Bushveld Minerals Annual Report 2019

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FY2019 Annual Report · Bushveld Minerals

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Annual Report and
Financial Results
December 2019

Steadily executing
our strategy

Building a scalable, low cost,
vertically-integrated
primary vanadium
producer

Bushveld Minerals Annual Report
and Financial Results December 2019

Steadily executing
our strategy

Contents

Business Overview

02
03
04
06
10
18
21
26
30
34
40
48
50
54
60

Who We Are
Our Core Business
Investment Case
Chairman’s Statement
Chief Executive Officer’s Review
Business Model
Vanadium Market Overview
Energy Storage Overview
Our Strategy
Finance Director’s Statement
Details of Operating Assets and Operational Review
Other Non-core Interests
Principal Risks
Sustainability: Value Beyond Compliance
Our People

Governance

64
71
74
76
79
80
94
97

Corporate Governance Report
Report of the Audit Committee
Board of Directors
Executive Management Team
Technical Advisors
Remuneration Report
Directors’ Report
Statement of Directors’ Responsibilities

Financial Statements

98
102

103
104
105
106

Independent Auditor’s Report
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements

This report is also available at
www.bushveldminerals.com/financial-reports

Throughout this publication, the Boards are referred to collectively as the Board.
In this Annual Report, the terms ‘Bushveld Minerals Group’, ‘Bushveld’, ‘Company’,
‘Group’, ‘we’, ‘us’, ‘our’ and ‘ourselves’ are used to refer to Bushveld Minerals
Limited. The terms ‘Vametco Mine and Processing Plant’, ‘Vametco Vanadium
mine’ and ‘Vametco’ are used to refer to ‘ Bushveld Vametco Alloys (Proprietary)
Limited’. The terms ‘Vanchem plant’ and ‘Vanchem’ are used to refer to ‘Bushveld
Vanchem Proprietary Limited’.

Cross-references refer to sections of the Annual Report, unless stated otherwise.

146

Supplementary Information

146
153
154
156
160

Mineral Resources and Reserves
Acronyms
Glossary
Notice of Annual General Meeting
Company Information

Financial StatementsSupplementary InformationGovernanceBusiness Overview02

Who We Are

Bushveld Minerals | Annual Report and Financial Results 2019

Bushveld Minerals is a low-cost,
vertically-integrated primary
vanadium producer.

It is one of only three operating primary vanadium producers, owning two
of the world’s four operating primary vanadium processing facilities.

In 2019, we produced 2,931 mtV, which represents approximately
three per cent of the global vanadium market. Our target is to
organically grow production to more than 8,400 mtVp.a. in the
medium term. Bushveld Minerals owns a diversiﬁed vanadium
product portfolio serving the needs of the steel, energy and
chemical sectors.

Bushveld Minerals participates in the entire vanadium value chain
through its two main pillars: Bushveld Vanadium, which mines
and processes vanadium; and Bushveld Energy, an energy storage
component manufacturer and project developer, focused on
vanadium-based energy storage systems called Vanadium Redox
Flow Batteries (‘VRFBs’).

Our vision

Bushveld Minerals’ vision is to become one of the world’s most significant, lowest-cost, vertically-integrated primary vanadium
producers with a diversified vanadium product portfolio. We intend to gain recognition for our operating efficiency and the value
we create for all our stakeholders.

Our mission

Bushveld Minerals is committed to generating value in a safe and sustainable way for all of our stakeholders throughout the
commodity cycle.

Our strategy

Bushveld Minerals’ strategy is:

– To build a sustainable, cash-generating, low-cost production platform, comprising:

a) high-grade, opencast and low-cost primary vanadium mines; and
b) refurbished brownfield processing facilities, with a flexible and scalable low-cost production capability and a diversified

vanadium product portfolio.

– To leverage our large, low-cost production platform and build a leading downstream vanadium-based energy storage
platform, which will have a pivotal role across the VRFB value chain as a supplier of electrolyte, a project developer and
a VRFB technology champion.

Our Core Business

KEY

Main Road

Main Road
KEY
Railway

Railway
Main Road

Railway

NORTHERN
LIMB

NORTHERN
LIMB
Mokopane

Mokopane
4

Mokopane

EASTERN
LIMB

KEY

Main Road

Railway

Bushveld Vanadium’s core assets

1 Vametco – Integrated mine
and processing facility

NORTHERN
LIMB

2 Brits resource

Mokopane

3 Vanchem – Processing facility

4 Mokopane project

EASTERN
LIMB

WESTERN
LIMB

Brits

E N E R G Y

Rustenburg

Vanchem

Middelburg

Kilometres

Pretoria

Vametco
Bushveld Energy, launched in 2016, is focused on developing and
promoting the role of vanadium in the growing global energy storage
market through the application of Vanadium Redox Flow Batteries
(‘VRFBs’). Bushveld Energy brings the energy storage value chain
to South Africa by leveraging the Company’s South African-mined
and beneficiated vanadium.

Johannesburg

Witbank

Our business model embraces a number of activities along the
VRFB value chain, including: electrolyte manufacturing, investment in
VRFB manufacturing, battery deployment and project development.

WESTERN
LIMB

Brits

Rustenburg

Brits

2
Brits
11

Brits
11
2

Brits

Vanchem

Rustenburg

60
Kilometres

Kilometres

Brits
Vametco

Vametco

Pretoria

Vanchem

Vametco

Pretoria
Johannesburg

Johannesburg

Middelburg
Witbank

Witbank

Middelburg

Kilometres

Johannesburg

The Company’s assets are located in South Africa, which hosts
the largest high-grade primary vanadium deposits in the world.

The Vametco mine, Brits resource and Mokopane project comprise
a total JORC-compliant resource base of at least 550 Mt (100 per cent
basis), including 76 Mt (100 per cent basis) of JORC-compliant
reserves, with some of the highest primary grades in the world.

Through Vametco and Vanchem, Bushveld Minerals produces
Nitrovan, ferrovanadium, vanadium oxides and vanadium chemicals,
which deliver a diversified revenue stream from the steel, chemicals
and energy storage markets.

Collectively, the Vametco and Vanchem plants provide Bushveld
with the potential for a flexible and scalable low-cost production
platform, which will enable us to maintain a competitive position
in the vanadium market.

Financial StatementsSupplementary InformationGovernanceBusiness Overview04

Bushveld Minerals | Annual Report and Financial Results 2019

Investment Case
Our key strengths

Compelling commodity
with attractive
fundamentals
– Vanadium demand is underpinned by its
use in steel, which is expected to grow at
a compound annual growth rate (‘CAGR’)
of 2.7 per cent through 20291;

– Vanadium Redox Flow Batteries (‘VRFBs’)

are expected to increase vanadium
demand by a CAGR of six per cent
per year by 20272;

– Supply is concentrated and constrained

and there is limited new supply expected
from greenfield projects given the higher
barriers to entry;

– Medium to long-term market

fundamentals remain attractive, and
existing primary producers such as
Bushveld Minerals are best positioned
to deliver new supply.

Quality
vanadium assets

– Bushveld Minerals’ primary vanadium
resources offer significant growth
potential. Our ore bodies comprise large,
high-grade opencast deposits, with
grades of 1.6 – 2.0 per cent V2O5
in-magnetite, which are among the
highest in the world;

– The Company’s 550 Mt (100 per cent

basis) combined resource is one of the
largest in the world and is complemented
by low-cost, scalable processing capacity;

– Bushveld Minerals owns two of the

world’s four operating primary vanadium
processing facilities and has capacity to
scale up production significantly, increasing
its share of the vanadium market.

Diverse
product offering

– Through Vametco and Vanchem,

Bushveld Minerals produces Nitrovan,
ferrovanadium, vanadium oxides and
vanadium chemicals, which deliver a
diversified revenue stream from the steel,
chemicals and energy storage markets.

Leading position in
VRFB value chain
– Bushveld Minerals, through its subsidiary

Bushveld Energy, focuses on VRFB
technology within the stationary storage
market. The energy storage market
is expected to grow to US$50 billion
by 20272.

Leadership
team

– Bushveld Minerals’ experienced

leadership team provides a pool of skills
and depth of experience that will enable
it to achieve its targets;

– The team has the necessary vanadium
mining and processing experience to
ensure targets are achieved;

– The management team has a proven

track record of value-creating
transactions that have generated strong
returns for shareholders;

– Board composition is constantly reviewed
to ensure strong corporate governance.

Vertical
integration
– Bushveld Minerals’ vertical

integration strategy allows it to
mine, process and manufacture
vanadium-based products in a
single value chain and provides
flexibility to maximise sales,
depending on product
demand dynamics;
– We are leveraging our low-cost scalable

production base to build a leading
downstream vanadium-based energy
storage platform, to enable us to play
a key role across the VRFB value chain;
– Vertical integration is key, not only for
strengthening the vanadium demand
profile from energy storage, but also
for unlocking significant economic
opportunities for the Company through
a single value chain;

– The Company’s vertical integration
strategy will provide a natural hedge
against volatility in the vanadium price,
as the Group can supply the steel,
chemicals and energy storage markets
to maintain its solid position throughout
the commodity cycle.

Sustainability – value
beyond compliance

– Bushveld Minerals is dedicated to

maintaining sustainable mining and
processing practices across all of our
operations and projects. This includes
ensuring our employees enjoy a healthy
and safe working environment, that we
operate in an environmentally and socially
responsible manner, and that we add
value to all stakeholders with whom
we work;

– The Company actively promotes the
principles of the circular economy,
developing the technical and commercial
parameters to ensure that vanadium
contained in VRFBs is re-used. VRFBs
are one of the key solutions to integrate
renewable energy globally and accelerate
the rate of the energy transition.

Governance

– Bushveld Minerals is committed to high
standards of corporate governance and
applies the Quoted Companies Alliance
Corporate Governance Code;

– The Company continuously reviews

its governance policies and is committed
to improving its practices over time.

Shareholder
Returns
– Bushveld Minerals is committed

to delivering attractive returns to its
shareholders. We apply a consistent
and disciplined approach towards
capital allocation to manage the
Group’s growth initiatives.

1 Sources: Roskill, Vanadium Outlook to 2029.
2 Source: Navigant Research.

Financial StatementsSupplementary InformationGovernanceBusiness Overview

Chairman’s Statement
Ian Watson

Bushveld Minerals | Annual Report and Financial Results 2019

Building an industry-leading business

Dear Stakeholders,
It is my great pleasure to report on the
2019 financial year, which was another
year of positive developments and growth
for Bushveld Minerals.

2019 was a transformational year, in which
the Company significantly progressed the
business development activities across our
upstream and downstream platforms. It saw
the completion of a landmark transaction,
the successful acquisition of the Vanchem
processing facility, which was a testament
to the strength of our management team.

Having successfully acquired Vametco and
Vanchem, Bushveld Minerals now owns two
of the three primary vanadium processing
facilities in South Africa and two of the four
operating primary processing facilities in
the world, setting the Company well on
its way to achieve its target of being one
of the most significant, low-cost primary
vanadium producers.

Although the backdrop to our operations over
the past year was in many ways challenging,
with continued slow growth in the South
African economy and uncertainty over the
sustainability of Eskom, the country’s power
utility, Bushveld was able to advance many of
its long-term ambitions. As a truly South African
corporate citizen, we believe our strategy –
to utilise and beneficiate the country’s natural
resources, grow our operations, create jobs
and assist with alternative energy solutions
– contributes towards addressing our
country’s complex problems.

Bushveld Minerals plans to develop its
downstream operations beyond production
of end-use vanadium products, to become
a key player across the energy storage value
chain. As we have repeatedly stated, the
energy storage market presents a sizeable
commercial opportunity for our Company.
Our integrated strategy means we will not
only benefit from the uptick in demand
arising from this opportunity, but it will also
allow us to participate meaningfully in the
downstream sector.

The VRFB Investment Platform that we
announced during the year is another
sign of our ambitions in energy, allowing
us to partner with VRFB Original Equipment
Manufacturers (‘OEMs’). Through this
platform, we have acquired interests in
VRFB OEM Invinity Energy Systems plc, and,
as part of a consortium, in Enerox GmbH.

We were also encouraged by the intentions
expressed by Minister of Minerals and Energy,
Gwede Mantashe, at the February 2020
Investing in Africa Mining Indaba, and by
President Cyril Ramaphosa in his State of the
Nation Address, to stimulate self-generation
by industry and municipalities. This is good
news for us as a mining and processing
company, positive for our business as an
energy company, and promising for the
country at large.

Often a review of the financial year-end
such as this one does not coincide with
finality of certain events in a company’s
lifecycle. Bushveld’s achievements in not
only initiating, but also closing, a number
of growth opportunities in 2019 (most
notably the acquisition of Vanchem)
across its platforms put us on a very
strong footing from which to tackle 2020.

The safety and wellbeing of our employees
and host communities is a priority for the
Group. We are pleased to announce another
fatality-free year and an improvement in
Vametco’s Total Reportable Injury Frequency
rate. The sudden outbreak of the Covid-19
pandemic in 2020 has temporarily delayed
our progress, along with worldwide
economic activity and trade. Bushveld was
required to put its operations on care and
maintenance for a period of time in order
to support the South African government’s
containment measures. In response to the
onset of the Covid-19 virus, we took a
number of measures to mitigate the risk
of spreading infection and have followed
the advice from health authorities in South
Africa. Further details on the measures
implemented by the Company in response
to the Covid-19 pandemic can be found
in the Principal Risks section of the report.

“

2019 was a transformational
year, in which the Company
significantly progressed the
business development activities
across our upstream and
downstream platforms. It saw
the completion of a landmark
transaction, the successful
acquisition of the Vanchem
processing facility, which was
a testament to the strength
of our management team.”

Financial StatementsSupplementary InformationGovernanceBusiness Overview08

Chairman’s Statement continued

Bushveld Minerals | Annual Report and Financial Results 2019

“

We will work closely with the government and all
of our stakeholders to manage the Covid-19 crisis
and ensure business continuity while complying
with applicable regulations and ensuring the safety
of our staff and communities in which we operate.”

As the near-term impact of Covid-19 and
operating conditions remains uncertain, the
Group has implemented cash preservation
measures, as well as reviewed and prioritised
its capital investment across the portfolio.
We are pleased that both Vametco and
Vanchem have now resumed operating at
pre-Covid-19 levels. Despite the Covid-19
outbreak we remain confident that the
fundamentals of the vanadium market
remain robust.

During the year, we were able to attract
several managers throughout the business.
Bertina Symonds joined as General Manager
of Vametco and Tanya Chikanza was
appointed as Finance Director of Bushveld
Minerals. They have already proved to be
valuable additions to the team. I would also
like to thank the outgoing Finance Director,
Geoff Sproule, for his contribution over the
years. We wish him all the best for the future.

After year-end, we were able to strengthen
our Board’s capability to govern and manage
risk within Bushveld Minerals by appointing
Dolly Mokgatle as an Independent Non-
Executive Director. Dolly is an established

business leader who has held various
significant leadership positions within several
of South Africa’s state-owned enterprises,
as well as within the private sector. With
her leadership experience in state-owned
enterprises, she has accumulated extensive
commercial and policy-making
understanding in the energy sector.

Looking ahead to the remainder of 2020,
it is difficult to predict the full impact of
Covid-19, whose first epicentre was China
before spreading across the world, upending
lives, disrupting economies and creating
substantial market volatility.

We will continue to monitor the situation
carefully and adjust our plans appropriately.
We will work closely with the government
and all our stakeholders to manage the
Covid-19 crisis and ensure business
continuity while complying with applicable
regulations and ensuring the safety of our
staff and communities in which we operate.

The Company remains committed to
the capital allocation policy which was
developed in 2018 and has created discipline

in how we deploy capital, while creating
long-term shareholder value. The Board
approved a dividend policy based on a free
cash flow pay-out ratio, reflecting Bushveld
Minerals’ commitment to return cash
to shareholders in a sustainable manner
while prioritising its stated growth strategy.
The Board is not recommending a dividend
for the year ended 31 December 2019.

After another year of sustainable growth
at both an operational and corporate level,
I would like to thank Fortune and the entire
Bushveld team for their efforts. They have
achieved continued operational strength
at Vametco while identifying and seizing
on opportunities thrown up by prevailing
market conditions.

We thank all our stakeholders for their
continued support.

Ian Watson
Independent Non-Executive Chairman
23 June 2020

Financial StatementsSupplementary InformationGovernanceBusiness Overview10

Chief Executive Officer’s Review
Fortune Mojapelo

Bushveld Minerals | Annual Report and Financial Results 2019

Creating value with disciplined
capital deployment

I am delighted to present the 2019 annual
report, a year in which we were able to
maintain a safe working environment for
our employees, while our focus on control
of costs allowed us to continue to generating
profits, despite a significant softening of the
vanadium price.

Once again, we achieved a year with no
fatalities. We had a single lost-time injury
at Vametco, which also recorded an
improvement of 19 per cent year-on-year
in its Total Injury Frequency Rate. This
metric will continue to be a key focus
for management as we pursue our goal
of zero harm across all our operations.

There were no new cases of occupational
health diseases at Vametco in 2019. Since we
assumed control of Vanchem in November
2019, there were no fatalities, lost-time injuries
or new occupational health diseases reported.

We have instilled a work culture based on
behavioural management that views safety and
health as of paramount importance. This was
achieved through various safety campaigns
implemented in 2019 and this ethos has shaped
our response as we deal with the challenges
presented by Covid-19 in 2020, which are
discussed in more detail below.

After safety, another key focus area for
the management team is keeping costs
at the operating level as low as possible on a
sustainable basis. Achieving this goal ensures
the Company’s ability to generate profits
through the commodity cycle, something
particularly important for a commodity with
the volatility of vanadium. It also ensures that
the best possible returns are generated for
stakeholders during periods of higher prices,

that supply to customers is guaranteed
throughout the cycle and the team can seize
opportunities in different price environments.

Redox Flow Battery (‘VRFB’) companies that
have well-established intellectual capital and
an existing platform of installed capacity.

We continue to achieve this primary goal
at our flagship Vametco operation, a tier-one
vanadium mining asset. Vametco remains
among one of the lowest-cost mines in the
vanadium sector, providing a world-class asset
at the core of our business and giving us unique
advantages. In the 2020 financial year we will
continue to investigate every opportunity to
lower our cost base even further.

During the course of the year, the Group
secured ZAR375 million in debt facilities from
Nedbank Limited, comprised of a ZAR125
million in revolving credit facility (“RCF”)
and a ZAR250 million term loan, through
its subsidiary Bushveld Vametco Proprietary
Limited. This is testament to the Group’s
financial strength. The facilities have
subsequently been fully drawn down to
provide balance sheet flexibility to Vametco
and the wider Group. We had a Group
unaudited gross cash and cash equivalent
position at 31 March 2020 of US$34.4 million,
which includes the ZAR375 million in
debt facilities.

Our strong industry position and improved
liquidity positioned us well to take advantage
of several investment opportunities during
2019 as we continued on our strategic path
to grow into a significant, low-cost, vertically-
integrated vanadium business.

The acquisition of Vanchem, a brownfield
primary vanadium processing plant with
a broad range of vanadium products,
gives the Company the platform to grow its
production base by almost three-fold over
the next five years, to become one of the
largest primary vanadium producers in the
world. The acquisition has many advantages
in addition to the significant greater
processing capacity for the Group, including
flexibility to scale up based on market
demand, a diversified product range and
the opportunity to unlock our Mokopane
resource much sooner and at a fraction
of the capital cost envisaged in the 2016
pre-feasibility study (“PFS”).

For the energy part of the business, we
announced our plans to partner and invest
in VRFB Original Equipment Manufacturers
(‘OEMs’) through a VRFB Investment Platform
(‘VIP’). This is a key part of Bushveld’s strategy
for two key reasons. Firstly, it will help to
accelerate VRFB use, which will increase
demand for vanadium. Secondly, it has the
potential to provide a natural hedge for the
Company against vanadium price volatility.
Our downstream and upstream targets
will grow the business and generate value
for shareholders.

The investments in our upstream and
downstream parts of the business were
made by adhering to our capital allocation
framework while remaining conscious of the
volatile commodity price environment. This
framework supports better decision-making
and growing long-term shareholder value.

“

In 2019, we strengthened our
current and future production
capacity with the acquisition of
Vanchem and accelerated our
growth in the energy storage
space with several strategic
investments in Vanadium
Redox Flow Battery (‘VRFB’)
companies that have well-
established intellectual capital
and an existing platform
of installed capacity.”

Financial StatementsSupplementary InformationGovernanceBusiness Overview12

Bushveld Minerals | Annual Report and Financial Results 2019

Chief Executive Officer’s Review continued

“

The acquisition of Vanchem, a brownfield primary vanadium
processing plant with a broad range of vanadium products, gives
the Company the platform to grow its production base by almost
three-fold over the next five years, to become one of the largest
primary vanadium producers in the world. The acquisition has
many advantages in addition to the significant greater processing
capacity for the Group, including flexibility to scale up based on
market demand, a diversified product range and the opportunity
to unlock our Mokopane resource much sooner and at a fraction of
the capital cost envisaged in the 2016 pre-feasibility study (“PFS”).”

Detailed review of operations
Bushveld Vanadium
Vametco
Vametco improved its operating performance
during the course of 2019 as we implemented
the initiatives identified as part of the
Transformation Programme diagnostic review,
conducted in 2018. The Transformation
Programme was designed to ensure
that we maximise production throughput
and minimise costs on the back of the
improvements implemented by our motivated
and engaged workforce. Since Vametco is
the Group’s primary earnings generator and
thus engine for growth, it is imperative that
it operates to its full potential.

For the full year 2019, Vametco achieved
record annual production of 2,833 mtV (100
per cent basis) in the form of Nitrovan from
magnetite feed only, meeting 2019 guidance
of 2,800 to 2,900 mtV. This is an 11 per cent
increase over 2018’s output of 2,560 mtV.

Vametco beat 2019 production cash cost
guidance of US$18.90/kgV to US$19.50/kgV,
achieving a 2019 production cash cost of
US$18.11/kgV. This is a five per cent reduction
compared with 2018, when costs were
US$19.11/kgV. The performance was achieved
through higher production volumes, our
cost reduction programme and a weaker
ZAR: USD relative to 2018, which was offset
by higher inflation.

During the fourth quarter of 2019, when Eskom
implemented industrial power rationing,
Vametco did not experience any periods of
total power loss. Instead Eskom implemented
load curtailment, which required maintaining

total daily power consumption to 10-12 MW
between the hours of 8am and 6pm. As a
result, Vametco’s operations were not affected
by these periods of load curtailment and there
was no impact on plant performance.

Vametco’s management places a high priority
on maintaining strong relationships with
Eskom’s regional management and customer
relations, which has helped us to take proactive
steps to reduce any impact of curtailed power
supply. The Company has also been looking
at ways to de-risk its power requirements
through its Bushveld Energy subsidiary, which
commenced a procurement process to install
a solar plus energy storage ‘mini-grid’. This
project will use a VRFB and has the capacity
to be expanded in the future to reduce
dependency on the electrical power grid.

Owing to its strong production numbers,
Vametco generated an EBITDA of
US$42.8 million for 2019, despite a
34 per cent reduction in the average
vanadium price received.

In 2020, we will commence the PFS for Phase
3 of the expansion for Vametco to achieve
a steady state production run-rate of 4,200
mtVp.a. by 2025. The preliminary capital
expenditure for Phase 3 is estimated at
approximately ZAR430 million (circa US$26
million), with most of the cost being Rand-
denominated. The capital expenditure and
production profile will be finalised after
feasibility studies are concluded. These
estimates are subject to ongoing review
in the context of the Covid-19 pandemic
implications. The Company will, over the
period, prioritise spend depending on
market conditions.

Vanchem
In November 2019, we were pleased to
announce the closing of the transformative
acquisition of Vanchem at a fair value
consideration of US$55.8 million1, down from
the initially proposed sum of US$68 million.
Vanchem is a primary vanadium producing
facility with a beneficiation plant producing
vanadium pentoxide, ferrovanadium,
vanadium chemicals and it is capable of
producing vanadium trioxide. The plant uses
the salt roast beneficiation process, which
is similar to the production process used
at Vametco.

This highly strategic transaction combines
our existing portfolio of high-grade, primary
vanadium resources, including the Mokopane
greenfield deposit, with an established
production facility.

Vanchem not only brings immediate scalable
processing capacity, but on completion of
the refurbishment programme, its three-kiln
configuration will add important flexibility
to the Company’s production throughputs
without compromising its cost efficiencies.
The vanadium chemicals and high purity
oxide capabilities will be particularly key
as the Company grows its exposure to the
emerging stationary energy storage industry
through VRFBs.

Post year-end, the Company completed
a preliminary desktop scoping study for
a three-phase refurbishment programme
to achieve a production run-rate in excess of
4,200 mtVp.a. by 2025 through the three-kiln
configuration at Vanchem. The total capital
expenditure for the refurbishment programme
is estimated at approximately ZAR750 million

1 Refer to Note 8 for details on the fair value

purchase price.

(circa US$45 million), with the majority of
the amount being Rand-denominated. The
first phase focuses on critical refurbishment
and regulatory capital expenditure and it is
expected to require a capital expenditure
of ZAR234 million (circa US$14 million). This
phase will be carried out in 2020 and 2021
and production is estimated at approximately
1,100 mtVp.a. The second phase will increase
production to 3,100 mtVp.a. after ramp-up,
and it is expected to require capital expenditure
of ZAR355 million (circa US$21 million). It will
be conducted in 2021 and 2022. The third
phase will raise production to more than
4,200 mtVp.a. after ramp-up. It is expected to
require a capital expenditure of ZAR171 million
(circa US$10 million) and be carried out in 2023
and 2024. The capital expenditure and
production plan are dependent on more
definitive feasibility study work. These estimates
are dependent upon the ongoing review in
the context of the impact of Covid-19 on our
business. The Company will prioritise spend
depending on market conditions.

As part of the first phase, the Group has
allocated a total of approximately ZAR85
million (circa US$5 million) as critical capital
spend in 2020 to enable Vanchem to
continue to operate sustainably at current
production levels of approximately 1,000
mtV. Most of the spending will be incurred
during the second half of 2020.

With the acquisition of Vanchem, Bushveld
Minerals is on a clear path to enhance
its competitive position in the vanadium
market over the coming years.

Mokopane
Mokopane is a key part of Bushveld’s
vanadium strategy. The project comprises
one of the world’s largest primary vanadium

resources, with high in-whole rock grades
of vanadium oxide. On 29 January 2020, the
Department of Mineral Resources and Energy
executed a 30-year mining right, giving the
Company legal permission to proceed with
physical mining activities.

The granting of a mining right was a significant
milestone in the development of the project.
It will support Bushveld’s plans for Mokopane
to become a primary supplier to Vanchem.
The total capital expenditure for the
Mokopane mine, including mine development
and the beneficiation plant (crushing,
screening and dry magnetic separation) and
associated surface infrastructure, is estimated
at ZAR370 million (circa US$22 million).

The Company retains the option of developing
Mokopane into a standalone integrated mine
and processing plant, producing 5,300 mtVp.a.
of greater than 99 per cent purity V2O5 product.

Brits
Post year-end, we published a Maiden
Resource Statement and JORC-compliant
Competent Person’s Report for our Brits
project, showing an aggregate Inferred and
Indicated Mineral Resource distributed across
the three seams (the Lower, Intermediate, and
Upper Seams) of 66.8 Mt at an average grade
of 1.6 per cent V2O5 in-magnetite, which is
among the highest grades in the world.

Brits provides the optionality for additional ore
feed for the Vametco plant and, if required,
concentrate feed for the Vanchem plant.

Bushveld Energy
In 2019, Bushveld Energy made significant
progress across all its key areas of focus. We
advanced the development of our electrolyte
production facility, deployed our electrolyte
rental model, advanced toward energy
storage mandates and launched the VIP
as part of our strategy of developing
partnerships with VRFB companies.

During the year, the Company unveiled
its strategy for partnering with Original
Equipment Manufacturers (“OEMs”) of VRFB
technology to supply vanadium electrolyte.
Furthermore, through the VIP, minority
investments will be made into VRFB
OEMs with attractive upside potential. We
have already announced two transactions.
The first was to fund a US$5 million
convertible loan, which supported the
merger of Canada-based Avalon Battery
Corporation (“Avalon”) with UK-based and
AIM-listed redT energy plc (“redT”) in April
2020. The enlarged group subsequently
changed its name to Invinity Energy Systems
plc (“Invinity”), in which our Company now
holds an 8.71 per cent interest. The second
transaction was the proposed purchase, as
part of an investment consortium, of Enerox
GmbH (“Enerox”) from CellCube Energy
Storage Systems Inc.

In all VIP ventures, Bushveld Energy will hold
a minority interest without direct operational
involvement beyond the supply of vanadium
and electrolyte.

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Bushveld Minerals | Annual Report and Financial Results 2019

Chief Executive Officer’s Review continued

Importantly, under separate agreements
between Bushveld and Avalon and redT
respectively Bushveld has acquired the right
of first refusal to supply vanadium products to
its invested companies on the same material
terms as any other supplier. This provides a
future hedge for Bushveld against volatility
in the vanadium price, as the VRFB market
continues to develop.

Bushveld entered into a Joint Venture
agreement with redT on 9 March 2020 to
form a Vanadium Financing Partnership to
supply vanadium electrolyte to be used in
third-party owned VRFB projects developed
by redT in Europe over the next two years.
The Joint Venture agreement was transferred
to Invinity. The partnership will be a special-
purpose vehicle structured to hold physical
vanadium. The projects will help demonstrate
proof of concept for this financial model on a
larger scale and build on the smaller contract
executed in 2019 in the US with Avalon.

The rental model Bushveld is pioneering
will reduce upfront purchase costs, taking
advantage of the re-usability and significant
residual value of vanadium electrolyte. The
agreement could be expanded to include
other VRFB companies or vanadium suppliers
in the future.

Post year-end we approved the construction
of the vanadium electrolyte plant in East
London South Africa, in partnership with the
Industrial Development Corporation (“IDC”).
The approved investment commitment from
Bushveld is up to ZAR68 million (circa US$4
million) through to 2022, and includes capital
expenditure, working capital and ramp-up
support. The IDC also approved the
investment for its share of equity and
all the debt funding for the project.

Furthermore, the Company is working with
energy policymakers on initiatives to reverse
the downward trajectory of South Africa’s
power system. At the same time, the
Company is reinforcing its own resilience,
in case the power system continues to
deteriorate. This includes completing grid
connections and geotechnical studies and
launching a procurement process for a
solar-plus-energy-storage mini-grid at the
Vametco mine. The project, which will use
a VRFB to provide long duration energy
storage, can be expanded in the future
to reduce the mine’s dependence on the
electric power grid.

Development. This approach is aligned
with the United Nations’ 2030 Sustainable
Development Goals. It is underpinned by
our belief in Shared Economic Value, where
there is fundamental synergy between our
economic performance, the social progress
of the communities where we operate
and our broader stakeholders.

Our commitment to sustainability is
evident not only in the way we manage
our operations, but in our belief that our
product, vanadium, contributes positively
towards creating a greener and more
sustainable economy.

Corporate Social Responsibility
Our commitment to corporate social
responsibility is a component of our strategy
that stems from our deep conviction that our
responsibility to our employees, communities
and the environment extends far more
broadly than the creation of jobs or payment
of dividends. We recently embarked on this
journey and our work is only starting. We
acknowledge that achieving sustainability
is a long-term goal.

Our starting point is that we intend to
generate value in a safe and sustainable way
for all stakeholders throughout the vanadium
value chain. Oversight of the implementation
of the sustainability pillars across the Group
rests with the executive and operations
leadership teams, supported by the Board
and its subcommittees.

The Company’s Environmental, Social and
Governance philosophy is ‘value beyond
compliance’ and is based on the principles
of building shared value with its stakeholders.
To achieve added value beyond compliance,
our approach to Sustainable Development
is guided by and embedded in three key
pillars: Health and Safety, Environmental
Management and Socio-Economic

Through our subsidiary, Bushveld Energy,
we are actively driving adoption of VRFBs in
the global energy storage industry. VRFBs will
play an increasingly important role during the
energy transition, helping grids to become
more efficient, supporting decarbonisation
through greater adoption of renewable energy
and assisting remote off-grid access to
electricity through renewable energy plus
storage applications.

The full re-usability of vanadium in VRFBs will
open up opportunities to rent the vanadium
electrolyte over 20 years or more of a
battery’s lifecycle, with scope to reuse the
electrolyte in other batteries or convert the
electrolyte (with no requirement for new
recycling facilities) into vanadium products
for the steel industry. We believe this quality
makes vanadium one of the most circular
economy-friendly minerals.

We have made significant progress in 2019
and will continue to build on this success.

More information can be found in the
Corporate Social Responsibility section
of this report.

“At Bushveld Minerals, the wellbeing of all our employees is of great importance.

Capital allocation
Bushveld Minerals continues to implement
the capital allocation policy that the Board
of Directors and management established last
year. The capital allocation framework imposes
consistent discipline, while enabling us to fund
capital expenditure items through changing
market conditions and price volatility.

In order of priority, the Group’s capital will
be allocated towards:
– Ensuring maintenance of stable production
across all our operations and prioritisation
of critical and regulatory capital;

– Supporting a strong balance sheet that is
resilient through the vanadium price cycle;
– Investing in the Group’s growth projects,

either through organic growth or
brownfield acquisitions, to achieve
a production rate of more than 8,400
mtVp.a and downstream integration
in the medium-term; and

– Returning cash to shareholders.

With the acquisition of Vanchem we now have
the processing facility to achieve our medium-
term production target of more than 8,400
mtVp.a. Increased production from Vametco
and Vanchem underscores our growth
trajectory. However, we will ensure that we
continue to be conservative in how we invest
capital and ensure that any production increase
is profitable, especially in the current price
environment. We will continue to appropriately
prioritise capital expenditure to maintain safe
and stable operations.

Johannesburg Stock
Exchange listing
The Company continues to monitor market
conditions and engage with South African
institutional investors. Timing of the
Johannesburg Stock Exchange listing has
been impacted by the Covid-19 pandemic.
Bushveld Minerals’ growth strategy will benefit

South Africa by using the country’s natural
strengths to become a leader in our industry.
The rationale for our proposed listing on the
JSE is based on the following considerations:
– our resources are located on the

world-renowned Bushveld Complex in
South Africa, the world’s largest primary
vanadium resource base;

– our vertical integration aligns with the
country’s push for increased local
beneficiation of its mineral resources;

– our downstream energy storage

proposition aligns with the government’s
stated goals of downstream mineral
beneficiation and adopting stationary
energy storage; and

– a listing will allow us to access a

significant pool of local investors
who have an affinity with our story.

Covid-19 response
At Bushveld Minerals, the wellbeing of all
our employees is of great importance. As a
Company we recognised the gravity of the
Covid-19 pandemic early and moved quickly
to take all necessary measures to create
awareness, minimise transmission risks and
establish intervention protocols for potential
cases. We established a cross-functional
Covid-19 Task Team, including operations,
health and safety, human resources, finance,
community and government relations and
other support functions to ensure that the
Company is best prepared to navigate this
period. To minimise the potential for
Covid-19 to spread at our operations, we
implemented various preventative measures,
including supplying sanitisers, temperature
testing, adapting workplaces to foster social
distancing, introducing strict procedures at
our operations and enabling remote work,
where it was practicable to do so. This is
being coupled with awareness campaigns
to inform and educate employees and the
wider community.

The Covid-19 pandemic is the biggest risk facing
the world economy at present, and it is still
evolving. The pandemic has resulted in drastic
actions by governments across the world,
potentially leading to a global recession. We are
fully supportive of the bold measures taken by
the South African government to mitigate and
contain infection levels in the country.

On 23 March 2020, the South African
government issued a directive requiring a 21-day
nationwide lockdown for all residents, with the
exception of essential businesses and activities,
to help contain the spread of Covid-19. As part
of the directive, mining operations had to be
placed on care and maintenance from midnight
on 26 March 2020 until 16 April 2020. We
placed our Vametco operations and Vanchem
facility on care and maintenance in a way that
enabled us to ramp up operations safely and
speedily after the lockdown and ensure the
long-term sustainability of our business.

Following engagement with the government
to obtain further detail on permitted activities
during the lockdown period, the Group
received approval from the South African
Department of Mineral Resources and Energy
for reduced-scale operations at Vametco,
under agreed precautionary measures. As
a result, the Group was able to successfully
complete the annual maintenance programme,
which was initially planned for the second
quarter of 2020.

Under the Amended Disaster Regulations
announced by the South African Government
on 16 April 2020, mining operations were
allowed to re-open and operate at a reduced
capacity of 50 per cent of normal production
levels during the lockdown period.
On 23 April 2020, the Government
announced that it would be following a
‘risk-adjusted strategy for economic activity’.

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Bushveld Minerals | Annual Report and Financial Results 2019

Chief Executive Officer’s Review continued

The approach proposes five alert levels, with
five being a hard lockdown and one being
where normal activity can resume. Different
parts of the country may be at different alert
levels at any one time, with levels adjusted
up or down based on the rate of transmission
in each area. On 1 May 2020, South Africa
moved to level four, allowing open-cast
mining to scale up operations to full
employment and supply chains for permitted
goods and services to resume. In preparing
for ramp-up, we established ‘return to work’
operating procedures and a rigorous
screening and testing regime for all
employees and contractors. All necessary
health and safety protocols, including social
distancing, sanitising and wearing personal
protective equipment, including face masks,
remain in place. We are delighted that both
Vametco and Vanchem are now back to
pre-lockdown production levels.

2020 Capital Expenditure
As the near-term impact of Covid-19 on
operating conditions remains uncertain,
we have taken cash preservation measures to
manage near-term liquidity, while preserving the
long-term sustainability of the assets and still
positioning the Company to increase its share of
the vanadium market. These include reviewing
operational expenditure, prioritisation of critical
and regulatory capital, as well as deferring some
growth-associated (non-critical) capital
expenditure across the mining, processing and
energy businesses. Furthermore, to enhance
our liquidity position and financial flexibility, we
drew down on the remaining RCF of ZAR125
million at the end of March 2020.

For 2020 we expect annual capital
expenditure to be approximately ZAR135
million (circa US$8 million). The funds
will be allocated as follows: ZAR85 million
(circa US$5 million) for the Vanchem critical
refurbishment programme to sustain current
production levels of approximately 1,000 mtV,
ZAR11 million (circa US$660,000) million for
sustaining capital expenditure at Vametco,
ZAR35 million (circa US$2 million) for the
completion of the kiln off-gas project at
Vametco and ZAR4 million (circa US$240,000)
for the Vametco Phase 3 PFS. We will continue
to monitor global macroeconomic
developments and inform the market
of any adjustments to these capital
expenditure plans.

Our capital allocation discipline drives
competition for capital across our projects.
Only those that offer the highest return options
while balancing risk and reward are considered
for development. As a result, each project in the
mining and energy business will work towards
minimising costs, while maximising production
and productivity, so as to offer the best return.

Outlook
While the 35-day nationwide lockdown
has resulted in a not-insignificant loss of
production, the Company has taken the view
that there is scope to still meet guidance.
It has decided to keep guidance at Vametco
and Vanchem unchanged, however this is
subject to no further Covid-19 related
stoppages. Production will be weighted
towards the second half of 2020, given the
days lost during the lockdown in the first half.
On a site-specific basis, Vametco is expected
to produce between 3,000 mtV and 3,200
mtV, at a production cash cost of between
ZAR257/kgV and ZAR265/kgV (US$17.20/kgV
and US$17.70/kgV). Vanchem is expected to
produce between 960 mtV and 1,100 mtV,
at a production cash cost of between
ZAR245/kgV and ZAR260/kgV (US$16.30/kgV
and US$17.30/kgV).

We are closely monitoring the evolving
impacts of the Covid-19 outbreak, which in
recent weeks has affected a number of other
mining operations in the country that had
newly restarted. We have implemented all
measures necessary to minimise any impact
on our employees and the business, while
adhering to the directives provided by the
South African government. The protocols we
have developed are robust and are designed
to ensure that in the event of a positive case
we will be able to manage it with minimal
disruption to our operations.

Despite the 2020 global outbreak of Covid-19,
we retain a positive outlook on the vanadium
market, characterised by a growing intensity
of use of vanadium in steel supported by
enforcement of rebar regulations in China,
with the country continuing to be a net
vanadium importer. We expect countries
across the world to increase infrastructure
spending in order to revive and support
economies following the impact of the
Covid-19 pandemic, as well as continuation
of the energy transition, which will see more
renewable and energy storage deployments
in which VRFBs are expected to capture
a significant market share. We retain the
view that supply remains constrained and
concentrated. All these factors benefit
primary vanadium producers such as
Bushveld Minerals.

We will continue to ensure that Vametco
and Vanchem maintain their competitive
edge by optimising and improving operating
margins, increasing production through
debottlenecking activities and prudently
investing for the future. We anticipate
synergies will accrue from both Vanchem and
Vametco as we bring the businesses together,
which will allow us to build a business with
a diversified product range that continues

to be resilient throughout the commodity
cycle and ready to capture the benefits
of a price recovery.

By doing so, we aim to increase our share
of the vanadium market while moving further
down the vanadium production cost curve.
This will allow us to withstand short-term
price weakness, make decisions with the
longer term in mind, and provide a stable
environment for the development of new
downstream demand sources, such as
energy storage.

At Bushveld Energy we have earmarked a few
priorities as we continue to make progress.
These priorities are to advance the vanadium
electrolyte plant; implement additional, large
electrolyte rental contracts; complete the
acquisition of Enerox as part of a consortium;
progress the VIP; prove the business case for
VRFB deployments, including delivery of the
Vametco mini-grid as a funded independent
power producer; and submit bids for battery
energy storage system opportunities as part
of South Africa’s Integrated Resource Plan.

Notwithstanding the short-term capital
deferments that have been necessitated by the
Covid-19 pandemic, the Company remains
committed to its five-year growth strategy that
will ultimately lead to a production platform
in excess of 8,400 mtVp.a. and see Bushveld
Energy become a leading energy storage
player. While internally generated cash flow
would always be the priority source of funding
for this growth programme, the Company will,
over the five-year period, investigate a variety
of forms of funding, and prioritise spend
depending on market conditions, ensuring an
optimal capital structure and the best returns
for shareholders in the long-term. Although
2020 is expected to be another transitional
year in our efforts to create a leading
vertically-integrated primary vanadium
business, the Covid-19 global pandemic
requires that we adapt to an extremely
fluid situation.

I would like to take this opportunity to
thank everyone that has played a crucial
role during another transformative year
for Bushveld Minerals.

Fortune Mojapelo
Chief Executive Officer
23 June 2020

Financial StatementsSupplementary InformationGovernanceBusiness Overview18

Business Model

Bushveld Minerals | Annual Report and Financial Results 2019

Our Vertical Integration Business Model
Creating long-term value for all of our stakeholders

Strategy rationale
Bushveld Minerals’ vanadium grades, at 1.6 per cent – 2.0 per cent
V2O5 in magnetite, are among the highest in the world, with
vanadium predominantly found in magnetite form co-existing with
iron and titanium (vanadium titaniferous magnetite ore). Metallurgical
beneficiation is thus a matter of necessity, producing products for
alloying applications in the steel sector and chemicals for other
applications. Accordingly, most vanadium production in the world
is done by integrated mines and processing plants.

For Bushveld Minerals, however, our vertical integration goes further,
covering diversification of vanadium products and our efforts to grow
demand by developing the opportunity for vanadium in the energy
storage industry. Here the Company sees a unique confluence of:
– A burgeoning energy storage industry that is set to create

a step change in vanadium demand;

– A unique positioning of the Company to capture a significant
share of the vanadium value chain in the energy storage
industry; and

– A large, attractive commercial opportunity that can create
a natural hedge for the Company operating in some of the
most volatile commodity markets.

While vertical integration captures commercial value for the business,
it is essential to unlock the energy storage opportunity for vanadium.

Vertical integration addresses two significant hurdles for global
adoption of vanadium redox flow batteries:
– Security of supply, where the massive but still uncertain growth in
energy demand for vanadium could create more market volatility,
if it is not matched with timely supply expansion. At the same time,
while a recent World Bank Group Minerals for Climate Action
report observed that by 2050 vanadium demand in energy alone
could be twice the current market, the uncertain timing of that
demand makes industry-wide production expansion challenging;
– Security of cost, where vanadium’s high price volatility and its role
as the sole mineral in the Vanadium Redox Flow Battery (“VRFB”),
makes cost more imperative than in other industries, such as steel.
Threats of price spikes, such as the one seen in 2018, while
profitable for vanadium producers threaten to undermine the
more nascent energy storage industry before it attains maturity.

Bushveld’s strategy implementation
Our vertical integration strategy has the following two primary
components:
– Establishing a low-cost primary production platform with a
production of more than 8,400 mtVp.a., based on our large
high-grade deposits and low-cost, scalable processing facilities;

– Leveraging our production capabilities to build a downstream

vanadium-based energy storage platform comprising electrolyte
production, investment into VRFB manufacturing and
development of megawatt-scale energy storage projects.

Geology
and Mining

Processing

Energy Storage

Bushveld has one of the largest, high-grade primary vanadium resource bases in the world. The
Company’s vanadium resource base currently consists of three mineral assets: Vametco, Brits and
Mokopane. Together, the three deposits constitute a 550 Mt (100 per cent basis) JORC-compliant
resource, including 76 Mt (100 per cent basis) of JORC-compliant reserves. The resource vanadium
grades are some of the highest primary grades in the world. These high-grade deposits are located
on the Bushveld complex, which hosts the world’s largest primary vanadium resources.

Bushveld Minerals seeks to establish a portfolio of vanadium resources for future development
in potential partnerships as the supply deficit deepens and it becomes clearer that primary
production is key to addressing this shortfall.

Bushveld’s asset strategy focuses on identifying underutilised and constrained processing
infrastructure that can be made more efficient and expanded. The attraction of brownfield
processing facilities lies in the potential for significant reductions in capital expenditure and
lead-time to achieve production, compared to new build options. This strategy led to Bushveld’s
purchase of Vametco in 2017, which provided the Company with a solid platform to expand its
vanadium production base. Further expansion included the acquisition of Vanchem, concluded in
November. These two plants together give Bushveld processing infrastructure with the potential
to significantly increase its share of the vanadium market while remaining one of the lowest-cost
producers. Our vanadium product portfolio is diverse and includes Nitrovan, ferrovanadium,
vanadium oxides, electrolyte and vanadium chemicals. These vanadium products are marketed
to steel manufacturers, chemical and battery companies around the world.

Bushveld Minerals has identified the fast-growing energy storage market as a key and attractive
downstream industry where vanadium-based battery systems have the potential to take
a significant share. Through our subsidiary Bushveld Energy Limited, we are actively driving
adoption of VRFBs in the global energy storage industry. Bushveld Energy’s business model
extends across three pillars: electrolyte manufacturing; investment into VRFB Manufacturing;
and battery deployment and project development.

According to Navigant Research, global stationary energy storage demand is forecast to grow
to 100 GWh in annual deployments by 2027. A mere 10 per cent share of this market by VRFBs
would see VRFB deployments of 10 GWh per annum by 2027. Since a 1 GWh VRFB system
requires approximately 5,500 mtV, or five per cent of 2019 annual global vanadium production
(circa 111,225 mtV1), this could add up to 55,000 mtV to annual vanadium demand by 2027.
Navigant Research forecast that flow batteries could account for up to 18 per cent of the US$50
billion2 energy storage market by 2027, representing nearly US$10 billion in revenue.

For these reasons, Bushveld pursued a downstream integrated business model through Bushveld Energy to:
– Exploit the rapidly growing multi-billion-dollar commercial opportunity that the energy storage industry presents, through the adoption

of VRFBs;

– Become a key player across the VRFB supply chain through electrolyte production, investment in VRFB manufacturing and original

equipment manufacturers, and megawatt-scale energy storage project development;

– Strengthen and diversify vanadium demand beyond the steel sector and create exposure to a high growth market, which the Company’s

upstream assets are well positioned to supply;

– Reduce volatility of Bushveld’s revenues and profitability, as energy storage exhibits lower market volatility than commodity markets and

provides an industrial hedge to the vanadium price; and

– Achieve higher valuation multiples for our business, as energy and diversified listed companies carry higher earnings multiples than

pure miners.

Financial StatementsSupplementary InformationGovernanceBusiness Overview20

Business Model continued

Bushveld Minerals | Annual Report and Financial Results 2019

Impact of policy environment
Developments in the global and South African policy environment reinforce Bushveld Minerals’ integrated strategy and the opportunities
it creates for the Company.

Global policy

The energy transition towards greater electrification and away from fossil fuels in favour of
renewable energy continues to accelerate. Its progress increases the need for vanadium and
demand for stationary energy storage in the global energy mix.

South African
policy

The climate-change agenda increasingly has teeth through both punitive policies and incentives
to drive de-carbonisation by many governments. This has driven increased deployment of
renewable energy to decarbonise electrical power systems. It is also enabling the shift in
transportation toward electrically powered vehicles.

More recently, policy impetus is shifting from being government mandate to being driven
by sound commercial motivations. Mounting stakeholder pressure is leading many investors
and corporations to adapt their Environmental, Social, and Governance policies to incorporate
decarbonisation and sustainability. In addition, the rapidly falling cost of renewable and distributed
electricity generation, such as solar photovoltaics (“PV”), is making self-supply of electricity
increasingly more cost effective.

All of these polices drive the global business case for vanadium because of its impact on
sustainability, from improving the strength to weight ratio of steel, to reducing NOx emissions as a
catalyst, to enabling greater renewable energy penetration through long-duration energy storage.

In South Africa, the “just” energy transition, has the potential to revitalise the mining industry.
It has a unique opportunity to build an integrated value chain strategy around some of the critical
metals used in energy storage. The government is starting to visualise that such a strategy should
go beyond just taking advantage of South Africa’s large and high-grade resources. It can extend to
developing an entire industry around energy minerals to maximize South Africa’s share of energy
transition value chains. South Africa already has significant metallurgical infrastructure that can be
leveraged to create or expand the downstream capabilities required. It also has metallurgical
expertise and Research and Development platforms that can be utilized more extensively.

Some progress can be seen in the Integrated Resource Plan (‘IRP’) 2019, which presents excellent
news for energy storage in South Africa. It includes a dedicated allocation for storage, calling for
over 2,000 MW of new capacity over the next 10 years. The upside for storage is even greater,
as it could be co-located for other technologies, including nearly 15,000 MW of wind, 6,800 MW
of solar PV, and over 4,000 MW of distributed and embedded generation. These numbers still
pale in comparison to global storage forecasts of 100,000 MWh in annual deployments by as
soon as 2027 and a US$600 billion industry by 20403. Nevertheless, as one of the earlier movers,
South Africa is poised to create a beachhead in the still nascent energy storage industry.

1 Source: Roskill, Vanadium Outlook to 2029.
2 Source: Navigant Research.
3 Source: Bloomberg New Energy Finance.

Overall, these efforts evidence how the South African government, including the newly
combined Department of Mineral Resources and Energy, supports and incentivises domestic
beneficiation of extracted minerals into higher value products, with even greater potential going
forward. In this manner, the Bushveld Minerals’ integrated vanadium strategy very closely aligns
with the national strategy of mineral beneficiation.

Unique positioning
All of these factors allow Bushveld Minerals to maximise the Company’s share of the vanadium value chain and underscore our unique
positioning to unlock this value, which includes:
– Large high-grade primary resource base;
– Low-cost, scalable primary processing infrastructure with capacity to grow production by almost three-fold over the next five years;
– Diverse vanadium product offering, including low capital intensity of further downstream products, such as vanadium electrolyte;
– Deep local knowledge of energy markets, enabling us to secure large-scale energy storage mandates; and
– Alignment with South Africa’s policy environment, which supports mineral beneficiation and large-scale deployment of stationary

energy storage systems.

Vanadium Market Overview

– Co-production derived from iron

processed for steel production remains
the main source of vanadium, accounting
for 71 per cent of 2019 global supply1;
– Primary production involves salt roasting,
water leaching, filtration, desilication and
precipitation through a salt roast method.
It accounted for 18 per cent of global
supply in 20191;

– Secondary production of vanadium

is the recovery of material from fly ash,
petroleum residues, alumina slag, and
from the recycling of spent catalysts used
in some crude oil refining. It accounted
for 11 per cent of global supply in 20191.

In 2019, global vanadium production
increased by 15 per cent year-on-year to
111,225 mtV1. This increase was supported
by higher slag production in China (which
increased by 19 per cent year-on-year),
driven by:
– increased crude steel production.

China produced an all-time peak of
996 Mt, representing a seven per cent
year-on-year increase; and

– high seaborne iron ore prices (in 2019 the
average iron ore price was US$93.48/mt2).
As a result, steel mills used more
domestic vanadium titaniferous
magnetite ore.

Vanadium production in the rest of the
world increased moderately across all
forms of production.

China is the world’s top vanadium producer,
with 59 per cent of global vanadium supply
in 2019. Most of its vanadium was derived
from co-production. Russia is the second-
largest producer, accounting for 17 per cent
of 2019 global supply. South Africa is the
third-largest producer, with seven per cent
of global vanadium supply in 2019. Most
of its vanadium was derived from primary
production from Bushveld Minerals
and Glencore.

The most traded vanadium products are
vanadium pentoxide and ferrovanadium.
Vanadium pentoxide is commonly produced
through the treatment of magnetite iron
ores, vanadium-bearing slags and secondary
materials. It can be used directly in some
non-metallurgical applications and in
producing vanadium chemicals. It is also
used as an intermediate product for the
production of ferrovanadium, the vanadium
alloy used as a strengthening agent in
manufacturing high-strength steel

About vanadium
Vanadium is a grey, soft and ductile
high-value metal with several unique
characteristics that position it strongly
in the steel, alloys and chemicals sectors.

Vanadium feedstock is derived from three
sources: co-production, primary production
and secondary production. In 2019,
approximately 90 per cent of vanadium
was recovered from magnetite and titano-
magnetite ores, either from co-production
or primary production

2019 global vanadium
production by country

2019 production by source

2019 primary production
by country

2019 co-production by country

17%

59%

11%

18%

71%

29%

30%

41%

23%

73%

China
Brazil

Russia
USA

S Africa
Other*

Co-production
Secondary

Primary

China

Brazil

S Africa

China
India

Russia
New Zealand

* Other includes: Austria, Belgium, France, Germany, India, Japan, South Korea, Netherlands, New Zealand, Taiwan and Vietnam

Financial StatementsSupplementary InformationGovernanceBusiness Overview

Vanadium Market Overview continued

Vanadium Market fundamentals
Supply
While co-production accounted for the majority of global vanadium
feedstock supply in 2019, it continues to face significant constraints,
including high input and processing costs where producers have no
leverage on steel prices, and environmental-related restrictions that
adversely impact producers’ competitiveness.

In 2019, global vanadium feedstock production totalled 111,225 mtV,
exceeding the previous peak of 101,791 mtV recorded in 2014, before
Evraz Highveld ceased operations1.

Most of the volume, on a unit basis, came from Chinese slag producers
whose production of slag increased as a consequence of greater steel
production. This absolute steel production increase has seen Chinese
co-producers operate at near capacity, limiting the scope for further
production growth.

The fastest growth in supply, however, has come from primary
production, which has grown by over 50 per cent in just two years.
It increased from just under 13,000 mtV and 14 per cent of the market
in 2017 to nearly 20,000 mtV and 18 per cent of the market in 2019. The
growth has been led by price-elastic primary producers in South Africa
and Brazil increasing their output in response to improved vanadium
prices and, to a lesser extent, by opportunistic stone coal production,
which accounted for about nine per cent of China’s production.

This growth in the market share of primary suppliers at the expense
of co-producers may appear modest. However, it may be part of
a longer-term trend of decoupling vanadium from steel production.
Historically, vanadium supply and demand has relied upon or been
coupled with steel supply and demand, respectively. The inelasticity
of vanadium-producing steel plants to the vanadium price is one
example of this coupling that contributes to vanadium’s price volatility.
With growth in primary production of vanadium, the dependency of
vanadium supply from steel is starting to fall or decouple. The same
trend would be likely to follow in vanadium demand, if new uses of
vanadium continue to grow faster than steel demand, such as in energy
storage applications.

Despite the significant increase in vanadium slag production, several
efforts by the Chinese government to rationalise its steel industry
and cut pollution may impose further constraints on vanadium
co-production steel plants. These initiatives include the reduction

Ferrovanadium Price: May 1980 – May 2020

Bushveld Minerals | Annual Report and Financial Results 2019

of excess steelmaking capacity targeting highly polluting high-cost
plants, and the conversion of more than 200 Mtp.a. of blast furnace
operations to electric arc furnace technologies, which will increase
the role of scrap iron in steel making and reduce the overall demand for
iron ore. Declining domestic iron ore supply and iron ore quality along
with environmental restrictions on both steelmakers and co-product
vanadium producers can be expected to see a greater reliance on
hematite (non-vanadium bearing) iron ore for steel making among
co-producers, which will limit vanadium slag production growth.
Stone coal production, meanwhile, will continue to be limited by
environmental restrictions. The result is a constrained growth outlook
for Chinese vanadium production from co-producers, which are already
operating at near capacity, and stone coal vanadium producers, a
constraint exacerbated by the ban on vanadium slag imports into China.

Secondary production is poised to increase supply in the medium
term, as a result of the newly-implemented International Maritime
Organisation (“IMO”) 2020 regulations that require the use of more
refining catalyst. However, it remains a higher-cost form of production
than primary and co-production. The new supply could either displace
projects with weaker economics or help meet a growing deficit that
would almost certainly result from greater VRFB uptake in the absence
of which a larger and more durable surplus could be realised. Secondary
production is limited, not by processing capacity, but by both the
availability of the necessary feedstock and the high costs of production.
Supply of secondary materials is largely in the form of spent catalysts
associated with the processing of crude oils and oil sands, the
manufacture of various acids, ash and residues from the combustion
of oils and coals, and some residues from alumina production,
particularly in India.

Supply growth can also be considered across three categories: capacity
expansions of current producers, restarts of production plants that
had been mothballed, and greenfield project development. Capacity
expansions have the highest probability of realisation, with the lowest
capital and quickest path to production. According to Roskill, this
category could add as much as 5,000 mtV in new supply by 2029.
Restarts are expected to add a further potential 4,000 mtV – 12,000 mtV
in new supply by 2029. New greenfield projects face the most significant
hurdles. Most of the recent greenfield projects that have been
announced for development are of a co-production or multi-
commodities nature, suffer from relatively low grades and require
significant capital and a relatively stable and higher price outlook than
recent prices indicate.

)
l

a
n
m
o
N

(

)

V
g
k
/
$
S
U

(

e
c
i
r
p
-
d
m

a
c
i
r
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t
s
h
V
e
F

140

120

100

0
8
9
1
y
a
M

1
8
9
1
y
a
M

2
8
9
1
y
a
M

3
8
9
1
y
a
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4
8
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1
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5
8
9
1
y
a
M

6
8
9
1
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7
8
9
1
y
a
M

8
8
9
1
y
a
M

9
8
9
1
y
a
M

0
9
9
1
y
a
M

1
9
9
1
y
a
M

2
9
9
1
y
a
M

3
9
9
1
y
a
M

4
9
9
1
y
a
M

5
9
9
1
y
a
M

6
9
9
1
y
a
M

7
9
9
1
y
a
M

8
9
9
1
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M

9
9
9
1
y
a
M

0
0
0
2
y
a
M

1
0
0
2
y
a
M

2
0
0
2
y
a
M

3
0
0
2
y
a
M

4
0
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2
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a
M

5
0
0
2
y
a
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6
0
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0
0
2
y
a
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0
0
2
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a
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0
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0
2
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a
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1
1
0
2
y
a
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1
0
2
y
a
M

3
1
0
2
y
a
M

4
1
0
2
y
a
M

5
1
0
2
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a
M

6
1
0
2
y
a
M

7
1
0
2
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a
M

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1
0
2
y
a
M

9
1
0
2
y
a
M

0
2
0
2
y
a
M

Source: London Metal Bulletin price as at 29 May 2020.

Demand
Total vanadium demand is dominated by the steel industry.
It accounted for 92 per cent of total demand in 2019 and will
continue to dominate vanadium demand in future.

Global vanadium consumption rose by an estimated 6 per cent in 2019 to
111,442 mtV1, supported by greater compliance with the new high strength
rebar standards introduced by the Chinese government in November 2018.
The new rebar standards, introduced to improve construction safety
standards, regulate the characteristics of high strength reinforcing bars
and impose requirements to use micro-alloys in manufacture of rebar.
For example, grades 3, 4 and 5 rebars require approximately 0.35 kgV,
0.6 kgV and 1 kgV respectively to meet the new standards.

The new standards were introduced largely to outlaw the
quenching and tempering techniques employed by Chinese rebar
manufacturers to avoid addition of micro-alloys. As a consequence
of these quenching and tempering techniques, China’s vanadium
consumption decreased between 2014 and 2016, after growing at
twice the rate of steel production growth over the preceding 4 years.

Vanadium consumption from rebar rose by 28 per cent in 2019. The
increase in consumption was primarily driven by larger rebar volumes
in China as well as increased intensity of use of vanadium in steel
from 0.052 kgV/tonne of steel in 2018 to 0.054 kgV/tonne of steel in
2019. China’s crude steel production rose 7.3 per cent year-on-year
and rebar output surged 19 per cent year-on-year. In addition,
continued growth in vanadium demand from energy storage would
increase demand even further.

Going forward, it is forecast that vanadium demand in the steel
market will grow at a Compound Annual Growth Rate (“CAGR”) of
approximately 2.7 per cent1 through to 2029, with global vanadium
demand reaching approximately 138,000 tonnes by 20291. Although
forecasts for Vanadium Redox Flow Batteries (“VRFBs”) vary, they
indicate that demand from this segment could increase vanadium
demand by an additional six per cent per annum. Longer-term
demand will be even greater. For example, the World Bank Group
forecasts that by 2050 vanadium demand from energy storage alone
could consume nearly twice the 2018 global vanadium production.
While some forecasts are for flow batteries to capture up to
18 per cent of the stationary energy storage market by 20273,
even a 10 per cent market share by VRFBs would equate to 55,000
mtV of demand, compared with ~2,000 mtV consumed in 2018.

Vanadium Intensity of Use (2018-2025)

Thus, even as vanadium demand will continue to be underwritten
by the growing intensity of use of vanadium in the steel market, the
energy storage industry is expected to offer significant demand upside.

Developed economies such as Europe, Japan and North America
have a higher vanadium intensity than developing countries, with
China’s surpassing the world average intensity in use, supported
by enhanced compliance with rebar standards.

Steel production vs consumption

V
t
m

140,000

120,000

100,000

80,000

60,000

40,000

20,000

2,500

2,000

1,500

1,000

500

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

World crude steel production (Mt) – RHS
Outlook for consumption of vanadium in Steel (mtV) – LHS

Source: Roskill, Vanadium: Outlook 2029, World steel association.

China Crude Steel and Vanadium

1,200

1,000

)
t

(

e
e
t
S

800

600

400

200

2015

2016

2017

2018

2019

2020

2021 2022 2023 2024 2025 2026 2027 2028 2029

90,000

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

)

V
t
(

m
u
d
a
n
a
V

China crude steel consumption (Mt) – LHS
China crude steel production (Mt) – LHS

China vanadium
consumption (tV) – RHS

Source: Roskill, Vanadium Outlook to 2029.

t
/
g
y
t
i
s
n
e
t
n

m
u
d
a
n
a
V

100

China

Japan

India

South Korea

World Average

Rest of Asia

NAFTA

2018

2019

2020f

2021f

2022f

2023f

2024f

2025f

Source: Roskill, Vanadium: Outlook 2029.

Financial StatementsSupplementary InformationGovernanceBusiness Overview

Vanadium Market Overview continued

Vanadium market balance
Supply and demand dynamics point to a potential structural net deficit.
Supply is concentrated and constrained as:
– Over 70 per cent of vanadium comes from co-production, which is

driven by steel and iron ore fundamentals;

– Co-production is primarily driven by steel and iron ore market

dynamics rather than vanadium fundamentals, and co-producers are
currently operating close to full capacity. China and Russia accounted
for 76 per cent of global supply in 2019. In China, capacity utilisation
from slag producers was estimated at 80 to 90 per cent in 2019, with
the top five producers operating close to full capacity. Russia was
also operating close to full capacity, at approximately 90 per cent;
– The steel industry in China has been increasingly relying on imported

hematite iron ore, which is non-vanadium bearing;

– Over the longer term, Chinese vanadium production will be

constrained by the decline in domestic iron ore supply and iron ore
quality, coupled with environmental restrictions on steelmakers,
co-product and stone coal vanadium producers, as well as the ban
on vanadium slag imports;

– Importantly, with most vanadium co-producers, whose economics

are primarily driven by steel economics, operating at near full
capacity, the ability of co-producers to add new supply volumes
to the market is severely curtailed;

– Lower vanadium prices limit the advent of new greenfield production
due to more funding challenges, while also discouraging high-cost,
low-grade primary production, such as stone coal. Furthermore,
with lower vanadium prices, a historically volatile vanadium price and
a majority of greenfield new vanadium projects being high capex
co-production plants, the scope for significant greenfield production
capacity is even more limited.

Growing demand is underpinned by higher intensity of use of vanadium
in steel, which is expected to rise to 0.063 kgV by 2030 compared with
0.054 kgV in 2019. China will drive most of the increase. On top of this,
demand for vanadium from energy storage will continue to grow from
a base of 2,000 mtV in 2018. The rate of growth from this baseline will
have a significant influence on how quickly and to what extent this new
demand source puts pressure on the global market.

The global vanadium market has faced a supply deficit since 2015,
after a period of oversupply. The deficit encouraged increased output
from existing producers, as can be seen by growing output and market
share from primary producers. These miners are economic at both
prevailing and long-term forecast vanadium prices and were able to
increase production at their facilities on a lower-cost, brownfield basis.

According to Roskill, the vanadium market will move into a short-term
surplus in 2020 as current ex-China steel mill shutdowns continue
due to the Covid-19 pandemic. The market deficit is forecast to return
between 2021 and 2023, thereafter moving back into surplus, as new
supply comes on stream. Roskill applies a probability factor to new
vanadium production under development, forecasting an increase in
supply of 27,000 mtV between 2020 and 2029. Furthermore, Roskill
takes a conservative view on vanadium consumption in energy storage
(through VRFBs), forecasting growth in demand between 2020 and
2027 from 500 mtV to 1,463 mtV. (The Rongke Power 200 MW/800
MWh VRFB project in Dalian, when complete, is expected to consume
about ~5,000 mtV of vanadium.)

A review of contributions to supply growth from capacity expansions,
restarts and new greenfield projects (the vast majority of which are
expensive co-production plants) paints varying scenarios of vanadium
market balance. If supply forecasts are based on existing production

Bushveld Minerals | Annual Report and Financial Results 2019

Vanadium market balance (mtV)
Scenario 1: Applying Roskill expected new supply

160,000

140,000

120,000

100,000

80,000

60,000

40,000

20,000

15,000

10,000

5,000

-5,000

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

Balance – Roskill expected (RHS)
Supply – Roskill expected (LHS)

Demand (LHS)

Source: Fastmarkets, 2020; Roskill Vanadium Outlook to 2029.

and announced capacity expansions alone, the market can be
expected to move into a deeper deficit, reaching 12,600 mtV by
2029. Taking capacity expansions and project restarts into account,
the deficit is reduced but still significant at ~8,600 mtV by 2029.

Bushveld Minerals believes, in line with several energy-focused
research firms, that the potential vanadium demand from energy
storage applications could be significant and result in a deeper
vanadium deficit than suggested above.

Prevailing vanadium prices make it more attractive for emerging uses,
such as energy storage. Even at higher vanadium prices innovations
such as vanadium leases, which take advantage of the non-degrading
and thus re-usability characteristics of vanadium electrolyte will
continue to support VRFB deployments. Energy storage, while a
nascent sector, is growing rapidly, expanding by 50 per cent per
annum globally3. Similarly, while current vanadium consumption
by energy storage is low at just over 2,000 mtV in 2018, the higher
growth rate of this sector could drive significant new demand
for vanadium.

This large upside from energy storage is a key rationale for Bushveld
Minerals’ vertically-integrated business model, along with the
positioning of the Company to unlock two critical hurdles for VRFB
adoptions – vanadium security of supply and input costs. It will also
provide a natural hedge against vanadium price volatility, with greater
value created at high prices in mining and processing and at low
prices in energy storage. Through Bushveld Energy’s activities in
electrolyte component manufacturing, VRFB investment and energy
storage project development, the Company can support this
demand growth while capturing significant value from its upstream
mining and processing and downstream battery-related businesses.

Structural advantages enjoyed by low-cost primary vanadium
producers (low capex and shorter timeframes for capacity expansion
and the ability to leverage positive cash flow margins even in a low
vanadium price environment) allow them to scale up production on a
brownfield basis. This positions them to respond to any market deficits.

Vanadium market balance (mtV)
Scenario 2: Existing supply + Capacity expansions

Vanadium market balance (mtV)
Scenario 3: Existing supply + Capacity expansions + Restarts

160,000

140,000

120,000

100,000

80,000

60,000

40,000

20,000

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

20,000

160,000

15,000

140,000

10,000

120,000

5,000

-5,000

-10,000

-15,000

100,000

80,000

60,000

40,000

20,000

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

20,000

15,000

10,000

5,000

-5,000

-10,000

-15,000

Balance – existing + capacity expansions (RHS)
Supply – existing + capacity expansions (LHS)

Demand (LHS)

Balance – existing + capacity expansions (RHS)
Supply – existing + capacity expansions (LHS)

Demand (LHS)

Source: Bushveld Minerals, Roskill Vanadium Outlook to 2029.

Vanadium price
The vanadium price rose to a high of US$127/kgV in November 2018,
before settling to trade at an average of US$41.6/kgV in 2019. The price
correction in 2019 was influenced by a number of factors, including:
– Introduction of the new rebar standard in China from November
2018, which was enforced gradually, rather than immediately;

– Increased ferroniobium imports into China, allowing for

substitution of vanadium in rebar when vanadium prices are
approximately 3x higher;

– Increased slag production in China due to high seaborne iron

ore prices;

– Some opportunistic supply additions from stone coal producers

in response to high vanadium prices.

During the second half of 2019:
– Vanadium recovered market share in China, as the softening in the
vanadium price relative to ferroniobium meant vanadium offered
several advantages over ferroniobium in steel applications, and
reduced substitution with ferroniobium;

– The softening in the vanadium price reduced the incentive for

stone coal production;

– Increased enforcement of the new rebar standard in the second
half of 2019 in China supported demand growth, making China
a net vanadium importer in 2019.

Covid-19 impact on outlook
Covid-19’s impact on the global economy is evolving. Consensus,
however, is that the world will experience an economic recession.
The questions are how deep, for how long and what shape the
recovery will assume.

In the first quarter of 2020, Chinese steel production rose by 1.2 per
cent year on year4. The vanadium price started to recover during the
first quarter of 2020, however the global Covid-19 pandemic resulted
in price consolidation and could cause continued short-term volatility.

Governments around the world have announced different measures
to revive their economies after the impact of Covid-19. The Chinese
government took measures to stimulate demand recovery in late
March, two months after the initial lockdown of Wuhan. It announced
that it will support its economy through infrastructure investment and
will use this tool to stimulate growth in 2020. Increased infrastructure
spending would result in more steel and rebar production and

consumption, supporting vanadium demand. This trend is already
evident in the first half of 2020, as China continues to be a net
vanadium importer.

The Chinese government is aiming for RMB 3.75 trillion
(approximately US$500 billion) in local government special bonds
to encourage infrastructure investment. As China shifts from a
manufacturing-driven economy to a service and consumption-led
economy, it has set targets for information infrastructure such as
5G networks, large data centres, as well as ultra-high voltage power
transmission, urban mass transit and high-speed rail, new energy and
vehicle charging stations.

While China emerged from the lockdown ahead of most countries
and its economy is currently normalising, other countries have
gradually reopened from lockdowns since mid-May. The global
steel industry is now, more than ever, dependent on the Chinese
construction industry.

The World Steel Association expects Chinese steel demand to
increase by 1.0 per cent in 2020 and anticipates that the benefits
of infrastructure projects initiated in 2020 will carry over and support
steel demand in 2021. As more than 90 per cent of vanadium
utilisation is in steel manufacturing, and demand normally tracks
trends in the steel market, we expect vanadium demand will remain
robust in the medium- to long-term.

Furthermore, growing calls to take advantage of the waves of
fiscal stimulus programmes expected in the wake of the Covid-19
pandemic to accelerate, rather than delay, the energy transition to
a low-carbon energy future will provide a boon for the nascent and
growing stationary energy storage industry and, with it, for VRFBs.

1. Source: Roskill, Vanadium Outlook to 2029
2. Source: Bloomberg, 31 May 2020
3. Source: Navigant Research
4. Source: Bank of Montreal, 2020

Financial StatementsSupplementary InformationGovernanceBusiness Overview26

Bushveld Minerals | Annual Report and Financial Results 2019

Energy Storage Overview

Electricity’s share of global energy
consumption is growing rapidly. It doubled
from 10 per cent in 1980 to 20 per cent
today and is expected to account for about
45 per cent by 2050.

Energy storage is essential to support growth
in electricity demand while enabling the world
to make the transition to zero-carbon, since:
– Alternating current cannot be stored,

so other solutions are required;

– Penetration of variable and decentralised
renewable energy generation, such
as wind and solar, is increasing rapidly,
creating a greater need for balancing,
time-shifting and power system
optimisation;

– The transition towards a zero-carbon
world is making fossil fuel-based
generation and balancing technologies,
such as coal, gas or oil, unbankable
while stricter environmental regulation
is limiting deployment of pumped
hydro storage schemes.

As a result, stationary energy storage is
expected to exceed 100 GWh and become
a US$50 billion market by 2027, rising to
2,800 GWh by 20401,2.

Trends in stationary
energy storage
Stationary energy storage demand is forecast
to be the fastest growing type of storage,
at a rate of 58 per cent per annum and will
exceed 100 GWh by 2027 1. Over 90 per cent
of the demand for storage to absorb
renewable energy and balance the power
system is forecast to be for long-duration
(greater than four hours, and mostly six to ten
hours). VRFBs are well-positioned to meet this
need since they become relatively cheaper
for long-duration applications and their
water-based chemistry is inherently fire-safe.
They also offer other benefits for the energy
transition, such as:
– Long lifespans of 20 or more years with

minimal degradation;

– Easy recoverability of vanadium from the
electrolyte at the end of battery life; and

– Up to 30 per cent lower carbon dioxide
intensity compared with other battery
technologies.

Stationary energy storage applications include:
– Enhancing the stability of a power grid
that uses large amounts of variable
renewable energy sources;

– Smoothing a power system’s load

distribution by shifting power demand
from high peak areas to low peak areas
(load shifting);

– Storing excess power generated during
off-peak periods to use during peak-
demand periods; and

– Supporting remote electricity users without

access to transmission infrastructure
to connect to the main grid.

Evolving trends in stationary storage include:
– The growing need for long-duration
energy storage solutions, typically
offering three to 10 hours of daily storage
capacity. Long-duration applications are
expected to account for up to 90 per cent
of energy storage deployments by 2027
(excluding pumped hydropower). To date,
most battery energy storage installations
have been for short duration, i.e. 15 to
60 minutes;

– Energy storage systems are being

deployed for more than one application.
Traditionally, batteries have only provided
frequency control, since they can
respond to power fluctuations almost
immediately. This is increasingly being
coupled with other use cases, such as
to provide system reserves and peaking
capacity, to defer transmission and
distribution expansion and for ancillary
services; and

World energy demand by carrier, EJ/year

500

400

300

200

100

Electricity

Other energy*

Natural gas

Oil

Coal

1980

1990

2000

2010

2020

2030

2040

2050

In 1980, electricity formed
just 10% of all energy use

Today, electricity represents
20% of total energy use

By 2050, electricity will
be 45% of all energy use

* Other energy includes: Solar Thermal, Direct heat and Biomass.
Source: DNV GL Energy Transition Outlook 2018.

Total energy storage market, MWh

Annual installed stationary energy storage capacity
and development revenue by market segment

1,000,000

800,000

600,000

h
W
M

400,000

200,000

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Electric vehicles

Consumer electronics

Stationary storage

h
W
M

120,000

100,000

80,000

60,000

40,000

20,000

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Utility-scale
Residential

Commercial & industrial
Total Revenue

Source: Navigant Research.

n
o

i
l
l
i

S
U

– In a maturing industry, the focus is

shifting from pure technical and financial
capability to safety. Fires in South Korea
from 2017 to 2019, and numerous high
profile fires in Europe and the United States
at large battery sites using lithium-ion
technologies provided by well-established
developers and manufacturers, have
highlighted the focus on safety in stationary
energy storage. The potential damage and
human harm from fire and smoke is
significantly greater from larger stationary
energy storage installations than car or
computer batteries, increasing the focus
on safety in technology selection.

Energy storage
opportunities in Africa
Although the energy storage market is
global, Bushveld Energy has, from the
outset, focused on the African market,
which is traditionally underserved but
offers immense growth potential.

In sub-Saharan Africa, there are over 600
million people without access to electricity,
and grid infrastructure is poorly developed or
weak, leaving many industries to self-supply
electricity. At the same time, the continent
possesses considerable potential for solar
and wind generation, presenting an attractive
opportunity for both the energy transition
and greater use of energy storage.

Three important recent developments
reinforce our African focus:

middle-income countries. The programme
is expected to mobilise a further US$4
billion in concessional climate financing
and public and private investments to
deliver 17,500 MWh of energy storage
in these countries by 2025.

Since typically over one-third of
World Bank funding is directed towards
sub-Saharan Africa, the programme could
expect to deliver 5,000-6,000 MWh of
storage in Africa alone, or an average of
1,000 MWh per year. Most of the storage
deployed for future projects under the
programme will be to ensure greater
integration of renewable energy, which
requires daily, long-duration storage,
matching the technical and commercial
advantages of VRFB technology.

2. In 2018, South Africa’s power utility,

Eskom, announced it intended to install
1,400 MWh of battery energy storage as
part of the World Bank programme. The
first phase of that programme is expected
to start during 2020. The programme
could propel South Africa into one of the
top five energy storage markets globally.
Although the structure of the programme
and its projects have not yet been made
public, the country’s characteristic
demand profile, which lasts for six hours
a day and peaks twice a day, makes the
economics especially favourable for
long-duration, nearly limitless recycling
technologies such as VRFBs.

1. The World Bank Group announced a

US$1 billion programme to support the
deployment of energy storage in low- to

3. In October 2019, South Africa’s

Department of Mineral Resources
and Energy released the Integrated

Resource Plan (‘IRP’), outlining the
country’s future electricity needs and
required technologies. The IRP supports
more renewable energy, especially wind
and solar, and acknowledges the need to
support integration of variable generation
through storage technologies.

The 2019 IRP is largely favourable for energy
storage in South Africa. For the first time,
it included a dedicated allocation for
energy storage and promises to accelerate
its roll-out.

– The IRP allocates 2,088 MW of new

energy storage over two tranches: 513
MW by 2022 and 1,575 MW by 2029;
– Further storage could be co-located

with new renewable energy generation,
such as solar photovoltaics (“PV”) and
wind. Solar PV is expected to add a
further 6,800 MW of generation up to
2030, and wind is expected to add almost
16,000 MW of power generation in the
same period;

– Embedded generation, which is

uncapped for the next three years, is an
opportunity for medium-sized storage
(such as the Vametco mini-grid).

The inclusion of cost-effective storage in the
IRP will enable South Africa to advance its
power sector into the future. In addition, the
South African Renewable Energy Independent
Power Producer Procurement Programme
has been restarted and will continue to
add renewable energy to the grid, creating
opportunities for long-duration battery
storage, either as stand-alone facilities or
co-located with solar or wind generation.

Financial StatementsSupplementary InformationGovernanceBusiness Overview

Energy Storage Overview continued

Vanadium Redox Flow Batteries
VRFBs are well positioned to take a significant
share of the stationary energy storage market,
owing to unique features that give them
an edge in large-scale, stationary and
long-duration energy storage applications.

These features include:
– Long lifespan cycles: ability to repeatedly
charge/discharge over 35,000 times for
a lifespan of over 20 years;

– 100 per cent depth of discharge without

material performance degradation
is unique to VRFBs;

– Low cost per kWh when fully used at
least once daily makes VRFBs today
cheaper than li-ion batteries;
– Safety, with no fire or smoke risk

from thermal runaway;

– Sustainability, with a 30 per cent lower
carbon footprint than li-ion batteries.
100 per cent of vanadium is re-usable
on decommissioning of the system;

Bushveld Minerals | Annual Report and Financial Results 2019

Electrode

Membrane

V4/V5+

Electrolyte
Tank

V2/V3+

Pump

Power source-load

Pump

– Flexibility that allows for capturing the
multi-stacked values of energy storage
in grid applications;

– No cross-contamination, with only one
battery element, which is unique among
flow batteries.

The lack of cross-contamination or
degradation of the electrolyte, as well as the
simple architecture of the VRFB that allows
electrolyte to be removed and re-used,
creates an opportunity to devise innovative
financial solutions such as electrolyte rental.
These solutions will accelerate VRFB
adoption by reducing the upfront capital
costs while creating new economic
opportunities for vanadium producers.

VRFBs: challenges
and opportunities
The VRFB market opportunity is attractive, not
only because it diversifies and underscores
vanadium demand, but also because it offers
an attractive commercial opportunity. For
this purpose, Bushveld Minerals established
Bushveld Energy to exploit the multi-billion-
dollar commercial opportunity presented by
the energy storage industry.

According to Navigant Research, global
stationary energy storage demand is forecast
to grow to 100 GWh in annual deployments
by 2027.

VRFBs must overcome two key hurdles
to achieve sustainable success: security of
supply and stability of vanadium input costs.
– Security of supply: should VRFBs achieve

the 18 per cent Navigant Research
forecast share of the annual stationary
energy storage deployments of 100 GWh
by 2027, it would indicate a vanadium
demand of over 80,000 mtV for energy
storage alone. The ability to guarantee
supply of vanadium for VRFBs will be key
to the success of these systems;
– Stability of vanadium input costs:

vanadium can range between 30 and
50 per cent of the cost of a VRFB system,
depending on the battery size and

vanadium price. The adoption of VRFBs
depends on the relative and absolute
vanadium price. Low-cost primary
producers with significant production
capacity are well positioned to address
price volatility by potentially providing
long-term, stable pricing. Furthermore,
taking advantage of the VRFB chemistry
and never selling the vanadium to a
customer but rather renting it for the life
of the VRFB or project can materially
impact the cost-competitiveness of
VRFBs, while guaranteeing re-circulation
of the vanadium.

Bushveld Minerals is uniquely positioned
to tackle these hurdles, owing to its large,
high-grade resource base and low-cost
processing facilities and capitalise on
opportunities from rapid growth in vanadium
chemicals demand and VRFB deployments.

In 2019, Bushveld Energy made significant
progress in all its key areas of focus. It
advanced development of electrolyte
production capacity, deployed its electrolyte
rental model, started to create its project
pipeline eying large energy storage
mandates, installed its first VRFB and
launched the VRFB Investment Platform as
part of its strategy of developing partnerships
for VRFB assembly/manufacturing.

Covid-19 impact on outlook
Covid-19 has impacted the 2020 outlook for
energy storage and VRFBs, but we do not
believe it has impacted the outlook for 2021
or later years. Investment and construction
have slowed in some regions for all types of
energy projects, however, current thinking is
that there will be a fairly rapid rebound. Most
projects in energy storage systems continue
to advance, including the Eskom Energy
Storage Systems tender. Due to a reduction
in electricity consumption and less pollution,
especially in Asian countries, there is a sense
that Covid-19 may accelerate the energy
transition, as some coal and gas plants may
go bankrupt due to lost revenues over this
time. This could result in a faster deployment
of storage systems.

Overall, our view of the situation is consistent
with a recent assessment by HIS Markit
“despite a subdued year in 2019 and a
challenging start to 2020 caused by the
Covid-19 outbreak, the outlook for energy
storage remains strong, with cumulative
installations of grid-connected battery
energy storage predicted to reach
64.3 GW/179 GWh in 2025”.

1 Source: Navigant Research.
2 Source: Bloomberg new Energy Finance.

Financial StatementsSupplementary InformationGovernanceBusiness Overview30

Our Strategy

Bushveld Minerals | Annual Report and Financial Results 2019

2019 Track Record:
we have delivered on our commitments

Performance against our 2019 objectives

Health and Safety
highlights

Strategic highlights

Financial highlights

Operational
highlights

– Vametco reported zero fatalities in 2019, one lost-time injury and

no new occupational health diseases cases were recorded in 2019;
– Vanchem reported zero fatalities, no lost-time injuries and no new
occupational health diseases since Bushveld Minerals took control
in November 2019.

– Completed the acquisition of Vanchem, a primary processing facility;
– As part of its strategy to improve its financing structure, the Company
secured ZAR375 million in debt facilities from Nedbank, in the form of
a ZAR250 million term loan and a ZAR125 million revolving credit facility;

– In line with the Company’s strategy to simplify its balance sheet and

corporate structure, Bushveld Minerals agreed an early settlement of the
Yellow Dragon Holdings earn-out for US$3.6 million, which was payable
under the Bushveld Vametco Limited acquisition agreement.

– Revenue of US$116.5 million, a 40 per cent reduction relative to 2018

(2018: US$192.1 million) as a result of 34 per cent decline in the average
realised price;

– EBITDA of US$32.6 million, a 68 per cent decrease relative to 2018
(2018: US$101.2 million) due to decrease in vanadium prices partly
offset by a reduction in cost of sales;

– Gain recognised on bargain purchase of US$60.6 million for the Vanchem
acquisition, completed at fair value consideration of US$55.8 million1;
– Basic Earnings per share of 5.51c (2018: 2.90c). Underlying Earnings per

share (excluding gain on bargain purchase) of 0.12c;

– US$34.0 million cash and cash equivalents as at 31 December 2019

(includes ZAR250 million term loan) (2018: US$42.0 million).

1. Refer to note 8 for details on the fair value purchase price

Vametco
– Record annual production of 2,833 mtV in the form of Nitrovan, in line with
guidance of 2,800 mtV to 2,900 mtV, representing an 11 per cent increase
relative to 2018;

– Production cash cost of US$18.11 kgV, a five per cent reduction relative
to 2018, beating 2019 guidance of US$18.90/kgV to US$19.50/kgV;
– EBITDA of US$42.8 million for 2019, despite a 34 per cent reduction

in the average vanadium price received.

Vanchem
– Safely started operations under Bushveld’s ownership in mid-November 2019;
– A total of 98 mtV, in the form of ferrovanadium and vanadium chemicals,
was produced during the first period under Bushveld Minerals’ control.

Bushveld Energy
– Launched the Vanadium Redox Flow Battery (“VRFB”) Investment Platform

in line with our strategy for partnering with VRFB companies;

– Executed our first VRFB Investment Platform investments, including a US$5
million strategic interest in Invinity Energy Systems plc2, and the acquisition,
as part of a consortium, of a 24.9 per cent stake in Enerox GmbH;

– Implemented our first electrolyte rental contract with Avalon

Battery Corporation;

– Received Environmental Authorisation for the construction of a 200 MWh

vanadium electrolyte production facility in South Africa;

– Installed our first VRFB in South Africa at the Eskom Research and

Testing facility.

US$5 million convertible loan in Avalon: US$5 million in 2019 and US$1 million in 2020.

2020 Outlook:
building on existing momentum to further unlock value
through sustainable cost reduction and capital discipline

2020 objectives

Bushveld Minerals
– Committed to zero harm, with the health, safety and well-being of our employees being one of
our priorities. We will continue to work to improve safety tools and behaviours across the Group.

– Maintain the necessary safety measures required in a Covid-19 constrained environment while

ensuring minimal disruption to the operations.

– Committed to strengthening existing relations with labour and communities across our operations.
– The Company has made significant strides in building its organisational capacity. It will continue

to do so, focusing on human capital, financial resources, the operating model, business processes
and systems.

Bushveld Vanadium
– Implement synergies across Vametco and Vanchem as we integrate the operations;
– Focus our efforts on driving operational excellence and cost reductions at Vametco and Vanchem;
– Achieve Group production of between 3,960 mtV and 4,300 mtV in 2020, which represents an

increase of between 35 per cent and 47 per cent compared with 2019.

Vametco
– Achieve production guidance of between 3,000 mtV and 3,200 mtV and production cash cost
guidance of between ZAR257/kgV and ZAR265/kgV (US$17.20/kgV and US$17.70/kgV), subject
to no further Covid-19 related stoppages;

– Continue the sustained improvement in production and cost reduction based on the Transformation

Programme that started in 2019;

– Commence the pre-feasibility study (‘PFS’) for Phase 3 of the expansion project to review the
timing and required investment to advance towards steady state production of 4,200 mtVp.a.
The estimated capital expenditure for the PFS is ZAR4 million (circa US$240,000);

– Complete the kiln off-gas project in order to comply with environmental regulation requirements

and further increase kiln feed throughput. The estimated capital expenditure for 2020 is
ZAR35 million (circa US$2 million);

– Sustaining capital expenditure of ZAR11 million (circa US$ 660,000).

Vanchem
– Achieve 2020 production guidance of between 960 mtV and 1,100 mtV and production cash cost
guidance of between ZAR245/kgV and ZAR260/kgV (US$16.30/kgV and US$17.30/kgV), subject to
no further Covid-19 related stoppages;

– Commence critical refurbishment work to enable Vanchem to continue to operate sustainably
at approximately 1,000 mtV. Total 2020 critical capital expenditure is estimated at ZAR85 million
(circa US$5 million);

– Re-establish relationships with customers who historically preferred Vanchem’s product suite

of ferrovanadium, chemicals and vanadium oxides.

Bushveld Energy
Electrolyte
– Advance construction of the vanadium electrolyte plant, with an initial 200 MWh capacity;
– Implement additional, larger electrolyte rental contracts.

E N E R G Y

VRFB manufacturing
– Advance the Vanadium Redox Flow Batteries Investment Platform;
– Complete the Enerox GmbH acquisition as part of a consortium;
– Investigate the business case for South African-based VRFB assembly.

Deployments
– Demonstrate a business case for VRFB deployments, including delivery of the Vametco mini-grid

as a funded independent power producer;

– Participate in the 2,000 MW South African Integrated Resource Plan energy storage allocation and

other African projects within the World Bank’s 17.5 GWh energy storage roll-out programme,
including at Eskom;

– Develop partial self-supply of electricity at all Bushveld operations in South Africa to de-risk

potential deterioration of the power system.

Financial StatementsSupplementary InformationGovernanceBusiness Overview32

Our Strategy continued

12-Month Indicators

Bushveld Minerals | Annual Report and Financial Results 2019

Financial performance
Sound performance, despite a 34% fall in the average realised price.

Group revenue (US$ (millions))

Group EBITDA (US$ (millions))

0.10

200

0.08

160

0.06

120

0.04

0.02

0.00 0

2018

2019

0.10

120

100

0.08

0.06

0.04

0.02

0.00 0

2018

2019

Safety
Vametco achieved an improvement of 19% in its Total
Recordable Injury Frequency rate (‘TRIF’).

Employees
Increased the number of employees by 39%.

TRIF

0.10

25
0.08

20
0.06

0.04

0.02
5

0.00 0

2018

2019

Number of employees

0.10

700

600

0.08

500

0.06

400

300

0.04

200

0.02

100

0.00 0

2018

2019

Production
15% increase in Group production.

Production cost
Reduced Vametco’s production cash cost by 5% and
maintained its first quartile position on the cost curve.

Group production (mtV)

Vametco production cash cost (US$/kgV)

0,.10
3,000

2,500
0.08

2,000
0.06

1,500

0.04

1,000

0.02

500

0.00 0

2018

2019

0.10
20

0.08
15

0.06

0.04

5
0.02

0.00 0

2018

2019

Sales
Improved sales in China from zero in 2018 to 10% of the total
in 2019, as we continued to supply to the higher-priced market.

Vametco’s sales to China

2019 Vametco Sales

0.10
10

0.08
8

0.06
6

0.04
4

0.02
2

0.00 0

20%

50%

10%

2018

2019

China

Europe

Rest of the World

Financial StatementsSupplementary InformationGovernanceBusiness Overview34

Finance Director’s Statement
Tanya Chikanza

Bushveld Minerals | Annual Report and Financial Results 2019

Building a robust
and resilient business

Overview
The 2019 financial year delivered solid
operational and financial performance for
the business. A major feature of the Group’s
performance was the 15 per cent year-on-
year increase in production, primarily from
Vametco, to 2,833 mtV, building on the
operational foundation established in 2018.
We achieved sales of 2,392 mtV resulting in a
carry-over of stock which will unwind in 2020.

From a market perspective, the year can
be considered in two halves. In the first half,
the business continued to benefit from high
vanadium prices (average London Metal
Bulletin (“LMB”) price H1 2019: US$56/kgV).
The second half of the year, however, saw
a significant decline in prices (average LMB
price H2 2019: US$27/kgV). Pleasingly, cost
of sales was generally well contained during
the year, and decreased by 20 percent. The
Group generated Earnings Before Interest,
Tax, Depreciation and Amortisation (“EBITDA”)
of US$32.6 million (2018: US$101.2 million)
representing a decrease of 68 percent from
the prior year, primarily due to the decline in
the vanadium price. Net cash from operating
activities also decreased by 50 percent to
US$22.3 million due to the decline in price.
Earnings per share was 5.51c (2018 2.9c),
due to the impact of the bargain purchase
gain recognised in the year The full details are
outlined in note 12 of the financial statements.

Bushveld Minerals completed the acquisition
of Vanchem on 7 November 2019 and
assumed control of the business from this
date. The results of Vanchem have been
fully consolidated in the Bushveld Minerals
financial statements for two months in the

2019 financial year. The accounting treatment
of this acquisition is discussed below.
During the year, Bushveld Minerals secured
ZAR375 million in debt facilities, through
its subsidiary Bushveld Vametco Alloys
Proprietary Limited, with Nedbank Limited
(acting through its Nedbank Corporate and
Investment Banking division), a South African
based financial institution, providing liquidity
for the Group. Measures were taken during
the year to install more financial discipline,
reduce costs and follow a clear framework for
allocating capital. We will continue to prioritise
these measures.

Vanchem acquisition
On 7 November 2019, Bushveld Minerals
acquired 100 per cent of the Vanchem Plant
from Vanchem Vanadium Products (Pty)
Limited and South African Japan Vanadium
Proprietary Limited, and 100 per cent of the
issued shares in Ivanti Resources (Pty) Limited

for a fair value consideration of US$55.8
million funded through a cash payment
of US$30.7 million, a convertible loan of
US$23.0 million and an additional US$2.0
million deferred consideration. The US$2.0
million deferred consideration represents the
present value of US$500,000 payable as part
of the original agreement and a top-up for
stock and working capital. The full details are
outlined in Note 8 of the financial statements.

The acquisition is consistent with the Group’s
long-term strategy of acquiring existing,
low-cost, scalable brownfield operating
assets to expedite the development of its
significant and high-grade resource base.
The acquisition expands and diversifies
Bushveld Minerals’ business with the addition
of another operating, low-cost, expandable
production processing facility, while
providing product diversification.

As guided by IFRS 3, the table below summarises the financial treatment of the acquisition:

Vanchem acquisition

Property, plant and equipment
Land and buildings
Inventories
Trade and other receivables
Cash and cash equivalents
Environmental rehabilitation liability
Trade and other payables
Provisions

Total identifiable net assets acquired at Fair Value

Fair Value of Consideration

Acquisition related costs

Gain on Bargain Purchase

Refer to Note 8 of the financial statements for further detail.

US$

114,668,826
6,137,787
7,480,482
900,154
10,492
(10,382,628)
(906,727)
(13,899)

117,894,487

(55,787,885)

(1,519,969)

60,586,633

“

During the year, the Group
secured ZAR375 million in debt
facilities, comprised of a term
loan of ZAR250 million and an
RCF of ZAR125 million which
was subsequently drawn down in
March 2020 to enhance liquidity
and provide financial flexibility
in light of the uncertainty
arising from the Covid-19
pandemic and lockdown.”

Financial StatementsSupplementary InformationGovernanceBusiness Overview36

Finance Director’s Statement continued

Bushveld Minerals | Annual Report and Financial Results 2019

In accounting for the acquisition of Vanchem
as a business combination, we assessed
whether Vanchem met the IFRS 3 definition
of ‘a business’. IFRS 3 states that “a business
consists of inputs and processes applied to
those inputs that have the ability to create
outputs” and we have concluded that, at the
date of acquisition, Vanchem had inputs
(inventories and plant and equipment with
installed capacity), processes (methodology,
manufacturing ability, intellectual property and
a skilled workforce) and the ability to produce
outputs in the form of vanadium products.

we engaged an independent valuation expert
to value the assets acquired using the cost
approach, which we consider to be the most
appropriate fair value measurement technique
given the nature of the assets acquired and
the circumstances of the acquisition.

Where a business combination results in a
bargain purchase, IFRS 3 requires the acquirer
to reassess whether it has correctly identified
all of the assets and liabilities acquired and to
review the procedures used to measure the
fair values recognised at the acquisition date.
We have completed this assessment and
concluded that the recognition of a bargain
purchase is appropriate. In coming to this
conclusion we have considered the
circumstances of the sale as Vanchem was
in business rescue and therefore not an open
market transaction, and the advantages of
Vanchem which fit into the Group’s diversity
and growth strategy, advantages of which
are disclosed in note 8.

Analysis of results
Income statement summary (as adjusted from ‘statutory’ primary statement presentation)

Revenue
Cost of sales
Other operating and administration costs

EBITDA
Depreciation

Operating profit
Gain on bargain purchase – Vanchem
Net financing expense
Other non-operating costs

Profit before tax

Income tax charge
Profit after tax

US$
2019

US$
2018

116,514,112
(47,828,763)
(36,043,392)

32,641,956
(10,388,145)

22,253,811
60,586,633
1,923,687
(1,510,572)

192,089,845
(59,555,190)
(31,320,238)

101,214,417
(6,039,339)

95,175,078
–
753,927
(9,323,939)

83,253,558

86,605,066

(14,005,965)
69,247,593

(37,604 907)
49,000,159

The operating profit for 2019 was US$22.3
million compared with the prior year profit of
US$95.2 million, the reduction was mainly
due to the decrease in the commodity price
during the year. EBITDA for 2019 were
US$32.6 million, a decrease of US$68.5
million on 2018, mainly driven by weaker
commodity prices and inflationary increases
on the relevant cost items. There were also
once-off costs incurred for transformational
agents at Vametco as well as the acquisition
expenses which could not be capitalised.
Profit before tax was US$83.2 million (2018:

US$86.6 million), as a result of the gain on
bargain purchase (US$60.6 million) on the
Vanchem acquisition which was completed at
a lower price than the recognised fair value.

Revenue
Revenue for the Group amounted to US$116.5
million (2018:US$192.1 million). The Vametco
sales volume in 2019 was 2,392 mtV at an
average price of US$49/kgV with an average
exchange rate of ZAR14.4 to the United States
dollar (2018: 2,573 mtV, average price
US$74/kgV, average exchange rate ZAR13.2/

USD). Vametco sold 50 per cent of its product
to the United States, 20 per cent to Europe,
10 per cent to China and 20 per cent to the
rest of the world. Vametco’s average delivery
period to the final customer is eight to 12
weeks. The timing of deliveries that occur on
or around half-year and year-end impacts the
timing and quantum of revenue recognised
for commodity sales in each financial period.

Other revenue was generated from Vanchem:
US$89,000 (2018: nil) and Bushveld Energy:
US$71,000 (2018: nil). As Vanchem was only
acquired in November 2019, with a startup of
the plant mid-November, sales were minimal
with additional material held in stock.

Cost of sales
Cost of sales for the period amounted
to US$56.2 million (2018: US$65.3 million).
The reduction is primarily attributable to
the reduction in sales volumes at Vametco
for the year to 2,392 mtV (2018: 2,573 mtV).

A planned maintenance programme of
22 days in 2019 was completed as part
of Vametco’s improvements in equipment
efficiency, reduced downtime, and operational
stability. This has allowed the business to
reduce the downtime planned for 2020.

Operations at Vanchem were started
mid-November as production had
temporarily stopped prior to our acquisition
on 7 November 2019. A total of 98 mtV, in
the form of ferrovanadium and vanadium
chemicals, was produced during the first
period under Bushveld Minerals’ control.

Operations were affected by the power
rationing at the municipal level during the
fourth quarter of 2019 at Vanchem, however,
it did not materially impact production.
The Vametco operations were not affected
by the power rationing as the operations
have a direct line from the grid and are not
connected through the municipal line. The
Group is working on securing a dedicated
power line for the Vanchem operation.

The Group continues to refine its plans for
Vanchem, as operations are stabilised and the
synergies between the various intercompany
resources are unpacked.

Other operating and
administration costs
Other mine operating costs included
community, social and labour plan costs
at Vametco. Idle plant costs mainly reflected
the 22-day planned maintenance shutdown
implemented in the third quarter of 2019.
Administrative expenses included staff salaries
of US$9.6 million (2018:US$7.1 million) for
head office, Bushveld Energy and Lemur
and professional fees of US$7.6 million
(2018: US$1.9 million) mainly attributable to
transformational agent costs which amounted
to US$3.5 million, Johannesburg Stock
Exchange listing preparation costs of US$1
million, and other regulatory and governance
fees of US$1 million. Other costs incurred
related to security, travel and accommodation,
rental, conference marketing, as well as
provision for historical debtors of US$3 million
with the key amount attributable to the
take-on debtors on the acquisition of Strategic
Mineral Resources (“SMC”) of US$1.9 million.

The below EBITDA reconciliation illustrates
the impact of the decline in the vanadium
price from the prior year. The operating
costs also declined with the mineral royalty
payable relative to sales. The royalties are
paid by Vametco on the Unrefined Rate
of 0.5 + { EBIT/(Gross sales x 9) } x100 with
a maximum Royalty percentage payable
for Unrefined minerals at 7%.

Taxation amounted to US$14.0 million for
2019 (2018: US$37.6 million), mainly driven
by the decline in taxable income at Vametco
as a result of the decline in the commodity
price. The tax was offset by the tax refund
of US$5.0 million received as a result of
the conversion of SMC to a limited liability
company. This also meant that the deferred
tax asset at SMC had to be reversed. The gain
on bargain purchase is treated as a permanent
difference for tax purposes and will not attract
corporate income tax.

Balance sheet
Assets
Non-current assets increased during the
year in line with the growth strategy of
the business. The most significant increase
came from the Vanchem acquisition, as
noted above. There was also an increase
in the investments in other businesses,
namely Avalon Battery Corporation
(‘Avalon’) and Enerox GmbH (‘Enerox’)
as the Group matures its footprint in the
energy storage market.

Current assets decreased due to the decline
in the commodity price and its effect on the
quantum of accounts receivable. The cash
and cash equivalents decreased due to the
cash payment for the Vanchem acquisition,
offset by the drawdown of the debt raised in
the year. Stock levels also increased because
sales volumes were lower than production
both at Vametco and Vanchem.

2018 EBITDA
Revenue changes
Operating cost changes excluding foreign exchange impact
Inventory movement excluding foreign exchange impact
Change in realised foreign exchange and other working capital

2019 EBITDA

US$

101,214,417
(75,575,733)
(8,594,176)
8,912,861
6,684,587

32,641,956

Equity and liabilities
On 30 October 2019, the Group secured
ZAR375 million in debt facilities from
Nedbank, comprised of a ZAR125 million
revolving credit facility (‘RCF’) and a ZAR250
million term loan which was drawn down
at the time. The Group drew down the
remaining RCF of ZAR125 million at the
end of March 2020 to enhance liquidity
and provide financial flexibility at the onset of
the Covid-19 nationwide lockdown. Overall,
Bushveld’s gross cash and cash equivalent
position as at 31 December 2019 was
US$34.0 million. The full details are outlined
in Note 23 of the financial statements.

With the acquisition of Vanchem, there was
an increase in the environmental liability. The
liabilities further increased by the convertible
loan instrument payable as mentioned in
the acquisition note above. Other liabilities
included the adoption of IFRS 16 relating
to the initial recognition and measurement
of the lease liability.

Cash flows
Net cash flows from operating activities for
the year were US$28.5 million, a decrease of
US$16.5 million compared with 2018, driven
by reduced profitability. Capital expenditure
and investing activities for the year were
US$49.7 million, an increase of US$21.5
million over 2018, mainly due to the
acquisition of Vanchem as well as
investments in Avalon and Enerox.

Subsequent to the year end, at the end
March 2020, Bushveld drew down on its
RCF of ZAR125 million to enhance liquidity
and provide financial flexibility during
the uncertainty arising from the Covid-19
pandemic and the South African 35-day
nationwide lockdown. Bushveld Minerals’
unaudited gross cash and cash equivalent
position at 31 March 2020 was US$34.4
million, which includes ZAR375 million
in debt facilities.

Financial StatementsSupplementary InformationGovernanceBusiness Overview38

Finance Director’s Statement continued

Bushveld Minerals | Annual Report and Financial Results 2019

Cash generation
The table on the right summarises the main
components of the cash flow during the year:

Operating activities
The majority of the cash generated from
operating activities was from Vametco,
offset by head office activities, as disclosed in
the income statement section of the report.
Other working capital changes included
an increase in the finished goods and work
in progress items, offset by a reduction in
accounts receivable, mainly driven by the
reduction in sales prices due to the lower
commodity price. This is evident in accounts
payable, which have also reduced, mainly
due to the lower amount payable for
commissions because of the price reduction.
Taxes paid are net of a refund of US$5 million
on the conversion of SMC into a limited
liability company.

Investing activities
Investing activities included US$30.7 million
cash paid for the Vanchem purchase,
US$4.4 million investments in Avalon and
Enerox as well as the cash repayment of
US$3.6 million for the deferred consideration
payable to Yellow Dragon Holdings. This
was offset by interest generated on bank
deposits amounting to US$3.6 million.

Financing activities
Dividends paid as a result of upstreaming
cash from Vametco to the holding company
resulted in a leakage of US$4.5 million
which was paid to the 26 per cent minorities
of Vametco.

Financial risk management
The main financial risks faced by the Group
relate to the availability of funds to meet
business needs (liquidity risk), the risk
of default by counterparties to financial
transactions (credit risk), fluctuations in
interest and foreign exchange rates and
commodity prices. These factors are more
fully outlined in the notes to the accounts.
They are important aspects to consider
when addressing the going concern status,
particularly in the context of the Covid-19
pandemic. We are proactively managing the
risks within our control. There are, however,

Cash generation and net cash
The following table summarises the main components of the cash flow during the year:

Operating profit
Depreciation and amortisation
Changes in working capital and provisions
Taxes paid

Cash flow from operations
Sustaining capital1

Free cashflow
Cash from other investing activities
Financing activities

Cash (outflow)/inflow
Opening net cash
Foreign exchange movements

Closing net cash

2019
US$

2018
US$

22,253,811
10,388,145
4,586,737
(8,767,312)

28,461,381
(3,652,977)

24,808,404
(46,077,866)
13,287,374

(7,982,088)
42,019,123
(25,478)

95,175,078
6,039,339
(25,350,569)
(30,923,733)

44,940,115
(11,205,702)

33,734,413
(17,065,886)
16,238,967

32,907,494
9,739,632
(628,003)

34,011,557

42,019,123

1. Sustaining capital is defined as the capital expenditure required for maintaining and sustaining existing

production assets. This includes the replacement of plant and machinery and capital expenditure related to
safety, health, and the environment.

factors which are outside the control
of management, specifically volatility in
the ZAR:USD exchange rate as well as the
vanadium price, which we do not currently
hedge and which can have a significant
impact on the business.

Going concern
The Group manages liquidity risk by ensuring
that it has sufficient funds to facilitate all
ongoing operations. The Group’s philosophy
is to maintain a low level of financial gearing
given its exposure to the vanadium price
and exchange rate fluctuations.

As part of the annual budgeting and
long-term planning process, the Group’s
budget and cashflow forecasting is reviewed
and approved by the Board. The cashflow
forecast is amended in line with any material
changes identified during the year. Equally,
where funding requirements are identified
from the cashflow forecast, appropriate
measures are taken to ensure these
requirements can be satisfied. In particular,
a capital allocation framework is applied
which prioritises maintenance, critical and
regulatory capital funding requirements.
During the year, the Group secured ZAR375
million in debt facilities, comprised of a
term loan of ZAR250 million and an RCF
of ZAR125 million which was subsequently

drawn down in March 2020 to enhance
liquidity and provide financial flexibility
in light of the uncertainty arising from
the Covid-19 pandemic and lockdown.
At 31 December 2019, the Group held
substantial cash balances of circa US$34.0
million, placing it in a strong position.

The Group also closely monitors its liquidity
risk. It regularly produces cash forecasts and
analyses sensitivities for different scenarios,
including, but not limited to, changes in
commodity prices and different production
profiles from the Group’s producing assets.
The impact of Covid-19 has been assessed
by the Group and, although the operations
are producing again following the 35-day
lockdown period, near-term operating
conditions remain uncertain. Management
has run various scenarios and sensitivities
to provide the Board with various possible
outcomes to direct strategy in the best
interests of the business and its shareholders.
Consequently, the Group will continue
to take a prudent and proactive approach
towards managing liquidity and taking cash
preservation measures necessary to navigate
this uncertain and unprecedented period.

Based on the current status of the Group’s
finances, having considered cashflow
forecasts and all reasonable possible

and the financial stability of the business
to secure its longer-term sustainability.

Full details of Bushveld’s response to this
pandemic can be found in the Principal Risks
section of the report.

Tanya Chikanza
Finance Director
23 June 2020

investments and downside scenarios,
as well as the Group’s debt facilities and
terms, the Group’s forecasts indicate it will
have sufficient liquidity headroom to meet
its obligations in the ordinary course of
business for the 12 months following the
date of approval of the financial statements.

2020 outlook and
Covid-19 impact
The Group will continue to prioritise
operational performance, cost efficiencies
and synergies across Vametco and Vanchem,
and will maintain a disciplined approach
towards managing capital expenditure and
optimising operating margins. Our operations
began to ramp-up to pre-lockdown levels in
early May 2020. Vametco restarted operations
in mid-April 2020 when it was granted a
permit to ramp-up to 50 per cent capacity, in
line with the Amended Disaster Regulations
announced by the South African Government
on 16 April 2020. Vanchem restarted
operations in early May when the country
transitioned to Level 4, in accordance with
the Government’s risk-adjusted strategy
for economic activity. We have, for now,
maintained the 2020 production guidance for
both Vametco and Vanchem. We will however
continue to monitor the situation in light of
the Covid-19 virus driven risks and their
potential resultant impact on our operations.

As a precaution we have taken cash
preservation measures to manage near-term
liquidity while preserving the long-term
sustainability of the assets. Steps to conserve
cash resources include limiting operational
expenditure where necessary. We are
applying a capital prioritisation framework
which involves reducing as well as deferring
growth associated (non-critical) near term
capital expenditure whilst prioritising
regulatory capital across the business. In line
with the Group’s capital and cash
preservation measures we anticipate ZAR11
million (circa US$660,000) of sustaining
capital at Vametco, ZAR120 million (circa
US$7.2 million) of critical refurbishment
and regulatory capital expenditure at
Vametco and Vanchem and ZAR4 million
(circa US$240,000) as growth for the
Vametco Phase 3 pre-feasibility study.

From a supply chain perspective, the Group
has ensured security of supply and put in
place sufficient contingency plans. Bushveld
continues to work with its customers to fulfil
orders and meet their requirements while still
complying with Government directives. The
supply chain is open and customer orders
remain robust. The Company has not had
to declare force majeure. Management will
continue to focus on taking the necessary
steps to protect its staff and communities,

Financial StatementsSupplementary InformationGovernanceBusiness Overview40

Bushveld Minerals | Annual Report and Financial Results 2019

Details of Operating Assets and Operational Review

Bushveld Vanadium

KEY

Main Road

Railway

KEY

Main Road

Railway

Bushveld has one of the largest, high-grade
primary vanadium resource bases in the world.
The Company’s vanadium resource comprises
of three mineral assets: Vametco, Brits and
Mokopane. It also has two processing facilities:
Vametco and Vanchem. All of these assets are
situated in South Africa.

WESTERN
LIMB

WESTERN
LIMB
Brits

Rustenburg

Brits

Rustenburg

Vametco

Brits

Pretoria
11

NORTHERN
LIMB

Mokopane

EASTERN
LIMB

Vanchem

Middelburg

Vanchem

Witbank
3

Middelburg

Witbank

kilometers

Vametco

Johannesburg

Pretoria

Johannesburg

Bushveld Minerals’ large high-grade resource base and processing facilities comprise:

1. Vametco
Integrated mine and processing facility

2. Brits
Resource

Vametco is a primary low-cost vanadium mining and processing
operation, using the salt roast beneficiation process, with a 185.5
Mt JORC-compliant resource, including 47.4 Mt in reserves, with
in-magnetite vanadium grades averaging 2.0 per cent V2O5 and
a life of mine of more than 30 years (details can be found in
the Minerals Resource and Reserves section of this report).
The Vametco mine is an opencast mine along a strike of
approximately 3.5 kilometres. Vametco produces a steel-alloying
vanadium carbon nitride product, called Nitrovan.

In 2020, the Company will commence the pre-feasibility study for
Phase 3 of the multi-phase expansion project, to advance towards
a steady state production of 4,200 mtVp.a by 2025. The estimated
total capital expenditure required for Phase 3 is approximately
ZAR430 million (circa US$26 million), with most of the cost being
Rand-denominated. The capital expenditure is subject to further
definitive feasibility study work.

Brits includes prospecting rights and a mining right under
application on farms adjacent to Vametco. The mineralisation
is outcropping and a continuation of the Vametco deposit.
The Maiden Resource Statement published in July 2019 and
JORC-compliant Competent Person’s Report published in
January 2020 showed an aggregate Inferred and Indicated
Mineral Resource distributed across the three seams (the Lower,
Intermediate, and Upper Seams) of 66.8 Mt at an average grade
of 1.6 per cent V2O5 in-magnetite, which is among the highest
grades in the world. Brits has the potential to supply additional
feed tonnage for the Vametco plant, and if required, concentrate
feed for Vanchem.

3. Vanchem
Processing facility

4. Mokopane
Project

Vanchem is a primary low-cost vanadium processing facility.
It uses the salt roast beneficiation process, producing approximately
80 mtV per month (approximately 960 mtVp.a.). Vanchem has three
roasting kilns and associated leaching facilities, a vanadium chemical
facility, a vanadium pentoxide flake plant, two ferrovanadium
convert plants – an electric smelting and an alumino-thermic
smelting facility. Vanchem produces vanadium pentoxide,
ferrovanadium, vanadium chemicals and it is capable of producing
vanadium trioxide. The Company has completed a preliminary
desktop scoping study of the refurbishment programme for the
plant to achieve a steady state production run-rate in excess of
4,200 mtVp.a. by 2025. This will be attained in three phases. The
estimated total capital expenditure required for the refurbishment
of the plant is ZAR750 million (circa US$45 million), with most of the
cost being Rand-denominated. The production profile and capital
expenditure is subject to further definitive feasibility study work.

Mokopane is one of the world’s largest primary vanadium
resources, with a 298 Mt JORC-compliant resource, including
28.5 Mt in reserves and a weighted average grade of 1.4 per cent
V2O5 in-whole rock and 1.8 per cent V2O5 in-magnetite.
Mokopane is intended to become a primary source of feedstock
for Vanchem. The long-term plan remains to develop Mokopane
into a standalone integrated mine and processing plant. The
total capital expenditure for the development of the Mokopane
mine, including mine development and beneficiation plant
(crushing, screening and dry magnetic separation) and associated
surface infrastructure, is estimated at ZAR370 million (circa
US$22 million).

1. Vametco

Vametco is an integrated mining and
processing plant located eight kilometres
northeast of Brits in the North West Province
of South Africa. The operation owns the new
order mining right for vanadium and other
associated minerals over Portion 1 of the
farm Uitvalgrond 431 JQ and Portion 1 of the
farm Krokodilkraal 426 JQ in Brits. Vametco
operates an open pit mine supplying ore
to a vanadium processing plant located
on the same properties. It has a total of
516 employees and contractors.

Mine
Vametco’s open pit mine is approximately
3.5 kilometres long, extending in a west-east
direction. The ore body is well-defined,
continuous and dips in a north-east direction
at approximately 19 to 20 degrees. The mine
is based on a JORC-compliant resource of
185.5 Mt, including 47.4 Mt reserves, with
in-magnetite vanadium grades averaging
2.0 per cent V2O5, with a life of mine of
more than 30 years.

Processing
Vametco’s processing plant receives ore
from the co-located Vametco mine. Vametco
employs the standard salt roast and leach
process to produce a steel-alloying vanadium
carbon nitride product called Nitrovan.
The process involves the following stages:
– Step 1: Crushing, milling and magnetic
separation to produce a magnetite
concentrate with average grades
of approximately 2.0 per cent V2O5
in-magnetite;

– Step 2: Salt-roasting the concentrate,
where the concentrate is roasted with
sodium salts in a kiln at approximately
1,150°C to form a water-soluble sodium
vanadates material;

– Step 3: Leaching and purification,

with dissolution of roasted vanadium
concentrate in water, purification, and
precipitation of vanadium through the
addition of ammonium sulphate followed
by drying and then processing in
a reducing environment to produce
a Modified Vanadium Oxide (‘MVO’)
product; and

– Step 4: Nitrovan production: the MVO is
briquetted and fed into a shaft induction
furnace in a nitrogen atmosphere to
produce Nitrovan, which is used as
a micro-alloy in steel production.

2019 operational performance
– Vametco achieved record annual

production of 2,833 mtV (100 per cent
basis) in the form of Nitrovan from
magnetite feed only, meeting 2019
guidance of 2,800 to 2,900 mtV. This is
an 11 per cent increase relative to 2018
(2018: 2,560 mtV), reflecting a robust
operational performance underpinned
by the Transformation Programme;

– Vametco beat 2019 production cash cost
guidance of US$18.90/kgV to US$19.50/
kgV, achieving a 2019 production cash
cost of US$18.11/kgV. This is a five per
cent reduction compared with 2018
(2018: US$19.11/kgV), underpinned by a
weaker ZAR: USD relative to 2018, as well
as higher production volumes and a cost
reduction programme, offset by a higher
inflation rate;

– Vametco sold 2,392 mtV resulting in

a carry-over of stock which will unwind
in 2020;

– Vametco generated an audited EBITDA
of US$42.8 million for 2019 despite
a 34 per cent reduction in the average
vanadium price received.

Ore

Magnetite

AMV

MVO

Nitrovan

Financial StatementsSupplementary InformationGovernanceBusiness Overview42

Bushveld Minerals | Annual Report and Financial Results 2019

Details of Operating Assets and Operational Review continued

Table 1: Operational highlights for Vametco (on a 100 per cent basis) 1

Description

Vanadium (Nitrovan plus FeV) produced

Vanadium sold

Average realised price3

Revenue4

EBITDA

Production cash cost5

Unit

mtV2

US$/kgV

US$ m

ZAR/kgV

US$/kgV

2019

2,833

2,392

48.9

116.3

42.8

262

18.11

2018

2,560

2,573

74.0

192.3

107.8

253

19.11

2019 vs
2018

10.7%

-7.0%

-33.8%

-39.5%

-60.3%

3.7%

-5.2%

1. Bushveld’s net attributable interest of the above figures is approximately 74%.
2. mtV = metric tonnes of vanadium.
3. Realised price is based on the prior month’s mid average price before commissions.
4. Gross Revenue.
5.

Includes direct costs of production. Excludes depreciation, royalties and selling, general & administrative expenses.

Transformation Programme
In September 2017, Bushveld Minerals began
an expansion initiative to increase Vametco’s
production from approximately 2,600 mtVp.a.
to 4,200 mtVp.a.

The first two phases of the expansion,
designed to increase production to 3,400
mtVp.a., were completed in June 2018. To
complement the capital expansion, Bushveld
Minerals, with the assistance of external
consultants, undertook a detailed diagnostic
review aimed at identifying opportunities to
enhance operational efficiencies. The review
identified a number of initiatives to improve
operational performance, focusing on
stabilising and improving production,
reducing costs, raising capital efficiencies
and improving overall organisational health.

In 2019, Vametco made several changes
to its management structure, which were
designed to build greater depth in the
leadership team, improve co-ordination
with the greater Bushveld Group and create
dedicated capacity to co-ordinate the
development and implementation
of the many initiatives forming part
of the Transformation Programme.

These changes included the appointment of
Bertina Symonds as General Manager, a role
created by combining the Chief Executive
Officer and Chief Operating Officer functions.

During 2019, Vametco successfully
implemented its operational improvement
programme, resulting in improvements
in all key areas:
a) production scheduling;
b) vanadium grade in the kiln feed;
c) the hourly feed rate to the kiln; and
d) recoveries.

All these areas contributed to greater
throughput at higher grades.

Phase 3 of the multiphase
expansion project
In 2020 the Company will commence the
pre-feasibility study (“PFS”) for Phase 3 of the
expansion for Vametco to achieve a steady
state production run-rate of 4,200 mtVp.a,
by 2025. The preliminary capital expenditure
for Phase 3 is estimated at approximately
ZAR430 million (circa US$26 million), with
most of the cost being Rand-denominated.
The capital expenditure and ramp-up profile
will be finalised after feasibility studies are
completed and are subject to ongoing
review in the context of the Covid-19
pandemic. The Company will, over the
period, prioritise spend depending on
market conditions.

2019 Capital expenditure
– Sustaining capital expenditure required
for maintaining and sustaining Vametco
was US$3.7 million;

– A kiln off-gas project was initiated in 2018
to comply with environmental regulations
relating to air emissions and further
increase kiln feed throughput. During
2019, Vametco invested US$6 million
in the project.

2020 outlook and
capital expenditure
– While Vametco’s 2020 production

was disrupted by the 35-day nationwide
lockdown due to the Covid-19 pandemic,
the Company retains the 2020 guidance
of between 3,000 mtV and 3,200 mtV
with a production cash cost of between
ZAR257/kgV and ZAR265/kgV (US$17.20/
kgV and US$17.70/kgV). The achievement
of guidance is subject to no further
stoppages related to Covid-19;

– Commissioning of the kiln off-gas project
was planned to be completed during the
first half of 2020. However, due to the
Covid-19 lockdown, commissioning is
now expected to be completed during
the second half of 2020. The estimated
2020 capital expenditure for 2020 is
ZAR35 million (circa US$2 million);

– Sustaining capital expenditure of
ZAR11 million (circa US$660,000)
is expected for the year;

– The Company will commence the PFS for
the Phase 3 expansion project, to review
the required investment to advance
towards steady state production of
4,200 mtVp.a. The expected 2020 capital
expenditure for the PFS is ZAR4 million
(circa US$240,000). The estimated total
capital expenditure required for Phase 3
is approximately ZAR430 million (circa
US$26 million), with most of the cost
being Rand-denominated. The capital
expenditure is subject to further definitive
feasibility study work.

2. Brits

The project hosts high-grade vanadium
mineralisation in several magnetite layers.
The mineralisation, which is outcropping,
is a continuation of the Vametco strike.
The project offers a potential extension of
Vametco’s Life of Mine and a cheap source
of near-surface ore for the Vametco plant.
Recent drilling has shown lower seam
weighted average grades of 0.6 per cent
V2O5 in-whole rock and 1.6 per cent V2O5
in-magnetite, which are among the highest
in the world. A Competent Person’s Report
(‘CPR’) was published in January 2020 and

3. Vanchem

On 7 November 2019, Bushveld Minerals
announced the successful completion of the
Vanchem plant acquisition for a fair value
consideration of US$55.8 million1.

Vanchem is a primary vanadium-processing
facility with a beneficiation plant producing
vanadium pentoxide, ferrovanadium and
vanadium chemicals. It is capable of
producing vanadium trioxide. Vanchem uses
the salt roast beneficiation process, similar
to that used at Vametco, and is currently
producing circa 80 mtV per month using
a single kiln.

The plant consists of the following
components:
– A rail siding which was historically used

to transport ore to Vanchem;

– A milling and concentrating (magnetic
separation) facility for the treatment
of magnetite;

– A roast/leach configuration with three kilns;
– An ammonium poly-vanadate precipitation
plant which will be replaced with a new
ammonium metavanadate plant;

– A de-ammoniation/vanadium trioxide plant;
– Vanadium pentoxide flake production

facilities;

– An electric smelting facility for conversion
of vanadium trioxide to ferrovanadium;
– An aluminothermic smelting facility, for
conversion of vanadium pentoxide into
ferrovanadium; and

– A vanadium chemical plant producing
various vanadium chemical products.

Vanchem is located at Ferrobank Industrial
Park in Emalahleni Local Municipality,
Mpumalanga Province, in South Africa.
It has been operating since the late 1970s,

Refer to note 8 for details on the fair value
purchase price

can be found on our website http://www.
bushveldminerals.com/wp-content/
uploads/2020/01/Independent-CPR_Brits-
Vanadium_January_2020_Final.pdf.

Brits has the potential to provide additional
feed tonnage for Vametco and, if required,
concentrate feed for the Vanchem plant.

The Company’s interest in the asset ranges
between 51 per cent and 74 per cent through
three different companies, one of which is
Caber Trade Mining and Invest 1 (Pty) Ltd
(‘Caber Trade’), the mining right applicant,
in which the Company holds an interest
of 51 per cent.

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.
Without guaranteed ore supply from Mapochs,
Vanchem was forced into Business Rescue
in November 2015 with the Vanchem plant
being 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.

The ferrovanadium facilities are located at the
Highveld site and are situated approximately
10 km from the Vanchem plant.

Vanchem has secured sufficient ore supply
from third parties to support current levels
of production until the first half of 2021.
The Company retains the optionality
to supply magnetite concentrates from
Vametco to the Vanchem.

Vanchem processing:
– Step 1: Crushing, milling and magnetic
separation to produce a magnetite
concentrate with average grades of
approximately 1.65 per cent V2O5
in-magnetite;

– Step 2: Salt-roasting of concentrate. The
concentrate is roasted with sodium salts
in a kiln at approximately 1,150°C to form
a water-soluble sodium vanadate material;
– Step 3: Leaching and purification, involving

dissolution of roasted vanadium
concentrate in water, purification and
precipitation of vanadium through the
addition of ammonium sulphate, followed
by drying and then processing in a reducing
environment to produce an ammonium
metavanadate (‘AMV’) product;

– Step 4: The AMV is de-ammoniated and
melted to produce vanadium pentoxide
flakes – a primary product. The AMV is
also used in other processes to produce
a spectrum of vanadium chemicals; and

The Caber Trade mining right application
was recently refused by the Department
of Mineral Resource and Energy, since it did
not fulfil certain conditions set out in the
2012 letter of acceptance. Caber Trade has
subsequently lodged an appeal against the
decision, on the grounds that the process
followed in the refusal decision was
administratively flawed.

The Caber Trade properties were not
included in the CPR, therefore the refusal
of the mining right has no impact on the
mineral resource statement.

– Step 5: vanadium pentoxide is reduced by
aluminium in the aluminothermic process
in the presence of iron to produce
ferrovanadium – a primary product.

Rationale for the acquisition
The acquisition is consistent with Bushveld’s
long-term strategy of acquiring existing,
low-cost scalable brownfield operating
assets in South Africa to expedite the
development of its significant and high-
grade resource base. By sustainably reducing
costs, Vanchem will generate healthy
margins throughout the commodity cycle.

Key advantages:
– Increasing the Group’s exposure
to vanadium, a commodity with
compelling fundamentals;

– Supporting Bushveld Minerals’ target

production of more than 8,400 mtVp.a.
After completion of a refurbishment
and ramp-up programme, Vanchem
is expected to support steady state
production in excess of 4,200 mtVp.a.
– Diversifying the Company’s geographical
mining and production footprint within
South Africa. It also adds another processing
facility and its three kilns provide optionality
and increased availability during planned
and unplanned kiln maintenance;
– Adds new vanadium products to the

portfolio. Vanchem produces vanadium
pentoxide, ferrovanadium, vanadium
chemicals and it is capable of producing
vanadium trioxide, complementing
Vametco’s existing Nitrovan offering;
– Enhancing 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;

– Expediting the development of

Mokopane, which has been identified
as a primary source of feedstock,
to create a fully-integrated business.

Financial StatementsSupplementary InformationGovernanceBusiness Overview44

Bushveld Minerals | Annual Report and Financial Results 2019

Details of Operating Assets and Operational Review continued

Vanchem continued

Refurbishment programme
and capital expenditure
The Company has completed a preliminary
desktop scoping study on the refurbishment
programme for the entire plant to achieve a
steady state production run-rate in excess of
4,200 mtVp.a. by 2025, fully utilising a three kiln
configuration, after a three phase refurbishment
programme. The total preliminary
refurbishment capital expenditure is estimated
at approximately ZAR760 million (circa US$45
million), with the majority of the capital being
Rand-denominated. The refurbishment
programme will be conducted as follows:
– Phase 1: critical refurbishment

requirements, including extending
the calcine dump facility, replacement
of heavy moving equipment, upgrade
of the electrical reticulation system and
construction of a storm water treatment
facility. This phase is expected to require
a capital expenditure of ZAR234 million
(circa US$14 million) and be carried
out in 2020 and 2021, with production
estimated at approximately 1,100 mtVp.a.
The 2020 critical refurbishment of ZAR85
million (circa US$5 million) will focus on

extending the calcine dump and
commence the upgrade of the electrical
reticulation system and the storm
water treatment;

subject to ongoing review in the
context of the Covid-19 implications. The
Company will, over the period, prioritise
spend depending on market conditions.

– Phase 2: includes the refurbishment

of the first idle kiln and the construction
of a new ammonium metavanadate
plant. This phase will result in the plant
achieving a production of 3,100 mtVp.a.
after ramp-up. This phase is expected to
require a capital expenditure of ZAR355
million (circa US$21 million) and to
be carried out in 2021 and 2022; and
– Phase 3: includes the refurbishment of

the second idle kiln, the vanadium trioxide
plant, the vanadium pentoxide plant and
other associated infrastructure. This phase
will increase production to more than
4,200 mtVp.a. after ramp-up, it is
expected to require a capital expenditure
of ZAR171 million (circa US$10 million)
and be carried out in 2023 and 2024;
– The capital expenditure, ramp-up profile,
and timing to achieve a production in
excess of 4,200 mtVp.a. will be finalised
after prefeasibility and feasibility studies
are concluded. These estimates are

2020 outlook and
capital expenditure
– While Vanchem’s 2020 production

was disrupted by the 35-day nationwide
lockdown due to the Covid-19 pandemic,
the Company retains the 2020 guidance
of between 960 mtV and 1,100 mtV
with a production cash cost of between
ZAR245/kgV and ZAR260/kgV (US$16.30/
kgV and US$17.30/kgV). The achievement
of guidance is subject to no further
stoppages related to Covid-19;

– Given Vanchem’s modular configuration,

we have established that the critical
refurbishment programme to sustain
current production level of approximately
1,100 mtV in 2020 will cost ZAR85 million
(circa US$5 million). The 2020 critical
refurbishment will focus extending
the calcine dump and an initial upgrade
of the electrical reticulation system.

4. Mokopane

Mokopane is located on the central portion
of the northern limb of the Bushveld
Complex. The project is in the Mokopane
District of Limpopo Province, approximately
65 kilometres west of the provincial capital,
Polokwane. The project includes one of the
world’s largest primary vanadium resources,
with a weighted average grade of 1.4 per
cent V2O5 in-whole rock and 1.8 per cent
V2O5 in-magnetite.

Licensing
On 29 January 2020, the Department of
Mineral Resources and Energy in South Africa
executed a 30-year mining right in favour of
the company’s subsidiary, Pamish Investments
No. 39 (Pty) Ltd (‘Pamish’), over five farms:
Vogelstruisfontein 765 LR; Vriesland 781 LR;
Vliegekraal 783 LR; Schoonoord 786 LR;
and Bellevue 808 LR.

Ownership
While the Mokopane’s mining right is subject
to Mining Charter II regulations, the Company
is committed to adopting Mining Charter III
regulations in respect of host community
and employee shareholding requirements.
In accordance with Mining Charter III, five per
cent of the equity in Pamish will be sold by the
existing shareholders (Bushveld Minerals and

Izingwe Capital (Pty) Ltd) to the Bakenberg
Community Trust, a trust established for the
benefit of the local communities. This five per
cent share will be vendor-financed and repaid
from future proceeds from the mine. Bushveld
Minerals’ interest in the Mokopane Project will
accordingly reduce from 64 per cent to 60.8
per cent, while Izingwe’s shareholding will
reduce from 36 per cent to 34.2 per cent.
Pamish has further committed to allocate
an additional five per cent to an Employee
Share Ownership Participation Scheme
once the mine is operational, which will
result in Bushveld Minerals ultimately holding
57.6 per cent and Izingwe 32.4 per cent.

Geology & Resources
The Mokopane deposit is a layered orebody
along a 5.5 kilometre north-south strike,
dipping at between 18 and 22 degrees west.
The project comprises three adjacent and
parallel magnetite layers, namely the Main
Magnetite Layer (“MML”), the Main Magnetite
Layer-Hanging Wall (“MML-HW”) layer and
the AB Zone. Its 298 Mt (JORC) resources
and reserves run across three parallel
overlying magnetite layers with grades
ranging from 1.6 per cent to over 2.0 per cent
V2O5 as follows:
– MML: 52 Mt @ 1.48 per cent V2O5
(1.6-1.8 per cent V2O5 in-magnetite);

– MML-HW & Parting: 233 Mt @ 0.8 per cent
V2O5 (1.5-1.6 per cent V2O5 in-magnetite); and

– AB Zone: 12 Mt @ 0.7 per cent V2O5
(greater than 2.0 per cent V2O5
in-magnetite).

Outlook and capital expenditure
Mokopane is intended to be a primary source
of feedstock for Vanchem from its large
mineral reserve, and Vanchem will expedite
the development of this project. The
preliminary capital expenditure requirements
associated with developing Mokopane
including mine development, and the
development of beneficiation plant
(crushing, screening and dry magnetic
separation) and associated surface
infrastructure, is estimated at ZAR370 million
(circa US$22 million).

A definitive feasibility study (“DFS”) to mine
the Main Magnetite Layer, to provide a
resources and reserves assessment with a
focus on Mokopane as a primary feedstock
supplier to Vanchem has been deferred by a
year as part of the Group’s cash preservation
measures to manage near-term liquidity.
When restarted, we estimate the study will
take between nine to 12 months to complete.
The Company retains the option of
developing Mokopane into a standalone
integrated mine and processing plant,
producing 5,300 mtVp.a. of greater
than 99 per cent purity V2O5 product.

Flexible and Integrated Asset Base
with a Diversified Portfolio of Products

Bushveld Minerals’ vertical integration strategy and production flexibility allows it to mine, process and manufacture vanadium-based products
in a single value chain, providing flexibility to source feedstock and maximise sales, depending on product demand dynamics. This will provide
a solid foundation for our business throughout the commodity cycle.

Ore sources

Vametco
mine

Brits
deposit

Vanchem1
stockpiles

Third party
ore

Mokopane

Vametco
(crushing, screening, milling
and concentration)

Vanchem
(crushing, screening, milling
and concentration)

Magnetite concentrate

Vametco
(extraction, precipitation
and reﬁning)

Vanchem
(extraction, precipitation
and reﬁning)

e
t
a
r
t
n
e
c
n
o
c
e
t
i
t
e
n
g
a
M

Electrolyte
plant

Final
product

Current

Future

Nitrovan

AMV

MVO

V203

V205

FeV

Chemicals

Electrolyte

Nitrovan is
a vanadium-
nitrogen (VCN)
product. It
has similar
characteristics
to FeV and has
similar uses.

Vanadium
pregnant solution
is precipitated with
ammonium
sulphate to form
ammonium
metavanadate.
The metavanadate
precipitate is
filtered and dried
before V2O3 or
V2O5 is produced.

A combination of
V2O3 and V2O5.

Electrolyte, which
is a form of
chemicals and the
most important
component of
a VRFB.

Added to steel
as ferrovanadium
or vanadium-
nitrogen
proprietary alloys,
it increases
strength.

Commonly
produced
by treating
magnetite iron
ores, vanadium-
bearing slags and
secondary
materials.

Vanadium
is added
to steel as
ferrovanadium
or vanadium-
nitrogen
proprietary alloys
to increase
strength.

Vanadium
chemicals
are used in
manufacturing
industrial
chemicals and
to clean waste
streams from
industrial
processes.
Electrolytes are
used in VRFBs.

1 Purchased pre-completion of the acquisition.

Financial StatementsSupplementary InformationGovernanceBusiness Overview
46

Bushveld Minerals | Annual Report and Financial Results 2019

Details of Operating Assets and Operational Review continued

Bushveld Energy

In 2019, Bushveld Energy made encouraging progress in developing its three strategic
pillars – electrolyte production, Vanadium Redox Flow Battery (‘VRFB’) manufacturing
and VRFB deployment – as opportunities for energy storage expanded.

Electrolyte
Significant progress was made towards
our goal of producing at least 200 MWh
of vanadium electrolyte on an annual basis.
The process of manufacturing electrolyte
from Bushveld’s own feedstock was finalised
and work began to prove the product with
VRFB manufacturers. Preparations for the
construction of the electrolyte manufacturing
plant at the East London Industrial
Development Zone (‘ELIDZ’) also moved
forward, including site selection, agreement
of lease terms with the ELIDZ and obtaining
environmental approval for the plant, which
was a critical long-lead item. In the fourth
quarter of 2019, together with the Industrial
Development Corporation, Bushveld Energy
issued a public tender for the engineering,
procurement, and construction (‘EPC’)
contract for the plant.

In addition to pure electrolyte sales, the
Company launched an electrolyte rental
product. An initial contract was concluded
with Avalon Battery Corporation in June
2019. While the decline in vanadium prices
has made electrolyte rental less urgent,
it remains a core solution to ensure the
commercial competitive advantage and
environmental sustainability of VRFB
technology in the medium and long-term.

VRFB manufacturing
and collaboration
During the year, Bushveld Energy
communicated its approach to VRFB
manufacturing, including how it will
work with VRFB Original Equipment
Manufacturers (‘OEMs’).

As the industry grows, there will be a
greater need for collaboration to achieve the
necessary economies of scale to drive costs
down and compete with alternative energy
storage technologies. Bushveld Energy takes
a holistic approach to the full value chain,
from vanadium material and electrolyte sales
through to energy storage and project
development in Africa, where we deploy VRFBs.
This approach includes plans to support some
VRFB OEMs directly, by offering them financial
investment and manufacturing support.

In all our decisions, we recognise the
importance of ensuring our investments
yield attractive returns for our investors and
do not over-commit our Group to energy
projects that may delay the implementation
of our mining and processing strategy.

All the companies in which we invest must
be solid businesses with proven products
and offer an attractive financial entry point.
Bushveld will not invest on its own, but only
in conjunction with other investors. We will
ensure that we retain a minority position
without direct operational control.

This policy guided our investment
into Canada/US-based Avalon Battery
Corporation (‘Avalon’), which recently

concluded a merger with AIM-listed redT
energy plc (‘redT’), a company supported
by strong institutional investors in London.
On 1 April 2020, redT and Avalon merged to
form AIM-listed Invinity Energy Systems plc
(‘Invinity)’, a leading player in the growing
energy storage market with a presence in
North America, Europe, sub-Saharan Africa
and Asia. Bushveld Minerals holds an 8.71
per cent shareholding in Invinity. Similarly,
we have partnered with a consortium for an
investment into Austria-based Enerox GmbH.

Our share of these investments lays the
foundation for our VRFB Investment Platform
(‘VIP’). For the first time, the VIP allows
investors to access technologies to underpin
the rapidly-growing long-duration stationary

storage market. The VIP uses Bushveld’s
knowledge of VRFB technology and its supply
chain to lower the barrier to investing in VRFB
companies for potential investors. It also
expands the pool of capital available for these
investments well beyond Bushveld’s own
balance sheet. Bushveld’s role would be that
of a significant minority investor, with strategic
involvement such as vanadium sourcing,
while keeping the day-to-day operations
in the hands of the management team.
The VIP will also make minority investments
into VRFB manufactures allowing it to
support multiple manufactures.

Deployments
The opportunity for VRFB deployments in
Africa grew faster than any other aspect
of Bushveld Energy’s business during 2019.
Our original target was to identify 1,000
MWh of opportunities by 2020, but the
regional market is showing greater potential
than we expected.

Key developments during 2019 were:
– The announcement of the US$5 billion/
17.5 GWh initiative, led by the World Bank
Group, to deploy storage solutions in low-
and middle-income countries by 2025
to support the integration of renewable
energy generation with existing power
systems. One of the most significant
initiatives is the 1,400 MWh battery
programme announced by South African
utility Eskom, which indicates that a
significant portion of the programme
will be directed towards Africa;
– South Africa’s updated Integrated

Resource Plan 2019 has, for the first time,
included a dedicated allocation for energy
storage. It requires over 2,000 MW of new
storage capacity to be deployed over the
next 10 years. Bushveld identified market
growth as the largest potential risk when
it launched its energy business, but these
developments reduce that risk;
– To take advantage of this market

opportunity, Bushveld Energy has built
an internal Project Development team
to identify and develop African energy
projects requiring long-duration storage.
The team is developing a pipeline of
bankable projects, using its understanding
of local African energy markets, technical
knowledge of VRFB operation and proven
commercial expertise;

– In 2019, those projects included the

deployment of a 450 kWh VRFB at Eskom
and advancing the development of a
mini-grid at Vametco comprising a 2.5 MW
of solar PV and 1 MW / 4 MWh of VRFB
storage. The Vametco installation will be
one of the first solar with long-duration
storage mini-grid projects financed
off-balance sheet in Africa.

2020 outlook and
capital expenditure
As a result of the uncertain operating
conditions due to the Covid-19 pandemic,
the Group has taken cash preservation
measures to manage near-term liquidity while
preserving the long-term sustainability of the
assets. These include reviewing and limiting
operational expenditure where necessary,
prioritising sustaining and regulatory spending
and deferring some growth-associated
(non-critical) capital expenditure for up to
a year. Bushveld Energy’s priorities in 2020
will be to continue delivering the projects
within these three strategic pillars, including:

Electrolyte
– After year-end, an investment decision

was made by both the IDC and Bushveld
on the vanadium electrolyte plant. The
investment commitment from Bushveld
is up to ZAR68 million (circa US$4 million)
through to 2022, which includes capital
expenditure, working capital and ramp-up
support. The IDC also approved the
investment for its share of equity and
all the debt funding for the project. The
shareholding structure between Bushveld
Energy and the IDC has been updated to
55 per cent held by Bushveld and 45 per
cent by the IDC, reflecting additional work
Bushveld carried out in 2015 and 2016 on
the project, prior to entering into the
Co-operation Agreement with the IDC.
This also reflects the IDC’s preference
that Bushveld Energy should have
control of the project;

– Implementing additional, large electrolyte

rental contracts.

VRFB manufacturing
and collaboration
– Advancing the VRFB Investment platform;
– Completing the Enerox GmbH acquisition

as part of a consortium;

– Investigating the business case for South

African-based VRFB assembly.

Deployments
– Demonstrating the business case for

VRFB deployments, including delivering
the Vametco mini-grid as a funded
Independent Power Producer;

– Participating in the 2,000 MW South

African Integrated Resource Plan energy
storage allocation and other African
projects within the World Bank’s 17.5 GWh
energy storage roll-out programme,
including Eskom’s;

– Securing partial self-supply of electricity
at all Bushveld operations in South Africa
to mitigate disruption to power supply
from Eskom.

Our projects in South Africa are likely to
experience delays of several months due
to the nationwide lockdown to mitigate
the spread of the Covid-19 virus. For the
electrolyte plant, remote work, such as
engineering, design and some procurement,
was able to advance as scheduled, but there
are likely to be delays in starting work on the
civil construction for the building. For our
deployment projects, there is a likely impact
from our inability to source foreign experts to
maintain hardware. In addition, there may be
delays in the issuance of the Environmental
Impact Assessment for the Vametco mini-grid
that could extend deployment into 2021.
In all our projects, we are also budgeting
slightly longer supply chain times, including
logistics, through to the first half of 2021.

Bushveld Energy’s business model relies
significantly on external partnerships beyond
the companies within the Bushveld Group.
These relationships vary, ranging from joint
strategic initiatives to cost-sharing of
investments. The electrolyte plant is a good
example of our strategy, where development
risks and costs were shared between
Bushveld as a Group and the IDC, and
investment into the operating facility
also involved both parties making equity
investment (in addition to debt). Going
forward, Bushveld Energy will continue to
consider similar models for all of its priority
activities, balancing the strategic importance
of integration with Bushveld Minerals against
demand from external partners for strategic
collaboration and investment opportunities
in Bushveld Energy’s initiatives.

Financial StatementsSupplementary InformationGovernanceBusiness Overview48

Other Non-core Interests

Bushveld Minerals | Annual Report and Financial Results 2019

Additional investments in coal,
coal to power and tin

Coal – Lemur Holdings
Lemur Holdings (‘Lemur’), a wholly-owned
subsidiary of Bushveld Minerals, is focused
on coal energy projects. Its flagship project
is the Imaloto coal-to-power project in
southwest Madagascar, which consists of
four exploration permits and one mining
and exploitation permit, covering a total
area of about 81.25 square kilometres.

Imaloto is an integrated coal-fired power
project, envisaging a 136 Mt coal mine, a 60
MW power plant and a new transmission line
stretching over 250 kilometres. It is the only
coal-to-power solution being developed in
Madagascar. The power plant is scalable
from the current planned 30 MW to 60 MW
and the transmission line is expandable up
to 500 kilometres.

The project has a total of 136 Mt JORC-
compliant mineral resources, of which
92 Mt is in the measured and indicated
category. In addition to a fully-executed
mining exploitation licence, Lemur has two
exploration permits covering a combined
87.5 square kilometres in close proximity
to the Imaloto Power Project. Since 2008,
Lemur has invested over US$10 million
in developing the project.

From a geographical location and
development phase perspective,
the Imaloto Power Project is perfectly
positioned to address the persistent power
supply challenges that Madagascar faces,
particularly in its least-developed but
mineral-rich southern region. The southern
region currently does not have a power grid
and is almost entirely powered by isolated
generators, which have a combined capacity
of no more than 20 MW and currently
produce roughly 8 MW.

The Imaloto power station will be located next
to the coal mine, providing a captive market
for the mine’s production and unlocking the
intrinsic value in the underlying project.

In addition to substantially increasing
the generation capacity in Madagascar,
the initial 60 MW capacity of the Imaloto
Power Project will form the basis for
a power grid for the southern region.

The Imaloto Power Project is at an advanced
stage. The feasibility studies for both the
power plant and the transmission line were
completed by Sinohydro, following a technical
co-operation agreement signed in 2017.

The Imaloto project has a full mining
right for the coal mine as well as a 30-year
Independent Power Producer concession
from the government of Madagascar.
Lemur has also concluded a 30-year Power
Purchase Agreement for an initial 25 MW
from JIRAMA, the state-owned utility.

During the first quarter of 2019, Lemur
concluded a US$1 million facility agreement
with the Development Bank of Southern Africa
for project preparation finance. This facility will
be used to complete the remaining project
development activities and pay for advisory
services to enable the project to reach
financial close.

Lemur completed its drilling programme
for the Social and Environmental Impact
Assessment (‘SEIA’) specialist studies in
December 2019. A total of 16 holes were
drilled. The extracted cores will be analysed
using a number of different tests, including
geological and coal quality. Lemur expects to
submit the SEIA studies to the Ministry of the
Environment during the second half of 2020.

The coal mine optimisation study, aimed at
exploiting the underground portion of the
mine earlier than previously planned, has
been completed. On the basis of this study,
Lemur developed the scope of work
for a Definitive Feasibility Study, which
commenced in the first half of 2020.

Negotiations with the contractor for the
engineering, procurement, and construction
agreement for the power station are ongoing
and are expected to be finalised during the
second half of 2020.

Lemur is in project finance discussions
for the construction capital with interested
lenders. The company’s objective is to get
the project to a ‘construction-ready’ stage,
which we previously announced would be
completed in the first half of 2020. Due to
the effects of Covid-19 we anticipate that the
project will get to construction readiness in
the first half of 2021 and attain financial close
soon afterwards. Discussions with lenders
are expected to be concluded during 2020,
once the key studies such as the SEIA and
the mine definitive feasibility study are
completed. Subject to financial close on
approximately US$160 million of funding,
the plant commissioning date would be 2022.

Lemur will continue to focus on discussions
with potential strategic partners as well
as with the government of Madagascar
for the implementation phase of the project.

The PQ Iron & Titanium and
PQ Phosphate Projects
The PQ Iron & Titanium Project is a multi-
commodity project, located 45 kilometres
north-northwest of the town of Mokopane in
Limpopo Province, South Africa. The Project
has a JORC-compliant Inferred and Indicated
Mineral Resource of 955 Mt, with an average
grade of 33.7 per cent Fe and significant
TiO₂ (over 18 per cent TiO₂ in-magnetite
concentrates). The project boasts some of
the highest in-magnetite grades of titanium
in the world and could be developed as a
titanium and pig iron project in the long run,
depending on the evolution of low capital-
intensive methods for processing the ore.
Bushveld Minerals is following, with interest,
advances in metallurgical processing used for
similar deposits and exploring partnerships
with technology partners. No further work
is planned on the project at this stage.

The PQ Phosphate Project resource lies
immediately above the iron ore and titanium
resource of the PQ Project. The Company
reported on 3 June 2014 a maiden phosphate
resource statement for the PQ deposit of

442 Mt, with average phosphate grades
of 3.6 per cent P₂O₅. Although the grades
are low, the PQ Phosphate deposit is in the
immediate hanging wall of the PQ Project
and would be mined concurrently with the
stripping of the latter. Of particular interest
is that laboratory-scale test work has shown
that 37 per cent P₂O₅ concentrate grades
are achievable from this deposit.

Both projects are based on the same licence
area as Mokopane, where there is a mining
right held by Pamish Investments No. 39 (Pty)
Ltd (‘Pamish’). Bushveld Minerals currently
owns an effective controlling interest of 64
per cent in the PQ Iron & Titanium and PQ
Phosphate projects. While the mining right
is subject to Mining Charter II regulations,
the Company is committed to adopting
Mining Charter III regulations in respect of
host community and employee shareholding
requirements. Therefore, a five per cent
share for these stakeholders will be vendor-
financed and repaid from future proceeds
from the mine. Bushveld Minerals’ interest
in the PQ Iron & Titanium Project and PQ
Phosphate Project will accordingly reduce
from 64 per cent to 60.8 per cent, while

Izingwe’s shareholding will reduce from
36 per cent to 34.2 per cent. Pamish has
further committed to allocate an additional
five per cent to an Employee Share
Ownership Participation Scheme once
the mine is operational, which will result
in Bushveld Minerals ultimately holding
57.6 per cent and Izingwe 32.4 per cent.

Progress to date has been limited to
understanding the economic parameters
necessary for success and how these
projects can be configured in line with the
Company’s approach towards developing
projects. No further work is planned
on these projects while the Company
advances its vanadium platform.

AfriTin Mining Limited
The Company holds an eight per cent
shareholding in AIM-listed AfriTin Mining
Limited, an African mining company with
a portfolio of near-production tin assets
in Namibia and South Africa, which was
demerged from Bushveld Minerals in
November 2017.

Financial StatementsSupplementary InformationGovernanceBusiness Overview50

Risks

Principal Risks

Bushveld Minerals | Annual Report and Financial Results 2019

Everyone in the Company is responsible for managing risk. The risk management philosophy
and appetite are determined and overseen by the Board and Audit Committee.

The Company has a detailed risk register
which incorporates mitigation measures,
collated in conjunction with all areas of the
business, to understand the full spectrum
of risks across the organisation. Across
functions and subsidiaries, management
imbues and enforces risk management
practices and philosophy in daily operations
and responsibilities.

The risk management process is summarised
in the illustration below:

The identified risks are classified into four
categories – macroeconomic, strategic,
financial, and operational.

– Macroeconomic risks are largely beyond
the Company’s control but are managed
as proactively as possible. They include
the management of an evolving regulatory
environment, along with volatile
commodity prices and fluctuating
exchange rates;

– Strategic risks are those that affect the
Company’s ability to deliver its strategic
objectives, which include Bushveld’s
horizontal growth ambitions. Its vertical
integration strategy will provide a natural
hedge against vanadium price volatility,
ensuring sustainable operations and
attracting and retaining an experienced
team with the required skills to grow
the Company;

– Financial risks are managed and
monitored proactively through a
centralised treasury function, capital
governance processes, adequate
insurance coverage, access to funding
and adherence to risk management and
internal control policies. Maintaining
financial sustainability in a challenging
economy is critical;

– Operational risks are controlled with

hands-on management through approved
processes and ongoing monitoring of
performance against targets. Bushveld
recognizes the importance of operating
in a safe and healthy environment,
supported by continuous, meaningful
engagement with relevant stakeholders.

Risks identiﬁed by the various business units.Identify 01The net effect of the identiﬁed risks is calculated by assessing the likelihood and severity of impact, and recorded in a risk register. Assess02Preparation of mitigating measures for each risk. Plan03Risks and mitigating measures monitored and reviewed to ensure that risks are current and mitigating controls effective. Monitor and review 05Mitigating controls not already in place are actioned.Implementation04Provide reports to the Audit Committee and Boardat agreed times.Communicate06The Company has a detailed risk register which incorporates mitigation measures Risk management process51

Principal risks and mitigation:

Principal risk

Nature of risk

How we mitigate the risk

Macroeconomic

Regulatory
and legal

Mining rights and
tenure security

– Ensuring compliance with the Broad-Based Black Economic Empowerment ownership

requirements of the current Mining Charter.

– Continuous monitoring of legislation to ensure compliance with all aspects of the

Mining Charter.

– Regular monitoring of environmental and safety legislation, particularly in relation
to reclamation, waste product disposal and other environmental protection issues.

– Engagement and cultivating good working relationships with regulators

and stakeholders.

Adherence to
anti-bribery and
anti-corruption legislation

– Anti-corruption and bribery policy is in place.
– A culture of zero tolerance towards corruption.
– Ongoing training and awareness.

Financial

Volatile commodity
and currency prices

– Adherence to treasury and financial risk management policies to ensure financial risk

remains within board-approved limits.

– Focus on production costs to maximise margins and remain a low-cost producer.
– Majority of sales are US dollar-based while costs are mostly in South African rand.
The currency exposure is monitored on a regular basis and hedge arrangements
will be considered if beneficial to the business.

– Bushveld Energy has structured its business strategy to cater for commodity price volatility.

– Strong financial position with US dollar revenue, resulting in a rand hedge in the event

of a ratings downgrade.

– Rand-denominated cost profiles.

Sovereign credit
rating downgrades

Pandemics

Government
lockdown regulations

– Build a business strategy that allows for sufficient reserves to withstand the

consequences of a lockdown period.

Global impact on
vanadium demand

– Secure sales commitments.
– Monitor demand profile.
– Ability to build a flexible operation that can ramp production up or down without major

restructuring costs.

Strategic

Declining resource
and reserve base

– Executed a 30-year Mining Right for Mokopane, one of the world’s largest high-grade

primary vanadium resources.

– Continued investment in exploration and reserve generation at Brits, a continuation

of the Vametco resource.

– Actively identifying new exploration targets.

Geological reporting
of quality and quantity
of reserves

Attracting and
retaining staff

Skills shortages

– Conducted an independent geological review and mine optimisation study which

is being integrated into long-term planning.

– Conducted a detailed human resource analysis and put a recruitment strategy in place.
– Structured retention incentives – current, annual and long-term.
– Internal growth and career planning opportunities for employees.

– Internships and learnerships in place.
– Bursary programme in place for tertiary students.
– Study support and training, to be informed by community baseline study being carried out.

Meeting market
expectations

– Regular market communication.
– Ensuring production guidance is communicated to shareholders.
– Monitoring operational performance relative to analysts’ forecasts.

Stakeholder expectations

– Regular communication with unions.
– Ongoing communication with communities to ensure that local communities enjoy

sustainable upliftment from Bushveld’s commercial activities.

Financial StatementsSupplementary InformationGovernanceBusiness Overview52

Risks continued

Bushveld Minerals | Annual Report and Financial Results 2019

Principal risks and mitigation: continued

Principal risk

Nature of risk

How we mitigate the risk

Financial

Operational

Occupational
Health and Safety

Capital allocation
decisions

– Capital allocation is based on stringent investment criteria and subject to Board oversight.
– Ensuring the required skills and experience are in place for decision-making.

Cash flow generation
and debt levels

– Continuous focus on improving operational margins, both from a production

improvement perspective and to reduce costs.

– Standby facilities to be introduced to bridge any working capital deficits.
– Ensuring sufficient cash reserves are available.

Mine accidents

– Safety management policy and strategies in place, with zero tolerance applied if the rules

are disregarded.

– Task observations conducted regularly to proactively identify deviations from safe

operating procedures, provide coaching when necessary and reinforce good practices.

– Behaviour-based safety training.
– Independent oversight by regulators.

Workplace conditions

– Medical monitoring of occupational diseases.
– Regular medical examinations for all employees and contractors.
– Periodic monitoring of workplace conditions.
– Appropriate occupational health practices implemented.

Operational

Strike actions

– Proactive engagement with representative unions.
– Appropriate remuneration practices and incentivisation through an Employee Share

Ownership Participation Scheme.

– Compliance with all relevant South African labour legislation, including the

Mining Charter.

Environmental

Environmental damage

– Environmental management programme in place.
– Rehabilitation guarantee in place to minimise and mitigate the environmental effects

of mining.

– Pollution control and water catchment dams.
– Tailings dam monitoring and management programme.
– Compliance with environmental authorisations, licences and permits.

Pandemics

Temporary shutdown
required due to infection

– Rigorous health and safety measures implemented.
– Cash reserves to withstand expected quarantine period.

Supply chain

– Establishment of adequate contingency plans.
– Collaboration with suppliers on security of supply.
– Maintain higher stock levels.

Covid-19 pandemic preparedness

Bushveld Minerals established a
cross-functional Covid-19 Task Team,
including operations, safety and
health, finance, human resources,
community and government relations
and other support functions to ensure
that the Company is best prepared
to navigate this period through
a comprehensive awareness,
prevention, and intervention
programme. This includes:

1) close engagement with our

regional and national authorities;
2) implementing various preventative
measures, including supplying
sanitisers, temperature testing,
workplace adaptation to foster
social distancing, remote work
where practicable and introducing
strict procedures at our operations;

3) ensuring that the Company’s cash
reserves and available facilities are
sufficient not only to see the
Company through the lockdown
period but to allow it to ramp up
speedily, once the lockdown period
is lifted.

The programme prioritises the
protection of employees through
rapid implementation of health and
hygiene controls in the workplace,
protocols for dealing with suspected
cases of infection and business
continuity measures to minimise the
disruptive effects of the pandemic
on the business.

– Health and Safety: designing and
implementing protocols aligned
to those provided by the World
Health Organisation, South Africa’s
Department of Health, national
health organizations (such as the
National Institute for Communicable
Diseases), the South African
Department of Mineral Resources
and Energy and other government
authorities, to safeguard our
employees and operations.
Our approach has been to create
awareness in the workplace,
minimise transmission risk
and intervene in identified
or potential cases;

– Human Resources: proactively

managing the workforce,
focusing first on the high priority
vulnerabilities and establishing
business continuity measures and
protocols to enable the organisation
to adapt as the epidemic unfolds;

– Finance: establishing cash

preservation measures to manage
near-term liquidity while preserving
the long-term sustainability of the
assets. These include reviewing and
limiting operational expenditure
where necessary as well as
deferring growth-associated
(non-critical) capital expenditure;
– Information Technology: assessing
and addressing systems and cyber
vulnerabilities while enabling the
teams across the sites to work
and collaborate remotely;

– Supply Chain: ensuring security

of the supply chain, specifically by
anticipating potential disruptions
and putting in place adequate
contingency plans. Bushveld
continues to work with customers
to fulfil orders and meet their
requirements while still complying
with Government directives. The
supply chain is operating, and
customer orders remain robust;

– Stakeholder and Community:
continued engagement and
collaboration with employees,
government and communities
to reduce the impact on society;

– Customers: engaging with

our customers and leveraging
our existing relationships
to secure demand after
the current lockdown.

Our protocols have functioned
effectively, and we will continue to
monitor the situation and update our
measures in line with the guidelines
issued by the South African health
authorities and government.

Financial StatementsSupplementary InformationGovernanceBusiness Overview54

Bushveld Minerals | Annual Report and Financial Results 2019

Sustainability: Value Beyond Compliance

Bushveld Minerals is dedicated to the long-term sustainability of our operations, not because
it is a requirement but because we sincerely believe in creating value for all our stakeholders.

We acknowledge that achieving sustainability
is a complex, long-term goal, on which our
work is only starting, and that it will require
time and effort on our part to make a
meaningful difference to all the important
aspects that touch our business.

Implementation of the sustainability pillars
across the Group rests with executive and
operational leadership teams, with oversight
by the Board and its subcommittees.

In steadily executing our objective of adding
value beyond compliance, our approach to
sustainable development is guided by and

embedded in three key pillars: health
and safety, environmental management,
and socio-economic development. These
are aligned with the United Nations’ 2030
Sustainable Development Goals. Our
approach is underpinned by our belief
in shared economic value, where there
is fundamental synergy between our
economic performance and the social
progress of the communities within which
we operate. Through our initiatives in
Bushveld Energy, highlighted below, we are
participating in the circular economy and
reducing our contribution to global carbon
gas emissions.

1. Health and safety
Bushveld Minerals recognises that the
wellbeing of employees and communities
is key for our long-term success, and we
intend to build on the foundations already
put in place at Vametco and Vanchem. We
are determined to make our operations
sustainable. This includes ensuring our
employees enjoy a healthy and safe working
environment, operating in an environmentally
and socially responsible manner, and adding
value for all stakeholders.

Our employees

Peers in mining &
energy industries

Investors

Financial institutions

Government

OUR
STAKEHOLDERS

Statutory bodies

Communities

Customers

Media

Suppliers

Universities & research
institutions

Labour unions

Our guiding principle is zero tolerance for
deviations from safety regulations, whether by
our own employees or contractors. We have
instilled a work culture based on behavioural
management that views safety and health as
being of paramount importance. This was
achieved through various safety campaigns
implemented in 2019.

Training is directed at making sure our
employees not only work responsibly for
their own wellbeing, but also look out for
their colleagues’ health and safety. Our safety
drive entails visible leadership and behavioural
change coaching, inspections and training
programmes that are conducted on site
by both management and employees. We
believe that measuring ourselves against
industry-leading practices and implementing
good safety and health systems and
conditions will keep us in the forefront
of health and safety in the industry.

Bushveld Vametco’s safety performance for
2019 was zero fatalities and one lost-time
injury. The Department of Mineral Resources’
Mine Health and Safety inspectors paid six
visits to the mine and issued one stoppage
in terms of the Mine Health and Safety Act’s
Section 54. All findings were corrected,
and action plans were implemented to
prevent recurrence.

No occupational medical cases or claims
were recorded in 2019. We conducted
a health, hygiene and wellness programme
for all contractors and employees, which
included airborne pollutants, noise
monitoring, and voluntary testing for HIV,
high blood pressure, glucose and cholesterol.

2. Environmental management
Bushveld Minerals’ environment stewardship
is guided by the Environmental Management
Programmes (‘EMPs’) that it is required to
develop before commencing any mining and
processing activities. The EMPs identify and
address environmental impacts that could
occur during the exploration, mining and
mine closure phases. Incorporated within
the EMP are reports and plans to proactively
address the management of water, land,
waste (non-hazardous and hazardous
materials), air quality, energy consumption
and greenhouse gas emissions.

Our objective is to align our activities with
international standards, including those of
the International Finance Corporation and
ISO 14001:2015, which sets out guidelines
and requirements for how an environmental
management system should operate
to achieve continual improvement.

Annual environmental performance
assessment audits are conducted by an
external environmental specialist and by
regulatory authorities to assess the level of
compliance with the conditions of the EMP
and the mine’s Environmental Authorisations.
Environmental legal compliance audits were
also performed by an independent specialist.
No major findings were reported from any of
these audits and no environmental penalties
were imposed by the regulatory authorities.

In Bushveld Vametco Alloys’ Water Use
Licence there is an annual allocation of
1,624,811 m3 water resource from boreholes,
storm water and open pit seepage and
canals. In 2019, despite an increase in
production, only 77 per cent (1,251,114 m3)
of the total water allocation for abstraction
was utilised, resulting in a 23 per cent
(373,697 m3) saving.

Waste management
In general, our waste management is centred
around separation at source, recycling and
re-use. Compared with 2018, Bushveld
Vametco improved its waste recycling by
11 per cent while waste to landfill declined
by 29 per cent. Vametco conducted
internal and external audits for its
Waste Management Licence in 2019.

Regarding mineral waste, particularly the
tailings dam and magnetite tailings storage
facilities, an independent external specialist
conducted audits to ascertain the facilities’
structural stability. Both facilities were found
to be stable and with no risk of unexpected
failures, demonstrating our operational
effectiveness and good controls.

Air quality and environmental
dust fallout
The Bojanala District Municipality granted
Vametco an Atmospheric Emission Licence
and we are dedicated to ensuring that we
comply with it. This includes monitoring
our stacks emissions and implementing
management plans if they exceed the
designated limits.

Capital projects, including the installation
of off-gas scrubber systems and bag house
systems, demonstrate our commitment
to keep our emissions within standards.
Our effectiveness is evident in the results
of stack emissions monitoring conducted
by independent third-party specialists.

Vametco
Vametco is embarking on an Environmental
Impact Assessment (‘EIA’) for its expansion
project. The updated EIA will enable the
operation to develop a comprehensive
environmental management plan. Vametco
plans to start the process of developing
and implementing the ISO 14001:2015
Environmental Management System to
align the environmental management of
its operations with international standards.

Water management
Water management is integral to our licence
to operate, so compliance with all our
obligations on our Water Use Licence is
a priority. Vametco conducted all required
internal and external Integrated Water Use
Licence (‘IWUL’) audits in 2019. Action plans
were developed based on the audits to
improve water management.

Vametco adheres to an ongoing surface
and groundwater monitoring programme.
Sampling and analysis of various chemical
constituents and groundwater level
measurements are conducted on a monthly
and quarterly basis, as required by the IWUL
and South African National Standards drinking
water quality standards, to ensure effective
management of the water resources on site
and in surrounding areas. We implement best
practice measures for effective clean and
dirty water separation, optimised recycling
of used water and water balance.

Financial StatementsSupplementary InformationGovernanceBusiness Overview56

Bushveld Minerals | Annual Report and Financial Results 2019

Sustainability: Value Beyond Compliance continued

Our fall out dust sampling points
continuously present sample results which
are below industrial limits of 1,200 mg/m2
per day at the fence boundaries and therefore
comply with the South African National Dust
Control Regulations, 2013.

Vanchem
Occupational Health and Safety
One of our priorities is to provide a safe
and healthy workplace for our employees,
contractors, suppliers, and everyone who
visits our operations.

Biodiversity Management
Vametco conducts annual plant and animal
assessments as part of the biodiversity
impact assessment. This includes an Invader
Species Eradication Programme, in which
we employ people from the local community.
Establishment of vegetation and grass planting
on areas meeting final rehabilitation criteria
is conducted during the summer season.

Mine rehabilitation and
environmental liabilities
A closure cost review analysis for 2019 was
conducted by a third-party consulting firm.
No material change was reported compared
with 2018. An appropriate financial provision
adjustment to fund the gap will be made in
the second quarter of our 2020 financial
year. Concurrent rehabilitation is practised
wherever possible to minimize environmental
impacts during operation and reduce the
final environmental liability.

Quality Management System
(‘QMS’): ISO 9001:2015
Bushveld Vametco has continuously
maintained its ISO 9001 certification. During
the recertification audit conducted in 2019,
the organisation demonstrated that its quality
management system was in line with the
requirements of the standard and that it
complied with its own requirements.

The QMS is audited annually by the
certification body, Bureau Veritas (‘BV’).
During the audit, Bushveld Vametco fulfilled
its objectives of receiving no major non-
conformities. The minor non-conformities
raised received prompt attention and were
submitted to BV.

One of our first priorities following our
acquisition of Vanchem was to update
our Occupational Health and Safety Policy
and Procedures. The updated policy and
procedures are meant to provide the
leadership and resources required for
all our workers to go home safe and well
every day. The procedures also aim to
ensure a systematic approach to anticipating,
identifying, evaluating, controlling, monitoring,
and managing occupational health and
safety risks to make them “as low as
reasonably practicable”.

We have set a goal for our operations to
have an Occupational Health and Safety
Management System aligned to the ISO
45001:2018 standard by the end of 2020
and certified by the end of 2021.

Environment
Our operations impact the physical
environment, including the land, air, water,
and other important resources that we share
with others. Our stakeholders expect us to
manage and minimise any negative impacts
our operations may have on the environment
and we are committed to doing so through
international best practice, including the IFC
Performance Standards.

Since acquiring Vanchem, we have
commissioned independent consultants to
conduct various EIAs to evaluate the current
status quo on environmental impacts and
risks of our operation. For projects which
need to progress to construction and
operation, the EIA forms the basis of the
site-specific environmental management
system (‘EMS’).

We have set the goal of having an EMS
aligned to the ISO 14001:2015 standard by
the end of 2020 and certified by the end of
2021. This will ensure that we have systems
in place to monitor and improve our
environmental performance.

Bushveld Energy
Participating in the
circular economy
Through our subsidiary, Bushveld Energy,
we are actively driving adoption of Vanadium
Redox Flow Batteries (‘VRFBs’) in the global
energy storage industry. Bushveld Energy’s
activities stretch over three key areas:
electrolyte production; battery investment
and manufacturing; and project development.

Bushveld Energy is developing a 1 MW
mini-grid at Vametco, consisting of 2.5 MW
of solar photovoltaics and 1 MW/4 MWh of
VRFBs. The additional benefit of this project
for Bushveld Minerals is that it is expected
to contribute towards the reduction of the
Company’s carbon gas emissions through
the use of renewable energy and storage.

VRFBs are designed to last for 20 years or
more, so fewer batteries need to be deployed
than would be the case for lithium batteries.
The unique technical design allows full
re-usability of the chemical electrolyte in the
battery once the electrical and mechanical
components wear out. That means that even
after the 20-year lifetime of the battery is
reached, the electrolyte can be redeployed
into another battery. The electrolyte can
be easily reprocessed by existing vanadium
processing facilities, at minimal cost, into
products such as ferrovanadium and
vanadium-pentoxide for use in high-strength
steels and specialty alloys and chemicals.

Vanadium electrolyte is primarily made of
water, allowing for easier processing than from
other compound states. Only one mineral is
extracted from vanadium electrolyte, whereas
lithium, nickel, manganate, cobalt, etc. need
to be separated out in a lithium battery. These
opportunities may make vanadium the most
circular economy-friendly mineral.

Bushveld Energy
Participating in the circular economy

6. Removal of

electrolyte for
recycling after
VRFB end of life

5. Removal and

redeployment of
electrolyte into
other VRFBs

4. Deployment into
energy storage
VRFBs (through
a rental model)

3a. Production

into vanadium
electrolyte

1. Exploration
and mining

2. Processing into value-

added vanadium
products – Oxide – FeV

3b. Production into
high-strength
steels, speciality
alloys and speciality
chemicals

Financial StatementsSupplementary InformationGovernanceBusiness Overview58

Bushveld Minerals | Annual Report and Financial Results 2019

Sustainability: Value Beyond Compliance continued

3. Socio-economic development
Bushveld Minerals is not immune to global
economic pressures and various domestic
and international socio-political dynamics
that affect the business sector and the
community. All of these challenges
contribute towards high levels of inequality,
unemployment, and poverty and as a result
raise our stakeholders’ expectations of what
the business sector can deliver.

Vametco’s labour profile

Geographical area

The tables below show Vametco’s and
Vanchem’s labour profiles.

Socio-economic development
contributions: labour profile
Vametco and Vanchem employed a total of
664 people in the year under review.
Bushveld Minerals’ subsidiaries pay special
attention to sourcing labour from host
municipalities, which contributes directly
towards local socio-economic development.

Labour from within Madibeng Local Municipality
Labour from outside Bojanala District Municipality but from within South African borders
Labour from outside Madibeng Local Municipality but from within Bojanala District Municipality
Labour from outside the borders of South Africa

Total

Vanchem’s labour profile

Geographical area

Labour from within Emalahleni Local Municipality
Labour from outside Emalahleni Local Municipality but from within Nkangala District Municipality
Labour from outside Nkangala District Municipality but from within South African borders
Labour from outside the borders of South Africa

Number

402
86
28
0

516

Number

133
9
6
0

148

78
17
5
0

100

90
6
4
0

100

Total

Socio-economic development
contributions: human
resources development
Human resources development (‘HRD’) is one
of the Company’s important socio-economic
goals. Bushveld Minerals invests in developing
the skills of its employees and members of
the host communities. The aim is to improve
the quality of life of workers and members of
the community while increasing their labour
mobility and prospects of self-employment
beyond Bushveld Minerals. The HRD
programmes include learnerships, internships,
bursaries, portable skills and Adult Education
and Training. Below are the HRD programmes
and achievements in 2019:

1. Learnerships: The learnership

programmes are offered to both
employees and non-employees.
22 learnerships were funded in 2019,
and were for the following trades: Fitting,
Fitting and Turning, Electrical, Instrument
Mechanics, Rigging, Boiler making and
Diesel Mechanics.

4. Portable skills: There is continuous
development of employees with
computer skills. We trained 36 employees
in 2019. The following portable skills were
also offered to community members:
i) Certified Basic Computer Training

to 41 community members.
ii) Certified Basic Welding Training
to 12 community members.

2. Internships: Five community members

iii) Certified Basic Plumbing Training

were part of one-year internship
programmes (four Analytical Chemistry
students and one Mechanical Engineering
student). Furthermore, four community
members benefited from two-year
internship programmes (two in
Finance, one in Geology and one
in Electrical Engineering).

3. Bursaries: 38 bursaries were awarded.
24 of the bursary holders were females.
Qualifications being pursued included
medicine, accounting, engineering,
information technology, geology,
law, education and pharmacology.

to 20 community members.

5. Adult Education and Training (‘AET’):
This is an accredited curriculum that is
presented to community members and
employees to promote literacy, focusing
on communication in English and
numeracy. The curriculum ranges from
pre-AET to level 4 (NQF1). In 2019 there
were 18 learners from the community
and four employees on this course.

Socio-economic development
contributions: Community Socio-
Economic Investment project
Socio-Economic Development (‘SED’) is
aimed at raising the standard of living of our
host communities, in particular the previously
disadvantaged. SED contributions are any
monetary or non-monetary contribution
implemented for individuals (natural
individual or group of natural individuals) or
communities, where at least 75 per cent of
the beneficiaries are classified as black people.
Our socio-economic development initiatives
in 2019 amounted to over ZAR13 million and
were targeted towards poverty alleviation,
education, and skills and SMME development.

4. Stakeholder Engagement
Bushveld Minerals has developed a
Stakeholder Engagement Strategy which
forms the blueprint for building relationships
with stakeholders, including our host
communities and local landowners.
The stakeholder engagement strategy
was developed to enable Bushveld Minerals
to develop a collaborative relationship with
key stakeholders in support of its strategic
objective – to become a fully integrated
vanadium company.

The stakeholder engagement strategy builds
on Bushveld’s strategic intention to identify key
stakeholders, their interests and requirements
to develop appropriate engagement models.
There were meaningful, transparent, and
honest engagements with stakeholders
in 2019.

Four key stakeholder engagement
outcomes were set to support Bushveld
Minerals’ strategy:
– Socio-economic development, regulatory
compliance, and creation of value beyond
compliance in communities where
we operate;

– Development of a strong South African
vanadium industry, inclusive of a broad
base of stakeholders (including support of
Vanchem pre- and post-acquisition);
– Development of a policy and regulatory

framework for the battery energy storage
systems industry, including VRFBs, in the
South African electricity market; and
– Expansion of VRFB deployments into
the African continent and exports of
vanadium, electrolyte, and the electrolyte
rental product to key global markets
(US, UK/EU and China).

Financial StatementsSupplementary InformationGovernanceBusiness Overview60

Our People

Group Overview

Bushveld Minerals | Annual Report and Financial Results 2019

The Bushveld Minerals Group employs exceptional people with outstanding capabilities
and great potential in all areas of our business.

We aim to cultivate an environment in which
our people can be entrepreneurial, learn and
innovate while delivering tangible results.
Our leadership strives to make a difference
to everyone in our environment.

We want every employee to begin each day
with a sense of purpose and end the day
with a sense of accomplishment.

Over the past year, Bushveld’s employee
numbers have grown as we have attained
two key strategic milestones: recruiting
people with the appropriate skills and
capabilities and acquiring Vanchem.

Our primary focus was to acquire diversity
and depth of leadership skills to help us move
the business to the next level of growth and
smoothly integrate Vanchem into Bushveld
Minerals. These appointments gave impetus
to the achievement of our long-term business
objectives and have helped to create a
more diverse and inclusive group executive
committee, with deep technical and
leadership experience. Our business success
is underpinned by having an inclusive culture
which reflects the diversity of our employees
and stakeholders. Embracing diversity drives
social cohesion and enables us to tap into
the full extent of the talents and potential
of all those with whom we work.

At the end of the 2019 year, the Group
employed 691 people across its subsidiaries
and operations.

Bushveld Minerals has a total of
691 employees and contractors

Vametco
Creating a work environment conducive to
productivity and personal growth ranks high
on the Company’s human capital agenda.

Group labour profile

Employment type

Permanent

Fixed term contractors

Learnership/Apprentices/
Internships/Graduates

Total headcount

Bushveld
Minerals
Corporate
Office

Organisational health
In 2018 Bushveld Vametco employed
the services of an external consulting
firm to conduct an Organisational
Health diagnostic on the basis of their
Organizational Health Index (‘OHI’).
Organisational health is the organisation’s
ability to align around a common vision,
execute that vision effectively, and renew
itself through innovation and creative
thinking. It has been found that companies
that pay attention to their organisational
health not only achieve measurable
improvements in their organisational
well-being but also demonstrate tangible
performance gains in as little as six to
12 months.

The diagnostic was done by aggregating
the views of our employees on management
practices that drive nine key organisational
dimensions collated through a structured
survey. Scores were assigned to each
practice and outcome, allowing the
Company to see how it compares with
others in the consulting firm’s database.

The Company conducted the Organisational
Health Index survey (‘OHI survey’) in
December 2018 and again in December
2019, the outcomes of which resulted in the
development of the Vametco Organisational
Health Programme (Ke Nako Transformation
Programme). Year-on-year, the team achieved
significant shifts in all the OHI measurements,
and the December 2019 results showed
that Bushveld Vametco was among the top
25 per cent of companies in the consultancy
firm’s global database. The participation
rate was 87 per cent of all employees and
included more than 1,400 individual
comments and suggestions.

Bushveld
Energy

Vametco

Vanchem

Lemur
Holdings

444

516

148

The programme yielded a noteworthy
year-on-year improvement in the overall
health of our organisation.

Establishing momentum
The Vametco team has managed to establish
a rhythm of delivery that took the Company’s
production performance to a new level,
reaching an all-time high production output
of 2,833 mtV for the full 2019 year. This was
achieved through 81 initiatives and the
completion of 259 individual milestones.

We are confident that we will achieve our
growth targets at the required cost levels
through disciplined execution. The program
continues to drive Vametco’s strategies
through the following priorities:

Stabilising and improving
production
– Vametco produced record levels of
production from magnetite in the period after
the annual shutdown. Given the systems and
ownership that was established, management
is confident that these production levels will
not only be sustained but improved upon.

Maintaining cost efficiency
– given current depressed vanadium prices,
it is critical that cost control is maintained
without sacrificing operational stability.
The necessary systems and controls are
in place to position Vametco to take full
advantage of the next price uptick.

Year-on-year Vametco’s Organisational Health Index Results

100%

80%

60%

40%

20%

2018
2019

Direction

Accountability

Coordination
& control

External orientation

Leadership

Innovation & learning

Capabilities

Motivation

Work environment

• With a health score of 77, Bushveld Vametco now finds itself among the top 25 per cent healthiest companies

in the consultancy company database.

• Improvements are seen across all health outcomes, with the biggest jump (+31 points) on Work Environment.

• Similarly to last year, External Orientation shows as the organisation’s spike; Bushveld Vametco has also

excelled in Coordination & Control.

Financial StatementsSupplementary InformationGovernanceBusiness Overview62

Our People continued

Bushveld Minerals | Annual Report and Financial Results 2019

Organisational health
– through various initiatives and special
events, the employees and leadership of
Vametco were mobilised and equipped with
the necessary skills not only to deliver their
targets but to excel as a dynamic mining
organisation in South Africa.

The wider Vametco team has gone through
an exciting transformation and intends
to further improve sustainability, be
responsible towards our communities
and the environment and create value
for our shareholders.

Vanchem
In the last quarter of 2019, Bushveld Minerals
concluded the acquisition of Vanchem.
A Section 197 transfer of all current Vanchem
employees was agreed as part of the purchase
agreements and Competition Commission
submissions. At the time of closing the
transaction, Vanchem had 155 fixed-term
contractors (‘FTCs’) on its books. In terms of
Section 197, these employees were transferred
to Vanchem (apart from a few that retired) on
better terms and conditions of employment
than they had enjoyed previously.

In addition, we managed to retain key
individuals as part of the acquisition,
culminating in a successful Section 197
transfer of former Vanchem employees
into Vanchem with no people-related
disruption in business operations.

Our ability to attract, integrate and retain
high-calibre skills and human capabilities
while preserving job security remains at the
top of the Company’s human capital agenda.
For this reason, we have simultaneously
invested time and resources in best practice
talent acquisition while building a solid
remuneration and reward framework,
aimed at rewarding high performance
and at the same time retaining critical skills.

2020 Human Resources Priorities
Our priorities for 2020 are informed by
the Group Human Resources strategy
underpinned by the Group Strategic Priorities.

underpinned by people management
practices that foster the performance,
growth and prosperity of all our employees.

Bushveld Minerals sees all its employees as
long-term strategic partners, sharing the
common objective of building a sustainable
business for the mutual benefit of all
stakeholders. We believe in a shared human
capital identity and integrated employee
experience across our operations,

Skilled and engaged employees, working
in a safe and productive environment,
are able to innovate and drive operational
excellence, enabling us to create value
for our stakeholders.

STRATEGIC PILLAR

FOCUS AREA

Shared Human
Capital Identity

– Leadership – Shared leadership ethos and leadership talent
management including leadership succession management;
– Culture – Post-acquisition culture integration for the group

Integrated
Employee
Experience

and its operations;

– Employee Wellness and Relations – Focus on building
an integrated group approach to employee relations,
with fully-engaged employees who will thrive and give their
best to achieve their own and the Company’s objectives.

– Integrated talent management practices

• Talent acquisition: enhance our ability to attract great

talent across all operations;

• Performance: ensure that business leaders have the

requisite set of competencies and tools to shape and
drive a performance culture;

• Talent development: investment in the improvement

of both leadership and technical competencies across
the group;

• Remuneration and reward: group-wide implementation
of the remuneration and reward philosophy and policy.

– Bushveld employer branding

• Develop an integrated internal and external Bushveld

Minerals employer brand. Leverage the Group’s employee
value proposition to strengthen its reputation as a preferred
employer for both existing and prospective employees.

Financial StatementsSupplementary InformationGovernanceBusiness Overview64

Bushveld Minerals | Annual Report and Financial Results 2019

Corporate Governance Report

The Board collectively recognises that a high standard of corporate
governance is of paramount importance to continue to deliver the
Company’s strategy, create long-term value and maintain our licence
to operate. In accordance with the AIM Rules requiring all AIM-listed
companies to adopt and comply with a recognised corporate
governance code, the Company adopted and complies with the
Quoted Companies Alliance Corporate Governance Code (‘QCA
Code’), which is most suited to Bushveld’s needs and size.

The Company’s website includes a Corporate Governance Statement
that explains how the ten principles of the QCA Code are applied by
Bushveld. This can be found at http://www.bushveldminerals.com/
corporate-governance/.

This Annual Report further details below how Bushveld is applying
the QCA Code and how it supports Bushveld’s medium- to long-term
success. The QCA Code is clear that companies need to deliver growth,
long-term shareholder value and that this requires an efficient, effective
and dynamic management framework. It should be accompanied by
good communication, which helps to promote confidence and trust.

Principle 1:
Establish a strategy and business model which
promotes long-term value for investors
Bushveld Minerals is a low-cost, vertically-integrated primary vanadium
producer with a diversified product portfolio. The Company’s assets
are located in South Africa, which hosts the largest high-grade primary
vanadium districts in the world. Through Bushveld Energy, the
Company’s energy storage component manufacturer and project
developer, focused on vanadium-based energy storage systems called
Vanadium Redox Flow Batteries (‘VRFBs’), Bushveld Minerals plays a
pivotal role in the development and promotion of VRFB technology.

Bushveld Minerals’ vision is to be one of the world’s lowest-cost and
vertically-integrated primary vanadium producers, recognised for its
diversified vanadium product portfolio, operating efficiency and
value creation.

The overriding objective of the Board is to direct the business to
ongoing success and deliver long-term shareholder value. To achieve
this, an operating model has been adopted that defines how to deliver
and execute the strategy by defining the structures in which to operate
and the capabilities required.

Bushveld Minerals’ strategy and compelling investment case are
outlined on page 04 of this report.

While the Company’s focus is on the vanadium platform, it has
additional investments in an integrated coal mining and power
generation project in Madagascar, through its wholly-owned
subsidiary Lemur Holdings, and an eight per cent shareholding
in AIM-listed AfriTin Mining Limited.

Principle 2:
Seek to understand and meet shareholder needs
and expectations
The Board is committed to providing effective communication with
shareholders and attaches great importance to delivering clear and
transparent information on the Company’s activities and strategy.

The Bushveld Minerals Investor Relations team is dedicated to
communicating the Bushveld Minerals value proposition to both
institutional and private investors, as well as the broader market. This
is successfully achieved through active engagement with investors,
research analysts and journalists via a combination of investor roadshows,
proprietary webinars, attendance at conferences focused on the mining
and energy storage sectors and engagement with selective media.

The Board views the Annual General Meeting (‘AGM’) as the main
forum for communicating directly with investors. Notice of the AGM is
sent to shareholders at least 21 days before the meeting and the event
is attended by the directors, either in person or via teleconference,
who are available to answer questions raised by shareholders.
At the AGM, various resolutions are proposed and voted on by the
shareholders, either by attending the meeting or appointing a proxy
to vote on their behalf if unable to attend in person. The results of the
voting are released as soon as practicable after the AGM has closed.
Beyond the AGM, the Company engages with its shareholders
throughout the year across various platforms such as roadshows and
conferences. These engagements are key as they provide valuable
feedback in the decision-making process and determine how the
Company can best meet shareholder expectations.

Significant developments and regular operational updates are
disseminated through stock exchange announcements via the
Regulatory News Service (RNS) and can be found on the Company’s
website at http://www.bushveldminerals.com/regulatory-news-rns/.
The website also has a wealth of information for existing and
potential shareholders, including a corporate video, project
descriptions, investor presentations, financial and technical reports,
analyst research, webcasts and certain shareholder information.

Any shareholder enquiries can be directed to info@
bushveldminerals.com and to chika.edeh@bushveldminerals.com.

GovernanceRoadshows

London

Cape Town and Johannesburg

New York

London and New York

Site visits

Vametco and VRFB Eskom Site Visit

Reporting

Q1 2019 Operational Updates

Q2 2019 Operational Updates

2018 Full year Results

H1 2019 Results

Q3 2019 Operational Updates

Q4 2019 Operational Updates

Annual General Meeting

Conferences

Mining Indaba, Cape Town

121 Mining Investment, Cape Town

Benchmark Mineral Intelligence World Tour (Standard Bank), Cape Town

Africa Energy Indaba, Johannesburg

28th BMO Global Metals & Mining – Hollywood, Florida

World Bank´s Batteries, Energy Storage and the Renewable Future Workshop, Cape Town

Power & Electricity World Africa, Johannesburg

Exane BNP Paribas: Natural Resources Conference, London

Vanitec, Chengdu

Africa Utility Week, Cape Town

Benchmark Minerals World Tour, London

Junior Indaba, Johannesburg

World Bank Energy storage partnership, Paris

Macquarie Conference, London

International Flow Battery Forum, Lyon

RMB Morgan Stanley Off Piste Investor Conference, Cape Town

World Economic Forum on Africa, Cape Town

Power Week Africa, Johannesburg

CRU Ryan’s Notes Ferroalloys – Orlando, Florida

South Africa Energy Conference, Johannesburg

Johannesburg Indaba, Johannesburg

Macquarie Green Energy Conference (New Frontiers GEC), London

African Solar Energy Forum, Accra

South African Investment Conference, Johannesburg

2019

March

May

June

October

January

May

July

June

September

November

January 2020

July

February

March

April

May

June

July

September

October

November

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Bushveld Minerals | Annual Report and Financial Results 2019

Corporate Governance Report continued

Principle 3:
Take into account wider stakeholder and social responsibilities and their
implications for long-term success
Bushveld Minerals recognises that successful execution of its business strategy requires it to build and maintain meaningful, well-functioning
relationships with its multiple stakeholders. These include government, regulatory authorities, funders, partners, employees, contractors,
customers and, very importantly, the communities in which our projects and operations are based. We see our socio-economic role going
beyond the creation of jobs and revenue for South Africa, to acting as an agent for transforming these communities.

More information on this can be found within our Sustainability Report on page 54.

Principle 4:
Embed effective risk management, considering both opportunities and threats,
throughout the organisation
The Board has primary responsibility for establishing and maintaining the Company’s internal controls and risk management systems, which
are designed to meet the particular needs of the Company and the risks to which it is exposed. The responsibility for reviewing the adequacy
and effectiveness of these controls and risk management systems has been delegated to the Audit Committee. While the Board is aware that
no system can provide absolute assurance against material misstatement or loss, in view of the increased activity and further development
of the Company, continuing reviews of internal controls are undertaken to ensure that they are adequate and effective.

To manage the Company’s inherent risk, we have conducted a detailed risk analysis, together with risk mitigation strategies. The risks that
are detailed on page 50 are the principal risk factors that could impact the Company’s ability to deliver on our long-term strategic objectives.
As such, we have put significant effort into analysing these risks and putting in place initiatives to manage them.

The Board considers that the frequency of Board meetings and the level of detail presented to the Board for its consideration in relation to
the operations of the Company provide an appropriate process to identify, evaluate and manage significant risks relevant to the operations
on a continuous basis. This is coupled with the reports received from the Company’s external, independent auditor, via the Audit Committee,
on the state of its internal controls and whether any perceived gaps in the control environment require remedial action.

There is currently no internal audit function, however, to align with the Company’s growth trajectory the Audit Committee will be appointing
an internal auditor in due course.

Principle 5:
Maintaining the Board as a well-functioning, balanced team led by the Chair
The overriding objective of the Bushveld Minerals’ Board is to direct the business to ongoing success and deliver long-term shareholder
value. To achieve this, an efficient and effective operating model is required, coupled with clear communication which promotes confidence
and trust.

The 2019 Board consisted of a Non-Executive Chairman (Ian Watson), a Senior Non-Executive Director (Michael Kirkwood), two additional
Non-Executive Directors (Jeremy Friedlander and Anthony Viljoen) and two Executive Directors (the Chief Executive Officer and the Finance
Director, Fortune Mojapelo and Tanya Chikanza, respectively). The Chairman and two of the non-Executive Directors are deemed to be
independent. The Board is satisfied that it has achieved a suitable balance between independence, on the one hand, and knowledge of the
Company on the other, enabling it to discharge its duties effectively. Biographies and details of the committees of which each of the directors
is a member are on pages 74 and 75.

The Board holds formal quarterly meetings and meets outside those events as and when necessary. The executive directors work full-time
for the Company and the expectation is that the non-executive directors will spend 30 days per annum on work for the Company.

GovernanceThe Board met formally four times during the year ended 31 December 2019, with an additional eleven meetings held to consider matters
falling outside the quarterly cycles. Attendance was as follows:

Ian Watson
Michael J. Kirkwood
Jeremy Friedlander
Anthony Viljoen
Fortune Mojapelo
Geoff Sproule (resigned 30 September 2019)
Tanya Chikanza (appointed 1 October 2019)

15
13
13
14
15
7
5

The Board is supported by Audit, Remuneration, Nomination and Disclosure Committees that operate within specific terms of reference and
are described further in Principle 9 below.

Principle 6:
Ensure that the Directors pool the necessary up-to-date experience, skills, and capabilities
The Directors of Bushveld Minerals have been appointed to the Company because of the skills and experience they offer, as well as their
personal qualities and capabilities. Full biographical details of the Directors are included on pages 74 and 75, which provides an indication
of their breadth of skills and experience. The Board is also able to engage independent advisors should the need arise.

The Board is determined to ensure that it continues to have the right balance of directors. This is a continuous process, with the Nomination
Committee regularly reviewing the composition of the Board to ensure that it has the necessary breadth and depth of skills to support the
ongoing strategy of Bushveld Minerals. In addition to this, at least one-third of directors retire by rotation and offer themselves for re-election
every year, which is voted on by shareholders at the AGM.

At the end of September 2019, Geoff Sproule stepped down from the Board as Finance Director and was replaced by Tanya Chikanza. As the
biographical details on page 74 show, Tanya is a Chartered Accountant who has extensive experience in managing publicly-listed companies’
relationships with financial markets. She has thirty years’ experience in international equity and debt capital markets, strategy, corporate
finance, and audit. Her deep understanding of the South African mining industry, along with her experience in engaging debt and equity
investors, comes at an important time as the Company moves into its next stage of development.

After year-end, the Company appointed Dolly Mokgatle as an Independent Non-Executive Director to the Board. Dolly’s extensive expertise in
respect of South Africa’s power network, coupled with her in-depth knowledge of energy policy, will be valuable to the Company as it pursues
its energy strategy. In addition, her corporate experience, derived from participation in numerous company boards over the years, strengthens
our governance. Her full biography can be found on page 75.

Principle 7:
Evaluate Board performance based on clear and relevant objectives,
seeking continuous improvement
The Board recognises the importance of regularly reviewing the effectiveness of its performance and the ability of the members to work
together to achieve the Company’s objectives, as well as that of its committees and the individual directors.

Responsibility for assessing and monitoring the performance of the executive directors lies with the independent non-executive directors,
using agreed key performance indicators. Further detail can be found in our Remuneration Report on page 80.

The Board as a whole evaluates its own performance internally, and that of the committees, and uses the process to identify opportunities
for improvement. The Nomination Committee is responsible for reviewing the structure, size, and composition (including skills, knowledge,
experience and diversity) of the Board and making recommendations to the Board on any changes. Succession planning for directors and
other senior executives is also the responsibility of the Nomination Committee.

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Bushveld Minerals | Annual Report and Financial Results 2019

Corporate Governance Report continued

Principle 8:
Promote a corporate culture that is based on ethical values and behaviours
In building a strong governance framework, we have aimed to ensure that ethical values and behaviours are embedded within the culture
of Bushveld Minerals. The Board is very conscious that the tone and culture that it sets will impact all aspects of the Group and the way that
employees behave and operate.

The Company seeks to ensure that responsible business practices are fully integrated into the management of its operations, which is essential
for operational excellence and to deliver Bushveld’s strategy.

All directors and employees are bound by a confidentiality agreement that forms part of their service agreements or employment contracts,
as the case may be.

In addition, the Company has the following policies in place:

Anti-Corruption and Bribery Policy
It is the Company’s policy to conduct all of its business in an honest and ethical manner. We take a zero-tolerance approach to bribery
and corruption and are committed to acting professionally, fairly and with integrity in all our business dealings and relationships, wherever
we operate.

Share Dealing Policy
The Company has adopted a policy for dealing in its shares, which incorporates all obligations under both Rule 21 of the AIM Rules for
Companies and Article 19 of the Market Abuse Regulations.

The policy explains the circumstances in which shares in the Company can be bought or sold by directors and relevant employees, along
with the requirements and procedures that have to be followed when dealing in the Company’s shares. In addition to this, the Company has
a Memorandum on Inside Information providing additional information on applicable laws and possible sanctions, market abuse provisions
and communication requirements.

Social Media Policy
While the Company recognises the benefits that social media engagement can have in helping it reach out to stakeholders, this policy is in
place to facilitate the responsible use of social media and minimise the risks to the Company through its misuse, which can bring a company
into disrepute.

Governance69

Principle 9:
Maintain governance structures and processes that are fit for purpose and support
good decision-making by the Board
The Board’s role is to provide strategic leadership to the Company within a framework of prudent and effective controls enabling risk
to be assessed and managed.

Matters reserved for the attention of the Board include, inter alia:
– Board membership and powers, including the appointment and removal of Board members and determining the terms of reference

of the Board;

– Establishing the overall control framework, including the operating model that defines how to deliver and execute strategy by defining

the structures in which to operate;

– Key commercial matters, including the approval of the budget and financial plans, changes to the Company’s capital structure,

the Company’s business strategy, acquisitions and disposals of businesses and capital expenditure;
– The approval of financial statements, dividends and significant changes in accounting practices; and
– Stock exchange-related issues, including the approval of the Company’s announcements and communications with both shareholders

and the stock exchange.

The Board is supported by committees that have the necessary skills and knowledge to discharge their duties and responsibilities effectively.
These committees consist mostly of non-executive directors. Descriptions of the various committees are provided below.

Audit Committee
The Audit Committee has responsibility for monitoring the integrity of the financial statements of the Company, including its annual and
half yearly reports, interim management statements, preliminary results announcements and any other announcements relating to financial
performance before they are presented to the Board for approval. In addition to this, its duties include reviewing and reporting on the
Company’s internal financial controls and risk management systems.

The Audit Committee is responsible for recommending the appointment of the auditors and reviewing and monitoring their independence
and objectivity. The Committee has unrestricted access to the auditors.

Meetings are held at least three times a year at appropriate intervals in the financial reporting and audit cycle, and as otherwise required.

Remuneration Committee
The Remuneration Committee determines the framework for the remuneration of the Company’s Chairman and executive directors and,
as appropriate, other senior management, including pension entitlements, share option schemes and other benefits.

Remuneration of non-executive directors is a matter for the Board. No directors or senior managers are involved in any decisions on their
own remuneration.

Disclosure Committee
The purpose of the Disclosure Committee is oversight of the implementation of the governance and procedures associated with the
assessment, control, and disclosure of inside information in relation to the Company.

Nomination Committee
The Nomination Committee is responsible for reviewing the structure, size and composition of the Board, making recommendations to
the Board with regard to any changes, succession planning for directors and senior management, preparing a description of the role and
capabilities required for a particular appointment and nominating candidates to fill Board positions as and when they arise. The Committee
also makes recommendations to the Board concerning membership of the Audit, Remuneration and Disclosure Committees, in consultation
with the Chairman of each of those committees.

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Bushveld Minerals | Annual Report and Financial Results 2019

Corporate Governance Report continued

Principle 10:
Communicate how the Company is governed and is performing by maintaining a dialogue with
shareholders and other relevant stakeholders
The Board is committed to providing effective communication with shareholders and attaches great importance to delivering clear and
transparent information on the Company’s strategy, activities and financial position.

Results of the AGM, significant developments and regular operational updates are disseminated through stock exchange announcements
via RNS and can be found on the Company’s website at http://www.bushveldminerals.com/regulatory-news-rns/.

The Company’s website has a wealth of corporate information, including a corporate video, project descriptions, investor presentations,
financial and technical reports, analyst research, webcasts and certain shareholder information.

The Head of Investor Relations is the primary point of contact for shareholders and plays a key part in encouraging shareholder interaction
and listening to feedback.

Any shareholder enquiries can be directed to info@bushveldminerals.com and to chika.edeh@bushveldminerals.com.

Governance71

Report of the Audit Committee

Report of the Audit Committee
This report provides details of the role of the Audit Committee and the duties it has undertaken during the year under review.

The Audit Committee comprises Independent Non-Executive Directors Michael Kirkwood, Jeremy Friedlander and Non-Executive Director
Anthony Viljoen. Post year end, the Board added to the Audit Committee, through the appointment of Dolly Mogkatle. The Audit Committee
meets at least three times a year at appropriate intervals in the financial reporting and audit cycle and as otherwise required. Other directors
including the Finance Director and other individuals, as well as the external auditor, may be invited to attend all or part of any meeting,
as and when required.

The members of the Audit Committee have relevant financial experience through the various leadership roles they have held as set out
in their biographical details on pages 74 and 75.

The Audit Committee has access to sufficient resources in order to carry out its duties, including access to the Company Secretary for
assistance as required. The committee gives due consideration to applicable laws and regulations, the Quoted Companies Alliance Corporate
Governance Guidelines for Small and Mid-Sized Quoted Companies and the requirements of the London Stock Exchange’s rules for AlM
companies, as appropriate.

The Audit Committee will review its effectiveness periodically and will conduct an annual review of its constitution and terms of reference
to ensure it is operating at maximum effectiveness. Changes arising from these reviews are recommended to the Board for approval.

The Chairman of the committee reports formally to the Board on its proceedings after each meeting on all matters within its duties and
responsibilities, and how it has discharged its responsibilities.

Responsibilities of the Audit Committee
Key duties of the Audit Committee include:
– monitoring the integrity of the Company’s financial reporting;
– reviewing the consistency of, and any changes to, accounting policies both on a year-on-year basis and across the Company and its group
and reviewing whether management has followed appropriate accounting standards and made appropriate estimates and judgements,
taking into account the views of the external auditor;

– reviewing and reporting to the Board of Directors on significant financial reporting issues and judgements which they contain, having

regard to the matters communicated to it by the auditor.

– reviewing the Company’s internal financial controls and internal control and risk management systems;
– reviewing the adequacy and security of the Company’s whistleblowing facilities for employees and contractors, and ensuring that these

facilities allow for investigation and appropriate follow up action in respect of any reports made;

– reviewing the Company’s systems, procedures and controls for detecting fraud, the Company’s bribery and money laundering systems

and controls, and the adequacy and effectiveness of its compliance function;

– considering annually whether there is a need for an internal audit function, taking into account the growth of the Company, the scale,

diversity and complexity of the Company’s activities and the number of employees, as well as cost and benefit considerations;
– making recommendations to the Board (to be put to shareholders for approval at the Annual General Meeting) in relation to the

appointment of the external auditor;

– managing and overseeing the relationship with the external auditors, including their terms of engagement and remuneration; and
– meeting regularly with the external auditors and reviewing their findings.

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Bushveld Minerals | Annual Report and Financial Results 2019

Report of the Audit Committee continued

Financial reporting
The Audit Committee reviewed and assessed the Company’s financial reporting in the period, including its half-year report, results
announcements and this Annual Report. This review included an assessment of the consistency of, and changes to, accounting policies,
estimates and judgements; the methods used to account for significant or unusual transactions; the appropriateness of the accounting
standards used; the clarity and completeness of disclosures and the context in which statements are made; and a review of material
disclosures regarding audit and risk management in the financial statements, including in the strategic report and this corporate
governance statement.

In reviewing the Company’s financial statements, the Audit Committee has considered the Company’s accounting policies, particularly in
relation to the treatment of the Vanchem acquisition and the consequential gain on bargain purchase arising from the acquisition, as well
as the accounting estimates and judgements as described on pages 116 and 117. A further significant focus for the Audit Committee has been
the impact of Covid-19 on the going concern assumptions and viability of the Group. The potential risks to the Group include a decline in
vanadium prices as well as operational stoppages, resulting in reduced ability to sell its products as well as volatile market conditions, all of
which could impact the Group’s cashflows and ability to comply with its financial covenants. In mitigation, the Group has modelled a variety
of scenarios around cash preservation and cost containment that show the Group’s ability to continue to operate sustainably.

In addition to the publicly-released reports, the Committee’s review covered management reports as well as reports from and discussions
with the external auditor. The Audit Committee provided comment and feedback on this Annual Report before finalisation and approval.

The review concluded that, taken as a whole, this Annual Report is fair, balanced and understandable and provides the information necessary
for shareholders to assess the Company’s position, performance, business model and strategy.

Internal audit
The Company does not currently have an internal audit function. The Audit Committee considers annually whether there is a need for an
internal audit function, taking into account the growth of the Company, the scale, diversity and complexity of the Company’s activities and
its number of employees, as well as cost and benefit considerations.

The Audit Committee has concluded that, as a result of the acquisition of Vanchem and the various other growth initiatives in the group,
there is now a need for an internal audit function. An assessment is under way to determine the costs and benefits of insourcing or outsourcing
the function, after which the appointment will be made. The role is expected to be filled in the 2020 financial year.

External auditor
The Audit Committee is responsible for overseeing the Company’s relationship with the external auditor.

The Board appointed RSM UK Audit LLP as the Company’s auditor in the period and the Audit Committee has recommended to the Board that
shareholders be asked to approve the re-appointment of RSM UK Audit LLP as auditor at the Annual General Meeting.

The Audit Committee discharged its duties, in accordance with its terms of reference, during the period to 31 December 2019, including:
– approving the engagement of the external auditor, reviewing and approving the annual audit plan;
– meeting regularly with the external auditor;
– reviewing the findings of the audit of the financial statements for the period ended 31 December 2019 with the external auditor;
– reviewing the management representation letter requested by the external auditor before it was signed by management and

management’s response to the auditor’s findings and recommendations; and

– reviewing the effectiveness of the audit process.

Non-audit services
A policy is in place to govern the supply of non-audit services by the external auditor, in order to safeguard independence and objectivity.
The policy sets out the recommended maximum fees that should be payable for non-audit services as a percentage of the audit fee and
contains guidelines as to the circumstances where a proposed engagement should be subject to a tender process.

In the current period, following the appointment of RSM UK Audit LLP as statutory auditor, there were no fees paid for non-audit services.

Governance73

Whistleblowing
The Company has adopted a whistleblowing policy to ensure that staff are able to raise concerns about malpractice or impropriety without
fear of reprisals. The policy encourages all staff to maintain high standards in their work and to report any wrongdoing which falls short
of these standards. It commits the Company to treat all such disclosures in a confidential and sensitive manner. The group receives reports
regarding any significant allegations made, details of investigations and the outcomes. No significant issues were reported during the year.

Risk management and internal control
The Audit Committee is mandated to keep the Company’s internal control and risk management systems under review. Internal controls
and risk management systems are in place to support the integrity of the financial reporting process and the preparation of accounts.
These systems include policies and procedures to ensure that adequate accounting records are maintained and transactions are recorded
accurately and fairly to permit the preparation of financial statements in accordance with IFRS.

The key elements of the Company’s system of internal controls are discussed on page 100 of this report.

The Audit Committee’s review of the system of internal controls is supplemented by reports from the external auditors regarding issues
identified during their engagement, particularly those relating to control weaknesses, and the responses from management.

Michael J. Kirkwood
Audit Committee Chair
23 June 2020
Bushveld Minerals

Financial StatementsSupplementary InformationGovernanceBusiness Overview74

Board of Directors

Ian Watson
(77)

Fortune Mojapelo
(44)

Independent Non-Executive
Chairman

Co-founder and Chief
Executive Officer

Bushveld Minerals | Annual Report and Financial Results 2019

Tanya Chikanza
(54)

Finance Director

Appointed to Board
March 2012

Appointed to Board
October 2019

Experience
A mining engineer with experience in the
South African mining sector.

A professional engineer and a member
of the Engineering Council of South Africa.

Previous roles include Managing Director
of Northam Platinum.

A former CEO of Platmin Limited and International
Ferro Metals (SA).

Consulting Engineer at Gold Fields of
South Africa Limited.

Experience
Co-founder and Chief Executive of Bushveld
Minerals, a role he has held from the inception
of the Company.

Co-founder and Director of Bushveld Energy.

A founding shareholder of VM Investment Company,
a principal investment and advisory company
focusing on mining projects in Africa.

Played a leading role in the origination,
establishment and project development
of several junior mining companies in Africa.

Worked at McKinsey & Company as a consultant on
corporate strategy and organisational development
in several sectors in South Africa and Nigeria.

Experience
Has a global and market-facing perspective with
30 years in international equity and debt capital
markets, strategy, corporate finance and audit.

Previously spent nine years at dual-listed Lonmin Plc
where, as Executive Vice President of Corporate
Strategy, Investor Relations and Corporate
Communication, she helped to steer Lonmin’s return
to profitability in 2018 and led the recent all-share
transaction with Sibanye Stillwater.

Executive Director at Smith’s Corporate Advisory
in London.

Vice President Corporate Finance at JP Morgan
Cazenove.

Qualifications
National Diploma in Mining from Witwatersrand
Technical College School of Mines.

Qualifications
BSc (Actuarial Science) from the
University of Cape Town.

Mine Manager’s Certificate of Competency,
Republic of South Africa.

Qualifications
Qualified Chartered Accountant.

Member of the Institute of Chartered
Accountants of Zimbabwe.

Board Committee membership
Chairman of the Disclosure and Nomination
Committees and a member of the
Remuneration Committee.

Board Committee membership
Disclosure and Nomination Committees.

Anthony Viljoen
(43)

Jeremy
Friedlander (65)

Michael J.
Kirkwood (73)

Dolly Mokgatle
(64)

Non-Executive Director

Appointed to Board
March 2012, Executive Director.
Appointed Non-Executive Director in
November 2017

Experience
Chief Executive Officer of AIM-listed
AfriTin Mining Limited since 2017.

Executive Director of Bushveld
Minerals from March 2012 to
November 2017.

A mining entrepreneur and founding
shareholder and director of VM
Investment Company, a principal
investment and advisory company
focusing on mining.

Involved in the establishment and
project development of a number of
junior mining companies across Africa.

Previously worked at Deutsche Bank,
Barclays Capital in London and Loita
Capital Partners.

Qualifications
BSc (Business and Agricultural
Economics) from the University
of KwaZulu-Natal.

Postgraduate Diploma in Finance
Banking and Investment Management
from the University of KwaZulu-Natal.

Independent Non-
Executive Director

Appointed to Board
March 2012

Senior Independent
Non-Executive Director

Independent Non-
Executive Director

Appointed to Board
April 2018

Appointed to Board
March 2020

Experience
Established McCreedy Friedlander
in 1993, which became one of the
premier property agencies in South
Africa and listed it in 1998 on the JSE.

A director of Onslow Resources
(oil and gas in Namibia and Yemen).

Business development director of a
number of Avana companies involved
in uranium, coal, gold, oil and gas and
industrial minerals.

Recently involved in the establishment
of a number of natural resource
projects, predominantly in Africa
and South America.

Experience
Chairman of corporate advisory firm
Ondra LLP and also serves on the
Board of AngloGold Ashanti Limited.

Previously chairman of Circle
Holdings plc.

Served on the boards of UK Financial
Investments, Eros International plc,
Kidde plc and as Deputy Chairman
of the PricewaterhouseCoopers
Advisory Board.

Spent 31 years with Citigroup, latterly
as UK chairman.

Held appointments as president of
the Chartered Institute of Bankers,
deputy chairman of the British Bankers
Association, and as inaugural chairman
of British-American Business.

Was appointed a Companion of the
Order of St Michael and St George in
the Queen’s Birthday Honours in 2003.

Experience
A former Managing Director of
the Transmission Group at Eskom
and held various roles, including
Executive Director of Corporate
Affairs, Senior General Manager:
Growth and Development and
Acting Legal Manager.

Served on the steering committee of
the Electricity War Room for electricity
supply industry restructuring, both
within and outside Eskom.

From 2005 until 2009, she held the role
of Deputy Chairperson of the National
Energy Regulator of South Africa and
chaired the Electricity Committee.

Current chairperson of Total South
Africa and a Non-Executive Director
of Rothschild (South Africa), Bid
Corporation and Telkom SA.

Has served as a Non-Executive
Director of Kumba Iron Ore, Sasfin
Bank and Hudaco Industries, and
chaired the Board of Zurich Insurance
Co South Africa.

Qualifications
BA LLB from the University
of Cape Town.

Qualifications
Graduate of Stanford University,
California.

Qualifications
B Proc from University of the North,
South Africa.

LLB (Law) – University of
the Witwatersrand.

Higher Diploma in Tax Law –
University of the Witwatersrand.

Attorney of the High Court of
South Africa (non-practising).

Board Committee Membership
Audit Committee.

Board Committee Membership
Audit, Disclosure and
Remuneration Committees.

Board Committee Membership
Chairman of the Audit and
Remuneration Committees
and a member of the
Nomination Committee.

Financial StatementsSupplementary InformationGovernanceBusiness Overview76

Bushveld Minerals | Annual Report and Financial Results 2019

Executive Management Team

Fortune Mojapelo (44)

Tanya Chikanza (54)

Bertina Symonds (53)

André Strydom (43)

Mikhail Nikomarov (39)

Prince Nyati (42)

Co-founder and Chief Executive
Officer since March 2012

Finance Director
since October 2019

Experience
Co-founder and Chief Executive of Bushveld
Minerals, a role he has held from the inception
of the Company.

Co-founder and Director of Bushveld Energy.

A founding shareholder of VM Investment Company,
a principal investment and advisory company
focusing on mining projects in Africa.

Played a leading role in the origination,
establishment and project development
of several junior mining companies in Africa.

Worked at McKinsey & Company as a consultant on
corporate strategy and organisational development
in several sectors in South Africa and Nigeria.

Experience
Has a global and market-facing perspective with 30
years in international equity and debt capital markets,
strategy, corporate finance and audit.

General Manager of Vametco
since April 2019

Experience
Over 20 years’ experience in mining
and beneficiation.

A former General Manager of the Nkomati Nickel
Mine owned by JSE-listed African Rainbow Minerals,
a role she held from 2015.

Possesses a strong leadership, production and
commercial background and a solid track record
in general management, stakeholder engagement
and operations improvement.

Executive Director at Smith’s Corporate Advisory
in London.

Vice President Corporate Finance at JP Morgan
Cazenove.

Held a range of other senior positions within
Nkomati, including as Head of the Department
of Concentrate Production and Concentrate
Production Manager.

General Manager of Vanchem

Chief Executive Officer of Bushveld

Chief Executive Officer of Lemur

since August 2019

Energy since April 2015

Holdings since November 2017

Experience

Qualified Chemical Engineer with experience

Over 15 years of international business experience

Over 15 years’ experience developing energy and

in project development, construction,

in energy and finance, including as CEO and

mining projects in sub-Saharan Africa.

and commissioning.

co-founder of Bushveld Energy since 2015.

Started his career in oil and gas and petrochemicals

Over 18 years of mining and beneficiation

Seven years with McKinsey & Company in Moscow

in the US and has worked in Zambia, South Africa,

experience.

Previously General Manager at Sadiola and Yatela

mines operated by AngloGold Ashanti, a role he

held since 2012.

and Johannesburg, advising national governments,

India and Singapore for companies including Shell

utilities and manufacturers on growth strategy and

Oil, Total Petrochemicals, Eskom and Tata Power.

policy and leading operational turnarounds in the

energy sector.

As Africa Group Head at Tata Power, Prince evaluated

over 100 mine assets and 50 power opportunities in

Three years as Portfolio Manager at Sovereign Bank,

30 countries.

USA (now Santander Bank).

Storage Association.

Chairman of the Board, South African Energy

US$1 billion in value.

Chair, Energy Storage Committee, Vanitec (the

specialising in domestic and seaborne coal.

global association of vanadium producers).

Other experience includes commodity trading,

Worked on transactions representing over

Involved in the development and financial close of

a 120 MW hydro-electric project in Zambia as well

as two wind farm projects (235 MW) in South Africa.

Served on the boards of Cennergi and the

Tsitsikamma and Amakhala Wind Projects.

Qualifications
BSc (Actuarial Science) from the University
of Cape Town.

Qualifications
Qualified Chartered Accountant.

Member of the Institute of Chartered Accountants
of Zimbabwe.

Qualifications
BSc Honours (Chemistry) from Rand Afrikaans
University (now University of Johannesburg).

Master of Business Leadership from the University
of South Africa.

Qualifications

B.Eng (Chemical Engineering) specialising in Mineral

BA (History) and BA (Economics) from University

BA from the University of Zambia.

Processing from the Potchefstroom University for

of Massachusetts.

Christian Higher Education (now known as North

Diploma in Economics from London School

MBA from the University of Houston.

West University).

MBA from University of Liverpool.

of Economics.

MBA from INSEAD.

Fortune Mojapelo (44)

Tanya Chikanza (54)

Bertina Symonds (53)

André Strydom (43)

Mikhail Nikomarov (39)

Prince Nyati (42)

Co-founder and Chief Executive

Officer since March 2012

Finance Director

since October 2019

Experience

General Manager of Vametco

since April 2019

Experience

Co-founder and Chief Executive of Bushveld

Has a global and market-facing perspective with 30

Over 20 years’ experience in mining

Minerals, a role he has held from the inception

years in international equity and debt capital markets,

and beneficiation.

of the Company.

strategy, corporate finance and audit.

A former General Manager of the Nkomati Nickel

Co-founder and Director of Bushveld Energy.

Previously spent nine years at dual-listed Lonmin Plc

Mine owned by JSE-listed African Rainbow Minerals,

where, as Executive Vice President of Corporate

a role she held from 2015.

A founding shareholder of VM Investment Company,

a principal investment and advisory company

focusing on mining projects in Africa.

Played a leading role in the origination,

establishment and project development

of several junior mining companies in Africa.

Worked at McKinsey & Company as a consultant on

corporate strategy and organisational development

in several sectors in South Africa and Nigeria.

Strategy, Investor Relations and Corporate

Communication, she helped to steer Lonmin’s return

to profitability in 2018 and led the recent all-share

transaction with Sibanye Stillwater.

Executive Director at Smith’s Corporate Advisory

Possesses a strong leadership, production and

commercial background and a solid track record

in general management, stakeholder engagement

and operations improvement.

Held a range of other senior positions within

Nkomati, including as Head of the Department

in London.

Cazenove.

Vice President Corporate Finance at JP Morgan

of Concentrate Production and Concentrate

Production Manager.

General Manager of Vanchem
since August 2019

Chief Executive Officer of Bushveld
Energy since April 2015

Chief Executive Officer of Lemur
Holdings since November 2017

Experience
Qualified Chemical Engineer with experience
in project development, construction,
and commissioning.

Over 18 years of mining and beneficiation
experience.

Previously General Manager at Sadiola and Yatela
mines operated by AngloGold Ashanti, a role he
held since 2012.

Experience
Over 15 years of international business experience
in energy and finance, including as CEO and
co-founder of Bushveld Energy since 2015.

Seven years with McKinsey & Company in Moscow
and Johannesburg, advising national governments,
utilities and manufacturers on growth strategy and
policy and leading operational turnarounds in the
energy sector.

Three years as Portfolio Manager at Sovereign Bank,
USA (now Santander Bank).

Chairman of the Board, South African Energy
Storage Association.

Chair, Energy Storage Committee, Vanitec (the
global association of vanadium producers).

Experience
Over 15 years’ experience developing energy and
mining projects in sub-Saharan Africa.

Started his career in oil and gas and petrochemicals
in the US and has worked in Zambia, South Africa,
India and Singapore for companies including Shell
Oil, Total Petrochemicals, Eskom and Tata Power.

As Africa Group Head at Tata Power, Prince evaluated
over 100 mine assets and 50 power opportunities in
30 countries.

Worked on transactions representing over
US$1 billion in value.

Other experience includes commodity trading,
specialising in domestic and seaborne coal.

Involved in the development and financial close of
a 120 MW hydro-electric project in Zambia as well
as two wind farm projects (235 MW) in South Africa.

Served on the boards of Cennergi and the
Tsitsikamma and Amakhala Wind Projects.

Qualifications

of Cape Town.

BSc (Actuarial Science) from the University

Qualified Chartered Accountant.

Qualifications

Member of the Institute of Chartered Accountants

of Zimbabwe.

Master of Business Leadership from the University

BSc Honours (Chemistry) from Rand Afrikaans

University (now University of Johannesburg).

of South Africa.

Qualifications
B.Eng (Chemical Engineering) specialising in Mineral
Processing from the Potchefstroom University for
Christian Higher Education (now known as North
West University).

Qualifications
BA (History) and BA (Economics) from University
of Massachusetts.

Diploma in Economics from London School
of Economics.

MBA from University of Liverpool.

MBA from INSEAD.

Qualifications
BA from the University of Zambia.

MBA from the University of Houston.

Financial StatementsSupplementary InformationGovernanceBusiness Overview78

Bushveld Minerals | Annual Report and Financial Results 2019

Executive Management Team

Sihle Mdluli (39)

Ken Greve (59)

Viki Rapelas (41)

Mpume Makhubela (42)

Professor

Director Strategy and Corporate
Services since June 2019

Director Corporate Development
since January 2019

Director Legal and Compliance
since January 2019

Group Human Resources Director

since September 2017

Morris Viljoen (79)

Richard Viljoen (79)

Experience
Former Director and Operations Transformation
leader at Deloitte Africa’s Strategy and Operations
practice.

Spent over nine years assisting clients in defining
and executing their strategies and improving their
cost per output unit in a sustainable manner.

Has extensive experience in building stakeholder
value in the mining and public sectors, focusing on
Strategy Formulation and Execution, Business Model
Transformation, Recovery and Turnaround Strategy,
Capital Projects Efficiency, Collaborative Facilitation
and Stakeholder Engagement.

Prior to Deloitte, she spent over six years at
De Beers, where she acquired experience in
mining, plant operations, general management
and diamond sales.

Experience
Mining Engineer with extensive experience in project
management, project development, business and
company valuations, mergers and acquisitions,
logistics contracts and specialised financing,
particularly in the resources industry.

Held senior corporate finance and investment
banking roles at Gold Fields of South Africa,
JP Morgan, Kumba Resources and BHP Billiton,
where he was Vice President of Strategy & Business
Development in South Africa.

Previously held various directorships, including
at Richards Bay Minerals, where he oversaw the
Black Empowerment transaction.

Member of the South African Institute of Mining
and Metallurgy.

Experience
Admitted Attorney of the High Court of South Africa
since 2004.

Admitted Notary and Conveyancer since 2012.

Legal Advisor to the Bushveld Minerals group
since 2007.

18 years of transactional advisory, mergers and
acquisitions and general corporate and commercial
law experience.

Experience

Founding Chief Executive at Huvest People

Over 30 years’ experience in the mining industry,

Solutions since October 2014.

following a role with JCI in base metals (including

including 15 years as chief consulting geologist

nickel, copper antimony, gold and platinum)

for Gold Fields of South Africa.

exploration and mining in southern Africa and

as consulting geologist for Rustenburg Platinum

Mines (part of Anglo American Platinum).

Notable past experience includes the development

of significant mines, including Northam Platinum

and the Leeudoorn and Tarkwa gold mines,

Held the position of Professor of Mining Geology

identifying and developing a significant platinum

at the University of Witwatersrand for 13 years

deposit in the Bushveld Complex for Akanani

and established the Centre for Applied Mining

Resources as well as acting as consultant for

and Exploration Geology, which has identified and

exploration and mining companies in Canada,

developed mineral projects including the Amalia and

Mexico, Venezuela, India and China in the fields

Human Resources Manager at Nedbank.

Blaaubank lode gold deposits, the Akanani/AfriOre

of base metals, gold and platinum.

Platinum Project and the Uramin Uranium Project.

Has also completed numerous competent person’s

reports for projects including the Witwatersrand

South Reef project, Doornkop mine project and

the Uramin uranium project.

Qualifications
BSc Engineering (Metallurgy) from the University
of the Witwatersrand.

Qualifications
Mining Engineering degree from the University
of the Witwatersrand.

Qualifications
BProc and LLB from Rand Afrikaans University
(now University of Johannesburg).

MBA from Wits Business School.

Program for Management Development from
Gordon Institute of Business Science.

BCom Honours (Economics) from the University
of South Africa.

Divisional Director for Human Resources and

Marketing at Liberty Corporate for three years.

Spent a year at Vodacom as Executive Head

of Human Resources.

Spent a total of six years in the Alexander Forbes

Group in various roles, including Head of Human

Resources at Investment Solutions and AF Risk

and Insurance services.

Started her career in 1996, with seven years as

a Human Resources Consultant at Santam.

Qualifications

of Technology.

BTech in Human Resources from Tshwane University

International Executive Development Management

Certificate from the University of the Witwatersrand

and London Business School.

A Certified Remunerations Practitioner with SARA

and World at Work.

Human Resources Excellence Programme

Certification from IMD (Switzerland).

Sihle Mdluli (39)

Ken Greve (59)

Viki Rapelas (41)

Mpume Makhubela (42)

Director Strategy and Corporate

Director Corporate Development

Director Legal and Compliance

Services since June 2019

since January 2019

Former Director and Operations Transformation

Mining Engineer with extensive experience in project

Admitted Attorney of the High Court of South Africa

leader at Deloitte Africa’s Strategy and Operations

management, project development, business and

since 2004.

Experience

practice.

Spent over nine years assisting clients in defining

and executing their strategies and improving their

company valuations, mergers and acquisitions,

logistics contracts and specialised financing,

particularly in the resources industry.

cost per output unit in a sustainable manner.

Held senior corporate finance and investment

Has extensive experience in building stakeholder

value in the mining and public sectors, focusing on

Strategy Formulation and Execution, Business Model

Transformation, Recovery and Turnaround Strategy,

banking roles at Gold Fields of South Africa,

JP Morgan, Kumba Resources and BHP Billiton,

where he was Vice President of Strategy & Business

Development in South Africa.

Capital Projects Efficiency, Collaborative Facilitation

Previously held various directorships, including

and Stakeholder Engagement.

at Richards Bay Minerals, where he oversaw the

Prior to Deloitte, she spent over six years at

Black Empowerment transaction.

De Beers, where she acquired experience in

Member of the South African Institute of Mining

mining, plant operations, general management

and Metallurgy.

and diamond sales.

Admitted Notary and Conveyancer since 2012.

Legal Advisor to the Bushveld Minerals group

since 2007.

18 years of transactional advisory, mergers and

acquisitions and general corporate and commercial

law experience.

Qualifications

BSc Engineering (Metallurgy) from the University

Mining Engineering degree from the University

BProc and LLB from Rand Afrikaans University

of the Witwatersrand.

(now University of Johannesburg).

MBA from Wits Business School.

BCom Honours (Economics) from the University

Program for Management Development from

Gordon Institute of Business Science.

of South Africa.

Group Human Resources Director
since September 2017

Experience
Founding Chief Executive at Huvest People
Solutions since October 2014.

Divisional Director for Human Resources and
Marketing at Liberty Corporate for three years.

Spent a year at Vodacom as Executive Head
of Human Resources.

Spent a total of six years in the Alexander Forbes
Group in various roles, including Head of Human
Resources at Investment Solutions and AF Risk
and Insurance services.

Human Resources Manager at Nedbank.

Started her career in 1996, with seven years as
a Human Resources Consultant at Santam.

Qualifications
BTech in Human Resources from Tshwane University
of Technology.

International Executive Development Management
Certificate from the University of the Witwatersrand
and London Business School.

A Certified Remunerations Practitioner with SARA
and World at Work.

Human Resources Excellence Programme
Certification from IMD (Switzerland).

Technical Advisors

Professor
Morris Viljoen (79)

Professor
Richard Viljoen (79)

Experience
Over 30 years’ experience in the mining industry,
following a role with JCI in base metals (including
nickel, copper antimony, gold and platinum)
exploration and mining in southern Africa and
as consulting geologist for Rustenburg Platinum
Mines (part of Anglo American Platinum).

Held the position of Professor of Mining Geology
at the University of Witwatersrand for 13 years
and established the Centre for Applied Mining
and Exploration Geology, which has identified and
developed mineral projects including the Amalia and
Blaaubank lode gold deposits, the Akanani/AfriOre
Platinum Project and the Uramin Uranium Project.

Experience
Over 30 years’ experience in the mining industry,
including 15 years as chief consulting geologist
for Gold Fields of South Africa.

Notable past experience includes the development
of significant mines, including Northam Platinum
and the Leeudoorn and Tarkwa gold mines,
identifying and developing a significant platinum
deposit in the Bushveld Complex for Akanani
Resources as well as acting as consultant for
exploration and mining companies in Canada,
Mexico, Venezuela, India and China in the fields
of base metals, gold and platinum.

Has also completed numerous competent person’s
reports for projects including the Witwatersrand
South Reef project, Doornkop mine project and
the Uramin uranium project.

Financial StatementsSupplementary InformationGovernanceBusiness Overview80

Bushveld Minerals | Annual Report and Financial Results 2019

Remuneration Report

PART 1: BACKGROUND STATEMENT FROM THE REMUNERATION COMMITTEE CHAIRMAN

Dear Shareholders,
On behalf of the Bushveld Minerals Limited Remuneration Committee (the ‘Committee’) I am pleased to provide you with the remuneration
report for the year ended 31 December 2019.

Our aim in preparing this report is to ensure that our shareholders and stakeholders better understand our approach to remunerating
executives and the wider employee base. This includes the key principles we use to determine our reward framework and ensure that
our executives are focused on delivering long-term shareholder value consistent with our vision and strategy.

Following the progress made in respect of enhanced disclosure during the 2018 review period, and in light of Bushveld’s future plans to list
on the JSE, this report is presented in the King IV™ recommended format, while taking cognisance of the requirements of being an AIM-listed
company during the review period. As Bushveld is not subject to JSE listing requirements, the policy and implementation reports are not put
to non-binding shareholder votes.

The Committee is pleased to report on the successful implementation of our new short- and long-term incentives during 2019. This provided
a solid base for crafting the Group and subsidiary performance measures for 2020.

Business performance overview
The table below outlines key performance indicators for the Bushveld Minerals Group over a two-year period. The Group reported remarkable
underlying performance in its subsidiaries in the form of production volumes and operational improvements during the 2019 performance
year. These improvements did not however translate into commensurate improvements in the financial indicators owing to a marked decline
in vanadium prices during 2019 relative to 2018. Further detail on the Group’s performance is detailed in the Finance Director’s statement.
Please refer to page 34 of this report for further analysis and an account of the Group’s financial performance.

INDICATOR (US$)

EBIT
EBITDA
CLOSING CASH & CASH EQUIVALENTS
ADJUSTED ROIC*
CLOSING SHARE PRICE

FY19

FY18

22,253,811
32,641,956
34,011,557
33%
20p

95,175,078
101,214,417
42,019,123
54%
38.75p

* adjusted ROIC includes the bargain gain benefit from the strategic acquisition, which was acquired at a consideration below the fair value of the business.

Role of the Committee and key decisions taken
The Committee was established by the Bushveld Minerals Board (“Board”) to act as the Remuneration Committee of the Group and its
subsidiaries (the “Group”). The Committee is responsible for and oversees the governance of all Group remuneration matters. It is specifically
responsible for determining the individual remuneration of directors (executive and non-executive) and senior executives. In order to discharge
its responsibility in this regard, the Committee is required to:

a. Oversee the establishment of a remuneration policy that will promote the achievement of strategic objectives, encourage individual

performance and support Bushveld’s long-term interests. The final approval of the policy rests with the Board;

b. Determine the remuneration framework applicable to executives of Bushveld Minerals; and
c. Review the Group’s remuneration strategy and its implementation on an annual basis.

The Committee successfully implemented the new remuneration policy presented during 2018. In the 2019 financial period the Committee
delivered the following:

Executive remuneration
a. Review of the total remuneration against external benchmarks;
b. Recommendation of individual remuneration for executives;
c. Reviewed and approved the package of the incoming Finance Director; and
d. Reviewed and considered director remuneration best practices to ensure that Bushveld’s current practices remain progressive and relevant.

Governance

Non-executive director remuneration
a. Reviewed and benchmarked the non-executive directors’ fees for onward approval by the Board. No adjustments were recommended for 2020.

Group-wide remuneration matters
a. Review of the Group-wide remuneration policy;
b. Consideration of fair and responsible pay (see details below);
c. Review of retirement and risk benefits across the Group.

Performance – relating to forthcoming performance cycle
a. Setting short-term performance targets;
b. Setting performance targets for LTI awards and approving LTI awards.

Compliance
a. Reviewed and approved the Committee’s annual work plan;
b. Reviewed and approved the Remuneration Report for publication aligned to best practice.

Fair and Responsible Remuneration
During the past year the Committee actively engaged on the subject of fair and responsible remuneration. The Committee’s stance is that ‘fair’
remuneration is impartial and free from discrimination. It is also free from self-interest, prejudice or favouritism.

It is rational, and not based on an irrational or emotional basis. ‘Fair’ does not mean ‘the same’ and remuneration levels will differ according
to a number of factors, such as productivity, performance, skill, experience, risk and complexity, degree of challenge, level of responsibility
of decision making, consequence and impact on the organisation. Equal contributions to performance should, however, be rewarded equally.
The Company’s policy on fair and responsible remuneration can be summarised as follows:

Responsible pay
a. All variable pay is subject to the achievement of stretched performance conditions, carefully calibrated and selected by the Committee,

ensuring a close alignment with shareholder value creation over the long term;

b. A portion of the Short-term Incentive (STI) is deferred and delivered as shares. The Long-term Incentive (LTI) is subjected to a post-vesting

holding period. Both these measures ensure longer shareholder alignment;

c. The link between pay and performance is publicly disclosed by the Company in its remuneration report;
d. The Committee and ultimately the Board reviews and approves the remuneration of directors and senior management, ensuring

independence and transparency;

e. Although remuneration is benchmarked, affordability is a key consideration when making pay adjustments. Variable pay is subject to

reduction (malus) and recoup (claw-back). Executives are also expected to build and maintain a minimum shareholding in the Company.

Fair pay
a. Proper job profiles are in place for all roles within the organisation. Jobs are evaluated in accordance with a robust methodology and

employees are remunerated in accordance with the determined pay scales;

b. The Group is committed to eliminating any existing unfair discrimination/unjustified differentiation within its remuneration dispensation

and preventing future practices of discrimination/differentiation;

c. Horizontal fairness is applied and employees performing the same or similar job requirements at the same or similar level of performance

receive similar remuneration, aligned to the Group pay scale;

d. Vertical fairness is applied by assessing the pay ratio between the CEO and the pay levels of employees below the executive level;
e. Pay is well administered, with employees paid accurately, on time and in a way that is convenient.

Financial StatementsSupplementary InformationGovernanceBusiness Overview82

Bushveld Minerals | Annual Report and Financial Results 2019

Remuneration Report continued

PART 1: BACKGROUND STATEMENT FROM THE REMUNERATION COMMITTEE CHAIRMAN
CONTINUED

The Company conducted the following benchmarks and pay analysis during the period to test the principles of responsible and fair pay:

Gini coefficient
a. An internal Gini-coefficient was determined on a total reward basis and it was established that the Company’s Gini-coefficient is more

favourable than the South African mining-specific and SA National benchmarks (based on the PwC REMchannel® database);

b. The Committee will continue to monitor this on an annual basis.

Executive pay benchmarks
a. Executives and executive directors are paid in line with the Group’s pay policy. Their guaranteed packages are pegged between the lower

quartile and median of the market;

b. Executive pay is benchmarked against a bespoke comparator group with similar company features to the Group or subsidiary to ensure

the reliability and validity of the data against which we benchmark ourselves.

Pay policy for shareholder alignment
a. All STI and LTI participants are subjected to malus and claw-back provisions;
b. Furthermore, incentives (STI and LTI) are directly linked to business performance by way of Group and subsidiary performance targets.

Shareholder engagement
As our shareholder register reflects more institutional shareholders, we will engage to obtain views and comments on our remuneration policy
and its implementation. For the time being, the Remuneration Committee will respond to any inward enquiries relating to this report.

Future focus areas
In 2020 the focus will be on the embedding of the Group’s Remuneration and Performance philosophy into the wider people management
framework, so as to create total alignment in the Group’s Human Capital Agenda referred to in the “Our People” section of the report.

Furthermore, the Committee will prioritise the completion of the design and implementation of the Vametco ESOP as well as ensure full
integration of all the Group subsidiaries within the existing remuneration policy and framework.

Remuneration advisors
The Committee re-employed the services of PricewaterhouseCoopers (“PwC”), an independent professional services firm with a global
remuneration practice, to act as independent advisors to the Committee. The Committee is satisfied that they act independently.

We encourage and pursue open and regular dialogues with all our stakeholders. Your constructive input is valued and appreciated as we
continue to improve the remuneration system. On behalf of the Remuneration Committee, I thank you for your continued support and
feedback regarding our remuneration framework.

Michael J. Kirkwood
Chairman of the Remuneration Committee

Governance83

PART TWO: REMUNERATION POLICY

General Remuneration Policy
The Group Remuneration Policy seeks to enable Bushveld Minerals, to attract, motivate and retain high-performing individuals. It guides
decision-making in relation to all aspects of remuneration and supports the execution of strategic deliverables, as expressed in the Group’s
performance framework.

The policy applies to Bushveld Minerals’, head office employees, Bushveld Energy, Bushveld Vanchem and Lemur. Employees of Bushveld
Vametco Alloys are excluded at this stage, but the Committee aims for the policy to be rolled out to all subsidiaries where it makes sense,
taking into account existing contractual obligations, terms and conditions of employment. The remuneration policy is anchored on the
following remuneration philosophy statements and principles:

Total guaranteed remuneration
is primarily set between the
lower quartile and the median
in the relevant market.

Incentive-based rewards are
earned by achieving stretched
performance conditions
consistent with shareholder
interests over the short,
medium and long term.

ENCOURAGE A
CULTURE THAT
SUPPORTS
SUSTAINABLE AND
ENTREPRENEURIAL
BUSINESS GROWTH.

PROMOTE THE
ACHIEVEMENT
OF STRATEGIC
OBJECTIVES WITHIN
THE ORGANISATION’S
RISK APPETITE.

Short-term incentives relate to
financial and ESG measures.

Long-term incentives include
measures of Free Cash Flow
margin and TSR.

PROMOTE POSITIVE
OUTCOMES ACROSS THE
ECONOMIC, SOCIAL AND
ENVIRONMENTAL
CONTEXT IN WHICH THE
GROUP OPERATES.

PROMOTE A CULTURE
OF RESPONSIBLE
CORPORATE
CITIZENSHIP.

Remuneration practices are
aligned with corporate strategy.

Incentive plans, performance
measures and targets are
structured to operate effectively
throughout the business cycle
and include an overall cap.

Remuneration is aimed at being
fair and responsible.

The remuneration policy,
principles and benchmarking
approaches will be transparent.

The design of long-term
incentives is prudent and does not
expose shareholders to
unreasonable financial risk.

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Remuneration Report continued

PART TWO: REMUNERATION POLICY CONTINUED

Elements of remuneration
The Bushveld Minerals remuneration structure is made up of a combination of fixed and variable pay. The fixed pay component is referred
to as the Total Guaranteed Pay (TGP) and the variable component includes the Group’s Short-term Incentives (STI) and Long-term Incentives
(LTI). The main objective of the TGP is to provide individuals with a fixed income, priced in line with the market and aligned with the job that
they do.

The variable pay component is performance-related, designed to reward superior performance and to align the interests of executives and
management with those of the shareholders over the medium and long term. Below is a summary of the policy as it applies to designated
employees in the organisation (exclusions as explained above), together with the link to strategy.

Remuneration element

Policy

Total Guaranteed Pay, comprising fixed cash salary plus benefits
Policy

Our policy is to set TGP for all levels of staff between the lower quartile and median while the
total package opportunity (inclusive of incentives) is set at the median or above in the case of the
achievement of stretched targets, subject to discretion in the case of business needs to attract scarce
skills to the company.

Policy’s link to Company strategy

In light of the fact that the Group is still in a growth phase, the Committee has determined to set fixed
pay for all employees between the lower quartile and the median.

Approach to benchmarking
and salary adjustments

For executives, the benchmark is derived from listed companies with a similar profile to that
of Bushveld Minerals. Other employees are benchmarked against the mining circle of PwC’s
REMchannel® Remuneration Survey.

The total cost of annual increases for all employees who fall outside collective bargaining agreements
is approved by the Committee and set in accordance with expected market movement and affordability.

Distribution of increases to employees outside the bargaining forums is done with reference to
individual performance, inflation, internal equity, competence and potential. Increases occur annually
with effect from 1 January.

Benefits

Benefits include a Medical Aid, Retirement Fund, Group Life Cover, Disability Benefit and Death Benefit.

Short-term incentives (STI)
Purpose

Policy’s link to Company strategy
and performance measures

The purpose of the STI is to align the interest of employees with those of shareholders on an annual
basis. For managerial level employees, the STI has a deferred component, aligning employees with
shareholders beyond the short-term.

The STI is partly paid in cash and partly deferred into shares for employees on managerial levels, while
non-managerial employees receive their STI in cash. The STI gives employees an incentive to achieve
the Group’s annual goals, with payment levels based on both business (Group and/or subsidiary) and
personal performance, depending on the level of the employee.

The STI is designed to encourage and reward superior performance and to align the interests of
employees as closely as possible with the interests of shareholders. Annual Group performance
targets as well as subsidiary targets and measures are set and approved by the Board. Following
the annual Board strategy review process, it approves the strategic focus areas for the year, and these
are translated into a Group performance balanced scorecard which reflects on-target and stretch
deliverables for the year. These would include measures such as:

– Consolidated Economic Profit;
– Group Strategic Priorities (as mandated by the Board);
– Production Costs (Mining and Processing);
– Production Volumes (Mining and Processing);
– Normalised Revenue (Mining and Processing);
– LTIFR, Community Development and Environmental Targets.

Participants with line of sight on Group financial targets as well as strategic priorities will be allocated
a split weighting between the Group performance targets and functional targets. As a consequence
of Covid-19, only targets that could be approved for 2020 are disclosed below.

Governance85

Remuneration element

Policy

Eligibility

All employees of Bushveld Minerals’ head office, Bushveld Energy, Bushveld Vanchem and Lemur,
as well as the General Manager of Bushveld Vametco Alloys. Other employees of Bushveld Vametco
Alloys are excluded at this stage, but the Committee aims for the policy to be rolled out to all subsidiaries
where it makes sense, taking into account existing contractual obligations, terms and conditions
of employment.

Bonus formula

The STI operates as follows:

On-target incentive percentages

Performance measure weightings

Qualifying Annual TGP x On-Target Incentive Percentage x ((Personal Score x Personal Weighting)
+ (Business Score x Business Weighting));

For qualifying participants (middle management and above), the STI is partly paid in cash (annual
bonus) and partly deferred (deferred bonus) which is then settled as bonus awards under the LTI
(as described below);

The remainder of the participants (non-managerial) receive the full STI in cash.

The on-target incentive percentages are determined per grade and expressed as a percentage
of an employee’s qualifying TGP. The on-target incentive percentages will be determined by the
Remuneration Committee from time to time, informed by prevailing market trends. The on-target
ranges are indicated below.

A combination of financial and personal measures are used, each with an assigned weighting
depending on seniority. Executive performance is heavily weighted toward business performance,
to ensure executive and shareholder alignment.

The following weightings apply at Group and subsidiary level respectively:

Group:

Level

CEO and CFO
Executives
Senior management
Middle management or Professional Specialists
Non-managerial

Subsidiary:

Level

Executives
Senior management
Middle management or Professional specialists
Non-managerial

Business
weighting

Personal
weighting

80%
70%
60%
50%
0%

20%
30%
40%
50%
100%

Business
weighting

Personal
weighting

60%
50%
40%
0%

40%
50%
60%
100%

Subsidiary weightings for Vametco executives are implemented as follows:

Personal Weighting

Business – Vametco

Business – Group

40%

20%

= 60% business weighting

Business performance
measures and targets

As mentioned above, the business score will include a combination of financial and non-financial
performance measures. The applicable targets are disclosed below. Performance outcomes are
measured on the following business scale:

Performance achievement

Threshold performance
Target performance
Stretch performance

Business score

50%
100%
150%

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Remuneration Report continued

PART TWO: REMUNERATION POLICY CONTINUED

Remuneration element

Policy

Personal performance measures and
targets and related personal score

The personal score will be dependent on the personal performance rating of the employee for the
relevant financial year. Personal performance achievement will translate into the following personal
scores. A personal score below threshold acts as a gatekeeper, which means even if the business score
was achieved, a participant with a personal score below threshold will not qualify for any bonus.

Rating

Description

1
2.5
3
4
5

Non performance
Threshold
On Target
Exceeds expectation
Stretch performance

Performance
Score

0%
50%
100%
125%
150%

STI opportunity

Deferral operation

Threshold, target and stretch performance levels are set for each performance target. No bonus is
payable if threshold performance is not achieved. The on-target and stretch bonus levels for executives
are explained below under the heading “Package Design”.

For employees who hold jobs graded between Paterson Grades D and F, the STI is partly paid in cash
(annual bonus) and partly deferred (deferred bonus) which is then settled as bonus awards under the
LTI (as described below). The deferral is designed to further align management’s short-term interests
with those of the shareholders. The cash vs deferred on-target percentages are as follows:

Occupational Level

CEO and CFO
Executives
Senior management
Middle management or Professional specialists

On-target Bonus as a %
of Qualifying TGP

Annual
Bonus

Deferred
Bonus

45%
35%
30%
20%

28%
23%
18%
8%

Long-term incentives (LTI)
Purpose

Policy’s link to Company strategy

The Company adopted a new LTI, namely the Conditional Share Plan (‘CSP’) during 2018. The purpose
of the CSP is to align the interests of executives with those of shareholders over the medium to long-
term. Awards vest after a three-year period and are then subject to a further two-year holding period.

LTIs are inherently retentive but there are no schemes specifically in place for the sole purpose of
retaining key employees. Through the delivery of real equity, employees will become shareholders
in the Company.

Nature of LTI

In terms of the CSP, eligible employees will receive conditional rights to shares and the following
instruments are available:

– Performance awards are subject to forward-looking Company performance conditions,

measured over a three-year performance period. Awards will vest subject to the achievement
of the performance measures and continued employment for the duration of the vesting period.
– Bonus awards linked to STI performance which is deferred and subject to continued employment

but is not subject to forward-looking performance vesting conditions.

Eligibility

Middle management and above

Instruments and their application

A mix between performance and bonus awards will be awarded. The policy as it applies to executives
is explained in the “Package Design” section below.

Performance measures and period

Performance awards are subject to performance measures over a three-year period. To ensure Group
alignment, all performance awards will be subject to Group performance measures.

Applicable performance measures will be determined by the Committee each time an award is made
and will be communicated to participants in the award letter. Once the CSP has been implemented,
retrospective achievement against targets will be disclosed. The LTI targets include:

– Free Cash Flow Margin | 40%
– Total shareholder return (Absolute TSR) | 60%

As a consequence of Covid-19, targets for these performance measures will still be determined for the
2020 allocation by the RemCo.

Governance
87

Remuneration element

Policy

Award levels

Vesting levels

Vesting period

Dilution limit

Intended on-target award levels are expressed as a percentage of TGP and are disclosed in the
package design section below.

In recognition of the fact that TGP is set between the lower quartile and median, the CSP will
comprise of an outperformance element in the case of superior performance as follows:

– Threshold performance – 50% linear vesting
– Target performance – 100% linear vesting
– Stretch performance – 250% linear vesting

All awards are subject to a three-year vesting period, where after the shares will be settled. In addition,
at the discretion of the Committee, 50% of vested shares are subjected to an additional two-year holding
period during which they cannot be disposed of, post vesting retrospectively. During the holding period
the vested shares may also be subject to claw-back, as explained in further detail below.

The Company voluntarily imposed a dilution limit for the CSP. Up to 5% of the issued share capital
can be issued in settlement of awards granted under the CSP. When required under listing rules,
the Company would seek to formalise the limit in a general meeting.

2020 performance targets
In light of the uncertainty imposed on our business operations by Covid-19, the Board took a decision not to publish the 2020 Group financial KPIs.
The Committee has agreed financial and non-financial targets for the year, and these are the approved non-financial/ESG targets.

The approved ESG targets are outlined below:

Key performance
area

Weighting

Key performance
indicator

Threshold

On target

Stretch

Occupational
health & safety

Environment

30%

25%

Total Recordable Injury
Frequency Rate (TRIFR)

Lost Time Injury Frequency
Rate (LTIFR)

≥5% performance
improvement

≥18% performance
improvement

≥20% performance
improvement

New Occupational disease cases N/A

N/A

Responsible environmental
stewardship

No Major
Environmental
Incidents

Additional: Compliance
rating on environment
assessment audits

Additional: Environmental
management system that
incorporates international
standards such as IFC

Global vanadium advocacy

Social license
to operate

25%

100

Acquire and maintain social
license to operate

Active participation in
Vanitec processes that
address Vanadium
environmental matters

Additional: Active advocacy
on benefit of vanadium to
sustainability, in areas such
as the circular economy

Compliance to
applicable regulatory
frameworks (MCII,
B-BBEE & DTI
Codes, etc)

Additional: Adherence
to MCIII plan milestones
and the development
of Value Beyond
Compliance strategies

Governance

20%

100

Adherence to the QCA
Corporate Governance Code

Full adherence to the
QCA Code

Threshold + 100% year-on-
year improvement as per
Board approved Governance
annual workplan

Additional: Effective cross-
functional internal forums
such as transformational
forums inclusive of General
Management, Finance,
Procurement, HR
and Stakeholder

The Committee will continue to keep a close eye on the impact of Covid-19 on the business and will monitor its financial performance accordingly.
As the year progresses, and in the event that the full impact of Covid-19 on the business becomes more apparent, the Committee will be better
placed to make appropriate amendments to the STI metrics that would be fair to all stakeholders, both employees and shareholders.

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Remuneration Report continued

PART TWO: REMUNERATION POLICY CONTINUED

Package design
The remuneration policy is linked to our strategy and is an enabler for the achievement of the Group’s key performance indicators.
The structure of the remuneration package supports the Group’s strategic objectives and is made up of fixed and variable remuneration.

The mix between fixed and variable pay for executive directors linked to various performance outcomes (Threshold, On-target and Stretch)
under the terms of the policy are indicated in the following graphs:

CEO (US$ (millions))

CFO (US$ (millions))

1.50

1.25

1.00

0.75

0.50

0.25

CEO on Stretch

CEO on Target

CEO on Threshold

1.20

1.00

0.80

0.60

0.40

0.20

CFO on Stretch

CFO on Target

CFO on Threshold

TPG
STI
Deferred STI
LTI

Further detail relating to executives and directors

Minimum Shareholding Requirements
To ensure further shareholder alignment, executives are required to build up and maintain a percentage of their TGP in unencumbered
Company shares over a three-year period from date of implementation of the policy, or appointment.

This shareholding can be built up as desired by executives. Any existing shareholding, as well as vested Conditional Share Plan (CSP) shares
(including those that are subject to the holding period), will be taken into consideration when calculating the shareholding percentage.

The required shareholding levels, as a percentage of TGP (before tax) are as follows:

Chief Executive Officer
Finance Director
Other Executives

200%
175%
150%

Malus and Claw-Back Policy
As a result of increased corporate governance requirements pertaining to executive remuneration, variable remuneration is subject to malus
and claw-back. The purpose of such a policy is to give the board the discretion to recoup vested, settled and/or paid incentives (also referred
to a “claw-back”) and to reduce and cancel any unvested and/or unpaid incentive remuneration (also referred to as “malus”) when trigger
event(s) occur.

The policy may be implemented by the Board where there were material misstatements of financial results or other calculation errors that
resulted in the overpayment of incentives and gross misconduct on the part of the employee leading to dismissal. The policy applies to all
variable pay as follows:
– Unpaid STIs and unvested LTIs are subject to malus as a pre-vesting forfeiture provision.
– Paid STI and 50% of vested LTIs may be subject to claw-back as a post vesting recoupment of paid and vested incentives.
– LTIs that are subject to a holding period will be subject to claw-back as follows: 25% can be clawed back for a one-year period post vesting

and the final 25% for a two-year period post vesting.

Governance
89

Executive employment contracts and termination of employment
During this period the Committee appointed ENS Africa, one of the largest independent law firms in South Africa, to review existing and draft
new executive employment contracts that include restraint of trade provisions. All newly-appointed executives are engaged on the basis of
the new contract and tied to a six-month restraint period.

The STI and LTI make a distinction between fault and no-fault terminations as follows:

Fault termination (resignation and dismissal)

The incentive is forfeited

STI & LTI

No-fault termination (termination due to death, ill health, disability,
retrenchment, sale of an employer, retirement)

A pro-rata portion of the incentive is received, based on the number
of complete months in service, and in the case of performance shares
awards are adjusted for performance. The unvested or unpaid portion
will lapse

Shareholder engagement
Bushveld Minerals is committed to fair, responsible and transparent remuneration. As such the Company invites shareholders to engage with
the Group on remuneration-related matters. In response to shareholder queries, where appropriate, the Board may resolve to amend relevant
elements of the remuneration policy.

Non-executive director fees
Non-executive directors are appointed to the Bushveld Minerals Group based on their ability to contribute competence, insights and
experience appropriate to assisting the Group to set and achieve its objectives. Consequently, fees are set at levels to attract and retain the
calibre of directors necessary to contribute to a highly effective board.

They do not participate in either the STI or LTI. No arrangements exist for compensation in respect of loss of office. The aggregate fees of all
directors shall not exceed GBP500,000 per annum, or such higher amount as may be determined by ordinary resolution (excluding amounts
payable under any other provisions of the Articles).

The current approved fee structure is as follows:

Board Position

Chairman
Non-executive director
Senior non-executive director

Board Committee Chairperson

Remuneration committee
Audit committee
Nominations committee
Disclosure committee

Annual Fee – US$

98,303
52,428
65,535

Annual Fee – US$

6,554
6,554
3,277
3,277

PART THREE: REMUNERATION IMPLEMENTATION REPORT

TGP increases awarded to executives versus other employees
In line with the company’s philosophy to address the wage gap, higher increases were awarded to lower levels of staff. The following TGP
increases were awarded with effect from January 2020:

Occupational Level

Top Management
Executives
Middle management/professional specialists
Non-management

No TGP adjustments were made in 2019.

% Increase

4.5%
5%
5.5%
7%

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Remuneration Report continued

PART THREE: REMUNERATION IMPLEMENTATION REPORT CONTINUED

2019 STI outcomes
Metrics and weightings
The relative weighting and composition of Group and Individual objectives for 2019 were:

Performance category

Personal performance
Business performance

Business targets and outcomes

CEO and CFO Other Executives

20%
80%

30%
70%

Subsidiary
Executives

40%
60%

2019 Target

2019 outcomes

Measure

Weighting

Threshold

Target

Stretch

Consolidated Economic Profit (EVA = RONA vs WACC)

ESG

Safety performance

Health (compliance)

Community (number of business disruptions)

33%

RONA =
WACC

RONA =
WACC + 1.5%

RONA =
WACC + 3%

80% of target

100% of target

150% of target

90%

10%

95%

15%

100%

150%

100%

The overall weighted business performance achievement is 135%, resulting in the achievement of a stretch business performance outcome.

Personal targets and outcomes
Depending on the participant’s role, personal metrics and targets were set and evaluated with reference to the following performance
categories:

a. Strategy Implementation
b. Production Volumes
c. Production Costs
d. Capital Projects
e. Sustainability
f. Organisational Health

STI calculation and payments
The STI is calculated based on the following formula, which incorporates six variables derived from the end of year performance
evaluation scores:

Qualifying Annual TGP x On-Target Incentive Percentage x ((Personal Score x Personal Weighting) + (Business Score x Business Weighting)).

In this context, STIs (cash and deferred shares) were as follows for the CEO, who was the only eligible executive during 2019.

Name

TGP USD

On-target
incentive
percentage

F. Mojapelo

415,188

73%

Personal
Score

119%

Personal
weighting

20%

Business
score

135%

Business
weighting

80%

Cash
bonus
USD

Deferred
bonus (shares)

246,154

153,163

Governance91

Actual CEO STI against on-target and stretch

STI outcome (US$ (millions))

1.20

1.00

0.80

0.60

0.40

0.20

Stretch

Target

Actual

TPG
STI (cash)
STI (deferred)

2019 conditional shares awarded
The CSP comprises two elements: performance shares and bonus shares. During 2019, conditional performance shares were granted while
bonus shares will be awarded during 2020 for performance relating to the 2019 financial year.

Conditional performance shares are subject to a three-year vesting period, where after the shares may be settled subject to performance
conditions being met. The threshold, on-target and stretch performance shares to which the CEO is entitled are outlined below, conditional
on the Company meeting its long-term performance targets:

Threshold – 50%

339,286

Target – 100%

678,572

Stretch – 250%

1,696,429

On-target performance share allocation

Name

F Mojapelo
T Chikanza

On target
conditional award

Percentage of TGP

678,572
–

57%
–

Payments for former directors
Exit package and cash payment in lieu of shares – Geoff Sproule
Mr. Geoff Sproule retired in the course of 2019 after serving as the Group Finance Director since 2012. The committee approved an exit
package made up of a pre-tax cash payment of US$106,200, in lieu of retrospective/historical shares that were granted to him and declared
in the 2017 remuneration report.

Mr. Sproule had been granted 1,080,350 shares on an 8.40p share price at a ZAR16.9117 exchange rate. In addition, a pre-tax retirement exit
package of US$244,980 was paid to him in recognition of his years of service and commendable contribution to the Group in its formative years.

Minimum shareholding requirements
Minimum shareholding requirements for the executives were adopted at the beginning of this financial year. Executives are given three years
from this date, or the date of their employment, to build up the required shareholding. The current levels of ownership are depicted below:

Executive

F. Mojapelo
T. Chikanza

% of TGP held in shares
(as at 31 Dec 2019)

589%
0%

MSR target and target date

200% (31 Dec 2021)
150% (1 Oct 2022)

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PART THREE: REMUNERATION IMPLEMENTATION REPORT CONTINUED

Remuneration disclosure
Remuneration paid to executive directors during the year
Single figure of remuneration table:

Name

Executive directors

F Mojapelo3,4

T Chikanza5

G Sproule6,7

Year

2019

2018

2019

2018

2019

2018

Guaranteed
pay
USD

416,230

340,234

78,043

–

55,225

129,701

Benefits
USD

STI1,2
USD

LTI Reflected
USD

Other

Total single
figure of
Remuneration
USD

–

816,550

2,872,440

78,043

–

342,094

397,319

125,735

–

255,436

–

246,772

153,547

2,532,206

–

Footnotes:
1 No STI was paid during the 2018 financial year.
2 The STI included in the 2019 financial year relates to the cash component received relating to performance in the 2019 financial year.
3 The LTI reflected in the 2019 financial year includes the bonus share awards which relate to performance in the 2019 financial year and will be awarded after year end.
4 The LTI reflected in the 2018 financial year includes the retrospective award made in August 2018 at the award date share price of $0.36, which is subject to a 12 month

lock-in period. Refer to the approved notice for more detailed information regarding the retrospective scheme.

5 T Chikanza was employed as CFO on 1 October 2019 and therefore only 3 months’ remuneration is included. She did not qualify for an STI or LTI award during the 2019

financial year.

6 The LTI reflected in the 2018 financial year includes the cash payment in lieu of shares in terms of the retrospective award made in January 2018 at the award date value

of $125,735, which was only paid in the 2019 financial year. Refer to the approved notice for more detailed information regarding the retrospective scheme.

7 G Sproule retired as CFO on 30 June 2019 and acted as a director until 30 September 2019 (without receiving remuneration), therefore only 6 months’ remuneration

is included. He received an exit package included under ‘Other’ which consisted of cash.

* All amounts for the 2019 single figure disclosure were converted to US dollars using an average exchange rate of 14.4513 for the 2019 financial year.

Schedule of unvested awards and cash flow on settlement

Names

Award date Vesting date

Opening
balance on
1 Jan 20181

Granted
during 20182

Forfeited
during 2018

Settled
during 2018

Executive directors

F Mojapelo

Closing
balance on
31 Dec
20183

Cash value
of receipts
2018
(USD)

Estimated
closing fair
value on
31 Dec
2018
(USD)

– Retrospective share award2,3

Aug–18

Aug–19

– 7,000,000

CSP awards:

– Performance share award

Jan–19

Jan–22

–

G Sproule

– Retrospective cash award4

Jan–18

–

125,735

–

– 7,000,000

– 3,430,000

–

125,735

–

125,735

Names

Executive directors

F Mojapelo

– Retrospective share award2,3

CSP awards:

– Performance share award

G Sproule

– Retrospective cash award4

Granted
during 2019

Forfeited
during 2019

Settled
during 2019

Closing
balance on
31 Dec
2019

Cash value
of receipts
2019
(USD)5

Estimated
closing fair
value on
31 Dec
2019
(USD)6

–

–7,000,000

– 2,532,206

–

678,572

–

678,572

–

136,863

–125,735

–

125,735

–

Governance93

Footnotes:
1 There were no long-term incentive awards made in prior years therefore the balance at the beginning of the 2018 financial year is zero.
2 The retrospective award made in the 2018 financial year for F Mojapelo consisted of share awards, subject to a 12 month lock-in period.
3 The retrospective awards are included in the 2018 financial year at the year end share price of $0.49 and an estimated vesting percentage of 100%.
4 G Sproule received a cash payment in lieu of shares in terms of the retrospective award made in January 2018 which vested immediately, but will only be settled

in the 2019 financial year. For purposes of disclosure, $1 equals one unit therefore the award consists of 125,735 units @ $1 per unit.
Includes the proceeds from the awards settled during the year.

5
6 The performance share awards for the 2019 financial year are included at the year end share price of $0.26 with an estimated vesting percentage of 76.8%.

Bonus share award: A bonus share award will be made under the CSP to the CEO in the 2020 financial year relating to performance in the 2019 financial year.

Non-executive director fees paid during the year
No increases to the fees of non-executive directors were approved for the 2020 year. The fees paid during 2019 compared to 2018 are
disclosed below.

Non-executive
directors

Ian Watson
Michael Kirkwood
Jeremy Friedlander
Anthony Viljoen

Board

98,304
65,536
52,429
52,429

2019 Fees received by non-executive directors (USD)

Remuneration
Committee Chair

Audit Committee
Chair

Nominations
Committee Chair

Attendance of
ad-hoc meetings

Disclosure
Committee Chair

–
6,554
–
–

3,277
–
–
–

11,797
11,797
11,797
9,175

3,277
–
–
–

Total fees
received
2019

116,655
90,440
64,226
61,604

Total fees
received
2018

68,851
48,792
40,730
38,184

Financial StatementsSupplementary InformationGovernanceBusiness Overview94

Bushveld Minerals | Annual Report and Financial Results 2019

Directors’ Report

The Directors of Bushveld Minerals Limited (‘Bushveld’ or the Group”) hereby present their report together with the consolidated financial
statements for the year ended 31 December 2019.

Principal activities, business review and future developments
Bushveld Minerals is a low-cost, vertically-integrated primary vanadium producer with a diversified vanadium product portfolio, supplying
approximately 3,000 mtVp.a. of the global vanadium market from Vametco and Vanchem. The Group has recently acquired Vanchem,
this acquisition ensures that the Group is in a solid position to achieve its production target of more than 8,400 mtVp.a.

The acquisition is consistent with the Group’s long-term strategy of acquiring existing, low-cost scalable brownfield operating assets
in South Africa to expedite the development of the Group’s significant and high-grade resource base.

Bushveld Energy is an energy storage component manufacturer and project developer focused on vanadium-based energy storage systems
called Vanadium Redox Flow Batteries (‘VRFBs’). Bushveld Energy plays a pivotal role in the development and promotion of VRFB technology
within the growing global energy storage market. The Group also has interests in an integrated thermal coal mining and independent power
producer project in Madagascar.

Bushveld Minerals is the holding company of several companies. The Group structure is described in Note 1 of the financial statements.

Reviews of the Group’s financial and operational performance and future developments are provided in the Chairman’s Statement,
Chief Executive Officer’s review and the Finance Director’s review on pages 06, 10 and 34 respectively.

Results and dividend
The Group’s results show a profit before tax for the year of US$83.3 million (2018: profit of US$86.6 million). While its value proposition
to shareholders is primarily of a capital growth nature, the intention is to create shareholder value through delivering on strategy. Further
analysis of the results is disclosed in the Finance Director’s statement.

Share capital and funding
Full details of the authorised and issued share capital, together with details of the movements in the Company’s issued share capital during
the year, are shown in Note 28. The Company has one class of ordinary shares which carry no right to fixed income. Each share carries the
right to one vote at general meetings of the Company.

Directors
The Directors who served the Company since 1 January 2019 are as follows:

Fortune Mojapelo
Tanya Chikanza
Ian Watson
Michael J. Kirkwood
Anthony Viljoen
Jeremy Friedlander
Dolly Mokgatle
Geoffrey Sproule

Chief Executive Officer
Finance Director (Appointed October 2019)
Chairman and Independent Non-Executive Director
Senior Independent Non-Executive Director
Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director (Appointed March 2020)
Finance Director (Resigned October 2019)

Governance

Directors’ interests
The Directors’ beneficial interests in the shares of the Company at 31 December 2019 were:

Fortune Mojapelo
Tanya Chikanza
Ian Watson
Michael J. Kirkwood
Anthony Viljoen
Jeremy Friedlander
Dolly Mokgatle
Geoffrey Sproule

Ordinary shares
of 1p each
31 December
2019

Ordinary shares
of 1p each
31 December
2018

16,660,000
–
3,555,000
300,000
16,826,667
1,050,000
–
1,500,000

The Bushveld Minerals remuneration structure includes an incentive component which includes the Short-term Incentives (STI) and
Long-term Incentives (LTI) schemes. Refer to the remuneration report for details of options awarded and the vesting thereof.

Directors’ indemnity insurance
The Group has maintained insurance throughout the year for its Directors and officers against the consequences of actions brought against
them in relation to their duties for the group.

Employee involvement policies
The Group places considerable value on the awareness and involvement of its employees in the Group’s activities. Within the bounds of
commercial confidentiality, information is disseminated to all levels of staff about matters that affect the progress of the Group, and that
are of interest and concern to them as employees.

Creditor payment policy and practice
The group’s policy is to ensure that, in the absence of disputes, all suppliers are dealt with in accordance with its standard payment policy and
it abides by the terms of payment agreed with suppliers when agreeing the terms of each transaction. Suppliers are made aware of the terms
of payment.

Related party transactions
Details of related party transactions are detailed in Note 35 of the financial statements.

Events after the reporting date
Events after the reporting date are detailed in Note 36 of the financial statements, including the Covid-19 pandemic, the impact of which
is also described in the Chairman’s Statement, Chief Executive’s Review and Finance Director’s Report.

Financial StatementsSupplementary InformationGovernanceBusiness Overview96

Bushveld Minerals | Annual Report and Financial Results 2019

Directors’ Report continued

Statement as to disclosure of information to auditor
The Directors who were in office on the date of approval of these financial statements have confirmed that, as far as they are aware, there
is no relevant audit information of which the auditor is unaware. Each of the Directors have confirmed that they have taken all the steps that
they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that it has been
communicated to the auditor.

Auditor
The Company’s auditor is RSM UK Audit LLP.

Electronic communications
The maintenance and integrity of the Group’s website is the responsibility of the Directors. The work carried out by the auditor does not
involve consideration of these matters and, accordingly, the auditor accepts no responsibility for any changes that may have occurred
to the financial statements since they were initially presented on the website.

The group’s website is maintained in compliance with AIM Rule 26.

By order of the Board

Tanya Chikanza
Finance Director
23 June 2020

Governance97

Statement of Directors’ Responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Guernsey company law requires the Directors to prepare group financial statements for each financial year in accordance with generally-
accepted accounting principles. The Directors are required by the AIM Rules of the London Stock Exchange to prepare group financial
statements in accordance with International Financial Reporting Standards (‘IFRS’) as adopted by the European Union (‘EU’).

The financial statements of the Group are required by law to give a true and fair view of the state of the group’s affairs at the end of the
financial year and of the profit or loss of the Group and are required by IFRS, as adopted by the EU, to fairly present the financial position
and performance of the Group.

The Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs
of the Group and of the profit or loss of the Group for that year.

In preparing the Group financial statements, the Directors are required to:

(i) select suitable accounting policies and apply them consistently;
(ii) make judgements and accounting estimates that are reasonable and prudent;
(iii) state whether they have been prepared in accordance with IFRS as adopted by the EU; and
(iv) prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions, and
disclose with reasonable accuracy, at any time, the financial position of the Group and enable them to ensure that the financial statements
comply with applicable law. They are also responsible for safeguarding the assets of the Group and taking reasonable steps for the prevention
and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group’s website.
Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors confirm they have discharged their responsibilities as noted above.

Financial StatementsSupplementary InformationGovernanceBusiness Overview98

Bushveld Minerals | Annual Report and Financial Results 2019

Independent Auditor’s Report
To the Members of Bushveld Minerals Limited
For the year ended 31 December 2019

Opinion
We have audited the financial statements of Bushveld Minerals Limited and its subsidiaries (the ‘group’) for the year ended 31 December 2019
which comprise of the Consolidated Statement of Profit and Loss and Other Comprehensive Income, Consolidated Statement of Financial
Position, Consolidated Statement of Changes in Equity, Consolidated Statement of Cash Flows and notes to the financial statements, including
a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law
and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

In our opinion, the financial statements:
– give a true and fair view of the state of the group’s affairs as at 31 December 2019 and of the group’s profit for the year then ended;
– are in accordance with IFRSs as adopted by the European Union; and
– comply with the requirements of The Companies (Guernsey) Law, 2008.

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are
independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK,
including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with
these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
– the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
– the Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about
the group’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date
when the financial statements are authorised for issue.

Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements
of the current year and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified.
These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing
the efforts of the engagement team. These matters were addressed in the context of our audit of the group financial statements as a whole,
and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Acquisition of Vanchem and gain on bargain purchase
The acquisition of Vanchem in November 2019 had a material impact on the Statement of Financial Position and required the directors to
make significant judgements and estimates in determining whether Vanchem met the IFRS 3 definition of a business at acquisition date and
in estimating the fair value of the assets and liabilities acquired. The acquisition resulted in a gain on bargain purchase of US$60.6 million being
recognised, which had a material impact on the group’s result for the year. The acquisition was determined to be a key audit matter due to the
allocation of resources during the audit and the level of judgement involved.

Our work included:
– Review of the Sale and Purchase Agreement.
– Consideration of the application of IFRS 3 Business Combinations to the transaction, including whether the Vanchem operations met

the definition of ‘a business’ at the date of acquisition.

– Audit of the consideration recognised including consideration of the terms of the convertible loan note and consultation with RSM

valuation specialists.

– Review of the work of a component auditor in corroborating and challenging the valuation of the assets acquired, including audit

of the valuation methodology and the credentials and qualifications of the independent valuer.

– Visit to the acquired Vanchem operations and tour of the facilities.
– Challenge of management on the appropriateness of recognising a bargain purchase.
– Audit of the disclosures included in the financial statements in respect of the transaction.

The related disclosures are included in Note 8 in the financial statements.

Financial Statements99

Impact of Covid-19 and assessment of going concern
The Covid-19 pandemic resulted in a cessation of operations at the Group’s production sites in South Africa from the end of March 2020
through to 1 May 2020. As a result of the direct impact of Covid-19 on the Group’s operations and the wider impact on global markets and
economies, the directors updated their assessment of the appropriateness of the going concern basis of preparation to take account of the
impact of the pandemic.

The assessment of risks in an uncertain economic environment requires judgement, and a risk of material misstatement arises in respect of an
incorrect application of the going concern basis of preparation or the failure to disclose a material uncertainty. As a result, the potential impact
of the Covid-19 outbreak was considered to be one of most significance in the audit and was therefore determined to be a key audit matter.

Our work included:
– Checking the integrity and accuracy of the cashflow forecasts and covenant calculations as provided to the Board of directors by

management

– Challenging management on the reasonableness of the assumptions made in the forecasts, particularly in respect of production levels,

vanadium prices, operating costs and capital expenditure

– Corroborating the reasonableness of assumptions and explanations provided by management to supporting information where available
– Stress-testing management’s cashflow forecasts to assess the impact of assumptions worse than those included in management’s

forecasts

– Considering mitigating actions available to management and the level of headroom in the forecasts under various scenarios
– Discussing our findings with management and the Audit Committee
– Auditing the accuracy and completeness of disclosures made in the financial statements in respect of going concern and the impact

of Covid-19

– Review of the work of component auditors on the going concern basis of preparation adopted in the financial statements of

significant components

The directors have set out their analysis of the potential impact of the Covid-19 pandemic on the Group’s operations and financial position
in the description of the principal risks on pages 50 to 53, the going concern statement on page 108, the Finance Directors’ statement
on pages 38 to 39 and the post balance sheet events note on page 145.

Our application of materiality
When establishing our overall audit strategy, we set certain thresholds which help us to determine the nature, timing and extent of our audit
procedures. When evaluating whether the effects of misstatements, both individually and on the financial statements as a whole, could
reasonably influence the economic decisions of the users we take into account the qualitative nature and the size of the misstatements.
Materiality for the group financial statements as a whole was calculated as $2,240,000. We agreed with the Audit Committee that we would
report to them all unadjusted differences in excess of $112,000, as well as differences below that threshold that, in our view, warranted
reporting on qualitative grounds.

An overview of the scope of our audit
The audit was scoped to ensure that we obtained sufficient and appropriate audit evidence in respect of:
– the significant business operations of the group
– other operations which, irrespective of size, are perceived as carrying a significant level of audit risk whether through susceptibility to fraud,

or for other reasons

– the appropriateness of the going concern assumption used in the preparation of the financial statements

The audit was scoped to support our audit opinion on group financial statements of Bushveld Minerals Limited and was based on group
materiality and an assessment of risk at group level.

Where components of the group were considered significant, the group engagement team were involved in the component auditor’s
planning and risk assessment and reviewed the component auditor’s work in accordance with ISA (UK) 600. The Bushveld Vametco Holdings
Proprietary Limited group and Bushveld Vanchem Proprietary Limited were identified as significant components and we visited the offices
of the component auditors in South Africa to review the audit working papers and discuss the audit issues with the component auditors.

Financial StatementsSupplementary InformationGovernanceBusiness Overview100

Bushveld Minerals | Annual Report and Financial Results 2019

Independent Auditor’s Report continued
To the Members of Bushveld Minerals Limited
For the year ended 31 December 2019

Other information
The Directors are responsible for the other information. The other information comprises the information included in the annual report, other
than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information
and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to
be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether
there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where The Companies (Guernsey) Law 2008 requires us to report to you if,
in our opinion:
– proper accounting records have not been kept by the parent company; or
– the financial statements are not in agreement with the accounting records; or
– we have failed to obtain all the information and explanations which, to the best of our knowledge and belief, are necessary for the

purposes of our audit.

Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement set out on page 97, the Directors are responsible for the preparation of the
group’s financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine
is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the group’s ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate
the group or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs (UK), we exercise professional judgment and maintain professional scepticism throughout the
audit. We also:
– Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit

procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting from error as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of internal control.

– Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the

circumstances, but not for the purpose of expressing an opinion on the effectiveness of the group’s internal control.

– Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made

by the Directors.

– Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence

obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to
the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based
on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the group to cease
to continue as a going concern.

Financial Statements101

– Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial

statements represent the underlying transactions and events in a manner that achieves fair presentation.

– Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group
to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance
of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding
independence, including the FRC’s Ethical Standard, and communicate with them all relationships and other matters that may reasonably
be thought to bear on our independence, and where applicable, related.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit
of the consolidated financial statements of the current year and are therefore the key audit matters. We describe these matters in our auditor’s
report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that
a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.

Use of this report
This report is made solely to the company’s members, as a body, in accordance with section 262 of The Companies (Guernsey) Law 2008.
Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in
an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

RSM UK Audit LLP, Auditor
Chartered Accountants
25 Farringdon Street
London, EC4A 4AB

23 June 2020

Financial StatementsSupplementary InformationGovernanceBusiness Overview102

Bushveld Minerals | Annual Report and Financial Results 2019

Consolidated Statement of Profit or Loss
and Other Comprehensive Income
For the year ended 31 December 2019

Continuing operations
Revenue
Cost of sales

Gross profit
Other operating income
Selling and distribution costs
Other mine operating costs
Idle plant costs
Administration expenses

Operating profit
Finance income
Finance costs
Share based payment economic empowerment transaction
Gain on bargain purchase
Movement in earnout estimate

Profit before taxation
Taxation

Profit for the year

Consolidated other comprehensive income:
Items that may not be reclassified to profit or loss:
Changes in the fair value of financial assets at fair value through other comprehensive income
Other fair value movements

Total items that may not be reclassified to profit or loss

Items that may be reclassified to profit or loss:

Currency translation differences

Total comprehensive income for the year

Profit attributable to:
Owners of the parent
Non-controlling interest

Total comprehensive income attributable to:
Owners of the parent
Non-controlling interest

Earnings per share
Profit per ordinary share
Basic earnings per share (in cents)
Diluted earnings per share (in cents)

All results relate to continuing activities.

Notes

2019
US$

2018
US$

116,514,112
(56,198,919)

192,089,845
(65,273,543)

60,315,193
922,385
(7,556,687)
(3,865,303)
(2,893,286)
(24,668,491)

22,253,811
3,593,142
(1,669,456)
–
60,586,633
(1,510,572)

126,816,302
7,420,109
(10,661,706)
(2,508,971)
(2,688,422)
(23,202,234)

95,175,078
1,987,333
(1,233,406)
(3,232,425)
–
(6,091,514)

83,253,558
(14,005,965)

86,605,066
(37,604,907)

69,247,593

49,000,159

(359,045)
110,175

(248,870)

659,007
21,796

680,803

6,413,737

(13,715,270)

75,412,460

35,965,692

61,968,301
7,279,292

30,215,509
18,784,650

69,247,593

49,000,159

67,136,957
8,275,503

17,181,042
18,784,650

75,412,460

35,965,692

5.51
5.45

2.90
–

The accounting policies on pages 108 to 117 and the notes on pages 106 to 145 form an integral part of the consolidated financial statements.

Financial StatementsConsolidated Statement
of Financial Position
As at 31 December 2019

Assets
Non-Current Assets
Intangible assets – exploration and evaluation
Property, plant and equipment
Investment properties
Deferred tax
Financial assets – investments

Total Non-Current Assets

Current Assets
Inventories
Trade and other receivables
Restricted investment
Current tax receivable
Financial assets at fair value
Cash and cash equivalents

Total Current Assets

Total Assets

Equity and Liabilities
Share capital
Share premium
Retained income
Foreign currency translation reserve
Fair value reserve

Equity attributable to owners of the parent
Non-controlling interest

Total Equity

Liabilities
Non-Current Liabilities
Post-retirement medical liability
Environmental rehabilitation liability
Deferred consideration
Borrowings
Lease liabilities

Total Non-Current Liabilities

Current Liabilities
Trade and other payables
Provisions
Lease liabilities

Total Current Liabilities

Total Liabilities

Total Equity and Liabilities

103

Notes

2019
US$

2018
US$

59,408,821
185,269,063
2,905,449
173,892
4,420,891

57,150,425
47,881,162
2,816,007
3,004,141
–

252,178,116

110,851,735

35,082,342
4,427,793
6,605,465
493,178
1,952,227
34,011,557

17,193,018
32,586,185
5,388,953
251,382
2,311,272
42,019,123

82,572,562

99,749,933

334,750,678

210,601,668

15,357,271
111,067,064
83,415,438
(1,655,861)
(620,349)

14,921,079
101,003,256
21,447,137
(7,073,387)
(371,479)

207,563,563
33,527,723

129,926,606
29,712,446

241,091,286

159,639,052

2,331,325
17,844,066
7,108,819
41,756,152
4,677,338

2,377,737
6,632,607
17,427,512
–
–

73,717,700

26,437,856

15,721,502
3,432,619
787,571

20,203,795
4,320,965
–

19,941,692

24,524,760

93,659,392

50,962,616

334,750,678

210,601,668

The consolidated financial statements and the notes on pages 106 to 145, were approved by the board of directors on 23 June 2020 and
were signed on its behalf by:

Tanya Chikanza
Finance Director
The accounting policies on pages 108 to 117 and the notes on pages 106 to 145 form an integral part of the consolidated financial statements.

Financial StatementsSupplementary InformationGovernanceBusiness Overview104

Bushveld Minerals | Annual Report and Financial Results 2019

Consolidated Statement of Changes
in Equity
For the year ended 31 December 2019

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Financial Statements

105

Consolidated Statement of Cash Flows
For the year ended 31 December 2019

Cash flows from operating activities
Profit before taxation
Adjustments for:
Depreciation property, plant and equipment
Fair value economic empowerment transaction
Gain on bargain purchase
Movement in earnout estimate
Finance income
Finance costs
Changes in working capital
Income taxes paid

Net cash from operating activities

Cash flows from investing activities
Finance income
Acquisition of business
Purchase of property, plant and equipment
Payment of deferred consideration
Purchase of investments
Purchase of exploration and evaluation assets

Net cash from investing activities

Cash flows from financing activities
Finance costs
Net proceeds from issue of shares and warrants
Net proceeds from capital raised
Net proceeds/(repayment) of borrowings
Lease payments
Dividends paid

Net cash from financing activities

Total cash movement for the year
Cash at the beginning of the year
Effect of translation of foreign rate

Total cash at end of the year

Note

2019
US$

2018
US$

83,253,558

86,605,066

10,388,145
–
(60,586,633)
1,510,572
(3,593,142)
1,669,456
4,586,737
(8,767,312)

6,039,339
3,232,425
–
6,091,514
(1,987,333)
1,233,406
(25,350,569)
(30,923,733)

28,461,381

44,940,115

3,593,142
(30,713,500)
(13,320,897)
(3,600,000)
(4,420,891)
(1,268,697)

1,987,333
–
(11,205,702)
(17,500,000)
–
(1,553,219)

(49,730,843)

(28,271,588)

(108,596)
–
–
18,582,864
(726,668)
(4,460,226)

–
4,139,825
19,006,177
(6,907,035)
–
–

13,287,374

16,238,967

(7,982,088)
42,019,123
(25,478)

32,907,494
9,739,632
(628,003)

34,011,557

42,019,123

The accounting policies on pages 108 to 117 and the notes on pages 106 to 145 form an integral part of the consolidated financial statements.

Financial StatementsSupplementary InformationGovernanceBusiness Overview106

Bushveld Minerals | Annual Report and Financial Results 2019

Notes to the Consolidated
Financial Statements
For the year ended 31 December 2019

1. Corporate information and principal activities
Bushveld Minerals Limited (‘Bushveld’) was incorporated and domiciled in Guernsey on 5 January 2012 and admitted to the AIM market in
London on 26 March 2012.

The address of the Company’s registered office is 18-20 Le Pollet, St Peter Port, Guernsey. The consolidated financial statements of the
Company as at and for the year ended 31 December comprise of the Company and its subsidiaries (The ‘Group’) and the Group’s interest
in equity accounted investments.

Bushveld Resources Limited (‘BRL’) is an investment holding company formed to invest in resource-based vanadium mining and exploration
companies in South Africa. The South African subsidiaries of BRL are Bushveld Vanchem (Proprietary) Limited (‘Vanchem’), Pamish Investments
No. 39 (Proprietary) Limited (‘Pamish 39’), Amaraka Investments No. 85 (Proprietary) Limited (‘Amaraka 85’), Bushveld Minerals SA (Proprietary)
Limited, Great 1 Line Investment (Proprietary) Limited, Gemsbok Magnetite (Proprietary) Limited, Caber Trade and Invest 1 (Proprietary), Bushveld
Vametco Alloys (Proprietary) Limited, Bushveld Vametco Holdings (Proprietary) Limited, Bushveld Vametco Properties (Proprietary) Limited,
Bushveld Vanadium 1 (Proprietary) Limited and Bushveld Vanadium 2 (Proprietary) Limited.

The Lemur subsidiaries are integrated coal and power project development companies. The Lemur subsidiaries are the holder of 11
concession blocks in South West Madagascar covering the Imaloto Coal Basin.

As at 31 December 2019, the Bushveld Group comprised of:

Equity holding
and voting
rights

Note

N/A
100%
100%
64.00%
68.50%
100%
100%
62.5%
74%
51%
100%
84.00%
100%
100%
100%
100%
100%
74%
100%
100%
100%
99%
100%
99.00%
100%
50%

1
2
2
2
2
13
2
2
2
2
1
4
12
2
7
8
11
9
10
1
5
3
6
3
4

Country of
incorporation

Guernsey
Guernsey
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
Mauritius
South Africa
South Africa
Guernsey
United States
South Africa
South Africa
South Africa
South Africa
Mauritius
Madagascar
Mauritius
Madagascar
Mauritius
Guernsey

Nature of activities

Ultimate holding company
Holding company
Mining and manufacturing company
Mining and manufacturing company
Vanadium and iron ore exploration
Group support services
Processing company
Vanadium and iron ore exploration
Vanadium and iron ore exploration
Vanadium and iron ore exploration
Mining and manufacturing company
Holding company
Energy development
Energy development
Holding company
Holding company
Holding company
Holding company
Mining and manufacturing company
Property owning company
Holding company
Coal exploration
Holding company
Power generation company
Holding company
Holding company

Company

Bushveld Minerals Limited
Bushveld Resources Limited
Ivanti Resources Proprietary Limited
Pamish Investments 39 (Pty) Limited
Amaraka Investments 85 (Pty) Limited
Bushveld Minerals SA (Pty) Limited
Bushveld Vanchem (Pty) Limited
Great 1 Line Invest (Pty) Limited
Gemsbok Magnetite (Pty) Limited
Caber Trade and Invest 1 (Pty) Limited
Bushveld Vanadium 2 (Pty) Limited
Bushveld Energy Limited
Bushveld Energy Company (Pty) Limited
Bushveld Vametco Hybrid Mini Grid Company (RF) (Pty)
Bushveld Vametco Limited
Strategic Minerals Connecticut LLC
Bushveld Vanadium 1 (Pty) Limited
Bushveld Vametco Holdings (Pty) Limited
Bushveld Vametco Alloys (Pty) Limited
Bushveld Vametco Properties (Pty) Limited
Lemur Holdings Limited
Coal Mining Madagascar SARL
Imaloto Power Project Limited
Imaloto Power Project Company SARL
Lemur Investments Limited
Enerox Holdings Limited

1 Held directly by Bushveld Minerals Limited.
2 Held by Bushveld Resources Limited.
3 Held by Lemur Holdings Limited.
4 Held by Bushveld Energy Limited.
5 Held by Lemur Investments Limited.
6 Held by Imaloto Power Limited.
7 Held by Bushveld Vametco Limited.
8 Held by Strategic Minerals Connecticut LLC.
9 Held by Bushveld Vametco Holdings (Pty) Limited.
10 Held by Vametco Alloys (Pty) Limited.
11 Held by Bushveld Vanadium 1 (Pty) Limited.
12 Held by Bushveld Energy Company (Pty) Limited.
13 Held By Bushveld Vanadium 2( Pty) Limited.

Financial Statements107

2. Adoption of new and revised standards
Accounting standards and interpretations applied

IFRS 16 Leases

The new standard recognises a right of use asset and a lease liability for almost all leases and requires them to be
accounted for in a consistent manner. This introduces a single lessee accounting model and eliminates the previous
distinction between an operating lease and a finance lease.

Accounting standards and interpretations not applied
Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group:

IFRS 17 Insurance Contracts

IFRS 9 Prepayment
Features with Negative
Compensation –
(Amendments to IFRS 9)

IFRS 10 and IAS 28 Sale or Contribution
of Assets between an Investor and its
Associate or Joint Venture –
(Amendments to IFRS 10 and IAS 28)

IFRS 3, Definition of a Business –
(Amendments to IFRS 3)

IAS 1 and IAS 8 – Definition
of Material – (Amendments
to IAS 1 and IAS 8)

AIP IFRS 11 Joint
Arrangements: Previously
held interests in a joint operation

AIP IAS 12 Income Taxes:
Income tax consequences of
payments on financial
instruments classified as equity

AIP IAS 23 Borrowing Costs:
Borrowing costs eligible
for capitalisation

The new standard requires insurance liabilities to be measured at a current fulfilment value and provides a more
uniform measurement and presentation approach for all insurance contracts. These requirements are designed
to achieve the goal of a consistent, principle-based accounting for insurance contracts.

Under IFRS 9, a debit instrument can be measured at amortised cost or at fair value through other
comprehensive income, provided that the contractual cash flows are ‘solely payments of principal and interest
on the principal amount outstanding’ (the SPPI) criterion) and the instrument is held within the appropriate
business model for that classification. The amendments to IFRS 9 clarify that a financial asset passes the SPPI
criterion regardless of the event or circumstance that causes the early termination of the contract and
irrespective of which party pays or receives reasonable compensation for the early termination of the contract.

The amendments address the conflict between IFRS 10 and IAS 28 in dealing with the loss of control
of a subsidiary that is sold or contributed to an associate or joint venture.

The IASB issued amendments to the definition of a business in IFRS 3 Business Combinations to help entities
determine whether an acquired set of activities and assets is a business or not. They clarify the minimum
requirements for a business, remove the assessment of whether market participants are capable of replacing any
missing elements, add guidance to help entities assess whether an acquired process is substantive, narrow the
definitions of a business and of outputs, and introduce an optional fair value concentration test. New illustrative
examples were provided along with the amendments.

In October 2018, the IASB issued amendments to IAS 1 Presentation of Financial Statements and IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors to align the definition of ‘material’ across the
standards and to clarify certain aspects of the definition. The new definition states that, ‘Information is material if
omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users
of general purpose financial statements make on the basis of those financial statements, which provide financial
information about a specific reporting entity’.

The amendment clarifies that if a party participates in, but does not have joint control of, a joint operation and
subsequently obtains joint control of the joint operation (which constitutes a business as defined in IFRS 3) that,
in such cases, previously held interests in the joint operation are not remeasured.

The amendment specifies that the income tax consequences on dividends are recognised in profit or loss, other
comprehensive income or equity according to where the entity originally recognised the events or transactions
which generated the distributable reserves.

The amendment specifies that when determining the weighted average borrowing rate for purposes of
capitalising borrowing costs, the calculation excludes borrowings which have been made specifically for the
purposes of obtaining a qualifying asset, but only until substantially all the activities necessary to prepare the
asset for its intended use or sale are complete.

The Directors anticipate that the adoption of these Standards and Interpretations, which become effective for annual periods beginning on
or after 1 January 2020, in future periods will have no material impact on the financial statements of the Group.

Financial StatementsSupplementary InformationGovernanceBusiness Overview108

Bushveld Minerals | Annual Report and Financial Results 2019

Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2019

3. Significant accounting policies
Basis of accounting
These financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting
Standards and Interpretations (collectively ‘IFRS’) issued by the International Accounting Standards Board (‘IASB’) as adopted by the
European Union (‘EU adopted IFRS’).

The financial year covers the 12 months to 31 December 2019. The comparative period covered the 12 month period to 31 December 2018.

The consolidated financial statements have been prepared under the historical cost basis, except for the revaluation of certain financial
instruments and investment properties to fair value. Historical cost is generally based on the fair value of the consideration given in
exchange for the assets. The principal accounting policies are set out below.

Going concern
The group closely monitors and manages its liquidity risk, cash forecasts are regularly produced and sensitivities run for different scenarios
including, but not limited to, changes in commodity prices and different production profiles from the group’s producing assets. The Group
will continue to prioritise operational performance, cost efficiencies and synergies across Vametco and Vanchem, and will maintain
a disciplined approach towards managing capital expenditure and optimising operating margins. Our operations resumed in early May
following a 35-day national Covid-19 lockdown, in South Africa during which Vanchem was non-operational and Vametco was classified
as essential services and had limited production. Based on the current status of the group’s finances, having considered going concern
forecasts and reasonably possible investments, downside and Covid-19 scenarios, the group’s forecasts demonstrate it will have sufficient
liquidity headroom to meet its obligations in the ordinary course of business for the next 12 months from the date of approval of the
financial statements.

Accordingly the directors are satisfied that the group continues to adopt the going concern basis of accounting in preparation of the
31 December 2019 financial statements.

Basis of consolidation
Subsidiaries
Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity when the group is
exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power
over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from
the date that control ceases.

The group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of
a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests
issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration
arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially
at their fair values at the acquisition date. The group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition
basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets.

Acquisition-related costs are expensed as incurred.

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the
acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in profit
or loss.

Financial Statements109

Subsequent transactions that do not result in the obtaining of control are accounted for as equity transactions as follows:
– The carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in

the subsidiary

– Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid

is recognised directly in equity and attributed to the owners of the parent

Any contingent consideration to be transferred by the group is recognised at fair value at the acquisition date. Subsequent changes to the
fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IFRS 9 either in profit
or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its
subsequent settlement is accounted for within equity.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses
are also eliminated. When necessary amounts reported by subsidiaries have been adjusted to conform to the group’s accounting policies.

Disposal of subsidiaries
When the group ceases to have control, any retained interest in the entity is re-measured to its fair value at the date when control
is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes
of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously
recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related
assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

Non-controlling interests
Non-controlling interests in subsidiaries are identified separately from the group’s equity therein. Those interests of non-controlling
shareholders that present ownership interests entitling their holders to a proportionate share of the net assets upon liquidation are initially
measured at fair value. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at
initial recognition plus the non-controlling interests’ share of subsequent changes in equity. Total comprehensive income is attributed
to non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Black Economic Empowerment (‘BEE’) interests are accounted for as non-controlling interests on the basis that the group does not control
these entities.

Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments,
has been identified as the board of directors, which makes strategic decisions.

Foreign currencies
Functional and presentational currency
The individual financial statements of each group company are prepared in the currency of the primary economic environment in which
they operate (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each
group company are expressed in US Dollars, which is the presentation currency for the consolidated financial statements.

Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions
or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and
from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised
in the income statement.

Financial StatementsSupplementary InformationGovernanceBusiness Overview110

Bushveld Minerals | Annual Report and Financial Results 2019

Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2019

3. Significant accounting policies continued
Foreign currencies continued
Group companies
The results and financial position of all the group entities (none of which has the currency of a hyper-inflationary economy) that have
a functional currency different from the presentation currency are translated into the presentation currency as follows:
a) assets and liabilities for each statement of financial position presented are translated at the closing rate;
b) income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are
translated at the rate on the dates of the transactions); and

c) all resulting exchange differences are recognised in other comprehensive income.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity
and translated at the closing rate. Exchange differences arising are recognised in other comprehensive income.

Revenue recognition
Sale of goods/products
IFRS 15 requires revenue from contracts with customers to be recognised when the separate performance obligations are satisfied,
which is when control of promised goods or services are transferred to the customer.

The entity satisfies a performance obligation by transferring control of the promised goods/products to the customer. In the standard
‘control of an asset’ refers to the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset. Control
includes the ability to prevent other entities from directing the use of, and obtaining the benefits from, an asset.

The group recognises revenue at the amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring
goods or services to a customer. Revenue with contract customers is generated from sale of goods and is recognised upon delivery of the goods
to the customer, at a point in time and comprises the invoiced amount of goods to customers, net of value added tax.

Cost of sales
When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue
is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in
the period in which the write-down or loss occurs.

Share based payments
The Group may issue equity-settled share based payment instruments to BBE shareholders to either obtain or retain BEE credentials.
Equity-settled share-based payments are measured at the fair value of the instruments at the date of the grant.

In addition, equity-settled share-based compensation benefits are provided to directors and employees under the Group’s incentive schemes.

Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering
of services.

The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using either the
Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution,
the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate
for the term of the option, together with non-vesting conditions that do not determine whether the consolidated entity receives the
services that entitle the employees to receive payment. No account is taken of any other vesting conditions.

Financial Statements111

The cost of equity-settled transactions is recognised as an expense with a corresponding increase in equity over the vesting period. The
cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards
that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative
amount calculated at each reporting date less amounts already recognised in previous periods.

Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions are considered
to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied.

If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional
expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based
compensation benefit as at the date of modification.

If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the condition is treated
as a cancellation. If the condition is not within the control of the consolidated entity or employee and is not satisfied during the vesting
period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited.

If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised
immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were
a modification.

Finance income
Interest revenue is recognised when it is probable that economic benefits will flow to the group and the amount of revenue can be
measured reliably. Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that
asset’s net carrying amount on initial recognition.

Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.

The tax charge is based on taxable profit for the year. The group’s liability for current tax is calculated by using tax rates that have been
enacted or substantively enacted by the reporting date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the ‘balance
sheet liability’ method.

Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax is calculated
at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled based upon rates enacted and
substantively enacted at the reporting date. Deferred tax is charged or credited to profit or loss, except when it relates to items credited
or charged to other comprehensive income, in which case the deferred tax is also dealt with in other comprehensive income.

Intangible exploration and evaluation assets
All costs associated with mineral exploration and evaluation including the costs of acquiring prospecting licences; mineral production
licences and annual licences fees; rights to explore; topographical, geological, geochemical and geophysical studies; exploratory drilling;
trenching, sampling and activities to evaluate the technical feasibility and commercial viability of extracting a mineral resource; are capitalised
as intangible exploration and evaluation assets and subsequently measured at cost.

Financial StatementsSupplementary InformationGovernanceBusiness Overview112

Bushveld Minerals | Annual Report and Financial Results 2019

Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2019

3. Significant accounting policies continued
Intangible exploration and evaluation assets continued
If an exploration project is successful, the related expenditures will be transferred at cost to property, plant and equipment and amortised
over the estimated life of the commercial ore reserves on a unit of production basis (with this charge being taken through profit or loss).
Where a project does not lead to the discovery of commercially viable quantities of mineral resources and is relinquished, abandoned,
or is considered to be of no further commercial value to the group, the related costs are recognised in profit or loss.

The recoverability of capitalised exploration costs is dependent upon the discovery of economically viable ore reserves, the ability of the
group to obtain necessary financing to complete the development of ore reserves and future profitable production or proceeds from the
extraction or disposal thereof.

Impairment of exploration and evaluation assets
Whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, the asset is reviewed
for impairment. Assets are also reviewed for impairment at each reporting date in accordance with IFRS 6. An asset’s carrying value is
written down to its estimated recoverable amount (being the higher of the fair value less costs to sell and value in use) if that is less than
the asset’s carrying value. Impairment losses are recognised in profit or loss.

An impairment review is undertaken when indicators of impairment arise but typically when one of the following circumstances applies:
– unexpected geological occurrences that render the resources uneconomic; or
– title to the asset is compromised; or
– variations in mineral prices that render the project uneconomic; or
– variations in the foreign currency rates; or
– the group determines that it no longer wishes to continue to evaluate or develop the field.

Property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated depreciation, except for investment properties which are
carried at fair value. Depreciation is calculated on the straight line method to write off the cost of each asset (less residual value) over
its estimated useful life as follows:
Buildings and other improvements
Plant and machinery
Motor vehicles, furniture and equipment
Decommissioning asset
Waste stripping asset

20–25 years
15–20 years
4–10 years
Life of mine
21 months

Repairs and maintenance is generally charged in profit and loss during the financial period in which it is incurred. However renovations
are capitalised and included in the carrying amount of the asset when it is probable that future economic benefits will flow to the group.
Major renovations are depreciated over the remaining useful life of the related asset.

An item of property, plant and equipment is derecognised upon disposal or when no future benefits are expected from its use or disposal.
Any gain or loss arising from de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying
amount of the asset) is included in the income statement in the year the asset is derecognised.

Investment property
Investment property is initially measured at cost and subsequently at fair value with any change therein recognised in profit or loss. Any gain
or loss on disposal of investment property (calculated as the difference between the net proceeds from disposal and the carrying amount
of the item) is recognised in profit or loss.

Financial Statements

113

Impairment of property, plant and equipment
At each reporting date, the group reviews the carrying amounts of its tangible assets to determine whether there is any indication that
those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets,
the group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Where there has been a change in economic conditions that indicate a possible impairment in a cash-generating unit, the recoverability of
the net book value relating to that field is assessed by comparison with the estimated discounted future cash flows based on management’s
expectations of future commodity prices and future costs.

The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of
an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit)
is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried
at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where conditions giving rise to impairment
subsequently reverse, the effect of the impairment charge is also reversed as a credit to the income statement, net of any depreciation
that would have been charged since the impairment.

Inventories
Inventories are valued at the lower of cost or estimated net realisable value. Cost is determined on the following basis:
Raw materials
Consumable stores
Work in progress
Finished product

weighted average cost
weighted average cost
weighted average cost
weighted average cost

The cost of finished product and work in progress comprises of raw materials, direct labour, other direct costs, and related production
overheads (based on normal operating capacity) but excludes borrowing costs.

Net realisable value is the estimated selling price in the ordinary course of business, less costs of completion and selling expenses.

Financial assets and liabilities
Financial assets and financial liabilities are recognised in the group’s statement of financial position when the group becomes a party to
the contractual provisions of the instrument. Financial instruments are classified into specified categories dependent upon the nature and
purpose of the instruments at the time of initial recognition. All financial assets are recognised as loans and receivables or available for sale
investments and all financial liabilities are recognised as other financial liabilities.

Financial assets
The Group initially measures all financial assets at fair value plus, in the case of a financial asset not at fair value through profit or loss,
transaction costs. Financial assets are classified at initial recognition and subsequently measured at amortised cost, fair value though
other comprehensive income (OCI) or fair value through profit or loss.

The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the
Group’s business model for managing them.

In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows
that are ‘solely payments of principal and interest’ (SPPI) on the principal amount outstanding. This assessment is referred to as the SPPI
test and is performed at an instrument level.

The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows.
The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.

Financial StatementsSupplementary InformationGovernanceBusiness Overview

114

Bushveld Minerals | Annual Report and Financial Results 2019

Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2019

3. Significant accounting policies continued
Trade and other receivables
Trade and other receivables are stated initially recognised at the fair value of the consideration receivable and subsequently measured at
amortised cost using the effective interest method, less any allowance for expected credit losses. Allowances for expected credit losses
are recognised when there is objective evidence that the group will be unable to collect all of the amounts due under the terms of the
receivable, the amount of such a provision being the difference between the carrying amount and the present value of the future expected
cash flows associated with the impaired receivable.

Restricted investment
Restricted investment comprises of short-term deposits with an original maturity of three months or less and an investment in an investment
fund. These funds are dedicated towards future rehabilitation expenditure on the mine property.

Cash and cash equivalents
Cash and cash equivalents comprise cash at hand and deposits on a term of not greater than three months.

Trade and other payables
Trade and other payables are initially recognised at fair value. They are subsequently measured at amortised cost using the effective interest
rate method.

Investments and other financial assets
Listed shares held by the group that are traded in an active market are classified as being available for sale and are stated at fair value.
The fair value of such investments is determined by reference to quoted market prices.

IFRS 9 requires all equity investments to be measured at fair value. The default approach is for all changes in fair value to be recognised
in profit or loss (FVPL). However, for equity investments that are not held for trading, entities can make an irrevocable election at initial
recognition to classify the instruments at FVOCI, with all subsequent changes in fair value being recognised in other comprehensive
income (OCI). This election is available for each separate investment.

Under this new FVOCI category, fair value changes are recognised in OCI while dividends are recognised in profit or loss.

Although it might appear similar to the AFS category in IAS 39, it is important to note that this is a new measurement category which
is different. In particular, under the new category, on disposal of the investment the cumulative change in fair value must remain in OCI
and is not recycled to profit or loss. However, entities have the ability to transfer amounts between reserves within equity.

Financial assets at fair value through profit or loss
Financial assets not measured at amortised cost or at fair value through other comprehensive income are classified as financial assets
at fair value through profit or loss. Typically, such financial assets will be either: (i) held for trading, where they are acquired for the purpose
of selling in the short-term with an intention of making a profit, or a derivative; or (ii) designated as such upon initial recognition where
permitted. Fair value movements are recognised in profit or loss.

Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income include equity investments which the consolidated entity intends to
hold for the foreseeable future and has irrevocably elected to classify them as such upon initial recognition.

Financial Statements115

Financial liabilities and equity
Financial liabilities (including loans and advances due to related parties) and equity instruments are classified according to the substance
of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the
group after deducting all of its liabilities. When the terms of a financial liability are negotiated with the creditor and settlement occurs
through the issue of the Company’s equity instruments, the equity instruments are measured at fair value and treated as consideration for
the extinguishment of the liability. Any difference between the carrying amount of the liability and the fair value of the equity instruments
issued is recognised in profit or loss.

Convertible loan
Interest-bearing loans are recorded initially at their fair value, net of direct transaction costs. Such instruments are subsequently carried at
their amortised cost and finance charges, including premiums payable on settlement, redemption or conversion, are recognised in profit
or loss over the term of the instrument using the effective rate of interest.

Instruments where the holder has the option to redeem for cash or convert into a pre-determined quantity of equity shares are classified
as compound instruments and presented partly as a liability and partly as equity.

Instruments where the holder has the option to redeem for cash or convert into a variable quantity of equity shares are classified separately
as a loan and a derivative liability.

Where conversion results in a fixed number of equity shares, the fair value of the liability component at the date of issue is estimated using
the prevailing market interest rate for a similar non-convertible instrument. The difference between the proceeds of issue and the fair value
assigned to the liability component, representing the embedded option to convert the liability into equity of the group, is included in equity.
Where conversion is likely to result in a variable quantity of equity shares the related derivative liability is valued and included in liabilities.

The interest expense on the liability component is calculated by applying the prevailing market interest rate for similar non-convertible debt
to the instrument. The difference between this amount and the interest paid is added to the carrying value of the convertible loan note.

Derivative liabilities are revalued at fair value at the reporting date, and changes in the valuation amounts are credited or charged to the
profit or loss.

Warrants
Warrants issued by the company are recorded at fair value on initial recognition net of transaction costs. The fair value of warrants granted is
recognised as an expense or as share issue costs, with a corresponding increase in equity. The fair value of the warrants granted is measured
using the Black Scholes valuation model for options without market conditions and using the binomial method for those with market
conditions, taking into account the terms and conditions under which the options were granted. The amount recognised as an expense
is adjusted to reflect the actual number of warrants that vest.

IFRS 16 Leases
The group elected to apply IFRS 16 utilising the modified retrospective approach, no cumulative effect of initially applying IFRS 16 was
identified and recognised as an adjustment to the opening balance of retained earnings. The cumulative impact on the adoption of IFRS 16
resulted in the recognition of right of use assets, lease liabilities and the resultant deferred tax. Refer to Note 15 for the detail on the right of
use assets and lease liabilities. Comparative information has not been restated.

For contracts previously classified as leases under IAS 17 Leases, the group has reassessed whether the contract is or contains a lease upon
initial transition to the new standard and has also performed an assessment to identify significant contracts which have not previously been
classified as leases, but which may be a lease under the new standard.

Financial StatementsSupplementary InformationGovernanceBusiness Overview116

Bushveld Minerals | Annual Report and Financial Results 2019

Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2019

3. Significant accounting policies continued
Provisions
General
Provisions are recognised when the group has a present obligation (legal or constructive) as a result of a past event, it is probable that
an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the
amount of the obligation. Where the group expects some or all of a provision to be reimbursed, for example under an insurance contract,
the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any
provision is presented in the statement or comprehensive income, provisions are discounted using a current pre-tax rate that reflects,
where appropriate, the risks specific to the liability. Where discounting is used the increase in the provision due to the passage of time
is recognised as a finance cost.

i. Environmental rehabilitation liability

The group is exposed to environmental liabilities relating to its operations. Full provision for the cost of environmental and other remedial
work such as reclamation costs, close down and restoration costs and pollution control is made based on the estimated cost as per the
Environmental Management Program Report. Annual increases in the provisions relating to change in the net present value of the provision
and inflationary increases are shown in the statement of comprehensive income as a finance cost. Changes in estimates of the provision
are accounted for in the year the change in estimate occurs, and is charged to either the statement of comprehensive income or the
decommissioning asset in property, plant and equipment, depending on the nature of the liability.

ii. Post-retirement medical liability

The liability in respect of the defined benefit medical plan is the present value of the defined benefit obligation at the reporting date
together with adjustments for actuarial gains/losses. Any actuarial gains or losses are accounted for in other comprehensive income.
The defined benefit obligation is calculated annually by independent actuaries using the projected unit of credit method.

iii. Provident fund contributions

The group’s contributions to the defined contribution plan are charged to profit and loss in the year to which they relate.

Use of estimates and judgements
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about
the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions
are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates in
particular, information about significant areas of estimation uncertainty considered by management in preparing the financial statements
is described below:

i. Decommissioning and rehabilitation obligations

Estimating the future costs of environmental and rehabilitation obligations is complex and requires management to make estimates and
judgements as most of the obligations will be fulfilled in the future and contracts and laws are often not clear regarding what is required.
The resulting provisions are further influenced by changing technologies, political, environmental, safety, business and statutory
considerations.

ii. Asset lives and residual values

Property, plant and equipment are depreciated over its useful life taking into account residual values, where appropriate. The actual lives of
the assets and residual values are assessed annually and may vary depending on a number of factors. In reassessing asset lives, factors such
as technological innovation, product life cycles and maintenance programmes are taken into account. Residual value assessments consider
issues such as future market conditions, the remaining life of the asset and projected disposal values.

Financial Statements117

iii. Post-retirement employee benefits

Post-retirement medical aid liabilities are provided for certain existing employees. Actuarial valuations are based on assumptions which
include employee turnover, mortality rates, the discount rate, health care inflation costs and rates of increase in costs.

iv. Surface rights liabilities

The group has provided for surface lease costs that would accrue to the owners of the land on which the mine is built. The quantum of the
amounts due post implementation of the Mineral and Petroleum Resources Development Act (MPRDA) and the granting of the new order
mining right to the group is somewhat uncertain, and need to be negotiated with such owners. The group has conservatively accrued for
possible costs in this regard, but the actual obligation may be materially different when negotiations with the relevant parties are completed.

v. Revaluation of investment properties

The group carries its residential investment properties at fair value. The group engaged an independent valuation specialist to assess the
fair value as at 31 December 2019 for residential properties. For residential properties, it measures land and buildings at revalued amounts
with changes in fair value being recognised in other comprehensive income. Land and buildings were valued by reference to market-based
evidence, using comparable prices adjusted for specific market factors such as nature, location and condition of the property. The key
assumptions used to determine the fair value of the residential properties are provided in Note 16.

vi. Impairment of exploration and evaluation assets

Determining whether an exploration and evaluation asset is impaired requires an assessment of whether there are any indicators of
impairment, including by reference to specific impairment indicators prescribed in IFRS 6 – Exploration for and Evaluation of Mineral
Resources. If there is any indication of potential impairment, an impairment test is required based on value in use of the asset. The valuation
of intangible exploration assets is dependent upon the discovery of economically recoverable deposits which, in turn, is dependent
on future vanadium and iron ore prices, future capital expenditures and environmental and regulatory restrictions. The directors have
concluded that there are no indications of impairment in respect of the carrying value of intangible assets at 31 December 2019 based
on planned future development of the projects and current and forecast commodity prices. See Note 12 for details of exploration and
evaluation assets.

vii. IFRS 3 Business combination

In accounting for the acquisition of Vanchem as a business combination, the company assessed whether Vanchem met the IFRS 3
definition of ‘a business’. IFRS 3 states that ‘a business consists of inputs and processes applied to those inputs that have the ability to create
outputs’ and we have concluded that, at the date of acquisition, Vanchem had inputs (inventories and plant and equipment with installed
capacity), processes (methodology, manufacturing ability, intellectual property and a skilled workforce) and the ability to produce outputs
in the form of vanadium products.

IFRS 3 requires an acquirer to measure the cost of the acquisition at the fair value of the consideration paid, and measure acquired
identifiable assets and liabilities at their fair values, with any excess of acquired assets and liabilities over the consideration paid (a ‘bargain
purchase’) recognised in profit or loss immediately. As detailed in Note 8, the company engaged an independent valuation expert to value
the assets acquired using the cost approach, which we consider to be the most appropriate fair value measurement technique given the
nature of the assets acquired and the circumstances of the acquisition.

Where a business combination results in a bargain purchase, IFRS 3 requires that the acquirer to reassess whether it has correctly identified
all of the assets and liabilities acquired and to review the procedures used to measure the fair values recognised at the acquisition date.

Financial StatementsSupplementary InformationGovernanceBusiness Overview118

Bushveld Minerals | Annual Report and Financial Results 2019

Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2019

4. Segmental reporting
The reporting segments are identified by the directors of the group (who are considered to be the chief operating decision makers)
by the way that group’s operations are organised. As at 31 December 2019 the group operated within four operating segments, mineral
exploration activities for iron ore and vanadium, vanadium mining and production, coal exploration and energy. Activities take place in
South Africa (iron ore, vanadium and energy) and Madagascar (coal).

Segment revenue and results
The following is an analysis of the group’s revenue and results by reportable segment.

Year ended 31 December 2019 Results

Segment revenue
Segment costs

Segmental (loss)/profit

Year ended 31 December 2018 Results

Segment revenue
Segment costs

Segmental (loss)/profit

Vanadium
and iron ore
exploration
US$

Vanadium
mining and
production
US$

Energy
US$

Total
US$

–
–

–

116,442,585
(83,752,365)

71,527
(530,041)

116,514,112
(84,282,406)

32,690,220

(458,514)

32,231,706

Vanadium
and iron ore
exploration
US$

Vanadium
mining and
production
US$

Energy
US$

Total
US$

–
(2,721,652)

192,089,845
(84,051,698)

–
(231,540)

192,089,845
(87,004,890)

(2,721,652)

108,038,147

(231,540)

105,084,955

During the year there were no costs incurred for the exploration of vanadium and iron ore as well as the coal segment. Costs attributable
to both segments were of a capital nature.

The reconciliation of segmental profit to the group’s profit before tax is as follows:

Segmental profit
Unallocated costs
Gain on bargain purchase
Movement in earnout estimate
Finance income
Finance costs

Profit before tax

Year ended
31 December
2019
US$

32,231,706
(9,977,896)
60,586,633
(1,510,572)
3,593,142
(1,669,455)

Year ended
31 December
2018
US$

105,084,955
(13,142,302)
–
(6,091,514)
1,987,333
(1,233,406)

83,253,558

86,605,066

Unallocated costs relate primarily to corporate costs and parent company overheads not attributable to a specific segment.

Financial Statements119

Other segmental information

31 December 2019

Intangible assets – exploration and evaluation
Total reportable segmental net assets
Unallocated net liabilities

Total consolidated net assets

31 December 2018

Intangible assets – exploration and evaluation
Total reportable segmental net assets
Unallocated net liabilities

Total consolidated net assets

Vanadium
and iron ore
exploration
US$

Vanadium
mining and
production
US$

56,827,085
56,827,085

–
201,456,855

Coal
exploration
US$

2,581,736
2,581,736

Bushveld
Energy
US$

–
6,760,468

Vanadium
and iron ore
exploration
US$

Vanadium
mining and
production
US$

55,639,067
55,639,067

–
132,200,627

Coal
exploration
US$

1,511,358
1,511,358

Bushveld
Energy
US$

–
(420,254)

Total
US$

59,408,821
267,626,144
(26,534,858)

241,091,286

Total
US$

57,150,425
188,930,798
(29,291,746)

159,639,052

Unallocated assets and liabilities relate to corporate and parent company assets and liabilities not attributable to a specific segment.

5. Revenue

Revenue from contracts with customers
Sale of goods
Rendering of services
Bushveld Energy services rendered

Disaggregation of revenue from contracts with customers
The company disaggregates revenue from customers as follows:
Sale of goods
Local sales of vanadium – NV12
Local sales of vanadium – NV16
Local sales of vanadium – MVO
Export sales of vanadium – NV12
Export sales of vanadium – NV16
Export sales of vanadium – AMV

Rendering of services
Bushveld Energy services rendered
Export tolling – MVO

Total revenue from contracts with customers

2019
US$

2018
US$

116,442,585
–
71,527

191,344,909
744,936
–

116,514,112

192,089,845

4,118,063
87,076
2,406
17,083,662
95,011,546
139,832

16,931,800
101,232
243,651
18,183,896
155,884,330
–

116,442,585

191,344,909

71,527
–

71,527

–
744,936

744,936

116,514,112

192,089,845

Revenue with contract customers is generated from sale of goods and is recognised upon delivery of the goods to the customer, at a point
in time and comprises the invoiced amount of goods to customers, net of value added tax.

Financial StatementsSupplementary InformationGovernanceBusiness Overview120

Bushveld Minerals | Annual Report and Financial Results 2019

Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2019

6. Administrative expenses by nature

The profit for the year has been arrived at after charging:
Shares issued to directors and senior employees
Staff costs
Depreciation of property, plant and equipment
Professional fees
Bad debts
Foreign exchange loss
Other

Total administrative expenses

2019
US$

2018
US$

–
9,616,139
232,131
7,619,272
3,016,120
–
4,184,829

8,333,360
7,166,859
182,159
1,886,507
–
91,082
5,542,267

24,668,491

23,202,234

7. Staff costs
Details of directors’ remuneration are included in Note 35 (related party transactions) and the Remuneration Report.

8. Acquisitions
8.1 Acquisition of Bushveld Vanchem Business
On 7 November 2019, the Bushveld group completed the acquisition of 100% of the Vanchem Plant as well as 100 per cent of Ivanti
Propriety Limited from Duferco Investments (‘Duferco’).

A viable business case for Vanchem Vanadium Products ‘VVP’ was formulated with key focus on ore feedstock from within the Group
(Mokopane) and a refurbishment programme, and presented to the Board of Directors (‘BoD’) in June 2018. The BoD approved that
Bushveld reopened negotiations with Duferco, including revised commercial terms and an extended exclusivity period. An approach to
Duferco was made and an initial agreement was reached with Duferco which resulted in the execution of the term sheet on 5 December
2018. The agreement was for a Transaction consideration of US$68 million. The US$68 million was made up of deposit of US$6.8 million
payable when the definitive agreements had been executed (01 May 2019) with the balance of US$61.2 million payable on then-envisaged
Transaction closing dates of 30 June 2019 or 30 September 2019 (long stop date). The final executed purchase price of US$53.5 million
plus a working capital adjustment for the acquisition was renegotiated in September 2019, the fair value of the consideration price is
reflected in section C below.

Financial Statements121

Acquisition rationale remained clear:
– Would significantly contribute toward Bushveld’s Vanadium production growth strategy of 8,400 tVpa in the next five years;
– Brownfields expansion (total acquisition and refurbishment capex was estimated to be around US$140 million for circa 4,200 tVpa
capacity including Mokopane mine development, this compared favourably against the then estimated US$350 million capital
requirement to develop and build 5,400 tV facility at Mokopane);

– Would facilitate the expeditious development of Mokopane, preserving the tenure of the project and ensuring the option for an

end-to-end production facility would be crystalised;

– Would provide geographic diversification with Bushveld production now in two geographic locations;
– Would provide production diversification – moving from a one kiln company to a four-kiln group;
– Would provide product diversification – moving from a single product offering to a wider range of products comprised of Nitrovan,

FeV, V2O5 and specialized chemical products;

– Significant NPV at long-term FeV price estimates at a conservative long-term FeV price;
– Increased footprint reduces Group overhead cost structure;
– Improved IP and market presence adds value with long-term off-take agreements;
– Assist and expedites the development of Bushveld’s own marketing channel; and
– In a benign vanadium price environment of 2018, Vanchem’s 6 months annual financial statements to 31 March 2019 presented net

profit amount in excess of ZAR200 million operating at less than 20% of capacity.

This acquisition of Vanchem demonstrates the value in the Company’s growth strategy of targeting brownfields processing infrastructure
which can be acquired at a lower price compared to the cost of building a greenfield operation, providing a lower risk and a quicker path
to production. This has been reflected in Bushveld agreeing and paying an amount far less than the fair value of the assets and liabilities
assumed. The Mokopane resource will also enable Bushveld to create a fully integrated vanadium production facility within the Group.

A. Consideration transferred
The following table summarises the acquisition date fair value of each major class of consideration transferred.

Fair value consideration

Cash
Deferred Consideration (i)
Working Capital Adjustment (ii)
Convertible Loan (iii)

Total fair value of consideration

i. Deferred Consideration

US$

30,713,500
409,323
1,665,063
23,000,000

55,787,886

The group has agreed to pay the selling shareholder a deferred payment of US$0.5 million, payable in cash 2 years post completion
of the acquisition.

ii. Working Capital Adjustment

The working capital adjustment was the difference between the original working capital included in the agreement versus the final
balances transferred to Bushveld. The amount is payable in cash after 2 years post completion of the acquisition and disclosed as
deferred consideration.

Financial StatementsSupplementary InformationGovernanceBusiness Overview122

Bushveld Minerals | Annual Report and Financial Results 2019

Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2019

8. Acquisitions continued
8.1 Acquisition of Bushveld Vanchem Business continued
A. Consideration transferred continued
iii. Convertible loan

A payment of US$23.0 million satisfied through the issue of Bushveld Minerals unsecured convertible loan notes (‘Loan Notes’) with the
following repayment, redemption and conversion terms (in addition to customary covenants, warranties and acceleration provisions):
– Interest at a coupon of 5% per annum payable annually in arrears or on conversion or redemption;
– Repayable in cash after the second anniversary of Transaction Closure, plus any accrued interest;
– Convertible at the holder’s option in two tranches of up to US$11.5 million each, after the first and second anniversary of Transaction
Closure respectively, at a 5% discount to the prevailing 10-day volume weighted average Bushveld Minerals share price leading up
to conversion;

– Early redemption of the Loan Notes at the election of Bushveld Minerals, subject to the condition that the holder will have an option

of converting up to 50% of the early redemption amounts into Bushveld Minerals shares on the same terms set out above;

– Scope for acceleration of redemption of up to US$5 million of the Loan Notes 12 months after Transaction Closure if an average

ferrovanadium price of US$40/kgV is realised during any nine-month period during the 12 month period after Transaction Closure;

– Obligation to repay an amount equal to 40% of any cash received on a new share issue which raises more than US$30 million, provided

no more than 50% of the Loan Notes have already been paid, redeemed or converted;

– Obligation to repay an amount equal to 50% of any debt raised over US$15 million, provided no more than 50% of the Loan Notes have

been repaid, redeemed or converted;

– Obligation to repay on a substantial sale of assets or change of control;
– The holder will not be able to divest any Bushveld Minerals shares received for six months following conversion and be subject to an

orderly market arrangement for the following six months.

Acquisition related costs

The group incurred acquisition-related costs of US$1,519,969. These costs have been included in the calculation of the bargain purchase
below.

B. Identifiable assets and liabilities acquired
The following table summarises the recognised amounts of assets acquired, and liabilities assumed at the date of acquisition:

Assets and liabilities acquired

Property, plant and equipment
Land and buildings
Inventories
Trade and other receivables
Cash and cash equivalents
Environmental rehabilitation liability
Trade and other payables
Provisions

Total identifiable net assets acquired at Fair Value

Measurement of fair values

US$

114,668,826
6,137,787
7,480,482
900,154
10,492
(10,382,628)
(906,727)
(13,899)

117,894,487

An independent valuer was appointed to determine the fair value of the property, plant and equipment. The fair values of other assets and
liabilities were estimated by the directors.

Financial Statements123

Property, plant and equipment

Marsh (Propriety) Limited was appointed for the valuation.

Marsh has been in the industry in South Africa since 1984. Marsh’s global experience coupled with professionals, who maintain the highest
certifications and advanced professional accreditations, enable them to deliver accurate and timely valuations.
Marsh adheres to the International Valuation Standards, strict ethical code of conduct and best practice prescribed by the South African
Council for the Property Valuers Profession, South African Institute of Valuers, American Society of Appraisers and the Royal Institution
of Chartered Surveyors.

The determination of Fair Market Value (FMV) was based on the estimate cost of acquiring and installing a new or similar equivalent to
the current asset at hand. Marsh then determined the remaining life of the asset and therefore calculated the difference obtained from the
new replacement value similar or to the next model in the market determining the effective age or life span and minus the remaining life.
This determines the economic life of the asset which in turn is the condition rating percentage.

The cost of erecting the building, together with the cost of ancillary site works, was estimated. This cost included relevant professional
fees and other associated expenses directly related to the construction of the building and ancillary site works but excluded any finance
charges. The cost is then depreciated according to physical, functional and economic conditions to give the Depreciated Replacement
Cost of the buildings.

The Market Value of the land, as if vacant, has been determined by the comparison of recent sales of similar properties in the area and
similar areas. The sum of these values reflect the Depreciated Replacement Value of the property.

Key procedures conducted:

Plant, Machinery & Equipment (Movable Assets)
– A Fair Market valuation was performed.
– A physical on-site survey was performed to inspect and value all the assets on a per asset basis.
– Production asset per location was assessed for Useful Lives, Remaining Lives and Condition rating.
– Assets were recorded per location and department.
– Sufficient detail and specifications was collected in order to value the assets according to the Fair Market.

Buildings (Fixed Assets)
– A Fair Market valuation was performed.
– Each building was individually assessed for Useful Lives, Remaining Lives and Condition rating.
– Building costs in the area was used to establish a Rate/m2.
– Professional fees, escalations, demolition, and debris removal costs were included.
– Land Values for the plant and waste site were included.

Valuation Process

The valuation process took place over four core components. These components are designed to ensure the highest degree of valuation
accuracy while ensuring limited interruption to the operations of our clients.

An overview of the four main components is as follows:

Initial Project Research and Preparation
This phase of the valuation program involved research, information gathering and preparation by Marsh Valuation Services to ensure
a preliminary understanding of Bushveld Minerals SA (PTY) LTD operations, locations and accounting principles.

This is a crucial stage in the valuation process ensuring reduced time spent at each location as part of the physical inspection.

Financial StatementsSupplementary InformationGovernanceBusiness Overview124

Bushveld Minerals | Annual Report and Financial Results 2019

Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2019

8. Acquisitions continued
8.1 Acquisition of Bushveld Vanchem Business continued
B. Identifiable assets and liabilities acquired continued
Physical Inspection and Information Gathering
The aim of this step of the process was information gathering and data collection while ensuring minimal impact on the operations.
The valuation process, whilst on site, was generally undertaken via the following process:

Research, Analysis and Reporting
This phase of the valuation process involves utilising the information gained during the inspection process, our internal databases of
information, external sources of data, recent and planned capital expenditure details, information from suppliers and international research
to undertake the valuation calculations. The analysis and calculations were then extrapolated and input into a detailed valuation report.

Delivery and Findings
After the valuation research and reporting was completed, a valuation report was provided including the list of assets identified as well
as the fair market values of those assets with remaining useful lives.

C. Accounting for the acquisition
The acquisition has been accounted for as follows:

Vanchem Acquisition

Property, plant and equipment
Residential properties
Inventories
Trade and other receivables
Cash and cash equivalents
Environmental rehabilitation liability
Trade and other payables
Provisions

Total identifiable net assets acquired at Fair Value

Fair Value of Consideration
Acquisition related costs

Gain on Bargain Purchase

US$

114,668,826
6,137,787
7,480,482
900,154
10,492
(10,382,628)
(906,727)
(13,899)

117,894,487

(55,787,885)
(1,519,969)

60,586,633

IFRS 3 requires an acquirer to measure the cost of the acquisition at the fair value of the consideration paid, and measure acquired
identifiable assets and liabilities at their fair values, with any excess of acquired assets and liabilities over the consideration paid (a ‘bargain
purchase’) recognised in profit or loss immediately. The group engaged an independent valuation expert to value the assets acquired
using the cost approach, which we consider to be the most appropriate fair value measurement technique given the nature of the assets
acquired and the circumstances of the acquisition.

Where a business combination results in a bargain purchase, IFRS 3 requires the acquirer to reassess whether it has correctly identified
all of the assets and liabilities acquired and to review the procedures used to measure the fair values recognised at the acquisition date.
We have completed this assessment and concluded that the recognition of a bargain purchase is appropriate. In coming to this conclusion
we have considered the circumstances of the sale as Vanchem was in business rescue and therefore not an open market transaction,
and the advantages of Vanchem which fit into the Group’s diversity and growth strategy, advantages of which are disclosed above.

Financial Statements125

8.2 Acquisition of Sojitz interest in Strategic Minerals Corporation
On 13 September 2018, the group completed the acquisition of a 21.22 per cent interest in Strategic Minerals Corporation, an intermediate
holding company of Vametco Alloys Proprietary Limited, from Sojitz Noble Alloys Corporation for a total cash consideration of US$17,500,000
(‘the transaction’). On completion of the transaction, the Bushveld group increased its indirect beneficial interest in Vametco Alloys Proprietary
Limited from 59.1 per cent to 75 per cent.

Transaction summary
The group acquired all of Sojitz Noble Alloys Corporation’s shareholding interest and accompanying rights in Strategic Minerals Corporation,
the 75 per cent owner of Vametco Alloys Proprietary Limited, for a total consideration of US$20,000,000 (twenty million US dollars).

The US$20,000,000 consideration payable comprised:
– US$17,500,000 in cash (seventeen million five hundred thousand US dollars) for the sale shares; and
– US$2,500,000 in cash (two million five hundred thousand US dollars) in full and final settlement of accrued but unpaid dividends

on the sale shares.

The Sojitz Noble Alloys Corporation shareholding in Strategic Minerals Corporation was acquired free from all claims, liens, equities,
charges, encumbrances and adverse rights of any description, and together with all rights attaching thereto, accrued or contingent.

Following completion of the transaction Bushveld, through wholly owned Bushveld Vametco Limited, owned 100 per cent of Strategic
Minerals Corporation and therefore had an indirect beneficial interest of 75 per cent in Vametco Alloys Proprietary Limited (subsequently
reduced to 74 per cent).

The group used existing cash resources to complete the transaction.

9. Finance income

Bank interest

10. Finance costs

Interest on convertible bonds
Interest on unsecured convertible loan notes
Other finance costs
Interest on lease liabilities

2019
US$

2018
US$

3,593,142

1,987,333

2019
US$

–
173,288
1,032,655
463,513

2018
US$

522,079
–
711,327
–

1,669,456

1,233,406

Financial StatementsSupplementary InformationGovernanceBusiness Overview126

Bushveld Minerals | Annual Report and Financial Results 2019

Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2019

11. Taxation
The tax expense represents the sum of the tax currently payable and the deferred tax adjustment for the year.

Profit before tax
Loss before taxation multiplied by Guernsey corporation tax rate of 0%
South African tax – current tax
South African tax – deferred tax
USA – deferred tax
USA – current tax

Taxation expense for the year

2019
US$

83,253,558
–
13,033,205
267,538
2,665,603
(1,960,381)

2018
US$

86,605,066
–
32,218,043
386,864
–
5,000,000

14,005,965

37,604,907

Management believe that any unrecognised deferred tax assets relating to the accumulated losses in the subsidiary undertakings of the
group, would be immaterial to these financial statements.

USA – current tax charge comprises irrecoverable withholding tax of US$3,039,619 on dividends received and the reversal of a tax liability
pertaining to the conversion of a subsidiary from a corporation into a limited liability company in the USA, which resulted in an upfront
prepayment of US$5,000,000 being payable to Internal Revenue Service (IRS) in 2018. In 2019 this amount was subsequently refunded
once the final tax calculation was completed. Due to the conversion all tax credits including deferred tax assets recognised previously
would be neutralised.

12. Earnings per share from continuing operations
Basic earnings per share
The calculation of a basic earnings per share of 5.51 cents (December 2018: 2.9 cents), is calculated using the total profit
for the year attributable to the owners of the company of US$61,968,301 (December 2018: Profit of US$30,215,509) and 1,125,562,148
shares (2018:1,043,907,922) being the weighted average number of share in issue during the year.

Diluted earnings per share
The calculation of diluted earnings per share of 5.45 cents (December 2018: 2.9 cents), is based on diluted earnings of US$62,141,589
(2018:US$30,215,509) and 1,139,216,582 shares (2018:1,043,907,922) being the diluted weighted average number of share in issue during
the year.

13. Intangible assets – exploration and evaluation

Vanadium and Iron ore
Coal

Total

Cost
US$

56,827,085
2,581,736

59,408,821

2019

Accumulated
impairment
US$

Carrying
value
US$

2018

Accumulated
impairment
US$

Cost
US$

–
–

–

56,827,085
2,581,736

55,639,067
1,511,358

59,408,821

57,150,425

–
–

–

Carrying
value
US$

55,639,067
1,511,358

57,150,425

Reconciliation of intangible assets – exploration and evaluation – 2019

Vanadium and Iron ore
Coal

Opening
balance
US$

55,639,067
1,511,358

Additions
US$

198,319
1,070,378

Exchange
differences
US$

989,699
–

Total
US$

56,827,085
2,581,736

57,150,425

1,268,697

989,699

59,408,821

Financial Statements127

Reconciliation of intangible assets – exploration and evaluation – 2018

Vanadium and Iron ore
Coal

Opening
balance
US$

60,862,691
–

Additions
US$

41,861
1,511,358

Exchange
differences
US$

Total
US$

(5,265,485)
–

55,639,067
1,511,358

60,862,691

1,553,219

(5,265,485)

57,150,425

Vanadium and Iron Ore
The Company’s subsidiary, Bushveld Resources Limited has a 64% interest in Pamish Investment No 39 (Proprietary) Limited (‘Pamish’)
which holds an interest in Prospecting right 95 (‘Pamish 39’). Bushveld Resources Limited also has a 68.5% interest in Amaraka Investment
No 85 (Proprietary) Limited (‘Amaraka’) which holds an interest in Prospecting right 438 (‘Amaraka 85’).

The Department of Mineral Resources and Energy (‘DMRE’) granted a mining right to Pamish Investments No. 39 (Pty) Ltd (‘Pamish’),
in respect of the five farms Vliegekraal 783 LR, Vogelstruisfontein 765 LR, Vriesland 781 LR, Schoonoord 786 LR and Bellevue 808 LR
situated in the District of Mogalakwena, Limpopo, which make up the Mokopane Project.

Mokopane is one of the world’s largest primary vanadium resources, with a 298 Mt JORC compliant resource and a weighted average
V2O5 grade of 1.75 per cent in magnetite (1.41 per cent in-situ). The Mokopane deposit is a layered orebody along a 5.5 km north-south
strike at a dip of between 18 degrees and 22 degrees west. The project comprises three adjacent and parallel magnetite layers namely the
Main Magnetite Layer (‘MML’), the MML Hanging Wall (‘MML-HW’) layer and the AB Zone. 298 Mt (JORC) resources and reserves run across
three parallel overlying magnetite layers with grades ranging from 1.6 per cent to over 2 per cent V2O5 as follows:
– MML: 52 Mt @ 1.48 per cent V2O5 (1.75 per cent V2O5 in magnetite);
– MML-HW & Parting: 233 Mt @ 0.8 per cent V2O5 (1.5-1.6 per cent V2O5 in magnetite); and
– AB Zone: 12 Mt @ 0.7 per cent V2O5 (greater than 2 per cent V2O5 in magnetite).

The mining right allows for the extraction of several other minerals over the entire Mokopane project resource area, including, titanium,
phosphate, platinum group metals, gold, cobalt, copper, nickel and chrome.

Brits Vanadium Project
Bushveld Minerals Limited has been granted Section 11 of the Mineral and Petroleum Resources Development Act (MPRDA) for acquiring
control of Sable Platinum Mining Pty Ltd for NW 30/5/1/1/2/11124 PR, held through Great Line 1 Invest (Pty) Ltd. The company has also
applied for Section 102 of the Mineral and Petroleum Resources Development Act (MPRDA) and waiting for approval to incorporate
NW 30/5/1/1/2/11069 PR into NW 30/5/1/1/2/11124 PR.

Bushveld Minerals Limited has applied for prospecting which has been accepted and environmental authorisation has been granted under
GP 30/5/1/1/2/10576 PR held by Gemsbok Magnetite (Pty) Ltd.

Coal
Coal Exploration licences have been issued to Coal Mining Madagascar SARL a 99% subsidiary of Lemur Investments Limited.

The exploration is in South West Madagascar covering 11 concession blocks in the Imaloto Coal basin known as the Imaloto Coal Project
and Extension.

Financial StatementsSupplementary InformationGovernanceBusiness Overview128

Bushveld Minerals | Annual Report and Financial Results 2019

Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2019

14. Property, plant and equipment

Buildings
and other
improvements
US$

Plant and
machinery
US$

Motor
vehicles
furniture and
equipment
US$

Decommissioning
assets
US$

Right
of use
asset
US$

Waste
stripping
asset
US$

Assets under
construction
US$

Total
US$

Cost
At 1 January 2018
Additions
Disposals
Assets under construction

capitalised

Foreign exchange differences

610,789
–
–

42,147,393
–
(1,180,001)

28,670
–
(30,017)

1,507,013
271,518
–

730,388
(82,128)

3,310,376
(1,398,908)

246,498
(3,856)

–
(202,636)

At 31 December 2018

1,259,049

42,878,860

241,295

1,575,895

–
–
–

–
–

–

–
–
–

–
–

–

934,379
10,934,184
–

45,228,244
11,205,702
(1,210,018)

(4,287,262)
(125,639)

–
(1,813,167)

7,455,662

53,410,761

Additions
Disposals
Assets under construction

capitalised

Foreign exchange differences

6,714,835 113,453,458
(2,134,666)
(414,250)

1,371,514
(239,102)

942,121
–

5,727,902
–

3,920,684
–

11,883,121 144,013,635
(2,788,018)

–

268,304
368,583

8,992,207
3,179,724

48,833
51,571

–
79,271

–
7,988

–
–

(9,309,344)
639,339

–
4,326,476

At 31 December 2019

8,196,521 166,369,583

1,474,110

2,597,288

5,735,890

3,920,684

10,668,778 198,962,854

Depreciation
At 1 January 2018
Depreciation charge for the year
Disposals
Foreign exchange differences

–
(237,758)
–
–

(809,055)
(5,508,585)
1,180,001
108,787

–
(209,890)
30,017
–

At 31 December 2018

(237,758)

(5,028,852)

(179,873)

–
(83,106)
–
–

(83,106)

–
–
–
–

–

–
–
–
–

–

Depreciation charge for the year
Disposals
Foreign exchange differences

(1,177,756)
414,251
(21,021)

(5,947,944)
1,804,752
(211,965)

(617,794)
234,711
27,246

(848,939)
–
(22,543)

(627,475)
–
(1,488)

(1,168,237)
–
–

–
–
–
–

–

(809,055)
(6,039,339)
1,210,018
108,787

(5,529,589)

– (10,388,145)
2,453,714
–
(229,771)
–

At 31 December 2019

(1,022,284)

(9,384,009)

(535,710)

(954,588)

(628,963)

(1,168,237)

– (13,693,791)

Net Book Value
At 31 December 2018

1,021,291

37,850,008

61,411

1,492,790

–

7,455,662

47,881,162

At 31 December 2019

7,174,237 156,985,574

938,400

1,642,700

5,106,927

2,752,447

10,668,778 185,269,063

15. Lease liabilities
The Group has applied IFRS 16 for the first time in the period. IFRS 16 introduces new or amended requirements with respect to lease
accounting. It introduces significant changes to lessee accounting by removing the distinction between operating and finance leases and
requiring the recognition of a right-of-use asset and a lease liability at the lease commencement for all leases, except for short-term leases
and leases of low value assets. This note explains the impact of the adoption of IFRS 16 ‘Leases’ on the Group’s consolidated year end
report and discloses the new accounting policies that have been applied from 1 January 2019. The Group has adopted IFRS 16 using the
modified retrospective approach from 1 January 2019 and has not restated comparatives for the 2018 reporting period, as permitted under
the specific transitional provisions in the standard. The reclassifications and adjustments arising from the new leasing rules are therefore
recognised in the opening balance sheet on 1 January 2019.

Applying IFRS 16, for all leases (except as noted below), the Group:
a) recognises right-of-use assets and lease liabilities in the Statement of Financial Position, initially measured at the present value of future

lease payments;

b) recognises depreciation of right-of-use assets and interest on lease liabilities in the Income Statement; and
c) separates the total amount of cash paid into a principal portion (presented within financing activities) and interest (presented within

operating activities) in the Statement of Cash Flows.

Financial Statements129

Lease incentives (e.g. free rent period) are recognised as part of the measurement of the right-of-use assets and lease liabilities whereas
under IAS 17 they resulted in the recognition of a lease incentive liability, amortised as a reduction of rental expense on a straight-line basis.
Under IFRS 16, right-of-use assets are tested for impairment in accordance with IAS 36 Impairment of Assets. This replaces the previous
requirement to recognise a provision for onerous lease contracts. For short-term leases (lease term of 12 months or less) and leases of
low-value assets (such as personal computers and office furniture), the Group has opted to recognise a lease expense on a straight-line
basis as permitted by IFRS 16. This expense is presented within net operating expenses in the Income Statement.

The Group assesses whether a contract is or contains a lease, at inception of a contract. The Group recognises a right-of-use asset and
a corresponding lease liability with respect to all lease agreements in which it is the lessee, except for short-term leases (defined as leases
with a lease term of 12 months or less) and leases of low value assets. For these leases, the Group recognises the lease payments as an
operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time
pattern in which economic benefits from the leased asset are consumed.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted
by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate. The discount
rate used ranges between 10% – 11% depending on the nature of the underlying asset.

Lease payments included in the measurement of the lease liability comprise:
– fixed lease payments (including in-substance fixed payments), less any lease incentives;
– variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;
– the amount expected to be payable by the lessee under residual value guarantees;
– the exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and
– payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.

The lease liability is presented as a separate line in the Statement of Financial Position. The lease liability is subsequently measured by
increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying
amount to reflect the lease payments made.

The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
– the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the lease liability

is remeasured by discounting the revised lease payments using a revised discount rate.

– the lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value,
in which cases the lease liability is remeasured by discounting the revised lease payments using the initial discount rate (unless the
lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used).

– a lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability

is remeasured by discounting the revised lease payments using a revised discount rate.

The Group did not make any such adjustments during the periods presented.

The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the
commencement day and any initial direct costs.

They are subsequently measured at cost less accumulated depreciation and impairment losses.

Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or
restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured
under IAS 37. The costs are included in the related right-of-use asset, unless those costs are incurred to produce inventories.

Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers
ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option,
the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement
date of the lease. The right-of-use assets are presented as a separate line in the Statement of Financial Position. The Group applies
IAS 36 Impairment of Assets to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss.

Financial StatementsSupplementary InformationGovernanceBusiness Overview130

Bushveld Minerals | Annual Report and Financial Results 2019

Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2019

15. Lease liabilities continued
A reconciliation of total operating lease commitments to the IFRS 16 lease liability at 31 December 2019 is as follows:

Operating lease commitments disclosed at 31 December 2018
Less: short-term leases recognised on a straight-line basis as expense
Less: discount effect using incremental borrowing rate

Lease liability recognised at 1 January 2019

Of which:
Non-current lease liabilities
Current lease liabilities

US$

10,709,178
(726,668)
(4,517,601)

5,464,909

4,677,338
787,571

5,464,909

In addition to the recognition of right-of-use assets, lease liabilities and adjustments to net operating expenses for operating lease costs
and depreciation coupled with adjustments to finance expenses and have been remeasured under the new standard.

16. Investment properties

Investment properties

2,816,007

89,442

2,905,449

3,303,501

(487,494)

2,816,007

Opening
balance
US$

2019

Fair value
movements
US$

Closing
balance
US$

Opening
balance
US$

2018

Fair value
movements
US$

Closing
balance
US$

Land and buildings comprise residential housing in Brits and Elandsrand, North West Province.

Investment properties are stated at fair value, which has been determined based on valuations performed by Mr WJ van Aardt, an accredited
independent valuer, as at 31 December 2019 and 2018. Fair value is the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date.

The following valuation techniques and key inputs were used in the valuation of the investment properties:
i. Physical inspection of each property;
ii. Consultation with estate agencies to discuss current sales market trends; and
iii. Comparative sales reports for locations where properties are situated were obtained from South Africa.

17. Financial assets – investments

Name of company

Enerox
Avalon

2019
US$

420,891
4,000,000

4,420,891

2018
US$

–
–

–

Financial Statements131

Avalon
The Company has agreed to support the merger of Avalon Battery Corporation (‘Avalon’) and redT energy plc (‘’redT’) (the ‘Merger’)
with interim funding of US$5 million which will give Bushveld the opportunity to acquire a strategic interest in the merged energy
storage company.

In July 2019, AIM-quoted energy storage provider redT and Avalon, a North American-based vanadium redox flow battery (‘VRFB’)
manufacturer, announced their plans to merge. The resulting business will be a leading player in the growing energy storage market.
Traded on AIM in London, the merged entity will have a global sales footprint, a robust near-term project pipeline, operations in North
America, Europe and Asia, market-leading technology, and a strong management team.

Bushveld has agreed to provide a convertible loan of up to US$5 million to Avalon (the ‘Interim Funding’), half of which will be loaned
by Avalon to redT, to support the companies through the due diligence process, finalisation of the Merger negotiation and completion
of the Fundraising. These funds also allow both companies to continue delivering on their current project pipelines.

The investment is in line with the Company’s strategy of building a leading downstream vanadium-based energy storage platform, by:
– Increasing Bushveld’s exposure to the massive potential of the stationary energy storage market, for the first time directly with

a manufacturer of the VRFB technology;

– Partnering with selective VRFB companies with attractive upside potential, including the establishment of a VRFB Investment

Platform; and

– Demonstrating upstream support from the vanadium industry for the development of the VRFB sector and encouraging additional

investment into the combined company.

Refer to events after the reporting period Note 36 for details of the conversion.

Enerox
The investment in Enerox is in line with Bushveld Minerals’ strategy of partnering with Vanadium Redox Flow Battery (‘VRFB’) companies
and part of the VRFB Investment Platform (‘VIP’) Consortium.

The Consortium, which currently includes Bushveld Minerals, has signed an initial sale and purchase agreement (‘ISPA’). In terms of
the ISPA, the members of the Consortium have acquired, in equal proportions, 24.9 per cent of the issued share capital of Enerox for
€150,000 from CellCube Energy Storage Systems Inc (the ‘Seller’). In addition to this amount, to date, the Consortium has invested
€600,000 in Enerox to fund ongoing working capital. The investment of US$420,891 represents Bushveld’s share of the investment.

The Consortium has been granted exclusivity to complete due diligence. Bushveld Minerals anticipates contributing not more than 50 per cent
of the funds to be invested by the Consortium and is considering additional investors to participate as part of the Consortium. The Enerox
investment is part of Bushveld Minerals’ strategy of partnering with VRFB Original Equipment Manufacturers (‘OEMs’) that incudes supply
of vanadium and electrolyte, deployments and investment. The investment strategy is implemented through the VIP, which seeks to make
significant minority investments into high potential VRFB OEMs. The VIP allows for the flow of investment into VRFB OEMs and provides
investors with access to the rapidly growing energy storage market.

18. Deferred tax

Deferred tax assets

As at 31 December 2019

2019
US$

173,892

2018
US$

3,004,141

Financial StatementsSupplementary InformationGovernanceBusiness Overview132

Bushveld Minerals | Annual Report and Financial Results 2019

Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2019

19. Inventories

Finished goods
Work in progress
Raw materials
Consumable stores

Inventories

The amount of write-down of inventories due to net realisable value provision requirement is nil (2018: nil).

20. Trade and other receivables

Trade receivables
Other receivables

Total trade and other receivables

2019
US$

17,062,028
4,544,303
1,702,062
11,773,949

2018
US$

6,094,274
4,489,189
2,157,296
4,452,259

35,082,342

17,193,018

2019
US$

2018
US$

2,762,448
1,665,345

27,454,540
5,131,645

4,427,793

32,586,185

Trade receivables are non-interest bearing and are generally on 15-90 day terms. There were no indicators of impairment at the year end.
At 31 December 2019 the group had one customer which accounted for approximately 90% of trade receivables (2018: approximately 90%).

The directors consider that the carrying amount of trade and other receivables approximates to their fair value due to their short-term
nature. As at the year end, no receivables are past their due date, hence no allowance for doubtful receivables is provided on the basis
that expected credit losses are nil.

The total trade and other receivables denominated in South African Rand amount to US$2,814,561 (December 2018: US$1,602,806).

21. Restricted investments

Rehabilitation trust fund and insurance fund

2019
US$

2018
US$

6,605,465

5,388,953

The group is required by statutory law in South Africa to hold these restricted investments in order to meet decommissioning liabilities
on the statement of financial position (see Note 27 for further details).

22. Financial assets at fair value

As at 1 January
Fair value movement
As at 31 December

2019
US$

2,311,272
(359,045)
1,952,227

2018
US$

1,652,265
659,007
2,311,272

The Group measures the fair value of the investment in AfriTin Mining Limited using the quoted price in an active market for that instrument.
A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing
information on an ongoing basis.

Financial Statements133

23. Cash and cash equivalents

Cash at hand and in bank

2019
US$

2018
US$

34,011,557

42,019,123

Cash and cash equivalents (which are presented as a single class of assets on the face of the Statement of Financial Position) comprise
cash at bank and other short-term highly liquid investments with an original maturity of three months or less. The directors consider that
the carrying amount of cash and cash equivalents approximates their fair value.

The total cash and cash equivalents denominated in South African Rand amount to US$17,469,385 (2018: US$38,304,481).

24. Borrowings

Development Bank of Southern Africa
NedBank Term Loan
Convertible Loan Notes

2019
US$

511,522
18,071,342
23,173,288

41,756,152

2018
US$

–
–
–

–

Development Bank of Southern Africa – Facility Agreement
Lemur Holdings Limited, a subsidiary undertaking, entered into a US$1,000,000 facility agreement with the Development Bank of Southern
Africa Limited in March 2019. The purpose of the facility is to assist with the costs associated with delivering the key milestones to the
power project. The repayment is subject to the successful bankable feasibility study of the project at which point the repayment would be
the facility value plus an amount equal to an IRR of 40% capped at 2.5 times which ever is lower. As at 31 December 2019, only US$511,523
was drawn down.

Nedbank
Bushveld Minerals Limited secured ZAR375 million (approximately US$25 million) in debt facilities through its subsidiary Bushveld Vametco
Alloys Proprietary Limited (‘the Borrower’) with Nedbank Limited (acting through its Nedbank Corporate and Investment Banking division),
a South African based financial institution, in the form of a ZAR250 million loan and a ZAR125 million revolving credit facility.

Key highlights of the ZAR250 million loan which was drawn in November 2019:
– Five-year amortising loan;
– Interest rate calculated using the three year or six months JIBAR1 as selected by the Company plus a 3.4% margin;
– Interest payments are due semi-annually with first payment due in six months from financial close;
– Principal repayments will be made semi-annually in arrears over four years in eight equal instalments, with first payment due 18 months

after financial close.

Key highlights of the ZAR125 million revolving credit facility, which was undrawn for the financial year 2019:
– Three-year term;
– Interest rate calculated using the three year or six months JIBAR1 as selected by the Company plus a 3.6% margin;
– Interest payments are due semi-annually with first payment due in six months from financial close.

The security provided is customary for a secured financing of this nature, including cession of shares in the Borrower, security over the
assets of the Borrower, and a parent guarantee.

Financial StatementsSupplementary InformationGovernanceBusiness Overview134

Bushveld Minerals | Annual Report and Financial Results 2019

Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2019

24. Borrowings and other financial liabilities continued
Financial Covenants undertaken
The Borrower shall ensure that for so long as any amount is outstanding under a Finance Document or any Commitment is in force,
in respect of each Measurement Period:
– the Cumulative DSCR exceeds 1.4 times;
– the Interest Cover Ratio exceeds 4 times; and
– the Net Debt to EBITDA Ratio at a Borrower level shall not exceed 2 times.

Convertible Loan
As part of the consideration related to the Bushveld Vanchem acquisition, a payment of US$23.0 million is to be satisfied through the issue
of Bushveld Minerals unsecured convertible loan notes (‘Loan Notes’) with the following repayment, redemption and conversion terms
(in addition to customary covenants, warranties and acceleration provisions):
– Interest at a coupon of 5% per annum payable annually in arrears or on conversion or redemption;
– Repayable in cash after the second anniversary of Transaction Closure, plus any accrued interest;
– Convertible at the holder’s option in two tranches of up to US$11.5 million each, after the first and second anniversary of Transaction
Closure respectively, at a 5% discount to the prevailing 10-day volume weighted average Bushveld Minerals share price leading up
to conversion;

– Early redemption of the Loan Notes at the election of Bushveld Minerals, subject to the condition that the holder will have an option

of converting up to 50% of the early redemption amounts into Bushveld Minerals shares on the same terms set out above;

– Scope for acceleration of redemption of up to US$5 million of the Loan Notes 12 months after Transaction Closure if an average

ferrovanadium price of US$40/kgV is realised during any nine-month period during the 12 month period after Transaction Closure;

– Obligation to repay an amount equal to 40% of any cash received on a new share issue which raises more than US$30 million, provided

no more than 50% of the Loan Notes have already been paid, redeemed or converted;

– Obligation to repay an amount equal to 50% of any debt raised over US$15 million, provided no more than 50% of the Loan Notes have

been repaid, redeemed or converted;

– Obligation to repay on a substantial sale of assets or change of control.

The holder will not be able to divest any Bushveld Minerals shares received for six months following conversion and be subject to an
orderly market arrangement for the following six months.

25. Trade and other payables

Financial instruments:
Trade payables
Accruals and other payables

2019
US$

2018
US$

12,651,751
3,069,751

12,140,085
8,063,710

15,721,502

20,203,795

Trade and other payables principally comprise amounts outstanding for trade purchases and on-going costs. The average credit period
taken for trade purchases is 30 days.

The group has financial risk management policies in place to ensure that all payables are paid within the pre-arranged credit terms.
No interest has been charged by any suppliers as a result of late payment of invoices during the year.

The directors consider that the carrying amount of trade and other payables approximates to their fair value.

The total trade and other payables denominated in South African Rand amount to US$12,027,091 (2018: US$15,793,322).

Financial Statements135

26. Post-retirement medical liability
Benefit liability

As at 1 January
Actuarial changes arising from changes in financial assumption

Balance at 31 December

2019
US$

2018
US$

2,377,737
(46,412)

2,783,456
(405,719)

2,331,325

2,377,737

The benefit comprises medical aid subsidies provided to qualifying retired employees. Actuarial valuations are made annually, and the most
recent valuation was made on 31 December 2019.

The main assumptions in the valuation are:
Discount rate
Health care cost inflation
Average retirement age

9.80%
7.30%
76.9 years

A one percentage point change in the assumed rate of healthcare costs would have the following effect on the present value of the
unfunded obligation: Plus 1%: US$2.5 million; Less 1%: US$2.2 million.

A one percentage point change in the assumed interest rate would have the following effect on the present value of the unfunded
obligation; Plus 1%: US$0.24 million; Less 1%: US$0.20 million.

27. Environmental rehabilitation liability

Provision for future environmental rehabilitation costs

2019
US$

2018
US$

17,844,066

6,632,607

Provision for future environmental rehabilitation costs are made on a progressive basis. Estimates are based on costs that are regularly
reviewed and adjusted as appropriate for new circumstances.

The rehabilitation provision represents the present value of rehabilitation costs relating to the mining and processing operations, which are
expected to be incurred up until end of life of mine or plant, which is when the producing mine properties and plant are expected to cease
operations. The provisions are based on management’s estimates and assumptions based on the current economic environment. Actual
rehabilitation costs will ultimately depend upon future market prices for the necessary rehabilitation works and timing of when the mine
ceases operation. Furthermore, the timing of rehabilitation is likely to depend on when the mines cease to produce at economically viable
rates. This, in turn, will depend upon future vanadium prices, which are inherently uncertain.

The discount rate used in the calculation of the provision as at 31 December 2019 was 10.07% (2018: 9.73%).

Financial StatementsSupplementary InformationGovernanceBusiness Overview

136

Bushveld Minerals | Annual Report and Financial Results 2019

Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2019

28. Share capital and share premium

At 1 January 2018
Conversion of convertible bonds
Warrants exercised
Shares issued
Shares issued to directors and staff
Share issue expenses

At 1 January 2019
Shares issued – Yellow Dragon Holdings

At 31 December 2019

Shares
Number

875,894,905
32,499,147
33,737,419
152,749,172
24,847,310
–

Share
capital
US$

11,817,573
413,649
429,409
1,944,191
316,257
–

Share
premium
US$

69,222,661
2,991,090
3,710,416
18,080,981
8,017,103
(1,018,995)

Total share
capital and
premium
US$

81,040,234
3,404,739
4,139,825
20,025,172
8,333,360
(1,018,995)

1,119,727,953
33,914,729

14,921,079
436,192

101,003,256
10,063,808

115,924,335
10,500,000

1,153,642,682

15,357,271

111,067,064

126,424,335

The Board may, subject to Guernsey Law, issue shares or grant rights to subscribe for or convert securities into shares. It may issue different
classes of shares ranking equally with existing shares. It may convert all or any classes of shares into redeemable shares. The Company may
also hold treasury shares in accordance with the law. Dividends may be paid in proportion to the amount paid up on each class of shares.

As at the 31 December 2019 the Company owns 670,000 (2018: 670,000) treasury shares with a nominal value of 1 pence.

Shares issued
Yellow Dragon
As part of the Vametco acquisition terms announced on 30 November 2017, Bushveld Minerals agreed to make further deferred payments
to Yellow Dragon as follows:
– Two deferred payments of US$0.6 million each, payable following publication of the accounts for Vametco Holdings Limited for

respectively the years ending 31 December 2018 and 31 December 2019; and

– A final payment to be made on publication of the Vametco Holdings Limited accounts for the year ended 31 December 2020 to
be calculated by reference to Vametco Holdings Limited’s EBITDA for the 2020 financial year. The payment being calculated on
the following basis 4.5 x EBITDA (as shown in the 2020 Accounts) x 5.91 per cent.

The Company paid the first of the two US$0.6 million payments, following which the two parties agreed on an early settlement for the
balance of amounts payable to be settled as follows:
– Full and final settlement of the earn out of US$13,500,000, being an all-in total payment comprising:

– A cash component payment totalling US$3,000,000; and
– A total of US$10,500,000 payable in 33,914,729 Bushveld Minerals Limited ordinary shares of 1.0 penny each to be issued at a price of
£0.24 (which favourably compared to the 10 day volume weighted average price of £0.235 and the 20 day volume weighted average
price of £0.226, as at 22 October 2019).

The shares issued to Yellow Dragon are subject to a 6 month lock-in arrangement and a further 6 month orderly market arrangement
which are subject to certain exceptions and may otherwise only be waived with the consent of the Company’s brokers.

Financial Statements137

Equity Placing
On 26 March 2018, the Company raised approximately US$20.0 million (before expenses) by way of an oversubscribed placing of 152,749,172
new ordinary shares of 1 penny each at a price of 10.3 pence per share with leading institutional and mining investors. The price was calculated
as the 5 day volume weighted average price (as published by Bloomberg) at close of trading Monday 19 March 2018. The Placing shares
represented approximately 14.4% of the Company’s issued share capital on admission.

The planned use of the net proceeds of the Placing was to:
– Redeem the outstanding Atlas Capital Convertible Bond US$6.9 million;
– Simplify Bushveld’s organisational and corporate structure to improve Bushveld’s exposure to the underlying cash flows of its assets

US$9.0 million; and

– Support Bushveld’s vanadium expansion programme: Expansion of the vanadium reserves and resources at the Vametco mine and

Brits Project for future production and support Vametco’s expansion plans to increase production to more than 5,000 mtV and beyond
US$5.6 million.

Shares issued to directors and staff
During the course of 2018 a benchmarking exercise was conducted in order to address a pay gap matter which resulted in a one-off
retrospective compensation by way of shares being issued to employees, directors and advisors. Further to the approval by Shareholders of
the Retrospective Compensation Scheme, the Compensation Shares were issued as follows:

Name of recipient

Fortune Mojapelo
Anthony Viljoen
Ian Watson
Jeremy Friedlander
Bill Chipane
Senior Employees and Advisor

Total shares

Role

Chief Executive Officer
Non-Executive Director
Non-Executive Chairman
Non-Executive Director
Director of Bushveld Vametco Limited

Number of
Compensation
shares

7,000,000
7,000,000
3,015,000
1,050,000
2,500,000
4,282,310

24,847,310

Nature and purpose of other reserves
Share premium
The share premium reserve represents the amount subscribed for share capital in excess of nominal value.

Warrant reserve
The warrant reserve represents proceeds on issue of warrants relating to the equity component (i.e. option to convert the debt into
share capital).

Foreign exchange translation reserve
The translation reserve comprises all foreign currency differences arising from the translation of financial statements of foreign operations.

Fair value reserve
The fair value reserve comprises the cumulative net change in the fair value of financial assets at fair value through other comprehensive
income until the assets are derecognised or impaired.

Accumulated profit/loss
The accumulated profit/loss reserve represents other net gains and losses and transactions with owners (e.g. dividends) not
recognised elsewhere.

Financial StatementsSupplementary InformationGovernanceBusiness Overview138

Bushveld Minerals | Annual Report and Financial Results 2019

Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2019

29. Provisions
Reconciliation of provisions – 2019

Leave pay
Performance bonus
Surface lease
Other

Reconciliation of provisions – 2018

Leave pay
Performance bonus
Surface lease
Other

Opening
balance
US$

836,455
809,085
622,616
2,052,809

Additions
US$

387,945
2,640,764
(622,616)
147,869

Utilised
during the year
US$

–
(1,327,699)
–
(2,057,581)

Foreign
exchange
US$

(30,770)
(23,585)
–
(2,673)

Total
US$

1,193,630
2,098,565
–
140,424

4,320,965

2,553,962

(3,385,280)

(57,028)

3,432,619

Opening
balance
US$

929,525
1,293,417
1,148,922
100,018

Additions
US$

73,314
1,841,460
(86,905)
2,158,839

Utilised
during the year
US$

–
(2,175,591)
(315,116)
(192,524)

Foreign
exchange
US$

(166,384)
(150,201)
(124,285)
(13,524)

Total
US$

836,455
809,085
622,616
2,052,809

3,471,882

3,986,708

(2,683,231)

(454,394)

4,320,965

Leave pay and bonus
Leave pay represents employee leave days due multiplied by their cost to the company employment package. The bonus represents the
estimated amount due to employees based on their approved bonus scheme.

Performance bonus
The performance bonus represents an incentive bonus due to senior employees, calculated in terms of an approved scheme based on
the company’s operating results.

Surface lease
The provision is based on management’s best estimate of the expenditure required to settle the obligation for surface lease rentals
to Co-Owners, subsequent to finalisation of the surface lease agreements. As at year end an agreement was reached with Co-Owners
which was settled post year end. The settlement amount has been recorded under trade payable as at year end.

Other
The other provisions represents estimates for group tax, legal and consulting fees to be charged.

Financial Statements139

2019
US$

17,427,512
(3,600,000)
(10,500,000)
34,434
1,510,572
2,074,385
161,916

2018
US$

11,019,447
–
–
316,551
6,091,514
–
–

7,108,819

17,427,512

30. Deferred consideration

Opening balance
Cash payment
Shares settlement (see Note 28)
Unwinding of discount
Movement in earnout estimate
Consideration for Vanchem acquisition (see Note 8)
Foreign exchange

At the year-end management have updated their estimate of the earnout payable to Evraz on the acquisition of the Vametco Group,
which is based on the expected EBITDA for the year ended 31 December 2020, to a maximum of US$5 million. The remaining balance
relates to the consideration attributable to the acquisition of Vanchem.

31. Financial instruments
The group is exposed to the risks that arise from its use of financial instruments. This note describes the objectives, policies and processes
of the group for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks
is presented throughout these financial statements.

Capital risk management
The group manages its capital to ensure that entities in the group will be able to continue as going concerns while maximising returns
to shareholders. In order to maintain or adjust the capital structure, the group may issue new shares or arrange debt financing. At the
reporting date, the group had borrowings of US$41,756,152 (2018: US$nil).

The capital structure of the group consists of cash and cash equivalents, equity and borrowings. Equity comprises of issued capital and
retained profits.

The group is not subject to any externally imposed capital requirements.

Significant accounting policies
Details of the significant accounting policies and methods adopted including the criteria for recognition, the basis of measurement and
the bases for recognition of income and expenses for each class of financial asset, financial liability and equity instrument are disclosed
in note 3.

Principal financial instruments
The principal financial instruments used by the group, from which financial instrument risk arises, are as follows:
– Trade and other receivables;
– Cash at bank;
– Trade and other payables;
– Borrowings;
– Investments.

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Bushveld Minerals | Annual Report and Financial Results 2019

Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2019

31. Financial instruments continued
Categories of financial instruments

The group holds the following financial assets:
Loans and receivables
Trade and other receivables
Restricted investment
Financial assets – Investments
Cash and cash equivalents
Financial assets at fair value

Total financial assets

The group holds the following financial liabilities:
Other financial liabilities
Trade and other payables
Lease liabilities
Deferred consideration
Borrowings

Total financial liabilities

2019
US$

2018
US$

4,427,793
6,605,465
4,420,891
34,011,557
1,952,227

32,586,186
5,388,953
–
42,019,123
2,311,272

51,417,933

82,305,534

2019
US$

2018
US$

15,721,502
5,464,909
7,108,819
41,756,152

20,203,795
–
17,427,512
–

70,051,382

37,631,307

General objectives, policies and processes
The Board has overall responsibility for the determination of the group’s risk management objectives and policies. The Board receives
reports through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies
it sets.

The overall objective of the Board is to set polices that seek to reduce risk as far as possible without unduly affecting the group’s
competitiveness and flexibility. Further details regarding these policies are set out below:

Price risk
The Group’s exposure to commodity price risk is dependent on the fluctuating price of the various commodities that it mines, processes
and sells.

The average market price of each of the following commodities was:

NV
MVO
AMV

2019
US$/kgV

48.87
–
19.09

2018
US$/kgV

67.36
110.12
–

If the average price of each of these commodities increased/decreased by 10% the total sales related to each of these commodities would
have increased/decreased as follows:

NV
AMV

Effect on 2019
revenue
US$

Effect on 2019
net income
US$

11,692,487
14,391

8,418,591
10,361

11,706,878

8,428,952

Financial Statements141

Credit risk
Credit risk arises principally from the group’s cash balances with further risk arising due to its other receivables and available-for-sale
investments. Credit risk is the risk that the counterparty fails to repay its obligation to the group in respect of the amounts owed.
The group gives careful consideration to which organisations it uses for its banking services in order to minimise credit risk.

It is the group’s policy that all suppliers who wish to trade on credit terms are subject to credit verification procedures. Credit risk arises
from credit exposure to customers, including outstanding receivables and committed transactions.

Trade account receivables comprise a limited customer base. Ongoing credit evaluation of the financial position of customers is performed
and granting of credit is approved by directors.

The group’s credit risk is considered by counterparty, geography and by currency. The group has a significant concentration of cash held
on deposit with large banks in South Africa, Mauritius and the United Kingdom and America with A ratings and above (Standard and Poors).

The concentration of credit risk by currency was as follows:

Currency

Sterling
South African Rand
United States Dollar

2019
US$

169,071
17,469,394
16,373,092

2018
US$

1,548,907
10,322,765
30,147,451

34,011,557

42,019,123

At 31 December 2019, the group held no collateral as security against any financial asset. The carrying amount of financial assets recorded
in the financial statements, net of any allowances for losses, represents the group’s maximum exposure to credit risk without taking
account of the value of any collateral obtained. At 31 December 2019, no financial assets were past their due date. As a result, there
has been no impairment of financial assets during the year. An allowance for impairment is made where there is an identified loss event
which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows. Management considers the above
measures to be sufficient to control the credit risk exposure.

Liquidity risk
Liquidity risk is the risk that the group will encounter difficulty in meeting its financial obligations as they fall due. Ultimate responsibility
for liquidity risk management rests with the Board of directors. The Board manages liquidity risk by regularly reviewing the group’s gearing
levels, cash-flow projections and associated headroom and ensuring that excess banking facilities are available for future use.

The group maintains good relationships with its banks, which have high credit ratings and its cash requirements are anticipated via the
budgetary process. At 31 December 2019, the group had US$34,011,557 (2018: US$42,019,123) of cash reserves and borrowings of
US$41,756,152 (2018: nil). The Group will maintain its ability to service its borrowings over the next 12 months.

Market risk
The group’s activities expose it primarily to the financial risk of changes in foreign currency exchange rates and interest rates.

Interest rate risk
With the exception of cash and cash equivalents, the group’s only interest-bearing assets or liabilities were the borrowings of term debt as
well as convertible loan (see note 24), which carry a variable rate based on JIBAR and fixed rate of interest respectively. As the debt was only
executed in November 2019, no sensitivity has been performed as the effect would be immaterial for the year.

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Bushveld Minerals | Annual Report and Financial Results 2019

Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2019

31. Financial instruments continued
Foreign exchange risk
As highlighted earlier in these financial statements, the functional currency of the group is US Dollars. The group also has foreign currency
denominated assets and liabilities. Exposure to exchange rate fluctuations therefore arise. The carrying amount of the group’s foreign
currency denominated monetary assets and liabilities, all in US Dollars, are shown below:

Cash and cash equivalents
Other receivables
Trade and other payables

2019
US$

17,638,465
2,170,847
(11,563,170)

2018
US$

11,871,672
5,383,027
(9,161,039)

8,246,142

8,093,660

The group is exposed to a level of foreign currency risk. Due to the minimal level of foreign transactions; the directors currently believe
that foreign currency risk is at an acceptable level.

The group does not enter into any derivative financial instruments to manage its exposure to foreign currency risk.

32. Contingent liabilities
Bank guarantee
As required by the Minerals and Petroleum Resources Act (South Africa), a guarantee amounting to US$6,461,513 before tax and
US$4,652,290 after tax was issued in favour of the Department of Mineral Resources for the unscheduled closure of the Bushveld Vametco
Alloys mine. This guarantee was issued on condition that a portion be deposited in cash with Guard Risk Insurance Company Ltd with
restricted use by the Group, as per the below.

Restricted cash
The restricted cash disclosed as a current asset consists of US$3,051,487(2018: US$2,702,089) paid to Investec Bank Limited and
US$3,553,978 (2018:US$2,686,864) paid to Guardrisk Insurance Company Ltd, to enable Guard Risk Insurance Company Ltd to issue
a guarantee to the Department of Mineral Resources for the mine’s environmental rehabilitation obligation. The insurance company
deposited this balance in a Money Market account and interest at a rate of 5.5% is earned on the net credit balance. The guarantee is valid
for three years, commencing on 1 April 2018 and the funds are only available if the agreement is terminated with a three months’ notice
period. The contract was renewed on 1 April 2018, it will expire on 31 March 2021.

Suretyship
On 22 May 2019, the Company announced that it had agreed to provide a short-term standby working capital support facility to AfriTin for
the amount of ZAR 30,000,000 (approximately US$2.1 million on 22 May 2019). AfriTin has subsequently secured a working capital facility
for the amount of NAD 35,000,000 from Nedbank Namibia (the ‘Nedbank Facility’), with the support of Bushveld Minerals providing to
stand surety for the Nedbank Facility to the value of NAD 30,000,000 (approximately US$2.0 million).

In the unlikely event of default, Nedbank will first call on the suretyship of the parent company of the AfriTin Group (i.e. AfriTin Mining
Limited). In the event that AfriTin Mining Limited cannot meets its obligations under the facility, Nedbank will call upon the Bushveld
Minerals suretyship.

The above is less onerous on Bushveld Minerals as it is not a cash collateralised guarantee. In addition, the terms agreed for the Working
Capital Facility announced on the 22 May 2019 remain unchanged with respect to Bushveld Minerals. The Company is comfortable with
the progress that AfriTin has made towards production at its Namibian flagship project and with the security it retains from AfriTin for the
suretyship in the form of a notarial bond over the AfriTin processing plant.

Financial Statements143

2019
US$

2018
US$

2,449,568
608,778

7,599,075
2,258,667

3,058,346

9,857,742

33. Capital commitments

Authorised and contracted for
Authorised but not contracted for

34. Broad based black economic empowerment ownership in the group
On 27 September 2018, the group completed the sale of a 1.0% equity interest in Bushveld Vametco Holdings (Proprietary) Limited equally
to its two Broad Based Black Economic Empowerment Shareholders, Business Ventures Investments No. 1833 (Proprietary) Limited and
Business Ventures Investments No. 973 (Proprietary) Limited (‘BBBEE Shareholders’) for a total cash consideration of ZAR1,780,000.

The commitment to conclude the transaction at the agreed consideration was made by the previous Strategic Minerals Corporation
owners, prior to Bushveld Minerals Limited’s acquisition of Strategic Minerals Corporation, with a view to meeting the Black Economic
Empowerment equity requirements as set out in the recently promulgated Mining Charter III. Accordingly, the sale increased Bushveld
Vametco Holdings (Proprietary) Limited’s Broad Based Black Economic Empowerment shareholding from 25.0% to 26.0%, ensuring
Bushveld Vametco Holdings (Proprietary) Limited is fully compliant with the minimum Black Economic Empowerment ownership
requirements of the Mining Charter. Bushveld Minerals Limited’s shareholding in Bushveld Vametco Holdings (Proprietary) Limited,
through its wholly owned subsidiary Strategic Minerals Corporation, accordingly, reduces to 74%.

Transaction summary
– Total 1.0% interest acquired to increase total Broad Based Black Economic Empowerment shareholders interest to 26.0% for a total

cash consideration of ZAR1,780,000;

– The ZAR1,780,000 consideration was vendor financed provided to Broad Based Black Economic Empowerment shareholders by

Bushveld Minerals which has since been repaid; and

– The share based payment charge recognised in the 2018 income statement of US$3,232,425 represented the difference between the
grant date fair value and the 1% interest and the amount receivable for the shares. A charge was recognised in the income statement
to recognise the services (BEE credentials) received by the group.

The fair value of the shares were determined by using the estimated fair value of the subsidiary company.

The fair value of the subsidiary company was determined using the following assumptions:
– Future estimated vanadium prices;
– Future estimated exchange rates;
– Future estimated production volumes;
– Discount rate of 12.8%;
– New order mining rights will expire in 2037.

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Bushveld Minerals | Annual Report and Financial Results 2019

Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2019

35. Related parties
Relationships
Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation
and are not disclosed in this note.

VM Investments Limited is a related party due to two of the Executive Directors (Fortune Mojapelo and Anthony Viljoen) of Bushveld
Minerals Limited being majority shareholders of VM Investments. VM Investments owns the offices rented by Bushveld Minerals Limited.
The rent paid in 2019 financial period is US$176,474 (2018: US$0).

Services rendered by Ondra LLP for the amount of US$376,800 is classified as a related party transaction due to a non-executive director
(Michael Kirkwood) being a partner at the firm.

The remuneration of key management personnel, being the directors and other executive committee members, is set out below. Further
information about the remuneration of individual directors is provided in the Directors’ remuneration report.

Salaries and fees
Short-term incentives
Long-term incentives
Share based payments

2019
US$

1,772,702
881,934
346,157
–

2018
US$

196,557
595,670
–
6,058,690

3,000,793

6,850,917

36. Events after the reporting period
Financial Assets – investment conversion post year end
On 1 November 2019, Bushveld announced it had agreed to invest in Avalon with funding of US$5 million through a convertible. In
accordance with the terms of the convertible loan, on successful completion of the merger in March 2020, the loan was converted into
shares in Invinity. The previously provided US$5 million loan (together with the accrued interest and commitment fee) has been converted
into 302,978,063 Ordinary Shares at a price of 1.65 pence in Invinity, representing up to 8.71 per cent of Invinity. The shares issued to
Bushveld are not subject to a lock-in arrangement. In addition to the funding from Bushveld, Invinity has raised £7.9 million through
an equity placing at 1.65 pence per share.

Under the agreement, following the completion of the Merger, Bushveld has a right to nominate a director to the Board of Invinity, subject
to Bushveld retaining at least 5 per cent of the issued share capital of Invinity. The nomination of a director will be done in due course.
Bushveld will retain that right after one year provided it beneficially owns at least 10 per cent of Invinity. In addition, for so long as Bushveld
beneficially owns at least 20 per cent of Invinity, it shall have a right to nominate two members of the board of Invinity. The investment
is in line with Bushveld’s strategy of partnering with VRFB companies and part of the VRFB Investment Platform (‘VIP’), as announced on
1 November 2019.

Financial Statements145

Covid-19
On 31 December 2019, the World Health Organization (WHO) reported a cluster of pneumonia cases in Wuhan City, China. ‘Severe Acute
Respiratory Syndrome Coronavirus 2’ (SARS-CoV-2) was confirmed as the causative agent of what we now know as ‘Coronavirus Disease
2019’ (Covid-19). Since then, the virus has spread to more than 100 countries, including South Africa with a countrywide lockdown
implemented on the 24 March 2020.

As a Company we recognised the gravity of the Covid-19 pandemic early and moved quickly to take all necessary measures to create
awareness, minimise transmission risks and establish intervention protocols for potential cases. We established a cross-functional Covid-19
Task Team, including operations, health and safety, human resources, finance, community and government relations and other support
functions to ensure that the Company is best prepared to navigate this period. To minimise the potential for Covid-19 to spread at our
operations, we implemented various preventative measures, including supplying sanitisers, temperature testing, adapting workplaces
to foster social distancing, introducing strict procedures at our operations and enabling remote work, where it was practicable to do so.
This is being coupled with awareness campaigns to inform and educate employees and the wider community.

As the near-term impact of Covid-19 on operating conditions remains uncertain, we have taken cash preservation measures to manage
near-term liquidity, while preserving the long-term sustainability of the assets and still positioning the Company to increase its share of
the vanadium market. These include: reviewing operational expenditure, prioritisation of critical and regulatory capital, as well as deferring
some growth-associated (non-critical) capital expenditure across the mining, processing and energy businesses. Furthermore, to enhance
our liquidity position and financial flexibility, we drew down on the remaining revolving credit facility of ZAR125 million at the end of March
2020. Refer to the CEO’s statement for a more detailed response to the pandemic.

Financial StatementsSupplementary InformationGovernanceBusiness Overview146

Bushveld Minerals | Annual Report and Financial Results 2019

Mineral Resources and Reserves

Mineral Resources are the estimated quantities of material with potential for eventual economic
extraction from the Group’s properties.

Ore Reserves are a subset of Measured
and/or Indicated Mineral Resources that can
be demonstrably extracted, economically
and legally.

Ore Reserves are declared for open pits
inside the Life of Mine pit design (the
optimised pit shell in this instance), including
diluting materials and allowances for losses
which may occur when the material is mined
or extracted. They are defined by studies
at pre-feasibility or feasibility level, as
appropriate, that include the application
of modifying factors. Those studies
demonstrate that, at the time of reporting,
extraction could reasonably be justified
(JORC, 2012). Ore Reserves are declared for
in-whole rock tonnes in the pits and exclude
any stockpiles. Economic assumptions used
to estimate reserves change from one period
to another as additional technical and
operational data is generated.

Bushveld Minerals: vanadium
resource and reserves
The Resources and Reserves estimates are
based on the Competent Person’s statements
prepared by an independent consultancy
company, MSA Group, at 31 December 2019.

Vametco mine

– Ore Reserves were depleted by two

per cent after nine months of mining,
compared with the previous Ore Reserve
estimate at 29 March 2019. Ore Reserves
are reported at 31 December 2019
as 274,100 tonnes V2O5 in-magnetite
at a grade of 2.02 V2O5 in-magnetite.
– Combined Inferred and Indicated Mineral
Resources comprise three seams (the
Lower, Intermediate and Upper seams)
and are reported after nine months of
mining at 31 December 2019 at 185.5 Mt
at an average grade of 1.98 per cent V2O5
in-magnetite, with an average magnetite
content of 35.0 per cent (in-whole rock)
for 714,700 tonnes of contained
vanadium. The combined Inferred
and Indicated Mineral Resource was
previously reported on 29 March 2019
as 186.7 Mt at an average grade of
1.98 per cent V2O5 in-magnetite, with an
average magnetite content of 35.0 per cent
(in whole rock) for 719,300 tonnes of
contained vanadium.

– Within this resource, the Ore Reserve in
the Probable Category comprises three
seams (the Lower, Intermediate and
Upper seams) and is reported as 47.4 Mt
at an average grade of 2.02 per cent V2O5
in-magnetite, with an average magnetite
content of 28.5 per cent in-whole rock
for 153,500 tonnes of vanadium.

– The Lower Seam is the main ore seam
and the thickest, ranging from 13.8 to 52
metres, comprising a Probable Reserve
of 39.6 Mt at an average grade of
2.05 per cent V2O5 in-magnetite,
with an average magnetite content of
29.3 per cent in-whole rock for 133,900
tonnes of vanadium.

– The decrease in the 2019 Mineral

Resource tonnage by 0.64 per cent
compared with the 29 March 2019
estimate is attributed to mining
of the seams over nine months.
No Mineral Resource Exploration
was carried out in the period.

– The decrease in the estimated Ore
Reserve tonnage from 48.4 Mt on
29 March 2019 to 47.4 Mt on
31 December 2019 is due to the
depletion of the lower and intermediate
seams over the nine-month period,
based on the pit-to-plant reconciled
production data supplied by Vametco.

Supplementary Information147

Table 1: Vametco Mineral Resource at a cut-off grade of 20% magnetite, as at 31 December 2019 – Gross Basis

Class

Indicated

Inferred

Indicated and Inferred

Seam name

Upper
Intermediate
Lower

Total

Upper
Intermediate
Lower

Total

Upper
Intermediate
Lower

Total

Tonnes
(Millions)

V2O5 grade of
whole rock
%

Magnetite grade
of whole rock
%

V2O5 grade
in-magnetite
%

Tonnes V2O5
in-magnetite
(Thousands)

Tonnes V
in-magnetite
(Thousands)

5.7
28.2
108.8

142.7

10.4
7.0
25.4

42.8

16.0
35.3
135.2

185.5

1.44
0.67
0.72

0.74

1.46
0.67
0.74

0.90

1.45
0.67
0.72

0.78

65.9
32.8
32.3

33.8

63.5
32.1
31.3

39.2

64.3
32.7
32.1

35.0

1.78
1.91
2.03

2.00

1.75
1.92
2.00

1.93

1.76
1.91
2.03

1.98

66.3
176.6
715.7

958.6

115.3
43.3
158.4

317.2

181.7
220.0
874.1

1,275.9

37.1
98.9
400.9

537.0

64.6
24.3
88.7

177.6

101.7
123.2
489.6

714.7

Notes:
1 All tabulated data have been rounded and as a result minor computational errors may occur.
2 Mineral Resources which are not Ore Reserves have no demonstrated economic viability.
3 Mineral Resources are inclusive of Ore Reserves (not indicated in the table).
4 Magnetite content (grade) is determined as the proportion of magnetite concentrate recovered using Davis Tube methodology.
5 Due to the magnetite grade being a recovered grade, differences will occur between whole rock V2O5 grades back-calculated from concentrate, versus those derived

from whole rock assays.

6 Original depletion as at 29 March 2019.
7 New depletion as at 31 December 2019.
8 Reported on a Gross Basis. Bushveld Minerals shareholding in Vametco Alloys is 74%.

Table 2: Vametco Mineral Resource at a cut-off grade of 20% magnetite, as at 31 December 2019 – Attributable Basis

Class

Indicated

Inferred

Indicated and Inferred

Seam name

Upper
Intermediate
Lower

Total

Upper
Intermediate
Lower

Total

Upper
Intermediate
Lower

Total

Tonnes
(Millions)

V2O5 grade of
whole rock
%

Magnetite grade
of whole rock
%

V2O5 grade
in-magnetite
%

Tonnes V2O5
in-magnetite
(Thousands)

Tonnes V
in-magnetite
(Thousands)

4.2
20.9
80.5

105.6

7.7
5.2
18.8

31.7

11.9
26.1
99.3

137.3

1.44
0.67
0.72

0.74

1.46
0.67
0.74

0.90

1.45
0.67
0.72

0.78

65.9
32.8
32.3

33.8

63.5
32.1
31.3

39.2

64.3
32.7
32.1

35.0

1.78
1.91
2.03

2.00

1.75
1.92
2.00

1.93

1.76
1.91
2.03

1.98

49.0
130.7
529.6

709.4

85.3
32.1
117.2

234.7

134.4
162.8
646.8

944.1

27.5
73.2
296.6

397.3

47.8
17.9
65.6

131.4

75.3
91.1
362.3

528.8

from whole rock assays.

6 Original depletion as at 29 March 2019.
7 New depletion as at 31 December 2019.
8 Reported on an Attributable Basis. Bushveld Minerals shareholding in Vametco Alloys is 74%.

Financial StatementsSupplementary InformationGovernanceBusiness Overview148

Bushveld Minerals | Annual Report and Financial Results 2019

Mineral Resources and Reserves
continued

Table 3: Vametco Ore Reserves, as at 31 December 2019 – Gross Basis

Class

Probable

Seam name

Upper
Intermediate
Lower

Total

Tonnes
(Millions)

V2O5 grade of
whole rock
%

Magnetite grade
of whole rock
%

V2O5 grade
in-magnetite
%

Tonnes V2O5
in-magnetite
(Thousands)

Tonnes V
in-magnetite
(Thousands)

1.0
6.8
39.6

47.4

0.58
0.53
0.63

0.62

27.3
23.8
29.3

28.5

1.78
1.87
2.06

2.02

4.60
30.37
239.09

274.1

2.6
17.0
133.9

153.5

Notes:
1 All tabulated data have been rounded and as a result minor computational errors may occur.
2 Ore Reserve tonnes and grades reported on dry ROM (plant feed) basis after mining modifying factors have been applied but before beneficiation down-stream

recoveries/losses have been applied.

3 Reporting was prepared on a Mineral Resource model developed by MSA.
4 Ore Reserve tonnes depleted as at 31 December 2019.
5 Reported on a Gross Basis. Bushveld Minerals shareholding in Vametco Alloys is 74%.
6 Ore Reserves estimate depleted using reconciled production data supplied by Vametco from the previous 29 March 2019 Ore Reserves.

Table 4: Vametco Ore Reserves, as at 31 December 2019 – Attributable Basis

Class

Probable

Seam name

Upper
Intermediate
Lower

Total

Tonnes
(Millions)

V2O5 grade of
whole rock
%

Magnetite grade
of whole rock
%

V2O5 grade
in-magnetite
%

Tonnes V2O5
in-magnetite
(Thousands)

Tonnes V
in-magnetite
(Thousands)

0.7
5.0
29.3

35.1

0.58
0.53
0.63

0.62

27.3
23.8
29.3

28.5

1.78
1.87
2.06

2.02

3.4
22.5
176.9

202.8

1.9
12.6
99.1

113.6

recoveries/losses have been applied.

3 Reporting was prepared on a Mineral Resource model developed by MSA.
4 Ore Reserve tonnes depleted as at 31 December 2019.
5 Reported on an Attributable Basis. Bushveld Minerals shareholding in Vametco Alloys is 74%.
6 Ore Reserves estimate depleted using reconciled production data supplied by Vametco from the previous 29 March 2019 Ore Reserves.

Supplementary Information149

Brits
The Resources estimates are based on the
JORC-compliant maiden Mineral Resource
estimate published in July 2019 and the
Competent Person’s statements prepared
by an independent consultancy company,
the MSA Group, published in January 2020.

The Mineral Resource is 66.8 Mt (Indicated
and Inferred combined) at a weighted V2O5
average grade of 1.58 per cent in-magnetite.
The maiden Mineral Resource incorporates
data from the 2018 drilling campaign,
comprising 26 drill holes over a total of
2,967 meters of diamond drilling.

The Mineral Resource was reported
in accordance with the 2012 edition
of the Australasian Code for Reporting
of Exploration Results, Mineral Resources
and Ore Reserves (the JORC Code) and is
classified into the Indicated and Inferred
Categories in Tables 1 and 2 below on a
gross and net attributable basis respectively.

Key Highlights
– The aggregate Inferred and Indicated

Mineral Resource distributed across the
three seams (the Lower, Intermediate,
and Upper Seams) is reported as 66.8 Mt
at an average grade of 1.58 per cent
V2O5 in-magnetite, at a cut-off grade of
20 per cent magnetite in-whole rock for
175,400 tonnes of contained vanadium.

– The Indicated Mineral Resource

tonnages account for 67 per cent of the
total combined Mineral Resource and
stand at 44.9 Mt with an average grade
of 1.59 per cent V2O5 in-magnetite for
115,600 tonnes of contained vanadium
across the three seams.

– The Lower Seam represents a major

portion of the total combined Mineral
Resource tonnages at the cut-off grade
of 20 per cent, with 55.5 Mt at an
average grade of 1.58 per cent V2O5
in-magnetite for 137,000 tonnes of
contained vanadium. This represents
approximately 83 per cent of the total
combined tonnage of the maiden
Mineral Resource.

– Within the combined Mineral Resource,
the Intermediate Seam has the highest
grade of the three seams at 1.76 per
cent V2O5 in-magnetite, although
the tonnages are low at the current
cut-off grade of 20 per cent magnetite
in-whole rock.

– A geological trend of decreasing grade in
vanadium for magnetite-rich layers from
west to east in the Bushveld Complex
accounts for the lower grades on the
Brits Project in comparison to the grades
at the operating Vametco Mine.

– The Mineral Resource is reported up to a
depth of 150 meters below surface and is
based on the drilling on the western and
central blocks of the farm Uitvalgrond
Portion 3 which extends over a strike
length of approximately 1.65 kilometres
to the most eastern fault where the last
line of drilling was completed. There is
potential to increase the resource on the
remaining eastern unexplored portion of
the farm on a strike length of 1 kilometre.

Table 5: Brits Vanadium Mineral Resource at a cut-off grade of 20% magnetite, as at 18 June 2019 – Gross Basis

Class

Indicated

Inferred

Indicated and Inferred

Seam name

Upper
Intermediate
Lower

Total

Upper
Intermediate
Lower

Total

Upper
Intermediate
Lower

Total

Tonnes
(Millions)

V2O5 grade of
whole rock
%

Magnetite grade
of whole rock
%

V2O5 grade
of magnetite
%

Tonnes V2O5
in-magnetite
(Thousands)

Tonnes V
in-magnetite
(Thousands)

2.0
1.9
41.0

44.9

7.1
0.4
14.5

22.0

9.2
2.2
55.5

66.8

0.66
0.47
0.56

0.56

0.65
0.44
0.50

0.55

0.65
0.46
0.54

0.56

43.64
21.52
28.54

28.94

43.89
21.13
26.09

31.78

43.84
21.46
27.90

29.87

1.51
1.75
1.59

1.59

1.50
1.85
1.55

1.54

1.50
1.76
1.58

1.58

13.4
7.0
185.9

206.3

46.7
1.4
58.8

106.9

60.1
8.4
244.6

313.2

7.5
3.9
104.2

115.6

26.2
0.8
32.9

59.9

33.7
4.7
137.0

175.4

Notes:
1 All tabulated data have been rounded and as a result minor computational errors may occur.
2 Mineral Resources which are not Ore Reserves have no demonstrated economic viability.
3 Magnetite grade is determined as the proportion of magnetite concentrate recovered using Davis Tube methodology.
4 Due to the magnetite grade being a recovered grade, differences will occur between whole rock V2O5 grades back calculated from concentrate, versus those derived

from whole rock assays.

5 The Mineral Resource is reported as 100% of the Mineral Resource for the project. Bushveld Minerals shareholding in Brits is 62.5%.
6 Bushveld Minerals is the operator of Brits Vanadium Project.

Financial StatementsSupplementary InformationGovernanceBusiness Overview150

Bushveld Minerals | Annual Report and Financial Results 2019

Mineral Resources and Reserves
continued

Table 6: Brits Vanadium Mineral Resource at a cut-off grade of 20% magnetite, as at 18 June 2019 – Net Attributable Basis

Class

Indicated

Inferred

Indicated and Inferred

Seam Name

Upper
Intermediate
Lower

Total

Upper
Intermediate
Lower

Total

Upper
Intermediate
Lower

Total

Tonnes
(Millions)

V2O5 grade of
whole rock
%

Magnetite grade
of whole rock
%

V2O5 grade
of magnetite
%

Tonnes V2O5
in-magnetite
(Thousands)

Tonnes V
in-magnetite
(Thousands)

1.3
1.2
25.6

28.0

4.4
0.2
9.1

13.7

5.7
1.4
34.7

41.8

0.66
0.47
0.56

0.56

0.65
0.44
0.50

0.55

0.65
0.46
0.54

0.56

43.64
21.52
28.54

28.94

43.89
21.13
26.09

31.78

43.84
21.46
27.90

29.87

1.51
1.75
1.59

1.59

1.50
1.85
1.55

1.54

1.50
1.76
1.58

1.58

8.4
4.4
116.2

129.0

29.2
0.9
36.7

66.8

37.6
5.2
152.9

195.8

4.7
2.4
65.1

72.2

16.3
0.5
20.6

37.4

21.0
2.9
85.6

109.7

Notes:
1 All tabulated data have been rounded and as a result minor computational errors may occur.
2 Mineral Resources which are not Ore Reserves have no demonstrated economic viability.
3 Magnetite grade is determined as the proportion of magnetite concentrate recovered using Davis Tube methodology.
4 Due to the magnetite grade being a recovered grade, differences will occur between whole rock V2O5 grades back calculated from concentrate, versus those derived

from whole rock assays.

5 Bushveld Minerals shareholding in Brits is 62.5%.
6 Bushveld Minerals is the operator of Brits Vanadium Project.

Mokopane Resources and Reserves
The Mokopane Project has a 298 Mt JORC-compliant Resource, including 28.5 Mt Reserves and a weighted average V2O5 grade of 1.41 per
cent in-whole rock and 1.75 per cent in-magnetite.

Table 7: MML and MML HW Mineral Resources at a 0.30 per cent V2O5 cut-off, ≤120 m depth, as at 15 October 2017

Layer name

UG-C
UG-A
UMG1
UMG2
MAG1 HW GAB**
MAG1
MAG2
MML HW
Total
MAG3
PART
MAG4

Mineral resource
category

Width
(m)

Tonnes
(Mt)

Density
(t/m)

V2O5
(%)

Fe
(%)

Fe2O3
(%)

TiO2
(%)

SiO2*
(%)

Al2O3*
(%)

P2O5*
(%)

S*
(%)

V2O5
(kt)

Fe
(Mt)

Inferred
Inferred
Inferred
Inferred
Inferred
Inferred
Inferred
Inferred
Inferred
Indicated
Indicated
Indicated

4.04
1.64
3.24
2.03
17.53
1.31
1.10
5.89
36.77
4.09
2.16
3.59

31.8
12.7
25.5
15.7
72.3
12.0
9.2
42.3
221.5
27.5
11.4
24.3

3.48
3.31
3.30
3.40
3.02
3.96
3.57
3.01
3.21
4.08
3.16
4.00

3.85

3.33

0.64
0.59
0.59
0.69
0.31
1.07
0.83
0.32
0.50
1.50
0.58
1.46

25.7
23.2
22.9
25.9
13.1
40.0
30.2
13.4
19.8
45.5
20.9
43.9

1.32

40.4

36.7
33.1
32.7
37.0
18.8
57.1
43.1
19.2
28.3
65.1
29.9
62.7

57.8

0.68

24.4

34.8

5.9
5.3
5.4
6.2
2.9
9.7
7.2
2.5
4.4
10.0
3.5
9.3

8.6

5.4

30.2
32.5
32.6
29.4
42.0
15.6
25.1
42.2
35.7
10.6
34.5
11.8

15.4

31.2

15.4
17.5
17.6
16.7
21.9
10.8
15.1
21.6
18.9
7.8
19.0
8.9

10.2

17.0

0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.02
0.01
0.01
0.01
0.01

0.01

202.8
0.12
75.6
0.01
150.4
0.01
107.7
0.01
223.3
0.12
128.7
0.06
76.3
0.06
0.11
136.0
0.08 1,100.8
412.5
0.12
66.3
0.17
354.9
0.24

0.18

833.7

0.10 1,934.5

8.2
3.0
5.8
4.1
9.5
4.8
2.8
5.7
43.8
12.5
2.4
10.7

25.6

69.4

Total

Indicated

9.84

63.2

Total Mineral Resources

46.61 284.8

Included for information purposes only, no value will be derived from these materials.

*
** A 0.30 per cent V2O5 cut-off has been applied laterally across this layer, so only material greater than 0.30 per cent V2O5 is included in the tonnage listed in this table.

Supplementary Information151

V₂O₅
(%)

1.425
1.387

1.41

Cu
ppm

466
47
33

132

Table 8: MML Probable Ore Reserves as at 19 January 2016

Orebody

MML Upper, MAG 3
MML Lower, MAG 4

Total/Average

True
thickness
(m)

4.09
3.59

7.68

SG
(t/m³)

4.08
4.00

4.04

Tonnes
(million)

15.3
13.2

28.5

Table 9: AB Zone Mineral Resource at 0.3 per cent V2O5 cut-off, ≤120 m vertical depth, as at 15 October 2017

Layer

Upper AB
AB Parting
Lower AB

Total