8,112,725
------------------ ----------------
106,857,285 89,920,958
------------------ ----------------
Rendering of services
Bushveld Energy services rendered - 67,120
------------------ ----------------
Total revenue from contracts with customers 106,857,285 89,988,078
------------------ ----------------
Revenue with contract customers is generated from sale of goods
and is recognised upon delivery of the goods to the customer, at a
point in time and comprises the invoiced amount of goods to
customers, net of value added tax.
*The negative sales amount is due to the return of MVO sold
during the 2020 financial year.
6. Staff costs
Details of directors' remuneration are included in note 34
(related party transactions) and the Remuneration Report on page
77.
7. Administrative expenses by nature
2021 2020
US$ US$
---------- ----------
Staff costs 10,746,322 8,146,473
Depreciation of property, plant and equipment 392,669 256,929
Professional fees 5,860,976 6,017,782
Other 3,894,325 5,361,992
---------- ----------
Total administrative expenses 20,894,292 19,783,176
---------- ----------
8. Finance income
2021 2020
US$ US$
------- ---------
Bank interest 935,347 1,077,991
------- ---------
9. Finance costs
2021 2020
US$ US$
---------- ---------
Interest on unsecured convertible loan notes 4,706,184 1,614,577
Interest on rehabilitation liability 1,781,584 1,663,602
Interest on borrowings 4,984,532 1,749,386
Interest on lease liabilities 459,430 466,032
Other finance costs 252,329 238,652
---------- ---------
Total administrative expenses 12,184,059 5,732,249
---------- ---------
10. Taxation
The tax expense represents the sum of the tax currently payable
and the deferred tax adjustment for the year.
Current
6. Taxation
Current
Current income tax charge 370,437 3,265,229
Local income tax - recognised in current tax for prior periods
(13,246)-
357,191 3,265,229
Deferred
2021 2020
US$ US$
----------- ------------
Prior year adjustment 82,573 -
Deferred tax movement (5,111,019) (9,835,255)-
----------- ------------
(5,028,446) (9,835,255)
----------- ------------
(4,671,255) (6,570,026)
----------- ------------
The tax expense represents the sum of the tax currently payable
and the deferred tax adjustment for the year.
Loss before tax (46,784,668) (37,667,417)
Tax at the effective tax rate of 11.6% (2020: 18.6%) (5,422,632) (7,023,575)
Tax effect on non-deductible items 602,895 353,652
Origination and reversal of temporary differences 1,400,229 737,127
Deferred tax asset not recognised 3,704,257 9,270,466
Recognised deferred tax assets - initial recognition (4,956,004) (9,907,696)
--------------- ------------
Taxation expense for the year (4,671,255) (6,570,026)
--------------- ------------
11. Loss per share from continuing operations
Basic loss per share
The calculation of a basic loss per share of 3.39 cents
(December 2020: 2.63 cents restated), is calculated using the total
loss for the year attributable to the owners of the company of
US$40,779,853 (December 2020: Restated loss of US$30,595,243) and
1,201,683,206 shares (2020: 1,164,710,352) being the weighted
average number of share in issue during the year.
Diluted loss per share
Due to the Group being loss making for the year, instruments are
not considered dilutive and therefore the diluted loss per share is
the same as basic loss per share for both financial years.
12. Intangible assets
2021 2020
------------------------ -------------------- --------------------- ------------------
Cost / Carrying Cost / Carrying
Valuation value Valuation value
US$ US$ US$ US$
------------------------ -------------------- --------------------- ------------------
Vanadium and
Iron ore 53,855,618 53,855,618 54,950,331 54,950,331
Coal 5,398,754 5,398,754 4,053,494 4,053,494
------------------------ -------------------- --------------------- ------------------
Total 59,254,372 59,254,372 59,003,825 59,003,825
------------------------ -------------------- --------------------- ------------------
Reconciliation
of intangible
assets - 2021
Foreign
Opening exchange Impairment
balance Additions movements loss* US$ Total
US$ US$ US$ US$
---------------- ------------------------ -------------------- --------------------- ------------------
Vanadium and
Iron ore 54,950,331 162,621 (715,974) (541,360) 53,855,618
Coal 4,053,494 766,339 578,921 - 5,398,754
---------------- ------------------------ -------------------- --------------------- ------------------
59,003,825 928,960 (137,053) (541,360) 59,254,372
---------------- ------------------------ -------------------- --------------------- ------------------
*The directors performed an impairment review on intangible
assets at 31 December 2021, and impaired assets that will not
produce economically recoverable deposits based on planned future
development of the projects, current and forecast commodity
prices.
Reconciliation
of intangible
assets - 2020
Foreign
Opening exchange Impairment
balance Additions movements loss Total
US$ US$ US$ US$ US$
---------------------- -------------------- --------------------- ---------------- ----------------
Vanadium and
Iron ore 56,827,085 89,764 (1,966,518) - 54,950,331
Coal 2,581,736 1,381,378 90,380 - 4,053,494
---------------------- -------------------- --------------------- ---------------- ----------------
59,408,821 1,471,142 (1,876,138) - 59,003,825
---------------------- -------------------- --------------------- ---------------- ----------------
Vanadium and Iron Ore
The Company's subsidiary, Bushveld Resources Limited has a 64%
interest in Pamish Investment No 39 (Proprietary) Limited
("Pamish") which holds an interest in Prospecting right 95 ("Pamish
39").
The Department of Mineral Resources and Energy ("DMRE") granted
a mining right to Pamish Investments No. 39 (Pty) Ltd ("Pamish") on
the 28th of August 2019, in respect of the five farms Vliegekraal
783 LR, Vogelstruisfontein 765 LR, Vriesland 781 LR, Schoonoord 786
LR and Bellevue 808 LR situated in the District of Mogalakwena,
Limpopo, which make up the Mokopane Project.
Mokopane is a vanadium resource. On 29 January 2020, the DMRE
executed a 30-year mining right in favour of the Company, over five
farms: Vogelstruisfontein 765 LR; Vriesland 781 LR; Vliegekraal 783
LR; Schoonoord 786 LR; and Bellevue 808 LR. The Mining Right
required Pamish to commence mining activities, including in-situ
activities associated with the Definitive Feasibility Study ("DFS")
by end of January 2021. The COVID-19 pandemic resulted in a
significant delay in the commencement of the DFS and the necessary
engagement with local communities required to finalise Land Use
arrangements and, consequently, this deadline was not met.
Application to the DMRE for an extension of 18 months to commence
mining activities has been submitted. Engagement has begun with
communities to reach agreement for access to the project areas and
secure a Land Use Arrangement.
The mining right allows for the extraction of several other
minerals over the entire Mokopane project resource area, including,
titanium, phosphate, platinum Group metals, gold, cobalt, copper,
nickel and chrome.
Brits Vanadium Project
Bushveld Minerals Limited has been granted Section 11 of the
Mineral and Petroleum Resources Development Act (MPRDA) for
acquiring control of Sable Platinum Mining (Pty) Ltd for NW
30/5/1/1/2/11124 PR, held through Great Line 1 Invest (Pty) Ltd and
was executed in May 2021. The company has also applied for Section
102 of the Mineral and Petroleum Resources Development Act (MPRDA)
and waiting for approval to incorporate NW 30/5/1/1/2/11069 PR into
NW 30/5/1/1/2/11124 PR.
Bushveld Minerals Limited has applied for a prospecting right
which has been accepted and environmental authorisation has been
granted under GP 30/5/1/1/2/10576 PR held by Gemsbok Magnetite
(Pty) Ltd.
A renewal application for Prospecting Right NW 30/5/1/1/2/11124
PR was granted for Great 1 Line on Farm Uitvalgrond 431 JQ Portion
3.
Coal
Coal Exploration licences have been issued to Coal Mining
Madagascar SARL a 99% subsidiary of Lemur Investments Limited.
The exploration is in South West Madagascar covering 11
concession blocks in the Imaloto Coal basin known as the Imaloto
Coal Project and Extension.
13. Property, plant and equipment
Buildings and Plant and Motor Decommissi Right of Waste Assets under Total
use
other machinery Vehicles ning assets asset stripping construction
improvements furniture asset
and
equipment
US$ US$ US$ US$ US$ US$ US$ US$
------------- ------------- -------------- ---------------- ----------- --------------- -------------- ------------ ----------------
Cost
At 1
January
2020 8,196,521 166,369,583 1,474,110 2,597,288 5,735,890 3,920,684 10,668,778 198,962,854
Additions - 2,256,794 62,665 - - - 6,950,465 9,269,924
Disposals (336,491) (2,490,766) (192,023) - - - - (3,019,280)
Transfers 190,930 11,645,072 121,070 - - - (11,957,072) -
Revaluations - - - (695,244) - - - (695,244)
Foreign
exchange
differences (344,926) (6,179,154) (559,874) 33,180 (231,619) (156,242) (718,321) (8,156,956)
------------- ------------- -------------- ---------------- ----------- --------------- -------------- ------------ ----------------
At 31
December
2020 7,706,034 171,601,529 905,948 1,935,224 5,504,271 3,764,442 4,943,850 196,361,298
------------- ------------- -------------- ---------------- ----------- --------------- -------------- ------------ ----------------
Additions - 5,156,605 24,024 (207,189) 396,239 - 14,079,978 19,449,657
Disposals - (1,916,158) (78,119) - - (3,723,494) - (5,717,771)
Impairments
of obsolete
assets - (2,263,063) - - - - - (2,263,063)
Assets under
construction
capitalised - 5,373,628 57,148 - - - (5,430,776) -
Foreign
exchange
differences (426,162) (3,323,601) (108,315) (73,658) (834,539) (40,948) (996,705) (5,803,928)
------------- ------------- -------------- ---------------- ----------- --------------- -------------- ------------ ----------------
At 31
December
2021 7,279,872 174,628,940 800,686 1,654,377 5,065,971 - 12,596,347 202,026,193
------------- ------------- -------------- ---------------- ----------- --------------- -------------- ------------ ----------------
Depreciation
At 1 January
2020 (1,022,284) (9,384,009) (535,710) (954,588) (628,963) (1,168,237) - (13,693,791)
Disposals 336,491 2,407,463 248,586 - - - - 2,992,540
Depreciation
charge for
the
year (385,785) (14,468,628) (175,976) (53,233) (434,768) (2,347,763) - (17,866,153)
Foreign
exchange
differences 3,367 301,705 (151,754) 31,352 (150,129) (248,442) - (213,901)
------------- ------------- -------------- ---------------- ----------- --------------- -------------- ------------ ----------------
At 31
December
2020 (1,068,211) (21,143,469) (614,854) (976,469) (1,213,860) (3,764,442) - (28,781,305)
------------- ------------- -------------- ---------------- ----------- --------------- -------------- ------------ ----------------
Depreciation
charge for
the
year (354,785) (18,087,039) (266,419) (46,321) (640,932) - - (19,395,496)
Disposals - 1,777,899 89,424 - - 3,723,494 - 5,590,817
Impairment of
obsolete
assets - 365,533 - - - - - 365,533
Foreign
exchange
differences 79,596 (7,221,073) 34,257 76,847 294,385 40,948 - (6,695,040)
------------- ------------- -------------- ---------------- ----------- --------------- -------------- ------------ ----------------
At 31
December
2021 (1,343,400) (44,308,149) (757,592) (945,943) (1,560,407) - - (48,915,491)
------------- ------------- -------------- ---------------- ----------- --------------- -------------- ------------ ----------------
Net Book
Value
------------- ------------- -------------- ---------------- ----------- --------------- -------------- ------------ ----------------
At 31
December
2020 6,637,823 150,458,060 291,094 958,755 4,290,411 - 4,943,850 167,579,993
------------- ------------- -------------- ---------------- ----------- --------------- -------------- ------------ ----------------
At 31
December
2021 5,936,472 130,320,791 43,094 708,434 3,505,564 - 12,596,347 153,110,702
------------- ------------- -------------- ---------------- ----------- --------------- -------------- ------------ ----------------
The right of of use asset of $3.5million relates to land and
buildings of $3.4million and plant and machinery of $0.09million.
Refer to note 3(vi) on management's assumptions for the impairment
of non-current assets. The net impairment charge of
$1.8m recognised during the year relates to items of property,
plant and equipment that were identified as being either obsolete,
or no longer in use
14. Investment
property
2021 2020
Opening Fair value Closing Opening Fair value Closing
balance movements balance balance movements balance
US$ US$ US$ US$ US$ US$
Investment
properties 2,811,017 (215,658) 2,595,359 2,905,449 (94,432) 2,811,017
Investment properties comprise residential housing in Brits and
Elandsrand, North West Province.
Investment properties are stated at fair value, which has been
determined based on valuations performed by Domus Estate
Management, an accredited independent valuer, as at 31 December
2021. Fair value is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
The following valuation techniques and key inputs were used in
the valuation of the investment properties:
i. Physical inspection of each property;
ii. Consultation with estate agencies to discuss current sales market trends; and
iii. Comparative sales reports for locations where properties
are situated were obtained from South Africa.
2021 2020 2019
Restated* Restated*
US$ US$ US$
15. Deferred tax
Deferred tax liability
Residential properties (577,502) (624,978) (644,691)
Property plant and equipment (25,721,549) (29,267,614) (32,182,666)
Prepayments (24,092) (144,472) (187,898)
Doubtful debt allowance (11) (332) -
Total deferred tax liability (26,323,154) (30,037,396) (33,015,255)
Deferred tax asset
Provisions 3,813,396 3,926,545 3,674,640
Inventory - 356,194 1,082,620
Environmental rehabilitation liability 1,976,545 2,009,660 2,004,422
Leases - Lease liability 165,925 178,783 86,793
Assessed loss 13,819,438 11,435,066 1,235,365
Post-retirement medical liability 533,607 581,286 652,771
Deferred tax balance from temporary
differences other than unused tax losses 20,308,911 18,487,534 8,736,611
Total deferred tax asset 20,308,911 18,487,534 8,736,611
15. Deferred tax (continued)
Deferred tax liability (26,323,154) (30,037,396) (33,015,255)
Deferred tax assets 20,308,911 18,487,534 8,736,611
Total net deferred tax liability (6,014,243) (11,549,862) (24,278,644)
The evidence supporting recognition of a deferred tax liability
is forecasts for the component to which the losses relate which
indicate with reasonable certainty the availability of sufficient
future taxable profits in the next 3 years against which the losses
can be utilised.
Refer to note 35 on a detailed explanation on the
restatement.
Reconciliation of deferred tax asset / (liability)
At beginning of year (11,549,862) (24,278,644) 265,025
Transfer from statement of profit or loss and
other comprehensive 5,028,446 9,835,225 (23,077,361)
income
Revaluation through other comprehensive income (2,916) (34,919) (35,941)
Other movements (72,442) (72,442) -
Foreign exchange difference 582,530 2,856,004 (1,430,367)
(6,014,244) (11,549,862) (24,278,644)
2021 2020
US$ US$
------------------- ----------------
16. Financial assets at fair value
At 1 January 22,452,877 1,952,227
Additions 9,987,735 7,304,099
Disposals (16,147,154) (286,643)
Fair value movement (3,771,367) 13,483,194
Transfer to interest in joint venture (12,291,834) -
Foreign exchange (230,257) -
------------------- ----------------
As at 31 December - 22,452,877
------------------- ----------------
During the year the Group made further investment in VRFB
Holdings Limited and in April 2021 the investment became a joint
venture. Further details are included in note 17.
AfriTin Mining Limited
The Group measures the fair value of the investment in AfriTin
Mining Limited using the quoted price in an active market for that
instrument. A market is regarded as active if transactions for the
asset or liability take place with sufficient frequency and volume
to provide pricing information on an ongoing basis. The investment
in AfriTin was disposed in 2021.
Invinity Energy Systems
The investment in Invinity was realised, resulting in capital
appreciation. The proceeds of the sale were used towards Bushveld
Energy's 2021 projects.
17. Interests in joint ventures
2021 2020
US$ US$
----------------- ----------------
Transfer from financial assets held at fair value 12,291,834 -
Loss on joint venture undertaking (4,351,356) -
Foreign exhange (85,241) -
----------------- ----------------
7,855,237 -
----------------- ----------------
VRFB Holdings Limited
The investment in VRFB Holding Limited is in line with Bushveld
Minerals' strategy of partnering with Vanadium Redox Flow Battery
("VRFB") companies.
VRFB is a company incorporated as a special purpose vehicle
consisting of various shareholders including Bushveld Energy
Limited (BE), a majority owned subsidiary of Bushveld Minerals. In
2021, Bushveld acquired a 50.5% interest in VRFB Holdings Limited
(VRFB). VRFB is the holding company for the Group's investment in
CellCube ("Enerox").
Bushveld accounts for its 50.5% shareholding in VRFB as an
investment in joint venture as it does not meet the requirements of
control under IFRS10.
The VRFB investment is part of Bushveld Minerals' strategy of
partnering with VRFB Original Equipment Manufacturers ("OEMs") that
includes supply of vanadium and electrolyte, deployments and
investment into the rapidly growing energy storage market.
18. Inventories
2021 2020
US$ US$
Finished goods 18,058,022 12,070,061
Work in progress 9,323,360 7,454,987
Raw materials 3,159,418 1,761,551
Consumable stores 11,105,356 12,795,026
------------------ ----------------
Total inventories 41,646,156 34,081,625
------------------ ----------------
The amount of write-down of inventories due to net realisable
value provision requirement is nil (2020: nil).
2021 2020
US$ US$
19. Trade and other receivables
Trade receivables 6,129,311 3,854,461
Other receivables 5,861,661 1,610,261
Loss allowance (76,704) (32,826)
Non-financial instruments:
VAT 5,727,948 4,993,467
Total trade and other receivables 17,642,216 10,425,363
Categorisation of trade and other receivables
Trade and other receivables are categorised as follows in accordance
with IFRS 9: Financial Instruments:
At amortised cost 11,914,268 5,431,896
Non-financial instruments 5,727,948 4,993,467
17,642,216 10,425,363
Trade receivables are amounts due from customers for in the ordinary course
goods sold or services performed business. They are as current. of
generally due for settlement within 15-90 days and
therefore are all classified
Other receivables consist of prepayments and deposits,
which are realised overtime.
Due to the short-term nature of the current receivables, their
carrying amount is considered to be the same as their fair
value.
Impairment and risk exposure
Information about the impairment of trade receivables and the
Group's exposure to credit risk, foreign currency risk and interest
rate risk can be found in note 32.
20. Restricted investment
Rehabilitation trust fund and insurance fund 2,868,886 3,111,465
The Group is required by statutory law in South Africa to hold
these restricted investments in order to meet decommissioning
liabilities on the statement of financial position (refer to note
25 and 33 for further details).
21. Cash and cash equivalents
2021 2020
US$ US$
Cash at hand and in bank 15,432,852 50,540,672
Cash and cash equivalents (which are presented as a single class
of assets on the face of the Statement of Financial Position)
comprise cash at bank and other short-term highly liquid
investments with an original maturity of three months or less.
Short-term deposits include funds received from Orion Mine Finance
("Orion") under the Production Financing Agreement (PFA) and
Convertible Loan Notes Instrument (CLN).
The total cash and cash equivalents denominated in South African
Rand amount to US$14,883,820 (2020: US$34,165,671).
The directors consider that the carrying amount of cash and cash
equivalents approximates to their fair value.
Refer to Note 28 for further information in relation to the
Production Financing Agreement and Convertible Loan Notes
Instrument.
22. Share capital and share premium Total
share
Share capital
and
Shares Share capital premium premium
Number US$ US$ US$
At 1 January 2020 1,153,642,682 15,357,271 111,067,064 126,424,335
Shares issued - Duferco 37,115,210 501,157 5,998,843 6,500,000
-------------
At 1 January 2021 1,190,757,892 15,858,428 117,065,907 132,924,335
Shares issued - PMDR 1,473,651 18,910 203,281 222,191
Shares issued - PMDR 1,335,277 17,134 184,194 201,328
Shares issued - Duferco 66,892,037 902,708 8,097,292 9,000,000
-------------
At 31 December 2021 1,260,458,857 16,797,180 125,550,674 142,347,854
------------- --------------
The Board may, subject to Guernsey Law, issue shares or grant
rights to subscribe for or convert securities into shares. It may
issue different classes of shares ranking equally with existing
shares. It may convert all or any classes of shares into redeemable
shares. The Company may also hold treasury shares in accordance
with the law. Dividends may be paid in proportion to the amount
paid up on each class of shares.
As at the 31 December 2021 the Company owns 670,000 (2020:
670,000) treasury shares with a nominal value of 1 pence.
Shares issued
Duferco Participations Holding S.A. ("Duferco")
In settlement of US$6.5million of the convertible loan notes
issued to Duferco on the acquisition of Vanchem, Bushveld Minerals
Limited issued 37,115,210 new shares on 18 December 2020. The
shares issued had a conversion price of 12.97p, which was a 5 per
cent discount to the prevailing 10-day volume weighted average
Bushveld Minerals share price leading up to conversion.
Refer to note 28 for details on the Convertible Loan Note
details.
Persons Discharging Managerial Responsibilities (PMDRs)
The Company issued 1,473,651 and 1,335,277 new ordinary shares
of 1 pence each in the Company ("Ordinary Shares") in respect of
the Bonus Awards announced on 21 July 2020.
Nature and purpose of other reserves Share premium
The share premium reserve represents the amount subscribed for
share capital in excess of nominal value.
Share-based payment reserve
The share-based payment reserve represents the cumulative fair
value of share options granted to employees.
Convertible loan note reserve
This reserve represents the equity portion of a convertible
loan.
Foreign exchange translation reserve
The translation reserve comprises all foreign currency
differences arising from the translation of financial statements of
foreign operations.
Fair value reserve
The fair value reserve comprises the cumulative net change in
the fair value of financial assets at fair value through other
comprehensive income until the assets are derecognised or
impaired.
Retained income reserve
The retained income reserve represents other net gains and
losses and transactions with owners (e.g. dividends) not recognised
elsewhere
23. Share based payments Short Term Incentive (STI)
Bushveld Minerals Limited issued bonus shares to the employees
under the STI scheme. The shares had a grant date of 5 August 2021
and vesting dates aligned to the STI scheme rules being, 12 months
and 18 months from the financial year end to which they relate, for
the first and second half of the settlement, respectively. The
vesting of shares is dependent on the employees still be employed
on the respective vesting dates.
All bonus shares are settled directly by Bushveld Mineral
Limited, in its own shares.
The fair value of the rights at grant date US$955 451 was
estimated by taking the market price of the company's shares and
the reporting exchange rate on that date.
The following table shows the bonus shares granted and
outstanding at the beginning and end of the reporting period:
2021 2020
Number of Number
shares of
shares
As at 1 January - -
Granted during the year 5,204,396 -
Vested during the year - -
Forfeited during the year - -
As at 31 December 5,204,396 -
Long Term Incentive (LTI)
On 31 December 2021, 4,002 812 shares vested. These shares
remained part of Bushveld's equity as at 31 December 2021 because
they where issued under the STI scheme rules in February 2022.
Bushveld Minerals awarded a number of performance shares to
employees on 28 November 2019 under its Long Term Incentive Plan.
The grant vests over a period of three years. The vesting of the
awards is subject to both employment and performance
conditions.
The performance condition is measured over a period of three
years i.e. 1 January 2019 to 31 December 2021.
The market condition states that 60% of the number of shares
awarded would vest based on the performance of Bushveld Ltd's Total
Shareholder Return ("TSR"), per annum, over the performance
period.
The non-market condition states that 40% of the number of shares
awarded will vest based on the performance of Bushveld Ltd's Free
Cash Flow Margin ("FCF"), per annum, over the performance
period.
As at 31 December 2021, it is assumed that 0% of the conditional
share awards made to participants during 2019 will vest. This is
based on Bushveld's performance on both TSR and FCF being below the
threshold.
22. Share based payments (continued) 2021 2020
Number of Number
shares of
shares
As at 1 January 2,458,443 2,458,443
Granted during the year - -
Vested during the year - -
As at 31 December 2,458,443 2,458,443
24. Post-retirement medical liability
Benefit liability
2021 2020
US$ US$
Present value of the defined benefit obligation-wholly
unfunded 2,076,023 2,331,325
Present value of the defined benefit obligation-partially
or wholly funded (170,284) (255,302)
Balance at 31 December 1,905,739 2,076,023
The benefit comprises medical aid subsidies provided to
qualifying retired employees. Actuarial valuations are made
annually, and the most recent valuation was made on 31 December
2021.
Key assumptions used
Actual age 77.3 years 77.3 years
Discount rates 10.90% 10.60%
Health care cost inflation 7.90% 7.30%
Duration of liability 9.3 years 9.1 years
A one percentage point change in the assumed rate of healthcare
costs would have the following effect on the present value of the
unfunded obligation: Plus 1% - US$2.07 million; Less 1% - US$1.76
million.
A one percentage point change in the assumed interest rate would
have the following effect on the present value of the unfunded
obligation; Plus 1% - US$0.21 million; Less 1% - US$0.18
million
25. Environmental rehabilitation liability
2021 2020
US$ US$
Opening balance 17,998,366 17,844,066
Unwinding of discount rate 1,781,584 1,872,634
Fair value adjustment (315,434) (1,007,237)
Foreign Exchange (1,433,195) (711,097)
At 31 December 2021 18,031,321 17,998,366
The Group makes full provision for the future cost of
rehabilitating mine sites and related production facilities on a
discounted basis at the time of developing the mine and installing
and using those facilities.
The rehabilitation provision represents the present value of
rehabilitation costs relating to mine sites, which are expected to
be incurred up to 2037, which is when the producing mine properties
are expected to cease operations. These provisions have been
created based on the Group's internal estimates. Assumptions based
on the current economic environment have been made, which
management believes are a reasonable basis upon changes to the
assumptions. However, actual rehabilitation costs will ultimately
depend upon future market prices for the necessary rehabilitation
works required that will reflect market conditions at the relevant
time. Furthermore, the timing of rehabilitation is likely to depend
on when the mines cease to produce at economically viable rates.
This, in turn, will depend upon future vanadium prices, which are
inherently uncertain.
The discount rate used in the calculation of the provision as at
31 December 2021 was 10.76% (2020: 10.93%).
26. Deferred consideration
2021 2020
US$ US$
Opening balance 5,622,532 7,108,819
Cash payment (3,723,980) (1,680,459)
Interest 90,617 -
Movement in earnout estimate - 206,066
Foreign exchange (305,148) (11,894)
1,684,021 5,622,532
Split between non-current and current portions
Non-current 1,684,021 1,802,884
Current - 3,819,648
1,684,021 5,622,532
At the year-end management have updated their estimate of the
earnout payable to EVRAZ on the acquisition of the Vametco Group,
which is based on the expected EBITDA for the year ended 31
December 2021, to a maximum of US$1.68 million. The consideration
attributable to the acquisition of Vanchem was settled in November
2021.
27. Loans
Industrial Development Corporation 3,280,948 1,597,972
The loan represents The Industrial Development Corporation's
contribution and is governed by the tripartite agreement between
Bushveld Energy Company (Pty) Ltd, Bushveld Electrolyte Company
(Pty) Ltd and The Industrial Development Corporation of South
Africa Limited. The loan represents the initial capitalised costs
of US$260 366 plus the subscription amount of US$3 020 582 of the
total US$3 821 028 to be advanced to Bushveld Electrolyte Company
Pty Ltd. Bushveld Electrolyte Company is a South African producer
of vanadium electrolyte. The company is jointly owned by Bushveld
Energy and the IDC, with shareholding of 55% and 45% respectively.
Its first manufacturing facility is under construction and located
in East London, South Africa.
The loan is interest free, unsecured, subordinated in favour of
Bushveld Electrolyte Company's creditors and has no fixed term of
repayment in the next 12 months.
Split between non-current and current portions
Non-current liabilities 3,280,948 1,597,972
28. Borrowings
2021 2020
US$ US$
Development Bank of Southern Africa 999,950 845,588
Nedbank Term Loan and Revolving Credit Facility 5,821,082 8,636,535
Convertible Loan Notes - Duferco - 11,585,068
Production Financing Agreement - Orion Mine Finance 33,511,742 30,105,886
Convertible Loan Notes Instrument - Orion Mine Finance 37,313,976 33,073,699
77,646,750 84,246,776
Split between non-current and current portions
Non-current 67,435,647 70,909,370
Current 10,211,102 13,337,406
77,646,749 84,246,776
Development Bank of Southern Africa - Facility Agreement
Lemur Holdings Limited, a subsidiary undertaking, entered into a
US$1 000 000 facility agreement with the Development Bank of
Southern Africa Limited in March 2019. The purpose of the facility
is to assist with the costs associated with delivering the key
milestones to the power project. The repayment is subject to the
successful bankable feasibility study of the project at which point
the repayment would be the facility value plus an amount equal to
an IRR of 40% capped at 2.5 times which ever is lower. As at 31
December 2021, US$999 950 (2020: US$845 588) was drawn down.
Nedbank Term Loan and Revolving Credit Facility
In November 2019, Bushveld Minerals Limited secured R375 million
(approximately US$25 million) in debt facilities through its
subsidiary Bushveld Vametco Alloys Proprietary Limited ("the
Borrower") with Nedbank Limited (acting through its Nedbank
Corporate and Investment Banking division), a South African based
financial institution, in the form of a R250 million loan and a
R125 million revolving credit facility.
The Nedbank term loan was repaid in December 2020.
Key highlights of the R125 million revolving credit facility,
which was drawn in March 2020:
-- Three-year term - Repayment due in November 2022;
-- Interest rate calculated using the three year or six months
JIBAR1 as selected by the Company plus a 3.85% margin;
-- Interest payments are due semi-annually with first payment
due in six months from financial close.
The security provided is customary for a secured financing of
this nature, including cession of shares in the Borrower, security
over the assets of the Borrower, and a parent guarantee.
Financial Covenants undertaken
The Borrower shall ensure that for so long as any amount is
outstanding under a Finance Document or any Commitment is in force,
in respect of each Measurement Period:
-- the Net Interest Cover Ratio; and
-- the Net Debt to EBITDA Ratio at a Borrower level shall not exceed 4.0 times.
As reported in the going concern policy, the net debt to EBITDA
ratio was breached at 31 December 2021 following the remeasurement
of the Orion Mine Finance PFA liability. This covenant has been
retrospectively waived by Nedbank.
Convertible Loan Note - Duferco
On 27 October 2021, Bushveld met the final repayment terms of
the remaining US$11.5 million unsecured convertible notes held by
Duferco the previous owner of Vanchem, effective on 8 November
2021. US$2.5 million of the amount due, as well as the accrued
interest of US$0.512 million, was satisfied in cash and the balance
of US$9 million with the issue of 66,892,037 new ordinary shares of
Bushveld, using a conversion price of 9.97p, which was a 5 per cent
discount to the prevailing 10-day volume weighted average Bushveld
Minerals share price leading up to conversion. There is no lock in
or orderly marketing period for the shares issued.
Production Financing Agreement - Orion Mine Finance
In December 2020, Bushveld Minerals Limited signed a long-term
Production Financing Agreement of US$30 million (or the "PFA") with
mining-focused investment business Orion Mine Finance ("Orion"),
primarily to finance its expansion plans at Bushveld Vametco Alloys
(Pty) Ltd and debt repayment. Exchange control authorization from
the South Africa Reserve Bank Financial Surveillance Department was
granted in October 2020. A first amendment was issued to the
agreement on 6 August 2021.
PFA Transaction Details
The Company will repay the principal amount and pay interest via
quarterly payments determined initially as the sum of:
a gross revenue rate (set at 1.175 per cent for 2020 and 2021
and 1.45 per cent from 2022 onwards, subject to adjustment based on
applicable quarterly vanadium prices) multiplied by the gross
revenue for the quarter; and
a unit rate of US$0.443/kgV multiplied by the aggregate amount
of vanadium sold for the quarter.
Once the Company reaches vanadium sales of approximately 132,020
mtV during the term of the facility, the gross revenue rate and
unit rate will reduce by 75 per cent (i.e. to 25 per cent of the
applicable rates).
On each of the first three loan anniversaries, the Company has
the option to repay up to 50 per cent of both constituent loan
parts (each may only be repaid once). If the Company utilises the
loan repayment option, the gross revenue rate and/or the unit rate
will reduce accordingly.
The PFA capital will provide funding to continue to grow
production at Vametco to more than 4,200 mtV per annual production
level and debt repayment. Part of the proceeds of the Instrument
were used by the Company to prepay in full the Nedbank ZAR250
million term loan. In addition, the following amendments will be
applied to the financial covenants:
-- Removing the cumulative DSCR covenant;
-- Increasing the defaut level on the group net debt to Group EBITDA ratio to 4.0 times
-- Changing the gross interest cover ratio to net interest cover ratio
First Amendment Agreement dated 6 August 2021
In terms of the Amended Agreement with Orion, $17.8million of
the funds ringfenced for the Vametco Phase 3 Expansion was
re-allocated to Vanchem mainly for capital expenditure on kiln 3.
Kiln 3 is expected to achieve a steady state production run rate of
2,600 mtVp.a by the end of 2022.
Impact of Amended Agreement on future cashflows of the debt
instrument
The original PFA had a cap of 1'075mtV per quarter. This
amounted to 4300mtV per annum expected from 2024 onwards following
the completion of the Vametco Phase 3 expansion project
The amended agreement, with the addition of the Vanchem
production volumes from 1 July 2021 resulted in the initial cap of
4'300mtV being reached earlier, from 1 July 2022 instead of from
2024.
Accounting for non-substantial modifications
IFRS 9 requires the amortised cost of the liability to be
recalculated by discounting the modified contractual cash flows
(excluding costs and fees) using the original effective interest
rate. Any change to the amortised cost of the financial liability
is required to be recognised within profit or loss at the date of
the modification.
The carrying amount of the liability is then further revised for
any costs or fees incurred. The effective interest rate is also
revised accordingly, so the costs are amortised over the remaining
term of the modified liability.
As a result of the increased production volumes from Vanchem and
the cap of 4'300mtV being reached earlier, this resulted in a
non-substantial modification to the contractual terms. The
amortised cost was recalculated and the adjustment was recognised
within profit or loss:
IFRS 9 fair value adjustment US$ 1,902,172
Contractual and legal balances vs IFRS 9 accounting balances The
contractual and legal accounting differ from IFRS 9 accounting.
Below table illustrates the differences in the carrying values,
interest and capital of the contractual PFA and IFRS 9 accounting
for the 2021 financial year.
2021 2020
US$ US$
Reconciliation of Production Finance Agreement - Orion
Mine Finance 30,105,886 -
Opening balance
Loan received - 30,000,000
Interest accrued 4,058,488 105,886
- Contractual interest 1,198,919 105,886
- Notional interest (IFRS 9) 2,859,569 -
Repayments made (2,554,804) -
Remeasurement (IFRS 9) 1,902,172 -
Closing balance 33,511,742 30,105,886
Convertible Loan Notes Instrument - Orion Mine Finance
Bushveld Minerals Limited, through an affiliate of Orion Mine
Finance, agreed to subscribe for US$35 million convertible loan
notes instrument (the "Instrument"). The conversion price of the
convertible loan notes was set at 17pence. The Instrument's
proceeds will go towards the first phase of Vanchem's critical
refurbishment programme and debt repayment.
Financing terms of the Instrument and convertible loan notes
-- A fixed 10 per cent per annum coupon with a three year
maturity date from the drawdown date.
-- All interest will accrue and be capitalised on a quarterly
basis in arrears but compounded annually.
-- Accumulated capitalised and accrued interest is convertible
into Bushveld ordinary shares. All interest and principal, to the
extent not converted into ordinary shares, is due and payable at
maturity date.
-- Funds raised are to be used for capital investment purposes
for the first phase of Vanchem's critical refurbishment programme,
and the balance for debt repayment purposes.
Conversion feature
Between drawdown and the Instrument's maturity date Orion may,
at their option, convert an amount of the outstanding debt,
including capitalised and accrued interest, into Bushveld's
ordinary shares as follows:
-- First six months: Up to one third of the outstanding amount;
-- Second six months: Up to two thirds of the outstanding amount
(less any amount previously converted);
-- From the anniversary of drawdown until the maturity date: the
outstanding amount under the Instrument may be converted;
-- Bushveld also has the option to convert all, but not some, of
the amount outstanding under the Instrument, if its volume weighted
average share price is more than 200 per cent of the conversion
price over a continuous 15 trading day period, a trading day being
a day on which the AIM market is open for the trading of
securities.
At any time until the convertible maturity date, Orion may
convert the debt as above mentioned into an amount of ordinary
shares equal to the total amount available for conversion under the
Instrument divided by the conversion price of 17 pence.
The Orion and Nedbank borrowings are secured against certain
group companies and associated assets.
29. Lease liabilities
A reconciliation of total operating lease commitments to the
IFRS 16 lease liability at 31 December 2021 is as follows:
2021 2020
US$ US$
As at 1 January 5,002,144 5,464,909
Additions 127,964 -
Accretion of interest 459,430 497,042
Payments (705,373) (753,302)
Foreign exchange (398.853) (206,505)
4,485,312 5,002,144
Non-current lease liabilities 3,920,698 4,376,483
Current lease liabilities 564,614 625,661
4,485,312 5,002,144
30. Trade and other payables
Financial instruments:
Trade payables 28,329,519 17,074,422
Trade payables - related parties 107,026 -
Accruals and other payables 4,644,125 4,991,179
33,080,670 22,065,601
Trade and other payables principally comprise amounts
outstanding for trade purchases and on-going costs. The average
credit period taken for trade purchases is 30 days.
The Group has financial risk management policies in place to
ensure that all payables are paid within the pre-arranged credit
terms. No interest has been charged by any suppliers as a result of
late payment of invoices during the year.
The directors consider that the carrying amount of trade and
other payables approximates to their fair value.
The total trade and other payables denominated in South African
Rand amount to US$20,622,241 (2020: US$15,895,209).
31. Provisions
Reconciliation of provisions
- 2021
Utilised
Opening during Foreign
the
balance Additions year exchange Total
US$ US$ US$ US$ US$
Leave pay 1,655,457 50,519 - (77,252) 1,628,724
Performance bonus 1,375,147 881,920 (333,724) - 1,923,343
Other 266,290 157,152 (253,656) - 169,786
---------------
3,296,894 1,089,591 (587,380) (77,252) 3,721,853
---------------
Reconciliation of provisions
- 2020
Utilised
Opening during Foreign
the
balance Additions year exchange Total
US$ US$ US$ US$ US$
Leave pay 1,193,630 504,394 - (42,567) 1,655,457
Performance bonus 2,098,565 1,602,991 (2,290,117) (36,292) 1,375,147
Other 140,424 221,983 (92,680) (3,437) 266,290
---------------
3,432,619 2,329,368 (2,382,797) (82,296) 3,296,894
---------------
Leave pay and bonus
Leave pay represents employee leave days due multiplied by their
cost to the company employment package. The bonus represents the
estimated amount due to employees based on their approved bonus
scheme.
Performance bonus
The performance bonus represents an incentive bonus due to
senior employees, calculated in terms of an approved scheme based
on the company's operating results.
Other
The other provisions represents estimates for Group tax, legal
and consulting fees to be charged.
32. Financial instruments
The Group is exposed to the risks that arise from its use of
financial instruments. This note describes the objectives, policies
and processes of the Group for managing those risks and the methods
used to measure them. Further quantitative information in respect
of these risks is presented throughout these financial
statements.
Capital risk management
The Group manages its capital to ensure that entities in the
Group will be able to continue as going concerns while maximising
returns to shareholders. In order to maintain or adjust the capital
structure, the Group may issue new shares or arrange debt
financing. At the reporting date, the Group had borrowings of
US$77,646,750 (2020: US$84,246,776).
The capital structure of the Group consists of cash and cash
equivalents, equity and borrowings. Equity comprises of issued
capital and retained profits.
The Group is not subject to any externally imposed capital
requirements.
Principal financial instruments
The principal financial instruments used by the Group, from
which financial instrument risk arises, are as follows:
-- Trade and other receivables
-- Cash at bank
-- Trade and other payables
-- Borrowings
-- Investments
-- Lease liabilities
2021 2020
US$ US$
Categories of financial instruments
The Group holds the following financial assets:
Financial assets at amortised cost
Trade and other receivables 11,914,268 10,451,736
Restricted investment 2,868,886 3,111,465
Cash and cash equivalents 15,432,852 50,540,672
Financial assets - Investment - 2,785,507
Total financial assets at amortised cost 30,216,006 66,889,380
Financial assets at fair value - 20,439,565
Total financial assets 30,216,006 87,328,945
The Group holds the following financial liabilities:
Financial liabilities at amortised cost
Trade and other payables 33,080,670 23,853,676
Lease liabilities 4,485,312 5,002,144
Deferred consideration 1,684,021 5,416,466
Loans 3,280,948 1,597,972
Borrowings 77,646,750 84,246,776
Total financial liabilities 120,177,701 120,117,034
General objectives, policies and processes
The Board has overall responsibility for the determination of
the Group's risk management objectives and policies. The Board
receives reports through which it reviews the effectiveness of the
processes put in place and the appropriateness of the objectives
and policies it sets.
The overall objective of the Board is to set policies that seek
to reduce risk as far as possible without unduly affecting the
Group's competitiveness and flexibility. Further details regarding
these policies are set out below:
Price risk
The Group's exposure to commodity price risk is dependent on the
fluctuating price of the various commodities that it mines,
processes and sells.
The average market price of each of the following
commodities was:
2021 2020
Vametco US$/kgV US$/kgV
NV 34.10 23.56
MVO 17.18 17.18
AMV - 17.53
FEV - 22.33
2021 2020
Vanchem US$/kgV US$/kgV
Vanadium Pentoxide Flake (FVP) 25.04 19.86
Vanadium Pentoxide Chemical (VCM) 32.73 22.79
Sodium Ammonium Vanadate (SAV) 51.22 32.97
Ammonium Metavanadate (AMV) 35.19 26.79
Ferro Vanadium (FEV) 31.53 22.56
Vanadyl Oxalate Solution (VOX) 195.41 -
Potassium Metavanadate 35.31 -
Nitrovan 30.60 -
If the average price of each of these commodities
increased/decreased by 10% the total sales related to each of these
commodities would have increased/decreased as follows:
Effect on Effect
on
2021 2021
Vametco revenue net income
US$ US$
NV 8,431,404 6,069,757
AMV (14,352) (10,334)
8,417,052 6,059,423
Effect on Efect
on
2020 2020
Vametco revenue net income
US$ US$
NV 7,733,450 5,568,084
MVO 25,272 18,196
AMV 14,352 10,334
FEV 32,194 23,180
7,805,268 5,619,794
Effect on Effect
on
2021 2021
revenue net income
Vanchem US$ US$
Vanadium Pentoxide Flake (FVP) 610,815 439,787
Vanadium Pentoxide Chemical (VCM) 298,089 214,624
Sodium Ammonium Vanadate (SAV) 71,954 51,807
Ammonium Metavanadate (AMV) 27,320 19,670
Ferro Vanadium (FEV) 1,637,211 1,178,792
Vanadyl Oxalate Solution (VOX) 137,723 99,160
Potassium Metavanadate 46,810 33,703
Nitrovan 483,666 348,239
3,313,588 2,385,782
Effect on Effect
on
2020 2020
revenue net income
Vanchem US$ US$
Vanadium Pentoxide Flake (FVP) 831,607 598,757
Vanadium Pentoxide Chemical (VCM) 114,420 82,382
Sodium Ammonium Vanadate (SAV) 5,246 3,777
Ammonium Metavanadate (AMV) 12,704 9,147
Ferro Vanadium (FEV) 994,299 715,896
1,958,276 1,409,959
Credit risk
Credit risk is the risk that the counterparty fails to repay its
obligation to the Group in respect of the amounts owed.
Credit risk arises from cash and cash equivalents, contractual
cash flows of debt investments carried at amortised cost, at fair
value through other comprehensive income (FVOCI) and at fair value
through profit or loss (FVPL), as well as credit exposures to
customers, including outstanding receivables.
Risk management
Credit risk is managed on a Group basis. Credit verification
procedures are undertaken for all customers with whom we trade on
credit. Otherwise, if there is no independent rating, risk control
assesses the credit quality of the customer, taking into account
its financial position, past experience and other factors.
Individual risk limits are set based on internal or external
ratings in accordance with limits set by the board. The compliance
with credit limits by customers is regularly monitored by line
management.
Trade account receivables comprise a limited customer base.
Ongoing credit evaluation of the financial position of customers is
performed and granting of credit is approved by directors.
The Group's investments in debt instruments are considered to be
low risk investments. The credit ratings of the investments are
monitored for credit deterioration.
Security
At 31 December 2021, the company held no collateral as security
against any financial asset. The carrying amount of financial
assets recorded in the financial statements, net of any allowances
for losses, represents the company's maximum exposure to credit
risk without taking account of the value of any collateral
obtained. At 31 December 2021 and at 31 December 2020, no financial
assets were past their due date. An allowance for impairment is
made where there is an identified loss event which, based on
previous experience, is evidence of a reduction in the
recoverability of the cash flows. Management considers the above
measures to be sufficient to control the credit risk exposure.
Impairment of financial assets
The Group's only financial assets that are subject to the
expected credit loss model are third party trade receivables.
Trade receivables
The Group applies the IFRS 9 simplified approach to measure
expected credit losses which uses a lifetime expected loss
allowance for all trade receivables and contract assets.
To measure the expected credit losses, trade receivables have
been grouped based on shared credit risk characteristics and the
days past due.
The expected loss rates are based on the payment profiles of
sales over a period of 36 month before 31 December 2021 and the
corresponding historical credit losses experienced within this
period. The historical loss rates are adjusted to reflect current
and forward-looking information on macroeconomic factors affecting
the ability of the customers to settle the receivables. The Group
has identified the GDP and the unemployment rate of the countries
in which it sells its goods and services to be the most relevant
factors, and accordingly adjusts the historical loss rates based on
expected changes in these factors.
On that basis, the loss allowance as at 31 December 2021 and 31
December 2020 was determined as follows for trade receivables:
2021
Subsidiary Gross
Expected carrying Loss
credit loss amount allowance
rate US$ US$
Bushveld Vametco Alloys (Pty) Ltd 0.11 % 87,076 96
Bushveld Vametco Limited 0.13 % 4,197,730 5,457
Bushveld Vanchem (Pty) Ltd 0.13 % 1,274,756 1,657
Ivanti Resources (Pty) Ltd 0.43 % 609,197 2,620
Bushveld Minerals SA (Pty) Ltd 0.19 % 7,743 15
Bushveld Energy Company (Pty) Ltd 100.00 % 66,866 66,866
-----------
6,243,368 76,711
-----------
2020 Gross
Expected carrying Loss
credit loss amount allowance
Subsidiary rate US$ US$
-----------
Bushveld Vametco Alloys (Pty) Ltd 0.95 % 312,230 2,966
Bushveld Vanchem (Pty) Ltd 1.94 % 38,169 740
Bushveld Minerals SA (Pty) Ltd 1.94 % 69,189 1,342
Bushveld Energy Company (Pty) Ltd 1.94 % 72,651 1,409
Bushveld Vametco Limited 0.93 % 2,835,340 26,369
-----------
3,327,579 32,826
-----------
Trade receivables are written off when there is no reasonable
expectation of recovery. Indicators that there is no reasonable
expectation of recovery include, amongst others, the failure of a
debtor to engage in a repayment plan with the Group, and a failure
to make contractual payments for a period of greater than 120 days
past due.
Impairment losses on trade receivables are presented as net
impairment losses within operating profit. Subsequent recoveries of
amounts previously written off are credited against the same line
item. There were no impairment losses on trade receivables for the
2021 and 2020 financial year.
It is the Group's policy that all customers who wish to trade on
credit terms are subject to credit verification procedures. Credit
risk arises from credit exposure to customers, including
outstanding receivables and committed transactions.
The Group's credit risk is considered by counterparty, geography
and by currency. The Group has a significant concentration of cash
held on deposit with large banks in South Africa, Mauritius and the
United Kingdom and America with A ratings and above (Standard and
Poors).
The concentration of credit risk by currency was as
follows:
2021 2020
US$ US$
Currency
Pound Sterling 10,272 663,914
Euro 47 -
South African Rand 14,942,559 34,165,671
United States Dollar 479,974 15,711,087
15,432,852 50,540,672
Liquidity risk
Liquidity risk is the risk that the Group will encounter
difficulty in meeting its financial obligations as they fall due.
Ultimate responsibility for liquidity risk management rests with
the Board of directors. The Board manages liquidity risk by
regularly reviewing the Group's gearing levels, cash-flow
projections and associated headroom and ensuring that excess
banking facilities are available for future use.
The Group maintains good relationships with its banks, which
have high credit ratings and its cash requirements are anticipated
via the budgetary process. At 31 December 2021, the Group had
US$15,432,852 (2020: US$50,540,672) of cash reserves and borrowings
of US$77,646,750 (2020: US$84,246,776). The Group will maintain its
ability to service its borrowings over the next 12 months.
Market risk
The Group's activities expose it primarily to the financial risk
of changes in foreign currency exchange rates and interest
rates.
Interest rate risk
The Group has interest bearing assets and liabilities, the
Group's income and operating cash flows are dependent of changes in
market interest rates.
As part of the process of managing the Group's interest rate
risk, interest rate characteristics of new borrowings and the
refinancing of existing borrowings are positioned according to
expected movements in interest rates.
Interest
increase
by
2021 100 basis
Interest bearing instruments Value of points Effect
loan
----------
Borrowings (77,646,750) 1 % (776,468)
Cash and cash equivalents 852,547 1 % 8,525
(767,943)
---------
Interest
increase
2020 by 100
basis
Interest bearing instruments Value of points Effect
loan
----------
Borrowings (84,246,776) 1 % (842,468)
Cash and cash equivalents 40,260,188 1 % 402,602
(439,866)
---------
Foreign exchange risk
As highlighted earlier in these financial statements, the
functional currency of the Group is US Dollars. The Group also has
foreign currency denominated assets and liabilities. Exposure to
exchange rate fluctuations therefore arise. The carrying amount of
the Group's foreign currency denominated monetary assets and
liabilities, all in US Dollars, are shown below:
2021 2020
US$ US$
Cash and cash equivalents 15,134,842 34,829,585
Other receivables 12,696,364 4,818,931
Trade and other payables (20,752,795) (17,715,850)
7,078,411 21,932,666
The Group has transactional foreign exchange exposures, which
arise from sales or purchases by an operating unit in currencies
other than the unit's functional currency. The Vanadium market is
predominately priced in US dollars which exposes the Group to the
risk of fluctuations in the SA rand/US dollar. The Group monitors
and manages risk via the newly established internal audit
function.
The Group does not enter into any derivative financial
instruments to manage its exposure to foreign currency risk.
Fair value
The directors are of the opinion that the book value of those
financial instruments carried at amortised cost approximates fair
value. The carrying value less impairment provision of trade
receivables and payables are assumed to approximate their fair
values.
The Group used the following hierarchy for determining and
disclosing the fair value of financial instruments which are
measured at fair value by valuation technique:
Level 1: Quoted (unadjusted) market prices in active markets for
identical assets or liabilities.
Level 2: Other techniques for which all inputs which have a
significant effect on the recorded fair value are observable,
either directly or indirectly.
Level 3: Techniques which use inputs that have a significant
effect on the recorded fair value that are not based on observable
market data.
Of the Group's financial assets at fair value as described in
note 16, US$Nil (2020: US$20,148,778) is measured using level 1
techniques and US$Nil (2020: US$2,304,099) is measured using level
3 valuation techniques. There have been no transfers between level
2 and level 3 of the fair value hierarchy during the the year ended
31 December 2021 and 31 December 2020.
2021 2020
Financial assets Book value Fair value Book value Fair
value
Trade and other receivables 11,914,268 11,914,268 6,692,165 6,692,165
Restricted investments 2,868,886 2,868,886 3,111,465 3,111,465
Financial assets - investments - - 2,785,507 2,785,507
Financial assets at fair value - - 20,439,565 20,439,565
Cash and cash equivalents 15,432,852 15,432,852 50,540,672 50,540,672
2021 2020
Financial liabilities Book value Fair value Book value Fair
value
Trade and other payables 33,080,670 33,080,670 22,065,601 22,065,601
Borrowings 77,646,749 77,646,749 84,246,776 84,246,776
Deferred consideration 1,684,021 1,684,021 5,416,466 5,416,466
Loans 3,280,948 3,280,948 1,597,972 1,597,972
Lease liabilities 4,485,312 4,485,312 - -
*Management assessed that the fair values of cash and cash
equivalents, restricted investment, trade and other receivables and
trade and other payables, borrowings, loans and lease liabilities
approximate their carrying amounts largely due to the short-term
maturities of these instruments.
33. Contingent liabilities Bank guarantee
As required by the Minerals and Petroleum Resources Act (South
Africa), a guarantee amounting to US$12,762,752 (2020:
US$6,204,018) before tax and US$11,098,045 (2020: US$4,446,893)
after tax was issued in favour of the Department of Mineral
Resources for the unscheduled closure of the Bushveld Vametco
Alloys mine. This guarantee was issued on condition that a portion
be deposited in cash with Guard Risk Insurance Company Ltd with
restricted use by the Group, as per the below.
34. Related parties
`
Relationships
Balances and transactions between the Company and its
subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note.
VM Investment Company (Pty) Ltd is a related party due to the
Directors Fortune Mojapelo and Anthony Viljoen being majority
shareholders of VM Investments. VM Investments owns the offices
rented by Bushveld Minerals Limited. The rent paid in 2021
financial period is US$162,897 (2020: US$159,651).
Services rendered by Ondra LLP for the amount of US$200,000
(2020: US$566,056) is classified as a related party transaction due
to a non executive director (Michael Kirkwood) being a partner at
the firm.
The company paid on behalf of Mr Fortune Mojapelo, tax on
historic shares to the value of $439 094. The tax arises from
historic shares issued to Mr Mojapelo. The company had an
obligation to settle the tax on behalf of Mr Fortune Mojapelo. The
amount is reflected as a debtor.
The remuneration of key management personnel, being the
directors and other executive committee members, is set out below.
Further information about the remuneration of individual directors
is provided in the Directors' remuneration report.
2021 2020
US$ US$
Salaries and fees 2,181,500 2,181,022
Short-term incentives 166,190 144,055
Long-term incentives - 564,420
2,145,438 2,889,497
35. Restatements
Bushveld Vanchem acquired the business of Vanchem Vanadium
Products (Pty) Ltd and South African Japan Vanadium (Pty) Ltd on 7
November 2019.
The transaction was accounted for as a business combination as
prescribed by IFRS 3.
In the preparation of the 2019 annual financial statements, the
gain on bargain purchase of R1.2billion (c.$60million) that arose
from the business combination was treated as a permanent tax
difference and no deferred tax was provided in relation to the
uplift in the fair value of the property, plant and equipment
acquired. It was subsequently identified that the accounting
treatment in the 2019 annual financial audited statements was
incorrect and a deferred tax liability should have been recognised
as part of the net assets acquired. The adjustment impacts on the
deferred tax balances at 31 December 2019 and 31 December 2020 and
the income tax charge in those periods.
The information in the following tables show the effect of the
restatement on each affected financial statement line item:
Previously
reported Restated
Consolidated Statement of Financial Position at 31 December Adjustment at 31 December
2020 2020
Deferred tax asset/(liability) 5,085,154 (16,635,016) (11,549,862)
Retained earnings (46,734,823) 18,367,164 (28,367,659)
Foreign exchange translation reserve 11,202,236 (1,732,148) 9,470,088
No impact on cashflows as reported for the year ended 31
December 2020 were noted.
Previously
reported Restated
Consolidated Statement of Financial Position at 31 December Adjustment at 31 December
2019 2019
Deferred tax asset/(liability) 173,892 (24,452,536) (24,278,644)
Retained earnings (83,415,438) 24,452,536 (58,962,902)
Foreign exchange translation reserve 1,655,861 633,277 2,289,138
Previously
reported Restated
Consolidated Statement of Financial Position at 31 December Adjustment at 31 December
2019 2019
Taxation 484,654 6,085,372 6,570,026
Basic loss per share (3.00) 0.37 (2.63
36. Events after the reporting period
Mustang Convertible Loan Note
On 27 April 2021, Bushveld Minerals Limited ("the Company")
announced an investment by Mustang Energy Plc ("Mustang") into VRFB
Holdings Limited ("VRFB-H") to acquire an indirect interest of
11.05 per cent in Enerox GmbH ("Enerox"). Mustang invested
approximately US$7.5 million to subscribe for a 22.10 per cent
interest in VRFB-H ("Mustang Subscription Shares") which was
deployed into Enerox through its holding company, Enerox Holdings
Limited ("EHL"). Mustang funded its investment by way of an issue
of US$8 million unsecured convertible loan notes ("CLNs") bearing a
10 per cent coupon to certain investors ("Mustang Capital Raise").
This was captured in an investment agreement ("the Investment
Agreement").
A condition of the Investment Agreement was that Mustang's
shares be readmitted to trading on the Standard List of the Main
Market of the London Stock Exchange ("Readmission") by 31 December
2021 (the "Maturity Date"), failing which Mustang would have had
the right, by serving written notice on Bushveld within 5 Business
Days following the Maturity Date ("the Notice Date"), to require
that Bushveld, in return for Mustang transferring to Bushveld
Energy Limited all of the Mustang Subscription Shares and payment
of a backstop fee ("Backstop Fee"), must:
issue to each CLN holder by 28 January 2022 such number of new
Bushveld Minerals shares (at a price equal to the 20-day volume
weighted average prior to the date of issue, and rounded down to
the nearest share) as is equivalent to the par value of the
noteholders' CLNs together with accrued and unpaid interest;
and
procure that such Bushveld shares are admitted to trading on the
AIM market of the London Stock Exchange plc within five Business
Days thereafter ("Backstop").
As at 31 December 2021, the directors have concluded that the
fair value of the option right is immaterial for recognition.
Post completion of the investment, on 14 July 2021, the Company
announced that Garnet Commerce Limited ("Garnet"), a shareholder in
Enerox through its holding in EHL, issued a claim form in the High
Court of Justice: Business and Property Courts of England and Wales
(Chancery Division) against VRFB-H and EHL ("the Litigation").
Garnet's claim form sought declarations against VRFB-H concerning
alleged breaches of the joint venture agreement in relation to EHL,
in respect of the indirect investment into EHL through VRFB-H by
Mustang Energy Plc. The Mustang Capital Raise and the concurrent
acquisition by Mustang of shares in the capital of VRFB-H
constitutes a reverse takeover under the Financial Conduct
Authority's Listing Rules and requires the publication of a
prospectus. Due to the uncertainty of the Litigation at the time it
precluded Mustang from issuing a prospectus which is a precursor
for Readmission.
On 19 January 2022:
One of the CLN holders, Primorus Investment Plc ("Primorus")
elected to sell US$1.0 million of its CLNs to other CLN
noteholders. In addition, the Company granted an option to Primorus
to sell its residual CLNs (nominal value of US$1.5 million plus
accrued interest thereon) to the Company. The Company could elect,
at its discretion, as consideration for the exercise of the option,
to pay cash or to issue new Bushveld Minerals convertible loan
notes ("BMN CLNs");
The parties to the Investment Agreement updated the terms of
that agreement as follows ("Updated Terms"):
o The requirement for the publication of a prospectus by Mustang
and Readmission was to occur by no later than 28 February 2022;
o In circumstances where Readmission did not take place by 28
February 2022, assuming Mustang cannot redeem the CLNs:
-- Mustang will give notice to Bushveld to exercise the Backstop
and to the CLNs holders that it has done so, with a request that
the CLN holders advise of their election to convert their CLNs into
Bushveld or VRFB-H shares by the end of March 2022;
50
36. Events after the reporting period (continued)
-- Bushveld will issue the new Bushveld shares under the
Backstop in return for the transfer of the Mustang Subscription
Shares; and
-- Mustang will transfer the Mustang Subscription Shares to
Bushveld. In terms of the Investment Agreement, certain of the CLNs
holders, on exercise of the Backstop, have the discretion to elect
not to receive new Bushveld Minerals shares and instead receive
shares directly in the capital of VRFB-H.
o The Backstop Fee payable by Mustang to Bushveld will be
reduced from 5.0% to 2.0% of the amount of any
CLNs converted to Bushveld shares, to be satisfied by the issue
of Mustang shares at a price of 20 pence each.
o In the event that the Litigation is resolved such that Mustang
can continue to hold the VRFB-H shares and the
Backstop has been exercised, then Mustang has the option to buy
back the Mustang Subscription Shares that would have been
transferred to Bushveld in terms of the Backstop and Bushveld would
have the option to put the Mustang Subscription Shares to Mustang
at the original subscription price.
o Bushveld provided Mustang with a working capital loan of
US$220 000 at no interest ("Loan"), repayable in the
event the Litigation is settled or determined such that Mustang
can hold shares directly or indirectly in VRFB-
H. Mustang repay the Loan in cash, or in shares (together with a
warrant for every two shares), in full on the earlier of 31
December 2023 or Mustang completing a capital raise. The Loan shall
be waived in full in the event that the Litigation is settled or
determined such that Bushveld Energy cannot hold shares directly or
indirectly in VRFB-H and the Backstop arrangements have been
implemented.
o Sixty per cent of the Backstop Fee has been waived in the
event the Litigation does not result in Mustang being able to hold
shares in VRFB-H.
Primorus elected to exercise the option and on 28 March
2022:
the Company issued the BMN CLNs to Primorus;
Mustang cancelled the Mustang CLNs issued to Primorus on 26
April 2021 and issued US$1,500,000 10 per cent convertible loan
notes to Bushveld, subject to and with the benefit of the
provisions contained in the Loan Note Instrument entered into by
Mustang on 26 April 2021 as amended and restated on 18 January 2022
and as further amended and restated between Mustang and the CLNs
noteholders on 28 March 2022. The conversion price of the Mustang
CLNs is GBP0.18;
Mustang paid Bushveld a Backstop Fee of US$32,737; and
the Updated Terms were further updated and supplemented as
follows:
o The nominal amount of the BMN CLNs is GBP1,208,988, being the
nominal value of the Mustang CLNs issued to Primorus of US$1.5
million plus interest accrued thereon as at 28 March 2022 of
US$136,849.32 (being an aggregate amount of US$1,636.849.32),
converted at an exchange rate of US$1.3539/GBP;
o Unless previously redeemed by the Company, and subject to a
conversion notice being received by the
Company at least three business days prior to the relevant
conversion date, a tranche consisting of one sixth of the aggregate
amount of the BMN CLNs may be converted by Primorus into BMN shares
at any time within a conversion period (the six conversion periods
being: 28 February 2022 to 14 April 2022; 15 April 2022 to 14
July 2022; 15 July 2022 to 14 October 2022; 15 October 2022 to
16 January 2023; 17 January 2023 to 14 April 2023;15 April 2023 to
14 July 2023) at a conversion price of GBP0.098987, being the
volume weighted average price of a share as shown on Bloomberg over
the 20 trading days prior to (and excluding) 28 February 2022.
Primorus issued conversion notices in the first two conversion
periods and has accordingly converted one third of the BMN
CLNs.
Enerox Legal Matter
Garnet Commerce Limited ("Garnet") issued a claim form in the
English High court against VRFB Holdings Limited ("VRFB- H") and
Enerox Holdings Limited ("EHL"). EHL owns a 100 per cent interest
in Enerox GmbH ("Enerox"), a Vanadium Redox Flow Battery
manufacturer, providing grid scale and micro-grid energy storage
solutions.
Garnet's claim form sought declarations against VRFB-H
concerning an alleged breach of the joint venture agreement in
relation to EHL. The alleged breach was in respect of the indirect
investment, announced on 27 April 2021, into EHL by Mustang Energy
Plc through VRFB-H, in terms of which Mustang acquired a 22.1
percent shareholding in VRFB-H in return for an investment of
US$7,5 million.
The judgement was made on 7 March 20222 in the High Court of
Justice: Business and Property Courts of England and Wales
(Chancery Division) in the matter between Garnet Commerce Limited
(Claimant), VRFB Holdings Limited and Enerox Holdings Limited
(Defendants) and 2289609 Alberta Limited (Third Party) [Claim No.
BL-2021-001153].
The judgement outcome vindicated the position that the
investment by VRFB Holdings Limited ("VRFB-H") into Enerox Holdings
Limited ("EHL"), funded as it were partly from an investment by
Mustang plc ("Mustang"), was entirely appropriate and not in
violation of any agreements. Accordingly, the investment by Mustang
into VRFB-H, and the investment by VRFB- H into EHL, continue to be
in place. As previously announced, Mustang's investment into VRFB-H
constitutes a reverse takeover according to the AIM Rules. As such,
Mustang shares remained suspended while it prepares a prospectus on
its investment into VRFB-H.
36. Events after the reporting period (continued)
The judgement outcome vindicated the position that the
investment by VRFB Holdings Limited ("VRFB-H") into Enerox Holdings
Limited ("EHL"), funded as it were partly from an investment by
Mustang plc ("Mustang"), was entirely appropriate and not in
violation of any agreements. Accordingly, the investment by Mustang
into VRFB-H, and the investment by VRFB- H into EHL, continue to be
in place. As previously announced, Mustang's investment into VRFB-H
constitutes a reverse takeover according to the AIM Rules. As such,
Mustang shares remained suspended while it prepares a prospectus on
its investment into VRFB-H.
Kiln 3
In June 2022 the refurbishment of Kiln 3 was successfully
commissioned at Vanchem. The commissioning was completed on time
and within budget, with focus now on plant optimization and
ramp-up. The kiln is currently ramping up. Refer to note Going
concern note 3.
Bushveld Minigrid
In June 2022 Bushveld Minerals Limited secured funding for the
engineering, procurement and construction ("EPC") of the Vametco
hybrid mini-grid, which is owned by its 84%-owned energy
subsidiary, Bushveld Energy Limited ("Bushveld Energy").
Bushveld Energy has completed the development and achieved
financial closing for a 3.5 MW solar PV plus a 1 MW / 4 MWh
Vanadium Redox Flow Battery ("VRFB") hybrid mini-grid project for
Vametco, which will operate as a funded independent power producer
("IPP").
Bushveld Energy and NESA Investment Holdings, a South African
investment firm, have signed a shareholders agreement as strategic
equity partners in the project's development and financing, with
the project being housed in a separate special purpose vehicle
("SPV"). NESA has provided 60% of the equity, while Bushveld Energy
has provided 40%. Bushveld Energy will recognise a development fee
of ZAR5.6 million as revenue from the project upon financial
close.
ABSA Relationship Banking has approved a ZAR64 million
(approximately US$4.1 million) loan to part fund the construction
of the mini-grid project.
The project's total cost is estimated to be ZAR113 million
(approximately US$7.1 million).It will be built on a turnkey basis
by NESA Power, who have already executed an Engineering,
Procurement and Supply (EPC) Agreement alongside the SPV., The
project's 1 MW/4 MWh VRFB will be supplied by CellCube, a VRFB
original equipment manufacturer in which Bushveld owns an indirect
25.25% interest.
Site preparation for construction began in Q1 2022. The project
is now fully funded and is expected to be completed in H1 2023.
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END
FR FMMATMTJJBLT
(END) Dow Jones Newswires
June 30, 2022 11:53 ET (15:53 GMT)
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