Release Date: September 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Bushveld Minerals Ltd (BSHVF, Financial) has made significant strides in operational stability, particularly at Vametco, with production reaching 217 mtV in May, the highest monthly output in a year.
- The company is implementing several cost-cutting measures and operational initiatives, targeting annualized savings of $8 million to $10 million by the end of 2025.
- Bushveld Minerals Ltd (BSHVF) has secured $10 million in match funding from Orion and a $12 million working capital facility from SPR, providing a cash balance of $4.1 million as of August 31.
- The company is focused on asset rationalization, including the sale of non-core assets like Vanchem, Lemur, and BELCO, which is expected to improve liquidity.
- Bushveld Minerals Ltd (BSHVF) is changing the structure of its purchase agreements to longer-term contracts, aiming for significant cost reductions and operational efficiencies.
Negative Points
- The company reported an adjusted EBITDA loss of $14.3 million and an operating loss of $18.6 million for the first half of 2024, primarily due to lower vanadium prices and production volumes.
- Cash costs for H1 2024 were significantly higher at $32.80 per kilogram, driven by lower production volumes and higher raw material costs.
- The company has a high level of debt, with a total net debt of $124 million as of June 30, 2024, which includes various loans and working capital facilities.
- Bushveld Minerals Ltd (BSHVF) is currently producing vanadium at a loss, and the company cannot guarantee a viable business going forward if vanadium prices remain depressed.
- Production volumes at Vametco have been lower than previously achieved, partly due to a lengthy pre-planned shutdown and issues with non-preferred OEM suppliers.
Q & A Highlights
Highlights from Bushveld Minerals Ltd (BSHVF) Earnings Call
Q: What is the situation regarding Bushveld's stake in CellCube or Enerox?
A: Craig Coltman, CEO: We embarked on a strategic process for our remaining stake in CellCube but were unable to find interested buyers. Bushveld has now diluted to less than 5% as we have not invested further.
Q: Could you clarify that Bushveld received $20 million over the next four years from SPR as final payments for their purchase of Vanchem?
A: Craig Coltman, CEO: SPR shall pay 25% of the distributable free cash flow from Vanchem over three years following the closure date, with a minimum of $15 million to a maximum of $20 million over that period.
Q: With the current cost of production far exceeding the present market price, how long do you anticipate continual operations?
A: Craig Coltman, CEO: Based on a set of price assumptions, operations are expected to continue as planned for at least 12 months from the balance sheet date. We are actively managing liquidity and monitoring options to improve the group's financial stability.
Q: The expected prices suggested in the presentation are significantly higher than current achievable prices. Are they realistic?
A: Craig Coltman, CEO: We estimate average sales prices of around $29 per kilogram for the remainder of 2024, which is an 8% increase from current prices. This is based on the impact of Russian sanctions and pending rebar standards. Our outlook for January to December is around $34 per kilogram, based on leading industry analyst market research.
Q: Why have production volumes at Vametco been lower than previously achieved volumes?
A: Craig Coltman, CEO: Production was lower, particularly in Q1, due to a lengthy pre-planned shutdown for maintenance, including the refractory of the kiln. We had to use a non-preferred supplier for the refractory work, which caused additional downtime. However, we saw a standout month in May with production reaching 217 mtV.
Q: In the sale of Lemur, it was stated that Bushveld would receive approximately $2 million in annual payments over five years. Is this correct?
A: Craig Coltman, CEO: No, the Lemur contract does not reference receiving $2 million over five years. It only mentions the cancellation of our existing $2.5 million guarantee.
Q: Given the high levels of debt and the fact that the company is currently producing vanadium product at a loss, how can you reassure investors that there is a viable business going forward?
A: Craig Coltman, CEO: While I can't guarantee a viable business at current prices, we are actively managing liquidity risk and ensuring sufficient funds for the next 12 months. We have measures in place to ensure funding requirements and are pursuing the sale of non-core assets and implementing cost-saving measures.
Q: If prices remain static into 2025, how long do you forecast before running out of cash?
A: Robbie Taylor, Interim CFO: Based on our going concern assessment, we are good for the next 12 months, taking us to September 2025. However, if prices stay flat, we would face significant challenges by the end of Q1 next year.
Q: What total cost of production and administrative costs do you expect to come down to after all the cost-cutting initiatives have been achieved per kilogram of vanadium?
A: Craig Coltman, CEO: We expect to achieve annualized savings of $8 million to $10 million, reducing costs by about $4 per kilogram. This includes labor cost reductions, long-term supplier contracts, yield improvements, and raw material consumption reductions.
Q: What steps is Bushveld taking to regain market share, particularly in regions like the US and Europe where vanadium demand has historically been strong?
A: Craig Coltman, CEO: We have contracts in place to deliver minimum quantities, and our agent Wogan is doing an excellent job. We are currently selling about 62-63% of our nitro vanadium product in the US, with the balance in Europe. We aim to maximize margins by targeting regions with higher premiums.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
