Vanchem

Vanchem

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. In May 2019, Bushveld Minerals announced the conditional acquisition of Vanchem.

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:

• 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, processing a combination of ore feed from the Mapochs vanadium mine (“Mapochs”) and slag from Highveld. Highveld continued to supply ore to Vanchem from its Mapochs mine in Limpopo until it closed in 2015. The closure of the mine saw Vanchem, without guaranteed ore supply from Mapochs, which eventually resulted in it going into Business Rescue in November 2015. The Vanchem Plant was put into care and maintenance later that year. The plant was partially re-started in the third quarter of 2018, after Vanchem was able to procure magnetite ore from third parties.

SAJV, is located at the Highveld site and is situated approximately 10 km from the Vanchem Plant. SAJV, comprises of an alumino-thermic smelting facility which is adjacent to the Vanchem Plant electric smelting facility.

Vanchem has secured sufficient ore supply from third parties to support current levels of production, until Mokopane’s development has been completed. The Company retains the optionality to supply magnetite concentrates from Vametco to the Vanchem Business. Upon receipt of the mining right, Mokopane will become a primary source of feedstock to the Vanchem Business as a result of its large mineral reserve. The Mokopane-Vanchem model will represent a fully integrated business, in line with the Company’s strategy for Vametco.

Acquisition Rationale 

The acquisition reinforces the Bushveld Minerals’ growth strategy to become one of the world’s most significant, lowest-cost and most vertically integrated companies because it:

• Increases exposure to vanadium, a commodity with compelling fundamentals anchored by demand from the steel sector.
• Supports Bushveld Minerals’ target production nameplate capacity of 10,000 mtVp.a.
• Diversifies the Company’s geographical mining and production footprint within South Africa and adds new vanadium products into our offering.
• Expedites the development of Mokopane.
• Identified as a primary source of feedstock.
• Creating a fully integrated business.
• Enhances 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.

The acquisition represents a low-cost increase in Bushveld Minerals’ existing vanadium production capacity.

• Collectively, the US$68 million consideration, the US$45 million refurbishment capital expenditure and US$20 million capital spend for Mokopane represent approximately 40% of the cost of the greenfield development of Mokopane and on a shorter timeline.
• Total investment is potentially on more favourable terms to Bushveld Minerals than the acquisition of an effective 74% shareholding in Vametco.
• The acquisition will be cash generative and earnings accretive.
• The acquisition will also provide significant NPV uplift to Bushveld.
• Vanadium supply-side increased risk will be limited: Vanchem historically produced more than 4,300 mtVp.a. before it was forced into Business Rescue. The acquisition will generate multiple synergies between Bushveld Minerals’ assets.
• Bushveld Minerals, with a complementary portfolio of high-grade vanadium deposits, is the natural buyer for this low-cost, scalable and cash generating asset.
• The acquisition enables operational and business case synergies between Vametco, Vanchem and Mokopane.
• A rail siding at Vanchem, linking the plant through the national rail network to the various Bushveld Minerals and other deposits, supports the supply of ore to Vanchem.
• Surplus concentrate production capacity at Vametco could be shipped to Vanchem as kiln feed, providing the opportunity to accelerate the development of the Brits deposit.
• Optimal product diversification as Vanchem can produce various vanadium oxides, FeV and vanadium chemicals.
• Mokopane’s development will allow the Company to sell significant vanadiferous magnetite ore to primary or secondary producers worldwide.
• Vanchem’s three-kiln configuration and multiple downstream plant flexibility allows it to scale production upward or downward without significantly increasing unit production costs.
• Annual Vametco kiln shutdowns can now be optimally managed group-wide.
• Vanchem has significant surplus FeV smelting capacity that will enable surplus MVO at Vametco to be converted to FeV at Vanchem.
• Provides the Group with critical mass in the world-wide marketing of vanadium (with significant product diversification).
• Cross-pollination of in-depth vanadium expertise and experience.