Almost a year ago I suggested that it would be a good time to consider banking at least some profit on Bushveld Minerals (BMN), but now that the share price has almost halved since then, I believe that the shares are now back in the buy zone. When I last covered the Vanadium producer the shares were trading at around 38p, and anyone who followed my original buy tip at around 2p would have been crazy not to have cashed in some of that profit, especially given the rise in the vanadium price in the lead up to, and subsequent to, that article. Since then ferro vanadium prices have nose-dived – currently trading at around $38/kg on the Chinese market and just $27/kg in Europe, compared to in the $130/kg and $120/kg ranges respectively this time last year. Like most producers in this sector, the future share price is very much a leveraged play on future commodity prices, and the price does seem to have levelled out to some degree in recent months, and I see a good chance of it rising in the near future – even more so if the trade tensions between the US and China start to diminish.
The previous financial results for the company show just how profitable the business can be and how quickly things can turn around on any sort of vanadium price reversal, especially when considering that the market cap stands at just £232 million currently, with a share price of around 21p. The last set of financials, for H1 2019, up until the end of June, showed that the business generated revenue of $78 million and a post-tax profit of $30.8 million, with net free cash flow of $23.3 million. That occurred at an average ferro vanadium price of $56.3/kg, so the subsequent drop in the commodity price will have had an impact in H2 so far and will result in significantly lower revenues, and profit – up until the end of September prices had averaged $48.2/kg. However, the company does still remain on track to meet its guidance of 2.8-2.9 million tonnes for the full year, and at an average unit cash cost of $18.90-$19.50/kg, and it is seeing growth in its output, with Q2 2019 being its best ever quarter.
There have been other developments as well over the past year, including the launch of an electrolyte rental model for industrial scale batteries alongside Californian company, Avalon Battery Innovate, amongst other developments. But of more significance was the maiden mineral resource for its 62.5% owned Brits project, which h gave indicated resources of 28 million tonnes, containing 129,000 tonnes of vanadium oxide and 72,200 tonnes of vanadium, in oxide – plus inferred resources of 41.8 million tonnes, 195,800 tonnes of VO, and 109,700 tonnes of vanadium, respectively. The acquisition of the Vanchem plant, plus the SAJV business and Avanti shares, is also progressing well and looks set to complete in the near future, for a total consideration of $68 million. The company has already paid a deposit of $6.8 million, and as at the end of June had enough cash in the bank to cover the balance of the transaction. The Vanchem business is expected to need capex of $45 million over a five year period and has the potential to expand annual output by 4.2 million tonnes overall. The facility is located close to Bushveld’s Mokopane project, which will cost $20 million to develop. All of this is expected to be funded from a mixture of existing cash, future cash generation, and potentially a debt facility if required.
Overall I think that this company has done amazingly well so far to grow to the size that it has already reached, and there is plenty of further future potential from both its mining and energy operations. A lot will come down to future vanadium prices, but given that China is looking to phase out inferior quality steels, then I see that eventually driving prices higher once again as long as the current trade disputes are resolved and we don’t see any sort of world economic recession. There is also a lot of potential from the energy storage sector, which is still relatively in its infancy currently, but the applications of vanadium in this area could also potentially lead to a big spike in demand. The spot price of vanadium is out of the control of the company, but operationally it continues to do well and ultimately has the potential to grow its total annual output to around 8.4 million tonnes, once expansion work at Vametco and Vanchem are completed over the next few years, and this would see it controlling as much as 10% of the current world supply of the commodity. There is of course still some risk involved, as a prolonged period of low vanadium prices would have a serious impact on future cash flows and Bushveld’s ability to carry out its planned capex and growth strategy.
Based on the current vanadium price and the likelihood, in my opinion, of that being close to the bottom of the down-cycle, I view this as a good time to be buying with a longer term view. Should the share price drop further, and assuming that wasn’t as a result of any factors that would have a serious impact on either future output from the company or vanadium prices, then I would view that as an opportunity to add more shares, as opposed to panic selling like so many PIs seem to do towards the bottom of a cycle – nickel being a good recent example of that. So overall I would view this as a good buy at around 21p and with the potential to return to the recent highs and beyond over the coming years, based on the cash generation that Bushveld would achieve at higher vanadium price levels.
Filed under: Bushveld Minerals, Premier African, PCG, St James's Place, Bidstack, System1 Group
RISK WARNING & DISCLAIMER - FiveFreeShareTips.com tips are provided by independent authors via a common carrier platform and do not represent the opinions of FiveFreeShareTips.com. FiveFreeShareTips.com does not accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at FiveFreeShareTips.com and via emails you receive from [email protected] are for your general information and use and are not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by the tipsters or FiveFreeShareTips.com and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Trading shares involves the risk of loss. The tipsters and FiveFreeShareTips.com shall not be liable for any losses or other damages incurred. The value of investments can go up or down and the past is not necessarily a guide of future performance.
Well actually it will be six. One every week day and one on Sunday, each landing with you at 11 AM sharp.
Unlike other services (which may always have a vested interest) we pride ourselves on our impartiality and cover all small caps including AIM. the Standard List, The Wider Main Market and NEX.
We cover small caps, penny shares, FTSE 350 stocks and blue chips. We look for red hot penny shares, Warren Buffett style value investments with yield and growth stocks. There is no technical analysis in our work just solid fundamental analysis from a team of experts with decades of stockmarket experience.
You will not agree with all we publish but if you are interested in small caps you cannot afford to ignore it either. Yo'll never be charged for the free share tips from Five Free Share Tips and given the star writers involved you know that they will move share prices.
There's no telephone number or postal address required and there is no charge, ever, for your Five Free Share Tips membership. Just free shares tips every day apart from Saturday And each day's share tip will not just be a few thoughts cobbled together but will be detailed analysis from experts.
Our experts do not just earn their living from writing. All own shares. If they own shares in a stock they cover they will declare it and will not sell until after advising a sell to our readers. And why not our tips are so good that why shouldn't our readers put their money where their mouth is?
Don't just take our word for it! Judge us on the calibre of our free share tips and join today to start receiving them from September 1 2017. If you don't like what you get delivered to your inbox unsubscribe and you will never hear from us again. So why not give it a go? Sign Up Now
We've put together a panel of top tipsters, including:
Tom Winnifrith, in his 27th year writing about shares, noted fraudbuster & dubbed "The maverick Tipster"
Chris Bailey, City whizz kid turned financial guru, rated as one of the top 50 commentators on shares on twitter, founder of Financial Orbit
Steve Moore, has worked with Tom Winnifrith for all bar 3 weeks of his working life - a noted commentator on value stocks
Malcolm Stacey, The Grandfather of Share Blogging, the founder of ShareCrazy & a best selling autthor of stockmarket books
Lucian Miers, the Bard of the Boleyn, one of the UK's best known short sellers
Gary Newman, writes about value investing on AIM, speciality is in share tips on oil and mining companies
Nigel Somerville, The Deputy Sheriff of AIM, an expert in forensic analysis a skill used to bust frauds but also to tip true value investments
The team from HotStockRockets, specialising in AIM and small cap shares which will fly on a three month view
Remember to book your place at the UK Investor Show 2018. The UK’s top investment show taking place on Saturday 21 April 2018 at the Queen Elizabeth II Conference Centre in Westminster, London. The show will feature a unique line-up of top speakers including Nigel Wray, tech queen Vin Murria, Dave Lenigas, Mark Slater, Tom Winnifrith, Adam Reynolds, Ed, Croft, Nick Leslau Luke Johnson and Dr Johnny Hon as well as 135 exhibiting small cap companies.
The hot share tips given here are of necessity, general. They cannot relate to the individual circumstances of investors. Anyone considering following the share tips contained here should seek independent advice from a Financial Conduct Authority authorised Stockbroker or Financial Adviser. We cannot be held liable if individuals suffer losses through following share tips contained on this site or emailed out as free share tips. The value of investments can go down as well as up. The past is not necessarily a guide to future performance. Investing in shares can lose you part or all of your capital although the potential returns are theoretically unlimited. The difference between the buy share price and the sell share price for smaller company shares (penny shares) can be significant. Profits from dealing in shares may be liable to tax - the level of tax and bases of relief from tax are subject to change. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency. Some of the shares recommended on this site will be smaller company shares. By their nature such investments can be relatively illiquid and thus hard to trade. And that makes such investments more of a high risk than larger company shares (or 'small caps'/'penny shares'). FiveFreeShareTips.com & its sister site ShareProphets.com defines a smaller company share as any stock traded on AIM or NEX or which has a market capitalisation of less than £300 million.