Bushveld Minerals (LSE:BMN) dipped 5.3pc to 38.6p on Wednesday morning after revealing that its vanadium production fell short of expectations last year.

The firm, which has rocketed from 8.6p over the past year, produced 2.560mtV of the metal from its South Africa-based Vametco project. The metal was produced in the form of Nitrovan, Bushveld’s trademark product sold in major steel markets across the world. This figure falls short of the 2,649mtV produced by the company in 2017 as well as its previously-announced guidance range of 2,600 to 2,650.

Bushveld said production was hit by unplanned maintenance and a repairs programme at Vametco in the final quarter of the year. The lower volumes that resulted from this work also led production costs to come in 3pc higher than guidance at ZAR260.6/KgV.

Wednesday’s disappointment comes after Bushveld was forced to reduce its 2018 production guidance from a range of 2,850mtV to 3,000mtV in Q3 2018. This came after production was hit by a two-week-long period of local, unprotected industrial action and a seven day kiln shutdown due to unplanned maintenance. The resolution of these issues led the business to enjoy a 22.4pc jump in production between the third and fourth quarters of 2018. 

Despite the disappointing production figures, Bushveld investors can take some solace in the fact that the firm’s sales revenue soared 142.7pc to $192.2m in 2018. Likewise, its EBITDA rose by 349.2pc to $107.5m. These increases were underpinned by higher ferrovanadium prices, which increased by 148.9pc year-on-year to an average of $81.2/KgV in 2018. Since the beginning of 2019, however, prices of the metal have dropped to an average of $76/KgV.

To address its ongoing performance issues, Bushveld launched a detailed diagnostic review of the Vametco plant in October. This was followed by the launch of an ‘operational transformational programme’ in December that aims to enhance the site’s performance. In Wednesday’s update, the business said it expects these efforts to result in higher production over the next 12 months. Guidance for 2019 will be provided in Bushveld’s Q1 operational update, once all aspects of the transformational programme have been scheduled.

On the exploration side, Bushveld said it has completed 13 drill holes at Vametco. These are part of an initiative to increase geological confidence and grade control of the ore mined at the project. The results have provided evidence of additional resources and reserves and an updated mineral resource estimate is due in the current quarter.

Finally, the firm has now received all of the assay results for the first phase of an exploration programme at its neighbouring Brits project. These have either been above or in line with management’s expectations. The results of a second phase of drill holes are expected in the current quarter and will be followed by a maiden mineral resource estimate in Q2 2019.

Fortune Mojapelo, chief executive at Bushveld, said that while Bushveld is benefitting from high vanadium price, it recognises the importance of driving Vametco towards ‘operational excellence’ and its ‘true potential’.

‘The transformation programme we have initiated at Vametco is designed to do just that and we are confident to see an improved production performance during 2019,’ added Fortune. ‘The deposit hosts exciting potential and our drilling programmes at Vametco and Brits have been carefully designed to ensure that we extract the wealth of the minerals in our portfolio and extract them in the most cost efficient, sustainable way.

‘At the Brits deposit, the recent exploration results continue to prove the deposit as a future source of additional production tonnages. As it is an election year for South Africa, we expect continued stability and positive sentiment to allow us to focus on our operations and make long term investment decisions for the benefit of all our stakeholders, including employees, local communities and shareholders.’

Author: Daniel Flynn

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