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Bushveld Minerals is playing a long term game in vanadium

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Bushveld Minerals [LON:BMN] has been on our radar for a while now. The vanadium producing and processing company was well-positioned for growth at the end of 2020 we believed. Yet despite a positive start to 2021 the share price continued to bump along at 2020’s lacklustre levels.

But there are promising signs so far in 2022. Although the Bushveld share price is still sitting at around 13p at time of writing, YTD it is up 27% and up 40% in the last week.

Bushveld operating fundamentals are strong

We believe that there is plenty of scope for Bushveld Minerals shares to bounce back to its 2018 levels of around 40p. This is partly because Bushveld Minerals is one of only a few vanadium producers globally. Bushveld owns two of the world’s four operating primary production processing facilities. Its 549 million tonne resource is one of the largest primary vanadium resource bases with three mineral assets: Vametco, Brits and Mokopane.

Through Vametco and Vanchem, its processing facility, Bushveld Minerals produces Nitrovan, ferrovanadium, vanadium oxides and vanadium chemicals. The company’s orebodies comprise large, long-life, opencast deposits, with grades of 1.6 – 2.0% V2O5 in-magnetite, which are among the highest in the world.

Alongside all this, last week Bushveld Minerals announced that it had successfully defended a claim from Garnet Commerce regarding an alleged breach of a joint venture agreement. Garnet Commerce issued a claim form in the High Court against VRFB Holdings, of which Bushveld Energy has a 50% stake and Enerox Holdings, a VRFB manufacturer providing grid scale and micro-grid energy storage solutions.

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High demand for vanadium

While it is still early days – last year Bushveld’s revenue for vanadium products to VRFBs amounted to US$0.2 million – as part of the global transition to clean energy vanadium is a market set to grow exponentially. Latest forecasts show that by 2026 vanadium could be worth US$592.4 million, from US$194.2 million in 2020. More than half of all vanadium is mined in China with South Africa the third-largest vanadium producer currently. Russia is the second largest producer.


Weaker financials

It is worth mentioning that Bushveld Minerals made a loss in H1 2021. The June results showed that overall revenue for H1 2021 was US$47 million. Despite seeing improved average realised prices, a combination of reduced sales volumes, higher production costs and a stronger ZAR:USD exchange rate resulted in an EBITDA loss of US$10.8 million. In H1 2020 the company managed US$1.0 million in profit. Bushveld says it is aiming to cut costs by between US$2.5-4 million this year.

It’s a journey, not a race stated Ian Watson, Bushveld’s Chairman in his report last year, adding that the company wants to make certain that “once we reach our goal, we can maintain our production rates for decades into the future.” Let’s hope he’s right.

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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