Bushveld Minerals Limited – Vanadium Q3 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, has today provided an operational update for the three months to end-September 2018 (“Q3 2018”), in respect of its Vanadium platform which consists of Bushveld Vametco Limited, the Brits Vanadium Project and the Mokopane Project.

Key Highlights

· Consolidation of Vametco ownership, following the acquisition, of Sojitz’s underlying effective 16% interest in Vametco Alloys (Pty) Ltd for US$20 million in September 2018, increasing Bushveld Minerals effective interest to 75%, subsequently reduced to 74% following completion of the sale of 1% to its Black Economic Empowerment shareholders, in line with the requirements of the mining regulations of South Africa.

· Vametco’s production for Q3 2018 was 537 mtV in the form of NitrovanTM from magnetite concentrate (Q3 2017: 669 mtV), a decrease of approximately 14.6% relative to Q2 2018 (Q2 2018: 629 mtV), primarily due to a 16 day unprotected industrial action during which the plant ceased operations.

· As a result of the industrial action and an unplanned seven day kiln maintenance exercise, Vametco’s 2018 production guidance has been reduced downwards from 2,850 mtV to 3,000 mtV to between 2,600 mtV and 2,650 mtV.

· Ferrovanadium price averaged US$85.8/KgV in Q3 2018, an increase of 24% relative to the previous quarter. For the nine months to September 2018 the ferrovanadium price averaged US$72.3/KgV, an increase of 137% relative to the comparable period in 2017.

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

· Ferrovanadium price has continued to strengthen with the Metal Bulletin FeV mid-price averaging US$114/KgV during the month of October 2018.

· The Company continues to progress the operational improvement initiatives to enhance Vametco’s productivity and achieve maximum throughput.

· 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. Assay results are expected by December 2018 with an updated Mineral Resource Estimate to be published in Q1 2019.

· The Company has received all assays results for Phase 1 of its exploration programme at the Brits Project, which has to date shown positive drilling results. Sampling results of Phase 2 drillholes are expected to be received in Q1 2019.

Fortune Mojapelo, CEO of Bushveld Minerals Limited, commented:

“The successful completion of the acquisition of Sojitz’s interest in Vametco has enabled us to accomplish our objective of achieving maximum ownership of the asset. To obtain the 74% ownership, Bushveld’s cash outlay totalled approximately US$48 million which, given the Vametco earnings already reported for the half year, implies a payback on investment of under 12 months.

“With the completion of most of the corporate action aimed at maximising Bushveld’s ownership of Bushveld Vametco, the Company can accordingly now focus on ensuring maximised production output and efficiencies at Vametco.

“The impact of the two week unprotected industrial action, as well as a seven day kiln shutdown due to unplanned maintenance, has resulted in the downward revision of guidance. This underscores the importance of focusing on operational improvement initiatives, production expansion initiatives, and proactive stakeholder engagement with organised labour and local communities. The latter will ensure these stakeholders remain an important part of our growth journey.

“We continue to benefit from a rising vanadium price supported by China’s new high-strength rebar standard which came into effect on 1 November 2018.

“While higher vanadium prices partially mitigated the impact of the production shortfall, with the Company expected to generate healthy cash flows, Bushveld intends to use this opportunity to sustainably maximise production volumes and drive operating costs down. Accordingly, we are pleased to have commenced with Phase 3 of our expansion plan, which will increase capacity at Vametco to 5,000 mtV per annum. Phase 3 will also benefit from advancement of the Brits Vanadium Project, which has yielded encouraging drilling results.

“Our primary focus is to continue expanding our footprint as we execute on our strategy. We are well placed to achieve significant benefits from our high quality assets and further strengthen our competitive position.”

Bushveld Vametco Limited

Production

· NitrovanTM production of 537 mtV for Q3 2018, decreased by approximately 14.6% relative to Q2 2018 (Q2 2018: 629 mtV). The lower volumes were mostly due to production interruptions as a result of a four day protest by members of the local community in July 2018 and a 16 day unprotected industrial action in September 2018.

Ø The industrial action was resolved on 21 September 2018, when the Company and the Association of Mineworkers and Construction Union announced that a resolution was reached through the implementation of a framework for a new Employee Share Options Scheme Structure.

Ø The Company continues to execute on its operational improvement initiative, to enhance Vametco’s productivity and achieve maximum throughput.

· Vametco’s production cost of ZAR298/KgV for Q3 2018, increased by approximately 11.0% relative to Q2 2018, as a result of lower volumes during the quarter due to the production interruptions.

· As a result of the unprotected industrial action in September 2018 and an unplanned seven day kiln maintenance exercise Vametco’s production guidance for the year has been revised downwards from 2,850 mtV to 3,000 mtV to between 2,600 and 2,650 mtV. The reduced volumes and higher inflation have therefore resulted in a unit cost guidance revision to between ZAR 250/KgV and ZAR255/KgV.

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

Description	Unit	Q3 CY18	9mths CY18	Q3 CY18 vs Q2 CY18	Q3 CY18 vs Q3 CY17	Q3 YTD CY18 vs Q3 YTD CY17
Vanadium (Nitrovan^®plus FeV) produced	mtV³	537	1,897	-14.6%	-19.7%	-10.1%
Vanadium sold	mtV³	584	1,987	-18.1%	-21.5%	-4.7%
Average MB vanadium price²	US$/KgV	85.8	72.3	+24.1%	+119.8%	+137.3%
USD/ZAR average exchange rate⁴	US$:ZAR	14.1	12.9	+11.4%	+7.8%	-2.1%
Production costs⁵	ZAR/KgV	297.74	262.08	+11.0%	+25.1%	+22.4%

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.

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.

Multi-phased expansion project

· In 2017, Vametco commenced a three-phased expansion project with the aim of increasing annualised production capacity to more than 5,000 mtV. As part of the operational improvement initiative, designed to enhance Vametco’s productivity, the Company is reviewing the timing and required investment to expand production capacity to 5,000 mtV.

· Completion of the expansion project will enhance Vametco’s existing competitive position in a structurally challenged market. In addition, the presence of an integrated platform will allow the development of downstream operations whilst achieving product diversification.

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 now be completed by end of Q4 2018 and deposition commence during Q1 2019.

· 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

· 13 drillholes have been sampled and submitted for assay. All assay results are expected to be received by December 2018, and an updated Mineral Resource Estimate and Mine Works Programme are expected once all Quality Assurance Quality Control procedures have been completed.

Brits Vanadium Project

The Company has completed the second phase of the exploration programme at Brits. The aim of the exploration programme is to delineate a maiden Mineral Resource Estimate at Brits. 26 drillholes, totalling 2,818.43 metres, have been completed over the two phases. Table 2 summarises the results for the first phase of the exploration programme, the results for the second phase will be provided in Q1 2019.

Table 2: 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.