There are two stories currently playing out in the shares of Bushveld Minerals (BMN), as first-half numbers show. The first is the global vanadium market, where steelmakers’ substitution to niobium, lacklustre enforcement of higher rebar standards in China and opportunistic marginal producers have all contributed to this year’s crash in prices.
Bushveld, which produces a vanadium product called Nitrovan from its Vametco mine in South Africa, continues to believe in the metal’s medium- to long-term fundamentals. The supply of short-term optimism is thinner. In the six months to June, ferrovanadium prices averaged $56.30 (£45.74) per kilogram, 14 per cent down on the same period in 2018. Since the period end, they have since stayed below the $40 mark.
The second story concerns the miner’s operational resilience. While the rise in post-tax earnings was partly down to the reversal of a $5.9m earn-out estimate, lower overheads compensated for a drop in both sales and prices – even after $6.3m-worth of inter-company charges were re-incorporated into the cost base.
Notwithstanding that adjustment, unit cash cost guidance has remained at $18.90 at $19.50 per kilogram, while full-year output is expected to rise by between 11 and 13 per cent, and by a fifth again in 2020. A wage agreement with Vametco’s workers, valid for the next three years, offers another important source of stability.
Analysts at Peel Hunt expect adjusted pre-tax profits of £54.4m and earnings of 2.6p per share this year, rising to £74.3m and 3.6p in 2020.
BUSHVELD MINERALS (BMN) | ||||
ORD PRICE: | 21p | MARKET VALUE: | £235m | |
TOUCH: | 20.5-21.5p | 12-MONTH HIGH: | 50p | LOW: 19.5p |
DIVIDEND YIELD: | NIL | PE RATIO: | 8 | |
NET ASSET VALUE: | 13.8¢ | NET CASH: | $66.1m* |
Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
2018 | 83.7 | 41.5 | 1.6 | nil |
2019 | 78.0 | 44.7 | 1.9 | nil |
% change | -7 | +8 | +22 | - |
Ex-div: | n/a | |||
Payment: | n/a | |||
£1=$1.23. *Excludes lease liabilities of $5.4m |