On 7 November 2019 Bushveld Minerals announced the successful completion of the Vanchem plant acquisition for US$53.5 million.
Vanchem is a primary vanadium-producing facility with a beneficiation plant capable of producing various vanadium oxides, FeV and vanadium chemicals. Vanchem uses the salt roast beneficiation process, similar to the one used at Vametco, and is currently producing circa 80 mtV per month using a single kiln. Following a five year refurbishment and ramp-up schedule, which is estimated to require approximately US$45 million of capital expenditure, Vanchem is expected to reach steady state production of 4,200 mtV per annum utilising all three kilns. The plant consists of the following components:
- A rail siding which was historically used to transport ore to Vanchem
- A milling and concentrator (magnetic separation) facility for the treatment of magnetite;
- A roast / leach configuration with three kilns;
- An ammonium poly-vanadate precipitation plant;
- A de-ammoniation / V2O3 plant;
- V2O5 flake production facilities;
- An electric smelting facility for conversion of V2O3 to FeV;
- An aluminothermic smelting facility, called South African Japan Vanadium Proprietary Limited (“SAJV”), for conversion of V2O5 into FeV; and
- A vanadium chemical plant producing various vanadium chemical products.
Vanchem is located at Ferrobank Industrial Park in Emalahleni Local Municipality, Mpumalanga Province in the Republic of South Africa, it has been operating since the late 1970s. The ferrovanadium facilities are located at the Highveld site and are situated approximately 10 km from the Vanchem plant. The FeV facilities consist of an alumino-thermic smelting facility adjacent to the Vanchem plant’s electric smelting facility.
Vanchem is expected to produce between 960 mtV and 1,100 mtV of vanadium in FY2020.
Rationale for the acquisition
The acquisition, which reinforces Bushveld Minerals’ growth strategy of becoming one of the world’s most significant, lowest-cost and most vertically-integrated companies, offers the following key advantages:
- Increasing the group’s exposure to vanadium, a commodity with compelling fundamentals, namely: robust and growing demand from steel manufacturers and energy storage; a structural supply deficit due to concentrated and constrained primary production; and limited new global vanadium production on the horizon.
- Supporting Bushveld Minerals’ target nameplate capacity of 10,000 mtVp.a. After refurbishment and ramp-up, Vanchem is expected to support steady state production of 4,200 mtVp.a.
- Diversifying the company’s geographical mining and production footprint within South Africa and adding new vanadium products to the portfolio. Vanchem can produce various vanadium oxides, ferrovanadium and vanadium chemicals, complementing Vametco’s existing Nitrovan™ offering. It also adds another processing facility and its three kilns provide optionality and increased availability during planned and unplanned kiln maintenance.
- Expediting the development of Mokopane, which has been identified as a primary source of feedstock, to create a fully integrated business.
- Enhancing the company’s ambitions in the global energy storage and VRFB space by leveraging Vanchem’s existing chemical plant and high purity oxide production capacity in the manufacture of vanadium electrolyte.
Vanchem represents a low-cost addition to Bushveld Minerals’ existing vanadium production capacity, based on the following considerations:
- Collectively, the US$68 million purchase consideration, the US$45 million refurbishment capital and US$20 million capital required for Mokopane represent approximately 40% of the cost of developing Mokopane as a greenfields site, and the timeline will be shorter.
- The total investment is potentially more favourable to Bushveld Minerals than the acquisition of an effective 74% shareholding in Vametco.
- The acquisition will be cash generative and earnings accretive.
- It will also provide significant NPV uplift to Bushveld.
- Vanadium supply-side increase risk will be limited. Vanchem historically produced more than 4,300 mtVp.a. before it was forced into business rescue.
- Step 1: Crushing, milling and magnetic separation to produce a magnetite concentrate with average grades of approximately 1.65% V2O5 in magnetite;
- Step 2: Salt-roasting of concentrate. The concentrate is roasted with sodium salts in a kiln at approximately 1,150oC to form a water-soluble sodium vanadate material;
- Step 3: Leaching and purification involving dissolution of roasted vanadium concentrate in water, purification and precipitation of vanadium through the addition of ammonium sulphate followed by drying and then processing in a reducing environment to produce an AMV (ammonium meta vanadate) product;
- Step 4: The AMV is de-ammoniated and melted to produce V2O5 flakes – a primary product. The AMV is also used in other processes to produce a spectrum of vanadium chemicals
- Step 5: V2O5 is reduced by aluminium in the aluminothermic process in the presence of iron to produce ferrovanadium – a primary product.