Founder: Turnaround Talk
One of the early signs of the 2008 Global Financial Crisis was a significant slump in commodities as countries worldwide had to adjust their growth aspirations in line with the prevailing economic conditions.
There are significant concerns that this will be a considerable factor again as the world heads deeper into a tough economic climate. These are ominous portents for countries like South Africa, whose economies depend on mining and commodity demand. There also needs to be strong companies on hand to cater for increased demand when the global economy experiences growth. This is why the news that Bushveld Minerals is undergoing significant disruption is concerning.
Deep trouble
The article points out that Bushveld Minerals shares slumped by double digits on Wednesday, when it announced its long-serving CEO and co-founder Fortune Mojapelo will be stepping down from the key role.
The company is one of only three operating primary vanadium producers globally and owns two of the world’s four operating primary vanadium processing facilities, both in SA.
As CEO for the past 11 years, Mojapelo has led the company through its evolution from an exploration firm to a mining and energy company.
Used in steelmaking, just 0.2% of vanadium in the mix doubles the strength of the final product. Its application in utility-scale storage in the form of Vanadium Redox Flow Batteries positions the metal to play a role in low-carbon economies.
The article adds that the company, which also released its results for the year to end December, reported a jump in revenue to $148 million (~R2.72 billion), up from $106.9 million in the previous year, lifted by higher prices.
Image By: Supplied
The company, however, reported a net loss of $35.4 million, up from a loss of $34.2 million in 2021, while net debt climbed from $68.9 million to $79.5 million.
The News24 article points out that the stock – which is listed on the London Stock Exchange’s Alternative Investment Market (AIM) – hit a six-year low of under 3p on Wednesday. It recovered slightly, but still fell almost 14% to 3.1p.
Executives were taken to task over Bushveld’s longer-term performance in a subsequent investor call.
Debt woes
The article adds that one analyst asked why he should stay invested in the group.
“From an investor point of view, the performance of the company over the past five years, and the share price over the past four years has been a disaster. Everything promised …has either been delayed, not delivered, or cost significantly more. As a result, the company is saddled with debt and unable to expand further,” he said.
“There appears to be no appetite to invest from institutional investors or the directors running the company. So given that, can you provide investors with any short-term reasons why they should remain invested or continue to show faith and hold?”
Mojapelo said, “I have to acknowledge that the share price performance of the company has been bad. I should also acknowledge that in terms of missed guidance, it is something that the market has, and should have, little tolerance for.” He added that this did, however, not reflect the investment case going forward.
The article points out that significant investments had been made in assets, funded by cash generated by the business over the past five years, the group said, and while 2020 and 2021 were loss-making years, the results presented on Wednesday demonstrated a company turning around.
“And we expect that operational improvement to continue growing … especially with a kind of razor-sharp focus on operational performance that we will be seeing going forward,” said Mojapelo.
The article adds that, while Bushveld’s Vametco mine has performed well, its Vanchem processing facility has not yet lived up to expectations, although it is expected to soon step up and start playing its part in the group, he said.
Acknowledging that debt has been a drag on the share price, the restructuring of a loan agreement with Orion Mine Finance is expected to remove the risk of a large cash outflow, which has been putting pressure on Bushveld’s balance sheet and cash position. The new structure will enable the group to repay the debt over a longer time period and in line with its planned internally generated cash flows.
“I think there are enough reasons out there for investors to see some scope for meaningful upside,” Mojapelo said.
Image By: Supplied
CEO’s departure
The article points out that Mojapelo’s exit marks the beginning of a new phase for the company as it progresses work to unbundle its energy assets out from the rest of its business, something which will hopefully unlock some value.
Because Bushveld Minerals is primarily seen as a mining company, spinning off the energy business may mean that that energy-focused investors can invest in the company and support its growth.
As for Mojapelo himself, he still has skin in the game.
“I have a vested interest in making sure Bushveld will succeed. I have shares in the company. So, it’s important to me that the company is successful,” he told News24 in an interview.
The article adds that, stepping into the role of CEO next month is Craig Coltman, who has vast industry experience, including 32 years in operational and commercial roles at De Beers Consolidated Mines, including that of CFO.
Stability is essential
Coltman will hopefully bring some stability to the company at a time when mining is at a turning point in terms of redefining future value and its existence in a world that is increasingly moving towards sustainability and renewable resources as opposed to finite resources.
The next 12 months will be interesting for Bushveld Minerals.
