Aim-quoted integrated vanadium producer and energy storage solutions provider Bushveld Minerals on September 13 reported significant improvements in revenue, earnings before interest, taxes, depreciation and amortisation (Ebitda) and operating profit for the six months ended June 30.  

Bushveld FD Tanya Chikanza noted that revenue had increased by 62% year-on-year to $76.2-million for the period under review. This increase was one of the key factors in improving adjusted Ebitda, which swung from a loss of $15.6-million in the 2021 interim period – an improvement of $26.4-million year-on-year.

Operating profit was $6.1-million for the interim period under review – a year-on-year improvement of $8-million.

“The improvement in adjusted Ebitda and operating profit was [also] significantly supported by a weak exchange rate, which had an overall positive impact of $10.8-million on adjusted Ebitda,” Chikanza said.

She added that the group cost per unit sold, including sustaining capital, decreased to $37.8/kg of vanadium from $39.7/kg of vanadium a year ago. This reduction was owing to a weaker exchange rate, higher sales volumes and a stay in capital expenditure.

“This reduction was partly offset by an increase in general and administrative and operating costs.”

Bushveld CE Fortune Mojapelo attributed the “strong” interim performance to Bushveld’s building on the solid foundations of 2021.

Group production improved by 4% year-on-year owing to Vametco’s stable operational performance. However, Vanchem’s production during the period was lower than anticipated owing to lower recoveries associated with the Kiln 1 wind-down, load-shedding and a slower-than-planned ramp-up following the commissioning of Kiln 3.

As such, Bushveld has revised Vanchem’s production guidance downwards from between 1 750 t and 1 850 t to between 1 350 t and 1 450 t for the full-year, owing to its initial performance and considering ongoing load-shedding risk.

Vametco’s guidance has marginally increased to between 2 550 t and 2 650 t, with the group still expecting to reach the total annualised run rate of between 5 000 t and 5 400 t by year-end.

“Barring any unforeseen events, we expect the positive adjusted Ebitda and cash generation to be maintained in the second half of 2022, which will be used to meet the remaining capital requirements and reduce leverage.”

The group cash balance at the end of the period was $7-million, compared with $15.4-million as at December 31, 2021, with the reduction arising from capital for the refurbishment of Vanchem Kiln 3, construction of the Belco electrolyte plant, the equity investment in the Vametco minigrid and the partial repayment of a Nedbank revolving credit facility.

“As noted in the 2021 Annual Report, having incubated the energy division, and created the critical mass to ensure its success, Bushveld Minerals intends to carve out Bushveld Energy as a standalone company focused on the vanadium redox flow battery (VRFB) value chain. Bushveld plans to retain a substantial share in the carved-out entity.

“The proposed carve-out process is under way and is planned to be completed by year-end,” Mojapelo commented.

He added that a benefit of Bushveld Energy’s having developed a commercial solar VRFB storage minigrid for Vametco –  to be completed during the first half of the 2023 financial year – was that, aside from helping to improve security of supply, it proved that it was possible to deliver renewable energy with VRFB storage, with project economics that were “sufficiently attractive” for third-party equity and commercial debt agreements.

“We're very excited about the minigrid in terms of the doors we think it is going to open.”

Meanwhile, Mojapelo noted that construction of the Belco electrolyte plant is more than 80% complete and is expected to enter into operation in the first half of 2023, with an eventual ramp-up to eight-million litres a year.

Belco is undergoing a qualification process for its electrolyte with VRFB companies in preparation for electrolyte sales next year.

“Despite the recent softening in the vanadium price, we remain confident that the medium- to long-term market fundamentals continue to support vanadium prices going forward.

“We expect to see an even stronger operational performance in the second half of 2022, supported by improved operational stability at Vanchem which has continued into the month of September, and as Vametco continues to demonstrate solid and consistent production levels,” Mojapelo commented.

QUESTIONS ABOUT ESKOM
Mojapelo, during a question-and-answer session after a presentation of the group’s results noted that Bushveld was looking to reduce the effects of load-shedding on its operations.

He explained that, unlike Vanchem, which receives its power from the municipality and is therefore affected by load-shedding schedules, Vametco receives its power directly from Eskom, and as a large industrial user, has its consumption curtailed, rather than shut off.

Bushveld is hoping to implement a similar arrangement for Vanchem.

However, he also noted that the group was evaluating self-generation initiatives, as it intends to take advantage of recent regulatory changes in the electricity sector.

When responding to a question regarding the lack of VRFB systems awarded by power utility Eskom, he noted that only 343 MW of the 500 MW battery energy storage solutions initiative had been awarded.

“I think, in reality, a lot of stationary storage systems procured to date are still predominantly focused on the upfront capex. We are seeing the landscape evolving, but I think it's fair to say that we still see most procurement processes favouring technologies of the likes of lithium-ion.”

However, he reiterated that Bushveld was “comfortable” that VRFBs were competitive in terms of long-duration storage, and long lifecycle systems, adding that the requirements and the demand for long-duration energy storage were growing.