Bushveld Minerals CEO Fortune Mojapelo. Picture: SUPPLIED
Bushveld Minerals CEO Fortune Mojapelo. Picture: SUPPLIED

Bushveld Minerals, one of the world’s important sources of vanadium, stepped up production of the mineral used to make steel, chemical products and batteries, but it has slowed work on developing a new mine in SA.

Bushveld, which is traded on London’s Alternative Investment Market, has all its operations in SA, including two large processing plants, Vametco and Vanchem. These plants are among just four primary vanadium processing plants in the world.

“While Bushveld Vanadium was initially operating at the run rate required to meet its 2020 guidance at Vametco and Vanchem, this was interrupted when the SA government issued a directive ... for a 21-days’ nationwide lockdown,” CEO Fortune Mojapelo said.

Bushveld has intentions of growing output to 8,400 tonnes of vanadium a year, which will make it one of the senior suppliers of the mineral. Those plans have been delayed by SA’s lockdown that started on March 27 to curtail the spread of Covid-19. After a first period, the government then allowed mining companies to operate at 50% of capacity from April 18, with further easing expected over time.

Bushveld used the first lockdown period to complete maintenance scheduled for the second quarter of the year at Vametco, leaving the mine and processing plant free of planned stoppages for the remainder of 2020,  Mojapelo said.

Vametco sold 898 tonnes of vanadium in the first quarter, a 77% increase year on year. Prices, however, were about two-thirds lower over the same period for vanadium sold to European and US customers. For Asian clients, prices fell 56%. Vanadium prices for the three regions traded in an average range of $24/kg-$27/kg.

“The vanadium prices remained resilient in all regions despite the impact of Covid-19. China’s processing and manufacturing index indicated improved rebar production and demand driven by the restart in the construction sector,” Mojapelo said. Rebar is a form of steel used to reinforce concrete structures during building activities.

“We are encouraged to see China has remained a net importer of vanadium even during March. We expect vanadium demand to remain robust,” he said. Bushveld prioritised customers in China and the US and it was able to continue sending vanadium to those countries but at reduced frequencies. China is the world’s largest steelmaker.

The cost of production at Vametco was $19/kg, keeping a profit margin intact for the company. Vanchem, which Bushveld bought last November, was hit by 10 days of load-shedding and the start of the lockdown. Its sales of 182 tonnes made up a third of Bushveld’s sales. An R85m programme to refurbish the Vanchem plant will be carried out during the second half of 2020 because the expenditure is regarded as “critical”. Bushveld has liquidity of $34m.

“Overall group sales came in at a strong 1,080 metric tonnes of vanadium, 17% ahead of our 920 metric tonnes vanadium forecast due to destocking of the previously reported strong fourth-quarter excess production,” analysts at Peel Hunt said.

Vametco and Vanchem are both ramping up to normal production levels because they use opencast mines, which employ relatively small workforces, making virus control measures more effective.

Bushveld has put the definitive feasibility study into building the Mokopane mining project under review as it seeks to preserve cash. The mine is to supply Vanchem, but Mojapelo said it has enough ore to keep it at steady capacity until the first half of 2021.

“We retain a positive view on the vanadium market in the medium to long term, so we retain our growth commitments,” he said.

seccombea@businesslive.co.za