Bushveld Minerals Limited Bushveld Vanadium Q4 Operational Update

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Bushveld Minerals Limited (LON: BMN), the AIM listed, integrated primary vanadium producer, with ownership of high grade vanadium assets, is pleased to provide an operational update for the three months to end-December 2018, in respect of its Vanadium platform which consists of Bushveld Vametco Limited, the Brits Vanadium Project and the Mokopane Project.

Key Highlights

· Vametco’s sales revenue and EBITDA for the 2018 financial year increased by 142.7% and 349.2% respectively to US$192.2 million (2017: US$79.2 million) and US$107.5 million (2017: US$23.9 million), underpinned by higher vanadium prices.

· Ferrovanadium price averaged US$81.2/KgV in 2018, an increase of 148.9% relative to the previous year.

Ø Vametco’ s realised price is based on the prior month’s average price.

Ø Ferrovanadium price has averaged US$76/KgV, year to date1.

· Vametco’s production for the 2018 financial year was 2,560 mtV (2017: 2,649 mtV) in the form of NitrovanTM from magnetite concentrate, compared to previously announced guidance range of 2,600 to 2,650 mtV. Production was impacted by an unplanned maintenance and repairs programme in Q4 at the refractory and cooler girth sections of the plant.

· Vametco’s production for Q4 2018 was 657 mtV in the form of NitrovanTM from magnetite concentrate (Q4 2017: 539 mtV), an increase of approximately 22.4% relative to Q3 2018 (Q3 2018: 537 mtV), following the unprotected industrial action from the previous quarter.

· In October 2018 the Company, with the assistance of an independent external consultant, initiated a detailed diagnostic review of the Vametco plant performance. Following the completion of the review in December 2018, the Company commenced an operational Transformation Programme to enhance Vametco’s performance.

· The Company has commenced the implementation of the Transformation Programme and expects production levels in the current year to be higher than 2018. Guidance for 2019 will be provided in the Q1 2019 operational update once all aspects of this programme have been scheduled.

· The Company has completed 13 (VM001 – VM013) exploration drillholes, as part of an initiative to increase geological confidence and grade control of the ore mined at Vametco. The results provide evidence of additional resources and reserves at Vametco mine with an updated Mineral Resource Estimate due to be published in Q1 2019.

· The Company has received all assay results for Phase 1 of its exploration programme at the neighbouring Brits Project, which has to date been above/in line with management’s expectations. Results of the Phase 2 drillholes are expected to be received in Q1 2019 with a maiden Mineral Resource Estimate in Q2 2019.

1. Year to date average as at 23 January 2018.

Fortune Mojapelo, CEO of Bushveld Minerals Limited, commented:

“The strong vanadium market ensured that Vametco generated healthy cash flows, even while its operational performance fell below expectations. We are benefiting from the high vanadium prices, nevertheless, we are mindful of the imperative to drive Vametco towards operational excellence and realise 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.

“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.”

Bushveld Vametco Limited

Production

· Vametco sales revenue and EBITDA for the 2018 financial year increased by 142.7% and 349.2% respectively to US$192.2 million (2017: US$79.2 million) and US$107.5 million (2017: US$23.9 million), underpinned by higher vanadium prices.

Ø Vametco’ s production for Q4 2018 was 657 mtV in the form of NitrovanTM from magnetite concentrate (Q4 2017: 539 mtV), an increase of approximately 22.4% relative to Q3 2018 (Q3 2018: 537 mtV), following the unprotected industrial action from the previous quarter.

· Vametco’s production cost for the 2018 financial year was ZAR260.6/KgV (US$19.7/KgV), 3% higher than guidance, as a result of lower volumes due to an unplanned maintenance and repairs programme in Q4.

Table 1: Operational highlights for Vametco (on a 100% basis)¹

Description	Unit	Q4 CY18	12 mth CY18	Q4 CY18 vs Q3CY18	Q4 CY18 vs Q4 CY17	12 mth CY18 vs 12 mth CY17
Vanadium (Nitrovan^TM plus FeV) produced	mtV³	657	2,560	+22.4%	+21.9%	-3.4%
Vanadium sold	mtV³	586	2,573	+0.4%	-7.8%	-5.4%
Average MB vanadium price²	US$/KgV	108.0	81.2	+25.8%	+176.0%	+148.9%
USD/ZAR average exchange rate⁴	US$:ZAR	14.3	13.2	+1.5%	+4.6%	-0.3%
Revenue	ZAR’m	858.8	2,545.4	+34.9%	+178.9%	141.9%
EBITDA	ZAR’m	565.3	1,423.1	+67.9%	+339.6%	347.8%
Underlying production costs⁵	ZAR/kgV	256.3	260.6	-14.5%	+5.6%	+18.5%
Revenue	US$’m	60.2	192.2	32.9%	166.5%	142.7%
EBITDA	US$’m	39.6	107.5	65.4%	320.2%	349.2%
Underlying production costs⁵	US$/kgV	18.0	19.7	15.7%	0.9%	18.9%

1. Based on provisional, unaudited estimates. Bushveld’s net attributable interest of the above production and financials was 59.1% as at 12 September 2018 and approximately 74% from 13 September 2018 through a series of transactions.

2. The vanadium price is based on the FeV mid average price for the period, published by Metal Bulletin. Vametco realised price is based on the prior month’s average price.

3. mtV = metric tonnes of vanadium.

4. Source: Bloomberg. The achieved USD/ZAR average exchange rate may vary.

5. Excludes depreciation, royalties, selling, general, & administrative expenses and impact from production stoppages.

Vametco Diagnostic Review

· Vametco’s 2018 production of 2,560mtV was impacted by a total of 37.5 days stoppages and unexpected operational challenges. An estimated 230 mtV of production was lost due to these unforeseen events. The total potential production for the year would therefore have been approximately 2,800 mtV. Following the operational challenges experienced during the ramp up of Phase 2, Bushveld Minerals, with the assistance of an external consultant, commenced in October 2018 a detailed diagnostic review of the Vametco plant performance which was completed in December 2018. The primary findings of the diagnostic assessment are summarised below.

Phase 2 of the multi-phase project

Ø Phase 2 of the multi-phase project was completed in June 2018 increasing production capacity to 3,750 mtV. During the commissioning phase, production of the new milling circuit was unable to ramp up to the nameplate capacity. Concurrently, there was a reduction in the run-of-mine ore vanadium grades. These events lead to a reduced concentrate production, lower recoveries and plant instability, resulting in the plant not meeting its capacity target.

Ø The diagnostic review highlighted that no additional capital expenditure is required to achieve a sustainable production of c.3,400 mtV, which represents 90 per cent of the name plate capacity. In order to achieve the production target management will be primarily focused on, among others:

§ Increasing vanadium grade in crushed ore through improved mine scheduling which will result in an increased exposure to ore of higher vanadium content and magnetite;

§ Increasing vanadium grade in kiln feed through improved silica liberation;

§ Increasing kiln availability through improved engineering practices and production throughput; and

§ Sustainably increasing the kiln feed rate.

Phase 3 of the multi-phase project

Ø The diagnostic assessment highlighted that additional targeted investment is required for the kiln, the leach and crushing circuits to reach Phase 3 capacity. The Company continues to explore several improvement initiatives to further increase production capacity to 5,000 mtV.

§ During 2019 Vametco will continue to progress environmental approvals for Phase 3 of the multi-phased expansion project. In addition, detailed design work and capital estimation will commence with a view to construction commencing in 2020.

Stakeholder management

Ø The Company continues to build on the ongoing, cooperative relationship with all stakeholders, particularly our workforce and local communities. An employee share participation scheme will be implemented at Vametco in Q1 2019 which will more closely align Vametco’s workforce to its operational targets.

· Following the completion of the diagnostic review in December 2018, the Company initiated an operational Transformation Programme to enhance Vametco’s performance. The Company has commenced the implementation of the Transformation Programme and expects production levels in the current year to be higher than 2018. Guidance for 2019 will be provided in the Q1 2019 operational update once all aspects of this programme have been scheduled. Nevertheless, the Company is confident that with the implementation of the operational Transformation Programme Vametco will be able to achieve its future production targets and efficiencies while being one of the lowest-cost vanadium producers.

Other projects underway

· Tailings facility expansion: to maintain deposition capacity for depositing the calcines (which need to be deposited on a H:H liner) as part of ongoing operations will be completed during Q1 2019 and deposition will commence during this period.

· Kiln off-gas project: has been initiated to comply with regulatory requirements and further increase kiln feed throughput. Commissioning planned for end of Q1 2019.

Exploration at Vametco Mine

The Company has received all assay results for the boreholes submitted for analysis at an external laboratory at the end of December 2018. The table below summarises the results of the analyses. The summary shows the weighted averages of V2O5 % in magnetite in the three orebodies mined at Vametco Mine. The three orebodies are the Lower Seam (LS), Intermediate Seam (IS) and the Upper Seam (US). These assay results provide evidence of the presence of additional resources and reserves at Vametco Mine, and an updated Mineral Resource Estimate based on these assay results followed by a Mine Works Programme are expected at the end of Q1 2019.

Table 2: Assay results (as weighted averages) and intersections for Vametco Mine Drilling

Drillhole	Ore Seam	Intersection Interval (m)	Thickness (m)	Magnetite %	V₂O₅% (in magnetite)
VM001	US	12.00 – 13.44	1.44	60.74	1.98
VM001	LS	36.00 – 60.22	24.22	33.17	2.02
VM002	US	23.00 – 26.30	3.30	48.38	1.55
VM002	LS	60.00 -93.72	28.72	30.15	2.02
VM004	US	30.00 – 32.82	2.82	66.70	1.49
	IS	53.11 – 64.00	10.89	30.63	2.02
	LS	76.80 – 115.62	38.82	28.03	1.93
VM005	US	19.43 – 21.42	1.99	90.35	1.75
	IS	47.96 – 69.40	21.44	30.72	1.81
	LS	91.32 – 122.52	31.20	36.09	2.05
VM006	US	15.25 – 17.80	2.55	56.14	1.79
	IS	48.28 -85.00	36.72	32.38	1.80
	LS	115.00 – 156.71	41.71	32.01	2.00
VM007	IS	20.00 – 31.70	11.70	35.58	1.56
VM007	LS	39.00 – 69.57	30.57	35.81	1.60
VM008	US	42.00 – 45.50	3.50	69.95	1.89
	IS	72.71 – 73.71	1.00	23.09	1.75
	LS	92.00 – 113.90	2.,90	41.45	2.17
VM009	US	28.00 – 31.32	3.32	75.44	1.77
	IS	68.00 – 79.00	11.00	38.44	1.94
	LS	94.00 – 130.43	36.43	30.88	2.08
VM010	US	18.40 – 19.50	1.10	16.73	1.87
	IS	63.00 – 84.46	21.46	31.85	1.70
	LS	111.80 – 143.92	32.12	35.26	2.00
VM011	US	24.56 – 29.00	4.44	63.11	1.79
	IS	55.57 – 58.35	2.78	33.71	2.02
	LS	68.18 – 97.31	29.13	34.70	2.07
VM012	US	42.36 – 44.26	1.90	90.19	1.81
VM012	LS	65.68 – 106.46	40.78	34.47	2.09
VM013*	US	10.85 – 13.86	3.01	69.40	1.76
	IS	36.33 – 49.38	13.05	40.26	1.97
	LS	71.54 – 104.24	32.70	32.58	2.04

*Drill hole VM013 was drilled to replace VM003 which was not assayed

1. Note that depths are intersected depths and do not represent true thicknesses

2. LS = Lower Seam, IS = Intermediate Seam, US = Upper Seam

Brits Vanadium Project

The assay results for the second phase of exploration drilling at the Brits Vanadium Project for boreholes BVL009 to BVL026 are all expected to be reported before end of Q1 2019. Samples for boreholes BVL009 to BVL016 have already been submitted to the laboratory while sampling of the rest of the boreholes BVL017 to BVL026 continues. The Maiden Mineral Resource Estimate for the Brits Vanadium Project is expected in Q2 2019. Table 2 summarises the results for the first phase of the exploration programme reported in Q3 2018.

Table 3: Phase 1 – Assay results and intersections for Brits Vanadium Project Drilling

Drillhole	Intersection¹		Magnetite %	V₂O₅ % (in magnetite)
BVL001²	LS1	4.32-12.91 m	49.11	2.09
BVL002	LS8	16.45 – 17.55 m	40.69	1.43
	LS7	23.00 – 24.93 m	31.55	1.62
	LS6	30.00 – 31.10 m	53.88	1.57
	LS5	32.00 – 35.32 m	39.04	1.61
	LS4	38.00 – 39.50 m	40.58	1.40
	LS3	58.35 – 59.78 m	46.05	1.62
	LS2	63.30 – 65.60 m	36.04	1.86
	LS1	66.00 – 98.68 m	55.50	1.68
BVL003	LS8	12.60 – 14.80 m	33.97	1.47
	LS7	20.50 – 23.41 m	26.48	1.48
	LS6	27.00 – 29.46 m	38.68	1.57
	LS5	32.00 – 33.74 m	39.77	1.61
	LS4	36.10 – 38.00 m	38.84	1.45
	LS3	58.00 – 60.70 m	35.40	1.50
	LS2	64.00 – 66.90 m	35.64	1.61
	LS1	67.45 – 71.86 m	58.73	1.66
BVL004²	LS1	13.31 – 14.70 m	80.08	1.94
BVL005	IS2	19.46 – 21.70 m	29.50	1.45
	IS1	28.00 – 30.15 m	33.99	1.47
	LS8	39.16 – 41.18 m	32.80	1.43
	LS7	45.96 – 49.00 m	27.03	1.44
	LS6	54.00 – 55.25 m	55.64	1.39
	LS5	58.00 – 60.00 m	43.11	1.44
	LS4	63.00 – 64.40 m	41.71	1.59
	LS3	84.00 – 86.30 m	42.12	1.55
	LS2	90.00 – 92.18 m	37.88	1.53
	LS1	93.00 – 96.22 m	63.43	1.67
BVL006²	US2	29.00 – 32.32 m	34.77	1.75
	US1	34.35 – 41.00 m	38.40	1.63
	IS2	98.00 – 100.35 m	29.17	1.70
	IS1	106.00 – 108.5 m	30.02	1.68
	LS8	117.00- 119.00 m	36.56	1.64
	LS7	125.60 – 127.00 m	41.62	1.65
	LS6	131.85 – 133.10 m	57.62	1.66
	LS5	135.00 – 138.00 m	44.26	1.70
	LS4	140.20 – 141.10 m	53.82	1.66
	LS3	160.00 – 161.75 m	46.79	1.54
	LS2	165.00 – 167.73 m	39.65	1.79
	LS1	168.15 – 171.36 m	65.89	1.78
BVL007	US1	50.00 – 54.44 m	20.03	1.46
	IS2	59.00 – 61.00 m	28.48	1.52
	IS1	65.00 – 67.00 m	28.60	1.49
	LS8	71.92 – 74.60 m	34.52	1.42
	LS7	83.00 – 84.84 m	42.73	1.39
	LS6	97.00 – 98.00 m	66.30	1.40
	LS5	99.20 – 102.30 m	40.48	1.49
	LS4	105.00 – 106.35 m	53.78	1.40
	LS3	126.00 – 126.82 m	73.56	1.34
	LS2	126.82 – 127.50 m	80.08	1.31
	LS1	130.00 – 136.50 m	52.26	1.61
BVL008	New Seam ³	43.00 – 75.00 m	29.22	1.31
	New Seam³	107.00 – 108.90 m	32.88	1.36
	US2	110.40 – 112.22 m	55.57	1.41
	US1	128.65 – 129.34 m	50.59	1.37
	IS2	131.70 – 132.20 m	39.65	1.45
	IS1	133.00 – 138.58 m	41.29	1.38

1. Note that depths are intersected depths and do not represent true thicknesses

2. BVL001, BVL004 and BVL006 have been previously reported.

3. New Seam overlying Upper Seam (US): consistency to be verified with additional boreholes

LS = Lower Seam, IS = Intermediate Seam, US = Upper

The sample analysis results continue to reaffirm the consistent nature in grade and thickness of the Lower Seam (LS), Intermediate Seam (IS) and Upper Seam (US) Layers at the Brits Vanadium Project. Although the grade of the LS is marginally lower than that mined at Vametco, it still represents world-class vanadium grades. These assay results provide evidence of continuity of ore grades and thicknesses similar to the adjacent operating Bushveld Vametco Alloys mine and confirm the potential for an eastward extension of the current orebody being mined at Vametco.

Mokopane Vanadium Project

The Mokopane Vanadium Project is a key part of Bushveld’s vanadium strategy and the intention remains to secure the mining right and develop the greenfield project into a vanadium mine and processing plant. The Company continues to explore means to supply ore from the project to plants in China and / or elsewhere in the world.