TIDMBMN
RNS Number : 3620D
Bushveld Minerals Limited
21 June 2023
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
21 June 2023
Bushveld Minerals Limited
("Bushveld Minerals" "Bushveld" or the "Company")
Full Year Results for the 12-month Period Ended 31 December
2022
Bushveld Minerals Limited (AIM: BMN), the integrated primary
vanadium producer and energy storage solutions provider, is pleased
to announce its full year results for the year ended 31 December
2022.
FY2022 Financial Highlights
-- Revenue of US$148.4 million (2021: US$106.9 million).
-- Underlying EBITDA(1) of US$22.3 million and adjusted
EBITDA(1) loss of US$1.7 million (2021: Underlying EBITDA loss
US$7.5 million and adjusted EBITDA loss of US$9.9 million).
-- Impairment losses of US$24.0 million (2021: US$2.4 million)
of which US$$17.2 million relates to Vanchem. The Group previously
recognised US$60.6 million gain on bargain purchase on the
acquisition of Vanchem in 2019.
-- Net loss of US$35.4 million (2021: US$34.2 million).
-- Free cash flow(2) of US$14.6 million (2021: negative US$19.3 million).
-- Cash and cash equivalents of US$10.9 million (2021: US$15.4 million).
-- Net debt of US$79.5 million (2021:US$68.9 million).
-- Net debt excluding the Orion Production Financing Agreement
US$44.4 million (2021:US$35.4 million).
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. Free cash flow defined as operating cash flow less sustaining capital.
Management Changes
-- In a separate announcement published today, the Board
announced that Craig W. Coltman will be appointed as Chief
Executive and will join the Board of the Company with effect from
01 July 2023, the date on which Fortune Mojapelo will step down as
Chief Executive.
Group Priorities and Outlook
-- The Group has made significant progress with the legal
documentation to refinance its existing convertible loan note with
Orion Mine Finance ("Orion") of c.US$45 million (capital plus
interest).
-- On track to meet 2023 production guidance of between 4,200
mtV and 4,500 mtV, and weighted average production cash cost (C1)
guidance of between US$26.1kgV and US$27.0/kgV, (ZAR447/kgV and
438/kgV).
-- Bushveld Electrolyte plant (BELCO) and the Vametco hybrid
mini-grid to be fully operational during the second half of
2023.
-- Complete the Bushveld Energy carve-out.
Analyst conference call and presentation
Bushveld Minerals' Chairman, Michael Kirkwood, Chief Executive
Officer, Fortune Mojapelo, Finance Director, Tanya Chikanza and
Chief Executive designate, Craig W. Coltman will host a conference
call and presentation today at 12:00 PM BST (13:00 SAST), to
discuss the 2022 full year results and management changes with
analysts. Participants may join the call by dialling:
Tel: United Kingdom: +44 (0) 33 0551 0200; South Africa: +27 800
980 512; USA Local: +1 786 697 3501
Password: Quote Bushveld - Full Year when prompted by the operator
Alternatively, the presentation can be accessed as a webcast
here:
https://stream.brrmedia.co.uk/broadcast/6426b8b94b959ac1b1e40d18
Annual Report
The Annual Report for the year ended 31 December 2022 will be
available on the Company's website on Friday 23 June 2023 at the
following link: http://www.bushveldminerals.com/financial-reports/
. A further announcement will be made by the Company once hard
copies of the Annual Reports have been dispatched to
shareholders.
S
Enquiries: info@bushveldminerals.com
+27 (0) 11 268
Bushveld Minerals Limited 6555
Fortune Mojapelo, Chief Executive
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
Gareth Tredway / Tara Vivian-Neal 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 2022, the Company produced more
than 3,800 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.
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
Abundant opportunity constrained by several challenges
TO OUR SHAREHOLDERS,
I am pleased to preface this Annual Report for the first time,
having assumed the role of Chair from Ian Watson during the course
of the year under review.
There is a natural tendency for communications such as this to
dwell on the positive aspects of a company's performance and to
understate or plead mitigation on the challenges and the negatives
that impact results. In my view, this approach arguably discredits
the overall content, and strains the credibility of what is, after
all, the most important annual communication to the current and
prospective owners of a company.
FINANCIAL AND OPERATIONAL PERFORMANCE
The Company remained loss-making, although it was able to report
free cash flow, which was used to pay down debt and partially fund
the Business' other initiatives. The quick ratio approximately
halved, gearing increased, and equity accounts declined. This is
not the outcome we planned for, nor is it sustainable, and this is
reflected in our significantly discounted share price which more
than halved in the year under review. The Board and management
fully recognise this and have evolved plans to restore momentum in
operational stability, revenue generation, cost constraint,
profitability and cash generation.
The results for 2022 were, admittedly, impacted negatively by a
combination of external and internal factors.
Externally, the conflict in Ukraine triggered an energy price
and supply crisis that in turn created an inflationary cycle that
central banks around the world responded to with monetary policy
actions. Additionally, global supply chains were disrupted. Within
South Africa, where the Company primarily operates, electricity
supply was constantly disrupted by loadshedding, the government
logistics infrastructure and services deteriorated, and raised
inflation impacted operating costs.
Internally, the Company faced issues with operational stability,
particularly at its Vanchem plant. Production at the newly
commissioned Kiln-3 was negatively impacted by the unreliable
municipal power supply. The ore supply from Vametco was found to
have a higher silica content than ideal resulting in the need for
system clearing shutdowns. Thus, although Vametco performed well,
Vanchem failed to hit its production target for the year resulting
in guidance misses and higher Group overall sustaining costs.
GOING FORWARD AND FINDING SOLUTIONS
I prefaced my remarks by stating that the challenges Bushveld
has faced, and the consequential disappointing financial results,
mask the abundant opportunity that can be realised as the Company
stabilises, and in the mid-term optimises, its operations and
financial platform. Your Board believes this is eminently
achievable and is underway.
In the face of these challenges, management has and continues to
undertake various initiatives to ensure profitability in the
current year, to improve the Company's capital structure, to secure
a more stable power supply to support increased production, to
contain costs and to crystallise value for the Bushveld Energy
assets. The BELCO electrolyte plant will be commissioned and
commence production during the second half of 2023, making Bushveld
a fully-fledged vanadium electrolyte producer. Additionally, we are
making good progress with the Vametco mini-grid, which is expected
to supply just under 10 percent of Vametco's electrical energy and
also be online during the second half of 2023.
At Vanchem, an arrangement has been concluded with the
municipality to stabilise power supply and this has already had a
positive impact in the first quarter of 2023. Also, an ore supply
contract has been concluded with a third-party operating in the
Bushveld Complex for the supply of low-silica high-grade ore that
will have a positive impact on productivity and costs at the
plant.
As previously announced, plans are well advanced for CellCube,
one of Bushveld Energy's assets, to be carved out into a listed
vehicle on the London Stock Exchange (LSE). Your Company will
retain a significant minority holding in this vehicle and therefore
keep a stake in the evolution of vanadium as an energy storage
resource. This carve-out will help reduce central costs and permit
greater focus on the residual core businesses. The devolved pure
energy storage entity should also be able to attract capital, new
investors, and a valuation aligned to that sector.
We have previously announced that we are negotiating a
restructuring of the financing provided by Orion. The objective of
the proposed arrangements is to extend debt maturities and to
reduce the equity dilution overhang from the convertible loan note.
We are grateful to Orion for their continuing support. The
refinancing will be conditional on a number of factors being worked
on and also upon shareholder approval which we expect will be
sought at this year's General Meeting.
GOVERNANCE
During the year under review the Board of Directors has been
materially reconstituted. Ian Watson, who chaired the Company since
its inception, retired. Ian oversaw the early development of
Bushveld and its transformation into an integrated vanadium
producer. His long service and guiding hand deserve our full
appreciation and we wish him well for the future.
On Ian's retirement I assumed the role of Interim Chair and
subsequently the Board has seen fit to confirm my appointment as
Chairman on an ongoing basis. I thank my fellow Directors for
placing their trust in me and look forward to working with them as
a team to the benefit of all our stakeholders.
Additionally, two of our longest serving Directors, Anthony
Viljoen (a co-founder) and Jeremy Friedlander retired from the
Board. Their wise counsel and engagement in the development of
Bushveld should similarly be recognised.
We have been fortunate to attract a new slate of very capable
Directors to the Board with the appointments over the last 18
months of Kevin Alcock, Mirco Bardella and David Noko. They bring
relevant and valuable experience to the Board and are playing a key
role in guiding Bushveld in its next stage of development.
During the year we also welcomed Jacqueline Musiitwa as a
Non-Executive Director but unfortunately, she was obliged to step
down upon accepting a role within the United States Agency for
International Development (USAID) that precluded her from remaining
in private sector roles. We wish her success in this important
engagement.
Further to this, we have announced that co-founder and Chief
Executive, Fortune Mojapelo, has decided to step down from his role
as of 01 July 2023. He has led the Company for over 11 years and
has, through his vision and dedication to the Company, built
Bushveld Minerals from an exploration business to a multi-asset
vanadium producer, owning and operating two of four global primary
vanadium processing facilities. We sincerely appreciate all that
Fortune has done to make Bushveld what it is today and wish him
every success in his future endeavours.
We are delighted that Craig Coltman is taking up the position as
CEO. Having worked with De Beers Consolidated Mines for over 32
years in various operational and commercial roles, and most
recently as Chief Financial Officer and Executive Director of the
group, Craig is well qualified to take up the leadership mantle and
steer the Company going forward.
We look forward to working with him during a short period of
transition and thereafter.
CONCLUSION
We reinforce to our shareholders that our strategic aims are
robust and achievable. The foundations are laid, the edifice is
progressing but remains work in progress. The focus of the Board
and the Management is to deliver value and returns to our owners
through, and I am being intentionally repetitive, achieving our
operational targets, managing costs, generating free cash flow,
strengthening our balance sheet, and investing capital
prudently.
The Board has been incredibly engaged and supportive as we
tackle our challenges and it remains only for me, on their behalf,
to thank the entire Bushveld team for their efforts, resilience and
dedication during a challenging year and wish them well for fairer
winds ahead.
Michael J. Kirkwood
Chairman
Chief Executive Officer's Review
Progress with more potential in the pipeline
DEAR STAKEHOLDERS,
I am pleased to present the report on Bushveld Minerals'
performance over the past financial year. The year 2022 marks 10
years since the Company's listing on AIM as a junior mineral
exploration company. It also marks five years since we embarked on
our transformative journey from an explorer into a vanadium
producer, first with the acquisition of Vametco, and later Vanchem.
This allowed us to produce a broad range of vanadium products that
enable the production of more environmentally friendly steel and
support the global energy transition to green renewable energy
through the application of long-duration VRFBs.
In that time the Company has invested substantially to establish
a vertically-integrated primary vanadium production platform
comprising (a) two of only four operating primary-processing plants
in the world, supplying more than three percent of the global
vanadium market, with scope to grow this into the future and (b) a
VRFB platform that is positioned to play a meaningful role in the
growing stationary energy storage market.
While 2022 started with optimism on the back of a receding
COVID-19 pandemic, several factors in the geopolitical developments
continued to plague the global economy and specifically the
vanadium market. Consequently, between 2021 and 2022, vanadium
demand in steel making dropped by 0.41 percent which was
fortunately mitigated by a 79 percent increase in vanadium demand
from the energy storage sector, resulting in an overall increase of
0.48 percent in vanadium demand.
This global backdrop was exacerbated by unique local challenges,
most notably the national electricity crisis that saw Vanchem
without a steady flow of electrical supply at a pivotal time when
it was commissioning and optimising Kiln-3 after the refurbishment
programme.
THE YEAR IN REVIEW
If external factors paint a bleak operating environment for the
Company in the past three years, they also cast a spotlight on its
resilience, as it continued to invest in its producing assets to
grow production and lower unit costs (particularly at the recently
refurbished and ramping up Vanchem) as well as continuing to
develop its vanadium energy storage platform.
The Group production increase from 3,592 mtV in 2021 to 3,842
mtV in 2022, was underpinned by Vametco's operational performance.
Having achieved operational stability during the second half of
2021, its consistent production rates enabled it to report
full-year production of 2,705 mtV, exceeding the upper end guidance
of 2,550 - 2,650mtV.
In contrast to stable production at Vametco, Vanchem production
missed guidance for an overall production of 1,137mtV.
Consequently, Group production, at 3,842 mtV, was below the lower
end of the revised guidance of 3,900- 4,100 mtV. Lower recovery
rates from Kiln-1 at Vanchem as it was taken out of service, a
slower-than-anticipated ramp-up of Kiln-3 post commissioning,
higher silica content in the ore supply, and the impact of
loadshedding which affected our ability to optimise output, meant
production levels were considerably lower than anticipated. Details
on the Group's operational performance can be found in the
Operating Assets and Operational Review section of the Annual
Report.
Although we did not achieve our Group production run rate target
of 5,000 - 5,400 mtV by the end of 2022, we remain committed to
meeting this target by attaining similar levels of operational
stability at Vanchem as Vametco - centred around securing supply of
suitable ore, stable power supply and improved post commissioning
operations - all three areas that the Company has made progress in
resolving.
Specifically, in November 2022, an agreement was reached with
the Emalahleni Local Municipality putting Vanchem on a load-
curtailment contract plan. This arrangement has resulted in
reduced/curtailed power supply rather than an outright loss of
power during periods of loadshedding. While this has resulted in a
marked improvement in power security for Vanchem so far in 2023, we
continue to pursue a direct contract with Eskom, in line with
Vametco's power supply arrangements. In addition to this, the
access to low-silica, third-party feedstock will also contribute to
improved production and less downtime at Vanchem.
Group production cash cost of US$27.7/kgV was higher than in
2021 and above our guidance of between US$22.7/kgV and US$23.5/kgV,
driven by significantly higher price inflation across most inputs
and energy prices as well as a higher fixed cost base not matched
by expected higher production at Vanchem. Next to stable production
performance, cost containment is an area receiving intense focus
across several areas of the business. Details on our cost
initiatives can be found in the Finance Director's Review.
BUSHVELD ENERGY
Progress continues in advancing both the development of the
BELCO electrolyte plant in East London and the mini-grid at
Vametco. We have concluded that the full value and potential of
Bushveld Energy as a subsidiary business will be constrained and
for this reason we have been preparing its carve-out into a
stand-alone business.
As previously announced, we have entered into a conditional
agreement to sell our entire interest in CellCube to Mustang, and,
in exchange, we will receive shares in Mustang. The sale is an
important part of the carve-out process, as it effectively gives
Bushveld a significant stake in a London-listed energy storage
business. The transaction provides CellCube with direct access to
capital markets, allowing it to attain a transparent market value
and attract specialist investors looking to participate in this
exciting growth sector.
As we have communicated, it is the right time for this emerging
energy storage story to take on a life of its own, while we retain
an interest in the business through Mustang and, most importantly,
maintain our vertically-integrated business model. Subject to
various regulatory consents and capitalisation, we expect to
complete the carve-out during the second half of 2023.
FINANCIAL PERFORMANCE AND CONVERTIBLE LOAN NOTE
Despite the operational challenges we faced during the year
under review, higher prices and sales meant we generated Revenue of
US$148.4 million, underlying EBITDA of US$22.3 million and a
reduced adjusted EBITDA loss of US$1.7 million. During the year we
repaid the entire Nedbank revolving credit facility of US$5.9
million. We generated free cash flow of US$14.6 million and ended
the year with a cash and cash equivalent balance of US$10.9
million.
A large proportion of our capital investment over the last five
years was funded by debt, which includes a US$35 million
convertible loan note held by Orion. With an advancing maturity
date of November 2023, the convertible loan note was putting
pressure on our balance sheet and creating a potentially dilutive
overhang on the share price. We are in advanced discussions with
Orion for the convertible loan note to be restructured so as to
substantially reduce the pressure on the Company's balance sheet.
Details of the revised structure are provided in Note 37 of the
Financial Statements.
An extensive assessment of the financial position indicates that
the Group requires additional liquidity in order to meet its
obligations and activities over the next 12 months. We are
exercising levers within our control to improve the Group's
liquidity. In addition to these internal mechanisms under our
control we are pursuing various financing alternatives to increase
our liquidity and capital resources. Details on the Group's Going
Concern can be found in the Finance Director's Review and in Note 3
of the Financial Statements.
SUSTAINABILITY AND SAFETY
Long-term sustainability depends on securing and maintaining a
solid social licence to operate by nurturing strong partnerships
with all our stakeholders, especially our communities.
We also acknowledge that sustainability, for all companies, is a
journey. In 2022, we made notable progress in our sustainability
journey, highlighted by the establishment of an Environment Social
and Governance (ESG) Committee to oversee and monitor the
implementation of our ESG strategy. Our longer-term ambitions
remain unchanged, the details of which can be found in the
Sustainability section of this report. The safety and well-being of
our employees and contractors is an absolute priority and we remain
committed to the objective of zero harm in our workplace. We had no
fatalities during the current reporting period, however, the
Group's 2022 Total Injury Frequency Rate (TIFR) of 10.32 was 33
percent higher than 2021. For this reason, in the year under
review, we commissioned an audit of our safety procedures and
performance. We understand what the gaps are and I am heartened to
report that this has started yielding results, as evidenced by the
50 percent improvement in the TIFR in the last quarter of 2022.
CONCLUSION
I extend my heartfelt thanks to every one of Bushveld Minerals'
employees. In spite of the many challenges we face, your visible
commitment to ensuring the success of this Company in 2022 was
greatly appreciated by myself, senior management, and the Board. I
would like to thank our shareholders for their patience,
commitment, and faith in the Company.
I am confident in the opportunities that lie in the future for
the Business and firmly believe that the efforts of the past,
position the Company well to capture these going forward.
Finally, the Company and I announced today that after more than
10 years as the founding CEO of Bushveld Minerals, I will be
stepping down and will not seek re-election to the board of the
Company. Simultaneously announced today is the appointment of Craig
Coltman as CEO of the Company with effect from 01 July 2023.
Co-founding and leading Bushveld Minerals into an integrated
vanadium platform positioned to play an ever increasing role in the
growing vanadium industry has been an immense privilege. While
recognising the challenging circumstances the Company has had to
navigate in recent years, my conviction in the potential and future
success of this Company remains.
To our shareholders and stakeholders, thank you for your trust;
and to the team at Bushveld under the leadership of Craig, I wish
you the success that all your hard work and the trust of our
stakeholders deserves.
Fortune Mojapelo
Chief Executive Officer
Finance Director's Review
Positive Underlying EBITDA as Vametco attains target
production
1. OVERVIEW
Unit FY 2022 FY 2021
Revenue US$m 148.4 106.9
--------- -------- --------
Cost of sales US$m (108.3) (102.8)
--------- -------- --------
Other operating costs and income US$m (40.0) (12.8)
--------- -------- --------
Administrative costs US$m (20.3) (20.5)
--------- -------- --------
Adjusted EBITDA(1) US$m (1.7) (9.9)
--------- -------- --------
Impairment charges US$m (24.0) (2.4)
--------- -------- --------
Underlying EBITDA(2) US$m 22.3 (7.5)
--------- -------- --------
Operating loss US$m (20.1) (29.3)
--------- -------- --------
Average foreign exchange rate US$:ZAR 16.35 14.79
--------- -------- --------
Group production mtV 3,842 3,592
--------- -------- --------
Group sales mtVw 3,584 3,314
--------- -------- --------
All-in sustaining cost US$/kgV 43.7 37.4
--------- -------- --------
Average realised price US$/kgV 41.4 32.2
--------- -------- --------
The 2022 financial results show an improvement on the prior year
in a number of line items although we remained loss making. Our
strategy to prioritise operational stability and increase
investment in maintenance paid off as Vametco achieved consistent
and stable operational performance which was reflected in the
financial numbers.
We recorded an underlying EBITDA of US$22.3 million and adjusted
EBITDA loss of US$1.7 million. While an operating loss of US$20.1
million was incurred, this was a US$9.2 million positive change
from the prior year, as realised prices rose and we continued with
our cost management measures to mitigate any inflationary pressures
and electricity challenges. We realised savings of US$1.5 million
owing to initiatives related to procurement. The operating loss
also included impairment losses of US$24.0 million, U$21.5 million
higher than the prior year. US$17.2 million of the impairment
losses pertain to Vanchem.
Two years of volatile prices, operational challenges and the
impact of the COVID-19 pandemic have restricted our ability to pay
down the rest of the debt on our balance sheet. To this end we
recently announced a proposed refinancing of the Orion US$35
million convertible loan notes and capitalised interest into a
revised capital structure. Details on the proposed refinancing are
included in note 37 in the annual consolidated financial
statements. The refinancing will be conditional on several items,
including due diligence, shareholder approval at a general meeting
and definitive documentation. We have made significant progress
with the legal documentation of the restructuring.
The restructure of the convertible loan notes is expected to
remove the risk of a large cash outflow, which has been putting
pressure on our balance sheet and cash position. The new structure
will enable the Group to repay the debt over a longer time period
and in line with the Group's planned internally generated cash
flows.
2. INCOME STATEMENT
Analysis of results
The income statement summary below is adjusted from the
"statutory" primary statement presentation:
Year ended Year ended
31-Dec-22 31-Dec-21
US$'000 US$'000
Revenue 148,448 106,857
-------------------- --------------------
Cost of sales excluding depreciation (90,268) (83,780)
-------------------- --------------------
Other operating costs and income(3) (39,950) (12,837)
-------------------- --------------------
Administration costs excluding depreciation (19,889) (20,125)
-------------------- --------------------
Adjusted EBITDA (1,659) (9,885)
-------------------- --------------------
Depreciation (18,475) (19,395)
-------------------- --------------------
Operating loss (20,134) (29,280)
-------------------- --------------------
Other losses (818) (1,902)
-------------------- --------------------
Share of loss from joint ventures (5,112) (4,351)
-------------------- --------------------
Fair value gain on derivative liability 2,934 9,010
-------------------- --------------------
Net financing expenses(4) (13,654) (12,373)
-------------------- --------------------
Loss before tax (36,784) (38,896)
-------------------- --------------------
Income tax 1,345 4,671
-------------------- --------------------
Net loss for the year (35,439) (34,225)
-------------------- --------------------
Revenue
Year ended Year ended
31-Dec-22 31-Dec-21
Group sales (mtV) 3,584 3,314
----------- -----------
Average realised price (US$/kgV) 41.4 32.2
----------- -----------
Revenue (US$'000) 148,448 106,857
----------- -----------
Revenue
Revenue of US$148.4 million for the Group was 39 percent higher
than in the previous year, underpinned by the improved average
realised price of US$41.4/kgV (2021: US$32.2/kgV) and increased
Group sales volumes of 3,584 mtV, following record production of
3,842 mtV.
The geographic split of Group sales in 2022 was 44 percent to
the USA, 27 percent to Europe, 9 percent to Asia, 7 percent to
South Africa, and 13 percent to the rest of the world.
During the year, nitro vanadium sales into North America were
prioritised due to the higher vanadium prices realised in this
region and we maximised worldwide sales into the aerospace and
speciality chemical products sectors, which attract price
premiums.
Cost analysis
Year ended Year ended
31-Dec-22 31-Dec-21
Cost of sales excluding depreciation (90, 268) (83,780)
----------- -----------
Other operating costs and income (39,950) (12,837)
----------- -----------
Administrative costs excluding depreciation (19,889) (20,125)
----------- -----------
Total income statement operating cost excluding
depreciation (150,107) (116,742)
----------- -----------
Total units sold (mtV) 3,584 3,314
----------- -----------
Cost per income statement per unit sold
(excluding depreciation) (US$/kgV) 41.9 35.2
----------- -----------
Sustaining capital (6,589) (7,192)
----------- -----------
Total cost including sustaining capital (156,696) (123,934)
----------- -----------
Cost per unit sold including sustaining
capital (US$/kgV) 43.7 37.4
----------- -----------
Cost of sales
The cost of sales, excluding depreciation, for the year was
US$90.3 million, contained to an inflationary 8 percent increase
year-on-year, primarily due to higher costs at both Vametco and
Vanchem. The cost increases included:
-- Higher personnel costs at Vanchem associated with the
commissioning and ramp-up of Kiln-3 in order to seek to achieve the
anticipated production run rate of 2,600 mtVp.a which was not
attained in the financial year due to ore quality and electricity
supply issues;
-- Inflationary increases in raw material prices from suppliers;
-- Higher energy costs due to the increase in oil and diesel
prices as well as an increase in diesel usage during periods of
loadshedding at Vanchem;
-- Higher maintenance costs, mainly at Vanchem, due to the
additional maintenance required on Kiln-1, as well as maintenance
costs to sustain the plants, production volumes and improve
operational stability; and
-- Higher mining costs at Vametco, primarily due to increased
activity associated with mining the Upper Seam.
Other operating costs and income
Other operating costs and income increased to US$40.0 million
due to:
-- A US$2.9 million increase in selling and distribution costs
to US$9.3 million, primarily driven by the higher commissions paid
which are a consequence of the increased revenue as well as
increased shipping and warehouse costs;
-- A US$3.3 million increase in idle plant costs to US$6.7
million, primarily due to the unplanned downtime at Vanchem
associated with Kiln-1 during the first half of the year, unplanned
downtime due to loadshedding and higher than anticipated silica
content in the ore;
-- A US$21.5 million increase in impairment losses to US$24.0
million, due to an impairment loss of US$17.2 million recognised
for Vanchem given the slower than expected ramp up, impairment loss
of US$5.1 million in respect of the Imaloto Coal Project as there
are no further planned expenditures for this project, and an
impairment loss of US$1.6 million recognised for property, plant
and equipment. The Group recognised in 2019 a gain on bargain
purchase of US$60.6 million on the acquisition of Vanchem being the
difference between the fair value of the consideration paid and the
fair value of the acquired assets and liabilities; and
-- Other operating income of US$2.7 million was unchanged relative the prior year.
Cost per unit sold
The Group cost per unit sold for the year (including sustaining
capital expenditure) was US$43.7/kgV. This represents a 17 percent
increase relative to the prior year primarily as a result of the
cost factors noted above, offset by the cost containment measures
we implement; higher sales volumes and a weaker ZAR:US$ exchange
rate.
Administration costs
Administration costs, excluding depreciation charges for the
year were US$19.9 million. Below is a breakdown of the key items
included in administration costs:
Year ended Year ended
31-Dec-22 31-Dec-21
US$'000 US$'000
Staff costs 9,327 10,746
----------- -----------
Professional fees 6,007 5,861
----------- -----------
Share-based payments 315 (375)
----------- -----------
Other (incl. IT and security expenses) 4,240 3,893
----------- -----------
19,889 20,125
----------- -----------
Cost-saving programme
We continued with our cost-reduction measures, as previously
announced, and realised savings of US$1.5 million owing to
procurement initiatives for the 2022 financial year. We
re-estimated the projected savings for 2023, in light of
inflationary pressures, lingering product shortages, wage
escalations, shipping challenges and surging commodity prices, to
US$1.3 million. The total expected savings will be US$2.8 million
over the two-year period, which is still within the US$2.5 million
to US$4.0 million cost-savings target we had previously provided,
despite the negative impact of factors outside of our control such
as inflation. While production volume growth is expected to
contribute the most to reducing unit costs, we will continue to
seek broader cost- saving opportunities to improve the Group's unit
cost performance even further. These efforts are focused on
procurement, payroll, administration costs and maintenance.
Adjusted and underlying EBITDA
Adjusted EBITDA is a factor of volumes, prices and cost of
production. This is a measure of the underlying profitability of
the Group, which is widely used in the mining sector. Underlying
EBITDA removes the effect of impairment charges.
Year ended Year ended
31-Dec-22 31-Dec-21
US$'000 US$'000
Revenue 148,448 106,857
------------------ -----------
Cost of sales (108,304) (102,782)
------------------ -----------
Other operating costs and income (39,950) (12,837)
------------------ -----------
Administration costs (20,328) (20,518)
------------------ -----------
Add: Depreciation and amortisation 18,475 19,395
------------------ -----------
Adjusted EBITDA (1,659) (9,885)
------------------ -----------
Add: Impairment losses 23,965 2,439
------------------ -----------
Underlying EBITDA 22,306 (7,446)
------------------ -----------
US$'000
------------------ -----------
2021 Underlying EBITDA (7,446)
------------------ -----------
Revenue changes 41,591
------------------ -----------
Operating costs changes (20,163)
------------------ -----------
Inventory movement 8,324
------------------ -----------
2022 Underlying EBITDA 22,306
------------------ -----------
The Group delivered an adjusted EBITDA loss of US$1.7 million,
an improvement of US$8.2 million compared to 2021, primarily driven
by the higher average realised price and higher sales volumes, and
partially offset by the increase in cost of sales and other
operating and administration costs. The Group generated an
underlying EBITDA of US$22.3 million, which was an improvement of
US$29.8 million compared to the previous year.
Net financing expenses
Net financing expenses were US$13.7 million, US$1.3 million
higher than in the prior year. The increase was primarily due to
interest on the Orion PFA and Orion convertible loan notes. Below
is a breakdown of net financing expenses:
Year ended Year ended
31-Dec-22 31-Dec-21
US$'000 US$'000
Finance income (494) (935)
----------- -----------
Interest on borrowings 11,189 10,687
----------- -----------
Unwinding of discount 1,726 1,915
----------- -----------
Interest on lease liabilities 974 459
----------- -----------
Other finance costs 259 247
----------- -----------
13,654 12,373
----------- -----------
Interest on borrowings mainly reflected the finance cost on the
Orion convertible loan notes of US$6.4 million (2021: US$5.4
million), interest on the Orion PFA of US$4.4 million (2021: US$4.3
million), and interest on the Nedbank revolving credit facility of
US$0.2 million (2021: US$0.6 million). Refer to note 36 in the
annual consolidated financial statements for details of the change
in the accounting treatment for the Orion convertible loan notes
and its impact on finance costs.
Other non-cash costs
The share of loss from investments in joint ventures of US$5.1
million (2021: US$4.4 million) is the Group's share of the loss
from its investment in VRFB-H.
The fair value gain on the derivative liability on the Orion
convertible loan notes was US$2.9 million, a decrease from the
US$9.0 million in the prior year, as restated. The decrease was
primarily driven by the decrease in the Company's share price
compared to the conversion price on the Orion convertible loan
notes of 17 pence.
3. BALANCE SHEET
Assets
Non-current assets related to intangibles and property, plant
and equipment decreased compared to the previous year due to
impairment losses recognised, depreciation, and exchange rate
differences arising from a weaker ZAR:US$ exchange rate, partially
offset by capital expenditures.
Investment in joint ventures of US$3.2 million represents the
Group's equity investments in VRFB-H and the Vametco mini-grid. The
investment in joint ventures decreased from 2021 owing to the
recognition of the Group's share of the losses amounting to US$5.1
million, partly offset by the US$1.2 million investment into
Vametco's mini-grid.
Inventories of US$55.0 million increased by US$13.4 million
compared to the prior year, primarily due to an increase in work in
progress at Vanchem as a result of continued loadshedding. This
impacted the conversion of work in progress to finished goods.
The decrease in cash and cash equivalents to US$10.9 million was
primarily due to capital expenditures incurred (US$18.2 million),
the repayment of the Nedbank revolving credit facility (US$5.9
million), the payment of finance costs on the Orion PFA (US$2.9
million), partially offset by cash generated from operations
(US$21.2 million), and the proceeds received from funding provided
by the IDC to build the BELCO electrolyte plant (US$3.4
million).
Equity
The increase in the share capital and share premium was
primarily due to the conversion of the convertible loan notes
issued to Primorus Investments Plc and the shares issued to Lind
Global Macro Fund, in accordance with the backstop agreement
between the Mustang convertible loan notes holders (see RNS dated
29 March 2022). These transactions were entered into in the process
of carving out Bushveld Energy.
Liabilities
Total borrowings (excluding lease liabilities) of US$83.1
million increased by US$3.2 million compared to the previous year,
due to capitalised finance costs of US$11.7 million and funding
provided by the IDC of US$3.4 million in respect of Belco,
partially offset by the repayment of the Nedbank revolving credit
facility of US$5.9 million, repayment of finance costs on the Orion
PFA of US$2.9 million and the fair value gain on the derivative
liability of US$2.9 million. Current borrowings increased in 2022
to US$47.9 million, as the Orion convertible loan notes is due by
the end of 2023.
The net debt reconciliation below outlines the Group's total
debt and cash position:
Year ended Year ended
31-Dec-22 31-Dec-21 Change
US$'000 US$'000 US$'000
Nedbank revolving credit facility - (5,821) 5,821
----------- ----------- ---------
Orion Production Financing (PFA)
Arrangement (35,146) (33,512) (1,634)
----------- ----------- ---------
Orion convertible loan notes (39,742) (36,282) (3,460)
----------- ----------- ---------
Industrial Development Corporation
(IDC) loans (5,480) (3,282) (2,198)
----------- ----------- ---------
Other (2,762) (1,000) (1,762)
----------- ----------- ---------
Lease liabilities (7,283) (4,485) (2,798)
----------- ----------- ---------
Total debt (90,413) (84,382) (6,031)
----------- ----------- ---------
Total debt excluding PFA (55,267) (50,870) (4,397)
----------- ----------- ---------
Cash and cash equivalents 10,874 15,433 (4,559)
----------- ----------- ---------
Net debt (79,539) (68,949) (10,590)
----------- ----------- ---------
Net debt excluding PFA (44,393) (35,437) (8,956)
----------- ----------- ---------
Net debt increased by US$10.6 million compared to the prior year
due to capitalised interest of US$3.4 million on the Orion
convertible loan notes, increase in lease liabilities of US$2.8
million due to additional leases and extension of lease terms and
the decrease in the cash and cash equivalents balance of US$4.6
million.
The Group expects to repay the Orion debt obligations from
internally generated cash flows.
4. CASH FLOW STATEMENT
The table below summarises the main components of cash flow
during the year:
Year ended Year ended
31-Dec-22 31-Dec-21
US$'000 US$'000
Operating loss (20,134) (29,280)
------------------ -------------------
Impairment losses 23,965 2,439
------------------ -------------------
Depreciation and amortisation 18,475 19,395
------------------ -------------------
Other non-cash items (6,630) -
------------------ -------------------
Changes in working capital and provisions 6,154 (5,022)
------------------ -------------------
Taxes received/(paid) (648) 394
------------------ -------------------
Cash inflow/(outflow) from operations 21,183 (12,074)
------------------ -------------------
Sustaining capital expenditures (6,589) (7,192)
------------------ -------------------
Free cash flow 14,594 (19,266)
------------------ -------------------
Cash used in other investing activities (13,000) (9,967)
------------------ -------------------
Cash used in financing activities (5,346) (7,049
------------------ -------------------
Cash outflow (3,752) (36,282)
------------------ -------------------
Opening cash and cash equivalents 15,433 50,541
------------------ -------------------
Foreign exchange movement (807) 1,174
------------------ -------------------
Closing cash and cash equivalents 10,874 15,433
------------------ -------------------
Operating activities
The Group generated cash from operating activities of US$21.2
million, an increase of US$33.3 million from the previous year,
primarily driven by the improvement in adjusted EBITDA.
Investing activities
Cash used in investing activities (including sustaining capital
expenditure) of US$19.6 million was primarily driven by capital
expenditure on property, plant and equipment of US$18.2 million and
an equity investment into the Vametco mini-grid of US$1.2
million.
Capital Expenditure
2022 marks the end of a substantive capital investment phase,
during which we undertook extensive refurbishment and optimisation
of Vametco and Vanchem and constructed the BELCO electrolyte plant.
In addition, following the commissioning of Vanchem's Kiln-3, the
Company's capital expenditure rate has halved compared to 2021 as
spend has been limited mainly to sustaining capital, which is
expected to support positive cash generation.
Capital Expenditure (US$' million)
2022 2023
Vametco 6.5 -
- Growth 3.7-3.9
- Sustaining
------ ----------
Vanchem 4.5 -
- Growth 0.1 3.2-3.4
- Sustaining
------ ----------
Bushveld Energy 7.1 2.3-2.4*
- Growth - -
- Sustaining
------ ----------
Total 18.2 9.2-9.7
------ ----------
* Most of the spending will be on BELCO
Financing activities
Cash used in financing activities of US$5.3 million comprised
the repayment of the Nedbank revolving credit facility (including
interest) of US$5.9 million, repayment of finance cost on the Orion
PFA of US$2.9 million and repayment of lease liabilities of US$0.7
million, partially offset by the proceeds received from borrowings
of US$4.2 million, primarily from the IDC (US$3.4 million).
5. FINANCIAL RISK
The primary financial risks faced by the Group relate to the
availability of funds to meet business needs (liquidity risk), the
risk of default by counterparties to financial transactions (credit
risk), fluctuations in interest and foreign exchange rates, and
commodity prices (market risk). These factors are more fully
outlined in the notes to the consolidated financial statements.
They are important aspects to consider when addressing the Group's
going concern status. We proactively manage the risks within our
control.
There are, however, factors outside the control of management.
These are volatility in the ZAR:US$ exchange rate, as well as the
vanadium price, which we do not currently hedge, and which can have
a significant impact on the cash flows of the business. The slower
than planned ramp up in production at Vanchem has hampered our
ability to introduce a hedging policy. However, we remain committed
to considering a hedging policy and assessing the potential to
implement a strategy to address the fluctuations in the ZAR:US$
exchange rate when we attain steady state production at our
operations.
6. GOING CONCERN AND OUTLOOK
We closely monitor and manage liquidity risk by ensuring that
the Group has sufficient funds for all ongoing operations. As part
of the annual budgeting and long-term planning process, the
Directors reviewed the approved Group budget and cashflow forecast
through to 31 December 2024. The current cashflow forecast has been
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.
We entered into a non-binding term sheet with Orion subsequent
to year-end to refinance the convertible loan notes. The closing of
the transaction is still subject to certain conditions, including
South Africa Reserve Bank approval, shareholders' approval at the
general meeting which we urge shareholders to support and the
finalisation of definitive binding documentation. We have made
significant progress with the legal documentation of the
restructuring.
We have performed an assessment of whether the Group would be
able to continue as a going concern for at least twelve months from
the date of the annual consolidated financial statement. We took
into account the financial position, expected future performance of
the operations, the debt facilities and debt service requirements,
including those of the proposed refinancing of the Orion
convertible loan notes, the working capital and capital expenditure
commitments and forecasts.
Current cashflow forecast indicates that the Group requires
additional liquidity to fund its obligations and activities during
the next twelve months. We have identified and are proactively
exercising levers within our control which will improve the Group's
liquidity. Importantly, we are also actively pursuing various
financing alternatives including raising capital to increase
liquidity and capital resources. We believe shareholders will
support the capital raising endeavours to ensure the growth the
Company is positioned for, can be delivered.
The Group's ability to continue as a going concern is dependent
on its ability to complete the refinance of the Orion convertible
loan notes and obtain the necessary additional funding required
through a capital raise or alternative funding sources. These
conditions indicate the existence of material uncertainties that
may cast significant doubt on the Group's ability to continue as a
going concern.
The consolidated financial statements for the year ended 31
December 2022 have been prepared on a going concern basis as, in
the opinion of the Directors, the Group will be in a position to
continue to meet its operating and capital costs requirements and
pay its debts as and when they fall due for at least twelve months
from the date of this report. The going concern note included in
the accounting policies provides further information.
Tanya Chikanza
Finance Director
1. Adjusted EBITDA is EBITDA excluding the Group's share of
losses from joint ventures, fair value gain on derivative liability
and other losses.
2. Underlying EBITDA is Adjusted EBITDA excluding impairment losses.
3. Other operating costs and income include other operating
income, impairment losses, selling and distribution costs, other
mine operating costs and idle plant costs.
4. Finance income less finance costs
5. Other operating costs and income include other operating
income, selling and distribution costs, other mine operating costs
and idle plant costs
6. Finance income less finance costs
Bushveld Minerals Limited (Registration number 54506)
Consolidated Financial Statements for the year ended 31 December
2022
Consolidated Statement of Profit or Loss
------------------------------------------------- ---------------------------------
2022 2021
Restated*
Notes US$ '000 US$ '000
------------------------------------------------- ------- --------- -------------
Revenue 5 148,448 106,857
Cost of sales (108,304) (102,782)
--------- -------------
Gross profit 40,144 4,075
Other operating income 2,733 2,619
Impairment losses 13, 14 (23,965) (2,439)
Selling and distribution costs (9,270) (6,406)
Other mine operating costs (2,723) (3,224)
Idle plant costs (6,725) (3,387)
Administration expenses 7 (20,328) (20,518)
--------- -------------
Operating loss (20,134) (29,280)
Finance income 8 494 935
Finance costs* 9 (14,148) (13,308)
Other losses 10 (818) (1,902)
Fair value gain on derivative liability* 28 2,934 9,010
Share of loss from investments in joint ventures 18 (5,112) (4,351)
--------- -------------
Loss before taxation (36,784) (38,896)
Taxation 11 1,345 4,671
--------- -------------
Loss for the year (35,439) (34,225)
--------- -------------
Loss attributable to:
Owners of the parent (38,968) (32,892)
Non-controlling interest 3,529 (1,333)
--------- -------------
(35,439) (34,225)
--------- -------------
Loss per ordinary share
Basic loss per share (cents) 12 (3.07) (2.74)
Diluted loss per share (cents) 12 (3.07) (2.74)
--------- -------------
The accounting policies and the notes form an integral part of
the consolidated financial statements.
Refer to note 36 for details of restatement
Consolidated Statement of Comprehensive Loss
-------------------------------------------------- --------------------------------------
2022 2021
Restated*
Notes US$ '000 US$ '000
-------------------------------------------------- ------------ --------- -------------
Loss for the year (35,439) (34,225)
Consolidated other comprehensive income / (loss):
Items that will not be reclassified to profit
or loss:
Losses on valuation of investments in equity
instruments - (3,772)
Other fair value movements 140 14
--------- -------------
Total items that will not be reclassified to
profit or loss 140 (3,758)
--------- -------------
Items that may be reclassified to profit or
loss:
Currency translation differences (15,712) (9,713)
--------- -------------
Other comprehensive loss for the year net of
taxation (15,572) (13,471)
--------- -------------
Total comprehensive loss (51,011) (47,696)
--------- -------------
Total comprehensive loss attributable to:
Equity holders (53,323) (48,031)
Non-controlling interest 2,312 335
--------- -------------
(51,011) (47,696)
--------- -------------
The accounting policies and the notes form an integral part of
the consolidated financial statements.
Consolidated Statement of Financial
Position
----------------------------------------- --------------------------------------------------
2022 2021 2020
Restated* Restated*
Notes US$ '000 US$ '000 US$ '000
----------------------------------------- ------- --------- --------------- -------------
Assets
Non-current assets
Intangible assets 13 53,469 59,254 59,004
Property, plant and equipment 14 127,409 153,113 167,580
Investment properties 15 2,412 2,595 2,811
Investments in joint ventures 18 3,151 7,855 -
Restricted investment 21 2,710 - -
--------- --------------- -------------
Total non-current assets 189,151 222,817 229,395
--------- --------------- -------------
Current assets
Inventories 19 54,990 41,646 34,082
Trade and other receivables 20 9,498 17,642 10,425
Restricted investment 21 - 2,869 3,111
Current tax receivable - 275 814
Financial assets 17 3,075 - 22,453
Cash and cash equivalents 22 10,874 15,433 50,541
--------- --------------- -------------
Total current assets 78,437 77,865 121,426
--------- --------------- -------------
Total assets 267,588 300,682 350,821
--------- --------------- -------------
Equity and liabilities
Share capital 23 17,122 16,797 15,858
Share premium 23 127,702 125,551 117,066
(Accumulated loss)/retained income* 23 (39,147) (179) 21,567
Share-based payment reserve 24 515 - 375
Foreign currency translation reserve 23 (35,346) (20,851) (9,470)
Fair value reserve 23 (1,798) (1,938) 12,966
--------- --------------- -------------
Attributable to equity holders 69,048 119,380 158,362
Non-controlling interest 36,583 32,482 32,147
--------- --------------- -------------
Total equity 105,631 151,862 190,509
--------- --------------- -------------
Liabilities
Non-current liabilities
Post retirement medical liability 25 1,675 1,906 2,076
Environmental rehabilitation liabilities 26 16,610 18,031 17,998
Deferred consideration 27 1,527 1,684 1,803
Borrowings* 28 35,272 69,686 79,362
Lease liabilities 29 6,721 3,921 4,377
Deferred tax liabilities 16 1,191 6,014 11,550
--------- --------------- -------------
Total non-current liabilities 62,996 101,242 117,166
--------- --------------- -------------
Current liabilities
Trade and other payables 30 45,896 33,081 22,066
Provisions 31 1,714 3,722 3,297
Borrowings* 28 47,858 10,211 13,337
Lease liabilities 29 561 564 626
Deferred consideration 27 901 - 3,820
Current tax payable 2,031 - -
-------- -------- --------
Total current liabilities 98,961 47,578 43,146
-------- -------- --------
Total liabilities 161,957 148,820 160,312
-------- -------- --------
Total equity and liabilities 267,588 300,682 350,821
-------- -------- --------
The consolidated financial statements and the notes were
approved by the Board of Directors on the 20th of June 2023 and
were signed on its behalf by:
Tanya Chikanza Finance Director
The accounting policies and the notes form an integral part of
the consolidated financial statements.
Refer to note 36 for details of restatement
Bushveld Minerals Limited
(Registration number 54506)
Consolidated Financial Statements for the year ended 31 December
2022
Consolidated Statement of Changes in Equity
Share Share Foreign Share-based Convertible Fair (Accumulated Total Non- Total
capital premium currency payment loan note value loss)/retained attributable controlling equity
translation reserve reserve reserve income to equity interest
reserve holders
of the Group
---------------
US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
--------------- ------------ ----------- ------------ ----------- ------------ ---------- -------------- ------------ ------------ ----------------
Opening balance
as previously
reported 15,858 117,066 (9,470) 375 55 12,966 28,367 165,217 32,147 197,364
Adjustments
Restatement
(note 36) - - - - (55) - (6,800) (6,855) - (6,855)
------------ ----------- ------------ ----------- ------------ ---------- -------------- ------------ ------------ ----------------
Restated
balance at 1
January
2021* 15,858 117,066 (9,470) 375 - 12,966 21,567 158,362 32,147 190,509
------------ ----------- ------------ ----------- ------------ ---------- -------------- ------------ ------------ ----------------
Restated loss
for the year* - - - - - - (32,892) (32,892) (1,333) (34,225)
Other
comprehensive
income,
net of tax:
Currency
translation
differences - - (11,381) - - - - (11,381) 1,668 (9,713)
Other fair
value movements - - - - - (3,758) - (3,758) - (3,758)
------------ ----------- ------------ ----------- ------------ ---------- -------------- ------------ ------------ ----------------
Total
comprehensive
loss
for the year - - (11,381) - - (3,758) (32,892) (48,031) 335 (47,696)
Transaction
with owners:
Issue of shares 939 8,485 - - - - - 9,424 - 9,424
Share-based
payment - - - (375) - - - (375) - (375)
Transfer
between
reserves - - - - - (11,146) 11,146 - - -
------------ ----------- ------------ ----------- ------------ ---------- -------------- ------------ ------------ ----------------
Balance at 1
January 2022 16,797 125,551 (20,851) - - (1,938) (179) 119,380 32,482 151,862
------------ ----------- ------------ ----------- ------------ ---------- -------------- ------------ ------------ ----------------
Loss for the
year - - - - - - (38,968) (38,968) 3,529 (35,439)
Other
comprehensive
income,
net of tax:
Currency
translation
differences - - (14,495) - - - - (14,495) (1,217) (15,712)
Other fair
value movements - - - - - 140 - 140 - 140
------------ ----------- ------------ ----------- ------------ ---------- -------------- ------------ ------------ ----------------
Total
comprehensive
loss
for the year - - (14,495) - - 140 (38,968) (53,323) 2,312 (51,011)
------------ ----------- ------------ ----------- ------------ ---------- -------------- ------------ ------------ ----------------
Transaction
with owners:
Issue of shares 325 2,151 - - - - - 2,476 - 2,476
Share-based
payment - - - 515 - - - 515 - 515
Contribution
from
non-controlling
interest (note - - - - - - - - 1,789 1,789
28)
------------ ----------- ------------ ----------- ------------ ---------- -------------- ------------ ------------ ----------------
Balance at 31
December 2022 17,122 127,702 (35,346) 515 - (1,798) (39,147) 69,048 36,583 105,631
------------ ----------- ------------ ----------- ------------ ---------- -------------- ------------ ------------ ----------------
*Refer to note 36 for details of restatement
Consolidated Statement of Cash Flows
------------------------------------------------ -------------------------------------------
2022 2021
Restated*
Note US$ '000 US$ '000
------------------------------------------------ ------------------ --------- ------------
Cash flows from operating activities
Loss before taxation (36,784) (38,896)
Adjustments for:
Depreciation property, plant and equipment
(including right-of-use assets) 14 18,475 19,395
Share of loss from joint ventures 18 5,112 4,351
Remeasurement of financial liabilities 28 - 1,902
Fair value gain on derivative liability* 28 (2,934) (9,010)
Finance income 8 (494) (935)
Finance costs* 9 14,148 13,308
Impairment losses 13, 14 23,965 2,439
Other non-cash movements 1,138 -
Foreign exchange differences (6,949) -
Changes in working capital 6,154 (5,022)
Income taxes (paid)/received (648) 394
--------- ------------
Net cash generated from / (used in) operating
activities 21,183 (12,074)
--------- ------------
Cash flows from investing activities
Finance income 336 935
Purchase of property, plant and equipment (18,197) (19,450)
Payment of deferred consideration 27 - (3,874)
Purchase of investments 18 (1,211) (9,988)
Purchase of exploration and evaluation assets 13 (517) (929)
Disposal of financial assets held at fair value - 16,147
--------- ------------
Net cash used in investing activities (19,589) (17,159)
--------- ------------
Cash flows from financing activities
Finance costs 28 (3,217) (2,948)
Repayment of borrowings 28 (5,623) (4,732)
Proceeds from borrowings 28 4,222 1,336
Lease payments 29 (728) (705)
--------- ------------
Net cash used in financing activities (5,346) (7,049)
--------- ------------
Total cash and cash equivalents movement for
the year (3,752) (36,282)
Cash and cash equivalents at the beginning
of the year 15,433 50,541
Effect of translation of foreign exchange rates (807) 1,174
--------- ------------
Total cash and cash equivalents at end of
the year 22 10,874 15,433
--------- ------------
The accounting policies and the notes form an integral part of
the consolidated financial statements.
*Refer to note 36 for details of restatement
Notes to the Consolidated Financial Statements
1. General information and principal activities
Bushveld Minerals Limited ("Bushveld" or the "Company") and its
subsidiaries and interest in equity accounted investments (together
the "Group") are an integrated primary vanadium producer and energy
storage solutions provider. The Company 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.
As at 31 December 2022, the Bushveld Group comprised of:
Equity holding Country
Company Note and voting of incorporation Nature of activities
rights
---------------------------------- ------ -------------- ------------------ -------------------------
Bushveld Minerals Limited n/a Guernsey Ultimate holding company
Bushveld Resources Limited 1 100% Guernsey Holding company
Ivanti Resources (Pty) Limited 2 100% South Africa Processing company
Pamish Investments No 39 (Pty)
Limited 2 64% South Africa Mining right holder
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% Mauritius Holding company
Bushveld Energy Company (Pty)
Limited 4 100% South Africa Energy development
Bushveld Vametco Hybrid Mini-Grid
Company (RF) 12 40% 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 Sales of vanadium
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% Madagascar Power generation company
Lemur Investments Limited 3 100% Mauritius Holding company
Lemur SA (Pty) Ltd 3 100% South Africa Coal exploration
================================== ====== ============== ================== =========================
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:
Amendments to The amendments simplified the application of IFRS 1
IFRS 1 First time by a subsidiary that becomes a first-time adopter after
adoption of International its parent. Subsidiary, associate or joint venture can
Financial Reporting elect to apply exemption in par D16(a) to the cumulative
Standards ("IFRS"): translation difference.
Subsidiary as
a first-time adopter
--------------------------- -----------------------------------------------------------
Amendments to The amendments clarify what is included in the fees
IFRS 9 Financial paid and fees received.
Instruments: Fees
in the '10 per
cent' test for
derecognition
of financial liabilities
--------------------------- -----------------------------------------------------------
Amendments to The amendments address costs a company should include
IAS 37 Provisions, as the cost of fulfilling a contract when assessing
Contingent Liabilities whether a contract is onerous.
and Contingent
Assets: Cost of
fulfilling a contract
--------------------------- -----------------------------------------------------------
Amendments to The amendments prohibit deducting from the cost of an
IAS 16 Property, item of property, plant and equipment any proceeds from
Plant and Equipment: selling items produced while bringing that asset to
Proceeds before the location and condition necessary for it to be capable
intended use of operating in the manner intended by management.
--------------------------- -----------------------------------------------------------
Amendments to The amendments update an outdated reference in IFRS
IFRS 3 Business 3 without significantly changing its requirements
Combinations:
Reference to the
conceptual framework
--------------------------- -----------------------------------------------------------
The adoption of these Standards and Interpretations, which
become effective for annual periods beginning on or after 1 January
2022, had no material impact on the consolidated 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:
Amendments to The amendments provide recognition exemption and no
IAS 12 Income longer applies to transactions that, on initial recognition,
Taxes: Deferred give rise to equal taxable and deductible temporary
tax related to differences.
assets and liabilities
arising from a
single transaction
-------------------------- -----------------------------------------------------------------
Amendments to The amendments include the definition of accounting
IAS 8 Accounting estimates to help entities to distinguish between accounting
Policies, Changes policies and accounting estimates.
in Accounting
Estimates and
Errors: Definition
of accounting
estimates
-------------------------- -----------------------------------------------------------------
Amendments to The amendments intend to help preparers in deciding
IAS 1 Presentation which accounting policies to disclose in their financial
of Financial Statements statements.
and IFRS Practice
Statement 2:
-------------------------- -----------------------------------------------------------------
Amendments to
IAS 1 Presentation The amendments may change the classification of certain
of Financial Statements: liabilities as current or non-current, for example convertible
Classification debt. Entities may need to provide new disclosures for
of liabilities liabilities subject to covenants.
as current or
non- current and
non-current liabilities
with covenants
-------------------------- -----------------------------------------------------------------
IFRS 16 Leases: The amendments specify how a seller-lessee should apply
Lease liability the subsequent measurement requirements in IFRS 16 to
in a sale and the lease liability that arises in the sale and leaseback
leaseback transaction.
-------------------------- -----------------------------------------------------------------
The Directors anticipate that the adoption of these Standards
and Interpretations, which become effective for annual periods
beginning on or after 1 January 2023, in future periods will have
no material impact on the consolidated financial statements of the
Group, except for the adoption of Amendments to IAS 1 Presentation
of Financial Statements: Classification of liabilities as current
or non-current and non-current liabilities with covenants.
3. Significant accounting policies
The principal accounting policies applied in the preparation of
the consolidated financial statements are set out below. These
policies have been consistently applied to all the years presented,
unless otherwise stated.
Basis of preparation
The consolidated financial statements of the Company and its
subsidiaries and interest in equity accounted investments as at and
for the year ended 31 December 2022 have been prepared in
accordance with the UK-adopted International Accounting
Standards.
The consolidated financial statements have been prepared under
the historical cost basis, except for certain financial instruments
and investment properties measured at fair value. Historical cost
is generally based on the fair value of the consideration given in
exchange for the assets.
Going concern
The consolidated financial statements have been prepared on the
going concern basis, which contemplates continuity of normal
business activities and the realisation of assets and discharge of
liabilities in the normal course of business.
The Group recorded a net loss after tax of US$35.44 million for
the year ended 31 December 2022 (31 December 2021: US$34.22
million) and as at 31 December 2022 had cash and cash equivalents
of US$10.87 million (31 December 2021: US$15.43 million) as well as
total borrowings of US$83.13 million, of which US$47.85 million is
due within 12 months most of which comprised of the Orion
convertible loan notes (31 December 2021: total borrowing of
US$79.90 million). In recent years, the Group has been loss making
due to a combination of weaker vanadium prices and losses incurred
whilst the refurbishment work at Vanchem was completed. The
refurbished Kiln-3 was commissioned in June 2022, later than
initially planned. However, due to unreliable municipal power
supply and higher silica content in the ore supply, the production
ramp up was slower than expected and had not reached its targeted
run rate at the end of 2022.
The Orion convertible loan notes are due to mature in November
2023 and given that the current share price is lower than the
conversion price, the convertible loan notes will likely require
repayment or refinancing (see note 28). The Company entered into a
non-binding term sheet with Orion subsequent to year-end to
refinance the convertible loan notes (see note 37). The closing of
the transaction is still subject to certain conditions, including
South Africa Reserve Bank approval, shareholders' approval at the
general meeting which the Directors urge shareholders to support
and the finalisation of definitive binding documentation.
The Directors closely monitor and manage the liquidity risk of
the Group by ensuring that the Group has sufficient funds for all
ongoing operations. As part of the annual budgeting and long-term
planning process, the Directors reviewed the approved Group budget
and cashflow forecast through to 31 December 2024. The current
cashflow forecast has been 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.
The Directors have performed an assessment of whether the Group
would be able to continue as a going concern for at least twelve
months from the date of this report. In their assessment, the Group
has taken into account its financial position, expected future
performance of its operations, its debt facilities and debt service
requirements, including those of the proposed refinancing of the
Orion convertible loan notes, its working capital and capital
expenditure commitments and forecasts.
The cashflow forecast assumes that Vametco continues to perform
in line with historical levels, 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.
The cashflow forecast for Vanchem takes into consideration the
production levels achieved to date, the expected improvements from
the arrangement concluded with the municipality to stabilise power
supply as well as the arrangement concluded with a third party for
the supply of low-silica high-grade ore. This forecast assumes an
annual planned maintenance shutdown and these shutdowns proceed in
line with the planned timetable and no unplanned shutdowns are
experienced during the going concern period.
With regards to pricing, the short to medium term assumptions
are that the average price achieved by the Group will be US$36.2
through to 31 December 2023 and average at US$35.5 throughout 2024.
The year to date average price achieved by the group was
US$37.99.
Current cashflow forecast indicates that the Group requires
additional liquidity to fund its obligations and activities during
the next twelve months. The Group is actively pursuing various
financing alternatives to increase its liquidity and capital
resources including raising capital, refinancing of debt
facilities, securing additional working capital facilities, as well
as disposing of assets and/or an interest therein and/or
joint-venture partnerships. The Directors believe shareholders will
support the capital raising endeavours to ensure the growth the
Group is positioned for, can be delivered.
The Group's ability to continue as a going concern is dependent
on its ability to complete the refinance of the Orion convertible
loan note, and obtain the necessary additional funding required
through a capital raise or alternative funding sources. Although
the Group has been successful in the past in obtaining additional
liquidity, there is no assurance that it will be able to do so in
the future or that such arrangements will be on terms advantageous
to the Group.
These conditions indicate the existence of material
uncertainties that may cast significant doubt on the Group's
ability to continue as a going concern. The consolidated financial
statements for the year ended 31 December 2022 have been prepared
on a going concern basis as, in the opinion of the Directors, the
Group will be in a position to continue to meet its operating and
capital costs requirements and pay its debts as and when they fall
due for at least twelve months from the date of this report.
Accordingly, these consolidated financial statements do not include
adjustments to the recoverability and classification of recorded
assets and liabilities and related expenses that might be necessary
should the Group be unable to continue as a going concern.
Basis of consolidation
The consolidated financial statements present the consolidated
statement of financial position and changes therein, consolidated
statement of profit or loss, consolidated statement of
comprehensive loss and consolidated statement of cash flows for the
Group. Where necessary, adjustments are made to the results of
subsidiaries and equity accounted investments 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.
Where the Group's interest in a subsidiary is less than 100
percent, the Group recognises a non-controlling interest.
Disposal of subsidiaries
When the Group ceases to have control, any retained interest in
the entity is remeasured 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.
Business combinations
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 remeasured to fair value at the
acquisition date; any gains or losses arising from such
remeasurement 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 remeasured and its subsequent
settlement is accounted for within equity.
Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker
("CODM"). The CODM, who is responsible for allocating resources and
assessing performance of the operating segments, has been
identified as the Chief Executive Officer and the Executive
Committee. Operating segments whose revenues, net earnings or
losses or assets exceed 10 percent of the total consolidated
revenues, net earnings or losses or assets, are reportable
segments.
In order to determine the reportable operating segments, various
factors are considered, including geographical location and
managerial structure.
Functional and presentational currency
The functional currency of each entity in the Group is
determined as the currency of the primary economic environment in
which it operates. For the purpose of the consolidated financial
statements, the results and financial position of each entity
within the Group are expressed in US Dollars, which is the
presentation currency for the consolidated financial
statements.
Transactions denominated in foreign currencies are translated
into the entity's functional currency as follows:
-- Monetary assets and liabilities are translated at the
exchange rate in effect at the balance sheet date;
-- Non-monetary assets and liabilities are translated at
historical exchange rates prevailing at each transaction date;
-- Deferred tax assets and liabilities are translated at the
exchange rate in effect at the balance sheet date with translation
gains and losses recorded in income tax expense; and
-- Revenues and expenses are translated at the average exchange
rates throughout the reporting period, except depreciation, which
is translated at the rates of exchange applicable to the related
assets, and share-based compensation expense, which is translated
at the rates of exchange applicable at the date of grant of the
share- based compensation.
Exchange gains or losses on translation of transactions are
included in the consolidated statement of profit or loss.
The results and financial position of all entities within the
Group that have a functional currency different from the
presentation currency are translated into the presentation currency
as follows:
-- assets and liabilities for each statement of financial
position presented are translated at the closing rate;
-- 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
-- all resulting exchange differences are recognised in other
comprehensive income and accumulated in foreign currency
translation reserve.
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.
On disposal of a foreign operation, the cumulative exchange
differences recognised in the foreign currency translation reserve
relating to that entity up to the date of disposal are transferred
to the consolidated statement of profit or loss as part of the
profit or loss on disposal.
Revenue recognition - sale of goods
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 or services to the customer. 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 transferring control 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 ("STI") 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.
The fair value of the performance shares issued under the
long-term incentive scheme ("LTI") is recognised as an expense over
the vesting period. Non-vesting conditions and market vesting
conditions are factored into the fair value of the performance
shares granted. An option pricing model is used to measure the fair
value of the performance shares.
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.
Current and deferred income tax
The tax expense represents the sum of the tax currently payable
and deferred income tax.
The current income tax charge is calculated based on the tax
laws enacted or substantively enacted at the reporting date in the
countries where the Group's subsidiaries operate and generate
taxable income.
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 as an impairment loss in the consolidated statement of
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 of disposal and value in
use) if that is less than the asset's carrying value. Impairment
losses are recognised in the consolidated statement of 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 and accumulated impairment losses, except
for investment properties which are carried at fair value. Cost
comprises the aggregate amount paid and the fair value of any other
consideration given to acquire the asset and includes costs
directly attributable to making the asset capable of operating as
intended.
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. The depreciation method
applied, the estimated useful lives of assets and their residual
values are 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 consolidated 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 items
of property, plant and equipment are as follows:
-- Buildings and other improvements 20-25 years
-- Plant and machinery 5-20 years
-- Motor vehicles, furniture and 3-10 years
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 derecognition of the asset
(calculated as the difference between the net disposal proceeds and
the carrying amount of the asset) is included in the consolidated
statement of profit or loss 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 ("CGU") 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 are sourced from
the 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.
Investment property
Investment property is initially measured at cost and
subsequently at fair value with any change therein recognised in
the consolidated statement of 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 the consolidated statement of 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.
Provision is made, if necessary, for slow-moving, obsolete and
defective inventory.
Financial assets and liabilities
Financial assets and financial liabilities are recognised in the
Group's consolidated 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 ("FVTPL"), transaction costs.
Transaction costs of financial assets carried at FVTPL are expensed
in the consolidated statement of profit or loss.
Financial assets are classified at initial recognition and
subsequently measured at amortised cost, fair value though other
comprehensive income ("FVOCI") or FVTPL.
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 FVTPL. A gain or loss on a debt
investment that is subsequently measured at FVTPL is recognised in
the consolidated statement of profit or loss and presented net
within other income/(expenses) 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 FVTPL are
recognised in other income/(expenses) in the consolidated 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.
Trade and other receivables
Trade receivables are recognised initially at the amount of
consideration that is unconditional unless they contain significant
financing components, then 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
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 33.6 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 an investment in an insurance
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.
Financial liabilities
Accounts payable, accrued liabilities and borrowings are
accounted for at amortised cost, using the effective interest rate
method.
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.
Borrowings
Borrowings are initially recognised at fair value, net of
transaction costs incurred. Borrowings are subsequently measured at
amortised cost. Any difference between the proceeds (net of
transaction costs) and the redemption amount is recognised in
profit or loss over the period of the borrowings using the
effective interest method. Fees paid on the establishment of loan
facilities are recognised as transaction costs of the loan to the
extent that it is probable that some or all of the facility will be
drawn down.
Borrowings are removed from the balance sheet when the
obligation specified in the contract is discharged, cancelled or
expired. The difference between the carrying amount of a financial
liability that has been extinguished or transferred to another
party and the consideration paid, including any non-cash assets
transferred or liabilities assumed, is recognised in profit or loss
as other income or finance costs.
Borrowings are classified as current liabilities unless the
Group has an unconditional right to defer settlement of the
liability for at least 12 months after the reporting period.
Borrowing costs are capitalized and allocated specifically to
qualifying assets when funds have been borrowed, either to
specifically finance a project or for general borrowings during the
period of construction. Qualifying assets are defined as assets
that require more than a year to be brought to the location and
condition intended by management. Capitalization of borrowing costs
ceases when such assets are ready for their intended use.
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 percent to
11 percent 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
consolidated 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 consolidated statement of profit or loss,
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 liabilities
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 consolidated
statement of profit or loss 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 consolidated
statement of profit or loss 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
The preparation of consolidated financial statements in
conformity with UK-adopted International Accouting Standards
requires management to make judgements, estimates and assumptions
that affect the reported amounts of assets, liabilities and
contingent liabilities at the date of the consolidated financial
statements and reported amounts of revenues and expenses during the
reporting period. Estimates and assumptions are continuously
evaluated and are based on management's experience and other
factors, including expectations of future events that are believed
to be reasonable under the circumstances.
Assumptions about the future and other major sources of
estimation uncertainty at the end of the reporting period have a
significant risk of resulting in a material adjustment to the
carrying amounts of assets and liabilities, within the next
financial year. The most significant judgements and sources of
estimation uncertainty that the Group believes could have a
significant impact on the amounts recognised in its consolidated
financial statements are described below.
i. Impairment of non-current assets
Judgements made in relation to accounting policies
Both internal and external sources of information are required
to be considered when determining the presence of an impairment
indicator or an indicator of reversal of a previous impairment.
Judgement is required around significant adverse changes in the
business climate which may be indicators of impairment such as a
significant decline in the asset's market value, decline in
resources and/or reserves including as a result of geological
reassessment or change in timing of extraction of resources and/or
reserves which would result in a change in the discounted cash
flow, and lower commodity prices or higher input cost prices than
would have been expected since the most recent valuation. Judgement
is also required when considering whether significant positive
changes in any of these items indicate a previous impairment may
have reversed.
Key sources of estimation uncertainty
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 commodity prices,
discount rates, foreign currency exchange rates, estimates of costs
to produce products and future capital expenditure. Refer to Note
14 for key assumptions.
ii. Impairment of exploration and evaluation assets
Judgements made in relation to accounting policies
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.
As disclosed in note 13, the Mokopane license held by the Group
requires that mining operations commence prior to the end of
January 2021. As at 31 December 2022 no mining has taken place at
the site. Based on the conditions included in the mining right, the
Group has the right to apply for an extension to the requirements
to commence mining activities and an application has been submitted
to the Department of Mineral Resources and Energy ("DMRE"), however
a response has not yet been received.
Based on the mining right conditions, including that the
Minister has to give written notice regarding a potential
suspension or cancellation of the mining right and that the Group
has the opportunity to provide reasons to the Minister on why this
should not occur and the remedies put in place, 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 with a
carrying amount of US$53.47 million is required.
iii. Environmental rehabilitation liabilities
Key sources of estimation uncertainty
Estimating the future costs of environmental and rehabilitation
obligations is complex and requires management to make estimates
and judgements as most of the obligations will be fulfilled in the
future and contracts and laws are often not clear regarding what is
required. The resulting provisions are further influenced by
changing technologies, political, environmental, safety, business
and statutory considerations. Refer to note 26.
iv. Valuation of derivative liability
Key sources of estimation uncertainty
The conversion option (embedded derivative liability) in
connection with the Orion Mine Finance convertible loan note are
carried at fair value. The Group engaged an independent valuation
specialist which calculated the fair value of the conversion option
using a Monte-Carlo simulation. The Monte-Carlo simulation captured
the impact of movements in the US$/GBP exchange rate and the price
per ordinary share over the life of the convertible loan note.
4. Segmental reporting
Bushveld Minerals Limited's operating segments are identified by
the Chief Executive Officer and the Executive Committee,
collectively named as the CODM. The operating segments are
identified by the way the Group's operations are organised. As at
31 December 2022, the Group operated within three operating
segments, vanadium mining and production, which consists of the
Vametco and Vanchem operations; energy and mineral exploration
activities for vanadium and coal exploration (together
"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). Corporate includes the remaining balances within
the Group.
Segment revenue and results
The following is an analysis of the Group's revenue and results
by reportable segment.
Consolidated statement of profit or loss
Revenues Cost of Other Administrative Impairment Operating
costs expenses losses loss
sales (2) (3)
(1)
31 December 2022 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
-------------------- -------- ------------ -------- -------------- --------------- ---------
Vanadium mining and
production 148,446 (108,304) (16,525) (8,435) (18,454) (3,272)
Exploration - - - (21) (5,137) (5,158)
Energy 2 - 171 (952) (374) (1,153)
Corporate - - 369 (10,920) - (10,551)
-------------------- -------- ------------ -------- -------------- --------------- ---------
Total 148,448 (108,304) (15,985) (20,328) (23,965) (20,134)
-------------------- -------- ------------ -------- -------------- --------------- ---------
(1) Include depreciation of US$18.04 million.
(2) Other costs include other operating income, other mine
operating costs, selling and distribution costs and idle plant
costs.
(3) Include depreciation of US$0.15 million for Vanadium mining
and production, US$0.10 million for Energy and USD$0.18 million for
Corporate.
Consolidated statement of profit or loss
Revenues Costs Other Administrative Impairment Operating
of sales costs expenses losses loss
(1) (2) (3)
31 December 2021 US$ '000 US$ '000 US$ '000 US$ '000 US$' 000 US$'
000
-------------------- -------- -------------- -------- -------------- ---------- ---------
Vanadium and mining
production 106,857 (102,782) (10,695) (7,171) (1,694) (15,485)
Exploration - - - 26 (340) (314)
Energy - - - (808) (405) (1,213)
Corporate - - 297 (12,565) - (12,268)
-------------------- -------- -------------- -------- -------------- ---------- ---------
Total 106,857 (102,782) (10,398) (20,518) (2,439) (29,280)
-------------------- -------- -------------- -------- -------------- ---------- ---------
(1) Include depreciation of US$19.00 million.
(2) Other costs include other operating income, other mine
operating costs, selling and distribution costs and idle plant
costs.
(3) Include depreciation of US$0.13 million for Vanadium mining
and production and US$0.26 for Corporate.
Other segmental information
31 December 2022 31 December 2021
Total Total Total Total
assets liabilities assets liabilities
US$ '000 US$ '000 US$ '000 US$ '000
-------------------- --------- ------------ --------- ------------
Vanadium mining and
production 186,460 104,351 221,704 70,927
Exploration 53,679 38 59,340 54
Energy 17,432 10,836 8,448 5,839)
Corporate 10,017 46,732 11,190 72,000
---------------------- --------- ------------ --------- ------------
Total 267,588 161,957 300,682 148,820
---------------------- --------- ------------ --------- ------------
2022 2021
US$ '000 US$ '000
-------- --------
5. Revenue
Revenue from contracts with customers
Sale of goods 148,446 106,857
Other 2 -
------- -------
148,448 106,857
------- -------
Disaggregation of revenue from contracts with customers
The Group disaggregates revenue from customers as follows:
Sale of goods
Local sales of vanadium - NV12 5,503 5,090
Local sales of vanadium - NV16 2,650 1,606
Local sales of vanadium - MVO 4 (140)*
Export sales of vanadium - NV12 34,939 21,721
Export sales of vanadium - NV16 99,672 71,713
Export sales of vanadium - AMV 5,678 6,867
148,446 106,857
Other 2 -
------- -------
148,448 106,857
------- -------
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
Production staff 25,799 24,613
Administrative staff 7,259 8,601
Key management personnel 2,068 2,145
------ ------
35,126 35,359
------ ------
Details of directors' remuneration are included in note 35
(related party transactions) and the Remuneration Report on page
58.
7. Administrative expenses by nature
Key management personnel 2,068 2,145
Staff costs 7,259 8,601
Depreciation of property, plant and equipment 439 393
Professional fees 6,007 5,861
Share-based payments 315 (375)
Other 4,240 3,893
------ ------
20,328 20,518
------ ------
8. Finance income
Bank interest 206 827
Interest on restricted investment 127 106
Other finance income 161 2
--- ---
494 935
--- ---
9. Finance costs*
Interest on borrowings 28 11,189 10,687
Unwinding of discount 26 1,726 1,915
Interest on lease liabilities 29 974 459
Other finance costs 259 247
------ --------------------
14,148 13,308
------ --------------------
*Refer to note 36 for details of restatement
10. Other losses
Movement in earnout estimate 27 693 -
Loss on financial instrument Remeasurement 125
of financial liabilities 28 - - 1,902
------ --------------------
818 1,902
------ --------------------
11. Taxation
Current income taxes
Current income tax on profits for the year 3,294 370
Current income tax recognised for prior years - (13)
--------- ---------
3,294 357
--------- ---------
Deferred income taxes
Deferred income tax movement for current year (4,659) (5,111)
Prior year adjustment 20 83
--------- ---------
(4,639) (5,028)
--------- ---------
Income tax recovery (1,345) (4,671)
--------- ---------
The income tax expense represents the sum of the tax currently
payable and the deferred tax adjustment for the year.
Loss before tax (36,784) (38,896)
Tax at the applicable tax rate of 28% (2021: 28%) (10,300) (10,891)
Tax effect on non-deductible items 1,423 606
Origination and reversal of temporary differences (2,045) 1,477
Deferred tax asset (recognised)/not recognised 7,916 8,841
Recognised deferred tax assets - initial recognition (17) (5,028)
Tax rate change (210) -
Foreign jurisdictions subject to a different tax rate 1,888 324
-------- --------
Taxation recovery for the year (1,345) (4,671)
-------- --------
12. Loss per share Basic loss per share*
Basic loss per share is calculated by dividing the net loss
attributable to equity holders of the Company by the weighted
average number of ordinary shares in issue during the year
excluding ordinary shares purchased by the Company and held as
treasury shares.
Numerator
Net loss attributable to equity holders (38,968) (32,892)
----------- --------------
Denominator (in thousands)
Weighted average number of common shares 1,270,637 1,201,683
----------- --------------
Basic loss per share attributable to equity holders
(cents) (3.07) (2.74)
----------- --------------
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.
13. Intangible assets
---------------------------------
Vanadium
and Iron Coal Total
Ore
US$ '000 US$ '000 US$ '000
-------- ------------- --------
Balance, 1 January 2021 54,950 4,054 59,004
Capitalised expenditures 163 766 929
Impairment loss (541) - (541)
Exchange differences (716) 578 (138)
-------- ------------- --------
Balance, 31 December 2021 53,856 5,398 59,254
Capitalised expenditures 174 343 517
Impairment loss - (5,137) (5,137)
Exchange differences (561) (604) (1,165)
-------- ------------- --------
Balance, 31 December 2022 53,469 - 53,469
-------- ------------- --------
Mokopane Vanadium and Iron Ore Project
The Group has a 64 per cent interest in Pamish Investment No 39
Proprietary Limited ("Pamish") which holds an interest in
Prospecting right 95.
The Department of Mineral Resources and Energy ("DMRE") executed
a 30-year mining right on 29 January 2020 in favour of Pamish, over
five farms: Vogelstruisfontein 765 LR; Vriesland 781 LR;
Vliegekraal 783 LR; Schoonoord 786 LR; and Bellevue 808 LR (the
"Mining Right") situated in the District of Mogalakwena, Limpopo,
which make up the Mokopane Project. 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.
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 to commence
mining activities has been submitted and Pamish is waiting on a
response. Engagement has begun with communities to reach agreement
for access to the project areas and secure a land use
arrangement.
*Refer to note 36 for details of restatement
Brits Vanadium Project
The Group 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 Group has also applied for Section 102 of the MPRDA and waiting
for approval to incorporate NW 30/5/1/1/2/11069 PR into NW
30/5/1/1/2/11124 PR.
The Group 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 per cent 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. The Imaloto Coal Project was impaired
during the year as no further expenditures were budgeted.
Notes to the Consolidated Financial Statements
14. Property,
plant and Buildings and Plant Motor Right of Waste Assets under Total
equipment and use
other machinery* vehicles, asset stripping construction
improvements furniture asset
and US$ '000
US$ '000 US$ '000 equipment US$ '000 US$ '000 US$ '000
US$ '000
----------------- ----------------------------------- ---------------- --------------- -------------- ------------- ------------------- ----------
Cost
At 1 January
2021 7,559 180,623 1,466 5,504 3,764 7,117 206,033
Additions - 240 25 - - 19,450 19,715
Disposals - (3,912) (55) - (3,723) - (7,690)
Impairment of
obsolete assets - (475) - - - - (475)
Transfers within
PPE - 5,374 57 - - (5,431) -
Changes in
environmental
rehabilitation
liabilities - (199) - - - - (199)
Exchange
differences (602) (12,167) (119) (438) (41) (1,989) (15,356)
----------------- ----------------------------------- ---------------- --------------- -------------- ------------- ------------------- ----------
At 31 December
2021 6,957 169,484 1,374 5,066 - 19,147 202,028
----------------- ----------------------------------- ---------------- --------------- -------------- ------------- ------------------- ----------
Additions - 691 138 2,989 1,850 15,988 21,656
Changes in
environmental
rehabilitation
liabilities - (1,705) - - - - (1,705)
Transfers within
PPE 63 19,376 34 - - (19,473) -
Exchange
differences (445) (9,298) (92) (435) (68) (1,097) (11,435)
----------------- ----------------------------------- ---------------- --------------- -------------- ------------- ------------------- ----------
At 31 December
2022 6,575 178,548 1,454 7,620 1,782 14,564 210,543
----------------- ----------------------------------- ---------------- --------------- -------------- ------------- ------------------- ----------
Accumulated
depreciation
At 1 January
2021 (1,032) (31,828) (615) (1,214) (3,764) - (38,453)
Depreciation
charge for the
year (355) (18,146) (277) (618) - - (19,396)
Disposals - 2,239 53 - 3,723 - 6,015
Exchange
differences 107 2,417 80 272 41 - 2,917
----------------- ----------------------------------- ---------------- --------------- -------------- ------------- ------------------- ----------
At 31 December
2021 (1,280) (45,318) (759) (1,560) - - (48,917)
----------------- ----------------------------------- ---------------- --------------- -------------- ------------- ------------------- ----------
Depreciation
charge for the
year (330) (17,233) (219) (297) (396) - (18,475)
Impairment (898) (17,920) (10) - - - (18,828)
Exchange
differences 122 2,776 56 117 14 - 3,085
----------------- ----------------------------------- ---------------- --------------- -------------- ------------- ------------------- ----------
At 31 December
2022 (2,386) (77,695) (930) (1,741) (382) - (83,134)
----------------- ----------------------------------- ---------------- --------------- -------------- ------------- ------------------- ----------
Net Book Value
----------------- ----------------------------------- ---------------- --------------- -------------- ------------- ------------------- ----------
At 31 December
2021 5,677 124,168 617 3,505 - 19,146 153,113
----------------- ----------------------------------- ---------------- --------------- -------------- ------------- ------------------- ----------
At 31 December
2022 5,038 100,008 523 5,873 1,401 14,566 127,409
----------------- ----------------------------------- ---------------- --------------- -------------- ------------- ------------------- ----------
*Include
decommissioning
assets.
----------------- ----------------------------------- ---------------- --------------- -------------- ------------- ------------------- ----------
The right of use asset of US$5.87 million relates to land and
buildings of US$5.77 million and plant and machinery of US$0.1
million.
Impairment disclosure
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 exist, the recoverable amount of the asset is estimated
in order to determine the extent of the impairment loss (if
any).
Vanchem Cash generating unit (CGU)
The newly refurbished Kiln-3 at Vanchem was commissioned in June
2022 however due to various issues including loadshedding and ore
feed supply, the production ramp up was slower than expected and
had not reached its targeted run rate by the end of 2022. The lower
than expected performance was considered by the Group to be an
indicator of impairment for the Vanchem CGU, which consists of
Bushveld Vanchem (Pty) Limited and Ivanti Resources (Pty) Limited.
The Vanchem CGU forms part of the vanadium mining and production
reportable segment.
The recoverable amount of the CGU was determined by calculating
the fair value less cost of disposal ("FVLCD"). The FVLCD was
determined by calculating the net present value of the estimated
future cash flows. The determination of FVLCD is considered to be
Level 3 fair value measurement as the FVLCD is derived from
valuation techniques that include inputs that are not based on
observable market data. The Group considered the inputs and the
valuation approach to be consistent with the approach taken by
market participants.
Estimates of quantities of recoverable minerals, production
levels, operating costs and capital requirements are sourced from
the planning process, including the LOM plans, two-year budgets and
CGU-specific studies.
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 model was 1,500 mtVpa for
2023, 2,300 mtVpa for 2024 and increasing to 2,500 mtVpa
thereafter. 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; and the selling price of the
commodities extracted. The cash flows are computed using
appropriate individual economic models and key assumptions
established by management. 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.
Estimated long-term FeV price for the current year and the
comparative year that have been used to estimate future revenues,
are as follows:
2022
----------------- --------------------------------
Long term
Assumptions 2023 2024 2025 2026 2027 (2028+)
------ ------------- ----------------- ------ ------ ----------------
Fev US$ per
KgV 36.10 36.05 36.00 37.00 38.00 40.00
------ ------------- ----------------- ------ ------ ----------------
2021
Long
Assumptions 2022 2023 term (2024+)
----- ----- -------------
Fev US$ per KgV 41.35 35.15 40.00
----- ----- -------------
Discount rates: In calculating the FVLCD, a real post-tax
discount rate of 9.70 percent (2021: 7.70 percent) 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. Segment-specific risk is incorporated by
applying individual beta factors. The beta factors are evaluated
annually based on publicly available market data. The WACC also
includes an appropriate small capital premium.
Exchange rates:Foreign exchange rates are estimated with
reference to external market forecasts. 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 15.75 (2021:15.00).
The impairment test determined that the recoverable amount of
US$66.32 million, representing the CGU's FVLCD, was below the
carrying amount. This resulted in an impairment charge of US$17.27
million being recognised in the consolidated statement of profit
and loss within impairment losses and in the consolidated statement
of financial position as a reduction to property, plant and
equipment.
Any change in the key assumptions above may result in a further
impairment write down or partial reversal of the recognised
impairment charge.
Other
The Group also recognised an impairment charge of US$1.56
million in the consolidated statement of profit or loss related to
items of property, plant and equipment that were identified as
being no longer in use.
15. Investment properties
--------------------
2022 2021
US$ '000 US$ '000
--------- ---------
Balance, beginning of the year 2,595 2,811
Fair value movement (17) (216)
Exchange differences (166) -
--------- ---------
Balance, end of the year 2,412 2,595
--------- ---------
Investment properties comprise residential housing in
Brits and Elandsrand, North West Province.
Investment properties are stated at fair value (level 3 of the
fair value hierachy), which has been determined based on valuations
performed by Domus Estate Management, an accredited independent
valuer, as at 31 December 2022. 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.
16. Deferred tax liabilities
Deferred tax liability
Investment properties (517) (577)
Property, plant and equipment (17,925) (25,722)
Prepayments (15) (24)
Expected credit losses (18) -
---------- ----------
Total deferred tax liability (18,475) (26,323)
---------- ----------
Deferred tax asset
Provisions (642) 711
Environmental rehabilitation liabilities 4,549 5,049
Lease liabilities 1,521 195
Non-deductible expenses 1,029 -
Post-retirement medical liability 460 534
---------- ----------
Deferred tax balance from temporary differences other
than unused tax losses 6,917 6,489
Unused tax losses 10,367 13,820
---------- ----------
Total deferred tax asset 17,284 20,309
---------- ----------
Deferred tax liability (18,475) (26,323)
Deferred tax assets 17,284 20,309
---------- ----------
Total net deferred tax liability (1,191) (6,014)
---------- ----------
The evidence supporting recognition of a deferred tax asset is
forecasts for the component to which the losses relate which
indicate with reasonable certainty the availability of sufficient
future taxable profits and the existence of corresponding deferred
tax liabilities against which the losses can be utilised.
Beginning Statement Other Exchange Ending
balance of profit comprehensive differences balance
or loss income
2022 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
--------- ---------- -------------- ------------- --------
Deferred tax liability
Investment properties (577) 24 - 36 (517)
Property, plant and equipment (25,722) 6,374 - 1,423 (17,925)
Prepayments (24) 8 - 1 (15)
Expected credit losses - (19) - 1 (18)
Deferred tax asset
Provisions 711 (1,358) - 5 (642)
Non-deductible expenses - 1,068 - (39) 1,029
Environmental rehabilitation
liabilities 5,049 (181) - (318) 4,550
Lease liabilities 195 1,389 - (63) 1,521
Post-retirement medical
liability 534 - (34) (41) 459
Unused tax losses 13,820 (2,666) - (787) 10,367
--------- ---------- -------------- ------------- --------
(6,014) 4,639 (34) 218 (1,191)
--------- ---------- -------------- ------------- --------
Other
Beginning Statement Comprehensive Exchange Ending
of
balance Profit or Income differences balance
loss
2021 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
----------- --------- ------------- --------------- ---------------------------
Deferred tax liability
Investment properties (625) (2) - 50 (577)
Property, plant and
equipment (29,268) 1,306 - 2,240 (25,722)
Prepayments (144) 117 - 3 (24)
Deferred tax asset
Provisions 856 (82) - (63) 711
Inventories 356 (352) - (4) -
Environmental
rehabilitation
liabilities 5,040 441 - (432) 5,049
Lease liabilities 219 (7) - (17) 195
Post-retirement medical
liability 581 - (1) (46) 534
Unused tax losses 11,435 3,607 - (1,222) 13,820
----------- --------- ------------- --------------- ---------------------------
(11,550) 5,028 (1) 509 (6,014)
----------- --------- ------------- --------------- ---------------------------
17. Financial assets
--------------- ---------------------------
2022 2021
US$ '000 US$ '000
--------------- ---------------------------
Balance, beginning of the
year - 22,453
Additions 2,923 9,988
Disposals (1) - (16,147)
Fair value movement - (3,771)
Finance income
Transfer to investments
in 159
joint ventures (2) - - (12,292)
Exchange differences (7) (231)
--------------- ---------------------------
Balance, end of the year 3,075 -
--------------- ---------------------------
(1) The Group disposed during
of 2021.
its investment in
AfriTin
(2)The Group's investment in VRFB Holdings Limited ("VRFB")
became an investment in joint venture in April 2021. Refer to note
18.
The Group subscribed for two convertible loan notes issued by
Mustang Energy Plc ("Mustang") with a principle amount of US$2.93
million bearing 10 percent interest per annum in exchange for a
convertible loan note issued to Primorius and share capital issued
to Lind Partners. See note 23 and 28.
2022 2021
US$ '000 US$ '000
-------------------------------------------- ----------------- ------------- ----------------
18. Investments in joint ventures
----------------- ------------- ----------------
VRFB US$ Mini-Grid Total
'000 US$ '000 US$' 000
----------------- ------------- ----------------
Balance, 1 January 2021 - - -
Transfer from financial assets 12,292 - 12,292
Share of loss (4,351) - (4,351)
Exchange differences (86) - (86)
----------------- ------------- ----------------
Balance, 31 December 2021 7,855 - 7,855
Acquisition of investment in joint ventures - 1,211 1,211
Share of loss (5,112) - (5,112)
Exchange differences (751) (52) (803)
----------------- ------------- ----------------
Balance, 31 December 2022 1,992 1,159 3,151
----------------- ------------- ----------------
VRFB Holdings Limited ("VRFB")
The Group acquired a 50.5 percent interest in VRFB in April
2021, which is the holding company for the Group's investment in
Enerox GmbH ("Cellcube"). The investment in VRFB is in line with
the Group's strategy of partnering with Vanadium Redox Flow Battery
("VRFB") companies. The Group accounts for its 50.5 percent
shareholding in VRFB as an investment in joint venture as it does
not meet the requirements of control.
Summarised financial information in respect of VRFB
is set out below:
Revenue 11,183 1,008
Net loss (20,389) (8,484)
Other comprehensive income 275 (1,941)
---------------- -------
Comprehensive loss (8,931) (9,417)
---------------- -------
The Group entered into a conditional agreement on 25 November
2022 to sell its entire 50.5 percent interest in VRFB to Mustang.
The transaction remains subject to the fulfilment of a number of
conditions precedent, including Mustang completing a reserve
takeover and obtaining the relevant approvals from its
shareholders, the FCA and the Takeover Panel.
Hybrid Mini-Grid Company Proprietary Limited ("Mini-Grid")
The Group entered into a shareholders' agreement with NESA
Investment Holdings, whereby it holds a 40 percent interest in
Mini-Grid. The Group accounts for its 40 percent shareholding as an
investment in joint venture as the relevant decisions require
unanimous consent.
19. Inventories
Finished goods 23,511 18,058
Work in progress 14,740 9,323
Raw materials 4,435 3,160
Consumable stores 12,304 11,105
------ ------
Total inventories 54,990 41,646
------ ------
The cost of inventories recognised as an expense during the year
was US$88.60 million (2021: US$82.49 million).
The Group recognised a net realisable value write down of
finished goods amounting to US$0.33 million (31 December 2021:
US$0.48 million) and work in progress amounting to US$0.19 million
(31 December 2021: US$nil).
20. Trade and other receivables
Financial instruments:
Trade receivables 3,134 6,129
Other receivables 2,856 5,034
Expected credit losses (78) (77)
Non-financial instruments:
Value-added taxes 3,163 5,728
Deposits 19 -
Prepaid expenses 404 828
------- ---------
Total trade and other receivables 9,498 17,642
------- ---------
Categorisation of trade and other receivables
Trade and other receivables are categorised as follows in accordance
with IFRS 9: Financial Instruments:
At amortised cost 5,912 11,086
Non-financial instruments 3,586 6,556
------- ---------
9,498 17,642
------- ---------
Trade receivables are amounts due from customers for goods sold
or services performed in the ordinary course of business. They are
generally due for settlement within 15-90 days and therefore are
all classified as current.
The fair value of trade and other receivables approximate the
carrying value due to the short maturity.
Impairment and risk exposure
Information about the impairment of trade receivables and the
Group's exposure to credit risk, interest rate risk and foreign
currency risk can be found in note 33.
21. Restricted investment
Rehabilitation insurance fund 2,710 2,869
------- -------
Split between non-current and current portions
Current assets - 2,869
Non-current assets 2,710 -
------- -------
2,710 2,869
------- -------
The Group is required by statutory law in South Africa to hold
this restricted investment in order to meet environmental
rehabilitation liabilities on the statement of financial position
(refer to note 26 and 34 for further details).
22. Cash and cash equivalents
Cash at bank and on hand 8,347 7,336
Short-term deposits 2,527 8,097
------ ------
10,874 15,433
------ ------
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$6.72 million (2021: US$14.88 million).
The fair value of cash and cash equivalents approximates the
carrying value due to the short maturity.
23. Share capital, share premium
and reserves Share Total
Number Share capital premium share capital
of and premium
shares US$ '000 US$ '000 US$ '000
------------- --------------- ----------------- -----------------
Balance, 1 January 2021 1,190,757,892 15,858 117,066 132,924
Shares issued - Directors and staff 2,808,928 36 388 424
Shares issued - Duferco 66,892,037 903 8,097 9,000
------------- --------------- ----------------- -----------------
Balance, 31 December 2021 1,260,458,857 16,797 125,551 142,348
Shares issued - Directors and staff 2,324,842 29 494 523
Shares issued - Primorus Convertible 4,157,645 54 476 530
Shares issued - Lind 20,876,937 242 1,181 1,423
------------- --------------- ----------------- -----------------
Balance, 31 December 2022 1,287,818,281 17,122 127,702 144,824
------------- --------------- ----------------- -----------------
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 2022 the Company owns 670,000 (31 December
2021: 670,000) treasury shares with a nominal value of 1 pence.
Shares issued Directors and staff
The Company issued 2,324,842 new ordinary shares of 1 pence each
in the Company in respect of the short-term incentive plans (2021:
2,808,928 ordinary shares).
Duferco Participations Holdings S.A. ("Duferco")
The Group settled the unsecured convertible notes held by
Duferco on 8 November 2021. US$2.50 million of the amount due, as
well as the accrued interest of US$0.51 million, was satisfied in
cash and the balance of US$9.0 million was satisfied with the issue
of 66,892,037 new ordinary shares of 1 pence, using a conversion
price of 9.97 pence, which was a 5 percent discount to the
prevailing 10-day volume weighted average share price leading up to
conversion. There was no lock in or orderly marketing period for
the shares issued.
Primorus Investments Plc ("Primorus")
The Company issued a convertible loan note to Primorus. The
Company issued a total of 4,157,645 new ordinary shares of 1 pence
each in accordance with the conversion provisions.
Lind Global Macro Fund, LP ("Lind")
The Company issued 20,876,937 new ordinary shares of 1 pence
each to Lind in accordance with the Investment Agreement between
the Company and Mustang.
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.
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
24. Share-based payments
Short-Term Incentive ("STI")
Number of shares
Deferred share awards 2022 2021
Balance, beginning of the year 1,212,360 -
Granted - 5,226,020
Vested (1,099,404) (4,013,660)
Forfeited (112,956) -
Balance, end of the year - 1,212,360
The Group awarded 2,424,720 deferred share awards to certain
employees on 5 August 2021 under its short-term incentive plan. The
deferred share awards vested in equal tranches after twelve months
(31 December 2021) and 18 months (30 June 2022). The vesting of the
deferred share awards is dependent on the employees still being
employed on the respective vesting dates. The deferred share awards
are settled directly by the Company, in its own shares. The fair
value of the deferred share awards was US$0.42 million which is the
market price of the Company's share at grant date (GBP0.13) and the
exchange rate on that date.
The Group awarded 2,801,300 deferred share awards to certain
employees on 5 August 2021 in lieu of a cash bonus. These deferred
share awards vested on 31 December 2021. The vesting of the
deferred share awards is dependent on the employees still being
employed on the vesting date. The deferred share awards are settled
directly by the Company, in its own shares. The fair value of the
deferred share awards was US$0.50 million which is the market price
of the Company's share at grant date (GBP0.13) and the exchange
rate on that date.
The Company issued 2,324,842 new ordinary shares of 1 pence each
in respect to the STI (note 23) and 2,788,222 shares are still to
be issued to certain employees being in a closed period.
Long-Term Incentive ("LTI")
Performance awards
Number of shares
2022 2021
Balance, beginning of the year 2,458,443 2,458,443
Granted - -
Vested - -
Lapsed (2,458,443) -
Balance, end of the year - 2,458,443
--------------- ---------
The Group awarded performance awards to certain employees on 28
November 2019 under its long-term incentive plan. The performance
awards vest over a period of three years and is subject to both
employment and performance conditions. The performance conditions
contain both a market condition and a non-market condition.
The market condition states that 60 percent of the number of
performance shares awarded would vest based on the performance of
the Company's total shareholder return ("TSR"), per annum, over the
performance period. The non-market condition states that 40percent
of the number of performance shares awarded will vest based on the
performance of the Group's free cash flow margin ("FCF"), per
annum, over the performance period.
As at 31 December 2021, it was assumed that 0 percent of the
performance shares awarded to participants during 2019 will vest.
This was based on the Group's performance on both TSR and FCF being
below the threshold. At vesting date, 28 November 2022, it was
determined that 0 percent of the performance shares awarded vested
as the thresholds on both TSR and FCF not being achieved.
The remuneration committee approved performance awards in 2022,
which were awarded in 2023. The performance awards vest over a
period of three years and is subject to both employment and
performance conditions. The performance conditions contain both a
market condition and a non-market condition.
25. Post-retirement medical liability
The benefit comprises medical aid subsidies provided to
qualifying retired employees. Actuarial valuations are made
annually with the most recent valuation on 31 December 2022. The
present value of the post-retirement medical liability were
measured using the projected unit credit method.
The following table summarises the components of the net benefit
expense recognized in the consolidated statement of profit or loss
and the consolidated statement of comprehensive income or loss and
the amounts recognised in the consolidated statement of financial
position.
Balance, beginning of the year 1,906 2,076
Net expense recognised in profit or loss 13 5
Actuarial changes recognized in other comprehensive
income or loss (126) (10)
Exchange differences (118) (165)
Balance, end of the year 1,675 1,906
The principal assumptions used for the purposes of
the actuarial valuation was as follows:
Actual age 77.3 years 77.3 years
Discount rates 11.60% 10.90%
Health care cost inflation 7.80% 7.90%
Duration of liability 8.8 years 9.3 years
A 1 percent change in the assumed rate of healthcare costs
inflation would have the following effect on the present value of
the unfunded obligation: Plus 1 percent - US$0.13 million (2021:
US$0.16 million); Less 1 percent - US$0.12 million (2021:US$0.14
million).
A 1 percent change in the assumed interest rate would have the
following effect on the current service cost and interest cost;
Plus 1 percent - US$0.20 million (2021: US$0.21 million); Less 1
percent - US$0.17 million (2021: US$0.18 million).
26. Environmental rehabilitation liabilities
Balance, beginning of the year 18,031 17,998
Unwinding of discount 9 1,726 1,915
Change in estimates charged to profit or
loss (291) (140)
Change in estimates capitalized to property,
plant and equipment 14 (1,705) (199)
Exchange differences (1,151) (1,543)
Balance, end of the year 16,610 18,031
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 2052, 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 provision is calculated using the following key
assumptions:
Inflation rate 10.41 % 9.76 %
10.76
Discount rate 11.41 % %
A 1 percent change in the assumed discount rate would have the
following effect on the present value of the provision: Plus 1
percent - decrease of US$3.91 million; Less 1 percent - increase of
US$5.16 million.
A 1 percent change in the assumed inflation rate would have the
following effect on the present value of the provision: Plus 1
percent - increase of US$5.16 million; Less 1 percent - decrease of
US$3.97 million.
27. Deferred consideration
Balance, beginning of the year 1,684 5,623
Payment - (3,724)
Finance costs 51 91
Movement in earnout estimate Exchange 693
differences 10 - - (306)
2,428 1,684
---------------------
Split between non-current and current
portions
Current deferred consideration 901 -
Non-current deferred consideration 1,527 1,684
---------------------
2,428 1,684
---------------------
The Group is required to pay an earnout amount to EVRAZ on the
acquisition of the Vametco Group which is based on the annual
percentage of additional revenue ascribed to Bushveld Vametco
Alloys as a result of the prevailing price being above the trigger
price in respect of each financial year commencing on 1 January
2018 and ending on 31 December 2025, up to a maximum amount of
US$5.54 million.
Management updated their estimated earnout payment to reflect
actual production and price for the year ended 31 December 2022 and
estimated production and price for future years which resulted in
an increase of US$0.69 million in the estimated earnout
payment.
28. Borrowings*
Production financing agreement 35,146 33,512
Orion convertible loan notes 39,742 36,282
Nedbank revolving credit facility - 5,821
Industrial Development Corporation shareholder loan 1,999 3,282
Industrial Development Corporation property, plant
and equipment loan 3,481 -
Development Bank of South Africa 1,000 1,000
Other 1,762 -
------ ------
83,130 79,897
------ ------
Split between non-current and current portions
Non-current 35,272 69,686
Current 47,858 10,211
------ ------
83,130 79,897
------ ------
*Refer to note 36 for details of restatement
Nedbank Industrial
Product Orion revolving Development
financing convertible credit Corporation
agreement loan notes facility loans Other Total
US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
--------- ------------ --------
Balance, beginning of
the year 33,512 36,282 5,821 3,282 1,000 79,897
Cash changes:
Proceeds from borrowings - - - 3,416 806 4,222
Repayments of principle
and (2,906) - (5,885) - (49) (8,840)
Interest
Non-cash changes:
Convertible loan note
in - - - - 1,636 1,636
exchange for financial
assets
Conversion of convertible
loan - - - - (530) (530)
notes
Finance costs (1) 4,420 6,394 232 470 143 11,659
Fair value gain on derivative - (2,934) - - - (2,934)
Liability
Adjustment to reflect
market - - - (1,789) - (1,789)
value of loan
Exchange differences 120 - (168) 101 (244) (191)
--------- ------------ --------
35,146 39,742 - 5,480 2,762 83,130
--------- ------------ --------
(1)Finance costs include capitalised finance costs of US$0.47
million to property,plant and equipment.
Orion Mine Finance Production Financing Agreement
The Group signed a long-term production financing agreement
("PFA") of US$30 million with Orion Mine Finance ("Orion) in
December 2020, primarily to finance its expansion plans at Bushveld
Vametco Alloys Proprietary Limited and debt repayment. Exchange
control authorization from the South Africa Reserve Bank Financial
Surveillance Department was granted in October 2020.
PFA Details
The Group 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 Group 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 Group has the
option to repay up to 50 per cent of both constituent loan parts
(each may only be repaid once). If the Group 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 were used by the
Group to prepay in full the Nedbank ZAR250 million term loan.
First Amendment
The Group entered into a first amendment to the agreement on 6
August 2021. In terms of the amendment, US$17.8 million of the
funds ringfenced for the Vametco Phase 3 Expansion was reallocated
to Vanchem mainly for capital expenditure on Kiln-3.
The original PFA had a cap of 1,075 mtV per quarter. This
amounted to 4,300 mtV 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 4,300 mtV
being brought forward, from 1 July 2022 instead of from 2024.
Accounting impact of amendment
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 brought forward, this resulted in a
non-substantial modification to the contractual terms. The
amortised cost was recalculated and loss on remeasurement of
financial liabilities of US$1.90 million was recognised in the
consolidated statement of profit or loss for the year ended 31
December 2021.
Orion Mine Finance Convertible Loan Notes Instrument
The Company subscribed to a US$35 million convertible loan notes
instrument in December 2020 (the "Instrument") with Orion Mine
Finance ("Orion"). The Instrument's proceeds were used towards the
first phase of Vanchem's critical refurbishment programme and debt
repayment.
The terms of the Instrument are:
-- A fixed 10 per cent per annum coupon with a three year
maturity date from the drawdown date.
-- All interest will accrue and be capitalised on a quarterly
basis in arrears but compounded annually.
-- Accumulated capitalised and accrued interest is convertible
into Bushveld ordinary shares. All interest and principal, to the
extent not converted into ordinary shares, is due and payable at
maturity date.
-- Conversion price set at 17 pence.
The conversion features are:
Between drawdown and the Instrument's maturity date Orion may,
at their option, convert an amount of the outstanding debt,
including capitalised and accrued interest, into Bushveld's
ordinary shares as follows:
-- First six months: Up to one third of the outstanding amount;
-- Second six months: Up to two thirds of the outstanding amount
(less any amount previously converted);
-- From the anniversary of drawdown until the maturity date: the
outstanding amount under the Instrument may be converted;
-- The Company also has the option to convert all, but not some,
of the amount outstanding under the Instrument, if its volume
weighted average share price is more than 200 per cent of the
conversion price over a continuous 15 trading day period, a trading
day being a day on which the AIM market is open for the trading of
securities.
At any time until the convertible maturity date, Orion may
convert the debt as above mentioned into an amount of ordinary
shares equal to the total amount available for conversion under the
Instrument divided by the conversion price of 17 pence.
Refer to note 36 for the restatement associated with the change
in accounting treatment.
Derivative
Loan liability Total
US$ '000 US$ '000 US$ '000
--------
Balance, 01 January 2021 27,952 11,976 39,928
Finance costs and fair value gain 5,364 (9,010) (3,646)
--------
Balance, 31 December 2021 33,316 2,966 36,282
Finance costs and fair value gain 6,394 (2,934) 3,460
--------
Balance, 31 December 2022 39,710 32 39,742
--------
The Orion and Nedbank borrowings are secured against certain
group companies and associated assets.
Nedbank Term Loan and Revolving Credit Facility
The Group secured R375 million (approximately US$25 million) in
debt facilities through its subsidiary Bushveld Vametco Alloys
Proprietary Limited (the "Borrower") in November 2019 with Nedbank
Limited in the form of a R250 million term loan and a R125 million
revolving credit facility.
The Nedbank term loan was repaid in December 2020.
The Group had drawn the R125 million revolving credit facility
in March 2020 which have the following key terms:
-- Three-year term - Repayment due in November 2022;
-- Interest rate calculated using the three year or six months
JIBAR as selected by the Company plus a 3.85 percent margin;
-- Interest payments are due semi-annually.
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.
The following financial covenants are in place for the Borrower
for so long as any amount is outstanding, in respect of each
reporting period:
-- the Net Interest Cover Ratio; and
-- the Net Debt to EBITDA Ratio at a Borrower level shall not exceed 4.0 times.
The Nedbank revolving credit facility was repaid in November
2022, except for R1.
Industrial Development Corporation Shareholder Loan
Bushveld Electrolyte Company ("BELCO") is 55 percent owned by
Bushveld Energy Company ("BEC") and 45 percent by the Industrial
Development Corporation ("IDC"). The loan represents the IDC's
contribution to BELCO and consists of the initial capitalized cost
of R4.38 million (US$0.26 million; 31 December 2021: R4.38 million
(US$0.26 million)) and the subsequent subscription amount of R55.31
million (US$3.26 million; 31 December 2021: R55.31 million (US$3.82
million)).
The loan is interest free, unsecured, subordinated in favour of
BELCO's creditors and has no fixed term of repayment and shall only
be repaid from free cash flow when available. BELCO has the
unconditional right to defer settlement until it has sufficient
free cash flow to settle the outstanding amount, which is estimated
at the end of 2028. The loan has been classified as
non-current.
The shareholder loan is measured at the present value of the
future cash payments discounted using an interest rate of 8.5
percent, which is the estimated prevailing market rate. The
difference between the fair value and the nominal amount of US$1.79
million was recognised as non-controlling interest.
A general notarial bond for a minimum amount of R140 million
plus an additional sum of 30 percent for ancillary costs and
expenses was registered over all the movable assets owned by
BELCO.
Industrial Development Corporation Property, Plant and Equipment
Loan
The IDC provided a property, plant and equipment loan to BELCO
as part of the funding for the construction of the electrolyte
plant. The loan bears interest at the South African prime rate plus
2.5 percent margin and is repayable in 84 equal monthly instalments
starting in July 2023.
Development Bank of Southern Africa - Facility Agreement
Lemur Holdings Limited entered into a US$1.0 million 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 percent capped
at 2.5 times, which ever is lower. As at 31 December 2022, US$1.0
million (31 December 2020: US$1.0 million) was drawn down.
Primorius
The Company issued a convertible loan note to Primorius for the
nominal amount of GBP1,20 million bearing interest at 10 percent
per annum. The convertible loan note may be converted into Bushveld
ordinary shares at any time within the 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. Primorius converted
GBP0.41 million of the principal amount and was issued a total of
4,157,645 Bushveld ordinary shares.
Nesa Investment Holdings ("Nesa")
The Group entered into a loan agreement with Nesa to fund
US$0.81 million (R12.08 million) bearing interest at South African
prime rate plus 3.5 percent margin and is repayable on 30 October
2023.
29. Lease liabilities
Balance, beginning of the year 4,485 5,002
Additions 2,989 128
Finance cost 9 974 459
Payments (728) (705)
Exchange differences (438) (399)
Balance, end of the year 7,282 4,485
Non-current lease liabilities 6,721 3,921
Current lease liabilities 561 564
7,282 4,485
Leases are entered into and exist to meet specific business
requirements, considering the appropriate term and nature of the
leases asset. The Group leases relate to land leases, office leases
and equipment lease.
Extension options
Some property leases contain extension options exercisable by
the Group. The Group assesses at the lease commencement date
whether it is reasonably certain to exercise the extension options.
The Group reassesses whether it is reasonably certain to exercise
its options if there is a significant event or significant changes
within its control.
30. Trade and other payables
Financial instruments:
Trade payables 40,573 28,330
Trade payables - related parties 61 107
Accruals and other payables 5,257 4,644
Non-financial instruments:
Value-added taxes 5 -
45,896 33,081
--------
Financial instrument and non-financial instrument components
of trade and other payables
At amortised cost 45,891 33,081
Non-financial instruments 5 -
--------
45,896 33,081
--------
Trade and other payables principally comprise amounts
outstanding for trade purchases and on-going costs. The average
credit period taken for trade purchases is 90 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$29.78 million (2021: US$20.62 million).
31. Provisions
Reconciliation of provisions
- 2022
Opening Additions Utilised Foreign Total
balance during the exchange
year US$
US$ '000 US$ '000 '000 US$ '000 US$ '000
Leave pay 1,629 80 (40) (81) 1,588
Performance bonus 1,923 - (1,923) - -
Other 170 - (13) (31) 126
---------------------- ---------
3,722 80 (1,976) (112) 1,714
----------------- ---------------------- ---------
Reconciliation of provisions
- 2021
Opening Additions Utilised Foreign Total
balance during the exchange
year US$
US$ '000 US$ '000 '000 US$ '000 US$ '000
Leave pay 1,655 51 - (77) 1,629
Performance bonus 1,375 882 (334) - 1,923
Other 267 157 (254) - 170
---------------------- ---------
3,297 1,090 (588) (77) 3,722
----------------- ---------------------- ---------
Leave pay
Leave pay represents employee leave days due multiplied by their
cost to the company employment package.
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. Non-controlling interest
Selected summarized financial information of subsidiaries that
have material non-controlling interest are provided below:
2022 2021
US$ '000 US$ '000
Bushveld Vametco Holdings
Percentage of voting rights held by non-controlling
interest 26 % 26 %
Current assets 85,598 66,820
Non-current assets 80,228 77,916
Current liabilities (25,517) (22,944)
Non-current liabilities (45,311) (42,376)
Net assets 94,998 79,416
Revenues 117,226 83,114
Net earnings / (loss) for the year 21,401 (2,451)
Net earnings / (loss) attributable to non-controlling
interest 5,564 (637)
Net cash generated from / (used in) operating activities 14,270 (917)
Net cash used in investing activities (10,649) (15,097)
Net cash used in financing activities (6,020) (2,364)
Net increase / (decrease) in cash and cash equivalents (2,398) (18,378)
33. 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 consolidated financial
statements.
33.1. Categories of financial instruments 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 and cash equivalents
- Restricted investments
- Trade and other payables
- Borrowings
- Financial assets
- Lease liabilities
- Deferred consideration
The Group holds the following financial assets and
financial liabilities:
2022 2021
US$ '000 US$ '000
Financial assets at amortised cost
Trade and other receivables 5,912 11,086
Restricted investment 2,710 2,869
Cash and cash equivalents 10,874 15,433
--------
19,496 29,388
Financial assets at fair value
Financial assets at fair value through profit or loss 3,075 -
--------
Total financial assets 22,571 29,388
--------
Financial liabilities at amortised cost
Trade and other payables 45,891 33,081
Borrowings - loan 83,098 76,931
Lease liabilities 7,282 4,485
--------
136,271 114,497
Financial liabilities at fair value
Borrowings - derivative liability 32 2,966
Deferred consideration 2,428 1,684
--------
2,460 4,650
Total financial liabilities 138,731 119,147
--------
33.2. 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:
33.3. 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 31 December 2022, the Group had borrowings of
US$83.13 million (2021: US$79.90 million).
The financial covenants for the Nedbank revolving credit
facility are continuously monitored by management and the Group is
compliant.
The capital structure of the Group consists of cash and cash
equivalents, equity and borrowings. Equity comprises of issued
capital and retained income.
2022 2021
US$ '000 US$
'000
Cash and cash equivalents 10,874 15,433
Borrowings 83,130 79,897
Equity 105,677 142,169
199,681 237,499
The Group is not subject to any externally imposed
capital requirements.
33.4. Price risk
The Group's exposure to commodity price risk is dependent various commodities that
on the fluctuating price of the mines, processes and it
sells.
The average market price of each of the following commodities
was:
2022 2021
Vametco US$/kgV US$/kgV
Ferro Vanadium (FEV) 50.17 -
Nitrovan (NV) 44.45 34.10
Ammonium Metavanadate (AMV) 30.05 -
Modified Vanadium Oxide (MVO) - 17.18
2022 2021
Vanchem US$/kgV US$/kgV
Vanadium Pentoxide Flake (FVP) 31.82 25.04
Vanadium Pentoxide Chemical (VCM) 35.85 32.73
Sodium Ammonium Vanadate (SAV) 55.07 51.22
Ammonium Metavanadate (AMV) 52.80 35.19
Ferro Vanadium (FEV) 35.73 31.53
Vanadyl Oxalate Solution (VOX) 197.79 195.41
Potassium Metavanadate 42.41 35.31
Nitrovan - 30.60
If the average price of each of these commodities
increased/decreased by 10 per cent the total sales related to each
of these commodities would have increased/decreased as follows: 10
percent is the sensitivity used when reporting commodity prices
internally to management.
Effect Effect Effect Effect
on 2022 on 2022 on 2021 on 2021
revenue net loss revenue net loss
Vametco US$ '000 US$ '000 US$ '000 US$ '000
Ferro Vanadium (FEV) 358 258 - -
Nitrovan (NV) 11,568 8,329 8,431 6,071
Ammonium Metavanadate (AMV) 81 58 (14) (10)
12,007 8,645 8,417 6,061
Effect Effect Effect Effect
on on on on
2022 revenue 2022 net 2021 revenue 2021 net
loss loss
Vanchem US$ '000 US$ '000 US$ '000 US$ '000
------------
Vanadium Pentoxide Flake (FVP) 494 356 611 440
Vanadium Pentoxide Chemical (VCM) 329 237 298 215
Sodium Ammonium Vanadate (SAV) 182 131 72 52
Ammonium Metavanadate (AMV) 34 25 27 20
Ferro Vanadium (FEV) 2,391 1,721 1,637 1,179
Vanadyl Oxalate Solution (VOX) 63 45 138 99
Potassium Metavanadate 157 113 47 34
Nitrovan (NV) - - 484 348
------------
3,650 2,628 3,314 2,387
------------
33.5. 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. 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 2022, the Group had US$10.9 million (2021:
US$15.4 million) of cash and cash equivalents. At 31 December 2022,
the Group had borrowings of US$83.13 million (2021: US$79.90
million), lease liabilities of US$7.28 million (2021: US$4.49
million) and trade and other payables of US$45.90 million (2021:
US$33.08 million).
Carrying Contractual
amount cash flows <1 year 1 - 2 3 - 4 years >4 years
years
2022 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
*Production financing
agreement 35,146 139,795 4,181 8,626 8,833 118,155
Orion convertible loan
notes 39,742 46,585 46,585 - - -
Industrial Development
Corporation 1,999 3,515 - - - 3,515
shareholder loan
Industrial Development
Corporation 3,481 5,725 477 1,636 1,636 1,976
property, plant and
equipment loan
Development Bank of
South Africa 1,000 1,000 - 1,000 - -
Other 1,762 1,794 1,794 - - -
Lease liabilities 7,283 22,577 704 901 1,348 19,624
Trade and other payables 45,891 45,891 45,891 - - -
Carrying Contractual
amount cash flows <1 year 1 - 2 3 - 4 years >4 years
years
2021 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
*Production financing
agreement 33,512 145,435 4,123 8,868 9,012 123,432
Orion convertible loan
notes 36,282 46,585 - 46,585 - -
Nedbank revolving credit
facility 5,821 5,885 5,885 - - -
Industrial Development
Corporation 3,281 3,515 - - - 3,515
shareholder loan
Development Bank of
South Africa 1,000 1,000 - 1,000 - -
Lease liabilities 4,485 9,771 614 501 902 7,754
Trade and other payables 33,081 33,081 33,081 - - -
*The contractual cash flows are based on estimated principal and
interest payments calculated as the sum of the gross revenue rate
multiplied by the gross revenue for the quarter and the unit rate
multiplied by the aggregate amount of vanadium sold for the
quarter.
33.6. Credit risk
Credit risk is the risk that one party to a financial instrument
will cause a financial loss for the other party by failing to
discharge an obligation. The maximum amount of credit risk is equal
to the balance of cash and cash equivalents, restricted
investments, trade and other receivables and financial assets.
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.
The Group holds cash and cash equivalents and restricted
investments in creditworthy financial institutions that comply with
the Company's credit risk parameters. The Group has a significant
concentration of cash held on deposit with large banks in South
Africa, Mauritius, United States of America and the United Kingdom
with A ratings and above (Standards and Poors).
The concentration of credit risk by currency was as
follows:
2022 2021
US$ '000 US$ '000
Pound Sterling 20 10
South African Rand 6,702 14,943
United States Dollar 4,152 480
10,874 15,433
Impairment of financial assets
The Group's only financial assets that are subject to the
expected credit loss model are third party 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 2022 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 2022 and 31
December 2021 was determined as follows for trade receivables:
Gross
Expected carrying Loss allowance
credit loss amount
Subsidiary - 2022 rate US$ '000 US$ '000
------------------
Bushveld Vametco Alloys (Pty) Ltd 0.15 % 1,135 2
Bushveld Vanchem (Pty) Ltd 0.27 % 1,487 4
Ivanti Resources (Pty) Ltd 7.74 % 121 9
Bushveld Energy Company (Pty) Ltd 100.00 % 63 63
------------------
2,806 78
------------------
Gross
Expected carrying Loss
credit loss amount allowance
Subsidiary - 2021 rate US$' 000 US$ '000
------------------
Bushveld Vametco Alloys (Pty) Ltd 0.11 % 87 -
Bushveld Vametco Limited 0.13 % 4,198 5
Bushveld Vanchem (Pty) Ltd 0.13 % 1,275 2
Ivanti Resources (Pty) Ltd 0.43 % 609 3
Bushveld Minerals SA (Pty) Ltd 0.19 % 8 -
Bushveld Energy Company (Pty) Ltd 100.00 % 67 67
------------------
6,244 77
------------------
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
2022 and 2021 financial year.
33.7. Interest rate risk
Interest rate risk is the risk that the fair values and future
cash flows of the Group's financial instruments will fluctuate
because of changes in market interest rates. The Group has interest
bearing financial assets and borrowings. As part of the process of
management 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.
As at 31 December 2022, the majority of the Groups' borrowings
was at fixed rates. A 1 percent increase or decrease in the
interest rates would result in a nominal increase or decrease in
the Group's earnings in respect of borrowings held at variable
rates. There was no significant change in the Group's exposure to
interest rate risk during the year ended 31 December 2022.
33.8. Foreign exchange risk
The presentation currency of the Group is United States Dollar
and the functional currency of its major subsidiaries are South
African Rand. The Group has foreign currency denominated assets and
liabilities. Exposure to exchange rate fluctuations therefore
arise. The Group has transactional foreign exchange exposures,
which arise from sales or purchases by the subsidiaries in
currencies other than their functional currency. The vanadium
market is predominately priced in US$ which exposes the Group to
the risk of fluctuations in the ZAR/US$ exchange rate. The carrying
amount of the Groups foreign currency denominated monetary assets
and liabilities, all in US$, are shown below:
2022 2021
US$ '000 US$ '000
Cash and cash equivalents 6,723 15,135
Other receivables 11,226 12,696
Trade and other payables (32,652) (20,753)
(14,703) 7,078
---------
The Group does not enter into any derivative financial
instruments to manage its exposure to foreign currency risk.
33.9. Fair value
The fair value hierarchy categorizes into three levels the
inputs to valuation techniques used to measure fair value. The fair
value hierarchy gives the highest priority to quoted prices
(unadjusted) in active markets for identical assets or liabilities
(Level 1 inputs) and the lowest priority to unobservable inputs
(Level 3 inputs).
Level 1 inputs are quoted prices (unadjusted) in active markets
for identical assets or liabilities which the entity can access at
the measurement date.
Level 2 inputs are inputs other than quoted prices included
within Level 1 which are observable for the asset or liability,
either directly or indirectly such as those derived from
prices.
Level 3 inputs are unobservable inputs for the asset or
liability.
There have been no changes in the classification of the
financial instruments in the fair value hierarchy since 31 December
2021.
(a) Financial assets and liabilities measured at fair value on a
recurring basis
Carrying Total
amount Level Level Level 3 fair
1 2 value
2022 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
Assets
Financial assets 3,075 - - 3,075 3,075
Liabilities
Derivative liability - conversion
option on 32 - 32 - 32
Orion CLN
Deferred consideration 2,428 - - 2,428 2,428
Carrying Total
amount Level Level Level 3 fair
1 2 value
2021 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
Assets Financial assets Liabilities - -
Derivative liability - conversion
option on - 2,966 - - 2,966 - - 2,966
Orion CLN
Deferred consideration 1,684 - - 1,684 1,684
(b) Financial assets and liabilities amortised
measured at costs
2022 2021
Book value Fair value Book value Fair
Financial assets US$ '000 US$ '000 US$ '000 value
US$ '000
Trade and other receivables 5,912 5,912 11,086 11,086
Restricted investments 2,710 2,710 2,869 2,869
Cash and cash equivalents 10,874 10,874 15,433 15,433
2022 2021
Book value Fair value Book value Fair
Financial liabilities US$ '000 US$ '000 US$ '000 value
US$ '000
Trade and other payables 45,891 45,891 33,081 33,081
The directors are of the opinion that the book value of
financial instruments measured at amortised costs approximates fair
value due to the short-term maturities of these instruments. The
carrying value less impairment provision of trade receivables and
payables are assumed to approximate their fair values.
The directors consider that sufficient information to understand
the borrowings of the Group is disclosed in note 28.
34. Contingent liabilities Bank guarantee
As required by the Minerals and Petroleum Resources Act (South
Africa), a guarantee amounting to US$11.94 million (2021: US$12.76
million) before tax and US$8.60 million (2021: US$9.19 million)
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 Centriq Insurance Company Ltd with
restricted use by the Group. The restricted cash consists of
US$2.71 million (2021: US$2.87 million) held by Centriq Insurance
Company.
35. 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 ("VM Investments") is a related
party due to the Director, Fortune Mojapelo being majority
shareholder of VM Investments. VM Investments owns the offices
rented by Bushveld Minerals Limited. The rent paid in 2022
financial period was US$206,209 (2021: US$162,897).
Services rendered by Ondra LLP for the amount of US$61,900
(2021: US$200,000) 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 US$439 094. The tax arises from
historic shares issued to Mr Mojapelo. The company had an
obligation to settle the tax on behalf of Mr Fortune Mojapelo. The
amount is reflected as a debtor.
The remuneration of key management personnel, being the
directors and other executive committee members, is set out below.
Further information about the remuneration of individual directors
is provided in the Directors' remuneration report.
2022 2021
US$ '000 US$ '000
Salaries and fees 1,866 1,979
Short-term incentives 95 166
Long-term incentives 107 -
2,068 2,145
36. Restatements
The Company subscribed to a US$35 million convertible loan notes
instrument in December 2020 with a fixed 10 percent per annum
coupon, a three year maturity date and a conversion price of 17
pence (the "Instrument") (refer to note 28).
At inception the Instrument was accounted for as a compound
instrument and was partly presented as a loan (US$34.95 million)
and partly as equity (US$0.05 million). The equity component was
not subsequently remeasured. The loan component was subsequently
measured at amortized cost.
During the preparation of the annual consolidated financial
statements for the year ended 31 December 2022, it was determined
that the Instrument should have been accounted for at inception as
a loan and a derivative liability as the conversion will result in
a variable amount of shares. Subsequently the derivative liability
is remeasured to fair value at each reporting date with fair value
movements recorded in the consolidated statement of profit or loss.
The amount allocated to the loan continues to be measured at
amortized cost.
The information in the following tables show the effect of the
restatement on each affected financial statement line item:
Previously
reported Restated
at 31 December at 31 December
2021 Adjustment 2021
Consolidated Statement of Financial Position US$ '000 US$ '000 US$ '000
Convertible loan note reserve 55 (55) -
Retained earnings (1,265) 1,086 (179)
Total equity 150,831 1,031 151,862
Borrowings - non-current portion 70,717 (1,031) 69,686
Borrowings - current portion 10,211 - 10,211
Total liabilities 149,849 (1,031) 148,818
No impact on total cashflows as reported for the year ended 31
December 2021 were noted as these adjustments were non- cash. The
add backs for finance costs and fair value gain on derivative
liability were adjusted.
Previously
reported Restated
at 31 at
December 31 December
2021 Adjustment 2021
Consolidated Statement of Profit or Loss US$ '000 US$ '000 US$ '000
Finance costs 12,184 1,124 13,308
Fair value gain on derivative liability - (9,010) (9,010)
Loss before taxation 46,782 (7,886) 38,896
Loss for the year 42,113 (7,886) 34,227
Basic loss per share (3.39) 0.65 (2.74)
Previously
reported Restated
at 31 at
December 31 December
2020 Adjustment 2020
Consolidated Statement of Financial Position US$ '000 US$ '000 US$ '000
Convertible loan note reserve 55 (55) -
Retained earnings 28,367 (6,800) 21,567
Total equity 197,364 (6,855) 190,509
Borrowings - non-current portion 72,507 6,855 79,362
Borrowings - current portion 13,337 - 13,337
Total liabilities 153,457 6,855 160,312
37. Events after the reporting period
The Company entered into a non-binding term sheet with Orion
Mine Finance ("Orion") on 5 May 2023. The term sheet, which were
approved by the Orion Investment Committee, envisages that the
Orion convertible loan notes which are due in November 2023 will be
refinanced into the following components:
-- A three-year secured term loan ("Term Loan") totaling
approximately US$27 million, bearing interest at 6 percent plus the
greater of (i) 3-month secured overnight financing rate and (ii)
3.0 percent per annum, payable quarterly in cash in arears. 25
percent of the facility is repayable in June 2024, 30 percent
repayable in June 2025 and 45 percent repayable in June 2026.
-- A new convertible loan note of approximately US$13.5 million,
bearing interest at 12 percent per annum, conversion price of 8
pence and a maturity date of June 2028. The Company shall have a
one-time right to redeem 50 percent (in whole and not in part) of
the New CLN in June 2026, subject to the right of Orion to elect
for conversion of the same for a 30-day period.
-- Conversion of approximately US$4.5 million of existing
convertible loan notes into shares at 6 pence per share.
-- Supplemental production financing agreement ("PFA") on the
same terms as the existing PFA during the tenure of the Term Loan,
except for the PFA rate being 0.22 percent with a realized kgV
price of less than US$47/kgV or the PFA rate being 0.18 percent
with a realized kgV price of more than US$47/kgV. Once the Term
Loan has matured in June 2027, the top-up PFA rate will reduce by a
further 80 percent for the life of mine
The transaction is conditional on several items, including due
diligence, shareholder approval at a general meeting and definitive
documentation.
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END
FR EAEKEAEKDEAA
(END) Dow Jones Newswires
June 21, 2023 02:01 ET (06:01 GMT)
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