(MENAFN- ProactiveInvestors)'On the vanadium side I'm very comfortable' says Fortune Mojapelo chief executive of Bushveld Minerals (LON:BMN). There are many strings to Bushveld's South African bow including exposure to iron ore titanium tin and coal but it's the vanadium opportunity that's most advanced. Back in July of last year the company produced a scoping study that showed that using just one area of mineralisation known as the Main Magnetite Layer the project is capable of producing 10370 tonnes of vanadium pentoxide flakes per year at a 60 per cent operating margin. But things have moved on considerably since then. 'Our focus is on trying to complete our pre-feasibility study that we've been busy with' says Mojapelo. 'We've been running all sorts of studies. People are hard at work to get this done and in terms of the work itself it's going very well.' The current work is also incorporating some elements of a definitive feasibility study and it shouldn't be too long now before it's finished although Mojapelo is vague about the precise timings. But even without the results in hand the potential is clear. In the scoping study the estimated capital costs came in at around US$261.5mln but Fortune is keen to get those costs down possibly by securing a market for a concentrate. What's more there could be further savings on the cost side as the Vanadium Project is currently slated to be one of the lowest cost primary producers in the world. Combine all that with a likely straitening of supply that could well exert further upward pressure on the price and the margins could turn out to be very healthy indeed. 'Our aim at Bushveld' says Mojapelo 'is to develop projects that are in the lower cost quartile. 'When you've got that you're in a very good position. Whatever happens you'll be fine. 'But in this case the supply position of vanadium is more vulnerable than is commonly recognised. The steel workers that produce vanadium slag as a by-product are struggling to make money and we expect to see some of them shut down.' And he has an easy example to hand. 'Look no further than Highfield Steel & Vanadium which is in business rescue and which supplies 20% of vanadium into the market.' And then there's the Chinese players. 'There's a possibility that some of them start switching to seaborne iron ore which doesn't have any vanadium in it' continues Fortune. 'If they do shift we would see a shift in the vanadium market too. That's why we believe the future of vanadium supply lies with primary producers. You don't need the steel economics to work or the high capex that steel requires.' And as a little kicker there's also the potential that demand may surge further on upside from vanadium applications in energy storage. So all to the good on the vanadium side. But while all that's going on Bushveld is also pressing on with work on other projects. 'We still have our tin project' says Mojapelo. 'We're focused on building our inventory there. And there's the P-Q tin and iron project which remains a project of value.' In addition are the company's ongoing attempts to consolidate its position in Lemur Resources from 63.6% to 100%. Lemur owns the 136mln tonne Imaloto thermal coal project in Madagascar which looks a choice asset. But the ownership structure is messy. Accordingly Bushveld has made a cash offer of A$0.06 per share for Lemur valuing the company at just under A$11 million. One may ask why Bushveld as a publicly-listed company itself isn't offering paper. But Mojapelo has a straightforward answer to that. 'There's a lot of investors in Australia who have no appetite for Aim' he says. 'That's the thinking behind it.' It's a big slug of cash though for a small company to find in markets that have been tough for a couple of years. But Bushveld still has its followers. One high net worth individual who sits behind a vehicle called Riverridge has built up a considerable stake in the company and has now made available further funds through a £2.6 mln convertible loan. And Bushveld can also call upon a further £2.6 mln convertible facility from Darwin Strategic. That all adds up to a significant war chest given that the company raised an additional £1.25 mln towards the end of last year and boasted over £8 mln in cash on its balance sheet at the last set of accounts for the half year to 31 August. And ideally the loans from Darwin and Riverridge will be converted. 'We're hoping that following the [Lemur] deal our share price will reflect better the inherent value of the group which will proved better incentive for the financiers to convert' says Fortune. 'If that happens it'll mean we've almost been able to do a paper-for-paper deal.'
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.