Base Resources (AIM, ASX: BSE) – Mineral Sands in the Pink (Transcript)

Can Base Resources build on the success of their first project in Kenya without shareholder dilution? We interviewed Tim Carstens, Managing Director of Base Resources to find out.

Their ‘new’ project in Madagascar has a lot of similarities to the first project so a lot of learnings and complementary skill sets. Mineral Sands is little understood by investors as it is small market with few players, but it can have very high-margins. Rutile and Ilmenite are both used in the production of pigment ie: to colour paper, plastics, cosmetics. Plus Zircon is used in ceramics & tiles.

They produced some good numbers last year so we discuss the future for the business and find out where that growth comes from. Carstens tell us what he thinks it is going to take for investors to see a movement in the share price. We discuss their plans for project financing at the new project. They are debt free but there is no movement in the share price. When does the plan kick in for shareholders? Carstens also breaks down the shareholder register and what type of investor he is looking for.

Carstens says East Africa is better for business than West Africa but how is he planning to spend the money they made in Kenya? With no dividends on the horizon, where is the value being created? Lot’s of deliverables in the next year to build this Mineral Sands company in the hope of becoming a mid-tier company with only a few peers.

Interview Highlights:

  • Overview of the Business: What are Mineral Sands?
  • Review of Last Year and Focus on Safety.
  • Madagascar Asset: How Will They Get it Financed?
  • Share Price & Shareholders: What are They Doing to Bring Value to the Company? What’s Their Strategy for Growth?
  • When and Why Should You Invest?
  • Deliverables for Next Year.

Click here to watch the interview.


Matthew Gordon: Thanks for joining us Tim. You’re doing the rounds in London. Are you going anywhere else?

Tim Carstens: No, not on this trip. This is one of our regular visits to support the listing over here.

Matthew Gordon: Let’s start off with a minute summary on the business.

Tim Carstens: We’re a pure play Mineral Sands Company listed in Australia and here in London. We’ve got a highly profitable, successful operation that we developed in Kenya. It was Kenya’s first Large-Scale Mining project, and we’ve now picked up the learnings from that and looking to apply it in a new project we acquired about 18 months ago in Madagascar. A very similar style of mineral sand operation, a little bit bigger in terms of capital and looking to bring that into being and create a pretty unique mineral sands company that’s got a very clear growth path, highly profitable. And, something we think is going to have strategic relevance in the sector.

Matthew Gordon: For people new to mineral sands, please explain what it is.

Tim Carstens: In our terms, mineral sands… we basically produce three products. Rutile is the biggest component of our suite in Kenya. It’s the highest-grade form of Titanium Dioxide. It’s about 95%. We also produce a lot of Ilmenite, which is a lower grade form of the same material – Titanium Dioxide. And the majority of both of those go into the production of pigment. That 95% of all of Titanium Dioxide materials go into production of pigment. So, everything you see with a colour.

Matthew Gordon: So, paints, plastics, paper inks…

Tim Carstens: Food dies, you name it, make-up all has Titanium Dioxide pigment. And so, consumption is very tightly tied to a global GDP. Now it’s more of an urbanization and wealth driver, I guess, than industrialization. And then the third component for us is Zircon, which is quite different, predominantly used in the ceramics industry, in glazes and tiles and the like. Also has some other sort of industrial uses as well.

Matthew Gordon: You’ve said this project’s been going 18 months. How did last year go for you, 2018-2019?

Tim Carstens: Well, there’s two parts of the business – first is Kwale the operating mine in Kenya. We got our first shipment away in February 2014. So, we’ve been going for a while there.

Matthew Gordon: That’s cash producing, profitable

Tim Carstens: Significantly cash producing.

Matthew Gordon: Give us a sense of those numbers.

Tim Carstens: I mean last year was USD$113M. That was a record year, revenue was at USD$209M, so very, very significant producer.

Matthew Gordon: Debt free?

Tim Carstens: Debt free. We have now paid out the original $235M project financing that was used to part fund the construction with net cash of $20M. So, a very strong year last year from an earnings perspective. Another very strong year from a safety perspective. We haven’t had lost time injury since February 2014 right across the business. We haven’t had a medically treated injury for two years. It’s an extremely strong safety culture in our business.

Matthew Gordon: Let’s touch upon that, because most people don’t bother talking about.

Tim Carstens: Ours is a less inherently dangerous form of mining than compared to Hard Rock Underground, for example. But yet there’s still an awful lot of moving parts in our business. You know, road transport, a lot of risks. The reason we focus on it is 1. It’s central to sort of how we want to go about doing business. 2. But it’s also a pretty good window in on the performance culture of the business in general. Because you never find a business or an operation that has really good safety performance and poor operational performance because the management disciplines that drive one, drive the other. The other reason it’s really important for us is we’ve come into a country with no history of mining in Kenya, in terms of no large-scale mining. We’re 98% Kenyan workforce. So roughly 1,000 people on site. So being able to embed that sort of safety culture in an environment that’s not used to it is a significant achievement.

Matthew Gordon: You’re also spending a bit of money on some CSR activity.

Tim Carstens: We do spend a significant amount each year. It was about $3.8M last year on community development and environmental enhancement programs. We’ve actually banned the use of the phrase “corporate social responsibility in the business” largely because it’s the language of obligation. Its what companies feel they need to do to be seen to be corporately socially responsible. We take a slightly more strategic view on it. In that for us, we need to have a community and a government that has a felt fair exchange of benefit, mutual benefit with us so that at one level we have a really proud, happy workforce. We have a community that will defend the project or the mining operation against any sort of political interference. And then at the other end of the extreme, we have a community and a government. They’re a fantastic reference for us when we want to move into somewhere like Madagascar, where we’ve now gone. We’ll be able to point to what happened in Kenya. And you very quickly have a government that recognizes you as someone they want operating in the country.

Matthew Gordon: Let’s talk about Madagascar. That’s a relatively new operation. How are things going?

Tim Carstens: That’s going really well. We bought it as a project, so it’s going through the study phases at the moment. We completed the Pre-Feasibility Study (PFS) in March, which reinforced our view of it being probably the best undeveloped mineral sand asset in the world. We’d looked at a lot of projects before we decided it was the one we wanted to go for. We’re now completing the definitive study, which will be out in December 2019. And that will then form the basis for completing the financing for development.

Matthew Gordon: So how are the conversations on financing are going? What are you looking for?

Tim Carstens: They’re going well. We’re looking at a combination of things at the moment. There will be a fairly significant debt package as part of the funding. We’re pursuing two options. One is a classic project financing, very similar to what we did in Kenya. And in fact, involving a lot of the same banks who had a fantastic experience with us first time round. They like the way we do what we do. They like the project and the way it gives them an entry into Madagascar in ways that probably haven’t had a lot of access to before. So that’s one debt funding option. We’re also pursuing in parallel a Nordic Bond, exploring that possibility and looking to put in place something around $350M debt facility. And in parallel with that, we’re also progressing a few joint venture discussions just to sort of understand what might be possible in with some industry plans.

Matthew Gordon: So, things are obviously going well on that front. The share price though. If I look at the history, in 2016, things took off in Kenya. The share price went screaming all the way up to $0.19. Very nice.

Tim Carstens: It’s been a bit of a wild ride almost from the moment we turned the plant on in Kwale in early 2014, our commodity prices were falling. And so, we actually got to the point in February 2016 of having a market cap of $16M. That was the low point when it was A$0.026 cents. And then we saw commodity prices turn and in about the middle of 2016 and share price shot up. We were up in the $0.30s. But we’ve largely tracked sideways since we acquired Toliyara sort of sat in a channel, $0.24 to $0.30 cents somewhere in that range. And to a certain extent, that’s explained by the market needing some more clarity on exactly how we’re going to fund the project.

Matthew Gordon: And that’s what I want to get into in now. If I look at some of the statements in your PowerPoint, you’ve mined more ore, your numbers are generally positive. You’ve paid down debts, you are net debt free. The share prices continued on a general downward slope. It’s been fairly up and down, but the general trend is slightly down.

Tim Carstens: I disagree with that. It’s been trending up for the last 12 months, but I see it’s exactly where it was twelve months ago.

Matthew Gordon: People can get have a look at the chart and work out how they feel about that statement. What is the go forward strategy here? Where are your loyalties? You’ve got loyalty to employees, loyalty to the community, loyalty to shareholders. But what are you doing for shareholders going forward? What’s the growth component to the story?

Tim Carstens: Well Toliyaras is clearly the growth component.

Matthew Gordon: But when does it kick in?

Tim Carstens: Well, on the sort of timetable we’re on, we’re aiming to be in production by the middle of 2022, which will still see us with overlap with Kwale – two operations running. You’ve got that diversity of earnings and extremely powerful earnings profile. I mentally Toliyara based on the PFS numbers is going to spin off free cash flow each year of around $13M. So significant cash flows across the two. One of the challenges in developing an asset in Kenya or Africa generally is getting full value in a share price sense for the earnings you generate simply because of this perception of risk. And that’s particularly exacerbated when you’re a single asset, single jurisdiction company. So, our strategy had always been to let’s go get Kwale up and moving. Use it to build our business model. Use it to build our capital base, our reputation, our scale with a view to then taking all of that to move to the next asset, to get that diversity happening and build a company with a number of operations that smooths that out and starts to unlock the latent value of the earnings.

Matthew Gordon: Do you think you’re telling that story well at the moment?

Tim Carstens:  We’re telling the story as well as we can at the moment, because the key unknown for people is exactly how we’re going to fund it. And we can’t explain it any more than we are at the moment, because we’ve got all these components that are moving forward sensibly. They can’t move forward any faster because obviously completion of a DFS is central to that. It’s a long-term exercise building a business from scratch.

Matthew Gordon: You are throwing out cash, you are paying down debt, and you’re looking after the administrative side of things. At what point do current investors or new investors get interested in you again. Are they going to wait until you get your debt package in place in the new year? Is that the moment they should really be looking at you?

Tim Carstens: I think people are crazy not getting involved now. But I understand why they aren’t. Because, we’ve got a very clear picture of what the value is in this business. And it’s a question of time before people actually see that. As I keep repeating, for a lot of people the lack of clarity around exactly how we’re going to fund it gives people a sense of maybe they’ll go fund raising and that’s something that we need to dispel. The other part to it is that we have a ridiculously supportive shareholder base where the top 20 hold 91% of the stock. The top three hold 65% of the stock at the current share price. No one’s really interested in letting any stock go.

Matthew Gordon: Isn’t that part of the problem?

Tim Carstens: Well, it is part of the problem, no question. But it’s why we need to be a little bit patient with this, because for someone looking to get in in a meaningful way as an institution, you’ve got to get yourself comfortable with the value proposition. You’ve then got to be able to see a pathway through to acquiring some stock in the first place. And then you’ve got to get yourself comfortable. You can exit if you wanted to. So, this liquidity share price standoff is unquestionably one of their challenges. The catalyst for breaking that is quite clearly getting the DFS out. So, that’s the next level of resolution around the shape of the project. But the critical catalyst, as far as I’m concerned, is when we’re able to go out quite clearly and say, here’s what the debt looks like, here’s what any joint venture looks like, here’s how the rest of the funding comes together. And this is what that means for you shareholders. Now, I think if people sit and wait until that happens, they might find they miss out.

Matthew Gordon: So that says to me that you’re interested in institutional investors, not so much retail?

Tim Carstens: No, not necessarily. We’ve made a concerted effort now to really reach out to retail. We just seem to have been more successful in getting to the institutional side of things, we’ve done quite well there. But the retail is somewhere we need to spend more time focusing on.

Matthew Gordon: Why’s that?

Tim Carstens: When you’ve got limited liquidity, they’re the people that are going to set the share price and then the price becomes the price at which blocks trade. And it’s something we do need to…

Matthew Gordon: And do you find that’s a much harder story to tell to retail? You mentioned the Africa component here. Also, mineral sands being little understood.

Tim Carstens: Yeah one of the challenges with mineral sands is there are so few pure play mineral sands companies in the world. It’s not a story that people get to touch regularly, even amongst institutional investors. They don’t see too many mineral sand companies coming around. It’s a less immediately clear sector in the sense that you don’t get a lot of commentary about it, it’s not like people talk about it like what’s happening in the copper price or nickel or whatever. And then you’ve got the Africa factor as well, which a lot of people just aren’t really quite comfortable with what Africa’s about.

Matthew Gordon: With gold, more so than most other minerals in Africa they might be a little bit more comfortable.

Tim Carstens: I always find it interesting that people seem to be more comfortable with gold in West Africa than super simple mineral sands in East Africa.

Matthew Gordon: Gold’s a very big market in terms of value terms and it’s been around a while. And mineral sands is new and it’s a smaller market.

Tim Carstens: It’s more the nature of the countries you’re talking about. There’s a lot more policy volatility in West Africa than there is in East Africa at the moment, except for Tanzania.

Matthew Gordon: I like Tanzania, I’ve worked there.

Tim Carstens:  It’s a great country, an interesting policy environment. People are waiting to see if there is a knock-on effect.

Matthew Gordon: Shareholders are sitting around patiently waiting for this pop. And you think it’s going to come when there’s clarity on your debt package. What are you going to do for them? Kenya generated a lot of cash. You’re hoping to replicate that in Madagascar. Is there some kind of dividend coming down the line or some share buybacks?

Tim Carstens: Shareholders fall into two categories in our world, the shareholders who would suggest that a dividend to be good. And then there is the vast majority who say, don’t be stupid because we’re looking for that growth. We can see the project coming next year. Why would you issue a dividend now ahead of making a major investment next year? So now, while we have every desire to be a dividend payer and its part of the business that we’re building and the diversity of cashflow we’re building, right now is not the time.

Matthew Gordon: Isn’t that the trap that producers fall into, that they create cash and they go, ‘oh, we need to grow, so we need to make an acquisition’. They spend a lot of money on an acquisition, spend money on the CapEx getting that into production to produce more cash, but they kind of forget about the shareholders along the way.

Tim Carstens: As a generalization, that’s fine. But to suggest that we’ve forgotten about shareholders is not really appropriate. Every company has its own peculiarities and its own circumstances. We started at Kwale with an asset that had to short mine life, it had mine life of 11 years. We’ve built an extremely robust business and business model and team. And, the option that you’re talking about would be for us to run that for cash and close the business and moved on.

Matthew Gordon: It’s not quite…

Tim Carstens: Well yes it is, because, you can’t get too close to the end of the mine life at Kwale when we’re talking about mid-2024 without having somebody to replace it. We’re not making the most of our platform that we’ve built if we’re not applying it to something else. And our shareholders have certainly been encouraging us to go down that path and we can see such significant opportunities in the sector because we had been so profitable during the downturn. Even in a downtime, we were still able to service our debt. We were not financially stressed in the way a lot of our competitors were. Which meant we’re able to grab what we think is the best project to add to the portfolio and get to that next level, at which point we will be a very significant cash generator and a completely different set of options at that point. For us, this was absolutely, unequivocally the clear path.

Matthew Gordon: What I’m saying is for institutions who will sit back and play the long game, that’s one thing. For retail, family office, high net worth looking for quicker return, it’s a very different model, Everyone’s got different investment models. Your focus at the moment is around the institutional guys, because it’s around 90% of the business.

Tim Carstens: Not necessarily. We actually found we have a huge number of very long-term retail. I actually take a different view. A lot of the institutions are actually much more focused on short-term performance. A lot of our retail shareholders understand the long game of building this company and they’re involved in it. And the point I’d make to shareholders who are looking for that short-term hit in the yield in the next two years, we’re probably not the company for you. So, I suggest you go somewhere else.

Matthew Gordon: That’s what I’m hearing loud and clear.

Tim Carstens: People can vote with their feet. I got no problem with that. We’ve been very clear about what we’re doing with this business and we’ve got a very clear path on how we develop it.And the shareholders need to choose whether it’s their profile.

Matthew Gordon: So next year, few things happening; the DFS and the raise.

Tim Carstens: Well the DFS will be in December then the rest of the year will be spent very much on bringing together the funding components, working towards being in a position to make a final investment decision to stop the major construction over the course of next year. Now, we’ve given ourselves a fair bit of runway through until probably the end of the third quarter next year to get all those pieces to come together, because there’s a fair bit of complexity in it and when you’re talking about potential minority joint venture participation, debt facilities, we’ve still got to pin down the final fiscal terms with the government in Madagascar. So, all of those pieces need to come together over next year. The other thing that’s getting a lot of focus for us is mine life extension at Kwale. We announced there is a large resource on a separate dune called the North Dune during the year. I’s very big, 171Mt, but quite low-grade. So, we’re doing a study on that at the moment to see what subset of that could make sense as mine life extension. Then we’ve got another couple of areas around Kwale that we’re exploring to see if we can identify more.

Matthew Gordon: Do you want to give us a little summary for investors looking at this from new as to why they should be investing in you guys?

Tim Carstens: We’re trying to build what is a very unique mineral sand company in terms of being a mid-cap company, heading towards having two operations at the moment. We’ve got one very profitable one we think we can extend. We’ve got another world class development asset. We’ve got a business model that’s been very successful in Africa. We do win quite a lot of awards for our environmental stewardship and community engagement. And the whole team that brought Kwale together is still with us. So, the whole team that did it the first time around is there to do it again. We’ve got a very robust financial platform to be able to build that business. But the long term aim here is to create something pretty unique, because in our sector, there is really only Aluca at $3Bn – $4Bn market cap. And then you drop down to Kenmare and ourselves around the USD$200M-$300M market cap. And we’re trying to create something quite unique in that space with a multi-asset sort of business with a growth profile.


Company website: https://www.baseresources.com.au/

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Pan African Resources (AIM: PAF) – A Dividend Paying Gold Producer (Transcript)

Interview with Cobus Loots, CEO of Pan African Resources (AIM: PAF).

We don’t tend to like investing in Gold producers as they rarely perform for shareholders. But we like this one, a lot. The CEO is brutally and refreshingly honest. He spends lot of time pointing out the difficulties in mining and operating in South Africa.

However, they make it work. They have a long track record of producing Gold and paying dividends. Last year they suspended the dividend payments as their debt borrowing for the new plant was the focus, however, they are planning to pay a dividend (subject to shareholder vote in November). The Audit Results are out today. The numbers are extremely encouraging and show a tremendous growth across the company. Cobus Loots talks about how they have done it and what the growth targets are in the short term. We were impressed about the way they think about capital allocation. Investing in their assets, they want to repay the debt on balance sheet, paying a dividend and how to deliver growth.

They still have a lot to do but we think this team is rigorous in its planning and methodical is how it delivers its projects.

Interview Highlights:

  • Overview of the Company
  • Audit Report: Great News?
  • Safety & Why It is Important to Pan African Resources
  • Productivity & Production: What Numbers Are They Looking At? Can They Lower Their AISC?
  • Paying a Dividend: Why Now?
  • Mining in South Africa: Benefits and Risks
  • Company Financials and Share Price: What’s The Outlook?
  • Future Plans for The Company

Click here to watch the interview.


Matthew Gordon: I’m looking at your executive officer statement. We had a chance to quickly scan through this. Some great numbers on there, you must be very pleased.

Cobus Loots: We are quite pleased. And I think this was a great improvement on pretty much all fronts.

Matthew Gordon: Definitely. Give us a one-minute summary of the business for those new to the story to start with.

Cobus Loots: The company is Pan African Resources PLC. We’re a UK company, but with a South African base, with all of our operations currently in South Africa. We have two large gold mining complexes. The first being Barberton Mines. Barberton Mines has been going for almost 130 years. So, gold mining started in Barberton in 1886. We’ve made some major improvements in recent years at Barberton. So, we have the underground mine that we’ve been mining, and will continue to mine for quite some time. And then we also have a tailings plant that produces ultra-low-cost ounces. The other complex is Evander Gold mines. The largest operation that we have now as part of the Evandar is the Elikhulu plant. That also produces very low-cost and low-risk gold ounces. And then we have an underground operation that we are also in the process of developing further at the moment.

Matthew Gordon: Can we talk about some of the growth stories that I’ve been reading about, eg: Egoli and Royal Sheba. But let’s start with these numbers. You’ve produced some exceptional numbers there. What stands out for you?

Cobus Loots: What stands out is the fact that we improved our safety performance at the year past. That’s critical for us on a number of fronts. If we can’t produce safety, we cannot produce. I’m very happy to report that all of our safety statistics have come down in terms of incidents in the last year. That’s a result of principally the Elikhulu tailings plant, which inherently is just a lower risk operation, but then also a massive focus on safety schemes, safety initiatives across the group. The safety box is never ticked. We have to continue to work on safety, but it was a good performance. Operationally we exceeded our production guidance for the year past. That’s obviously quite a positive. Actually, from all operations we had an improved performance. On the cost side from an All In Sustaining Cost (AISC) perspective we reduced our costs quite substantially. I’d like to say we are the lowest cost producer in South Africa as a group, certainly amongst the lowest cost at the moment. But not only that, we also internationally very competitive. So, AISC came in at $980 an ounce. The international benchmark at the moment is just over $900. So, $980 versus $900. Not bad. And there is potential for us to bring down that cost further in the year to come. So overall, good performance. I’m also very pleased by the fact we are proposing a dividend for approval at the upcoming AGM. And that’s positive. We had to suspend the dividend last year as a result of obviously gold price. What was happening at Evander, the substantial capital we were incurring on the construction of Elikhulu. So, I’m quite happy that the dividend is back. We’ll be at a more modest level, but it’s still to 1% yield is not to be frowned at.

Matthew Gordon: Good news it seems to me, but not without a lot of hard work from your team. And I noticed the first thing you focused on there was safety, which again is unusual. People usually to stick that at the back of the presentation. Why is it such a big deal for you guys?

Cobus Loots: If you analyse it coldly, the world is changing. If you can’t produce gold safely, it makes it very difficult to produce. Our people are our primary asset. That’s an addition to our ore bodies and all of our other infrastructure. So, we need to take care of our people from a health and safety perspective. Safety first, health also very important. So, without our people, well, we can’t achieve what we’ve achieved in the last year.

Matthew Gordon: Good. Nice to hear. Let’s talk about productivity. You’ve increased your forecast, so you’re going to be producing at what level by the end of next year?

Cobus Loots: We’re guiding 185,000 ounces for FY20, which as going to you said, is quite a be a big improvement on the 172,000 that we did last year. So that’s off the back of a number of projects. So, 1. Elikhulu will produce now for a full year. We commissioned Elikhulu in September 2018. So, we really only had the benefit of nine months of production from Elikhulu. You obviously ramping up also. So now you’re looking at a full year of production from Elikhulu which includes the enhanced or increased capacity via the ETRP. It’s a tailings block. So, we’re saying 65,000 ounces from Elikhulu. We’re saying 20,000 ounces from what we call the Evander Pillar project at the Evander underground, and then 100,000 ounces from Barberton. So, that makes up of our increased production guidance of 185,000 ounces.

Matthew Gordon: That puts you firmly in the mid-tier producer range. And if you look at what gold price is doing in the last couple of months, you’ll start to see the benefit of that in terms of margins, because of the amount that you’re producing. I make that point for investors, because there’s an assumption because gold is up that the junior explorers and developers will benefit. And they don’t. It’s the producers who will benefit far more quickly because of sales. You talk about the lower AISC, which I thought was interesting. You are striving to drive towards that $900 mark. You’ve clearly made some headway into that. What do you attribute that to and how are you going to continue driving the AISC lower?

Cobus Loots: The first contributor to the reduction of AISC has most definitely been our tailings business. We commissioned Elikhulu in the last year. It’s quite a large plant. It processes 1.2Mt of tailings p/m. And that’s where we get our 65,000 ounces of gold for the next year. The great thing with Elikhulu is it produces at an exceptionally low AISC. We should be at $650, if not lower. We then have the Barberton tailings retreatment plant (BTRP) that does also 20,000 ounces. So overall, we have 85,000 ounces that are what we like to call ultra-low-cost production. This provides a stable base load, for our portfolio, and allows us to survive pretty much in any gold price environment. And it brings down the groups AISC quite significantly. Those are the tailings businesses. There’s quite a lot of optimization happening underground at Barberton. We’re simplifying the infrastructure. We’re doing a lot more development which allows us further access to high-grade ore bodies. We’re looking at the marginal side of the business to see if we cut some ounces and reduce costs? There are a number of initiatives also ongoing to further reduce the AISC for the group.

Matthew Gordon: But that does tend to suggest that the Barberton costs are quite high.

Cobus Loots: If you look at our results presentation, Barberton underground actually has put different shafts with different cost structures. The flagship underground business is Fairview. Fairview has been going for many years. It’s an incredibly high-grade ore body. It’s on average more than 10g/t, but we get pockets of +100/gt. The principal ore body that we mine at Fairview is the MRC. It has a life currently of 20 years. And we’ve been doing a number of improvements to infrastructure to ensure that we can continue to mine successfully, safely and profitably in years to come. So, Fairview by itself is still a fairly low-cost producer. Then we have a more marginal ounces at Sheba and at Consort. So those are the answers that we have to focus on and reduce that all in sustaining costs.

Matthew Gordon: With regards to Sheba, what’s the chances of that making some kind of contribution this year?

Cobus Loots: Sheba has certainly contributed in the year past, but the focus is increasing that contribution. It’s a project that we’ve been speaking about for some time. We want to get the first gold out of Royal Sheba in the year to come. Sheba should do better this year.

Matthew Gordon: Let’s talk about dividends. But you’ve announced that you’re going to pay a dividend, it’s got to be voted for. I’m assuming the shareholders will accept. What made you do that?

Cobus Loots: It’s a modest dividend versus what we’ve paid in the past. It’s still in effect a yield versus having your money in a bank and in some jurisdictions earning a negative interest rate. I think that makes it attractive. If you consider the way that we think about capital allocation. 1. the first is investing in our assets. We have to continue invest in our assets, otherwise we will not be able to continue to generate returns. 2. is balance sheet, because of the project Elikhulu that we constructed in the last year, our balance sheet is highly geared, certainly more than what we’d like to see. So, in the next year, we’d like to repay quite a lot of the debt we have sitting on the balance sheet. 3. it is providing a cash return to our shareholders in the form of dividends. 4. once we’ve taken care of those we also look at growth.

Matthew Gordon: Mining is tough. Mining in South Africa is really tough. But your track record of bringing projects online is good. We talked previously about doing business in South Africa and what it was like. And you said, ‘yeah, it is tough, but we deal with it. We’re used to it’. Tell people about that conversation because I thought it was fascinating.

Cobus Loots: Well, I’ve concluded that gold is so precious because it’s so difficult to mine regardless of where you are actually doing your mining. South Africa has a fairly negative perception internationally and some of it is justified and some of it potentially is not. We have a long history of mining, certainly gold. More than 50% of all the gold that’s been mined in the world has come from our country. We have great infrastructure. We have access to power. We have access to technical skills. We have a good constitution. We have a good legal system, etc. But then you’re faced with the con’s also. You have unemployment. The economy is not doing great. There’s uncertainty in terms of mining legislation. We have power challenges, electricity issues. So, that sort of makes for an interesting mix. But as you point out, we’ve been able to mine successfully in South Africa for many years. We’ve been able to bring great projects online in South Africa in recent years which demonstrates that we have the ability to operate. One thing that’s certainly come to the fore in the last year is that Africa generally is a difficult place to do business. You look at regulatory issues in Tanzania. You look at terrorism in West Africa. You have to accept that mining in Africa does come with challenges and you have to equip yourselves and skill yourself to be able to deal with us and be successful and operate successfully and sustainably.

Matthew Gordon: You bring up points which most CEOs try to avoid discussing, which I appreciate. It’s also on page 7 of the presentation whene you talk about the underlying risks and how you’re dealing with them. It’s quite attractive when a company is refreshingly honest about the issues that they are dealing with. What it is hard to argue against is your track record of continually delivering the answers. What’s also important is driving that share price up. You have had your share price affected negatively. So what are you doing about it?

Cobus Loots: Well, if a share price does badly and we continue to sort of fret and worry about the share price, that it doesn’t really get us anywhere. So now we have a saying that ‘we focus on those things we can control and then the share price will take care of itself’, as it has done to some extent. I don’t want to speculate about the future, but now we’ve repositioned ourselves as a low-cost producer, even in a global sense. We have a long life. We have great projects where we can further increase production with fairly benign investments. I think we’re well positioned. We are safe producer. We are investing into our communities. We’re making a difference where we operate. All of that makes for a good mix. And if we deliver pretty much what we said we will do, the share price should take care of itself.

Matthew Gordon: As a producer, you’re benefiting from a higher gold price. Certainly, next year’s numbers will should, if it continues, benefit from a higher gold price because your margins are quite good. They’re definitely improving. I want to see them continue to improve. And I’m sure you do too. Let’s see what that looks like in the next the next few months. The one thing which I look for when I’m analysing a company is an understanding its financial health. You have debt at the moment. Which project are you using that for at the moment?

Cobus Loots: Well, that was the $130M Elikhulu project this last year. The project-based testament to what you can get done in South Africa. So, to put $130MIL into the ground in 12 months is not insignificant. This plant can cheat 1.2Mt of material a month. We currently produce for 65,000 ounces at an ultra-low AISC in the year ahead. So that’s to demonstrate that you can get things done in South Africa.

Matthew Gordon: And have you got more plans to raise any more money for capital expansion programs or are you done?

Cobus Loots: We are funded as far as the existing projects are concerned. So, there’s no need for us to go to market. I think the shareholders want to see us deliver on what we said we would do. 2019 was a first or second step in doing that and 2020 should be more of the same.

Matthew Gordon: So, margins are improving. Cash flow is starting to improve, are you starting see the benefit of it now?

Cobus Loots: Well certainly at the current gold price we are definitely seeing the benefit. That’s another positive around being based in South Africa. We have generally a Rand cost base, which is our local currency, which means that inflation is higher than what you’ll find in U.S. dollar terms. Wage inflation is higher than what you see in dollar terms. Electricity inflation is higher than what you’d see in dollar terms. So that’s sort of generally then puts a squeeze on margins. Where there’s a benefit is when you find a local currency, the Rand, blow out a little bit more to the dollar. What it’s done in the last months. So, then you see the margins actually go up quite a bit more than what you would find in dollar terms for your African producer. You can look to hedge. But what I’m saying is that the negative on cost inflation is offset when you find a large depreciation in Rand, which is what we have seen in the last month. So, $15,000 gold price is good for us, 700,000 Rand per kilo gold price, which is what we look at is even better for us at the moment.

Matthew Gordon: And then there’s just one other aspect – you’ve covered off safety and you’ve covered off the CSG component, but there have been some disturbances in-country. One of your sheets talks about arrest rates. Why declare that one? What’s that got to do with your ability to mine?

Cobus Loots: Well, illegal mining is a serious issue, and not only in South Africa and the rest of Africa. But you do find the guys being in South Africa quite militant, aggressive, armed. It’s meant that we’ve had to up our game a little, to professionalize further. We’ve spent a lot of money on security in the last year, more so than in years past. And that’s to protect our assets and to make sure we can continue to mine safely and sustainably into the future. So, yes, it’s endemic in South Africa. The fact that you have really high rates of unemployment. That’s going to create discontent. It’s going to create sort of people that have nothing to lose. And hence are desperate and that’s understandable. And so, we do what we can. If you look at our operations, contractors and employees combined, we employ 3,500 people. So, rule of thumb each of the workers and contractors look after up to 10 other dependents. So, 35,000 people that’s depended on our business. So, that is a big responsibility for us and it’s also a big responsibility for government to make sure that we can continue to operate. And we have been seeing the support from government, both nationally and locally, in terms of making sure that we can continue to operate.

Matthew Gordon: It is not just restricted to Africa either. We’ve been speaking to some companies in South America also struggling with illegal workers and all the issues that brings. You’ve got to be sensitive, but you also need to be able to continue to mine. If I may finish off with what you’ve done with your current assets, you’re sweating those assets and working them hard. And that’s reflected in the numbers we see. We look forward to seeing some guidance as to what that is looking like during the course of the next 12 months, obviously. And the final question is always, so any plans for any acquisitions?

Cobus Loots: We continue to look at acquisitions. It’s always a good thing because it teaches you. I always say in looking at other people’s businesses, you learn quite a bit about your own assets and what you can do differently. So, to some extent we’ll be busy with Royal Sheba, as a product of us looking at assets elsewhere. So, it’s not a priority for us. If we only sweat our own assets and we develop as we’ve set out in our plans for the year ahead, you should see a nice appreciation in the value of the business. So, an acquisition is not an imperative for us. So, we’ll continue to look, but we are certainly by no means desperate. And we’ve always said if you can develop your own portfolio, that really is first prize. Elikhulu being case and point. Egoli potentially also part of Evander, being a second example of what we will look at in the year ahead.

Matthew Gordon: And I’m guessing, given you’ve got experience in underground mining and tailings, if you were looking, you’d be looking for some similar kind of setup that would be optimal for you.

Corbus Loots: I think generally it’s difficult for us to justify going out of Africa. Southern Africa in a way makes more sense because it’s close, it easier to manage. Well, I wouldn’t want to limit the company by only that. So, you know, does it make sense a risk adjusted return basis. That’s what we would look at.

Matthew Gordon: Cobus, thanks very much. I know you’ve got a really busy day today with these numbers out and you’ll be speaking to lots of people. Thanks for making the time for us. Appreciate that. Please stay in touch, because I think you’ve built, or you are you continuing to deliver on your track record. Refreshingly honest.

Cobus Loots: Great. Thanks for having me.


Company website: https://www.panafricanresources.com

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Aura Energy (ASX: AEE, AIM: AURA) – Uranium Cash Flow to Support their World Class Vanadium Exploration (Transcript)

See our interview with Peter Reeve, Executive Chairman of Uranium & Vanadium Explorer, Aura Energy (ASX: AEE, AIM: AURA). Peter worked with Robert Friedland at Ivanhoe so he explains how the big company experience translates to the smaller junior side. He explains the thinking behind their Uranium and Vanadium strategy and how they intend to deliver growth for shareholders.

Interview highlights: 

  • Overview of the Company
  • Mentality and Company Strategy: Choosing Two Very Different Assets
  • Junior vs Big Company Mentality & Experience of the Team
  • Company Financials, Raising Money & Director Remuneration
  • Lack of Marketing: Reasons and Solutions going forward
  • Three Projects and strategy for them
  • Wishful thinking for the Vanadium Story?
  • Views on the Uranium and Vanadium Markets

Click here to watch the interview.


Matthew Gordon: Why don’t we kick off with a summary of the business and then we’ll get stuck into some questions.

Peter Reeve: Aura’s got three major parts to its business.  The first one is the Tiris Uranium project in Mauritania where we’ve just released the Feasibility Study.  We’ve got a Vanadium project called Haggan up in Sweden and we have some fantastic Gold and Base Metal and Battery Metal tenements for exploration down in Mauritania.  Quite a lot of work’s been done on those and that’s an interesting situation, a third off the rank, if you like, before two development projects.  We are focusing on getting cash flow out of Tiris, and with that cash flow help to build the other projects, but we’re also considering each one of these businesses to be essentially separate entities, so we’re trying to fund them separately.  So we do talk about an IPO separately for Haggan and we talk about some form of separate funding for the Gold, base and battery metal exploration. 

Matthew Gordon: What was the big idea when you put this together?  If I look at your track record, there’s some big names in there.  Big company experience, but this is a start-up.  So what are you looking to do?

Peter Reeve:  If I talk to the management team for a start, the majority of the management team and a couple of the Directors came from BHP Billiton.  In fact one of my Directors was my boss back in BHP Billiton when we were 30.   So we’re essentially from big companies and what big companies do really, really well is they do a lot of good, boring, technical stuff but they fail to capitalise on it all the time and commercialise it because big companies don’t have the financial imperative that little companies have. I left BHP Billiton and went out… I did a lot of things.  I became a fund manager, I went to a lot of other mining companies, did some big IPOs and then one of the Directors asked me to come back in.  The reason why I came back in after having run some large companies was because I believed and I still believe that these assets can deliver a very, very large company over time when we get those projects in cash flow.  So that’s probably the core thinking.  Very, very good technical people, very experienced technical people, but hand in hand probably as much commercial impetus as we needed to get these things driving. So what we want to do with the projects is we don’t want to trade shares on the stock market.  We don’t want to flip projects.  We want to cut the ribbon on production for our projects, but obviously it’s a Director’s decision.  If somebody else has a lot of money for projects, of course we’ll sell them, but what we really want to do, we believe the best way to get best value for shareholders, is by cash flow receipts.   You can do it by takeover, you can do it via other methods, but we believe cash flow receipts will ultimately give you the highest valuations.  So we want to get these things into production and make them very valuable for the shareholders.

Matthew Gordon:  That’s about what you want to do.  I’m more interested in the strategy.  You’ve selected Uranium.  You’ve selected Vanadium and Battery Metals.  They’re quite volatile, certainly in the case of Vanadium.  Uranium’s in a tricky position at the moment, but obviously people expecting that story to bear fruit, and Battery Metals, flavour of the month.   Why did you pick on those very different commodities in Mauritania and Sweden?  Two very different types of environments.  Was it a case of they were there or was it case of actually we specifically identified these commodities or these jurisdictions?

Peter Reeve:  Going back to the first comment I made about the fact that the company started and was based on highly technical people well before I joined, we had very, very intrepid geos.  They see rocks and mineralisation.  So it was 2007 / 2008 and they thought Uranium was a very good idea.  So they went and discovered Uranium in Mauritania.  A survey had been sitting there without any work, a radiometric survey without any overview of anybody external for five or six years.  Managed the expedition, went out into the desert and found the first Uranium out there. 

Similarly one of our Directors, had done some work in the Scandinavian countries as a younger geo, and knew that the alum shale ran into Sweden and eventually a long story short, that became a piece of ground they picked and cut the first Resource for Uranium and Vanadium. So the very nice thing again about our company, both those projects were virgin discoveries to us.  They haven’t cost us a lot of money.  We found them out of real geology, so we selected it.

The Swedish government about 18 months ago banned the Uranium mining, as you’re probably aware.   We had done a lot of study on Vanadium in the past.  The Vanadium price had been through low and so we put that in the background, but there are a lot of other metals in it.  When Uranium looked like it was going to be problematic in Sweden, we recut the Resource immediately on the Vanadium side.  Of course, the Vanadium price for a period of time looked sensational and frankly for good projects, it’s still okay now.  And so we recast that project, which we discovered in 2009 / 10.  We recast that as a Vanadium project with some by-product credits.

And then just to flick onto the Gold side of it. Slightly more complicated.  We had a parallel sister company called ‘Drake Resources.’  Drake Resources, under our principle geologist, had put together this Gold package in Mauritania.  Some years ago they raised $10M.  They spent $3M of that on the project and Neil Clifford, who’s my principle geo, conceived that project when he was principle geo for Drake and when Drake decided to do other things corporately, we quickly picked that project up.

So again, it goes back.  Every one of our projects is a technical genesis of our people over a long period of time and we rank our technical people very highly.  Neil Clifford, regardless, is probably one of the best geos in Australia and nobody knows his name.  He’s fantastic.  He found 20Moz of Gold in Australia.  Essentially found the Sun Rise deposit. Our technical people, have driven what we’ve done.

Matthew Gordon:  But to finish off with the strategy.  These projects have been identified and pegged by your technical team.  Was that all done before you arrived?

Peter Reeve:  Discoveries were done before I arrived here. The shift to Vanadium was done under my direction.  I sort of drove a fair bit of that.  The pickup of the Gold and Base Metals and Battery Metals was done under my time as well.

Matthew Gordon:  So on the Uranium project, would you have chosen to do that if you were starting today? 

Peter Reeve:  I’m still a believer in the Uranium price. Absolutely, definitely.  I do believe its something to do, but what I recognised really quickly was the Uranium price. You couldn’t guarantee anybody that the Uranium price was going to go up in the next 12 months, two years or three years, and that’s been right. So we quickly started to diversify.  So what you’re seeing, if you’re trying to get to where we are on strategy, is what we did decide to do, is don’t put our eggs in one basket.  Let’s broaden this out.  We started with pure Uranium.  We’ve not got Uranium, Vanadium, and we’ve got Gold, base and battery metal exploration.  We’ve broadened it right out.

Matthew Gordon:  Juniors have got lots of challenges, but you’re making sure that you’re mitigating that country risk. You talked about the team being technical.  I hear that loud and clear, a very technical team, a very good team, but what about all the other experience or skill sets required?  You guys have come from big companies.  Is there anyone in there who’s been used to running junior companies because it‘s got a whole bunch of different needs?

Peter Reeve:  Well, quite a few of us have been involved in junior companies.  Let’s just say we all came out of large companies, but five or six junior companies are mixed amongst all our experience.  Since 2006/ 2007 Bob Beeson, one of our Directors, junior mining companies.  Neil Clifford, our geologist has done a lot of consulting and worked in junior mining companies.  Will Goodall, our principle metallurgist.  I’ve probably worked now in something of the order of say, five or six junior mining companies.  I’ve been a Director of most of those, maybe investments from Ivanhoe into junior mining companies.  So we’ve got a lot of junior mining experience as well.  Nothing prepares you for a bad time in a junior mining company.  All the experience in the world you tend to run those things because the biggest bucking bull you’ll see in our rodeo is a cakewalk compared to a junior mining company in the sector.

Matthew Gordon:  So let’s talk about some of those things.  Let’s talk about finance first of all.  Obviously with the Ivanhoe you were associated with Robert Friedland.  He could open a lot of doors in terms of the finance, but how are you finding it now going from big boy stuff down to juniors and are some of those doors shut or just polite conversations? 

Peter Reeve:  Robert will go into his grave as one of the world’s best mining CEOs that’s probably set foot on the earth.  And I say that simply by the score card for the number of great operating projects that he will have to his name out there, still putting dirt through the mill.  Nobody at the top of Rio or BHP has done what he has done. 

Going with that, is Robert’s ability.  He’s got a magical offer bottle in his coat jacket and he pulls it out and he passes this little bottle and the investors just hand over money.  It’s fantastic. He’s got some magic about him where he raises money and he does it very, very well, and I haven’t got a clue how he does it.  As much as I sat next to him for five or six years, haven’t got a clue.

Matthew Gordon: So what are you going to do now?  How are you going to raise money?  How do you go about it?

Peter Reeve:  We’ve got to do it more incrementally.  We had a strategy to get the Gold and Base Metals moving through the DFS period for Tiris, but we couldn’t get those tenements granted quick enough for that strategy to come off.  We thought that would be a good strategy to sort of go parallel with that boring sort of development phase because we know investors and share prices go to sleep when you’re trying to develop a project.  But now we’re in a situation where with Tiris in particular, the strategy we are pursuing is export credit agency finance.  Not completely well known but I think perfect for what a junior mining development company does and that’s obviously where a sovereign nation lends the junior money and the quid pro for that is that buy the equipment for its project from that country.

Matthew Gordon:  So you’ve had to look at alternative financing, alternative structures to be able to get this going.  How are you funded now?  How much cash have you got today? 

Peter Reeve:  According to yesterday we’ve got $830,000 in the bank.  We are essentially equity funding all our projects via a corporate.  That’s how we’re doing it. We are looking at various deals.  The IPO for Haggan is another way to relieve Aura corporate from having to fund all their programmes.  If I could find – and we are looking for a royalty interest in the Gold and base metal part of the business in order to keep the funding off there.  So as I said initially, we’re trying to look at Aura at the moment as three distinct businesses and each need their distinct form of funding.

Matthew Gordon:  So is Aura potentially an incubator or a hold co for these assets, which may be spun out into their own vehicles?

Peter Reeve:  It’s not quite as direct as that as a strategy because if I was doing that I would have started the conversation and say, ”Hey, we’re a company incubator and we’re going to spin those things out.”  But you’re right.  It’s a correct pick up, that’s essentially what we’re trying to do.  We don’t want to keep on making shareholders who are here for our Uranium asset fund Vanadium when it might not be their flavour of the month.  We don’t necessarily think everybody’s interested in more primary exploration in Gold base metals and battery metals.  So if we can fund it separately we’ve got less criticism from shareholders.

Matthew Gordon:  So corporate, ie, your shareholders who have invested into Aura Energy are paying for this.  How do you Directors remunerate yourselves?  Are you on big salaries and big warrants, big options? 

Peter Reeve:  The Directors are just on moderate and normal Director’s salaries.  I’m on a salary that I’ve taken for quite a lot of time between cash and shares.  I’ve got performance rights.  It’s just a mix of the norm.

Matthew Gordon:  So your $800,000 is going to last you till when and what’s that being spent on?  Is that mostly G&A?

Peter Reeve:  Oh, no, it’s G&A.  We did a $2million financing, only about two and a half, three months ago, and we were very focused on putting all that money into getting the Tiris BFS finished.

Matthew Gordon:  And that’s been the bulk of the money that you’ve spent since then till now, is it?

Peter Reeve:  Yes, that’s right.  And also the work we’re doing on Haggan.  So we drilled for about three or four months in Haggan.  We’ve now been cutting the core, doing the assays because we’re trying to get a measure, an indicator Resource up for Haggan, a Resource estimate done, a mining plan done so we can release the scoping study very shortly.  So really all are corporate and that money we raised is really focused on getting the DFS done and that’s now ticked off.

Matthew Gordon:  So when do you need to go and raise more capital? 

Peter Reeve: I’m not going to answer that question in an interview because that’s a selective briefing so I’ve got to be very careful with stuff like that.  So we wouldn’t answer when we’re going to run out the money,  We wouldn’t answer when we’re going to raise money again.  We put it out in the quarterly yesterday.  We put out forecasts, the amounts of cash we’re going to spend over a period of time.  So people can make their own decisions on that. 

What we’re trying to do is make sure that every single bit of money we spend is ticking off some form of technical box in one of the projects. So really the money we raised recently was about the DFS and Haggan to that scoping study stage.  And out of that and no money on the Gold, out of that everything’s really got to flow.  Everything’s got to fund itself.  I’m not going to take any more money out of Aura Corporate to fund Haggan.  Not going to take any money out of Aura to fund the Gold and base battery metals.  We’ve got to find alternative sources of funds for that.

Matthew Gordon: You’ll find alternative funds for those two, but Tiris, you think with this export agency finance should also fund itself?  Everything’s fully funded.

Peter Reeve:  The export credit agency finance is a combined package for both Haggan and Tiris, but Haggan’s there’s a time lag so yes, it’s more focused on Tiris at the front end.

Matthew Gordon:  And then just to finish off on the team’s experience.  Uranium’s very different from Gold, Battery Metals, Vanadium.  What’s the relevant experience in the team in those commodities?

Peter Reeve:  Neil was a part of the discovery team for Tiris Uranium.  He‘s a geologist.  He found a fantastic Gold deposit as well.  So good geo’s can do both.  Tiris wasn’t particularly… It was sitting there essentially.  It was a very good survey. I’ve worked in Uranium in Australia 20 years ago. Will is a very, very good metallurgist across many disciplines.  He works for First Quantum.  He works for BHP, so yeah, we’ve got enough experience in the different areas, but what we do and we do it really well, we’ve got a great technical network.  We basically employ 60 year old people wherever we can because they’ve got the best experience and they come on per diom’s and they work for us for a period of time.  So if we need a Gold expert, a Vanadium expert, we go and find it.

Matthew Gordon:  But what about your commitment?  Are you sitting on any other Boards?  How do you spend your time?  How much time is spent on Aura?

Peter Reeve:  I’m full time, but I’m one other Board which I was on before I left. 

Matthew Gordon:  The other thing that I noticed from one of your previous interviews, you said, I think it was in November last year – “We haven’t spent enough on marketing steps, but we’re going to make positive changes.”  Think you’ve done that?

Peter Reeve:  Have we done enough on marketing?

Matthew Gordon:  You said in November that you were going to make positive step changes.

Peter Reeve:  Did I really? 

Matthew Gordon:    On film.

Peter Reeve:  I’ve been around long enough to know that when the Uranium price is sitting still at $24, $25 a pound, it’s pretty hard to go open market Uranium.  I would have said that and I do say that on the basis of commodities doing some good work.  Really at the moment the commodities aren’t doing good work.  Gold’s doing some good work.  Uranium’s not.  Vanadium’s not.  But we still believe in our projects. 

I’m a little bit of the mind where we’ve sort of tucked our baton under our arm for the last 200m, and in tucking our arm under, what I’m really saying is we’ve got all the technical steps done.  We’ve come across the finish line and now is the time to really get out and talk very broadly about getting the Tiris project understood out in the market.  But that said, again, I’ve done thousands of investor meetings in my time, you can imagine, with Robert and people like that, and I’m not going to get a super warm, “Oh yeah, come on, let’s have a talk about Uranium, it’s a fantastic commodity,” because at the moment it’s not.  But we also know the way Uranium moves, that if a few utilities decide to walk through the door at the wrong time, ie together at the same time and sign big long-term contracts, the Uranium price will pop and things will change within a week.

So my favourite saying in business is “Success is where preparation meets opportunity” and that’s what we’ve been trying to do.  We wanted to get prepared and we are so happy and relieved and getting these DFS materials completed and we’re so happy that it’s in such a great condition and it’s got such good stats, and it sits there as something we can now, if you like, park technically and now really push our mind towards the financing and getting out and marketing that completed document.  Being modestly hard to go out and market Tiris without a completed DFS.  Now we really can, nothing holds us back.

Matthew Gordon:  So that’s a long way of saying you’ve consciously decided not to do any marketing because you don’t think the market’s right.  Money’s tight, but now you will up your game in that department.  Is that what you’re saying?

Peter Reeve:  In November when I made that statement, we were looking at… if you go back then, you’ll probably see our presentation we were going to release the DFS probably in about February or March.  It was actually a February date, okay.  What happened was we came across, as you are meant to do in technical studies, we came across a clay issue within the ore and that affected the processing and that delayed the scoping study, much to the chagrin of our shareholders, but that delayed the study by another three or four months.  But it’s the same story.  I wanted to get the study done in February, then get out and market.  Now we’ve belied that by three or four months.

Matthew Gordon: In the interview I watched you were talking about a July release.  So I think it was slightly prior to that.  Let’s just finish off on that thought, which is around the importance of marketing, the importance of talking to the market because especially for juniors who need that liquidity, that increased volume of trading, that comes from retail.  I know with the Aussie market it’s a big retail market and I know you’re obviously listed on AIM as well.  Those are two very large retail markets.  So is your idea to do more promotion now?  Do you believe in it or are you just a technical team?

Peter Reeve:  I was a metallurgist originally, but I’m a very rusty metallurgist now, I like to say.  I did a dozen years out of my 35 in the field and I’ve been really pushing corporate finance since then.  I’ve done a huge amount of marketing.  I think I know how to do it. 

The issue, I suppose, around marketing for us has just been getting a really good sell of a story and I think we’re getting there with both of them.  We’ve made a change to our London broker as well.  We’ve taken on SP Angel, who’s very Resource focused and they are at the moment our joint broker and there’ll be another change coming up to put them more in the box seat for helping us.  So that’s one big change.

Matthew Gordon:  Have they produced any broker reports for you? 

Peter Reeve:  They are in the process of getting a broker report together because we only signed them up about eight or nine weeks ago.  Seven or eight weeks ago, whatever it was, quite recently.  It’s one of our announcements.  But they’ve put some quite good value reports out on us, a full research piece is in the pipeline. 

Matthew Gordon:  Again, just in summary. So you value promotion, the question was timing?

Peter Reeve:  We value promotion very much.  I learned it all the way back when I was a fund manager.  I said that western mining, I’d describe – which under Hugh Morgan was a company that essentially was a little shop front window with the blinds pulled down and we could never get the information out of them, and so that’s what made you really have to have your windows cleaned, your blinds up and your door open.  So now I’m a big believer in promotion.  I would never have been a part of Robert’s group had I not believed in promotion.  I really believe it.

Your only customers for Resource companies, I don’t care what size you are and what commodity you are, your only customers in the world are your shareholders.  We’re all in commodities. Commodities walk out the door.  The only customers we have are our shareholders.

Matthew Gordon:  Glad you said it.  Not many people recognise that. 

Peter Reeve:  It’s number one.  I mean, I’m not saying I always do it as best as I could. I’m sure I can do things better at different times, but I’m a serious believer in it.

Matthew Gordon:  The last presentation on your website is from March, it’s now August.  We’re getting an update on that soon, getting a broker report soon and you’re going to get into the market more?

Peter Reeve:  Yes, absolutely. 

Matthew Gordon:  Shall we talk about your projects?  Let’s start with Tiris.  Again, like to understand the thinking.  Everyone’s got different business models.  Yours is get into production first and then we’ll worry about building out the Resource.  Is that it?

Peter Reeve:  That’s a big part of it, absolutely.

Matthew Gordon:  Tell me more.

Peter Reeve:  We said to our shareholders on Tiris quite some ago – we’ve got a 52Mlbs Inferred Resource there.  We’ve just put basically 13Mlbs into mineable Reserve plus a little bit of inventory, but we’ve got a much bigger conversion to come from that.  But I said to them, “I haven’t got any interest in spending a lot of your precious money on pushing that Resource out to be 30Mlbs or 40Mlbs of Reserve when I can only spend 1Mlbs of it a year.” 

You think of Tiris as 52Mlbs Inferred, 13Mlbs in the reserve mining inventory for the DFS.  We have got a 1Mlbs per annum project call at the moment, 800lbs and something on average, but call it a one million pound per annum project in a production sense.  And we’ve already got some pretty interesting plans to look at expanding that to 3Mlbs per annum over time when we get more of that reserve conversion done.

Matthew Gordon:  So let’s understand where that sits in your strategy.  That’s not a big project.  It’s not particularly high-grade.  It’s Mauritania, with all that kind of risk, but it potentially gives you cash flow to focus on a project that you want to focus on, which is slightly further north, up in Sweden.  Is that right? 

Peter Reeve:  When it comes down to it, just on Tiris, we came out the other day and said that in Australian dollar terms we could make 27 million dollars per annum of after-tax cash flow.  Put that on a 10 to 20 times multiple, which are part of the cycle you’re in, and you can start seeing what a project with a good Uranium price and working could do.  So it will go some way to funding what you do on Haggan absolutely, but Haggan will then stand on its own for a proportion of…

Matthew Gordon:  Eventually it will stand on its own, but right now it’s not at that point.  Again, I’d love to understand junior mining management mentality.  That’s not a bad strategy.  Not the first time we’ve seen it.  It’s worked elsewhere.  Nothing wrong with it, not criticising it.  I just want to understand if that’s your thinking.

Peter Reeve:  That has been our thinking all the way all the way along.  However, at the moment we’re varying that a little bit by bringing in this concept of doing the IPO to fund Haggan in its own right.

One of the other issues with Haggan is that when the Swedish sun rises, we go to sleep.  That’s a pretty good analogy for what happens to projects like that.  I think unless you have a really well paid, engaged and active management team in Sweden, it’s difficult to make projects come alive.   A part of the Haggan IPO strategy is to get enough cash to set up a permanent management team who speak Swedish, who like pickled herrings, who do all the right stuff in Sweden to make projects get ahead and that’s really a part of where we are now.  We want the Swedish project to live in Swedish daylight hours, not try and make it live in Australian daylight hours.

Matthew Gordon:  We talk to management teams who think they can manage projects from the other side of the world.  It’s tougher.  It’s not impossible, it’s just a lot tougher and creates problems.

Peter Reeve:  Really hard.

Matthew Gordon:  So Tiris is in the Uranium space.  Uranium spot price is doing what it’s doing.  The utilities aren’t fully engaged yet.  I think you’ve got to buy into the macro story to get behind Uranium.  You talked about roughly 1Mlbs a year over a 15 year life of mine (LOM), but that depends on the price you can get in the market.  There’s a Resource and then there’s mineable ore and depending on the price that will determine the scale of this opportunity.  So what is your DFS telling you?

Peter Reeve:  In terms of the range of size of the project?

Matthew Gordon: Yes

Peter Reeve:  The conversion of Resource to reserve is very high and the reason is our deposit is, call it an evacuative surface deposit.  Average mine depth is about five metres.  So we aren’t looking at a pit wall which looks like a cone with the gem of a Gold deposit down the bottom and all that sort of thing.   We are in a really good situation where every piece of our ore is accessible, and I believe it’s the sort of operation that, you know, it’s one thing for us to devise us what we do in the DFS – and that’s a step you must go through for all sorts of reasons, the market, events, and Directors and everybody – but when we unleash our operating team on that project, they’re going to do it exactly the way they see the ore in the ground. 

My strong belief, and the geo’s strong belief, is that we will expand each of the Resources in the area now.  I mean, to get a reserve of course, they’ve got them off as nice square blocks because mine engineers like working in nice square blocks.  They don’t like shapes.  And so once we can start showing that there is shape to it and it does go a little deeper, it does go a little further, I think we’ll expand the Resource more than contract it.  A lot of it will convert to reserve or mineable, whatever we want to call it.  Mineable Resource.  And we still haven’t really started to do inspiration outside of the core discovery areas, and I think when we do that …

You know how it is.  You’ve got a plant built.  You’ve got a team there.  You ‘ve got everything set up. The marginal cost of then going out to get that extra bit of ore, which might just be a pot of 5Mlbs, three or four kilometres out, is a lot lower. 

We understand what happens to projects once you get them there and we’re pretty excited about what that will look like, but yeah, I would be hoping one day we’re going to mine 75Mlbs of this thing at least.

Matthew Gordon:  It’s low tech, low CapEx, low OpEx. 

Peter Reeve:  It’s not just low CapEx, by the way.  It’s sensationally low cap ex.  You want to get the odds of marketing.  You go and look at any other junior mining company or any other Uranium hopeful at the moment, and their capitals are mostly measured in the hundreds of millions of dollars.   So to get something sub a hundred with the C1 cash cost of 25, and an all in sustaining cost under 30, there’s not many of us around.  That’s why I make this nice marketing line.  I say that this is currently one of the most compelling Uranium development projects in the world as we speak.  As small as it is, it’s one of the most compelling projects because of that capital and that op ex.

Matthew Gordon:  Let’s talk about Haggan.  You’ve previously said this is the most valuable asset in your portfolio currently.  Tell us why you say that.  You’ve done some drilling recently.  How are you moving that forward?

Peter Reeve:  There’s a lot of metal in that system, just for one.  As I said, the Vanadium concentration has been equivalent almost to the Uranium for a long period of time, probably even higher than the Uranium.  We had to make this change from Uranium because the Swedish government decided that nuclear in 2040’s going to fall out of their energy balance, so they don’t need Uranium.  There was a bit of political stuff going on as you can imagine as well.

But we were fortunate that we had done enough work, we understood enough.  We’ve done a lot of good drilling, so within two or three weeks of that all happening, we recapped the Resource into Vanadium and we had it ready to go.  So now we’ve got cut off grads for our Vanadium deposit and we found what we call a high-grade zone, but it would be better to call it a higher-grade zone.  And that’s a higher-grade zone of about 90Mt of 0.42 per cent of V205. 

But again we’re fortunate.  Alum shale largely comes to surface and so that Resource will be encapsulated in a pit that starts at about 20m from surface and finishes by about 90m.  So again, a very manageable operation. 

Before we were talking about a heap leach, a Uranium heap leach that was going to be 25Mt to 30Mt per annum.  We’re now talking about a project which is Aura Clubs, and about 2.7Mt per annum.  So quite a modest scale project.   We did the capital and operating estimates last year, so again we spent our $80,000 to get one of the independent engineering firms to do the capital and operating estimates for Haggan.  ASX will not let us release that until we have the measured and indicated Resource.  We cannot release that unfortunately with an inferred Resource.  So again, it’s where preparation leads to opportunity.

We’ve got a lot of internal numbers and the project looks very, very good.  We are quite aligned to the idea of the whole battery push, but we’ll sell our Vanadium to anybody who wants it.  But I think the battery push in Vanadium is pretty interesting and when we start to look at the scale of this project, without giving too much away because I’m not allowed to, we’ve contemplated at the moment a 7,500Mt per annum V205 project, that’s about five per cent of the world’s Vanadium.  We sized it because five per cent sounded like a pretty non-disruptive sort of thing to do, but we could double the size of that if we had the right market.  We can make our cash costs go through the floor, and there’s all sorts of interesting technical things that I sort of kind to allude to just at the moment.

There’s a few proprietary things that are pretty interesting about some by-products we’re playing with there which really help that, and make it a really commercially robust project as well.  But what I’m saying is accelerate all our Vanadium, where it’s fallen to, it’s clearly not as good as $33 Vanadium.  But we can make money out of $7-$8 Vanadium and we can make a lot of money out of $7-$8 Vanadium if we expand our project.

And therefore all that then goes back to what are you doing as far as your linkages?  Who are you talking to?  Who do you want to get into bed with?  And we’ve made no secret of the point that we are talking to battery manufacturers, we’re talking to people who can be a part of us in whatever way that is. 

Matthew Gordon:  But how real is that?  All Vanadium producers are talking the battery story.  90% of the market is rebar. That’s the reality and it’s early days in terms of the VRFB.  And again, we have this conversation a lot with Vanadium producers and talk the battery story because it sounds great to shareholders, but you’ve got to have the prerequisite skills in house or you’ve got to have the right partners on board, strategic partners with the right balance sheet to be able to do that.  You’re early stages, so is this wishful thinking or is this actually a reality of what you can do because you think the scale of this will allow you to do that?

Peter Reeve:  Well, so far I’ve had three sort of pretty serious full day conversations in three different locations in the world on this particular battery initiative that we’re talking about, and we’re taking it pretty seriously. 

The Vanadium battery market, and people know that they have a cap on the Vanadium price before they say it doesn’t really work.  I think there’s some really smart things you can do in terms of partnerships to ensure that goes on. 

Matthew Gordon:  You may be treating this seriously, but what does that actually mean?   Are you at latter stage discussions with people, or is it just a process you’re going through?

Peter Reeve:  There is a particular party who we are talking to in some detail.  I would still put it at the… it’s gone beyond the concept stage.  We’re talking how things could work.  We haven’t stayed in each other’s laps yet,  we haven’t gone… You know how these things move along progressively, but it’s quite serious.  We like the story.  I’d like to make it happen. 

There’s a chart that I have in my presentation for March which you might have read.  It’s a battery storage …  At the moment I think that chart says that there’s something in the order of 15Gw to 20Gw of storage capacity.  And in 11 years, they’re saying  now 2030, and they’re saying that might be 300Gw of storage.  Now if that chart isn’t even half wrong, if it’s two thirds wrong, if that was the beer market or the underwear market, you’d want to be in that sector.  So I would just say that if that’s storage graph is even a third right, then it’s not a bad market to be in.  

So I’m a big believer, whether it’s Vanadium Redox Flow Batteries (VRFB) or not, the flow batteries are the ones that do store power for a long period of time, and that’s what interests me.  So I’m a bit of a believer in it.

Matthew Gordon:  That’s the macro.  That’s got nothing to do with you right now.  You’re at the point where you’ve got a scoping study coming out later this month, potentially end of August. 

Peter Reeve:  Yes

Matthew Gordon:  So you’re going to have an idea of what you’ve got then and you’ve got to then work out how you move that forward.  So what are your hopes for between now and the end of year in terms of what you can do, in terms of understanding what you’ve got and then what are you going to do with it?

Peter Reeve:  To push you back a little back there, we found this project ten or eleven years ago.  We spent $20 million on it.  Yes, a lot of it went onto Uranium.  We spent a lot also on Vanadium.  So we really understand this project.   We do know Sweden pretty well, very well.  We know the region, we know the local people, so this is more than just a concept project.  This is a pretty serious thing. So I do believe the next step is do something where we start to get a tie up with some of these people.

Like I say, I would be equally happy to tie up with a steel producer who needs the Vanadium.   I’ve got some people who are interested in that.  They are less interested now that the Vanadium price has gone down, clearly because they don’t feel they need it.  But no, I want to move this to a corporate stage.  I do want to get the IPO done.  I do want to do something with the battery tie up if that’s possible, and I want to do that within a reasonably short period of time.

Matthew Gordon:  So just on the IPO you’re looking to IPO on ASX or AIM?

Peter Reeve:  Because of the waking up in Swedish daylight hours, it’s got to be European time.

Matthew Gordon:  So those are the two projects.  Can you quickly go through the Mauritian Gold, battery metals project?

Peter Reeve:  What we’ve got there is greenstone belts.  All of Kalgoorlie and you’ll notice similar stuff in Canada, is greenstone belt. This is really, really an unusual set of greenstone belts because the only discovery on this greenstone belt is Kinross’ Tazius mine at 21Moz deposit.  Greenstone belts are renowned for not having a single discovery and they are renowned for once you have one discovery and you find another, there’s a raft of different sizes.

Neil, our Geo, talks about something called Zipf’s Law.  Zipf’s Law is that you have a curve from a 20Moz deposit all the way down to a one million ounce and everything in between.  So when you do Zipf’s Law on the Kalgoorlie field, you see 30 or 40 different deposits of varying size.  We’ve got one on this field and it’s Tazius and it’s 20Moz.  

We got our tenements granted and we then did a deal with another party, so we have now tied up about half of that greenstone belt.  All but for one tenement we’ve tied up half the greenstone belt and Kinross has the other half.  We’ve hit mineralisation.  As I said, we bought this for $100,000 in a royalty, but previously Drake had spent $3 million on the greenstone belt, on these tenements.  So we’re not going in there cold and the guy who conceived it and did the work is now my principle geo.

We found mineralisation – what you’ve got to get is you’ve got to get systems size and you’ve got to get grade.  We’ve hit system size with a little bit of grade and we’ve hit grade with not much system size.  We’ve just got to get the two together, but we’re talking about one drill hole.  For the money we’ve spent we’ve drilled one drill hole for every 20sq.m so far.  We’ve got a lot more work to do. 

One of the more exciting parts of it – and the reason why I put on the battery metals, is we did a fence of drilling, 1.6km long.  Again, if you go through that presentation, it’s the bright pink slide.  It was equal holes.  They were about 6m-7m deep.  Pretty well every one of them hit near per cent nickel. So we assayed one in ten and we found Cobalt and the Cobalt was as high as 0.58%. So pretty exciting to get back and look at. 

Matthew Gordon:  So again, early stages but the potential there, greenstone belts in West Africa.  So let’s go a little bit more macro.  What’s your view on the Uranium market? When’s it going to turn?  Is it your area of expertise?  What do you know?

Peter Reeve:  I don’t know anything about the Uranium market at all with respect to how a Uranium market expert knows about the Uranium market, but I make it my job to talk to… We’ve got an off-take agreement for Uranium from a group in London and I talk to them quite often and I talk to other players in London on that.

Matthew Gordon:  That’s Yellowcake presumably?

Peter Reeve:  No, no, that’s a ETF.

Matthew Gordon:  So you’re relying on them but you kind of don’t care.  If the price is right, you’re going to get into production and you’ll start producing.

Peter Reeve:  The big thing at the moment with the market for me, it’s really simple.  I seriously don’t make a habit of trying to count how many reactors are getting built and how many pounds goes into each reactor.  I let other people with a digital mind do that sort of stuff.  What I am focusing on is this big concept  of what happened in 2005.  If you look at, there’s again a chart that I use. 2005 there was about 50 – or maybe it was 2004, there was 50Mlbs of long term contracting in place and with Finn by the next year they had put 250Mlbs of contracting in place.  And that lasted for seven or eight years.  It wasn’t a fluke. 

The current coverage in 2021 and 2022 for long term contracts is four and three per cent.  They will get nervous.  I don’t know when it’s going to be, but they will get nervous.  It doesn’t matter the cost they pay for this stuff, as you well know, but they definitely cant run out of it.  So at some stage they will move. Look, the February results of Cameco, I always read the Cameco stuff.  Their marketing stuff is brilliant.  They’re fantastic at it.  They’ve got teams and teams of people who are much smarter than me focused on it all day long – read their stuff.  They also know these comments about the utilities looking like they’re coming back to the table to start with the balance of doing long term contracting. 

So what happened in 2004, 2005 that leaned to that big explosion in price was seven or eight of the utilities all decided to squeeze through the door at once and of course… I always remember I asked one of the guys in London.  I said, “What happened with that?  What was the max price paid in that clique?” He thought it was about $138 a pound.  And I said, “Do you know the guy who did it?”  And he said, “Yeah, I do. I know him.”  I said, “What sort of guy is he?”  And he said, “Well, he’s a nuclear physicist.  He’s sitting there and he basically had a manila folder and said he needed this much Uranium, and on the day when his boss had walked down the corridor and said “How’s that contracting going?” and he said, “I haven’t got much.”  Well, you’ve got to fix that.  First to bid, first to bid, and kept on going.  So a nuclear physicist running a plant is also looking at nuclear… So these are the sort of things that might happen.  I’m a believer that it’s the utilities charging through the door at once which will give us the…

Matthew Gordon:  What is your outlook on the Vanadium market?

Peter Reeve:  Outlook on the Vanadium market is probably confused, but I would say that getting up to $33 there was clearly a lot of speculation, and I think falling back down to $7, I’d say there’s a lot of play.  Some of the people who need Vanadium, they have confided to me that I don’t think they think it’s going to stay down here, but it’s not going to race back up to $33 either.  We always thought somewhere in the $10 to $15 range was more likely for it to sit and that’s what I think it will go back to at some stage.  But I don’t expect to see, $20 or $25.

Matthew Gordon:  Can you summarise your thoughts on where Aura Energy is going and why you think new investors should be looking at Aura Energy. From what you’ve told me today there’s a lot of things that you’re going to be doing. 

Peter Reeve:  Primarily start with what we’ve got in Tiris.  We’re putting together a very interesting chart just comparing the CapEx on our project, it’s C1 cash cost and the All In Sustaining cash Cost (ASIC) against our market cap.  There is no doubt about it.  We are the most undervalued of the junior mining companies in this Uranium space with a development project, with the low capital and with the low OpEx. 

For me, there’s three things.  The low CapEx means the project’s doable and the low OpEx means you’ll make cash flow and the low market cap means we’ve got room for the share price to go up.

So that’s a good enough reason for any shareholder.  If they can believe that we will deliver what we say we are, that’s a good enough reason for the shareholders to get in.  Then add on to it that if we do an IPO and we retain 70%-80% of that, we’ll get an independent counter attributed into our share price.  That’s number two.

And then number three, when we discover a 3Moz deposit on the greenstone belt in Mauritania, everybody will want to own our shares.  So that’s going to happen as well.

Matthew Gordon: I appreciate your time.  That was a great first introduction to your company.  I know the guys on Twitter are going to be really happy about the fact that we’ve spoken.  Please stay in touch.  Keep us up to date with how things are moving, perhaps later in Q4.  Thank you very much.

Peter Reeve:  Thanks for the time.


Company page: http://www.auraenergy.com.au/

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Bushveld Minerals (AIM: BMN) – Interview with CEO Fortune Mojapelo (Transcript)

Crux Investor had the pleasure of interviewing Fortune Mojapelo, CEO of Bushveld Minerals (AIM: BMN). He tells us about his journey in the mining space as well as telling us about the strategy of the company.

  • Vanadium has excellent fundamentals and a solid outlook.
  • Largest High-Quality primary Vanadium Resource in the World.
  • Brown Field capacity, allowing them to hit targeted production volumes quickly and cheaply.
  • Management team with a depth of technical expertise in Vanadium.
  • Operation with a natural hedge towards a Multi-Billion Dollar Market opportunity.
  • Substantial capital growth ahead, with possibility to start paying a dividend to shareholders.
  • Vanadium Redox Flow Batteries (VRFB).

Click here to watch the interview.


Matthew Gordon: Well why don’t you start off, for some of the people new to the story, by giving us a two-minute overview of the business.

Fortune Mojapelo: Well what we are, we’re a Vanadium focused company. Vanadium is the commodity we focused on. And our vision, our ambition is to build it into one of the most significant lowest-cost, vertically integrated Vanadium company. Bit of a mouthful but basically what it means is, we want to combine our large primary Vanadium Resource base which is high-grade open-cast Resource base, across three deposits. The largest primary Vanadium Resource base of anybody in the world, combined with processing infrastructure that allows us to process this Vanadium into final product. And that processing infrastructure is centred around two key primary plants that we have in South Africa. The Vametco Plant, which we acquired in 2017. And Vanchem which we recently announced. So that gives us a platform to produce low-cost Vanadium at large scale. And the integrated piece of the business is how we take that Vanadium further downstream into the Energy Storage market, where we essentially plan on being one of the largest, one of the more significant Energy Storage companies through Vanadium Redox Flow Batteries (VRFB).

Matthew Gordon: The Vanadium spot price. If you look at it, it’s all over the place. It’s been a crazy ride.

Fortune Mojapelo: Yes.

Matthew Gordon: Tell us a little bit about where Vanadium sits in the market, its uses and applications?

Fortune Mojapelo: Yeah, it’s been a very volatile commodity. And when you look at its price profile it’s quite interesting to see. It can put some people off. But we think that in any commodity, your number one goal should be looking for that project or that production base that is cheap low-cost. If you’re the lowest cost producer, you won’t have much to worry about the volatility in the price.

Matthew Gordon: You’ve got a good margin. You’re one of the lowest quartile producers of Vanadium. But even so in terms of predictability, being able to plan ahead, it must be difficult?

Fortune Mojapelo: Again, I mean it depends how you structure your business.

Matthew Gordon: Tell us about that?

Fortune Mojapelo: For example you structure your business with a lot of debt, which is predicated on Vanadium coming in at a certain price. You got a problem if the price doesn’t realise there. But I think if you have a low-cost producer, and you’ve got a good capital structure, you should be okay. All right. We all want a stable Vanadium price. Make no mistake about it. But we think the first thing is make sure you’re a low-cost producer. And for us, it is one of four key pillars in the projects that we get involved in. Overall though, we think that as a commodity, Vanadium markets’ outlook is actually very good.

Matthew Gordon: Is this coming to your Redox Flow Battery (VRFB) component.

Fortune Mojapelo: But even before that.

Matthew Gordon: Describe Vanadium uses today and we’ll get onto what they could be.

Fortune Mojapelo: About 90% of the world’s Vanadium today is used in steel making. 8.2% of Vanadium to a ton of steel, you double its strength. And so it’s used in construction steel whenever you’re building infrastructure and it’s you know tensile strength in the steel…

Matthew Gordon: The rebar?

Fortune Mojapelo: And rebar. And so that’s been the traditional kind of space for Vanadium applications. And I should add that even if that was all that was to Vanadium consumption. That’s been the bedrock for a century plus. And I think it will continue to be, given its unique place in that space. In countries like China, where you got regulations that are being put in place to regulate the types of rebar that is produced, China is moving away from low-quality grade to rebar, to grade three, grade four rebars.

Matthew Gordon: China resetting the quality of the rebar did have an impact on the Vanadium price. And therefore, the knock on effect. Was that a big impact on you?

Fortune Mojapelo: It has an impact on Vanadium. I think the new standard in China, it’s estimated that if and when fully implemented, just to meet that standard, it should raise the demand for Vanadium in China domestically as much as 30%. Now given the China control about 50% of global Vanadium consumption is taking about a 15% uplift in the demand. That impact hasn’t really come through yet, because we believe that the enforcement of that standard hasn’t been as strong yet, but we believe that there will be… the government will start to implementing the inspections, and that in the second half of this year, we’ll see the enforcement of that standard increase. And therefore that demand upside will start to come through, from then on. And that’s of course just one part of the demand story. There is the Redox Flow Batteries, you talked about earlier on. And timing couldn’t be better, in terms of what’s going on in the world around higher energy electricity generation. The push for cleaner energy et cetera. So the use of Vanadium in Energy Storage, we think is going to substantially increase the demand profile of Vanadium, through these batteries called Vanadium Redox Flow Batteries.

Matthew Gordon: How long you’ve been with the company now?

Fortune Mojapelo: I have founded the company together with partners. Which stretches back to 2008. We enlisted in 2012 on AIM but we started essentially Bushveld Minerals, as an early stage exploration project, which we were developing from as early as 2000.

Matthew Gordon: You’ve gone from junior Explorer into Producer. You’ve obviously done quite well in terms of establishing yourself. So tell us about that journey?

Fortune Mojapelo: It’s been an interesting journey. I think we started our journey in the junior space at an interesting time, because it’s about the time that the global financial crisis was setting in. And as you know when that happened, risk capital becomes scarce because people are less willing to take big risks and the casualty of that is actually endeavours such as junior mining and Exploration. I partnered with three individuals in South Africa, two twins. Identical twins, both Professors of Geology. Maurice and Richard Filion and Anthony Filion is Richard’s son. And essentially, we started life with a view that you know these two gentlemen are doyen of geology in Africa. They know the Bushveld complex inside out. They’ve advised many people to find new deposits. Let’s create a business where we leverage that IP and we do it and we build projects and that’s how we started life and we started looking for Exploration projects that we can build up. And our journey grew from there.

Matthew Gordon: Are you a geologist?

Fortune Mojapelo: I’m not a geologist. I studied actuarial science and I worked in strategy consulting for a little bit.

Matthew Gordon: When you start it’s all about equity. Raising equity to be able to do what you needed to do.

Fortune Mojapelo: Look when we started, my interest was to do principal investments. I was looking for opportunities in Africa where there is scope for scale growth. And I’ll be honest with you, a year before that I didn’t know about anything called Junior mining at all, until I met with the Filions. And I think from there and we gelled. And we started finding projects, we started developing the projects, and were fortunate to get Baccus who backed us early. And you know one project led to another project, until we got Bushveld Minerals listed in 2012, on AIM.

Matthew Gordon: It’s interesting when we talk to a lot of CEOs, it’s not all plain sailing. It’s not smooth lines.

Fortune Mojapelo: It never is.

Matthew Gordon: So what are the important things for you, given you weren’t into junior mining when you first started. What are the things which stand out for you, what are those moments where there was a significant change in your understanding, or indeed the business?

Fortune Mojapelo: You’re always learning as you go. And I think for me starting point was that when you’re working with a technical team, in a technical field, that is exceptional, that it’s distinguished, who know what they’re talking about, is a good starting point. You know they will tell you that everything starts with geology and mining, and I tend to agree with them. And then the second thing is, your early deals there’s a general thing your early deals are always going to be the most expensive. But what’s more important is proving yourself and making money for your investors that give you capital to do what you want to do. And with time as you develop and as you prove successful. You can get a bit more leverage in your conversations with investors. So our very first project, was an expensive project from a financing point of view. But it gave us a platform to develop more. And that’s how we’ve developed ourselves. Even after we listed, we faced what every junior company faced. It was hard to raise money. We had projects that we were comfortable with, that they are solid projects. And we had a guiding philosophy, which we believed in, which I think has stood as very well. And we were fortunate that we had good projects. And from about 2013, after seeing our share price come down, or maybe it can come down since listing, we did what I think was pivotal, which is we decided to focus on Vanadium as a commodity. And it is really there that I think our inflection point started. We were still very small but we got our scoping study on our flagship project that we had done quickly. We did a Pre-Feasibility Study (PFS) and we developed a conviction about this market, that we’ve carried since then. And we believe it’s a market that is really for us to participate in.

Matthew Gordon: How much of the Vanadium market… you’re world number one?

Fortune Mojapelo: Well the largest in terms of the Resource base.

Matthew Gordon: In terms of the Resource base…in terms of production?

Fortune Mojapelo: In terms of production, we not the largest producer. There is at least two primary producers, that produce more than we do. Largo Resources and Glencore Rhovan operation in South Africa. But after their position that we did that we just announced a Vanchem between Vanchem and Vametco, from just a potential point of view, we have the capacity to become the largest primary producer, yes.

Matthew Gordon: What are you supplying in terms of world production now?

Fortune Mojapelo: Currently just under 3%.

Matthew Gordon: Just under 3%. And after?

Fortune Mojapelo: When we’ve gone through the refurbishment of Vanchem and we’ve got Vametco operating at full capacity, we’re targeting just about 10% of the global market.

Matthew Gordon: So significant. You have – Bushveld Minerals, Bushveld Vanadium, Bushveld Energy. Are those eventually going to be three different companies or are those just brands with the overall group?

Fortune Mojapelo: Bushveld Minerals is the listed holding company. Underneath that we got Bushveld Vanadium which essentially houses our mining and processing assets. So, it’s is the Resource platform. Mine it as cheaply as possible. And process it and produce Vanadium units. Bushveld Energy says let’s take it a step further and take a position in the energy storage market.

Matthew Gordon: I want to see if that gives us a clue or sense of where you want to go. Because if you’re creating those brands now, will they be separate entities at some point?

Fortune Mojapelo: I think you want to always retain flexibility around that. So we structure our companies always in a view, in a way that allows us that flexibility. Is it foreseeable that Bushveld Energy could be a standalone company in the future as possible. It’s not something that’s we definitely do. The reason we created it that way however, is that it is focused on a specific sector which is the energy market, and the energy storage market to be specific. If for example, we wanted to attract investors that are particularly interested in the energy market only, we have the ability to do that through Bushveld Energy. So we like that.

Matthew Gordon: But right now they are on the same P&L?

Fortune Mojapelo: Yes.

Matthew Gordon: Different team? Same team? Different skillset that’s for sure.

Fortune Mojapelo: It’s a different skill, especially if you look at the Bushveld Energy team is headed up by Mikhail Nikomarov, who’s got extensive experience in the energy markets. And his team includes people who have been involved in energy project development. So it is, you’re right, a very specific skill set that is required there.

Matthew Gordon: There’s Energy, and then there’s Energy. So again we’ll probably come onto it, but just to finish off with the recent acquisition. You made a recent acquisition! Why did you do it? What you’re thinking and what are you trying to fix?

Fortune Mojapelo: So our strategy that we’ve spelt out, the best route to developing are our projects is through targeting Brownfield assets. In fact if I step back. I mentioned earlier on that there’s a guiding philosophy to our projects. It talks about four key elements. 1. You want a commodity that is good sound fundamentals and good outlook from a price point of view. 2. You want to project all cost proposition will put you in the first or second quartile of the cost curve. 3. You want to have projects that you can reasonably bring into production, in the foreseeable future, without requiring massive CapEx. 4. And then the fourth one is you want scalability.

Matthew Gordon: Or it looks cheap or non-dilutive CapEx?

Fortune Mojapelo: Because if you need billions of dollars, where you gonna raise the money right? Especially if you’re a junior. 4. The fourth point is you want scalability. Vanadium ticks all of those boxes for us in South Africa. It’s a commodity with good fundamentals, as we talked about earlier on, from a demand side, from a supply side. In South Africa we really well located there.

Matthew Gordon: Well you are. But again, there’s a perception in the market in terms of country risk. Because there have been problems at various points in South Africa.

Fortune Mojapelo: I can come to that. But if I may for a second. I think you’ve got a commodity whose supply outlook is concentrated, mainly between three countries; China, South Africa and Russia. With South Africa having the largest high-grade primary Resources. We always say if you want high-grade Vanadium Resources, you’re going have to come to South Africa. Because that’s where we’ve got the combination of scale and grade. But also, the distribution of Vanadium Resources globally, and the distribution of the production Vanadium. It’s such that in our view, if you look forward to see where does new supply come from. If you don’t have grade that allows you to build a primary plant like we have in South Africa. You have to build a steel plant, which requires billions of dollars. Which is why you see most of the production in China and Russia, being of that nature, co-production steel plants which are expensive to build. New supply in our view is not going be dominated by the steel plants or big iron plants. It’s going to come from primary producers. But if you’re going to do primary production. You’re going to find grade.

Matthew Gordon: I think that’s true of a lot of commodities. I agree with you. Where are you’re selling your production?

Fortune Mojapelo: +50% of our production goes to the US.

Matthew Gordon: Goes the USA.

Fortune Mojapelo: But it’s predominantly the steel sector at the moment. And yeah. So you were we were talking about this philosophy and how we go to brownfields. So when we focused on Vanadium, and with our project in Mokopane, we did a scoping study, we did a Pre-Feasibility Study. What that showed us, we’d a project that required $300M. It was a high-grade Vanadium Resource. $300M CapEx to build mine & plant. Gives a good IRR of 25% assuming a Vanadium price, we’ll call it $33Kgs. Very nice project right.

Matthew Gordon: What’s it been averaging the last five years?

Fortune Mojapelo: Look I mean when prices have gone as low as $13.50 and gone as high as $127… So I couldn’t tell you exactly what the average is. But I’ll tell you that at $33, we’re comfortable we have a project that is good. All right. But the point I’m highlighting here is that, if you’re a $20M market cap company, or £20M might be coming market cap company, how are you going to raise $300M? Even though with a project that is solid, it is at that point for us where the epiphany of brownfields here, which is if I can find existing facilities, that I can convert into primary production for Vanadium, that a cheap and I can do it cheaply, then fantastic. And South Africa is unique in some respects in terms of Vanadium, because historically a lot of our industry was built on a vertically integrated basis. They didn’t just have mines, they’d in mines and processing plants. But what happened over like a 30yr globally, a shift upstream. So, your BHP’s, many of these companies they decided to focus only on mining. They saw the Pilbara expand capacity though just mining and ship it to China. Let China process it. It left a number, that kind of migration, left a number of facilities, downstream facilities, underutilised, in some instances not profitable et cetera et cetera. That is for us the opportunity when we talk Brownfield. It is can I acquire a facility that is either not being utilized or underutilized, and combine with my Resource base and produce Vanadium cheaply. The acquisition we did of Vametco was as a result of that of that strategy. We acquired it initially for $16.5M in partnership. It’s a plant which just last year, delivered a $107M in EBITDA. All right. And it’s a low-cost producer. And it’s a plant which we are now scaling up in terms of its production throughput. The same thing when you think of Vanchem. We thought okay. What are the plants out there that we can get our hands on? We’ve got the Resource base to supply them. We’ve got the logistics infrastructure to link our deposits with the plants. So Vanchem was the next one, where we did Vanchem. And between the two of them we create processing capacity that would have cost us many times over to build on a greenfield basis.

Matthew Gordon: I understand the financial logic. But in terms of a strategy for the business. We’ve touched upon briefly, in terms of what your plans are in terms of the energy space as well, but how do you describe your strategy? I mean you’re… logical, methodical about this. Would you describe yourself as aggressively confident about the way you do things?

Fortune Mojapelo: Maybe it’s part of a function of my upbringing and my learning. We tend to be very fact driven. Very analysis driven.

Matthew Gordon: Where does that come from?

Fortune Mojapelo: I studied Actuarial Science. I worked in a firm like McKinsey & Company, and there’s this sort of stuff that we did. And when we decided that Vanadium was a market we’re going to focus on, we bought Vametco at a time when Vanadium prices, this is when we agreed the deal, Vanadium prices were about $13.50. And yet we thought even if we have to subsidize this plant for another two years, it would still be worth it. What gave us the conviction, was a lot of work that we had done around the market structure, to come to the conclusion that this is a market in a structural deficit. A deficit that will continue for a while. A deficit that quite frankly, to close it, is the opportunity of primary producers, who have existing production capacity. And it was hard to convince people, so the deal wasn’t easy.

Matthew Gordon: By people, you mean the then owners?

Fortune Mojapelo: To convince financiers. But in the end, we got it done. And I think we’ve been proven right in respect of that. Another part of our strategy… so the brownfield strategy is a very clear strategy, that says Target Brownfield assets, and make sure that you invest in them. You refurbish them as necessary, and you maximise your throughput through them. Second part of it was that we realised 90% of the Vanadium demand is coming from the steel sector. What other sources of demand are there?

Matthew Gordon: What don’t you tell people about the VRFB which is Vanadium Redox Flow Battery. Start with that. What’s the difference between them and Lithium ion?

Fortune Mojapelo: Both of them are batteries which means that they store energy. And you charge them, and then you discharge them when you need energy. Vanadium Redox Flow Batteries (VRFB) essentially store that energy in Vanadium Electrolyte. Vanadium is one of those… 

Matthew Gordon: So it’s liquid?

Fortune Mojapelo:  It’s liquid. Vanadium can exist in four different oxidation states. It’s quite stable. So the concept of Vanadium Redox Flow Battery really is a reversible oxidation reduction reaction, between Vanadium and different oxidation states. So from two plus to three plus, from four plus to five plus. The charging and discharging, is the movement of ions between the different oxidation states. But what’s good about it is that it’s one element you’re using, so you don’t have the risks of cross contamination. Secondly what’s good is the fact that the way you store the electricity in these tanks, you can scale them up to the amount of energy you store by just increasing the size of the tanks, without duplicating the entire system. So they’re flexible, they’re scalable, they’re intrinsically safe.

Matthew Gordon: So less risk of fire or overheating?

Fortune Mojapelo: Never heard of any Vanadium battery catching fire. They can operate in fairly robust ranges of temperature and they’re long lifespan.

Matthew Gordon: So that’s less degradation?

Fortune Mojapelo: No degradation.

Matthew Gordon: No degradation?

Fortune Mojapelo:  And you can run this for 20 years plus.

Matthew Gordon: So uses for something like this… You’re talking about the much longer life.

Fortune Mojapelo: Yes.

Matthew Gordon: Larger.

Fortune Mojapelo: Yes. Safe.

Matthew Gordon: Safer.

Fortune Mojapelo: And scalable.

Matthew Gordon: Scalable so different applications to Lithium Ion.

Fortune Mojapelo: Lithium advantages are typically, its high energy density. And Lithium is cornered, mainly, the mobility space. You’re not going to put a Vanadium battery in a car. And so mobility, your cellphones, your laptops. That’s typically its space. In the stationary, when you took stationary storage, Lithium still plays in that space, but it’s typically are in the short duration space, like frequency regulation for example. Once you gain long duration, and long lifespan, that’s a space we believe flavors Vanadium Redox Flow Batteries.

Matthew Gordon: So how much of Vanadium Redox Flow Battery would be Vanadium? What’s the potential size of this market, have you done any work?

Fortune Mojapelo: Yeah we’ve done a lot of work. And in fact, on our website, we’ve got a webinar on the ‘Energy storage 101’, which does a deep dive into…

Matthew Gordon: What’s the URL?

Fortune Mojapelo: www.bushveldminerals.com or bushveldenergy.com. Both websites will give you access to it. It’s worthwhile, because it’s quite a deep dive into this, into the applications of stationary energy storage. So maybe just to explain on a very high level. You use, if you’ve got a utility, and your load in a country for energy is not flat. You’ve got peak periods, and you’ve got off-peak periods, and you’ve got another peak periods… in South Africa for example, typically morning and evening peaks, afternoon off-peak. So how do you design your generation to meet that? Typically you go with what is called base load. Which is not designed to be at the peak level and then you supplement during the peak periods, with peaking capacity. And these are typically other gas plants or diesel generator plants et cetera. What energy storage allows you to do, is it can help you to flatten in off-peak periods you can store the excess energy and you can supplement during peak periods. Equally as you introduce more renewable energy to the grid, you need to smooth that entrance of that into the grid. Energy storage can help you with that. Thirdly in some markets like South Africa, you’re generating… peak, your peak generation capacity for solar is during the day, off-peak. If you’re able to store that power you can make it available in a more flexible way during peak periods. And there are few other things like, your transmission CapEx deferral. When you’ve got a transmission infrastructure. Think of it like a highway. If you get a freeway that gets clogged in the morning, and gets clogged in the evening, you got four lanes. You don’t build half a lane. You’re going to build two lanes right. Or three lanes extra lanes. But if that same four lane freeway, during the afternoon, is virtually empty. Building an extra two lanes is not quite efficient. So what if you could distribute that traffic more regularly during the day? The result of that is that you don’t have to build that extra lane. So your CapEx for transmission expansion, you can push it out more. So the world over utilities are recognising the value of stationary energy storage. It’s so big a market. It’s expected by 2027 to be in the order of $50Bn+.

Matthew Gordon: Globally?

Fortune Mojapelo: Yeah. So you’re talking about something like a 100,000 megawatt hours of new energy storage deployments per year. Now there’ll be different technologies to take a share of that market. We estimate that if Vanadium Redox Flow Batteries (VRFB) captures only 10% of that market, you will need about 55,000t of Vanadium to support that. That’s more than 50% of last year’s total production.

Matthew Gordon: But there’s ifs and buts in there? If being gets to that. So that VRFB style of battery is not there yet. Is there… Well you tell me… is there much of a take-up?

Fortune Mojapelo: What do you mean?

Matthew Gordon: I mean Lithium ion everyone’s gearing up Lithium ion and there’s a few other options, that people around that, but where is this design today?

Fortune Mojapelo: So what if I tell you that today, the biggest battery installed with more than +4hours storage capacity in the world is a Vanadium flow battery built by Sumitomo, 60Mw hours, 15Mw for 4hrs in Japan. The biggest battery being constructed in the world today is an 800Mw hours. 200Mw for 4hrs storage. Vanadium Redox Flow Battery is being constructed in China. It’s not a technology that’s in a lab. It is a technology that is in commercial deployment.

Matthew Gordon: Sorry there’s one-off batteries to sort of see what sort of scale they can get to, because they are going to…You mentioned some pretty… Sumitomo- big name, a lot of money. So are they planning to roll this out? Are they going be manufacturers or is this just like you say…

Fortune Mojapelo: There are several companies there are manufacturing Vanadium Redox Flow Batteries today. And the point I’m making that they are in commercial deployment today. They need to scale up of course. But what’s going to drive this scale up is more uptake of the various systems. Right now, we are seeing signs of that growing momentum. So I’ll give you an example, in South Africa our utilities announced that they’re going to be procuring 1,400Mw hours of battery energy storage. Funded already.

Matthew Gordon: Have they decided on the technology for that?

Fortune Mojapelo: It’s batteries. Multiple batteries will bid in that space. It’s long duration type. We believe that Vanadium batteries have a very strong proposition there. Not to mention a strong local content proposition there. The World Bank has announced a program for 17,500Mw Battery energy storage by 2025, in low and middle income countries. And they’ve committed a $1Bn to mobilise another $4Bn towards this. It’s a terrain which will be occupied by multiple technologies. So I’m not saying that this is going to be solely Vanadium’s terrain. But the numbers I told you, I said, if VRFB’s were to capture even 10% of that market. This is what it means. The point about it is that it’s such a big deal for Vanadium, that the entire Vanadium industry, in my view, should be doing everything they can to support the VRFB opportunity: the technology is there, the scale-up is what is required. And what we did in setting up Bushveld Energy is precisely to drive that going forward. 

Matthew Gordon: You’ve adapted your strategy since 2012 to understand what’s coming down the line. But you’re… what you’re saying is, you think there’s a big bet to be made on the Battery technology… 

Fortune Mojapelo: I think there’s a big low-risk bet. Let me tell you why low risk. Because our demand is anchored in steel-making. If Batteries never existed, we still have a fantastic story, anchored in supplying to the steel market with a low production cost basis. Two, it’s low-risk because the capital expenditure required to play in that space is much, much smaller relative to the capital expenditure incurred in building mines and processing infrastructure. I’ll give an example of that. To build a processing… a chemicals electrolyte manufacturing plant, capable of delivering 200Mw hours worth of Electrolyte a year. That will cost us $10M. Debt / Equity included, $10M to build. And that will use about 1,100 metric tons of Vanadium. To build a mine and a plant that supplies 1,100t of Vanadium. If I just do a ratio, simple ratio. You’re talking about a $100M. So the capital intensity down there is very, very low. And if you take that into account, for us as a company, it’s a no brainer to say, let’s do everything we can to support this emerging industry, which is not only attractive for its demand strengthening proposition. Commercially we think it’s potentially x10 as big as the commodity market.

Matthew Gordon: Okay so tell me, we’re going to bring this back to your company right. We’re talking about the market here. So, where’s Bushveld going to sit in this? What precisely are you doing? You’ve got the Vanadium. You’ve got energy division, we’ll call it. What are you going to be actually doing?

Fortune Mojapelo: So, there are two things. The first one is Bushveld Vanadium which is developing a large Resource base. Developing processing capacity. We have two processing plants producing Vanadium, low-cost high-quality. With good margins in case…

Matthew Gordon: For sure, I bought that, big tick.

Fortune Mojapelo: Tick. Second part of it is Bushveld energy. Which is there to promote the Vanadium Redox Flow Battery (VRFB) opportunity for Bushveld minerals. There are three things we do there. One is to manufacture electrolyte for the industry. Two is we engage in market development. It’s project development. What I mean by that is a team of people that understand the energy industry. Those are regulated market. Those are structured in markets. You need to know where the structural levers are to unlock them at large scale. So it’s individuals, who know the energy markets. We go we secure mandates for large-scale energy storage deployments. That’s the second thing we do. So for example bidding into the Escom program, the World Bank program. The third component to the business is partnering with Vanadium Redox Flow Battery companies. And we don’t need to reinvent the wheel there. We partner with the existing players…

Matthew Gordon: So, break that down, because that’s about the future. The future value of your company is inextricably linked to this. If you think the market’s going the way it is. So, I get the bidding bit, that’s a real skill. It’s tough. It’s hard. But in terms of these JV’s, these partnerships and linking with existing Battery technologies and manufacturers. What would that look like for you in real terms?

Fortune Mojapelo: Suffice to say there are several of these companies that have a good product. That have good management teams. That need to solve two things: Security of supply of Vanadium. And the need to solve for the price volatility of Vanadium historically. Two things which we can work on…

Matthew Gordon: Would it work on a contract basis in terms of forward purchase?

Fortune Mojapelo: No.

Matthew Gordon: No, it would be always spot.

Fortune Mojapelo: No, we’ve got a solution for that, which I’ll talk to. And then they need to scale up. For us it’s a case of saying, let’s partner with these guys. And partnership takes many different forms. And whether it means equity partnerships, whether it means JV’s, or whether it means just a simple relationship of supply of Electrolyte into their systems.

Matthew Gordon: Well you need certainty too. What they want is very important. But what you need is important too?

Fortune Mojapelo: But we can do a lot about that. That’s why we’ve got a project development arm so we go secure the mandates. So, I can come to someone and say, “I’ve got a partner”. Let me give an example. We’re doing a mini-grid at our mine. A 4Mw hour battery, 2.5Mw of solar. So for me to go to battery companies and say, I have the opportunity to build batteries, to supply into. I will supply the Vanadium into that. Can you give me a solution? And can we put together a solution which is ‘bankable’, which provides a solid business case to our mine. And in the case of the mini-grid the answer is absolutely. And we’ve had a number of responses from companies, and we’re in negotiations at the moment. And we are going to appoint somebody, and news of that we will publish.

Matthew Gordon: That would be interesting. Well I think there would be a few other miners knocking on your door at that point.

Fortune Mojapelo: At least it will provide a good model that others can… that combination of solar + storage can be a viable source to their energy requirements. I had mentioned that we’ll help them solve for the cost piece, the supply piece. The question is how do we do that? On the supply side, that’s why we’re scaling up our production capacity. I mean you’re talking about more than trebling production from 2,560 last year to about 10,000Mt. On the cost side, what we tried to do is to say, let’s take out the price risk of Vanadium from the CapEx decision that needs to be made about a Vanadium flow battery. And because the Vanadium, as we talked earlier, doesn’t degrade over life. And that at the end of the life, I can take it out of the battery without destroying the battery. And I can use it in another battery or I can convert it into pure Vanadium and sell it into the Steel market. It’s got residual value. And that allows us to actually rent the Vanadium into battery systems. And they’re of such a scale that a single contract can allow me to deliver enough Vanadium and it’s secure. And while it’s sitting in that battery, it’s earning yield and it’s still sitting on the balance sheet. So we think that by combining innovations like this, we’re able to solve for the two main hurdles that Vanadium flow batteries may have faced in the past. And we think that is going to support their deployments globally.

Matthew Gordon: Could you give us five reasons why they should be thinking about your company as an investment proposition.

Fortune Mojapelo: Five! I‘ve got seven. First one is that we have a commodity of Vanadium with excellent fundamentals as I said earlier on it’s in a structural deficit its outlook is really solid. Two, we have high-quality high-grade primary Vanadium Resources. The largest primary Vanadium Resource base of anybody. And three, we have Brownfield processing capacity, which we’ve put together, which we’re going to be scaling up, which allows us to hit the kind of production volumes that we are targeting very quickly and much cheaper than it would cost us on a greenfield basis. The fourth point, I would mention is that through the way we’ve gone about it. We’ve also acquired and inherited management teams with depth of expertise in Vanadium. South Africa has been doing Vanadium for decades. So we understand Vanadium from a technical point of view. The fifth point to highlight is that, the integration we have into energy storage. We have an operation that has got a natural hedge. Well if Vanadium prices come down, energy storage solutions such as Vanadium become a lot more compelling. Right. And also that gives us access into what we see as a multi-billion dollar market opportunity for the company. Then finally, not finally, second but not least, is that we are operating in a South African jurisdiction. The Bushveld complex, which is host to the largest high-grade primary Vanadium Resource base in the world. And with the story that we’ve put together today, with the growth that we have, our proposition then to shareholders is even just on a production growth basis, we’ve got substantial capital growth ahead. When you look at the downstream integration into energy storage that’s significant capital growth proposition. On top of all of that, we believe that being a low-cost producer we’ll be generating sufficient cash to look after our growth. And also, at some point to start paying a dividend to shareholders. So, in a nutshell that the proposition… 

Matthew Gordon: That’s a magical phrase that. We like that. You’re sitting on a little bit of cash at the moment. I think you’re looking at building that up… you seem to know where you’re going with the company. It’s been fascinating listening to you today. Thank you very much for coming in and we look forward to seeing you soon.

Fortune Mojapelo: Thanks for your time.


Company page: www.bushveldminerals.com

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