Bushveld Minerals - Brownfield and beyond
23 March 2018
A summarization of the vanadium mine and brownfield landscape in the Bushveld Complex, related ‘new’ developments and possible relevancies to Bushveld Minerals.
The LEDA 2017 Annual Report provides some info about a number of development initiatives in the Limpopo region of S.A. – for clarity, Mokopane falls within Limpopo. It is essentially the end of year report (2016/17) for the Limpopo Economic Development Agency (LEDA), which has a mission “to implement integrated economic development initiatives in Limpopo, through accelerated industrial diversification; increased levels of trade and investment; and by developing sustainable enterprises.”
One key project is the Tubatse Special Economic Zone (SEZ), in the Eastern Limb of the Bushveld Igneous Complex, close to Steelpoort and Burgersfort. There are significant plans to develop the area into a powerhouse for the mining industry and related downstream activities.
Possible incentives offered by the SEZ include:
- Preferential 15% Corporate Tax
- Building Allowance
- Employment Incentive
- Customs Controlled Area
- 12I Tax Allowance (tax deductions based in implemented energy efficiencies).
The approximate location of the SEZ is pinned on the below map. Mokopane can be seen in the North-West.
Worth highlighting that on page 26 one of the key investment opportunities pertaining to the SEZ is a Vanadium Pentoxide Plant to produce "Vanadium Pentoxide and Redox Batteries". How much we can read into this from a BMN perspective is unclear but perhaps we will be thrown a Mokopane-curveball in the future, to include refining ore to vanadium pentoxide (the intermediary product, per the recent BRR video) and further processing to vanadium electrolyte - this would also complement views on a multi-location strategy for electrolyte (i.e. Vametco and Location B). Alternatively, maybe Bushveld Energy has some competition.
Also, it is noteworthy that another investment opportunity relates to Manufacturing of Solar Panels Components for “Solar Panels/Energy”. So, potentially the manufacture of a full renewable energy generation and storage solution in a single location.
To add to that, the report references a specific Vanadium orientated company called Vanadium & Magnetite Exploration & Development Co. (SA) (Proprietary) Limited ('VanMag'). A mining right to mine vanadium and magnetite was issued to the company around July 2010. The mining right is valid for a period of ten years and expires in 2020 but there appears to have been little progress since then. Continental Coal sold their holding in Vanmag in 2013 but there is very limited information on who the purchaser was. An initial partner in the firm seems to have been Luanhe Industrial Group, which is part of Hebei Iron and Steel Group. So Hesteel appears again, as it has with Mapochs (IRL management having connections to Hesteel) and Duferco (who own Vanchem, being majority owned by Hesteel). Perhaps they acquired Continental’s interest. Unfortunately, there is not much info about the directors listed in CIPC. Read into that what you will.
It does make one think that while we have been focusing of brownfield plants and processors, perhaps Fortune is working on further possible mineral deposits too. If the VRFB revolution is what we hope it to be, in-ground resources could be very good value currently, despite the vanadium market up-turn.
The 2015 BMN Factsheet presumably details Fortune and teams’ opinion on the key vanadium and brownfield sites in the Bushveld Complex (pg 3).
Having the benefit of experience as a Bushveld shareholder and hindsight, it could almost be viewed as a “hitlist” of Bushveld Minerals targets. So many sites have been mooted, ‘linked’ to BMN or ultimately secured by the company.
Mokopane was already in the bag but Vametco and Brits have now been secured. Highveld has been mentioned a couple of times. Mapochs was the subject of quite a lot of debate but was sold by auction to IRL, whose intentions and plans are still unclear. Rhovan and Ironveld appear tightly held.
Curiously, Vanchem is not mentioned. Possibly in 2015 there was less clarity on the situation with Vanchem and efforts were being focused on securing Vametco at that stage (and Highveld??).
For reference, the town of Burgersfort noted in the Factsheet on the edge of the eastern limb is in the proximity of the Tubatse SEZ mentioned above.
VanMag and how that might develop could be very interesting. It has been quiet on that front but it would be a nice surprise if BMN was in some way involved - particularly given it is next door to the Mokopane project (5 farms to the South); presumably below the outlined project area in the below diagram taken from the 2017 Admission Document (Page 332).
To take this further, there is a lot of information on the South African Companies and Intellectual Property Commission (CIPC) website. Company and ‘keyword’ searches on the CIPC site, and researching of other sources establishes the following:
- Vanchem Vanadium Products is in ‘Business Rescue’. Vanchem Mining, a newer company (setup in 2016) with largely the same directorship, is ‘In Business’.
- Mapochs Mine is in ‘Business Rescue’. However, Mapochs Resources, which seems to include, in part, the IRL personnel listed previously as directors, is ‘In Business’. it is likely this was a newer company set-up as part of IRL’s acquisition.
- Evraz Highveld has been carved up into a number of discrete companies aligned to the specific assets, e.g. the structural mill and plate mill. The plate mill seems to include the vanadium processor (it's tricky to get confirmation of this) and could be of interest to BMN for processing Mokopane ore for export. The directors of these companies are the business rescue practitioners; presumably until the relevant deals and acquisitions complete.
For the plate mill, the October 2017 Creditors Meeting details that Due Diligence was expected to complete, along with demonstration of proof of funding on 4th December 2017; with transaction proceeds payable by end of March 2018 and expected to be operational by H2 2018. That Business Rescue update from October showed the plate mill transaction had been signed with ‘a well-known Black Industrialist with highly regarded technical partners’. There is another creditors meeting in February, so it will be interesting to see if there is progress or greater clarity in this regard.
The Vanadium processor at Highveld could (to my knowledge) let BMN process the raw material from one of their resources (I guess Mokopane) into a more valuable concentrate. Making it a cost-effective option for shipping globally and consistent with the following quote by Fortune in the September 2017 Proactive Investor article:
"We think that there are opportunities for supplying ore directly into China. And we've got scale. We've got the largest primary resource base of anyone in the vanadium space so I think it's a very exciting future we have ahead of us"
This added process ultimately wouldn't meddle with the global vanadium production or brownfield market-share calculations that others on these boards have done to match the proposed production uplift from a Vanchem acquisition against Fortune’s stated production targets – i.e. you would have vanadium production at Vametco and “Brownfield II” (Vanchem), as expected; meaning that those figures stand. However, in addition, we might see a further revenue stream from the shipment of concentrate to China, which wouldn't technically impact those BMN vanadium market-share calculations. Admittedly, what you could see is global vanadium production increasing as BMN-supplied material is used to produce finished vanadium product in China, thereby skewing market-share when viewing things with a BMN-lens. However, this could perhaps be simply filling the void left by restrictions on vanadium slag imports and downstream vanadium production decreases, meaning there is little net change realised.
In summary, vanadium market-share figures could be largely unaffected but another revenue stream is added to BMN and there would indeed be provision of ore or concentrate to China, as suggested Fortune's comment in the Proactive article.
It begs the question of whether the omission of Vanchem in the Factsheet meant Highveld, rather than Vanchem, has been in the pipeline for a little while, with the intention of securing early income from Mokopane... simultaneously leveraging EVRAZ connections for both Vametco and Highveld seems quite logical. While the appearance of Vanchem was possibly a 'coup' that wasn't visible back in 2015, rather developed in 2016 and onwards. Maybe meaning a slight change in strategy, with a Mokopane processor put on the back burner while Vametco and Vanchem are secured for near-term production of vanadium pentoxide; Highveld to process ore into concentrate for export; and, the Tubatse SEZ for a Mokopane processor and electrolyte plant in due course.
- VanMag (VANADIUM AND MAGNETITE EXPLORATION AND DEVELOPMENT CO (SA)) is ‘In Business’ and shares some common directorships as ‘Limpopo Vanadium Company’ and ‘Limpopo Vanadium Holdings’. There are also directors from the ‘Corridor Mining Resources Ltd (CMR)’, which is ‘a diversified mining resources company, wholly owned by the Limpopo Economic Development Agency (LEDA). CMR boast a diverse commodity portfolio which includes but not limited to PGM’s, Chrome, Gold, Magnetite and Bentonite. CMR’s mandate is to promote economic development directly or indirectly through Mining by optimising the development of mineral resources, driving economic growth and Creating job opportunities and promoting sustainable empowerment in mining.’
Considering the indications that the Tubatse SEZ will offer investment opportunities relating to vanadium pentoxide production and VRFB manufacture, as well as VanMag’s proximity to Mokopane (next door), this ‘public ownership’ angle is an interesting one – it could be reasonably inferred that a partner with advanced relationships with a VRFB company (UET and BE in its own right), significant progress in implementation of electrolyte manufacture and strong business connections would be extremely appealing to LEDA achieving its goals for the SEZ. Reading further into the LEDA annual report also suggests VanMag in its current incarnation is not faring so well, so a more productive counterparty may be attractive if the M&A/licensing mechanics would allow for it; specifically, from page 42, ‘The company was forced through a court process to compile annual financial statements for the past three years and table them for approval at the company AGM. Through this process, the company was also forced to formally acknowledge the CMR loan which was a subject of AGSA (Auditor-General of South Africa) query in the past.’
To add yet greater relevance to the LEDA angle and the Tubatse Special Economic Zone, there was a Limpopo Investment Roundtable at the 2018 Mining Indaba on Wednesday 7th February 2018 featuring:
- Speaker: Ben Mphahlele, Group Chief Executive Officer , Limpopo Economic Development Agency
- Speaker: Victor Chepape, Chairman, Corridor Mining Resources
- Speaker: Kabu Nkadimeng, CEO, Corridor Mining Resource
Excluding Rhovan and Ironveld, which seem to be fairly secure, that exhausts the list of recognised mines and brownfield sites.
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