BUSHVELD Minerals outgoing CEO Fortune Mojapelo was on the end of a fiery farewell on Wednesday after one investor labelled his plans to grow the vanadium miner “a disaster”.
“From investor point of view, the performance over past five years and the share over the past four years has been a disaster,” said Mark Ryan of Tower Capital. “Everything promised … has been delayed, not delivered, or has cost more. The company is saddled with debt and can’t expand further,” he added.
“A good, punchy question,” responded Bushveld Minerals chair Michael Kirkwood with no small degree of under-statement. “I don’t think we can reasonably dispute the assumptions in there,” he added before turning over the criticism to Mojapelo.
Mojapelo acknowledged the company’s share performance had been “bad” and that its failure to meet production guidance ought not be tolerated by the market. But he said that some $160m in investment reviving the vanadium facilities had been generated from positive cash flow over three of the five years they had operated.
He also responded to additional questions from Tower Capital regarding the ‘carve-out’ (restructuring) of Bushveld Energy, Mojapelo’s speculative technology play, saying it was born of necessity as Bushveld Minerals primarily attracted mining valuations rather than valuations factoring in blue-sky innovation.
It was not the ideal send-off for Mojapelo, but nor was it unfair given that the firm’s CFO Tanya Chikanza acknowledged that risks lingered over the firm’s ability to continue as a going concern until a restructure in debt was complete.
Bushveld has $65m in debt consisting of a $35m convertible loan note ($45m including interest at maturity in November) and a $30m production financing agreement (PFA).
In terms of negotiations currently underway with the lender, Orion Mine Finance, the convertible note will be restructured with a new $27m, three-year term loan. In addition, it is hoped a new $13m convertible loan can be agreed and the conversion of $4.5m of the existing loan notes into shares at six pence per Bushveld share. There will also be a supplemental PFA effectively working as a royalty on gross revenues.
The upshot is that Bushveld’s hands are tied regarding growth, especially its previous ambition to reach 8,000 tons a year of vanadium product. Kirkwood clearly spelt out that shareholder interests would not be sacrificed for growth with the focus falling on operational delivery. Enter Craig Coltman, a former De Beers Consolidated Mines executive, who will be Bushveld Minerals’ CEO from July.
Hired to replace Mojapelo’s financial skills with technical nous, Coltman declined to comment on what he might do differently at Bushveld. It’s unusual for the outgoing CEO’s replacement to be publicly put before investors before the baton is formally handed over, but Bushveld’s urgent need to address shortcomings is evident.
The company ended the day 15% lower. At three pence per share, the company is at a six year ebb in valuation.
Undaunted, Tower Capital’s Ryan asked for explanations from Mojapelo absent “buzzwords” and “vague promises”. Mojapelo could only point to the “razor sharp” focus that would now be given to the firm’s operational targets.
Vanadium production totalled 3,842 tons in Bushveld’s 2022 financial year which is well short of the 5,000 to 5,400 tons previously forecast. For 2023, Bushveld has guided to between 4,200 to 4,500 tons, a 9% year-on-year increase at the low end of the range, and significantly short of the 8,000 tons a year ambition.
“Bushveld can, if it delivers production at the bottom end of guidance and costs at the top end of guidance, begin to turn the corner in 2023,” said Thomas Martin, an analyst for BNP Paribas in a note last month. But this turns on almost immediate operational improvement which explains Mojapelo’s departure without which the refinance cannot be completed.
Coltman and Bushveld’s board has it all to do.