Bushveld Minerals Annual Report 2021

Plain-text annual report

Life. Powered. The road to an advanced future is not paved with old ways. December 2021 Annual Report & Financial Results Bushveld Minerals is a low-cost, vertically-integrated primary vanadium producer, operating across the upstream and downstream value chain through Bushveld Vanadium and Bushveld Energy. Bushveld produces diversiﬁed products for the steel, energy and chemical sectors, accounting for about three per cent of the global vanadium market in 2021. Nitro Vanadium Ferrovanadium Vanadium Pentoxide Flake – Nitro Vanadium and ferrovandium have similar uses – Nitro Vanadium strengthens steel more efficiently – Strengthening mechanism allows steelmakers to use less vanadium in high- – Intermediate product to make Ferrovanadium – Vanadium aluminium master alloys strength low alloy steels and reduce vanadium costs by as much as 40 per cent for aerospace applications – Reinforcing Bars – Forgings – High-Strength Sheet, Plates, Bars and Structurals – Used as an additive in tool steels – Enhances grain reﬁnement (less alloy additions for same strength) – Enhances strength and hardness CHEMICALS – Specialised coatings for steel used in car manufacturing Vanadium Pentoxide Powder – Catalyst used in sulphuric acid Sodium Ammonium Vanadate – Catalyst that aids in sulphur removal Vanadyl Oxolate – Used as a catalyst in diesel engines production in scrubbers Ammonium Metavanadate – Used in ﬂuorescent tubes – Pigments in ceramics – Intermediate product to make Ferrovanadium Sodium Metavanadate – Used in the pharmaceutical industry Potassium Metavanadate – Ceramics (blue) – Petrochemical industry – Paints – Catalysts – Corrosion inhibitor Table of Contents Governance Business Overview Governance Financial Statements Supplementary Information 68 Board of Directors 69 Executive Management Team 70 Corporate Governance Report 76 Report of the Audit Committee 78 94 Directors’ Report 95 2021 Remuneration Report Statement of Directors’ Responsibilities Business Overview 4 Where We Operate 6 Bushveld Minerals’ Key Achievements 7 Tribute to Professor Viljoen 8 Our Approach 10 Investment Case 12 Chairman’s Statement 16 Chief Executive Officer’s Review 22 Business Model 24 Bushveld Minerals’ Performance and Objectives 28 Vanadium Market Overview 31 34 40 Operating Assets and Operational Review 48 Principal Risks 53 64 Our People Energy Storage Overview Finance Director’s Review Sustainability Financial Statements Independent Auditor’s Report 98 104 Consolidated Statement of Proﬁt or Loss 105 Consolidated Statement of Comprehensive Loss 106 Consolidated Statement of Financial Position 107 Consolidated Statement of Changes in Equity 108 Consolidated Statement of Cash Flows 109 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. Supplementary Information 150 Mineral Resources and Reserves 158 Acronyms 159 Glossary 161 Notice of Annual General Meeting IBC Company Information Annual Report and Financial Results 2021 1 Business Overview The road to an advanced future is not paved with old ways 2 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information Annual Report and Financial Results 2021 3 Where We Operate BUSHVELD VANADIUM’S CORE ASSETS 1 2 3 4 Vametco mine and plant Vanchem plant Brits resource Mokopane project BUSHVELD ENERGY’S CORE ASSETS 5 6 7 Belco plant Vametco mini-grid CellCube – Austria 7 CellCube – Austria - 4 2 6 3 1 5 4 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information BUSHVELD VANADIUM The Company’s mining and processing assets are located in South Africa, which hosts the largest high-grade primary deposits of vanadium in the world. The Vametco Mine, Brits Resource and Mokopane Project comprise a total JORC-compliant resource base of at least 548 Mt (100 per cent basis), including 74 Mt (100 per cent basis) of JORC-compliant reserves, representing some of the highest primary grades in the world. Collectively, the Vametco and Vanchem plants provide Bushveld with a ﬂexible and scalable low-cost production platform, enabling it to maintain a competitive position in the vanadium market. BUSHVELD ENERGY Bushveld Energy’s operations are located in South Africa, while its investment in the Vanadium Redox Flow (VRFB) Original Equipment Manufacturer (OEM) CellCube is located in Vienna, Austria. The Bushveld Electrolyte Company (BELCO) 8 million litre electrolyte/200 MWh production plant under construction is located in East London, South Africa. Bushveld Energy holds an indirect 25.25 per cent interest in CellCube, formerly known as Enerox. The site for the construction of the 3.5 MW solar PV and 1 MW/4 MWh VRFB mini-grid project for Vametco is located at Vametco in Brits, South Africa. KEY Main Road Railway NORTHERN LIMB 4 EASTERN LIMB WESTERN LIMB 1 6 3 Rustenburg Brits 0 20 40 60 kilometres 2 Middelburg Witbank Pretoria Johannesburg Annual Report and Financial Results 2021 5 Timeline Bushveld Minerals’ Key Achievements 2012 Bushveld Minerals Admitted to trading on AIM on 26 March 2012. 2013 Bushveld Minerals Bushveld Vanadium Project platform established on an initial resource of 52 Mt. 2014 Mokopane Licence extension for Mokopane Prospecting right approved. 2016 Bushveld Energy Official launch of Bushveld Energy. Cooperation Agreement signed with Industrial Development Corporation to determine the economic viability of VRFBs for use and manufacture in South Africa. 2017 Bushveld Vametco Acquired a 26.6 per cent shareholding in Vametco, a vanadium mine and primary processing facility. Bushveld Vametco Increased shareholding in Vametco to 59.1 per cent. Bushveld Minerals Demerger of Afritin Mining Ltd. 2018 Bushveld Vametco Increased its effective shareholding in Vametco to 74 per cent through a series of transactions. Bushveld Energy Started development of ﬁrst commercial photovoltaic and vanadium redox ﬂow battery mini-grid. 2019 Bushveld Vanchem Acquired 100 per cent of Vanchem assets, a primary vanadium processing facility. 2020 Bushveld Energy Vanadium rental partnership with Invinity and Pivot Power (part of the French EDF Renewables). Bushveld Energy Established the Bushveld Electrolyte Company (BELCO). Mokopane Executed a 30-year mining right. 2021 Bushveld Energy Commenced construction of the BELCO plant. Bushveld Energy Implemented its ﬁrst rental contract with Avalon Battery Corporation. Bushveld Energy Increased indirect interest to 25.25 per cent in Cellcube. Bushveld Energy 8.71 per cent investment into AIM- listed Invinity Energy Systems. Bushveld Energy Monetised Invinity Investment and realised ~US$13 million. Bushveld Energy Invested in Cellcube as part of an investment consortium. 2022 Bushveld Vametco Received ISO 14001:2015 Certiﬁcation valid until March 2025. Bushveld Vanchem Commissioning of Vanchem’s Kiln 3. Bushveld Energy Vametco Hybrid mini-grid achieves ﬁnancial close. 6 Annual Report and Financial Results 2021 Tribute to Professor Morris Viljoen Business Overview Governance Financial Statements Supplementary Information “ A rich legacy for Bushveld Minerals.” Professor Morris Viljoen 1940-2021 Bushveld Minerals Technical Advisor He also contributed valuable insights in optimised methods and techniques especially in the gold mining world. He will be remembered as a discoverer of Komatiites (a new class of ancient volcanic rocks in the Komati River valley in 1969) as part of his PhD which he did, together with his twin brother Richard. The term Komatiite has been adopted worldwide to describe such type of rocks. Prof Morris Viljoen was also highly respected by his peers and was a fellow of the GSSA (Geological Society of South Africa) and other notable international geological and mining societies. He authored and co-authored geoscientiﬁc books and published close to eighty papers in scientiﬁc journals worldwide, and contributed to legacy projects of the 35th International Geological Congress held in Cape Town in 2016, where two books were produced and published. His contribution to developing skills within the sector is evidenced by the many geoscientists he trained during his tenure as Professor of Mining Geology at Wits University. He has supervised PhD and Masters students, some of whom work for Bushveld Minerals today. The Bushveld Minerals family will miss him dearly for his unwavering support and wisdom. We will forever celebrate the rich legacy that he has left in our businesses. May his soul rest in peace. In 2021, we sadly lost Professor Morris Viljoen who was a technical advisor to Bushveld Minerals and who, more importantly, was one of the co-founders of VMIC (VM Investment Company), together with his twin brother Professor Richard Viljoen, Anthony Viljoen and Fortune Mojapelo. VMIC, a principal investment and advisory company focusing on mining projects in Africa, laid the foundation for the establishment of Bushveld Minerals and AfriTin as fully operational mining companies. To be precise, the geological base on which Bushveld and AfriTin were built was the work of Professors Morris Viljoen and Richard Viljoen, “the Twins” as we came to affectionately call them. Prof Viljoen will be remembered as one of the world’s greatest geologists, having made an immense contribution to the ﬁeld of geology and the mining industry. He will also be remembered as an academic father to many geologists and geoscientists in South Africa and the world over. More recently, he had become a pioneer of geo-tourism, where he documented and promoted South Africa’s geological and mining heritage. At Bushveld Minerals, we will remember Prof Viljoen for his illustrious career in the mining industry and will be forever grateful to have beneﬁted from his deep knowledge, and passion for the sector. Simply put, there could be no Bushveld Minerals without him. Some of his most notable achievements over the decades he worked as a mining geologist are evidenced in his instrumental role in the generation and development of several exploration targets of which many have developed into advanced prospecting targets and operating mines today. These include the Mokopane Vanadium Project, Amalia and Blaaubank lode gold deposits, the Akanani/ AfriOre Platinum Project, the Uramin Uranium Project and several others. Annual Report and Financial Results 2021 7 Our Approach Our vision and mission drives our business model and our strategic decisions. It is underpinned by our values which inform the behaviour and standards expected of all our colleagues in the business. Together these determine how we identify and deliver our immediate and long-term strategic objectives and generate long-term sustainable returns for all our stakeholders. OUR VISION Become one of the world’s most signiﬁcant, low-cost, vertically-integrated primary vanadium platforms, with a diversiﬁed vanadium product portfolio. OUR MISSION Generate value in a safe and sustainable way for all of our stakeholders throughout the commodity cycle. OUR VALUES The Bushveld Minerals’ shared values are the foundational DNA on which our business and brand are built. They were developed: − Based on the agreed culture moves and the desired culture the organisation seeks to embed − To guide the behaviour and decisions of all leaders and employees in the business − To be the set of guiding principles of the desired culture. We demonstrate care by focusing on safety ﬁrst, having the courage to pioneer, learn, and adapt, collaborating as one team for shared success, behaving in a way that ensures we are trusted, and always striving to deliver excellence. CARE We care for the safety and health of our people, safety of our assets, environment and our communities COURAGE We are pioneering, curious, resilient and innovative COLLABORATION We collaborate for shared success by building unity through our shared purpose and effective communication EXCELLENCE We continuously strive for excellence through rigour, effort and deliberate planning, focused on the right performance outcomes TRUSTED We are trusted because we show integrity, aspire to deliver on our promises, and go beyond compliance 8 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information Bushveld Minerals. Life. Powered. As our business grows and achieves signiﬁcant growth milestones towards becoming a true leader in the global vanadium value chain, it’s brand must also evolve and reﬂect our future ambitions of powering not only industry but people, communities and more sustainable ways of doing business. We ﬁnd our purpose in a quest to fuel human freedom in empowering better, safer and more sustainable living. We strive to do this by becoming one of the world’s most signiﬁcant low-cost, vertically integrated vanadium platforms. Backed by innovative thinking and disciplined expertise, we are committed to pulling a better future forward – ensuring that what we take from the earth goes back into it in the shape of progress. OUR BRAND STORY: The road to an advanced future is not paved with old ways. It is fuelled by the power of human possibility. Bringing manufacturing, development, energy, and growth not just to life, but to lives. A less wasteful, more resilient tomorrow requires a shift. In thinking. In doing. Toward better systems, better structures. Building. Not just structures, but sustainability. Powering. Not just progress, but people. To fuel human freedom in advancing a better, safer, more durable existence for us all. One that does not leave us as culpable, or vulnerable. At Bushveld Minerals we are committed to pulling this kind of future forward. OUR LOGO ‘Life powered’ captures the power of human possibility, bringing manufacturing, development, energy, and growth not just to life, but to lives. The new logo concept brings this story to life, whilst remembering where Bushveld came from. It leverages our existing tree symbol, displaying a modernised look and feel more aligned to future ideals. The updated look emanates freedom, innovation, and possibility – representing a life powered for all. Annual Report and Financial Results 2021 9 Investment Case Our Key Strengths Drive Our Investment Case Bushveld Minerals has, over the last decade, pursued a growth strategy that has facilitated the securing through acquisition of two world-class primary vanadium processing plants and the construction of an electrolyte manufacturing plant in South Africa for VRFBs. After a period of consolidation and refurbishment of these acquisitions, Bushveld is now a well-established mid-tier vanadium producer. At the near term production rate of 5,000 mtVp.a to 5,400 mtVp.a. by the end of the ﬁnancial year ending December 2022 – our currently funded production position – we have a business that is sustainable with an attractive cost proposition and good cash generation capacity. Our asset base is scalable with potential to increase production above 5,000 – 5,400 mtV production run rate to 8,000 mtVp.a. over the medium to long term. This growth will be facilitated through the advancement of the feasibility and pre-feasibility studies at Vametco and Vanchem, respectively, which will require modest further capital expenditure relative to greenﬁeld operations. The production growth potential is an opportunity to reduce unit costs further and can be done in incremental phases, each phase being value accretive with attractive internal rates of return per phase. The result is a large, low-cost primary vanadium producer with attractive cash generation potential through the vanadium price market cycles. Our vertical integration strategy has seen us establish a meaningful role for the Company across the full value chain of the VRFBs that are set to play an important role in the growing energy storage market, driven by the tremendous global energy transition push. This strategy, which has been implemented with reasonably low capital intensity (relative to the upstream mining and processing activities) has created signiﬁcant opportunities for the Company to capture economic value in this growing market sector, simultaneously supporting the growth and diversiﬁcation of vanadium demand while positioning the Company as a key supplier of vanadium in this sector. A GREEN COMMODITY FOR THE FUTURE WITH ATTRACTIVE FUNDAMENTALS – Medium to long-term market fundamentals remain attractive. – Vanadium demand is underpinned by its use as a strengthening alloy in steel sector, which is expected to drive demand growth at a Compound Annual Growth Rate (CAGR) of 2.7 per cent through to 20301. – Vanadium increases the efficiency of the steel sector, while reducing greenhouse gas emissions. – Vanadium demand from applications in VRFBs is expected to grow by a CAGR of 56.7 per cent by 20301. – Supply is concentrated, constrained and limited new primary supply is expected from greenﬁeld projects. SOLID ASSET BASE – The Company’s 548 Mt (100 per cent basis) resource is one of the largest primary vanadium resource bases and offers signiﬁcant growth potential. Bushveld Minerals’ ore bodies comprise large, long-life, opencast deposits, with grades of 1.6 – 2.0 per cent V2O5 in-magnetite, which are among the highest in the world. – The Group owns two of the world’s four operating primary production processing facilities, which are low-cost and scalable operations. Vametco and Vanchem were acquired for signiﬁcantly less than the cost of building a primary greenﬁeld production facility of the same scale. – Production platform with a diverse range of vanadium products which gives us production ﬂexibility to maximise sales and proﬁt margins based on product and market demand. 10 10 Annual Report and Financial Results 2021 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information – The Company is committed to reducing the environmental footprint of its mining and processing operations by reducing the carbon intensity of its own operations. Achieved, through the implementation of renewable energy and VRFB storage solutions at its operations, the Company has commenced a journey to reducing the carbon footprint associated with its energy consumption. – Bushveld Minerals’ products play an important role in global decarbonisation efforts through its applications in both the steel and energy sectors. – As a strengthening alloy in steel making (0.2 per cent of vanadium added to steel doubles its tensile strength), vanadium increases the efficiency of the steel sector, while reducing the carbon footprint of steel. – Vanadium applications in stationary energy storage, through VRFBs, promotes the integration of renewable energy sources, while promoting the efficiency of electricity grids, thereby playing a key role in the energy transition. Further, the VRFB technology supports the global transition to clean energy and produces lower life cycle CO2 emissions than competing storage technologies2. – The Company actively promotes the principles of the circular economy. It is scaling up the necessary technical and commercial parameters to ensure that vanadium in energy storage is re-used. Sources: 1. Roskill, Vanadium Outlook to 2030. 2. Vanitec and Texas A&M study. VERTICAL INTEGRATION – Bushveld Minerals’ vertical integration business model allows us to mine, process and manufacture vanadium-based products in a single value chain. – The Company uses its low-cost scalable production base to build a signiﬁcant downstream vanadium- based energy storage platform, thus participating in a rapidly-growing industry. – Vertical integration is key, both to ensure future vanadium demand from energy storage and to unlock signiﬁcant economic opportunities for the Company across its value chain. – This includes BELCO, the construction of one of the largest publicly announced Vanadium electrolyte plants’ outside of China with an expected initial capacity of 8 million litres of vanadium electrolyte per annum (using up to 1,100 Mtvp.a.) and capability to scale up to 32 million litres at the same location. – The growth of the VRFB industry can support vanadium demand and contribute to minimising volatility in the vanadium price. – The Group has diverse revenue streams coming from the steel, chemicals and energy markets, enabling it 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 its operations and projects. This includes ensuring employees enjoy a healthy and safe working environment, that it operates in an environmentally and socially-responsible manner, and that it adds meaningful value to all stakeholders. Annual Report and Financial Results 2021 Annual Report and Financial Results 2021 11 11 Chairman’s Statement I ﬁrmly believe that the last two years have proved our resilience as a company and made us stronger for the diﬃculties faced. We continue to operate to the highest standards of business while being mindful of ongoing global uncertainties and their impact on the sector. Ian Watson Independent Non-Executive Chairman 12 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information Resilient in challenging times DEAR STAKEHOLDERS, While 2020 was the year in which the COVID-19 pandemic plunged lives and business into turmoil across the globe and saw the implementation of emergency measures to keep businesses aﬂoat, 2021 was the year in which those emergency measures were put to the test. As the constant state of ﬂux became the new normal, it became apparent that companies had to adapt for unusual business contingencies. Restrictions are now lifting around the world, facilitating a return to pre-pandemic life. Not only are we able to see loved ones and to cross borders, and with less onerous restrictions global logistics are improving and the productiveness of industries the world over has begun to escalate considerably. I ﬁrmly believe that the last two years have proved our resilience as a company and made us stronger for the difficulties faced. We continue to operate to the highest standards of business while being mindful of ongoing global uncertainties and their impact on the sector. These include but are not limited to the war in Ukraine, rising COVID-19 cases in China and North Korea, and soaring inﬂation in the US and Europe. I applaud our employees for their stalwart commitment to the Company and our operations, ensuring that despite the ongoing impact of COVID-19 and the operational challenges at Vametco, our staff remained safe, and Bushveld adapted quickly and implemented several interventions, enabling the Group to ﬁnish the year strongly and make the upper end of our revised guidance for 2021 at 3,592 mtV. As a result of the improved performance in the second half of the year, the Group generated a positive underlying EBITDA in the second half, but this was not sufficient to offset the EBITDA loss in the H1, and the Group ended the year with an underlying EBITDA loss of US$7.5 million and a loss before tax for the year of US$46.8 million (2020: loss before tax of US$37.7 million). The strengthening of the South African rand had a substantial effect on expenses and on underlying EBITDA. We made an operating loss of US$29.3 million, similarly impacted by the signiﬁcant ZAR:US$ exchange rate movements and the net loss for the year was US$42.1 million, after net interest and non-cash adjustments, as detailed in the Finance Directors Review. Furthermore, as we have improved maintenance and ensured operational stability, Bushveld is targeting to reach a Group production run rate of 5,000-5,400 mtVp.a. in the last quarter of 2022, following the commissioning of Kiln 3 in June 2022, which is now undergoing stabilisation and optimization, with ramping up expected to commence thereafter. Higher production, once the Group is producing over 5,000 Mtvp.a, will lead to lower unit costs, resulting in Bushveld achieving sustainable proﬁtable performance throughout the cycle. As such, we anticipate Group production for the year to be in the region of between 4,200 mtV and 4,400 mtV, between 17-23 per cent higher than 2021, with output weighted towards the second half. We recently announced the key ﬁndings of the Vametco and Vanchem feasibility and pre-feasibility studies, the objectives of which are to increase and achieve a collective production of 8,000 mtVp.a. in the medium to long term. In contrast to the last few years where production growth was necessary to reach critical mass, we can be patient about this next stage. Management intend to pursue the staged expansion plans, subject to the meeting of short-term performance targets and in a phased manner, once sufficient funding has been secured, accompanied by any necessary third-party validation of associated project economics. We remain committed to our responsibility to ensure sustainable growth and provide returns to our investors, a consideration at the forefront of every company decision and are proud of the trust you, our shareholders, have placed in us to deliver this. I would like to thank Fortune Mojapelo, the Bushveld management team, and all our staff for their efforts to progress the Company and our operations over the course of the year. I would like to pay tribute to Professor Morris Viljoen who sadly passed away in August 2021. Alongside his twin brother Richard Viljoen, he was a technical advisor to the Company and major contributor to the founding of Bushveld. His knowledge and expertise were unparalleled in his ﬁeld and he will be sorely missed. I have been privileged to have the responsibility of chairing the Board over the last ten years. In this time, I have witnessed the Company go from strength to strength, a small exploration company into a signiﬁcant producer of vanadium no small achievement. We have come a long way, from our kick off in 2012 when we listed on AIM as an exploration company with a diversiﬁed portfolio including vanadium, tin, coal, titanium and iron ore assets, and raised £5.5 million. We established a quality portfolio of tin assets, which we unbundled and listed as Afritin on AIM, enabling Bushveld shareholders to unlock value from its tin platform. In this time, Bushveld acquired two brownﬁeld processing plants for a modest acquisition cost, catapulting production over six years from zero in 2016, to about 3,600 mtV in 2021. We have also been at the forefront of pioneering a vertically-integrated vanadium value chain, including our ongoing construction of what will be one of the largest vanadium electrolyte plants with a capacity of 8 million litres of vanadium electrolyte (approximately 1,100 mtV). Annual Report and Financial Results 2021 13 Chairman’s Statement continued Our other achievements include securing three large, high-grade opencast deposits, with a primary resource base of 548 Mt, one of the largest high-grade primary vanadium resources in the world. This gives us the conﬁdence to pursue further growth in the years ahead, knowing that we have decades-long Life-of Mine ahead. All this has been achieved at the modest acquisition cost of approximately US$121 million, signiﬁcantly less than the capital expenditure it would have required to develop our operational footprint from a greenﬁeld state; plus further capital expenditure spent since acquisition. On behalf of the Board I must thank Anthony Viljoen for his signiﬁcant contribution to Bushveld Minerals over more than a decade of service. Anthony played a core part in the formation and shaping of the Company. I wish him all the best as CEO of AfriTin Mining Limited, which is rapidly developing its large-scale tin resources. In addition, I would like to I thank Jeremy Friedlander for his signiﬁcant contribution to Bushveld with over a decade of service to the Company, helping provide vital guidance and leadership. While I am sad to be leaving the Bushveld family, I welcome the new members of the Board including Kevin Alcock, Mirco Bardella, Jacqueline Musiitwa and David Noko. These Board appointments have been made to ensure that the Board’s composition meets the high standards of corporate governance expected of AIM listed companies. I look forward to seeing the new heights to which I know they will take the Company. Ian Watson Independent Non-Executive Chairman 30 June 2022 14 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information Annual Report and Financial Results 2021 15 Chief Executive Officer’s Review Our transformation journey continues. With two of the world’s four operating primary vanadium production facilities, a diverse product proﬁle and signiﬁcant growth upside, we are well placed in a market that will increasingly look to primary producers to meet its growing vanadium demand. While we remain committed to maximising the production capacity of our plants, our immediate short-term focus is to ensure that the production base is stable, sustainable and cash generating. Fortune Mojapelo Chief Executive Officer 16 Annual Report and Financial Results 2021 Building a robust and stable operational platform for growth and stakeholder value Business Overview Governance Financial Statements DEAR STAKEHOLDERS, I am pleased to present this annual review statement at a time coinciding with the tenth anniversary of the listing of Bushveld Minerals Limited on the Alternative Investment Market (AIM) of the London Stock Exchange. In that time, we have successfully transitioned from an exploration company into a sizeable, margin- positive primary vanadium producer with global distribution networks, and signiﬁcant growth potential. We have achieved this transition through a brownﬁeld strategy that has seen us acquire two of the only four operating primary vanadium processing plants in the world in 2017 and 2019, respectively. We have now invested signiﬁcant refurbishment capital into the plants and their connection to some of the world’s largest and highest primary vanadium grade deposits has allowed our assets to provide a low-cost production platform, with potential for further cost improvements. While the vanadium market remains volatile, our cost positioning in the market presents a sustainable cash generation opportunity over the cycle, which will be more clearly demonstrated once the Group is producing over 5,000 mtVp.a. Since 2017, we have built an asset base with a net asset value of US$150 million, an achievement we are proud of as we started with a market capitalisation of US$20 million. We have achieved this by investing in excess of US$185 million in: 1) our acquisitions of Vametco and Vanchem, 2) refurbishment and expansion initiatives at the two sites, including the recently completed refurbishment of Kiln 3 at Vanchem and 3) investing in sustainable growth of the Bushveld Energy assets. We have grown this formidable asset base with a relatively heavy reliance on debt markets and very limited call on shareholders for equity ﬁnancing. 2021 OVERVIEW 2021 began with signiﬁcant challenges for Bushveld, impacted by the continued social and economic fallout from the COVID-19 pandemic. The South African commercial sector was further affected by a range of additional challenges, including periodical power supply shortages, and the severe disruption to local supply chains caused by the unrest in South Africa in July. OPERATIONS These contextual challenges compounded problems experienced at our operations, particularly in the early part of 2021, which related to operational plant stability on the back of no extensive annual maintenance shutdown being undertaken in 2020 due to the COVID-19 pandemic. In March 2021, a slower than expected ramp-up post a planned 35-day maintenance shutdown at Vametco affected production, further exacerbated by an unprotected industrial action that followed in April 2021. Following the March 2021 annual shutdown at Vametco, the company has focused on operational stability, which is being achieved through several interventions. These include a rebasing of monthly production in line with historical performance rather than aspirational targets, increasing investments in maintenance and sustaining capital, and implementing a rigorous and proactive maintenance programme. We have also embarked on a Bushveld culture journey to boost our aspirations towards operational excellence. This has entailed Annual Report and Financial Results 2021 deﬁning and cementing of our values and culture across the business, focusing on a philosophy of Care, Courage, Collaboration, Trust and Excellence. Supplementary Information This shift in approach has seen the Company produce solid successive quarterly performances since the shutdown in March 2021. Production in the second half of the year of 2,018 mtV was 28.2 per cent higher than the H1, illustrating our success in embedding improvements across all operations. I am pleased to report that this has continued into the current year and am delighted to announce the commissioning of Kiln-3 at Vanchem which will deliver production growth and result in lower unit costs at Vanchem. We expect that as we continue to pursue incremental operational improvements and further emphasise our values and culture at Bushveld over a sustained period, the effects will begin to reﬂect in our guidance and production numbers. We have already seen an improvement in our safety record, although this is from a very strong baseline, as set out in the Safety section below. Bushveld achieved production at the upper end of our revised guidance for the year ended 31 December 2021, with total Group production of 3,592 mtV. The higher throughput in the second half resulted in lower unit costs, with production cash cost (C1) for the year of US$24.0/kgV at Vametco and US$30.6/kgV at Vanchem, both in line with revised guidance. While production performance improved, Group sales of 3,314 mtV were below production levels, owing to the challenges in international logistics channels arising from COVID-19, and the disruptions at local ports in July and August. This resulted in a buildup of ﬁnished products inventory. Group production Group sales Unit mtV1 mtV1 2021 3,592 3,314 12M 2021 vs 12M 2020 -1.1% -13.7% While some of these logistical challenges have persisted into the 2022 year, we expect to meet our client obligations for the year. FINANCIALS The operational improvements post Q1 also translated into an improved ﬁnancial performance, with a positive underlying EBITDA of US$3.3 million in H2 2021, which has been maintained into the 2022 ﬁnancial year, compared with an H1 2021 underlying EBITDA loss of US$10.8 million. The overall underlying EBITDA loss of US$7.5 million for the year, an improvement on 2020, was affected by the exchange rate movements that saw the Rand strengthen signiﬁcantly from ZAR16.46/US$ to ZAR14.79/US$, resulting in a negative impact on costs and on underlying EBITDA amounting to US$11.6 million for the year on a like for like exchange rate with 2020. I am pleased to note that the trajectory of improved earnings has continued into 2022. After depreciation of US$19.4 million, we made an operating loss of US$29.3 million (2020: loss of US$32.8 million), similarly impacted by the signiﬁcant ZAR:US$ exchange rate movements. Net loss for the year was US$42.1 million after net interest of US$11.2 million 17 Chief Executive Officer’s Review continued and non-cash adjustments of US$6.2 million, as detailed in the Finance Directors Review. The Group ended the year with a cash and cash equivalents position of US$15.4 million, as we prioritised signiﬁcant investment including growth initiatives at Vanchem, Bushveld Energy investments and debt repayments. More details on the company’s ﬁnancial performance are set out in the Finance Director’s Review. SAFETY The Group recorded a 52 per cent improvement in the Total Injury Frequency Rate to 7.8 relative to the previous year (2020: 16.1), as a result of improved risk assessment and the implementation of mitigation measures. While these improvements are welcome, safety will continue to be an area of focus for Bushveld to ensure that we can sustain and continue a strong safety record. SUSTAINABILITY Bushveld Minerals has embarked on a journey to deﬁne and implement a comprehensive sustainability strategy. At the heart of this strategy is an overarching philosophy of going “Beyond Compliance”, which requires an understanding and commitment to sustainability as core to our business and not a question of meeting regulatory requirements. The philosophy underpins our approach to environment management and engaging with social partners. Our sustainability journey is in its early stages, deﬁned with short-term (2021 – 2025) objectives to meet our regulatory compliance obligations and ensuring alignment/standardisation of practices across the business, followed by longer-term (2026 onwards ) objectives that give effect to our “Beyond Compliance” ethos. Dedicated personnel have been brought into the business with executive leadership responsibility allocated for driving our ESG strategy going forward. Our approach to sustainability is also deﬁned along two important dimensions: (a) being clear about how we operate in a sustainable manner, and (b) articulating how our products and related solutions contribute towards global sustainability efforts. In respect of the second, Bushveld Minerals is well placed to make a meaningful contribution to global decarbonisation efforts through its alloying products that reduce the carbon footprint of steelmaking, and through its electrolyte products used in large-scale long-duration energy storage systems that will support the energy transition through, among others, supporting greater penetration of renewable energy to the global energy mix. GROWTH Through the acquisitions and investments in our plants we have signiﬁcantly increased our production by 36 per cent between 2017 to 2021 and Bushveld is now positioned as a signiﬁcant global vanadium producer. While our current business model and production run rate is sustainable without the need for additional growth, we are in the process of ramping up to a production run rate of 5,000 – 5,400 mtV by the end of 2022, which will provide Bushveld further cash generation potential. As outlined in the recently announced technical studies, the full production potential of our assets is much greater than the current production run rate, particularly in the wake of the commissioning of Kiln 3 at Vanchem in the second quarter of 2022. The studies provide a well-structured long-term incremental growth path to a production rate of 8,000 Mtvp.a., ensuring a permanent and reliable feedstock to both Vametco and Vanchem while reducing production unit costs. The option to implement the growth path in phases that are each value accretive substantially reduces the upfront capital requirements. We can attain the incremental production more rapidly and generate additional cash ﬂows after each phase, which can be leveraged for the next phase. As we have full ﬂexibility in relation to this growth, any decision in this regard will be dependent on market conditions and subject to capital availability. Further detail on the ﬁndings of the studies can be found in the operating assets section. BUSHVELD ENERGY The momentum of the energy transition away from fossil fuels to clean energy continued to grow in 2021 and was, in fact, given further impetus by the positive outcome of the COP26 climate change conference in Glasgow. Whilst forecasts of stationary energy storage deployments growth vary among analysts, they all point to substantial growth of the sector. Bloomberg New Energy Finance, for example, forecast that deployed energy storage installations around the world are will multiply by a factor of 122 to 2,850 GWh by 2040. Furthermore, Guidehouse Insights expects global annual deployments of VRFBs to grow at a compounded annual growth rate (CAGR) of 41 per cent over the next 10 years, reaching approximately 32.8 GWh in 2031. The VRFB deployment forecast by Guidehouse Insights would equate to between 127,500 and 173,800 tons of new vanadium demand per year by 2031, according to Vanitec calculations based off Guidehouse’s projection. That would be more than twice as much vanadium as is currently produced annually today. This certainly presents a substantial opportunity for Bushveld Energy, the company’s energy storage focused subsidiary whose mission is the advancement of VRFBs. Since inception in 2016, Bushveld Energy has made signiﬁcant inroads in establishing the case for VRFBs in the growing energy storage market through its focus on key activities along the VRFB value chain structured along three key areas: – Construction of the building for the vanadium electrolyte manufacturing plant in East London, South Africa, was completed in April 2022 and the Engineering, Procurement and Construction (EPC) contract is underway. The vanadium electrolyte manufacturing plant, targeting an initial capacity of 8 million litres, will be one of the largest plants outside of China. – VRFB Manufacturing: We invested US$10 million this year to acquire an effective shareholding of 25.25 per cent into CellCube, a grid-scale and micro-grid energy storage battery manufacturer, headquartered in Austria, bringing our total investment to US$12 million. – VRFB Projects Deployments: We completed the development and achieved ﬁnancial closing for a 3.5 MW solar photovoltaic (PV) generation farm and 4 MWh of VRFB energy storage pilot project at Vametco Mine (the Vametco mini grid). Site clearing 18 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information has commenced and commissioning is targeted for H1 2023; 26 mtV of electrolyte for the battery has been secured from Vametco. The Vametco mini-grid will serve to demonstrate the technical and commercial viability of hybrid mini-grids using solar PV and VRFB technology and in the process open up opportunities for the deployment of such solutions in an environment that is increasingly encouraging self-generation for large energy users. In addition, we identiﬁed captive opportunities within the Group of up to 120 MW of solar and 180 MWh of VRFB storage. These projects will also reduce the Group’s reliance on Eskom, help control electricity cost increases and reduce the carbon footprint of our vanadium production, as part of a broader sustainability strategy. We are pleased to have successfully defended the litigation initiated, during 2021, by Garnet Commerce Limited (Garnet), our partner in CellCube, against VRFB Holdings Limited (VRFB-H) and Enerox Holdings Limited (EHL), concerning an alleged breach by VRFB-H of the joint venture agreement in relation to EHL. Successfully defending this litigation which sought to challenge the indirect investment by Mustang plc into EHL, means the indirect investment by Mustang into EHL remains in place. Notwithstanding the large opportunity presented by the energy transition for energy storage solutions and signiﬁcant progress made by Bushveld Energy as summarised above, we recognise the complexity of a company spanning the vanadium value chain with operations that belong in different industry sectors and with different business models. Having incubated Bushveld Energy and created the critical mass to ensure its success, we intend to carve out Bushveld Energy as a stand-alone company focused on the VRFB value chain. We believe that this will help to crystalise the value of Bushveld Energy and to position it in the capital markets to attract the appropriate energy- market focused institutional investors with an appetite and understanding of the energy proposition, while retaining the vertical integration proposition of Bushveld Minerals via a signiﬁcant shareholding in the stand-alone energy company. VANADIUM MARKET OUTLOOK We remain bullish on the vanadium market. We believe the vanadium market is characterised by a structural deﬁcit in the medium to long term, supported by robust and growing demand amidst a concentrated supply base with limited scope for meaningful supply growth. Demand will continue to be anchored by the steel sector, underpinned by rising intensity of the use of vanadium within high-strength low-alloy (HSLA) steel. Away from steel, signiﬁcant upside potential is anticipated for vanadium within VRFBs, as the requirement for energy storage applications for renewable energy sources increases, with decarbonisation and the energy transition fast becoming global themes set to remain relevant for the decades to come. Vanadium supply is concentrated and increasingly constrained in its ability to respond to demand. Increasing utilisation levels of co-production steel plants, which account for more than 70 per cent of global vanadium supply, mean decreasing scope for co-producers to increase vanadium production, even in favourable steel market conditions, which are the key drivers of supply movements among co-producers. Meanwhile historical vanadium price volatility will, at least in the short term, continue to limit the availability of capital for developing greenﬁeld vanadium projects. This resulting structural deﬁcit in the medium to long term points towards vanadium price upside relative to historical averages. In the short term, however, vanadium prices continue to be volatile, driven by the lingering impacts of the COVID-19 pandemic, especially in China where hard lock downs have continued to be imposed. The recent Russia-Ukraine conﬂict and global recession fears have also added to volatility. The price volatility seen in 2020, 2021 and now in 2022 underscores the importance of being a low-cost vanadium producer and remains a core strategic focus for us as a company. Annual Report and Financial Results 2021 Annual Report and Financial Results 2021 19 19 Chief Executive Officer’s Review continued The Russia-Ukraine conﬂict puts a spotlight on the geopolitics of global vanadium supply, given the geographical concentration of supply with China and Russia accounting for 50 per cent and 17 per cent respectively. This places South Africa in a favourable position, with its massive high grade primary vanadium reserves. With two of the three operational plants in South Africa and scope to grow production on these, Bushveld has the opportunity to emerge as a key producer and supplier of vanadium in a global market. OUTLOOK We anticipate an encouraging 12 months ahead as we are on track to meet our Group production and cash cost guidance at the operations. This is supported by the commissioning of Kiln 3 at Vanchem which was completed in June 2022, and we anticipate to achieve a production run rate of 2,600 Mtvp.a during the last quarter of 2022. Overall, we expect Group production of between 4,200 mtV and 4,400 mtV in 2022, with volumes weighted towards the second half as Kiln 3 is ramped up by year end, with lower production cash cost (C1) of: between US$22.7/kgV and US$23.5/kgV at Vametco and between US$27.7/kgV and US$28.4/kgV at Vanchem. Production guidance at Vametco is between 2,450 mtV and 2,550 mtV and at Vanchem it is between 1,750 mtV and 1,850 mtV. We reported a strong start to the 2022 ﬁnancial year, with another solid set of quarterly operating results in Q1 2022. Continuing on from the performance in 2021 and the underlying EBITDA proﬁt in H2 2021, we have now successfully produced four quarters of consistent performance, building on the operational improvements and enhanced safety initiatives. We believe Bushveld Minerals is now a solid, sustainable, margin positive business, and there stills remains a large opportunity to continue our overall growth programme. CONCLUDING REMARKS So, our transformation journey continues. With two of the world’s four operating primary vanadium production facilities, a diverse product proﬁle and signiﬁcant growth upside, we are well placed in a market that will increasingly look to primary producers to meet its growing vanadium demand. While we remain committed to maximising the production capacity of our plants, our immediate short-term focus is to ensure that the production base is stable, sustainable and cash generating. Following the commissioning of Kiln 3 and the expected resulting group production level of 5,000-5,400 Mtvp.a. by the end of 2022, the Company is in a good position to generate cash and positive margins, as one of the largest and most signiﬁcant primary vanadium producers with a low cost production base and supplying approximately ﬁve per cent of the global market. Our decision to carve out Bushveld Energy comes at a time when the business has generated sufficient critical mass to stand alone, albeit still linked to the upstream vanadium production platform. It also comes at a time of growing momentum behind the energy transition and long duration energy storage in particular. The positioning this will give Bushveld Energy in the market is incredibly attractive while helping simplify Bushveld Minerals’ investment proposition as a vanadium producer. If the above sounds like a reset of sorts, that is because it is – a reset aimed at: a) consolidating our gains with the capital invested to date b) building organisational capacity to successfully manage our assets c) realising a sustainable cash generating business characterised by a stable and predictable low-cost production base with a secure balance sheet d) unlocking the value linked to a downstream, sound and growing energy storage platform that is independently funded through energy focused public capital markets. The importance of the simplicity of the resulting investment proposition cannot be over-emphasised. Supporting this reset are several important developments that I am pleased to announce, which will provide much needed support in this phase. These include the appointment of Lucas Msimanga as Director of Operations with effect from 1 June 2022, signiﬁcant changes to our Board of Directors with four new appointments who bring a diverse and complimentary skill and experience set, and the appointment of Royal Bank of Canada (RBC) as a broker and ﬁnancial advisor to the Company. I am delighted to welcome Lucas to the executive team. Lucas brings more than 20 years of operational leadership experience in the processing and metallurgy sector which is important for operations whose downstream processing/ metallurgical processing accounts for the vast majority of our production processes. RBC brings breadth and depth of capital markets advisory and support to the Company at a crucial time in our development. GRATITUDE Finally, I would like to sincerely thank each and every employee and contractor. Each and every one of you is an invaluable cog in our business and your care, courage and commitment has been fundamental in ensuring the continued success and development of Bushveld Minerals in 2021. I am privileged to work alongside you all and look forward to many years of continued service. I must also thank Jeremy Friedlander, Anthony Viljoen and of course, Ian Watson, who have been serving on the Board since IPO and during which time they played an important role through a transformative period of the company. Their guidance and leadership over the last decade has been invaluable. Michael Kirkwood will be appointed acting chairperson at the next Annual General Meeting (AGM), while the company continues its search for a permanent chairperson. We are pleased to welcome and look forward to working with the new directors as the company continues its growth path and evolution. Fortune Mojapelo Chief Executive Officer 30 June 2022 20 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information Annual Report and Financial Results 2021 21 Business Model Bushveld Minerals’ Vertical Integration Business Model Capturing demand opportunities across the vanadium value chain. Bushveld Minerals is a vertically-integrated producer of vanadium products that are sold to various end user sectors. The Company’s operations consist of open-cast mining and complex metallurgical processing that combine pyrometallurgy and hydrometallurgy to produce high-value ﬁnal vanadium products that are applied in various sectors, including the steel, aerospace and chemical sectors. Most of the world’s vanadium occurrence is hosted in magnetite deposits where the highest reported in-concentrate grades are approximately 3 per cent V2O5. This invariably lends them to vertically-integrated operations. As such, the majority of the economic rent for vanadium production lies in metallurgical processing (from concentration onwards), which accounts, in the case of Bushveld’s Vametco operations whose concentrate grades are ~1.7-2.0 per cent V2O5, for more than 75 per cent of the unit production costs of vanadium. Yet vanadium processing facilities are capital intensive, as illustrated by Bushveld Minerals’ Mokopane vanadium project, of which the pre-feasibility study, conducted in 2016, suggested a capital expenditure of US$300 million for a mine and plant producing ~5,300 mtVp.a. from a deposit grading an average of 1.75 per cent V2O5. Co-production steel- or pig-iron facilities (producing a vanadium-rich slag) are even more capital intensive relative to primary processing facility. The capital intensity of vanadium processing presents a signiﬁcant barrier to entry for new entrants, even where deposits are high grade. Moreover, the volatility of the vanadium price means that even those deposits with the requisite grades supportive of the development of primary processing face challenges in securing capital for their development. It is this context that has shaped Bushveld’s business model, which is built around two key pillars: a) A brownﬁeld development strategy – taking advantage of existing facilities that could be acquired and refurbished for a modest capital spend relative to greenﬁeld development; and b) Leveraging primary processing infrastructure to develop further downstream, relatively capital light value-accretive product opportunities. BROWNFIELD STRATEGY Bushveld Minerals’ brownﬁeld strategy, adopted in 2017, recognised the high-capital intensity of primary vanadium production and sought to identify existing facilities that could be refurbished or retroﬁtted into primary production facilities at a modest cost. The strategy also recognised that, even for high-grade deposits with an attractive cost position, the high volatility of vanadium prices combined with the relative obscurity of the commodity to date would translate into difficulties in raising requisite ﬁnancing to develop greenﬁeld processing facilities. As reported, the Company has developed a portfolio of mining and processing facilities ramping up to a combined production base of 5,000 – 5,400 mtVp.a. for a combined investment of ~US$185 million and has recently announced feasibilities studies estimating a capital spend of an additional US$150 million to increase production further to ~8,000 mtVp.a, a production level that would cost more than twice as much to establish through a greenﬁeld strategy. The Company has been able to leverage cash ﬂows from the brownﬁeld assets further underscores this approach. DOWNSTREAM DEVELOPMENT Having developed its primary vanadium processing platform with ﬂexibility, scalability and a range of vanadium products, Bushveld is well positioned to develop further downstream opportunities along the vanadium value chain, where there are opportunities to: a) Develop and produce high-margin niche vanadium products; and b) Identify and develop new vanadium market opportunities with scope to broaden and strengthen the vanadium demand proﬁle and support a more stable vanadium price outlook. Of the emerging demand opportunities, Bushveld was among the ﬁrst to recognise the signiﬁcant opportunity presented by the 22 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information In parallel, through the vanadium producers association, Vanitec, Bushveld Energy has led efforts for vanadium industry-wide support to the VRFB opportunity an effort that has mobilised substantial interest and support from producers with several adopting a vertical downstream integration strategy into VRFB manufacturing. The Company’s approach has been to leverage its position to mobilise other role players to create critical mass including other vanadium producers, capital providers, energy project developers, and regulators among the most signiﬁcant. The continued success of Bushveld Energy, however, requires: a) increasingly dedicated management focus; b) increasing capital investments; and c) a positioning in the capital markets that gives it the best opportunity to attract energy markets’ focussed capital and to crystalise its signiﬁcant value. It is for these reasons that Bushveld Minerals has taken the decision to carve out Bushveld Energy into a stand-alone VRFB-focussed energy storage play, while retaining a signiﬁcant shareholding in the resulting Company. More than resolving the growing capital allocation tensions within the Group, this approach will give Bushveld Energy the best platform and support to succeed while retaining the vertical integration model that remains key to success of VRFBs. growing stationary energy storage sector, where vanadium redox ﬂow batteries (VRFBs) are poised to play a meaningful role, provided they could address two signiﬁcant hurdles, namely: – Security of supply – The massive, but uncertain, growth in the energy sector’s demand for vanadium may create more market volatility, if not matched with timely supply expansion. A World Bank Group Minerals for Climate Action report estimated that the production vanadium, and other key minerals including graphite, lithium and cobalt, would need to increase by nearly 500 per cent by 2050, to meet the growing demand for clean energy technologies. It estimates that over 3 billion tons of minerals and metals will be needed to deploy wind, solar and geothermal power, as well as energy storage, required for limiting further global warming to below 2 degrees. Meanwhile, the uncertain timing of that demand makes industry-wide production expansion challenging thus limiting the emergence and scope of new production. – Security of cost – Vanadium’s high price volatility and its role as the sole mineral in the manufacture of VRFBs makes input costs more important than in other industries, such as steel. While price spikes, such as the one seen in 2018, are proﬁtable for producers and may well provide additional business opportunities, they could undermine the energy storage industry before its maturity. It is Bushveld’s view that providing solutions to these hurdles requires a vertically-integrated business model that combines an upstream scalable low-cost vanadium production with a downstream energy storage platform. The integration allows for brownﬁeld scale up of vanadium production in support of the VRFB industry, while a low-cost production base provides scope for supply of vanadium at price levels and through supply models that are supportive of VRFB market penetration while delivering margin to the vanadium production. Unlike the lithium-ion industry that has a well- established manufacturing ecosystem with large multi-billion Original Equipment Manufacturers that are now looking to vertically-integrate upstream to secure supply of the key raw materials, the VRFB industry is still nascent. This calls for an active role by the larger vanadium producers to support the development of the VRFB ecosystem, while the nascency of the sector presents signiﬁcant opportunities for vanadium producers to capture a greater share of the downstream value chain. BUSHVELD ENERGY CARVE OUT To unlock the energy storage opportunity for VRFBs, Bushveld established Bushveld Energy Limited to develop and implement a strategy to drive for greater adoption of VRFBs by addressing the above-described hurdles, with a focus on three key activities along the VRFB value chain: 1) Electrolyte production, sales and rentals; 2) Project development targeting long duration large scale energy storage opportunities; and 3) Investments in the VRFB manufacturing as a catalyst to draw needed capital to scale manufacturing capacity. Annual Report and Financial Results 2021 23 Bushveld Minerals’ Performance and Objectives Bushveld Minerals’ Strategy BUSHVELD M I N E R A L S Build a sustainable, cash-generating, low-cost production platform, comprising: − high-grade, open-cast and low-cost primary vanadium mines; and − refurbished scalable brownﬁeld processing facilities. Use our large, low-cost primary production platform to develop further downstream value-accretive opportunities that maximise our share of the value chain. Incubate and build a leading downstream vanadium-based energy storage platform, creating value as a manufacturer of electrolyte, a project developer and investor across the Vanadium Redox Flow Battery (VRFB) value chain. BUSHVELD V A N A D I U M BUSHVELD E N E R G Y 24 Annual Report and Financial Results 2021 Health and safety Financial 2021 ACHIEVEMENTS 2022 OBJECTIVES – Reported zero fatalities, two lost time injuries and no new – Ensure a safe environment for all employees and Business Overview Governance Financial Statements cases of occupational health. – Maintained the necessary safety measures required in a COVID-19 constrained environment, while ensuring minimal disruption to the operations. – US$15.4 million cash and cash equivalents held at 31 December 2021 (2020: US$50.5 million). – Initiated the identiﬁcation of Group cost savings. – Identiﬁed procurement cost savings of between US$2.5 million to US$4 million starting from 2022. – Successfully negotiated the removal of the Production Financing Agreement (PFA) ringfenced funds and allocated the funds to the refurbishment of Vanchem’s Kiln 3 to ensure sustained growth in production. – Disposal of Invinity shareholding US$12.7 million to facilitate the funding and following of our investment rights/obligations in CellCube, the Bushveld Energy investment. contractors through deliberate housekeeping and asset integrity programmes. Supplementary Information – Ensure that all hazards are fully understood, and risks are assessed, through reviewing and updating all safe operating and maintenance procedures. “Building safety into work”. – Continue to build operational capacity, ﬁnancial resources, and business processes and systems. – Rolling out and implementing the Group’s Cost Savings Programme to cut costs by between US$2.5 million to US$4 million. – Review the near and long-term funding of the Group as the Revolving Credit Facility matures in November 2022 and the US$35 million Orion convertible loan notes matures in November 2023. – Completing the funding the remaining capital requirements for Vanchem’s Kiln 3. – Returns to shareholders – remains a long-term objective – Disposal of Afritin shareholding US$3.5 million, funds as part of our capital allocation. – Balance the capital allocation to maximise shareholder value of Bushveld Energy’s projects as we prepare to carve it out of the Group. were used for general corporate purposes. Reduced debt excluding IFRS movements by US$15.2 million: – Retired legacy acquisition payment structures • US$1.7 million payment to Evraz • US$11.5 million Duferco convertible and interest through conversion of US$9.0 million into equity and US$2.5 million cash payment • US$2.2 million Duferco working capital – Started amortising the Nedbank RCF and paid approximately US$2.2 million (ZAR33 million) – Repaid US$1.1 million as capital repayment to Orion for the PFA. – Offset by capitalisation of the Orion convertible interest of US$3.5 million and the impact of IFRS 9 on Orion PFA of US$4.7 million. Operational – Achieved annual production of 3,592 mtV, at the upper end of 2021 guidance of between 3,400 mtV and 3,600 mtV. – Annual sales 3,314 mtV, impacted by challenges in international logistics channels arising from COVID-19, the unrest in South Africa and disruptions at local ports. – Completed technical studies at Vametco and Vanchem in Q4 2021 in order to identify an optimal growth path. – Commissioned Vanchem’s Kiln 3 in June 2022, to increase Vanchem’s annual production from 1,100 mtV to an annual production run rate of 2,600 mtV by the end of 2022. – Conduct a safe and effective annual shutdown in June 2022 to ensure that Vametco reaches its full potential in 2023 with a standard 21-days shutdown period. – Achieve annual steady state Group production run rate of 5,000-5,400 mtV by the end of 2022. – Began building an 8 million litre electrolyte/200 MWh – Scale up the vanadium electrolyte rental product with production plant. new contracts. – Acquired an indirect 25.25 per cent interest into – Secured the funding for the engineering, procurement CellCube, an Austria-based VRFB OEM, supporting the Company’s sales and manufacturing growth. and construction of the Vametco mini grid in June 2022. Expected to be completed in H1 2023. – Commenced site clearing for the construction of the 3.5 MW of solar PV and 1 MW/4 MWh VRFB mini-grid project for Vametco and secured 26 mtV of electrolyte for the battery from Vametco. – Started developing self-generation options for all of Bushveld’s existing and future electricity needs of up to 125 MW of solar PV and 180 MWh of storage. – Building an 8 million litres electrolyte/200 MW production plant – construction of the building is nearly complete. Expected to enter into operation in H1 2023. Annual Report and Financial Results 2021 25 Bushveld Minerals’ Performance and Objectives continued Group 3-year Performance Indicators Revenue versus average realised price Group Revenue of US$106.9 million (2020: US$90.0 million) an increase of 19 per cent as a result of improved average realised price of US$32.2/kgV in 2021 relative to 2020 (2020: US$23.4/kgV). Adjusted and Underlying EBITDA KPI Adjusted EBITDA loss of US$9.9 million, Underlying EBITDA loss of US$7.5 million (2020: US$14.9 million) an improvement on 2020. Impacted by the strengthening of the Rand during the period giving a net adverse exchange impact of US$11.6 million on Underlying EBITDA. Adjusted EBITDA is EBITDA, excluding the group’s share of losses from joint ventures and the remeasurement of ﬁnancial liabilities. Underlying EBITDA is Adjusted EBITDA excluding impairment charges. Revenue (US$ millions)/average realised price US$/kgV Adjusted EBITDA (US$ millions) 2021 2020 2019 32.2 106.9 23.4 90.0 48.9 116.5 2021 -9.9 2020 -14.9 2019 32.6 0 20 40 60 80 100 120 -15 -5 0 5 15 25 35 Average realised price Revenue Adjusted EBITDA Sales A 14 per cent decrease in 2021 sales volume relative to 2020, impacted by challenges in international logistics channels arising from COVID-19, the unrest in South Africa and disruptions at local ports during H2 2021. Sales to the United States increased from 34 per cent in 2020 to 47 per cent in 2021. Sales (mtV) 2021 3,314 2020 3,842 2019 2,392 0 1,000 2,000 3,000 4,000 Group sales by region % 3% 9% 6% 6% 29% United States Europe RSA ROW Asia China 47% 26 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information Production KPI 2021 Group production was marginally lower than 2020 by 1.1 per cent, impacted by the operational challenges and unscheduled stoppages at the beginning of the year. Total Injury Frequency rate (TIFR) Group TIFR was recorded at 7.78 in 2021 representing an improvement of 52 per cent relative to 2020 (2020: 16.06). Production (mtV) Group Total Injury Frequency Rate 2021 3,592 2020 3,631 2019 2,931 2021 7.8 2020 16.1 2019 23.5 0 1,000 2,000 3,000 4,000 0 5 10 15 20 25 Employees Bushveld employed 736 people in 2021. A three per cent increase on 2020, as a result of capacity building at Vanchem. Number of employees 2021 736 2020 712 2019 691 660 680 700 720 740 KPI Group’s key performance indicators Annual Report and Financial Results 2021 27 Vanadium Market Overview Vanadium Market Overview As economies around the world began to recover from the devastating impact of the COVID-19 pandemic, industry pundits anticipated demand for vanadium to improve in 2021. As economies around the world began to recover from the devastating impact of the COVID-19 pandemic, industry pundits anticipated demand for vanadium to improve in 2021. This expectation was fuelled by the fact that the vanadium market was, at the start of 2021, in a slight deﬁcit of 317mtV, with supply at 119,750 mtV. Demand did indeed grow during the period under review, driven by a rebound in global steel production and consumption, excluding China, although demand was robust in the ﬁrst part of the year. Though still relatively small vanadium consumption in the energy storage sector also witnessed growth, as more projects were implemented. Vanadium demand in 2021 was approximately 120,067 mtV with the steel production and vanadium redox ﬂow battery (VRFB) markets accounting for 92 per cent and two per cent of the vanadium consumption, respectively. Prices traded in a fairly broad range, with the average price for the year being US$34.31kgV (2020: US$24.99/kgV) for the London Metal Bulletin in Europe, US$34.86/kgV (2020: US$28.83/kgV) for Ryan’s Notes in North America and US$33.52/kgV (2020: US$25.36/kgV) for the Asian Metals in China. In the ﬁnal quarter of 2021, vanadium traded at an average price of US$32.33/kgV. While this is, 38.1 per cent higher than the previous year, it is marginally lower than long-term historical average vanadium prices. VANADIUM MARKET FUNDAMENTALS Supply Vanadium supply is concentrated – by type of production and geography. The most common occurrence of vanadium is in vanadium and titanium bearing magnetite ore bodies from which vanadium is extracted either directly (primary production) or indirectly as a vanadium rich slag during steel-making or pig-iron production (co-production): – Co-production – where a vanadium-rich slag is produced by steel plants processing vanadium-bearing magnetite ores. – Primary production – where vanadium is produced as the primary product directly from processing vanadium bearing magnetite ores. Co-production is the most signiﬁcant source of vanadium supply, accounting for an estimated 73 per cent of production in 2021. Most of these steel slag producers are situated in China, and are operating at close to full capacity. Their economics are driven by steel and iron prices and not by the vanadium market. Primary production was estimated at 17 per cent of global supply in 2021. The main producers are Bushveld Minerals and Glencore in South Africa, and Largo Resources in Brazil. These three companies have large reserves of high-grade ore and the ability to bring more tonnes to the market at a low production cost. Apart from vanadium bearing magnetite ores, some vanadium production, also derives from secondary sources (secondary production) Secondary production is the recovery of vanadium from such as ﬂy ash, petroleum residues, alumina slag, and from the recycling of spent catalysts used in crude oil reﬁning. Secondary vanadium production It accounted for approximately 10 per cent of global supply in 2021. It is Being dependent entirely on other industries for its feedstock, it can only increase production if more spent catalysts are available. In 2021, global vanadium supply increased to 119,750 mtV from 116,128 mtV in 2020. The world’s top vanadium producer, China, accounted for 61 per cent of global vanadium supply in 2021. Most of its vanadium was derived from co-production as most slag producers are Chinese steel mills. Russia is the second-largest producer and South Africa the third-largest, accounting for 17 per cent and seven per cent of 2021 supply, respectively. Like most ferroalloys, vanadium has been and still is largely exposed to the market characteristics of steel and more speciﬁcally to the Chinese steel industry. Although Chinese steel production fell by three per cent relative to 2020, due to the country’s COVID-19 mitigation measures, the world’s largest steel producer accounted for 53 per cent of the world steel production at 1,033 Mt in 2021. New vanadium supply may be triggered by the gradual implementation of International Maritime Organization’s (IMO) 2020 standard that introduces a new limit on sulphur emissions for ships operating outside designated emission control areas. The cutting of sulphur in bunker fuel would increase the volume of recycled spent oil catalysts. According to Wood Mackenzie, this increased vanadium supply could either displace projects with weaker economics or create a larger and more durable surplus. Nevertheless, secondary production is limited by both the availability of the necessary feedstock and the high costs of production. Opportunities for growth in vanadium supply can be considered across three categories: capacity expansions of current producers, re-commissioning of production plants that have been mothballed, and greenﬁeld project development. Capacity expansions have the highest probability of realisation, with the lowest capital requirements and fastest path to production. New greenﬁeld projects face the most signiﬁcant hurdles and the longest development timelines. Most of the recent greenﬁeld projects announced for development are of a co-production or multi-commodity nature, suffer from relatively low grades and require signiﬁcant capital and a relatively stable and higher price outlook than recent prices indicate. 28 Annual Report and Financial Results 2021 2021 Production by source 2021 Production by country 2021 Primary production 10% 17% 3% 5% 7% 7% 73% 17% 27% 61% 29% Co-production Primary Secondary China Russia South Africa Other Brazil USA South Africa Brazil China Business Overview Governance Financial Statements Supplementary Information 44% Demand Global vanadium consumption increased by approximately seven per cent to 120,067 mtV in 2021 from 112,157 mtV in 2020. The steel industry accounted for 92 per cent1 of total vanadium demand in 2021. It is expected to continue underwriting vanadium demand, led by China which accounts for about 60 per cent3 of global vanadium consumption and whose growing intensity of use of vanadium in its steel sector thus maintaining positive vanadium demand momentum. Notwithstanding regulation-driven growth in Chinese intensity of use of vanadium, China’s vanadium usage intensity, at 63 g/t of crude steel, still lags that of the developed economies in Europe, Japan and North America at 80 g/t. This suggests further support for demand even in a market expecting peak steel production later in 2022. Consumption of the metal from the steel sector is forecast to rise by 2.8 per cent in 2022 to 113,100 mtV. In the medium term Wood Mackenzie forecasts that vanadium demand in the steel market will grow at a CAGR of about 3.1 per cent through to 2030, when it is expected to reach approximately 136,000 tonnes by 2030. The VRFB sector has the potential to create an additional large market for vanadium and transform the commodity into a prime energy metal. VRFB development could also support the development of new magnetite greenﬁeld projects, producing high-purity vanadium pentoxide or trioxide for battery use. In addition, as the requirement for energy storage for renewable energy sources increases, demand for vanadium from this sector is expected to increase over the coming years. While forecasts vary for energy storage market growth, they all agree on substantial if not exponential market growth, driven by the energy transition to greener energy. Similarly, forecasts for the market penetration of vanadium redox ﬂow batteries (VRFB’s) in this sector vary. Yet even the more conservative estimates see vanadium demand from the energy storage fundamentally shifting vanadium demand in the future. Still, the question is how quickly this demand actualises, in a stationary energy storage industry that, while seeing increasing momentum, is still nascent. The growth in the number of large scale vanadium redox ﬂow batteries being commissioned or developed in recent years is encouraging in this respect. Examples include Sumitomo 51MWh VRFB installation in 2021, as a follow up to a 60MWh installation in 2015, and Rongke Power’s 800 MWh project in Dalian, China, to mention a few. According to Guidehouse Insights, global annual deployments of VRFBs are expected to reach approximately 32.8 GWh in 2031. This presents signiﬁcant growth with a CAGR of 41 per cent across the forecast period. China Crude Steel and Vanadium Consumption ) t M ( l e e t S 1,200 1,000 800 600 400 200 0 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 ) V t ( i m u d a n a V 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 China crude steel consumption (LHS) (Mt) China crude steel production (LHS) (Mt) China vanadium consumption in steel (RHS) (tV) Source: Roskill, Vanadium: Outlook 2030 1 Wood Mackenzie, Noble steel alloys short-term, Outlook May 2022 Annual Report and Financial Results 2021 29 Vanadium Market Overview continued VANADIUM PRICE AND OUTLOOK The outbreak of war in Ukraine in February 2022 led to volatility in the vanadium market. This compounded an already tight market and resulted in vanadium prices spiking in March and into early April. 2021, saw challenges presented by global logistical delays which affect the supply chain which contributed to the irregular prices in North America relative to prices in Europe and China. In February 2022, supply disruptions generated by the Russia-Ukraine conﬂict resulted in increased buying of Chinese ferrovanadium. This trend continued through April and trade data shows that ferrovanadium exports rose to 934 t (gross) in April, up 176 per cent year-on-year. The majority of these shipments have been destined for the Netherlands, Japan and South Korea. Ferrovanadium prices rose rapidly through February and early March, driven by the combination of tight supply and market volatility. European ferrovanadium prices averaged at US$45.3/kgV in Q1 2022 and Chinese ferrovanadium prices averaged at US$46.4/kgV, which was an increase of 41 per cent and 28 per cent on the previous quarter, respectively. These factors hit the North American market most severely, where prices were anomalously high in March at US$73.50/ kgV, representing a premium of over 18per cent over regions. China’s ongoing battle against COVID-19 and strict lockdowns has led to a weaker macroeconomic outlook, however, even with the reduction in the demand forecast as expected by Wood Mackenzie, a small deﬁcit is expected this year. In the VRFB space, there have been further announcements for developments not just in China but also in the North American and African markets. Wood Mackenzie maintains its previous forecast for annual VRFB installation capacity to rise to 1.5 GWh in 2024, which equates to 7.1 ktV consumption in 2024. From 2024, Wood Mackenzie expects the market to enter a surplus as new greenﬁeld projects come on-line and will outpace demand growth. It is worth noting that Wood Mackenzie assumes that all new projects announced will come into production, which may be an overly bullish assumption. This surplus is expected to peak in 2025-2026 and the market should gradually rebalance supported FeV historical LMB price US$/kgV by growing demand due to higher intensity of use of vanadium in steel and as well as demand from vanadium redox ﬂow batteries. Overall, we retain our in-house view that supply remains concentrated and constrained with only limited new supply expected from primary greenﬁeld projects, while co-production is still mainly driven by steel and iron ore fundamentals. As a result, primary producers of vanadium remain best positioned to meet the growing vanadium demand in the medium term. A GREEN COMMODITY FOR THE FUTURE Vanadium’s beneﬁts to a greener, more sustainable society include its contributions as an alloy in high-strength, low-alloy steels, primarily used in construction. A recent study quantiﬁed this beneﬁt as equivalent to the annual CO2 output of the Philippines or annually “planting approximately 260 million trees.” Its use as the critical mineral in energy storage coupled with electricity generation from renewable energy sources, further positions vanadium as a green commodity for the future. In the aerospace sector, vanadium has long been used to ensure low density, high strength, and strength at high operating temperatures which is essential in aero-engine gas turbines and airframes. Development of new titanium alloys continues and grades containing 8, 10 and 15 per cent vanadium have even higher strengths. They have the potential to make important contributions to weight reduction and fuel efficiency in the aircraft of the future. One of the key green applications of vanadium, with even more potential future upside, given the energy transition, is in VRFBs used for grid energy storage. VRFBs are safe and have a long lifespan, enabling them to repeatedly charge/discharge over 35,000 times for a lifespan of over 20 years. They also have a lower manufacturing carbon footprint than lithium-ion batteries. Bushveld Minerals is building its own VRFB solar mini-grid at the Vametco mine. This will decrease the Company’s carbon footprint, as it will reduce CO2 emissions by more than 8,000 metric tonnes per year (and nearly 200,000 tonnes of CO2 over the life of the project). Sources: 1. Wood Mackenzie, Nobel Steel Alloys, Short term, Outlook May 2022 2. World Steel Association, 2021 global crude steel production totals 3. Bloomberg, December 2021, June 2022 4. Texas A&M Study V g k / $ S U 140 120 100 80 60 40 20 0 7 8 n u J 8 8 n u J 9 8 n u J 0 9 n u J 1 9 n u J 2 9 n u J 3 9 n u J 4 9 n u J 5 9 n u J 6 9 n u J 7 9 n u J 8 9 n u J 9 9 n u J 1 0 n u J 2 0 n u J 3 0 n u J 4 0 n u J 5 0 n u J 6 0 n u J 7 0 n u J 8 0 n u J 9 0 n u J 0 1 n u J 1 1 n u J 2 1 n u J 3 1 n u J 4 1 n u J 5 1 n u J 6 1 n u J 7 1 n u J 8 1 n u J 9 1 n u J 0 2 n u J 1 2 n u J 2 2 n u J London Metal Bulletin, price as at 10 June 2022 30 Annual Report and Financial Results 2021 Energy Storage Overview The Case for Vanadium Redox Flow Batteries in Energy Storage Business Overview Governance Financial Statements Supplementary Information The energy sector is undergoing a fundamental transition, both in the extent of electriﬁcation and the overwhelming trend toward renewable sources of energy. The importance of electricity is increasing, a critical factor of the “energy transition” and the path to net zero carbon emissions. Electricity’s share of global energy consumption is expected to continue to grow at a rapid pace, doubling from 10 per cent in 1980 to 20 per cent today to over 40 per cent by 2050. At the same time, renewable energy is displacing the predominance of fossil fuels in energy generation. These two changes have enormous implications, not only for global energy production, but for all minerals involved in energy related value chains. Electricity is much more difficult to “store” than other types of energy, and the acceleration of demand is further increasing the need for stationary storage, such as large batteries. On top of that, the variability of renewable energy sources such as solar, wind and tidal, further exacerbates the daily misalignment between electricity production and consumption. Both aspects increase the need for stationary energy storage, especially long-duration storage (four or more hours per day). Storage is essential to support the growth in electricity demand while enabling the energy transition to a carbon neutral world. Thus, energy storage is now one of the most dynamic and rapidly advancing sectors in the broader technology industry, recognised for its ability to fundamentally reshape the power system. ENERGY STORAGE MARKET According to Bloomberg New Energy Finance, global stationary energy storage installations will grow 122-fold from 2018 to 2040, rising from 17 GWh to 2,850 GWh by 2040. Unsurprisingly, investment into battery technologies is also accelerating. Mercom Capital reported that in 2021 corporate funding of battery storage companies reached US$17 billion, compared to US$6.5 billion in 2020 and US$2.8 billion in 2019, almost tripling each of the past two years. VRFBS FOR ENERGY STORAGE – AN OVERVIEW Bushveld Minerals supports the demand growth of mined vanadium through Bushveld Energy, a subsidiary that participates in the global value chain for energy storage. It is doing this through the construction of a vanadium electrolyte plant and investment in Vanadium Redox Flow Battery (VRFB) companies and manufacturing. In addition to this, Bushveld has an energy storage project development business focused on the African market, an area traditionally under-served but which offers immense growth potential. The VRFB is the simplest and most developed ﬂow battery in commercial operation. The technology is durable and has a long lifespan, low operating costs, is safe in operation, and has a low environmental impact in manufacturing. Furthermore, the vanadium used in the batteries can be easily recycled. The storage system can work in tandem with other technologies to ﬁll demand in a growing energy storage market. Advantageous features of VRFBs include: – Long-lifespan, with ability to charge/discharge more than 35,000 times for over 20 years; World Energy Demand by Carrier World Electricity Generation by Power Station Type Units: EJ/yr 500 400 300 200 100 Units: PWh/yr 60 50 40 30 20 10 0 1980 1990 2000 2010 2020 2030 2040 2050 0 2018 2022 2026 2030 2034 2038 2042 2048 2050 Coal Oil Direct Heat Natural Gas Electricity Biomass Solar Thermal Oil fired Coal fired Fixed offshore wind Onshore wind Solar PV Solar thermal Gas fired Nuclear Floating offshore wind Geothermal Hydropower Source: DNV GL Energy Transition Outlook 2020, IEA 2019 Source: DNV GL Energy Transition Outlook 2020, IEA 2019 Annual Report and Financial Results 2021 31 Energy Storage Overview continued Annual Installed Utility-Scale VRFB Battery Deployment Energy Capacity and Total Revenue by Region, All Application Segments, World Markets: 2022-2031 20,000 15,000 h W M 10,000 5,000 0 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 70 60 50 40 30 20 10 0 n o i l l i b S U North America Latin America Western Europe Middle East Africa Eastern Europe Asia Pacific Total Revenue Source: Guidehouse Insights – 100 per cent depth of discharge, allowing the entire battery to be used all the time; – Lowest cost per kWh at long duration, lower than Li-ion batteries, when fully used at least once daily; – Safe, with no ﬁre risk from thermal runaway; – Very fast response time of less than 70 milliseconds; and – No chemical cross-contamination as only one battery element is used, a unique feature among ﬂow batteries. In addition, VRFBs have existing supply chain synergies with industries such as vanadium mining and vanadium chemicals production. These existing capabilities and facilities can be expanded to produce more vanadium or recycle existing electrolyte. Despite the many advantages, as a technology in the early stages of commercialisation, VRFB markets still face commercial challenges. Misconceptions about costs and comparisons based purely on upfront rather than lifetime costs are signiﬁcant barriers for VRFBs. Furthermore, a historical market for short duration storage has positioned Li-ion batteries as a dominant incumbent battery technology. Increasing understanding, reaching economies of scale and developing innovative funding solutions to overcome these barriers will lead to VRFBs’ continuous growth in the storage industry. Overview of Vanadium Redox Flow Battery Technology As VRFBs solely rely on vanadium as a mineral and because the chemistry itself does not degrade from usage, either the vanadium or the entire electrolyte in VRFBs can be re-used, creating an opportunity to devise innovative ﬁnancial solutions, such as electrolyte rental. Such innovation increases the circularity of vanadium and the sustainability of VRFB technology. Furthermore, these solutions accelerate adoption of VRFBs at commercial scale by reducing the upfront capital costs, while creating new economic opportunities for vanadium producers. VRFBS FOR ENERGY STORAGE MARKET Global deployment of VRFBs is starting to accelerate due to increasing demand for long-duration energy storage. According to Chengde Steel, Chinese vanadium demand from energy storage is expected to rise to at least 9,100 t of vanadium pentoxide (V2O5) equivalent in 2022 from 3,640 t in 2021, on the back of increasing energy storage projects. According to Guidehouse Insights the market is already in excess of 1 GWh per annum in energy capacity, with Asia Paciﬁc leading signiﬁcantly. By 2031, it is estimated that Asia Paciﬁc will reach around 14.5 GWh of annual VRFB energy capacity, out of a global demand of 32 GWh. Nevertheless, Bushveld remains bullish on the demand for energy storage in Africa, with South Africa as an excellent example of that growth. – Bushveld Energy’s development of the 3.5 MW solar PV plus a 1 MW/4 MWh VRFB hybrid mini-grid project for Vametco, the ﬁrst of its kind in South Africa, demonstrates the case for VRFBs in energy storage. This project will serve as a VRFB reference site for the mining industry, utilities and other users of the technological beneﬁts of long-duration VRFB systems coupled with renewable energy. – The country’s Integrated Resource Plan (IRP 2019) has a dedicated allocation for over 2000 MW in new energy storage during this decade. The Department of Mineral Resources and Energy (DMRE) and IPP Office have noted standalone storage procurement of the 513 MW IRP allocation. – Eskom battery procurement programme for 350 MW/1600 MWh is underway with the ﬁrst 199 MW/833 MWh in tenders signed. – Many municipalities and private customers, especially mining companies, are increasingly considering storage to off-set Eskom’s load shedding. Electrode Membrane V4/V5+ + e Electrolyte Tank V2/V3+ - e Pump Power source-load Pump Illustration: Bushveld Energy 32 Annual Report and Financial Results 2021 The VRFB technology is well-suited for a vanadium-based circular economy Business Overview Governance Financial Statements Supplementary Information 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, specialty alloys and specialty chemicals Annual Report and Financial Results 2021 33 Finance Director’s Review Cost containment sets base for growth 1. OVERVIEW The 2021 underlying result shows improvement from 2020, despite the continuation of the pandemic as we delivered an underlying EBITDA loss of US$7.5 million, up US$7.4 million from the 2020 underlying EBITDA loss of US$14.9 million (underlying EBITDA is adjusted EBITDA excluding impairment charges. Adjusted EBITDA is EBITDA, excluding the group’s share of losses from joint ventures and the remeasurement of ﬁnancial liabilities). Foreign exchange had a material impact on costs during the year, with the Rand strengthening from ZAR16.46/US$ to ZAR14.79/US$ in that period. This gave rise to a net adverse exchange impact of US$11.6 million on underlying EBITDA. Excluding the adverse exchange rate impact then we would have achieved a positive underlying EBITDA proﬁt of US$4.1 million for the year on a like for like exchange rate with 2020. Our operational and ﬁnancial performance in 2021 is however a story of two halves. In the H1, underlying EBITDA amounted to a loss of US$10.8 million, primarily due to a stronger ZAR: US$ exchange rate on costs and exacerbated by weak production performance at Vametco in the ﬁrst four months. In the second half of the year, the Group achieved an underlying EBITDA proﬁt of US$3.3 million on the back of a strong production performance at both Vametco and Vanchem and a higher realised price. This positive proﬁtability has been maintained into the 2022 ﬁnancial year to date. Recognising the potential signiﬁcant impact of the movement of the ZAR: US$ exchange rate on our results, we are constantly reviewing our hedging policy, and we will be better placed to implement this once we attain steady state production in 2023. The Group reported revenue of US$106.9 million (2020: US$90.0 million), driven by a higher average realised price of US$32.2/kgV (2020: US$23.4/kgV) and offset by lower sales. We made the decision to rebase our plans by reducing our production guidance for the year, implementing the changes that were required to stabilize production and provide the platform for growth. This entailed increasing investment in maintenance and sustaining capital, to help our operations to achieve stability and support the anticipated volume increase in the 2022 ﬁnancial year. Overall, we recorded a Group production for the year of 3,592 mtV, just shy of the upper end of the 2021 guidance of between 3,400 mtV and 3,600 mtV. Whilst continuing with the various cash conserving measures put inplace to protect the balance sheet during 2020, we remained ﬁrmly focused on our strategy to sustainably increase production. As part of our capital allocation process, we prioritised the refurbishment of Vanchem’s Kiln 3 as it provided the Group with the most rapid route to near term production growth. We successfully negotiated with Orion Mine Finance (Orion) to lift the Production Finance Arrangement (PFA) capital ringfence, allowing us to reallocate US$17.8 million of the PFA funding from Vametco to ﬁnance the refurbishment and expansion of Vanchem. Further details of the growth path are set out in the section on Operating Assets and Operational Review. The commissioning of Kiln 3 was completed within budget post year-end in June 2022, with focus now on plant stabilisation and optimization. The Group’s ability to achieve its future production proﬁle is predicated on the Kiln 3’s successful increase in production during the ﬁrst three to four months following commissioning, as it ramps up. This will enable the Group to reach its targeted steady state production run rate of 5,000 – 5,400 Mtvp.a. in the last quarter of the 2022 ﬁnancial year. This is a signiﬁcant increase from our production of 3,592 mtVp.a. in 2021 and supports our guidance of between 4,200 – 4,400 mtVp.a. for the 2022 ﬁnancial year. During the year, the Duferco loan of US$11.5 million was settled by way of US$2.5 million in cash and US$9.0 million by the issue of shares. Approximately US$12.7 million was realized in the H1 of 2021 from the sale of the investment in Invinity Energy Systems Plc (Invinity), earning an overall proﬁt of approximately US$7.7 million on the original investment of US$5.0 million. We invested US$10 million of the proceeds to increase our investment in VRFB manufacturer CellCube (previously referred to as Enerox GmbH), which resulted in an indirect interest of 25.25 per cent in CellCube. The Company sold its 4.76 per cent shareholding in AIM-listed Afritin Mining Limited and realised a total of approximately US$3.5 million. The proceeds of the sale were used for general corporate purposes. Revenue Cost of sales Other operating and administration costs Adjusted EBITDA Impairment charges Underlying EBITDA Average foreign exchange rate Group production Group sales All-In Sustaining Cost (AISC) Average realised price 1 Unaudited. 34 Unit H1 2021 1 H2 2021 1 FY 2021 FY 2020 US$m US$m US$m US$m US$m US$m US$m mtV 1 mtV 1 US$/kgV 1 US$/kgV 1 47.0 (43.3) (14.5) (10.8) – (10.8) 14.54 1,574 1,608 39.7 29.2 59.9 (40.1) (18.9) 0.9 2.4 3.3 15.02 2,018 1,706 35.2 35.1 106.9 (83.4) (33.4) (9.9) 2.4 (7.5) 14.79 3,592 3,314 37.4 32.2 90.0 (73.4) (31.5) (14.9) – (14.9) 16.46 3,631 3,842 28.8 23.4 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements US$ 2021 US$ 2020 Supplementary Information 106,857,285 (83,387,087) (33,357,130) 89,988,078 (73,394,608) (31,534,410) (9,886,932) (19,395,496) (14,940,940) (17,866,153) (29,282,428) (1,902,172) (4,351,356) (11,248,712) – (32,807,093) – – (4,654,258) (206,066) (46,784,668) 4,671,255 (37,667,417) 6,570,026 (42,113,413) (31,097,391) Cost of sales The cost of sales excluding depreciation for the period was US$83.4 million (2020: US$73.4 million), primarily due to the negative impact amounting to approximately US$8.5 million of the stronger ZAR:US$ exchange rate on costs in 2021. The balance of the increase is largely attributable to an overall increase in costs at both Vametco and Vanchem, as detailed below: – Increase in maintenance costs to US$16.5 million (2020: US$12.1 million) to sustain the plants, production volumes and improve operational stability. – Increase in energy and raw material costs to US$40.7 million (2020: US$38.5 million). 2. INCOME STATEMENT Analysis of results Income statement summary as adjusted from “statutory” primary statement presentation Revenue Cost of sales Other operating and administration costs Adjusted EBITDA Depreciation Operating loss Remeasurement of ﬁnancial liabilities Share of loss in joint venture Net ﬁnancing expense Other non-operating costs Loss before tax Income tax charge Loss after tax Revenue Group Sales of 3,314 mtV were 13.7 per cent lower than in 2020 due to challenges in international logistics channels arising from COVID-19, the unrest in South Africa and disruptions at local ports in July and August. Over the course of 2021, we saw a recovery in the Vanadium price to the average London Metal Bulletin of US$34.4/kgV, despite ongoing concerns about COVID-19. This recovery meant that the lower sales were offset by a higher average realised price in 2021 of US$32.2/kgV (2020: US$23.4/kgV) resulting in higher revenue for the group of US$106.9 million (2020:US$90.0 million). The logistical challenges resulted in the Company being unable to ship some of the product produced during 2021, resulting in a build-up of inventory throughout the logistics chain (stock at site, transit to Port, sea-borne and in-country warehouses) of 278 mtV which is included in the cumulative inventory at year end of 832 mtV. The geographic split of Group sales in 2021 was 47 per cent (2020: 34 percent) to the United States, 29 per cent to Europe, 3 per cent to China and 21 per cent to the rest of the world. We expect the geographic mix to shift as Kiln 3 comes online in 2022 with the resultant wider product mix. During the year, Bushveld took advantage of the robust vanadium demand and higher prices in the United States by diverting a larger portion of its sales to the Unites States. As a result, sales to the United States increased due to increased vanadium demand from the North American steel and aerospace industries on the easing of the pandemic lock down regulations and opening up of economies. We are pleased to have been able to supply into our framed contracts in the US despite these challenges. Annual Report and Financial Results 2021 35 35 3533 Finance Director’s Review continued – Increase in mining costs due to waste stripping of US$5.4 million (2020: US$3.2 million) associated with bringing the Upper Seam project online in September 2021. – The Group cost per unit sold (including sustaining capex) of US$37.4/kgV increased by 30 per cent (2020: US$28.8/kgV), mostly due to the cost factors mentioned above and lower sales volumes. The Group focused on the commissioning of Kiln 3 at Vanchem along with associated downstream refurbishments. As a result, Vanchem production personnel costs increased in line with expectation as we implemented the plan in anticipation of the commissioning scheduled for May 2022. The time lag between the upfront expenditure required ahead of the planned increase in production was a contributing factor to the higher Group cost of US$37.4/kgV (including sustaining capital) relative to 2020 (2020: US$28.8/kgV). We continued with our cost-reduction measures as the Group maintained its focus on embedding the synergies across Vametco and Vanchem to grow production organically. During the H1 of the year, we carried out a 35-day planned maintenance shutdown at our main operating asset, Vametco, which was followed by a slower than expected ramp up and a 10-day industrial action. The combination of these factors and a step change in our approach to a more sustainable production delivery resulted in a rebasing of our production proﬁle for the year. The rebasing of production had a negative impact on unit cost of production, with the ﬁxed costs, accounting for approximately 45 per cent of total costs, being absorbed off a lower production volume. Group production of 2,018 mtV in the second half was an improvement and 28.2 per cent higher than H1 2021 (H1 2021: 1,574 mtV) on the back of the operational improvements implemented after the production target rebasing. Total Cost Cost of sales (direct) US$ Operating costs and admin US$ Other non-operating costs US$ Total income statement cost excl. depreciation US$ Total units sold (mtV) Cost income statement per Unit sold (excl. Depreciation) US$/kgV Sustaining capital US$ Total cost including US$ Sustaining capital US$ Cost per unit sold including Sustaining capital US$/kgV Average exchange rate ZAR:US$ Total revenue Revenue US$ Average price realised US$/kgV 2021 2020 (83,387,087) (33,357,130) – (73,394,607) (31,534,411) (206,066) (116,744,216) 3,314 (105,135,084) 3,842 35.2 27.4 (7,192,393) (123,936,611) (5,375,610) (110,510,694) 37.4 14.79 28.8 16.46 106,857,285 32.2 89,988,078 23.4 Cost-saving programme We continued with the cost-savings programme (CSP) introduced in 2020. The CSP is aimed at ensuring continued competitiveness throughout the commodity cycle while enhancing our product offering to markets across the geographies and industries in which we compete. The Group performed a diagnostic analysis for an addressable baseline procurement spend of around U$55.0 million. The process was concluded in February 2022. The outcome was targeted annualised cost savings of US$2.5 million-US$4.0 million over a 12 to 24 month period from February 2022. While, going forward, growing production is expected to contribute to further lowering of costs through ﬁxed cost dilution, management will continue to seek broader cost saving opportunities to improve the company’s unit cost performance even further. Other operating and administration costs Group administrative expenses increased by US$1.1 million at US$20.9 million (2020: US$19.8 million). On a like for like exchange rate basis the costs would have reduced by US$2.0 million, demonstrating the success of the cost containment measures we initiated in 2020. Administrative expenses included staff salaries of US$10.8 million (2020: US$8.1 million) for both the operations and head office administration and management staff. Since the costs are not directly attributable to the cost of production, they are recorded under administrative expenditure based on industry practice. The operation salaries amounted to US$4.8 million (2020: US$4.7 million), whilst the shared service and change to head office division (including directors ‘fees), amounted to US$5.1 million (2020: US$3.5 million). The increase in head office staff costs is as a result of the employment of key employees to manage the operations as part of shared services. Professional fees were maintained at US$5.9 million (2020: US$6.0 million), Included in professional fees are costs incurred of US$1.1 m for legal fees for the litigation surrounding the Enerox Investment. On account of the successful defense against the litigation a portion of the legal costs have been recouped post year end. Administrative expenses by nature Staff costs Depreciation of property, plant & equipment Professional fees Other Total administrative expenses Dec 2021 US$ Dec 2020 US$ 10,746,322 8,146,473 392,669 5,860,976 3,894,325 20,894,282 256,926 6,017,782 5,361,992 19,783,176 Impairment losses of US$2.4 million (2020:US$0) was a result of the impairment of US$0.5 million Intangible asset and US$1.9 million plant and equipment. 36 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information Other mine operating costs include social commitments and obligations at both Vametco and Vanchem costs decreased by US$1.5 million to US$3.2 million (2020: US$ 4.7 million). The idle plant costs of US$3.4 million (2020:US$4.2 million) mainly reﬂects the 35-day maintenance shut down during the Q1 of 2021. Selling and distribution costs increased by US$1.6 million to US$6.4 million (2020: US$4.8 million) as a result of increased commission paid which is a consequence of increased revenue in 2021 compared to 2020. The distribution costs also increased due to longer holding times as a result of logistical issues experienced in 2021. Adjusted and Underlying EBITDA The Adjusted EBITDA reconciliation shown below illustrates the impact of the increase in vanadium prices from prior year, offset by the costs analysed above. 2020 Adjusted EBITDA Revenue changes Operating cost changes Inventory movement 2021 Adjusted EBITDA US$ (14,940,940) 16,869,207 (22,013,462) 10,198,263 (9,886,932) Adjusted EBITDA is a factor of volumes, prices and cost of production. This is a measure of the underlying proﬁtability of the Group, widely used in the mining sector. Underlying EBITDA removes the effect of impairment charges. Revenue Cost of Sales Other operating and administration costs Add Depreciation and Amortisation Adjusted EBITDA Dec 2021 US$ Dec 2020 US$ 106,857,285 (102,782,583) 89,988,078 (91,260,760) (33,357,130) 19,395,496 (9,886,932) (31,534,411) 17,866,153 (14,940,940) Add: Impairment losses 2,438,889 – Underlying EBITDA (7,448,045) (14,940,940) Other non cash costs IFRS 9 – Remeasurement of ﬁnancial liabilities The PFA was subject to remeasurement under IFRS 9. This resulted in a non-cash impact to the income statement of US$1.9 million (2020: £nil) remeasurement adjustment and US$2.8 million (2020: £nil) notional interest and a resultant increase in the loan of US$4.7 million. Share of loss of VRFB JV Our underlying investment in Celllcube, through VRFB holdings Limited (VRFB) is accounted for as an investment in Joint Venture. As such we recognise our portion of the loss recognised in Cellcube for 2021 which amounted to US$4.4 million. Deferred Tax Charges for deferred tax in 2021 amounted to a net deferred tax beneﬁt of US$5 million, compared to a net deferred tax beneﬁt of US$6.6 million in 2020 (restated). The deferred tax beneﬁt arises from the unwinding of the liability over the life of the assets. Deferred Tax on Vanchem acquisition In 2019, the Group acquired assets in Vanchem which resulted in a recognition of a gain on bargain purchase of some US$60,6 million in the Group accounts and around US$85 million in the subsidiary accounts under IFRS 3 (Business combination). Based on IAS 12-Income taxes, a deferred tax liability of R333 million (c.US$23.7 million) should have been raised with a corresponding charge to tax on the income statement. The liability which has no cash impact will unwind over the life of assets with a credit to 2020 income statement on the tax line of R89 million (c.US$6.1 million) and a credit in the 2021 income statement on the tax line of R76 million (c.US$4.8 included in the US$5 million mentioned above). The overall impact of the adjustment in the 2021 accounts is a deferred tax liability of R167 million (c.US$10.5 million), a debit of retained earnings brought forward of R243m (c.US$16.6 million) and a current year credit to the P&L of R76m (c.US$5.2 m). The prior years in the balance sheet have been restated to reﬂect these changes and more details can be found in notes 15 and 35 of the ﬁnancial statements. 3. BALANCE SHEET ASSETS Assets Non-current assets related to intangibles and property, plant and equipment remained broadly ﬂat relative to 2020 and changes were mainly due to depreciation in the year. Our investment in VRFB transferred from Current assets (Refer to note 16 of the ﬁnancial statements for further detail). A deferred tax asset was raised for the assessed loss incurred during the year, (refer to note 15 for further details). The decrease in Group cash and cash equivalents was as a result of US$15.4 million (2020: US$50.5 million) was primarily due to the capital spend on growth projects at Vanchem, VRFB investment and the construction of our plant in East London. The movement in fair value is as a result of the Group realising its investments in AfriTin and Invinity. AfriTin realised approximately US$3.5 million and Invinity US$3.5 million in 2021. Equity and liabilities Total current and non-current liabilities of US$149.9 million (2020 US$153.5 million) reduced by US$4.2 million from the prior year. The positive impact of the settlement of the Duferco loan of US$11.5 million of which US$2.5 million was cash and US$9 million settled through the issue of 66,892,037 shares, partial repayment of Nedbank of US$2.2 million as well as Orion US$1.1 million, were offset by the US$4.76 million IFRS9 impact on the Orion ﬁnancing loan, US$3.5 million Orion convertible interest, and interest accrual on the PFA for the Q4 2021 which was only due and payable in Q1 2022. Annual Report and Financial Results 2021 37 Finance Director’s Review continued Net debt The net debt reconciliation below outlines the Group’s total debt and cash position. Gross Cash and Cash Equivalent Nedbank Revolving Credit Facility Convertible Loan Notes – Duferco Production Financing Agreement – Orion Mine Finance Convertible Loan Notes Instrument – Orion Mine Finance Other Leases Net Debt Production ﬁnancials agreement of US$33.5 million includes US$4.76 million fair value adjustment and notional interest. * * Convertible loan note of US$37 million comprises of US$35 million Capital and amortised interest. 2021 US$ 2020 US$ Difference US$ 15,432,852 (5 821,082) 50,540,672 (8,636,535) -35,107,806 2,815,453 – 11,585,068) 11,585,068 (33,511,742) (30,105,886) -3,405,856 (37,313,976) (999,950) (33,073,699) (845,588) -4,204,277 -154,362 (4,485,312) (5,002,144) 516,832 (66,699,209) (38,708,248) -27,990,961 4. CASH FLOW STATEMENT The table below summarises the main components of cash ﬂow during the year. Year ended 31-Dec-21 (audited) US$ Year ended 31-Dec-20 (audited) US$ Operating loss Impairments Depreciation and amortisation Changes in working capital and provisions Taxes paid (29,282,428) 2,438,890 19,395,496 (5,022,120) 394,069 (32,807,093) – 17,866,153 1,253,029 (3,452,492) Cash (outflow) from operations Sustaining capital (12,076,093) (7,192,393) (17,140,404) (5,375,610) Free cash flow Cash from other investing activities Financing activities Cash (outflow)/inflow Opening net cash flow Foreign exchange movement (19,268,491) (9,965,907) (7,049,147) (36,283,545) 50,540,672 1,175,725 (22,516,014) (7,943,222) 47,433,269 16,974,034 34,011,557 (444,919) Closing net cash 15,432,852 50,540,672 Net cash from operating activities was an outﬂow of US$12.1 million (2020: US$17.1 million), an improvement from the previous year driven by Adjusted EBITDA. Capital expenditure and investing activities for the year were US$17.2 million (2020: US$13.3 million), an increase of US$3.9 million from 2020 mainly due to investing activities as explained below. The Group ended the year with a cash balance of US$15.4 million, (2020: US$50.5 million), the net outﬂow arising from, inter alia, higher capital expenditure and repayment of loans. Investing activities Investing activities were driven by capital expenditure growth with property plant and equipment expenditure of US$19.5 million, up US$9.3 million from 2020. This was mainly as a result of Kiln 3 capital expenditure of US$4.2 million and construction of the bushveld electrolyte plant of US$4.9 million. In addition to above, payments were made for the deferred consideration owed to Evraz of US$1.7 million, Duferco deferred consideration of US$2.2 million, Investment in CellCube of US$10 million. The costs were offset by ﬁnance income to the value of US$1.0 million for the year as well as the disposal of the US$12.7 million investment in Invinity and US$3.5 million investment in Afritin. Capital expenditure to sustain and grow our production In line with our rebasing, we substantially increased sustaining capital at Vametco, in order for our operations to achieve stability and support the volume increase in the 2022 ﬁnancial year as outlined below. Capital Expenditure 2021 US$(million) 2020 US$(million) Outlook 2022 US$(million) Vametco Growth Environmental/ Legal Compliance Sustaining Vanchem Growth Environmental/ Legal Compliance Sustaining Bushveld Energy Growth Total Capex 4.5 0.6 0.2 3.7 7.7 4.4 2.6 0.7 4.9 4.9 17.1 4.4 2.6 – 1.8 3.6 – 3.4 0.2 – 8.0 5.5 – 0.6 4.9 8.5 4.5 2.4 1.6 8.1 8.1 22.1 – The Group remained ﬁrmly focused on our strategy to sustainably increase production, prioritising the refurbishment of Vanchem’s Kiln 3. During 2021 the Group spent US$17.1 million 2020:US$8.0 million on sustaining and growth capital. The total spend was comprised of the following: – US$3.9 million sustaining capital at Vametco, mainly comprised of medium- and long-term maintenance capex. – US$4.2 million growth capital for the refurbishment of Kiln 3 at Vanchem. Vanchem’s production scale up to a run rate of 2,600 Mtvp.a. by the end of the 2022 ﬁnancial year. The balance to be incurred during 2022. – US$4.9 million growth capital for BELCO electrolyte plant. Financing activities Financing activities of US$7.0 million comprise of the loan repayments of US$2.2 million on the Nedbank RCF and US$2.5 million Capital repayment of the US$11.5 million unsecured convertible loan note held by Duferco as well as US$1.7 million interest on the Orion PFA. As explained above the balance of US$9.0 million which was due for 38 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information repayment was settled by the issue of 66,892,037 new Bushveld shares. This was offset by the receipt of US$1.3 million from the Industrial Development Corporation (refer to note 25) for BELCO. 5. FINANCIAL RISK The main ﬁnancial risks faced by the Group relate to the availability of funds to meet business needs (liquidity risk), the risk of default by counterparties to ﬁnancial transactions (credit risk), ﬂuctuations in interest and foreign exchange rates and commodity prices (market risk). These factors are more fully outlined in the notes to the accounts. They are important aspects to consider when addressing the Group’s going concern status. We proactively manage the risks within our control. There are, however, factors which are outside the control of management, speciﬁcally volatility in the ZAR: US$ exchange rate as well as the vanadium price, which we do not currently hedge, and which can have a signiﬁcant impact on the cash ﬂows of the business. As mentioned earlier, implementation of a hedging policy will be considered when we attain steady state production and have a wider range of products for sale in 2023. 6. GOING CONCERN AND OUTLOOK We manage liquidity risk by ensuring that the Group has sufficient funds for all ongoing operations. Our philosophy is to maintain a low level of ﬁnancial gearing, given exposure to the vanadium price and exchange rate ﬂuctuations. As part of the annual budgeting and long-term planning process, the Board reviewed and approved the Group’s budget and cash ﬂow forecasting through to 2023. The forecast is amended in line with any material changes identiﬁed during the year. Equally, where funding requirements are identiﬁed from the cash ﬂow forecast, appropriate measures are taken to ensure these requirements can be satisﬁed. In particular, a capital allocation framework is applied which prioritises maintenance and regulatory capital funding requirements. We also closely monitor our working capital and regularly produce cash forecasts and analyse sensitivities to different scenarios, including, but not limited to, changes in commodity prices and different production proﬁles from the Group’s producing assets. We have a pricing committee which considers commodity pricing outlook, taking into account industry analysts forecasts as well as inhouse intelligence. Our future production proﬁle in our forecasts is predicated on Vanchem Kiln 3 being commissioned during the H1 of 2022. Kiln 3 has been commissioned and is undergoing stabilisation and optimization, with ramping up expected to commence thereafter. The annual production run rate is forecast to ramp up to 5,000-5,400 Mtvp.a. in the last quarter of the 2022 ﬁnancial year and we remain comfortable that Kiln 3 will be at the forecast run rate by the end of year. The Nedbank Revolving Credit Facility (RCF) of ZAR125 million available to Vametco is subject to ﬁnancial covenants which are EBITDA-driven. The application of IFRS 9 on the Orion PFA resulted in an increase in accounting interest, over and above the actual interest paid which comprised the calculation of the net interest to debt covenant. Nedbank has approved the waiver of the covenants for the December 31, 2021, and we are conﬁdent of passing the 30 June 2022 reporting period. The term of the RCF ends in November 2022 and since August 2021, we have been paying approximately US$0.44 million (ZAR7.0 million) per month towards the RCF. of which approximately US$2.65 million (R42.0 million) has been paid post the year end Although the start of the 2022 ﬁnancial year has been challenging for Vanchem, as Kiln 1 battled with repairs and maintenance, we are encouraged by the positive production run rate at Vametco and the proﬁtability that is coming through from that operation. The plant at Vametco is currently down for its annual planned shutdown during June 2022 and has generally performed well and is beneﬁtting from the operational stability initiatives we embarked on during 2021. Whilst we have experienced logistical challenges with our sales, we have retained our customer relationships as the Group sells and distributes around 85 per cent of its product as frame contracts. We continue to prioritise ﬁnancial stability through cost containment, conserving cash and adhering to a clear capital allocation framework, to ensure the Group’s resilience through the operating cycle. Accordingly, the Directors continue to adopt the going concern basis in preparing the consolidated ﬁnancial information. Further information on the Directors going concern assessment is contained in the accounting policies. Tanya Chikanza Finance Director 30 June 2022 Annual Report and Financial Results 2021 39 Operating Assets and Operational Review Operating Assets and Operational Review Bushveld Minerals owns one of the largest, high-grade primary vanadium resource bases in the world, with all of its mining and processing assets situated in South Africa. The Company’s vanadium resource comprises three mineral assets: the Vametco Mine, Brits resource and the Mokopane project. The Group’s principal vanadium processing facilities are the Vametco processing plant (Vametco), in which the Company ﬁrst acquired an interest in April 2017, and the Vanchem plant (Vanchem), a primary vanadium-producing facility acquired in November 2019. The two processing plants provide a ﬂexible, scalable production base, with synergies and product diversiﬁcation between both the plants that provide for maximum market penetration, a signiﬁcant competitive edge. From an operational perspective, these plants are classiﬁed as “one ﬂowsheet”, with the ability of Vametco to produce concentrate as feedstock to Vanchem. Intermediate products (Ammonium Metavanadate (AMV), Modiﬁed Vanadium Oxide (MVO) can be introduced into each respective plant’s ﬂow sheet. Vametco is an integrated mining and processing plant located eight kilometres north-east of Brits in the North West Province of South Africa. The mine has a new order mining right for vanadium and other associated minerals over a portion of the remaining extent of 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 which supplies ore to a vanadium processing plant located on the same property. Vanchem is a primary vanadium-processing facility with a beneﬁciation plant located at the Ferrobank Industrial Park in Emalahleni Local Municipality at Mpumalanga Province, in South Africa. It produces vanadium pentoxide, ferrovanadium and vanadium chemicals and is capable of producing vanadium trioxide. Vanchem has been using ore acquired with the operation in 2019, supplemented with limited concentrate from Vametco. The Upper Seam Project, commissioned in Q4 2021, together with selective third party sources of ore will now be supplying Vanchem with a signiﬁcant proportion of ore requirement for the foreseeable future. 40 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information PROCESSING Vametco’s processing plant receives ore from the co-located Vametco Mine. Vametco utilises the standard salt-roast and leach process to produce a steel-alloying vanadium carbon nitride product called Nitro Vanadium. Vanchem also uses the salt-roast beneﬁciation process. The process involves the following stages: ORE SOURCES BRITS DEPOSIT VAMETCO MINE 3rd PARTY ORE MOKOPANE UPPER SEAM ORE VAMETCO (crushing, screening, milling and concentration) VANCHEM (crushing, screening, milling and concentration) MAGNETITE CONCENTRATE E T I T E N G A M E T A R T N E C N O C VAMETCO (extraction, precipitation and reﬁning) VANCHEM (extraction, precipitation and reﬁning) BELCO PLANT NITRO VANADIUM AMV¹ MVO FeV CHEMICALS V2O5 FLAKE V2O5 POWDER V2O3 ELECTROLYTE Current Future 1. Vametco’s AMV can be sent to Vanchem to produce FeV and V2O5, and Vanchem’s AMV can sent to Vametco to produce Nitro Vanadium. Vametco Processing (step 1-3 similar to Vanchem) Vanchem Processing (step 1-3 similar to Vametco, except Vanchem does not do crushing) – Step 1: Crushing, milling and magnetic separation to produce a magnetite concentrate with average grades of approximately 2.0 per cent V2O5; – Step 1: 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 the 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, 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 MVO product; and – Step 4: Nitro Vanadium 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. – 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 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 – Step 5: Vanadium pentoxide is reduced by aluminium in the aluminothermic process in the presence of iron to produce ferrovanadium – a primary product. Annual Report and Financial Results 2021 41 Operating Assets and Operational Review continued VAMETCO 2021 operational performance Vametco achieved an annual production of 2,453 mtV, which was eight per cent lower than in 2020, due to lower production in the H1 of the year. The weaker performance in the H1 of the year was due to a slower than expected ramp up post the completion of a planned 35 day maintenance shutdown along with an unprotected industrial action in April 2021. Thus, from April 2021, our primary focus shifted to increasing maintenance investment and sustaining capital to ensure the reliability of mining and plant equipment. Moreover, we implemented greater discipline in our proactive maintenance practices, instilled an organised and sequential maintenance methodology, introduced process controls for the technical team, and invested substantially in our people development strategy. Since the implementation of these measures we have seen stable and consistent production at Vametco which has carried on into the H1 of 2022. Vametco achieved a production cash cost of US$24.0/kgV and a total cash cost of US$32.2/kgV, which was impacted by the stronger ZAR:US$ exchange rate, lower production, and increased expenditure on costs such as planned maintenance. Table 1: Operational highlights for Vametco (on a 100 per cent basis) Unit 2021 2020 2021 vs 2020 mtV 2,453 2,654 -7.5% Description Vanadium (Nitro Vanadium plus FeV) produced Weighted average production cash cost1 (C1) Weighted average total 2022 OUTLOOK AND CAPITAL EXPENDITURE The continued operational stability experienced since Q1 2022 and the renewed focus on safety resulted in a solid production, as reported in the Q1 2022 operational update and bodes well for the 2022 Vametco production guidance of between 2,450 mtV and 2,550 mtV and cash cost (C1) guidance of between US$22.7/kgV and US$23.5/kgV (ZAR346.9/kgV and ZAR358.7/kgV). Vametco will operate at a steady state production run rate of 2,800 mtVp.a. by the end of the year. Total capital expenditure for 2022 is estimated at circa US$5.5 million, with most of the cost being Rand-denominated, and includes: – circa US$4.9 million of sustaining capital; – circa US$0.6 million of environmental capital. VANCHEM 2021 operational performance Vanchem achieved an annual production of 1,138 mtV, which was 15 per cent higher than in 2020, as a result of Vanchem ramping up production in 2020 and running at capacity in 2021. Vanchem achieved a C1 production cash cost of US$30.6/kgV and a total cash cost of US$42.2/kgV, impacted by the stronger ZAR:US$ exchange rate and growth capital on refurbishment of Kiln 3. – The unit cost of production reﬂects the weighted average cost across all various product categories. Unit costs vary across these product categories. Nitro Vanadium is produced at Vametco converting Vanchem ammonium metavanadate on a toll treatment basis. Chemical products, including specialist V2O5 powder are produced at higher unit cost than that of V2O5 ﬂake and FeV. US$/kgV 24.0 18.3 31.1% Table 2: Operational highlights for Vanchem (on a 100 per cent basis) cash cost2 US$/kgV 32.2 23.3 38.2% 1. 2. Includes direct costs of production. Excludes depreciation, royalties, movements in ﬁnished goods inventories and selling, general and administrative expenses. Includes direct costs of production, selling, general & administrative expenses and cash outﬂows on sustaining capital and growth capital. Excludes depreciation, royalties, movements in ﬁnished goods inventories and sales commissions. 2021 CAPITAL EXPENDITURE Sustaining capital expenditure required for maintaining and sustaining Vametco was US$3.9 million mainly reﬂecting the 35-day maintenance shut down during the Q1 of 2021. Growth capital expenditure for the year was US$0.6 million. Description Chemicals Flake FeV Nitro Vanadium Total production Weighted average production cash cost1 (C1) Weighted average total cash cost2 Unit mtV mtV mtV mtV mtV 2021 187 284 509 158 2020 137 418 434 2021 vs 2020 36.5% -32.1% 17.3% – 100.0% 1,138 990 15.0% US$/kgV 30.6 22.4 36.7% US$/kgV 42.2 29.9 41.1% 1. 2. Includes direct costs of production. Excludes depreciation, royalties, movements in ﬁnished goods inventories and selling, general and administrative expenses. Includes direct costs of production, selling, general & administrative expenses and cash outﬂows on sustaining capital and growth capital. Excludes depreciation, royalties, movements in ﬁnished goods inventories and sales commissions. 42 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information THE UPPER SEAM PROJECT The Upper Seam project was developed to supply ore to Vanchem (magnetite in ore > 70 per cent, V2O5 grade in magnetite > 1.65 per cent). The project consists of crushing, screening and dry magnetic separation. The plant was commissioned in the last quarter of 2021 with the ﬁnal installation of the dry magnetic separator completed in December 2021. During commissioning and ramp-up, ore quality was at times below requirements due to heavy rain and mining constraints, which resulted in operational challenges post milling and concentrating, in the Vanchem kiln, affecting recoveries. The project team optimised the plant performance during February 2022 to meet Vanchem ore speciﬁcation requirements and the Vanchem milling plant has been reconﬁgured to treat Upper Seam ore more efficiently. 2021 CAPITAL EXPENDITURE AND REFURBISHMENT OF KILN 3 Sustaining capital expenditure required for maintaining and sustaining Vanchem was US$0.7 million and US$2.6 million environmental and legal compliance capital. In 2021, Bushveld renegotiated the terms of its Production Finance Agreement (PFA), which enabled the reallocation of funding, to the value of US$17.8 million, to the refurbishment and expansion of Vanchem from Vametco. This project included the refurbishment of Kiln 3 for US$4.2 million and US$0.2 million for growth studies. Kiln 3 will enable Vanchem to produce at a steady state production run rate of up to 2,600 mtVp.a. by the end of 2022. 2022 OUTLOOK AND CAPITAL EXPENDITURE The refurbishment and commissioning of Kiln 3 was completed in Q2 2022. Stabilisation and optimisation of Kiln 3 is currently underway and it is expected to achieve a production run rate of 2,600 mtVp.a. by end of 2022. Kiln 3 will more than double Vanchem’s production run rate once fully ramped up. Accordingly, Vanchem’s production guidance of between 1,750 mtV and 1,850 mtV is weighted towards the second half of the year, and production cash cost (C1) guidance is between US$27.7/kgV and US$28.4/kgV (ZAR422.8/kgV and ZAR433.5/kgV. Total capital expenditure for 2022 is estimated at circa US$8.3 million, with most of the cost being Rand-denominated and includes: – circa US$1.6 million of sustaining capital; – circa US$2.4 million of sustaining environmental capital and; – circa US$4.5 million of growth capital of which US$3.7 million will go towards Kiln 3. GROWTH PROJECTS Feasibility and pre-feasibility studies at Vametco and Vanchem were completed to determine the nature and scope of growth beyond the current production run rate of 5,000-5,400 mtVp.a. They provide a well-structured long term growth path to 8,000 mtVp.a., ensuring a permanent and reliable feedstock to both Vametco and Vanchem. The growth plans will only be pursued subject to: – The meeting of short-term performance targets to deliver sustainable cash generating production at the production rate of 5,000-5,400 mtVp.a.; and – In a phased manner, with sufficient funding secured, accompanied by any necessary third-party validation of associated project economics. HIGHLIGHTS The Group has the signiﬁcant opportunity to increase production by approximately 50 per cent to 8,000 mtVp.a. is achievable at the Company’s existing operations. The production increase requires growth capital expenditure of approximately US$151 million (ZAR2.3 billion based on a R15.29 US$:ZAR exchange rate). The optimal expansion plan was determined by prioritising from the highest to lowest IRR and NPV, resulting in staged expansion plan namely: – Stage 1 – Vametco – Installation of a Semi-autogenous (SAG) Mill to establish a permanent and reliable supply of feedstock for both plants in advance of further capacity expansion. – Stage 2 – Vanchem – Refurbishment of Kiln 2 to increase production at Vanchem to between 3,600-3,700 mtVp.a. (and Group production to between 6,000-6,500 mtVp.a.). – Stage 3 – Vanchem – Refurbishment of Kiln 1 to increase production to between 4,600-4,700 mtVp.a. (and Group production to between 7,000-7,500 mtVp.a.). – Stage 4 – Vametco – Increase single kiln capacity to 3,400 mtVp.a. (and Group production to between 7,600-8,000 mtVp.a.). Stage 1 establishes a sustainable and reliable supply of concentrate feedstock (up to 6,800 mtV) for both plants in advance of further capacity expansion with the balance of ore, when required, being supplied through development of Mokopane, Brits or third party ore. The SAG Mill investment at Vametco will provide concentrate to enable Vanchem growth, whilst intermediate products (AMV, MVO) can also be shared between the plants. The option to implement the growth path in stages substantially reduces the upfront capital requirements, and results in incremental production being quicker to generate additional cash ﬂows after each stage, which can be leveraged for the next phase. The product diversiﬁcation and the ﬂexibility arising from the expansion allows for maximum market penetration. The growth plans to expand beyond 5,000-5,400 mtVp.a. will be pursued: – Once the short-term performance targets on delivering a sustainable cash generating production at the production rate of 5,000 – 5,400 mtVp.a. have been achieved; and – In a phased manner, once funding has been secured, accompanied by any necessary third-party validation of associated project economics. As a result of higher volumes and operational efficiencies, the Company has estimated that at full operational production of 8,000 mtVp.a., C1 costs per Kg/V produced at Vametco and Vanchem would fall by approximately 20 per cent respectively, compared to 2021. The expansion considers the synergies between Vametco and Vanchem and treats them almost as an operational entity with one ﬂowsheet. The expansion of Vametco provides concentrate to enable Vanchem growth, whilst intermediate products (AMV, MVO) can also be shared between the plants. The expansion provides superior operational ﬂexibility at Vanchem due to availability of multiple Kilns. Annual Report and Financial Results 2021 43 Operating Assets and Operational Review continued BRITS The Brits 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 cost-effective source of near-surface ore for the Vametco plant. 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 grades in the world. A Competent Person’s Report (CPR) was published in January 2020. Brits has the potential to provide additional feed tonnage for Vametco and, if required, concentrate feed for the Vanchem plant, based on the installation of the SAG mill, as outlined in the studies. Brits Project comprises of three different companies in which Bushveld Resources Ltd holds interest in their assets ranging between 51 per cent and 74 per cent, and the three companies are Caber Trade and Invest 1 (Pty) Ltd, Great 1 Line Invest (Pty) Ltd and Gemsbok Platinum (Pty) Ltd. Caber Trade and Invest 1 (Pty) Ltd (Caber Trade), in which the Company holds an interest of 51 per cent, which, as previously reported, had a mining right application refused by the Department of Mineral Resources and Energy (DMRE) in 2020. Caber Trade lodged an appeal against the decision and has recently been advised that the process has been concluded with the DMRE refusing the appeal. The Company is considering its options. The Caber Trade properties were not included in the CPR, and the refusal of the mining right has no impact on the mineral resource statement. Great 1 Line Invest (Pty) Ltd (Great 1 Line), is the prospecting right holder of Portion 3 of farm Uitvalgrond 431 JQ, and an interest of 62.5 per cent is held through Bushveld Resources Ltd. This is the property on which the Mineral Resource estimate contained in the 2019 CPR is based on. 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 Prospecting Right Reference Number: NW 30/5/1/1/2/11124 PR, held through Great Line 1 Invest (Pty) Ltd and was executed in May 2021. The company has also applied for Section 102 of the Mineral and Petroleum Resources Development Act (MPRDA) and waiting for approval to incorporate Prospecting Right Reference Number: NW 30/5/1/1/2/11069 PR into NW 30/5/1/1/2/11124 PR. A renewal for the Prospecting Right NW 30/5/1/1/2/11124 PR for Portion 3 of the Farm Uitvalgrond 431 JQ has been granted. This prospecting right had expired on the 3rd of November 2019. Gemsbok Magnetite (Pty) Ltd (Gemsbok), is the prospecting right holder of the remainder of farm Doornpoort 295 JR. Bushveld Resources Ltd holds 74 per cent interest in this company Environmental Authorisation for Gemsbok was granted and currently waiting for the granting of the prospecting right renewal submitted to the DMRE. 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 of South Africa, approximately 65 km west of the provincial capital, Polokwane and 45 km northwest of Mokopane town. The project includes one of the world’s largest primary vanadium resources, with an average grade of 1.80 per cent V2O5 in-magnetite. Licensing On 29 January 2020, the DMRE 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 mining right is subject to Mining Charter II regulations, the Company is committed to adhering to Mining Charter III regulations in respect of host community and employee shareholding requirements. In accordance with Mining Charter III, a carried of ﬁve per cent of the equity in Pamish, will in due course, be transferred to the Bakenberg community. 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 36.0 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, Mineral Resources and Reserves The Mokopane deposit is a layered orebody along a 5.5 km north- south strike, dipping at between 18 and 24 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. 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. A Combined Inferred and Indicated JORC Compliant Mineral Resource of 298 Mt runs 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. An Ore Reserve of 28.56 million tonnes (Mt) of MML mineralisation was estimated as mineable supporting a minimum 30-year Life-of-Mine. The Company’s vanadium resource base currently consists of three mineral assets: Vametco, Brits and the Mokopane project. Together, the three deposits constitute a 548 Mt (100 per cent basis) JORC-compliant resource, including 74 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 44 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information partnerships as the supply deﬁcit deepens and it becomes clearer that primary production is key to addressing this shortfall. The company’s activities along the value chain are described below: Currently, the Vametco mine is the sole internal source of feedstock into the two treatment plants at Vametco and Vanchem. The signiﬁcant Vametco resource ensures that the Vametco plant has a secure feedstock source for a period signiﬁcantly in excess of 30 years. Vametco’s Upper Seam project is currently providing feedstock to Vanchem as an Ore Product after dry magnetic separation. In the medium-term to longer term, Vanchem feedstock will be sourced from combinations of enhancements to the Vametco mining and concentrate facilities to increase concentrate production, the development of the Mokopane Project and third-party sources. Currently, Vanchem is acquiring high quality ore recovered from a signiﬁcant disused steel plant stockpile situated in close proximity to Vanchem which should provide some 10,000 tpm of ore for up to 5 years. South Africa has signiﬁcant resources of vanadiferous magnetite ore, with little incentive to export. Therefore, third party sources will continually be considered as feedstock into Vanchem provided the pricing thereof meets or beats the cost of internal sources. Outlook and capital expenditure activities for 2022 include Bushveld is reviewing the business case at Mokopane. This review will consider commencing mining operations at a much-reduced level (producing a dry magnetic separation ore product for transport to Vanchem, which has milling and dry magnetic separation production capacity). It would allow for scaling up as necessary, as Vanchem’s production capacity grows and third party sources are phased out. This analysis could, of necessity, affect the scope and nature of the DFS which has been planned at Mokopane for the commencement of mining activities. BUSHVELD ENERGY In 2016, Bushveld Minerals established Bushveld Energy, an 84 per cent-owned energy subsidiary, Bushveld Energy Limited (Bushveld Energy), with the objective of driving greater adoption of VRFBs in the global energy storage market. This was based on the view that the success of VRFBs in capturing a signiﬁcant share of the energy storage market rests on solving for two critical factors: (a) security of supply; and (b) vanadium price volatility – factors that low- cost primary producers are best placed to address. With these two factors addressed, the global opportunity for VRFBs is signiﬁcant. Bushveld Minerals recognised the proposition of VRFBs for Bushveld as two-fold: – It provides scope for growing and diversifying the demand proﬁle of vanadium; and – It presents attractive commercial value for Bushveld along the VRFB value chain. VANADIUM ELECTROLYTE MANUFACTURING AND LEASING Electrolyte manufacturing Bushveld Electrolyte Company “BELCO” is located in East London, South Africa, established in 2020, with 55 per cent ownership by Bushveld Energy and 45 per cent by the Industrial Development Corporation (IDC). With a targeted initial capacity of 8 million litres of vanadium electrolyte (using up to 1,100 tons of pentoxide equivalent) and capability to scale up to 32 million litres at the same location, the electrolyte plant is the largest publicly announced plant outside of China. The plant is designed to take vanadium oxide from Bushveld’s Vanchem operation as the preferred feedstock provider. Oxide from Bushveld Vametco or non-Bushveld suppliers can also be used. Construction is progressing well with production expected to commence in H1 2023 with an eventual ramp-up to 8 million litres per annum. In addition, BELCO is currently undergoing a qualiﬁcation process for its electrolyte with VRFB companies in preparation for electrolyte sales. Electrolyte rentals As previously announced, Bushveld Energy has partnered with various entities in pioneering the structure, design and supply of vanadium electrolyte rental products for the VRFBs. This included the successful deployment of vanadium electrolyte rental product in industrial-scale batteries. As announced on 7 September 2020, Vanadium Electrolyte Rental Limited (VERL), signed a 10-year contract with Pivot Power in the United Kingdom, part of EDF Renewables, for the rental of the electrolyte in Pivot Power’s 5 MWh ﬂow battery, supplied by Invinity and delivered to Pivot Power’s project at the Energy Superhub Oxford. While the electrolyte was produced at a third-party facility, it used high purity vanadium pentoxide sourced from Bushveld’s Vanchem facility. The battery is now operational and Invinity and Pivot Power have announced work to develop a 40 MWh VRFB project. Furthermore, Bushveld Energy has continually articulated the strategic initiative to scale-up the rental product through an off-balance sheet funding structure to match the global growth in energy storage and VRFBs. Electrolyte reprocessing In Q1 2021, Bushveld Energy completed the successful reprocessing of 4,400 litres of unusable electrolyte at Vanchem. The aim of the project was to determine whether the existing facilities at Vanchem can be used to process the spent electrolyte into a saleable ﬁnal product. Part of this aim was to make sure that the reprocessing of the electrolyte had no physical impact on the current process and that it did not impact the ﬁnal product (AMV, V2O5) quality. The vanadium present in the spent electrolyte received at Vanchem was successfully recovered, with an initial recovery rate of 92 per cent, which was consistent with the overall recovery seen by the Vanchem plant under normal conditions. This is signiﬁcant, differentiating VRFBs from other battery technologies like lithium-ion that require establishment of separate recycling facilities for batteries at the end of life. Annual Report and Financial Results 2021 45 Operating Assets and Operational Review continued Partnering with VRFB Original Equipment Manufacturers By partnering with VRFB Original Equipment Manufacturers (OEM) Bushveld Energy intends to play a catalytic role in mobilising third-party capital to assist VRFB manufacturers to scale-up their sales and capacity to meet the fast- growing demand for long- duration energy storage solutions. The catalytic role is tied to the unique position of a low-cost primary producer to address risks associated with security of supply of vanadium and the vanadium price volatility. In line with this strategy, Bushveld Energy made two signiﬁcant strategic equity investments in Invinity Energy Systems Plc (Invinity) and CellCube (previously referred to as Enerox GmbH) a grid scale and micro-grid energy storage battery manufacturer, headquartered in Austria. As importantly, Bushveld leveraged its investment to mobilise more third-party capital into these companies. During the period under review, Bushveld exited its shareholding in Invinity. The successful listing of the company, its growth in sales and delivered projects and the additional capital it was able to raise after Bushveld’s initial US$5 million investment, entrenched Invinity as a signiﬁcant player in stationary energy storage. It also proved the success of Bushveld’s strategy by achieving all the objectives of our investment. This included the ability to exit at US$7.7 million proﬁt for our shareholders. CellCube is a grid scale and micro-grid energy storage battery manufacturer, headquartered in Austria. Update on the outcome of Court Case As previously reported on the 14 July 2021, Garnet Commerce Limited (Garnet), a 50 per cent joint venture partner of Bushveld Energy in CellCube, commenced litigation in the English High Court against VRFB Holdings Limited (VRFB-H), a holding company for the investment by Bushveld Energy into CellCube, via the joint venture company Enerox Holdings Limited (EHL). As advised on 8 March 2022, VRFB-H successfully defended its position. The judgment outcome vindicated the position that the investment by Mustang in VRFB-H was entirely appropriate and that VRFB-H did not violate the any agreements. Accordingly, the investment by Mustang into VRFB-H, and the investment by VRFB-H into EHL, continue to be in place. As with its investment in Invinity, Bushveld Energy is supporting the growth of CellCube, with most of the capital coming from other investors. Deployment of VRFBs The Vametco mini-grid Bushveld Energy has developed a commercial solar plus storage mini-grid project for Vametco, with 3.5 MW of solar PV and a 1 MW/4 MWh VRFB. The mini-grid will operate as a funded independent power producer (IPP). The project at Vametco is part of Bushveld’s strategy to demonstrate the commercial viability of long-duration VRFB systems when paired with renewable energy. It will also use locally-mined and beneﬁciated vanadium, demonstrating the ability to achieve higher local content in South Africa than any other storage technology. The success of the Vametco mini-grid opens the door for more and larger such projects in a South Africa whose energy policy is supporting self-generation projects for large energy users. According to the South African Photo-voltaic Association, the current pipeline of such projects awaiting registration exceeds 5,000 MW. Post year end, the company announced that it had secured funding for the engineering, procurement and construction (EPC) of the Vametco hybrid mini-grid. A shareholders agreement was signed between Bushveld Energy and NESA Capital as strategic equity partners in the development and funding of the project. NESA is expected to take the majority of the project and provide 60 per cent of the equity. Bushveld Energy will hold 40 per cent of the equity and recognise a development fee as revenue from the project upon ﬁnancial close. Furthermore, ABSA Relationship Banking approved a ZAR64 million (approximately US$4.1 million) loan to part fund the construction of the mini-grid project. Site clearing for construction commenced in Q1 2022 and the project is expected to be completed during the H1 of 2023. The overall cost of the project is expected to be R113m (US$7.25 million) and the EPC is provided on a turnkey basis. The project is expected to be completed during the H1 of 2023, when it will be one of the ﬁrst solar mini-grid projects in Africa with long-duration storage ﬁnanced off of the customer’s balance sheet as a standalone Independent Power Producer. The hybrid mini-grid project will supply over 10 per cent of Vametco’s electrical energy and will demonstrate the technical and commercial capability of hybrid mini-grids using solar PV and VRFB technology at grid parity. While Vametco sold 26 mtV for the production of electrolyte for the VRFB, it has not used any of its own capital for the project. In addition, the hybrid mini-grid project will contribute towards reducing the carbon footprint of Bushveld’s mining and processing operations. It will cut CO2 emissions by more than 8,000 metric tonnes per year (and nearly 200,000 tonnes over the 25-year life of the project). This will be a positive contribution towards South Africa’s low-emission strategy and Bushveld Minerals’ environmental, social and governance (ESG) objectives. Captive opportunities Bushveld Energy is targeting captive opportunities within Group of up to 120 MW of PV and 180 MWh of storage. These projects will also reduce the Group’s reliance on Eskom, help control cost increases of energy costs and reduce the carbon footprint of its vanadium production, as part of a broader, long-term ESG strategy. 2022 outlook and capital expenditure At the time of writing, Bushveld Energy is focused to: – Progress construction of the BELCO electrolyte plant and qualiﬁcation of electrolyte, with completion targeted for H1 2023; – Commence construction of the Vametco mini-grid, with completion of construction targeted in H1 2023; – Initiate feasibility studies for the captive opportunities within the Group of up to 120 MW of PV and 180 MWh of storage and continue developing a pipeline of external projects in southern Africa; – Continue scaling up our electrolyte rental product, both with new 46 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information Discussions for the construction phase funding of Lemur’s power projects are ongoing with the Development Bank of Southern Africa, which is the Mandated Lead Arranger (MLA) for the project. Furthermore, Lemur remains in discussions with potential strategic partners, funders, and the Government of Madagascar on the implementation of the project. THE PQ IRON & TITANIUM PROJECT The PQ Iron & Titanium Project is a multi-commodity project which forms part of the Mokopane Project, located 45 km north northwest of the town of Mokopane in Limpopo Province, South Africa. 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 ll 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. Post year end, 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 On 27 September 2021, the Company announced the sale of its 4.76 per cent shareholding in AIM-listed Afritin Mining Limited, an African mining company with a portfolio of tin assets in Namibia and South Africa and realised a total of approximately US$3.5 million. The proceeds of the sale were used for general corporate purposes. contracts and off-balance sheet ﬁnancing to support the contracts; and – Support CellCube, together with the other shareholders of EHL, to enable it to capitalise on the rapidly-growing global energy storage market. Total capital expenditure for 2022 is estimated at circa US$8.1 million, with most of the cost associated with growth initiatives. NON-CORE INTERESTS Additional investments in coal, coal-to-power and tin Coal – Lemur Holdings Lemur Holdings (Lemur), a wholly owned subsidiary of Bushveld Minerals, is developing an integrated power project, the Imaloto Power Project, in the southwest of Madagascar. According to the 2019 CPR update, the project boasts a 136 million tonne coal resource. The project also consists of an initial 30 MW (scalable to 60 MW) mine-mouth coal-ﬁred power station and over 500 km of a 138 kV transmission line. The Imaloto Power Project is in its advanced stages of development with most of the key studies complete and key agreements in place. In 2018, Lemur executed a binding 30-year 25 MW Power Purchase Agreement with the state-owned utility, JIRAMA, as well as a concession agreement with the government of Madagascar, which gives it the right to build, own, operate and supply 60 MW of power, as well as build the transmission line. Lemur has four exploration permits and one exploitation permit for the coal mine, covering a total area of about 81.25 square kilometres. The mine will supply all the coal required by the power plant. Lemur’s energy projects are strategically located in the least- developed but mineral-rich southern region of Madagascar, which currently does not have a power grid and is almost entirely powered by isolated generators. In addition to substantially increasing the generation capacity in Madagascar, the initial capacity of electricity supplied by the Imaloto Power Project will provide baseload power and form the basis for a power grid for the region. Progress Update The travel restrictions imposed in Madagascar since the beginning of the COVID-19 pandemic in March 2020 had a negative impact project development activities. Notwithstanding the travel restrictions, Lemur completed all the ﬁeld studies, including conﬁrmatory drilling for the Imaloto coal mine during 2021. Among the key ﬁeld studies concluded are the mine’s Deﬁnitive Feasibility Study (DFS), the Environmental and Socio-economic Impact Assessment (ESIA) and the Environmental and Social Management Plan (ESMP). In addition to the coal power project, in 2021, Lemur converted 30 MW out of the total granted generation capacity of 60 MW to solar energy generation. The resulting solar plants will be located along the transmission line route. Lemur is currently conducting the technical feasibility and environmental studies for the solar project. The solar generation plants will be developed in parallel with the coal power project and will offset the Imaloto project’s carbon footprint. It is important to note that the submission of the environmental permit application to the Malagasy Environmental authority (O.N.E) is pending the conclusion of the environmental studies relating to Lemur’s solar project. Annual Report and Financial Results 2021 47 Principal Risks Principal Risks Nature of Risk Risk Owner Risk Rating Mitigating Action Risk Rating: Economic Strategic Operational 1. Funding of Working Capital and Debt Global market volatility affecting demand and commodity prices: − A significant decrease in vanadium commodity prices − Adverse changes in global demand Executive Committee (Exco) − Disrupted domestic and international logistics channels, including effects of COVID-19 − Growing trade protectionist policies in key markets Volatile exchange rate − Significant strengthening of the Exco exchange rate Exco Going concern may materialise in event of: − Missing budgeted production, sales and costs − Depleting cash resources due to debt servicing Breach of Vametco debt covenants levels Finance Director − Managing operations efficiently and cost effectively. − Commodity prices monitored on a regular basis. − Significant portion of Bushveld sales are frame contracts ensuring sufficient level of production is on off take. − Operational flexibility enabling a wide spectrum of vanadium products and developing a broad global market strategy. − Global vanadium market movements monitored on a daily basis – arbitrage pricing differences across markets and products. − Reducing surplus finished goods stock levels to generate additional cash. − Maintaining minimum stock levels and managing inventory levels at various global warehouses. − Careful pre-planning of product shipping and identification of multiple export channels. − Close and regular monitoring of international legislation. − Diversification of products and targeted international markets. − Proactive engagement of policy makers in high priority markets. − Managing our operations to the lowest cost levels possible. − Current and forecast exchange rates monitored daily. − Hedging considered as a mitigating strategy should exchange rates fall below specific thresholds. − Robust budgeting processes and regular monitoring of performance against budget. − Cost containment measures and controls in place and prioritisation of expenditure. − Funding options reviewed and alternate funding mechanisms proactively explored. − Regular dialogue with debt funders. − Regular monitoring of working capital requirements and expenditure in relation to debt covenant compliance. − Regular communication with lenders. − Taking proactive corrective measures ahead of potential covenant breaches, including considering alternate funding options and/or covenant waivers. 48 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information Nature of Risk Risk Owner Risk Rating Mitigating Action Risk Rating: Economic Strategic Operational 2. Operational Performance Director: Operations − Unplanned plant and equipment breakdowns causing production delays − Quality of Vanchem feedstock − Vanchem Kiln 3 production targets not met as a result of ramp-up challenges Director: HR/ Director: Operations − Unprotected strikes and community protest action − Legacy issues with labour unions may lead to unprotected industrial action − Unreasonable demands to by-pass procurement policies and processes to favour non-qualifying suppliers/service providers from the community − Unreasonable demands to employ community members where no vacancies exist or where no suitable candidates from the community are identified Plant and infrastructure maintenance backlog Director: Operations − Regular monitoring and constant review of plan versus actual. − Prioritised and revised plant and equipment maintenance strategy in progress. − Daily monitoring and proactive response to breakdowns. − Emergency repairs and maintenance teams mobilised and prioritised. − Capital allocated for refurbishment and maintenance. − Quality control introduced through dry- magnetic separator for the Upper Seam. − Management monitoring and supervision. − Pro-active stakeholder strategy in place resulting in frequent consultations and engagement with stakeholders, including communities. − Continue embedding a partnership culture and pro-actively engage the union stakeholders, in line with our Employee Relations strategy. − Addressing legacy and historical practices with organised labour. − Finalise long-term wage agreements. − Capital prioritised for refurbishment and maintenance of plant and equipment. − Plant and infrastructure maintenance prioritised during stay in business planning. − Planned annual plant shutdown executed and conduct routine maintenance and repairs. Reactive asset maintenance and scheduling Director: Operations − Asset management strategy being developed. − Asset register in place. Increased costs 3. Licence to Operate Compliance with Mining Charter III Transitional Plan and MPRDA Director: Operations Director: Strategy and Corporate Services − Cost-focused steering committee to monitor and control cost items. − Dedicated procurement programme that prioritises contract spend over free spend. − Building trusted relationships with stakeholders, including host communities. − Stakeholder engagement strategy in place. − Regular engagement with DMRE relating to the implementation of the Social and Labour Plan. Annual Report and Financial Results 2021 49 Principal Risks continued Nature of Risk Risk Owner Risk Rating Mitigating Action Risk Rating: Economic Strategic Operational 4. Talent Exco & HR Director − Inability to retain and recruit talent among non-bargaining unit staff in light of highly competitive remuneration packages in the market as well as wider work life balance choices post the pandemic 5. Environmental, Social and Governance Compliance with legislation: − Mokopane Project Water Use Director: Operations Licence application not lodged − Mokopane Project not commenced mining after one year of mining right granted, including outstanding DMRE approval for extension − Vanchem Water Use Licence lapsed February 2022 Lack of governance frameworks and policies Non-compliance with Minimum Emission Standards (MES) at Vanchem and Vametco Director: Legal, Governance & Compliance/ Finance Director Director: Operations Ground water pollution Director: Operations − Continue embedding the Group-wide culture programme and our values as part of establishing the Bushveld way across the operations. − Talent management and succession planning is being integrated into the business and looks at Group-wide talent. − Continuously reviewing our working model to improve our hybrid work model where practical to do so. − Review and communicate our employee value proposition. − Benchmarking of compensation against the market on an annual basis to understand any gaps in compensation. − Ongoing engagement with communities. − Ongoing engagement with DMRE. − Ground water feasibility to be conducted to determine ground water availability. − Application for non-compliance with MPRDA Section 25 lodged with DMRE. − Amendment and renewal of Vanchem Water Use Licence to the Department of Water and Sanitation has been completed. Awaiting Department response on the application. − Corporate Governance Framework being developed. − Regulatory Compliance Framework in place. − Kiln off gas system has been installed and commissioned. − Application lodged for postponement to comply with MES for Vanchem and awaiting National Air Quality Officer response. − Maintenance of pollution abatement system. − Ongoing stack monitoring to monitor compliance with MES and/or Atmospheric Emission Licence. − Ground water pollution modelling completed. − Ongoing monitoring of ground water quality. − Capital plan to implement ground water remediation plan for Vametco. − Multi-stakeholder engagement to address ground water remediation at Vanchem. − Lining of trenches transporting hazardous spillages into storage dams. − Operate pollution plume boreholes at maximum capacity – net increase in water balance at Vametco. 50 Annual Report and Financial Results 2021 Nature of Risk Risk Owner Risk Rating Mitigating Action Risk Rating: Economic Strategic Operational Business Overview Governance Financial Statements Supplementary Information 7. Develop Products for Energy Transition Slow pace to develop products to demonstrate proof of concept fast enough to respond to the energy transition in time Bushveld Energy – CEO 8.Safety Compliance with safety and health processes and protocols Director: Operations − Insufficient plant maintenance contributes to an unsafe workplace and increased safety incidents Director: Operations − Noncompliance with Tailings Storage Facility Factor of Safety (FoS) at Vametco 9. Electricity Supply and Fuel Costs 10. Global Pandemic Prolonged Unstable electricity supply from Local Municipality specific at Vanchem Director: Operations Eskom grid constraints, load- shedding, rising diesel costs for running of generators Risk of COVID-19 infections and emerging variants Exco China’s “zero-COVID” policy is leading to hard lockdowns in world’s biggest vanadium market, thus negatively impacting prices Exco − Ability to achieve financial close and raise third party funding for Vametco mini-grid − Regular review of the market and continual raising of awareness. − Regular monitoring of the products. − Partnership strategy that reduces the cost and risk to the Group while increasing the number of participants in the technologies and products supported by the Group. − Rigorous safety and health protocols implemented and observed. − Continuous monitoring of leading and lagging indicators. − Rigorous pre-employment medical examinations, pre-entry medical examination of contractors, continuous medical examination and exit medical examination by Occupational Medical Practitioner. − Safety given high priority in performance targets of all staff. − Increased safety awareness and campaigns. − Regular and continuous safety briefings communicated. − Safety protocols strictly maintained and adhered to. − Improved adherence to maintenance plans. − Install central penstock to improve pool/beach control. − Implement recommendation of the Tailings Storage Facility FoS report. − Plans to construct Buttress design during 2022. − Engagement with Eskom and government to create a direct Eskom supply. − Stand-by generators and counter measures in place in the case of load-shedding. − Development of self-generation options, including on-site energy storage for all facilities. − Strict enforcement and monitoring of COVID-19 government regulations by COVID-19 Task Team. − Significant decrease in national infection rates since January 2022 due to government- imposed safety protocols. − Continuous communication by leadership encouraging vaccination. − As herd immunity kicks in, restrictions will be eased over time Annual Report and Financial Results 2021 51 52 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information Sustainability Sustainability – Value Beyond Compliance 1. ESG STRATEGY Overview In 2021 Bushveld Minerals developed a comprehensive Environmental, Social and Governance (ESG) strategy with clear performance indicators to guide its efforts to build sustainable development capability and ensure that ESG considerations are integrated into all of its business decisions. It builds on and complements the work undertaken related to the development of an Environmental, Social and Governance Management System (ESG-MS). The purpose of this ESG strategy, which is aligned to the United Nations’ Sustainable Development Goals (SDGs), is to ensure the Group continues to protect and create value for all shareholders and stakeholders. The strategy is underpinned by a materiality assessment that identiﬁed the key ESG issues and opportunities that were most likely to affect the company’s holistic business performance both now and in the future. It covers Bushveld Minerals and its holdings in Vametco, Vanchem and Bushveld Energy but excludes Lemur Holdings. Key ESG topics identiﬁed The identiﬁcation of the key ESG topics was informed by the company’s current realities and future ambitions and were based on: (1) The Materiality Assessment conducted, (2) Bushveld’s Annual Report (2020), Corporate and Sustainability Strategies, publicly stated ambitions, as well as other documentation that was shared with the IBIS team, and (3) The “E”, “S” and “G” strategy workshops, and various internal interviews that were held between July to September 2021. This assessment helped to inform the baseline created, address any identiﬁed gaps, and articulate the necessary ESG goals. Governance Offensive 1. Regulatory compliance 2. Governance & Ethics 3. Transparency (Reporting) Environmental Social Ambition Offensive Priorities 1. Climate action 2. Energy supply and consumption 3. Water Security 4. Managing & Minimising Waste 5. Sustainable Closure 6. Biodiversity 7. Air emissions Offensive to Transformative 1. Inclusive employment, procurement and value creation 2. Community engagement and wellbeing 3. Workplace health & safety 4. Labour Management Plan Bushveld Minerals’ ESG Strategy Journey In order to account for current realities and available resources, the ESG Strategy has been divided into two phases. The ﬁrst phase (2021-2025) is mainly focused on compliance issues and ensuring alignment/standardization of practices across the business. While the second phase (2026 onwards) is more focused on setting and achieving more ambitious ESG targets (aligned to current and future market expectations as well as the emerging competitor landscape). However, the Group intends to remain responsive to emerging market conditions, requirements and opportunities, and recognises that certain aspects of the more ambitious second phase may materialise sooner. Phase 1 – Evaluate & Formulate Deliverable – A materiality assessment – An ESG Strategy & Implementation Plan (RoadMap) – An ESG Report Template with recommended KPIs SHORT TERM (2021-2022) MEDIUM TERM (2023-2024) LONG TERM (2025 AND BEYOND) Journey shows movement from compliance to transformative Phase 2 – Compliance & Alignment – Reducing ESG risks and liabilities – Completion of draft ESG policies and frameworks What does it mean practically? – Most urgent areas of non-compliance are addressed Phase 3 – Compliance, Alignment & Implementation – ESG risks and liabilities reduced – Opportunities identified What does it mean practically? – Actions implemented and tracked – Baselines used to measure and – Draft ESG policies, procedures and drive performance frameworks are finalised – Systems, policies and processes are – Co-ordination of ESG issues across the embedded Phase 4 – Embed & Transform – Sustainability part of organisation’s DNA – Business model reinvention What does it mean practically? – New markets identified and leveraged – Automated systems for management – Sustainability awards and recognition – Impact measurement and monitoring – Partnerships to drive sustainability organisation are agreed upon – Alignment of ESG strategy to the corporate strategy (currently under development by the Bushveld leadership team) – Sustainability KPIs embedded in all job roles – Co-ordinated external stakeholder engagements – Annual external ESG reporting – ESG capacity building and training Annual Report and Financial Results 2021 53 Sustainability continued Alignment to sustainable development goals (SDGs) The SDGs below are most applicable to Bushveld’s ESG Strategy journey. It is important that the Groups contributions to the SDGs be evaluated regularly to ensure they are still applicable and reﬂective of the business’ operations and priorities. SDG Bushveld’s contribution to the SDG Clean water and Sanitation – Bushveld has a number of ongoing water monitoring, water efficiency and water recycling/recovery initiatives and is looking to provide excess purified water to communities – These initiatives relate to Targets 6.3 and 6.4 Affordable & Clean Energy – Given the importance of battery storage solutions for renewable energy projects, as well as Bushveld Energy’s battery manufacturing operations and investments there is link to SDG Target 7.2. Decent Work and Economic Growth – The Bushveld Group creates jobs that are compliant with the sector health and safety standards, and this is aligned to SDG 8.5 – Bushveld has also developed Social & Enterprise Development initiatives, as well as preferential procurement policies that support SDG 8.3 Industry, Innovation & Infrastructure – Bushveld Energy’s facility which will make electrolyte for vanadium flow batteries in the Eastern Cape, directly supports SDG 9.2 through its local industrialisation efforts Responsible Consumption & Production – Bushveld Group has implemented a number of mineral and non-mineral waste management initiatives and plans to take further action in this space. This supports SDGs 12.4 and 12.5 – Given Bushveld Group has started reporting on its ESG matters and intends to launch its first sustainability report for 2021 next year, this contributes to SDG 12.6 Climate Control – The Bushveld Group tracks and monitors its emissions and will continue to look for ways to improve its operations. This supports SDG Target 13.2 ESG Management System In addition to the ESG strategy and road map that has been developed, the Group has also developed an ESG management system, which is in line with the International Finance Corporation (IFC) Performance Standards. It also incorporates the requirements of the ISO 14001:2015 Environmental Management Systems and ISO 45001:2018 Occupational Health and Safety Management Systems to facilitate future alignment with these standards and certiﬁcation at an operational level. Collectively, the ESG strategy and management system will assist Bushveld and its operations to meet its obligations in a systematic and structured framework. 2. SAFETY AND HEALTH Bushveld Minerals recognises that the safety, health and well-being of employees and communities is key to achieving its long-term success. Our approach to safety and health is risk-based, starting with a Baseline Risk Assessment, moving to an Issue-based Risk Assessment, and then to a Continuous Risk Assessment, which includes lagging and leading indicators. 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 health and safety as of paramount importance. Our commitment to safe production has been illustrated through our efforts to become compliant with industry-leading standards. In 2021, we furthered our progress in complying with the Quality Management System aligned to ISO 9001:2015 requirements. At the time of writing the certiﬁcation audit was underway. Moreover, the Group intends to have both Vanchem and Vametco operations Occupational Health and Safety Management Systems certiﬁed as per ISO 45001: by the end of 2023. Training is directed at making sure our employees not only work responsibly for their own well-being, 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 health and safety systems and conditions will keep us in the forefront of the industry. 54 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information Safety Bushveld Minerals’ priority is the safety and well-being of all employees and contractors. Our commitment to safe production was illustrated in 2021 not only by the fact that we maintained a zero fatality record but also the number of reported injuries declined to 18 in 2021 compared to 34 in 2020. The Total Injury Frequency Rate (TIFR) improved from 16.06 in 2020 to 7.78 in 2021 due to decreased number of incidents recorded and our continued efforts to eliminate injuries. Our improving safety performance is in part due to the safety stand downs that are conducted after each reported injury and lessons learned from the investigations are shared in the group to prevent repeat incidents. Safety indicators for the Group are show below: Safety Indicators Category Injuries Lagging Indicators Incidents Authority Instructions Safety Indicators First aid cases Medical Treatment cases Fatalities Total Recordable Injury Lost Time Injury Time lost LTIFR TIFR Critical Incidents High Potential Risk Incidents Near Miss incidents reported Section 55 Directives Section 54 Directives Vametco Vanchem Bushveld Minerals 8 9 0 17 0 0 0.0 8.62 0 3 0 2 0 0 0 0 2 2 6 4.37 4.37 0 0 0 0 0 8 9 0 19 2 6 1.07 7.78 0 3 0 2 0 Bushveld Vametco’s safety performance for 2021 and 2020 was zero fatalities and zero lost time injuries. There were zero fatalities & zero LTI in 2020. The Total Injury Frequency Rate (TIFR) improved from 18.42 in 2020 to 8.62 in 2021. Bushveld Vanchem recorded zero fatalities and two lost time injuries in 2021 compared to one in 2020. This caused an increase in the LTIFR rate from 2.63 in 2020 to 4.37. The TIFR also decreased from 5.26 in 2020 to 4.37 in 2021. Health Health Metrics Our employees’ health and wellness is of paramount importance as such chronic monitoring, Tuberculosis screening and HIV/AIDS voluntary counselling and testing is conducted at our on-site and off-site Occupational Health Clinics. There were no TB, Pneumoconiosis or any respiratory disease cases reported in 2021 and 2020. Health metrics Category Health Indicators Vametco Vanchem Occupational Diseases Total Occupational diseases COVID-19 New “Other” cases New Noise induced hearing loss cases New Respiratory diseases Positive Cases Fatalities – COVID-19 related Non-occupational Diseases 1 1 0 145 5 20 0 0 0 53 0 1 Bushveld Minerals 1 1 0 198 5 21 In 2021 one noise induced hearing loss (NIHL) case and 21 non- occupational diseases were reported in the Group compared to 2020, where zero NIHL and three non-occupational diseases were reported. COVID-19 Response The COVID-19 pandemic continued to have an impact on our employees and business generally in 2021. The Group recorded 198 new COVID-19 positive cases in 2021, a signiﬁcant increase in cases compared to the total of 51 COVID-19 positive cases recorded the previous year. It is with sadness we report that, during the second and third waves in January and July 2021, respectively, ﬁve of our colleagues lost their lives to COVID-19 related illness. All ﬁve employees worked at the Vametco operation. Our deepest condolences to the families, colleagues, and friends of our departed colleagues. Annual Report and Financial Results 2021 55 Sustainability continued COVID-19 vaccination drives were conducted in partnership with the Department of Health and Impala Platinum. Employees were encouraged to vaccinate through regular awareness and education initiatives. These are ongoing efforts to get as many of our employees vaccinated. While Bushveld Minerals supports COVID-19 vaccinations, we recognise that this is a personal choice and thus remains voluntary. As at the end of 2021, 41 per cent of Vametco employees and 66 per cent of employees at Vanchem were vaccinated for COVID-19, which include contractor employees. Various measures continued to be implemented to prevent, mitigate, monitor, and control the risks posed by the pandemic. Personal protective equipment, thermometers and sanitisers were provided to employees. To ensure the health and safety of all employees, self-monitoring and reporting were encouraged. Employees with COVID-19 symptoms were urged to stay at home and consult a medical practitioner for testing and further treatment. Employees who tested positive were followed up to ensure they received treatment and support. Contact tracing was conducted to identify those who may have been exposed and isolate them. Screening of all employees entering the workplace continued while social distancing was encouraged. Regular cleaning and disinfecting of workplace surfaces were maintained. COVID-19 Marshalls/SHE Representatives assisted with monitoring and enforcing the health and safety protocols within their work teams. Where practical, employees were also permitted to work from home to reduce the number of employees in the workplace. The COVID-19 Task team continued to monitor the situation, assisting the Group to navigate through this pandemic and ensure business continuity and focus. 56 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information 3. ENVIRONMENT Bushveld Minerals’ environmental strategy is centred on compliance with various environmental laws and regulations (national, provincial and local) and alignment with international standards, including the IFC’s environmental and social performance standards and the ISO 14001:2015 Environmental Management system. Annual environmental performance assessment audits are conducted by an external environmental specialist and by regulatory authorities. They consider the Group’s compliance with the conditions of the Environmental Management Plan (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. Status of Environmental operating licences/ authorisations and compliance Bushveld Mineral’s aims to comply with all relevant legislative and regulatory requirements including other international standards. We are pleased to report that, in 2021, the Company was awarded a number of licences, Environmental Authorisations by various government bodies and certiﬁed ISO 14001:2015 at Vametco operation. All these ensures that our operations are fully compliant with South African legislation. These are detailed in the table below: Vametco Vanchem Integrated Environmental Authorisation (IEA) In 2021, Vametco was issued with an Integrated Environmental Authorisation by DMRE. – The Authorisation replaces the 1998 Record of Decision issued in terms of the repealed Minerals Act of 1991 and ensures alignment of Vametco’s activities with modern legislations and regulations such as NEMA and NEMWA. – The authorisation allows for phase 3 expansion projects inclusive of: • additional TSF to store 28.7 million tons, • Calcine Dump expansion to store additional 8.9 million tons, • additional Waste Rock Dump to store 5.9 million cubic metres, Environmental Authorisation (Basic Assessment (BA)) – On 09 September 2021, Vanchem was issued with an Environmental Authorisation to allow for the construction of 120 m³ storage hazardous tanks at the chemical plant. and • additional Barren Dam to store 104 megalitres of barren solution. Air Emission Licence (AEL) The AEL is now valid until August of 2026. – In October 2021, Vametco’s AEL was amended to align the Boiler emissions to the Minimum Emissions Standards. • In November 2021, an AEL compliance inspection was conducted by the Licencing Officer and no non-compliance issues were raised. Water Use Licence (WUL) Vametco Water Use Licence is valid until April 2037. – An amendment to the licence was, at the time of writing, underway to align with Phase 3 expansion projects. Air Emission Licence (AEL) The Provisional Air Emission Licence (PAEL) issued to Vanchem main plant expired in August 2021. • While the renewal licence application was lodged timeously, the Licensing Authority had not issued a renewal AEL by the time of writing. It is important to point out that all compliance inspections were conducted by the Licencing Authority and culminated into a draft AEL being issued in November 2021. The ﬁnalisation of this process remains a priority for the 2022 reporting year. Water Use Licence (WUL) – Vanchem Water Use License expired in February 2022. – Vanchem initiated a license renewal consultation meeting with the Licensing Authority in April 2021. • A follow-up meeting was held in October 2021, wherein DWS issued a list of requirements that should be submitted by Vanchem in support of the application for renewal. • Currently the renewal application is undergoing public review (60 days, until 20 July 2022). Waste Management Licence (WML) – The Vanchem Calcine and TSF operates under the WML which is valid until August 2029. • Permission to commence with dumping on the DWF extension was granted by DFFE in March 2022. Annual Report and Financial Results 2021 57 Sustainability continued Environmental incidents In 2021, Bushveld Minerals recorded a total of 24 environmental incidents, out of which only two were classiﬁed as signiﬁcant compared to 13 environmental incidents, of which one was classiﬁed as signiﬁcant incident and reported to the authorities. No environmental directives or ﬁnes for non-compliance were issued to either operation in the period under review. Summary of Signiﬁcant Incidents reported in 2021 Incident Type Vametco Vanchem Total Minor Environmental Incidents Significant Environmental Incidents Major Environmental Incidents Environmental Directive/Order Fines for non-compliance 20 1 0 0 0 2 1 0 0 0 22 2 0 0 0 Incident Location Description of Incident Key Learnings Vametco On 14 January 2021, the Barren tank storing Barren liquor failed and released all content (354 m³). The released content ﬂowed into the stormwater dam located downstream of the plant. The released Barren liquor rainfall received during the time of the incident (20 mm) resulted into an overﬂow of the stormwater dam and ultimate discharges of 5,441 m³ of polluted water beyond the mining footprint. Continuous rainfall inhibited immediate mop-up or clean-up. – Improve control of Storm Water Dam (SWD) freeboard during dry season to create adequate capacity to accommodate wet season and accidental spillages. – Ensure ﬁt for purpose design of the hazardous material storage facilities, taking into account saline and corrosive nature of the material to be stored. – Ensure hazardous material storages have adequate bunding to contain spillages in the event of failures. Status of corrective actions Investigation report was communicated to DWS and DMRE. All actions were successfully closed out. Vanchem Storm Water Dam overﬂow resulting in discharge of polluted water following rainfall event. – Sizing of the dam in accordance to catchment it is serving is vital. – One kiln operation out of three limit the Business Unit evaporative capacity, hence overﬂow. Incident was reported to DWS, and mitigation measures implemented. Energy management and climate change The table below summarised fuel consumption per source at Vametco and Vanchem: 2021 Energy Consumption Unit Vametco Vanchem Total Energy Consumption Electricity (ESKOM) Sasol Gas LPG bulk Total Synthol Fuel (Heavy Fuel) Pea Coal Duff Coal LPG Cylinder (48 kg/cylinder) Acetylene (13.6 kg/cylinder) Diesel # = no data, n/a = Not applicable MWH 86,685 30,605 47,056 n/a n/a 110 GJ Kt 117,290 47,056 110 KL Kt Kt Kt Kt KL 570 12 21 1.2 2 2,452 n/a 19 14 # 0.6 224 570 31 35 1.2 2.7 2,676 In 2021, Bushveld Minerals Group developed a Climate Change Procedure which is aligned to the International Finance Corporations’s (IFC) ESG Performance Standard 3 dealing with Resource Efficiency and Pollution Preventions. The procedure seeks to ensure that, in 2022, each operation develops a Greenhouse Gas (GHG) emissions reduction plan that include the following: – energy efficiency and carbon reduction assessments, – the development and maintenance of an energy and GHG emissions savings register, and – the establishment of an energy and GHG emissions savings target. 58 Based on the 2021 energy consumption data, the table below summarises GHG emissions for each operation. 2021 GHG Emissions Tonne GHG/Total products (Nitrovan/ Chemicals (V205) Vametco Vanchem Totals CO2-eq CH4 104,339 1.02300 90,200 0.97000 194,538 1.99300 N2O 1.44100 1.39000 2.83100 Below is a summary of tons emitted per ton of product produced between the two business units: GHG Emission Type CO2-eq CH4 N2O Vametco Vanchem Emission/Ton of product produced (Nitrovan) Emission/Ton of product produced (Chemical Products) 39.41 0.00039 0.00054 46.23 0.00050 0.00071 Water management Water management is integral to the Group’s licence to operate. Compliance with the requirements of the Group’s Water Use Licence is a priority. Given the vital importance of water to the functioning of our operations, we have a robust system of water accounting in place at Vametco. At the time of writing a similar system was under development for Vanchem. Water intensity In 2021 Vametco Business Unit achieved water intensity of 1.8 as opposed to Vanchem 2.2 Kl/tonne of ore milled. Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information FY2021 Water Intensity Pollution Plume Abstraction (ML) 2.2 1.8 ) d e l l i m e n n o t / l K ( 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 Vametco Vanchem Water withdrawals The Group used/ consumed a total of 2,947 ML in 2021. Out of this total, about 1,491 ML/51 per cent of water was fresh/new augmentation. A table below provides the various sources of water and quantities withdrawn. 2021 Water Withdrawals from Resource (ML) 800 700 600 500 400 300 200 100 L M 240 498 580 0 Third Party Purchased Water (Waterboard/ Municipal) Mine Dewatering (Ground Seepage) Vametco Vanchem 97 Borehole – Potable Purpose 76 Borehole – Plume Remediation Water Discharge A total of 261 ML of water was discharged from Vametco in 2021, with only 1 per cent of the discharged water comprising dirty water from dirty circuits, with the remaining 99 per cent discharged from the clean circuit. This was inﬂuenced by climatic conditions such as rainfall and occurrence of extreme weather events. To ensure safe continuation of work, the business unit risk mitigation strategy also allows for a controlled release of water as a last resort, and this is also provided for in the Water Use Licence. 2021 Source of Water Unit (ML) Vametco Vanchem Water Discharges Dirty – Stormwater dam Clean circuit # = data not available ML ML 2.4 259 # 0 Total 261 2.4 259 L M Groundwater pollution plume remediation Vametco Water Use Licence point out to the existence of historic groundwater pollution plume which should be managed through series of interceptor or scavenger boreholes. Below is the performance of scavenger boreholes against WUL set targets: L M 250 200 150 100 50 0 76 47 44 FY2019 FY2020 FY2021 Actual Abstraction WUL Target The performance of pollution plume abstraction boreholes failed to meet the minimum abstraction threshold provided for in the WUL over the past three ﬁnancial years, with FY2021 being the worst year by retaining on 44 ML. On 18 June 2021, an aquifer analysis on each pollution plume borehole was concluded and the analysis report revealed that: – ﬁve boreholes out of nine were using a smaller pump with a yield of 1.2 l/s (litre per second) hence they were unable to withdraw enough water out of the well, – the boreholes were only operated during dry season and remain shut or dormant during wet season as they are deemed to be contributing to net positive water balance, and – two of the boreholes have caved in, while two others are dry and require replacement. On the back of these observations, Bushveld aims to purchase and install pumps with minimum yield of 4 l/s on the ﬁve boreholes, and to redrill four replacement boreholes in 2022. Water recycling The Group manage to recycle or reuse a total of 1,195 ML of water in FY2021, and this equates to total reuse/recycling efficiency of 41 per cent. Water Recycling/Reuse (ML) 1,200 1,000 800 600 400 200 0 TFS / Calcine Toe drain Stormwater Sewage effluent Vametco Vanchem Vanchem business unit achieved 29 per cent recycling efficiency, whilst Vametco achieves an impressive 49 per cent recycling efficiency. Annual Report and Financial Results 2021 59 Sustainability continued Air quality and environmental dust fall-out Stack Sampling: AEL Compliance Sampling Point AEL Limit (mg/Nm3) Kiln Stack MVO Stack Precipt Stack Nitrovan Stack Boiler 1 & 2 Stack Boiler 3 Stack PM SO2 NH3 PM SO2 NH3 PM SO2 NH3 PM SO2 PM SO2 PM SO2 50 1,200 30 50 1,200 30 50 1,200 30 50 1,200 250 2,800 250 2,800 May-20 592 2,788 0.2 48 – 0.0 18 134 0.0 179 – 226 635 – – Nov-20 88 1,902 0.2 97 0.3 0.1 60 – 0.0 140 – – – 391 357 May-21 Nov-21 Comment 50 90 0.2 46 – 0.1 41 – 0.0 155 2 224 266 334 536 195 554 Does not comply Complies 21.3 Complies 217 Does not comply 336.8 Complies 3.4 46 Complies Does not comply – Complies 0.0 Complies 442 Does not comply 12 Complies – – – – Complies Complies Does not comply Complies Vametco Kiln, MVO, and Boiler 3 stacks do not comply to AEL Particulate Matter (PM) emissions requirements. Capex is required to refurbish or upgrade the current abatement technologies to meet the AEL performance requirements. Waste generation and management The tables below provide breakdowns of waste types generated per business unit during the 2021 ﬁnancial year. 2021 Waste generation Unit Vametco Vanchem Total While all other stacks sampled for emission compliance meet the AEL and Minimum Emissions Standards (MES), Kiln 1 stack failed to meet expected performance with regard to PM and SO2 emissions. Sampled Parameter Date of Sampling Actual (mg/Nm³) PM SO2 24-Aug-20 08-Dec-20 19-Aug-20 15-Feb-22 24-Aug-20 08-Dec-20 19-Aug-20 15-Feb-22 62 241 800 2,635 7,221 3,340 14,033 10,359 AEL Limit (mg/Nm³) 50 22,331 Hazardous waste (off-site disposed) General waste (Municipal landfill) Sewage effluent disposed (Municipal sewer system) Hazardous waste – Mineral tailings (Calcine) Non-hazardous waste – Mineral tailings (TSF) Waste rock dumps Recycled waste (aper) Recycled waste (Scrap metals) Recent samples show deteriorating plant performance regarding compliance to AEL emissions requirements. Should SO2 emission at Kiln 1 default to the MES limit of 1,200 mg/Nm³, the plant would fail to comply to AEL requirements. Recycled waste (Rubber) Recycled waste (Used Oil) Boiler Ash – Community Brick Manufacturing Kt Kt 17 148 0.4 0.7 17 149 ML 360 79 439 Kt Kt Kt Kt Kt Kt Kt Kt 305 155 460 787 1,775 0.002 0.50 0.03 40 53 n/a 840 1,775 0 0.002 0.20 0 0 0.70 0.03 40 3.7 2.5 6 Considering this performance, Vanchem is to embark on a ﬁve-year plant refurbishment CAPEX programme which will ensure the refurbishment or upgrades of the current emissions abatement technologies. This project schedule, however, requires approval by the National Air Quality Officer within the Department of Environmental Affairs as it will impact on AEL compliance. Vanchem Main plant and Ferrovanadium plant were issued with AEL valid until 2027. Application for postponement to comply with MES has been lodged with DFFE in January 2022 and awaits response. During 2021, Bushveld Minerals generated a total of 3,726 kilotons of waste, with mineral waste (Tailings, Waste Rocks, and Slimes) constituting 83 per cent of the total waste generated, whilst 16 per cent of waste ends up in off-site landﬁll disposal facilities (municipal and hazardous landﬁll). 60 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information Bushveld Minerals Group Total Waste Generated (Kt) 1% 16% 83% Mineral waste Off-site landfill disposal facilities Recycled waste Mineral waste is managed internally and forms part of facility closure planning. Land and biodiversity management Land and biodiversity management remains of the highest priority since it enables the Licence to Operate. Of the 11,618 hectares of land that the Group owns or manages, only 5 per cent of that has been disturbed for operational activities. Vametco (Brits -North West Province) Vanchem (Witbank- Mpumalanga Province) PAMISH (Mokopane -Limpopo Province) Total Land Management Unit Total Land leased/ managed/owned Ha 1,508 82 10,029 11,618 Total Land disturbed Total Land Ha 543 Rehabilitation Ha 8 35 0 0 0 578 8 No land was rehabilitated in 2021 and as such substantial efforts would be required from 2022 and beyond to ensure concurrent rehabilitation is effected. Each business unit will need to develop rehabilitation targets to reduce land disturbance footprint. Annual Report and Financial Results 2021 61 Sustainability continued 4. SOCIO-ECONOMIC DEVELOPMENT Bushveld Minerals desires to drive socio-economic development, regulatory compliance and creation of value beyond compliance in communities where we operate, whilst remaining commercially competitive and delivering value to our stakeholders. Competitiveness Social Licence to operate Access to quality local service providers Meeting compliance targets Commercial advantages from supplier and infrastructure developments Employees beneﬁting from development initiatives Access to quality skills Sustainable proﬁts Relevant and feasible collaboration and shared value opportunities Trusted implementation partners Alignment between compliance requirements and community needs Maintenance plan and commitment in place when handing over infrastructure Greater impact and legacy of collaboration and shared value Clear commitments and accountability among stakeholders Licence to operate Recognition for successful collaboration initiatives Effective stakeholder engagement Successful initiative implementations Responsible and efficient use of funds Able to address ‘real’ community needs Well functioning and thriving communities Measureable impact Sustainable Social and Economic Impact Social and Labour Plan Vametco received approval of its 2018 to 2022 Social Labour Plan from the Department of Mineral Resources and Energy in June 2021. Post the approval, Vametco focused on streamlining all community programmes committed for in the Social and Labour Plan. This was to ensure that project scopes for all Mine Community Development projects element of the SLP are ﬁnalized and the process to identify service providers to assist with implementation of such projects kicks off. Implementation of some Local Economic Development project started in Q4 2021. Learnerships: Learnership programmes are offered to both employees and non-employees. In 2021, there were 35 non- employee learners that were progressing on the three years learnership programme as well as ﬁve employee learners. Trades were ranging from: Fitting, Fitting and Turning, Electrical, Instrument Mechanician, Rigging, Boiler-making and Diesel Mechanics. Despite the disruption that the COVID-19 pandemic caused, they have all managed to attend their due training towards the end of 2021 under extreme pressure as the college was experiencing high rates of quarantines. The Company’s current focus is the implementation of the committed projects in consultation with the municipality, beneﬁciary communities and other relevant stakeholders. The process for establishing the 2023 to 2027 SLP is already underway where Vametco has outlined its strategic intent in community development and is engaging relevant community stakeholders to submit their community development programmes proposals for consideration for the inclusion in the new SLP. Human Resources Development Human Resources Development (HRD) is one of the Group’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 employment beyond Bushveld Minerals. The HRD programmes include learnerships, internships, bursaries, portable skills and Adult Education and Training (AET). The HRD programmes and achievements in 2021 is alluded below: 62 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information Internships: out of eight internships on a two-year programme, three of the learners were absorbed into permanent position while they were still in internship programme which left ﬁve interns in the programme for the year 2021. All these candidates came from the surrounding communities receiving support in the following ﬁelds, one Geology; one Finance; one Human Resources; one Chemical Engineering and four in Analytical Chemistry. Two candidates were kept on temporal positions in a way to assist them with experience, even though their term has lapsed. The purpose was to keep them in the loop until we ﬁnd a way to absorb them into permanent positions should opportunities arise. Bursaries: out of the 23 candidates that were continuing from the previous year which were allocated bursaries, only 20 candidates were able to retain and continue with the bursary. Three learners were studying in the Engineering ﬁeld, one in Mining and the other 16 were in support services like Medicine, Accounting, Information Technology, Geology, Law, Education, Chef, Counselling, Business Administration, Sport and Excise Technology as well as Politics. AET: This is an accredited curriculum offered to community members and employees to promote literacy. It focuses on upgrading English communication skills and numeracy. The curriculum ranges from pre-AET to level 4 (NQF1). In 2021, there were 22 learners that were continuing from the community recruitment, of which one was in level 1; 10 were in level 2; 11 were in level 3 and only two candidates were employees. We have experienced a good progress with a satisfactory progress. Local Procurement Bushveld has since ringfenced some of the procurement opportunities for local businesses. Such information was shared with relevant structures as part of the procurement process which also looked at encouraging local businesses to follow a set process whenever they want to do business with the Company. Further to this, Vametco looked at opportunities where local businesses can be developed by “big” businesses to transact with the operation opportunities emerge in future. Nine employees beneﬁted from the bursary system studying various ﬁelds from different universities, and there were also six apprentices who were also supported through their training courses for them to be able to qualify for ﬁnal assessments. Post year end, the Group has appointed a Transformation, Enterprise and Supplier Development Manager whose sole responsibility will be enterprise development and identifying local businesses that the Group can develop to be ready to become business partners. Portable skills: Due to COVID-19 restrictions, the business was unable to make an impact in this area. There were no new developments in this area in FY2021. Outstanding activities were all postponed for 2022. Annual Report and Financial Results 2021 63 Sustainability continued Our People THE CULTURE PROGRAMME Bushveld Minerals Group employs over 700 employees, organised around the Bushveld Vanadium (mining/production) platform, the Bushveld Energy business, and head-office functions, and owing to growing through acquisitions, each with their own distinct cultures and ways of working. This signaled the need for a uniﬁed Bushveld culture, and ultimately the Bushveld Minerals Way. The Business Units operate under a Strategic Control operating model, aligned to the strategic intent of driving operational excellence and efficiencies. However, there is a need to have a culture that supports integration across operating divisions to enable efficiency in operations, business growth and the ability to leverage potential synergies across the group. This culture will be a sustained pattern of behaviours resulting from underlying values and shared beliefs that determine “how we do things around here”. In 2021 we started a programme that aimed at deﬁning, aligning, and enabling the implementation of this desired culture across the organisation. Our shared values The Bushveld Minerals’ shared values were developed: – Based on the agreed culture moves and the desired culture the organisation seeks to embed – To guide the behaviour and decisions of all leaders and employees in the business – To be the set of guiding principles of the desired culture We demonstrate care by focusing on safety ﬁrst, having the courage to pioneer, learn, and adapt, collaborating as one team for shared success, behaving in a way that ensures we are trusted, and always striving to deliver excellence. HUMAN CAPITAL CAPACITY Part of the Group’s focus for 2021 has been building up the human capital capacity across the different parts of our business in line with our operating model choice of strategic control. Some of the measures undertaken include: – Developed assessments that incorporate individual job competencies required in our recruitment processes – Enhancing our human resources support for the operations; – Reviewing and aligning policies and practices; – Conducting human resource mapping process for determining best practices for the future and as part of improving effectiveness and efficiency of our human capital offering; – Improving visibility, availability, and quality of HR service to line management and other stakeholders. We will continue with some of this work as part of our strategic focal areas in 2022 including the implementation of new Human Resources system. OVERALL GROUP STAFF COMPLEMENT The Group employed a total of 736 people at the end of December 2021. The table below provides a breakdown by business unit: Employment Type Permanent Fixed-term Contractors Learners/Apprentices/Interns/ Graduates Total Headcount Corporate incl. Bushveld Energy & Lemur 45 3 1 49 Vametco Vanchem 427 11 39 477 178 26 6 210 Demographic breakdowns can be seen in the circles below: Group: Race 10% Culture Programme implementation The implementation phase of the Bushveld Minerals culture journey is a key focus for 2022. Our culture playbook contains initiatives to embed the desired culture are presented according to the various levels that make up the Culture Wheel. These initiatives are deﬁned per business unit to which they are applicable as well as per the culture move that they are designed to address. Group: Gender The key is to ensure that the implementation plan is well understood, socialised, and adopted across the stakeholder groups. 81% Black White 90% 19% Female (140) Male (590) 64 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information TALENT, DIVERSITY, AND INCLUSION The Group’s racial demographics is diverse closely resembling the national country’s demographics. This is in line with the Company’s deliberate intent of attracting, acquiring and retaining diverse and deep leadership skills to help the business in moving to next level of growth. The Group 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. Bushveld Minerals will continue to focus on employment of women in key roles as part of improving its representivity levels in this regard. Employees with disability will also remain a strategic focus. The Group’s overall aspirations for employment equity include achieving value beyond compliance and improving labour and community relations, with transformation and diversity as a value driver across the business. Part of the Group’s talent management strategy will consist of offering those who join our family real challenging jobs, a conducive and ﬂexible working environment that is aligned to our values. We will also be offering career growth and development, and of course, a reward framework aimed at rewarding exceptional performance and retaining critical skills. EMPLOYEE RELATIONS In 2021, we developed and signed off a comprehensive Employee Relations (ER) strategy that is aligned to the overall business strategic intents. The strategy seeks to ensure labour peace and stability throughout all operations. The ER strategy’s main pillars are compliance with the applicable South African legislations, functional governance structures, structured engagement with labour union stakeholders, structured collective bargaining processes, capacitation of line managers and union leadership and continuous workplace improvement. These pillars are driven by sound policies, procedures, practices, principles, and processes. In 2021 Vanchem successfully negotiated and signed a three (3) year wage agreement with the two unions Association of Mineworkers and Construction Union (AMCU) and NUMSA. This was a strategic agreement in line with operational stability to enable the Kiln 3 project to be implemented. The three (3) year wage agreement at Vametco lapses on 30 June 2022. Post reporting period, the Company announced it has signed a ﬁve-year wage agreement with AMCU. The agreement provides for a seven per cent increase in 2023, then approximately 6.5 per cent for the subsequent years. This long term agreement is a ﬁrst for our Company and an important step to maintain operational stability, long-term labour amity that will allow the Company to focus on executing our strategic initiatives and meeting our objectives. In 2022, the ER function, in collaboration with the Business Units, will roll- out the approved policies for the company. This will result policy certainty and alignment across the business. CARE COURAGE COLLABORATION EXCELLENCE TRUSTED We always CARE for: – The safety and health of our people, maintaining zero harm – Our environment – Each other, our company and our assets – Our communities – Making the right choices for mutual and longer-term sustainable beneﬁt, of all stakeholders We show our COURAGE and conﬁdence by being: – Pioneering and innovative – Resilient, learning and adapting – Curious and open to new ideas – Entrepreneurial mindset – Constructively challenging each-other to make quality decisions We are TRUSTED because we: – Have respect for others – Show integrity through our ethical behaviour and striving to do the right thing ﬁrst time – Aspire to deliver on our promises – Leave a sustainable legacy – Ensuring our license to operate and aspiring to go beyond compliance We COLLABORATE for shared success by: – Building unity through our shared purpose and effective communication – Working together as one Bushveld Minerals team – Teamwork and recognizing each other’s contribution – Being inclusive and seeing strength in our diversity – Sharing knowledge and recognising the value in the experience of our people – Building strong relationships with customers/ stakeholders We continuously strive for EXCELLENCE through: – Rigour, effort and deliberate planning, focused on the right performance outcomes – Empowering the right people and accepting accountability – Driving continuous improvement and providing feedback – Developing our people’s skills, knowledge and experience – Implementing the right quality and business disciplines – Developing our products and services on time and of the right quality Annual Report and Financial Results 2021 65 Governance Powering not just progress, but people. 66 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information Annual Report and Financial Results 2021 67 Governance Meet the Board of Directors D N D E D E E ESG Committee D Disclosure Committee N Nominations Committee R Remuneration Committee A Audit Committee Denotes Chair R A N Ian Watson (79) Independent Non-Executive Chairman Board appointment March 2012 Experience: A mining engineer with considerable experience in the South African mining sector. Previous roles include MD of Northam Platinum, and CEO of Platmin Limited and International Ferro Metals (SA). Qualiﬁcations: National Diploma in Mining from Witwatersrand Technical College School of Mines. Mine Manager’s Certiﬁcate of Competency, Republic of South Africa. Fortune Mojapelo (46) Co-founder and Chief Executive Officer Board appointment March 2012 Experience: Co-founder and Chief Executive of Bushveld Minerals, Co-founder and Director of Bushveld Energy. He began his career at McKinsey & Company as a consultant on corporate strategy and went on to play a leading role in the origination, establishment and project development of several junior mining companies in Africa. Qualiﬁcations: BSc (Actuarial Science) from the University of Cape Town. Tanya Chikanza (56) Finance Director Board appointment October 2019 Experience: Tanya has extensive experience in managing publicly- listed companies’ relationships with ﬁnancial markets, having worked at Lonmin Plc, Smith’s Corporate Advisory and JP Morgan Cazenove. Her expertise lie in international equity and debt capital markets, strategy, corporate ﬁnance, audit and ﬁnance. Qualiﬁcations: Qualiﬁed Chartered Accountant. Member of the Institute of Chartered Accountants of Zimbabwe. Michael J. Kirkwood (75) Senior Independent Non-Executive Director Board appointment April 2018 Experience: Following 31 years at Citigroup, Michael chairs Ondra LLP and has held main board roles in several listed companies including Kidde, Circle Holdings, AngoGoldAshanti and UK Financial Investments. He was also Deputy Chair at PwC’s Advisory Board, Chair of BritishAmerican Business and President of the Chartered Institute of Bankers. Qualiﬁcations: Graduate of Stanford University; Fellowships: FCIB, HonFCT; Honours: CMG E R R A R A E N E Jacqueline Musiitwa (40) Independent Non-Executive Director Board appointment March 2022 Kevin Alcock (59) Independent Non-Executive Director Board appointment March 2022 Mirco Bardella (63) Independent Non-Executive Director Board appointment March 2022 David Noko (65) Independent Non-Executive Director Board appointment May 2022 Experience: A qualiﬁed attorney and founder of Hoja Law Group, Jaqueline previously served in various leadership capacities including as Chief Advisor of Corporate Relations for Africa and Ventures at Rio Tinto, and as Advisor to the Director-General of the World Trade Organization. Qualiﬁcations: Qualiﬁed Attorney Experience: He is a qualiﬁed chartered accountant, entrepreneur, business leader and advisor and has actively managed a portfolio of consultancy clients and private equity investments in the UK and Southern Africa. He has held a number of non-executive director roles in the past dozen years, including board positions at several prominent asset management ﬁrms. Qualiﬁcations: Qualiﬁed Chartered Accountant Experience: A chartered accountant and former EY Assurance Partner who led audits in the natural resources sector and advised organisations on a range of assurance and governance services. Throughout his career, he has been involved in mentorship programmes, diversity & inclusiveness initiatives, as well as other aspects of the people agenda. Qualiﬁcations: Qualiﬁed Chartered Accountant. Member of SAICA, Institute of Chartered Accountants in Australia and in Scotland. 68 Experience: David’s comprehensive business acumen is the result of many years advising prominent companies, holding senior roles at General Electric Company, Pepsi Cola International, South African Breweries (Pty) Ltd, De Beers Group, and Anglo Gold Ashanti. David is Chairman of the Council of the University of the Free State. Qualiﬁcations: Mechanical Engineer, MBA from Heriot Watt University, Post-Graduate Diploma in Company Direction from the Graduate Institute of Management Technology. Annual Report and Financial Results 2021 Executive Management Team Business Overview Governance Financial Statements Supplementary Information Fortune Mojapelo (46) Co-founder and Chief Executive Officer Experience: Co-founder and Chief Executive of Bushveld Minerals. Co-founder and Director of Bushveld Energy. He began his career at McKinsey & Company as a consultant on corporate strategy and went on to play a leading role in the origination, establishment and project development of several junior mining companies in Africa. Qualiﬁcations: BSc (Actuarial Science) from the University of Cape Town. Board Committee membership Disclosure and Nomination Committees. Tanya Chikanza (56) Finance Director Experience: Tanya has extensive experience in managing publicly- listed companies’ relationships with ﬁnancial markets, having worked at Lonmin Plc, Smith’s Corporate Advisroy and JP Morgan Cazenove. Her expertise lie in international equity and debt capital markets, strategy, corporate ﬁnance and audit. Qualiﬁcations: Qualiﬁed Chartered Accountant. Member of the Institute of Chartered Accountants of Zimbabwe. Mikhail Nikomarov (41) Chief Executive Officer of Bushveld Energy since April 2015 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. Qualiﬁcations: MBA from INSEAD. Diploma in Economics from London School of Economics. BA (History) and BA (Economics) from University of Massachusetts. Prince Nyati (44) Chief Executive Officer of Lemur Holdings since November 2017 Experience: Over 16 years’ experience developing energy and mining projects in sub-Saharan Africa. Started his career in oil, gas and petrochemicals in the USA and has worked in Zambia, South Africa, India and Singapore for companies including Shell Oil, Total Petrochemicals, Eskom and Tata Power. Qualiﬁcations: MBA from the University of Houston. BA from the University of Zambia. Sihle Mdluli (41) Director: Strategy and Corporate Services since June 2019 Experience: Former Director and Operations Transformation Leader at Deloitte Africa’s Strategy and Operations, Sihle has extensive experience in building stakeholder value in the mining and public sectors. Qualiﬁcations: Program for Management Development from Gordon Institute of Business Science. MBA from Wits Business School. BSc Engineering (Metallurgy) from the University of the Witwatersrand. Ken Greve (61) Director: Corporate Development since January 2019 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. Qualiﬁcations: BCom Honours (Economics) from the University of South Africa. Mining Engineering degree from the University of the Witwatersrand. Viki Rapelas (43) Director: Legal, Governance and Compliance since January 2019 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. Over 20 years of transactional advisory, mergers and acquisitions and general corporate and commercial law experience. Qualiﬁcations: International Law qualiﬁcation from University of Antwerp (Belgium). BProc and LLB from Rand Afrikaans University (now University of Johannesburg). Professor Richard Viljoen (81) Technical Advisor since March 2012 Experience: With over 30 years’ experience in the mining industry as consulting geologist, Richard has coordinated the development of the Northam Platinum mine and the Leeudoorn and Tarkwa gold mines. He has advised exploration and mining companies in multiple mining jurisdictions across the commodities sectors. Qualiﬁcations: MSc, PhD from University of the Witwatersrand, FGSSA, FSAIMM, FRSSA, FSEG, FGSI, Pr. Sc. Nat Annual Report and Financial Results 2021 69 Governance Corporate Governance Report The Board collectively recognises that implementing an effective corporate governance structure is of paramount importance in order to continue delivering on the Company’s strategy, create long-term value for shareholders, and maintain our licence to operate. Bushveld has elected to adopt the Quoted Companies Alliance Corporate Governance Code (QCA Code), which takes key elements of good governance and applies them in a manner that supports the different needs of growing companies. The Board believes that it is applying the ten principles of the QCA Code effectively across the business but also recognises that monitoring and developing its’ governance structure is a continuing process. The ten principles of the QCA Code are set out below, supplemented with details of how the Company is applying them and how the principles support the Company’s medium- to long-term success. DELIVER GROWTH PRINCIPLE 1: Establish a strategy and business model that promotes long-term value for shareholders Bushveld Minerals has a well-established strategy and business model, the objective of which is to unlock the value of assets in its diversiﬁed vanadium product portfolio and deliver returns to shareholders through effective management and efficient operations. The strategy is clear and supported by a compelling investment case, both of which are fully described in various sections within the Business Overview of this report. The overriding objective of the Board is to direct the business to ongoing success in delivering 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. 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, webinars, attendance at conferences focused on the mining and energy storage sectors, and engagement with selective media. These engagements are key as they provide valuable feedback in the Board’s decision-making process and determine how the Company can best meet shareholder expectations. The Board views the Annual General Meeting (AGM) as the main forum for communicating directly with investors. In light of the challenging context of the COVID-19 pandemic over the last two years, the Company appreciates that attending the meeting can be impractical and has therefore provided an audio webcast of the AGM so that shareholders can join the meeting online. This includes a question and answer session to address questions submitted by shareholders. 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/. Additionally, conference calls are hosted by the Chief Executive Officer and Finance Director post the release of quarterly operational updates and the interim and full year results. 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 70 Annual Report and Financial Results 2021 Virtual roadshows Non-Deal roadshow Full Year 2020 Results H1 2021 Reporting Q1 2021 Operational Update Q2 and H1 2021 Operational Update Final Results for the year ended 31 December 2020 Interim Results for six months to end of June 2021 Q3 and 9 months 2021 Operational Update Q4 and FY 2021 Operational Update Annual General Meeting Conferences 8th Vanitec Energy storage Webinar Africa Mining Indaba Virtual Investment Programme Power & Electricity World Africa Africa Solar Energy Forum The Junior Indaba South African National Energy Association Renpower Africa storage 2021 QPR Green Energy Summit 2021 DTIC Energy Storage session World Bank: Battery storage value chain creation in Southern Africa Business Overview Governance Financial Statements Supplementary Information 2021 February July October May July June September October January 2022 August January March August September October October November November November December Annual Report and Financial Results 2021 71 Governance Corporate Governance Report continued PRINCIPLE 3: Take into account wider stakeholder and social responsibilities and their implications for long-term success Bushveld’s strategic intent of value beyond compliance is anchored on the principle of creating shared, long-lasting value for all its stakeholders. It is recognised that the successful execution of its business strategy requires the Company to build and maintain meaningful, well-functioning relationships with its multiple stakeholders. These include government, regulatory authorities, funders, partners, employees, contractors, suppliers, customers and, very importantly, the communities residing in the radius of our projects and operations. The Company has developed a sustainability strategy focused on environmental, social and governance (ESG) principles which aims to integrate material ESG considerations into the decision-making process across the value chain. Material ESG key performance Indicators will be reported on and a consistent message communicated to stakeholders on key ESG commitments. This will all be supported by the establishment of an ESG Committee in 2022. More information and detail on this can be found within the Sustainability Report. 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 governance structures, internal controls and risk management systems, which are designed to meet the particular needs of the Company and address the risks to which it is exposed. The oversight responsibility for reviewing the adequacy and effectiveness of these has been delegated to the Audit Committee. In November 2021, an Enterprise Risk Management Framework, incorporating risk appetite and tolerance levels, was approved by the Audit Committee and the implementation thereof commenced in early 2022. Notwithstanding the ongoing implementation of the formal risk management framework, the Company identiﬁes, evaluates and manages risk throughout its operations and has completed detailed risk assessments, together with risk mitigation strategies. These detailed risk assessments are consolidated and have resulted in the identiﬁcation of principal risks that could impact the Company’s ability to deliver on its long-term strategic objectives. The principal risks are detailed on pages 48-51. Over and above the work being performed by the Internal Audit and Risk function, 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, provides an additional process to identify, evaluate and manage signiﬁcant risks relevant to its operations. Additionally, the reports received from the Company’s external, independent auditor, via the Audit Committee, on the state of Bushveld’s internal controls is, of course, another valuable tool. MAINTAIN A DYNAMIC MANAGEMENT FRAMEWORK PRINCIPLE 5: Maintaining the Board as a well-functioning, balanced team led by the Chair In 2021, the Board comprised of six members: a Non-Executive Chairman, three additional Non-Executive Directors and two Executive Directors (the CEO and the Finance Director). The Board was of the view that the Chairman and two of the three Non- Executive Directors were deemed to be independent and that the board structure was suitable for the Company’s size and activities. During the course of the year under review, the Nomination Committee undertook a comprehensive succession planning exercise, taking into consideration length of tenure and the future requirements and developments of the Company and its operations. As a result, and in accordance with governance best practice surrounding board composition and director rotation, in March 2022 the Company announced the appointment of three new independent Non-Executive Directors. Concurrent with this it was announced that Jeremy Friedlander would retire with immediate effect and that Ian Watson, Non- Executive Chairman, and Non-Executive Director Anthony Viljoen would be retiring from the Board at different intervals over the following few months to ensure both continuity and compliance with the Company’s Articles of Incorporation. Accordingly, in May 2022, a fourth new independent Non-Executive Director was appointed and Anthony Viljoen retired. Ian Watson will retire at the AGM. Ian, Jeremy and Anthony have all been on the Board of Directors since the Company’s IPO in 2012. Biographies of each of the directors can be found on page 68. The Board holds 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 approximately 30 days per annum on work for the Company. The Board met formally four times during the year ended 31 December 2021, with an additional six meetings held to consider matters falling outside of the quarterly cycles. Attendance was as follows: Ian Watson Michael J. Kirkwood Jeremy Friedlander Anthony Viljoen Fortune Mojapelo Tanya Chikanza 10/10 10/10 10/10 10/10 10/10 10/10 72 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information The Board is currently supported by the Audit, Remuneration, Nomination and Disclosure Committees, which operate within speciﬁc terms of reference and are described in more detail in Principle 9 below. The ESG Committee being established will add additional support to the Board. 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 varied skills and experience that they offer, as well as their personal qualities and capabilities. Full biographical details of the Directors are included on page 68, 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, which is evidenced by the recent changes mentioned in Principle 5. This is an ongoing process and the Nomination Committee continues to review 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. focus on and development of the longer term strategy, establishment of an ESG Committee, and enhancement of stakeholder relationships. Signiﬁcant progress has already been made with respect to Board succession planning, which is evidenced by the board and committee composition changes that have been announced in 2022. The Company will report on progress made on the other focus areas next year. PRINCIPLE 8: Promote a corporate culture that is based on ethical values and behaviours Bushveld is committed to the highest standards of transparency, accountability and conducts its business in an honest and ethical manner, in accordance with sound governance principles. In building a strong and sustainable governance framework, the Company’s aspiration is to ensure that ethical values and behaviours are fully embedded throughout the Company, supporting the ethical culture of Bushveld. The Board and senior management is conscious that the tone 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. PRINCIPLE 7: Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement The Board recognises the importance of reviewing the effectiveness of its performance and the ability of the members to work together to achieve the Company’s objectives, as well as those of its committees and individual Directors. Bushveld has the following policies in place: Conﬂicts of Interest, 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. Responsibility for assessing and monitoring the performance of the Executive Directors lies with the independent Non-Executive Directors, using agreed KPIs. Further detail can be found in the Remuneration Report on pages 78-93. The Board as a whole evaluates its own performance internally, as well as the performance of the committees, and uses the evaluation process to identify opportunities for improvement. The last board and committee evaluation process was completed in December 2021, led by the Chairman and facilitated by the Company Secretary. This involves the completion of a conﬁdential questionnaire by each Director covering a number of areas including board structure, strategy, risk management, processes, board dynamics, evaluation of the CEO and Chairman, and culture matters. Committee speciﬁc questionnaires that address the functioning of the committees are also completed. A report is collated with the responses received, on an unattributed basis, which is then presented to the Board for discussion. The evaluation process resulted in the identiﬁcation of several focus areas for 2022, including Board succession planning, development of a talent management framework for Management, continued The purpose of this policy is to provide clear guidelines and acceptable practices to all employees to avoid potential and perceived conﬂicts and interest. The policy further sets out ﬁrm rules and regulations regarding the receipt of gifts, entertainment and business courtesies. Bribery and corruption in any shape or form is strongly discouraged and employees found in contravention of these polices may be subject to disciplinary proceedings. Fraud Prevention and Fraud Investigation Policies The purpose of these policies is to detail the Company’s expectations with respect to managing fraud risk, to develop awareness of that risk in the organisation, to provide guidance to those who ﬁnd themselves having to deal with fraud, and for establishing procedures and assigning responsibility for the investigation of fraud and related offences. At the time of writing, these policies are in the process of ﬁnalisation. Whistle-blowing Policy This policy will help break the cycle of silence and inaction and assist in preventing corruption within Bushveld and the broader public sector in which it operates. The policy aims to encourage employees Annual Report and Financial Results 2021 73 Governance Corporate Governance Report continued and stakeholders to feel conﬁdent in raising breaches and concerns and to ensure that whistle-blowers will be protected from possible reprisals or victimisation if and when disclosures are made in good faith. 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 under 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 could bring a company into disrepute. 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. To that end, the Board is supported by committees that have the necessary skills and knowledge to discharge their duties and responsibilities effectively. These committees are primarily made up of Non-Executive Directors. Descriptions of the various committees are provided below. Audit Committee The Audit Committee is responsible 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, risk- management initiatives and governance structures. Furthermore, the Committee is responsible for recommending the appointment of the auditors and reviewing and monitoring their independence and objectivity. In 2021, the Audit Committee, comprised of Michael Kirkwood as Chair, Jeremy Friedlander and Anthony Viljoen. On 17 March 2022, Mirco Bardella was appointed to the Board and simultaneously appointed the new Chair of the Committee. Mirco brings a wealth of experience as a former Ernst & Young (EY) Assurance Partner who led audits in the natural resources sector and advised organisations on a range of assurance and governance services. Kevin Alcock, a chartered accountant by qualiﬁcation, has also been appointed to the Committee. The Internal Audit and Risk function assists the Audit Committee in executing its responsibilities. Meetings are held at least three times a year at appropriate intervals in the ﬁnancial reporting and audit cycle, and as otherwise required. The role of the Audit Committee and the duties it fulﬁlled during 2021 are more fully described in the Report of the Audit Committee on pages 76-77. Remuneration Committee The Remuneration Committee, comprising in 2021 of Michael Kirkwood as Chair, Ian Watson and Jeremy Friedlander, 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. A comprehensive Remuneration Report can be found on pages 78-93. With Jeremy Friedlander’s retirement in March 2022, and Ian Watson’s upcoming retirement at the AGM, Kevin Alcock, Mirco Bardella and Jacqueline Musiitwa have been appointed to the Remuneration Committee simultaneously with their board appointments. Kevin took on the role of as Chair following the Quarter 2 Board cycle. 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. The Committee meets on an ad hoc basis, as required, and consists of the Chairs of each of the other committees and the Executive Directors. The Committee has a rotating Chair between its independent members. 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 Chair of each of those committees. The Nomination Committee comprises Ian 74 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information Watson, Michael Kirkwood and Fortune Mojapelo, with Ian Watson as chair. Post the AGM, Michael will assume the responsibility of Chair and David Noko will be appointed as a member of the Committee. ESG Committee The ESG Committee is in the process of being established and will be focused on developing and implementing Bushveld’s ESG strategy and management system, as described in the Sustainability Report on pages 53-65. The ESG committee will comprise of Jacqueline Musiitwa, David Noko, Fortune Mojapelo and Tanya Chikanza, with Jacqueline chairing the Committee. BUILDS TRUST PRINCIPLE 10: Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders Bushveld 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 quarterly 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-newsrns/. Furthermore, 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. As has been described under Principle 2, the Bushveld Minerals Investor Relations team is dedicated to communicating the Bushveld Minerals’ value proposition to shareholders, 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, webinars, attendance at conferences and engagement with selected media. The Head of Investor Relations is the primary point of contact for shareholders and plays a key part in encouraging shareholder interaction and provides an effective mechanism for feedback. Any shareholder enquiries can be directed to info@bushveldminerals.com When it comes to communicating with other relevant stakeholders, Bushveld Minerals has developed a Stakeholder Engagement Strategy which forms the blueprint for building relationships with stakeholders, including host communities and local landowners. The stakeholder engagement strategy was developed to enable the Company to develop a collaborative relationship with key stakeholders in support of its strategic objectives. The Stakeholder Engagement Strategy builds on Bushveld’s strategic intention to identify key stakeholders and their interests and requirements, to develop appropriate engagement models. This has resulted in meaningful, transparent, and honest engagements with stakeholders. More information and detail on this can be found within our Sustainability Report on pages 53-65. Annual Report and Financial Results 2021 75 Governance Report of the Audit Committee This report provides details of the role of the Audit Committee and the duties it undertook during the year under review. During 2021, the Audit Committee comprised of Independent Non-Executive Directors Michael Kirkwood (as Chair) and Jeremy Friedlander, and Non-Executive Director Anthony Viljoen. Post year-end and subsequent to the Board changes announced in March 2022, the Audit Committee was reconstituted and now consists of Independent Non-Executive Directors Mirco Bardella, Michael Kirkwood and Kevin Alcock, with Mirco chairing the committee. Mirco and Kevin are both chartered accountants and bring a wealth of experience with them, as set out in their biographical details on page 68. Thanks is given to Jeremy and Anthony for their valued contribution to the Committee over the years. The Audit Committee meets quarterly and at other appropriate times in the ﬁnancial reporting and audit cycle if required. The Finance Director, Company Secretary, Internal Auditor and external auditor are all invited to attend the meetings. Other individuals may be invited to attend all or part of any meeting, as and when required. In fulﬁlling its duties, due consideration is given to applicable laws and regulations, the requirements of the AIM Rules, and the QCA Corporate Governance Code, as appropriate. The Chairman of the Committee reports formally to the Board on all matters within its duties and how it has discharged its responsibilities after each meeting. Key duties of the Audit Committee include: – Monitoring the integrity of the Company’s ﬁnancial statements; – 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, systems of internal control and risk; – Reviewing the adequacy and security of the Company’s whistleblowing facilities and ensuring that appropriate investigations and follow up action is conducted in respect of concerns raised; – Reviewing the adequacy of the Company’s systems, procedures and controls for detecting fraud, bribery and corruption; – Making recommendations to the Board on the appointment of the external auditor; – Managing and overseeing the relationship with the external auditors, including their terms of engagement and remuneration. – Meeting regularly with the external auditors and reviewing their ﬁndings. The Audit Committee evaluates its performance periodically and will conduct an annual review of its constitution and terms of reference to ensure it is operating at maximum effectiveness. Any changes arising from these reviews are then recommended to the Board for approval. 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. 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 accounting estimates and judgements as described on page 68. 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 cash ﬂows 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 With the appointment of the Group Head: Internal Audit and Risk having concluded at the end of 2020, in early 2021, the Board, on recommendation by the Audit Committee, mandated and gave effect to the Internal Audit and Risk function. The scope of the internal audit function has been summarised as below: – Provide independent and objective assurance through evaluating the Company’s governance, risk and internal control systems. – Evaluating the adequacy and effectiveness of internal ﬁnancial controls over ﬁnancial reporting and internal controls in general. – Reviewing the extent of compliance with laws, regulations, standards and codes. 76 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information The Committee is satisﬁed, having considered the assurance provided by Group Internal Audit, that no signiﬁcant or material issues have been identiﬁed that would render the Group’s system of internal ﬁnancial controls ineffective. Consequently, the Committee is of the view that reasonable assurance was provided and the ﬁnancial records may be relied upon for the preparation of the annual ﬁnancial statements. External auditor RSM UK Audit LLP (RSM) is the Company’s auditor and the Audit Committee has recommended to the Board that shareholders be asked to approve the re-appointment of RSM as auditor at the Annual General Meeting. Risk management and internal control The Audit Committee is mandated to provide oversight on the Company’s governance, internal control and risk management systems. 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 in this report. The Audit Committee discharged its duties, in accordance with its terms of reference, during the period to 31 December 2021, 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 2021 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. The Company’s senior executive management – the Executive Committee (Exco) – is responsible for managing and monitoring the risks under the stewardship of the Group Head: Internal Audit and Risk, and the Audit Committee actively reviews the key risks and mitigating controls. The Audit Committee’s review of the system of internal controls is supplemented by reports from the internal and external auditors regarding issues identiﬁed during their engagement, particularly those relating to control weaknesses, and the responses from management. I would like to thank the Finance team and my Audit Committee colleagues, past and present, for their work over the past four years that I have chaired this committee and to date. Michael J. Kirkwood Chairman of the Audit Committee 30 June 2022 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, non-audit fees of GBP15,000 were paid in respect of agreed upon procedures on the interim ﬁnancial statements for the period ended 30 June 2021. Whistleblowing The Company has a whistleblowing policy, coupled with an independently managed external whistleblowing reporting system, to encourage stakeholders and employees to raise suspected breaches, malpractice or impropriety, without fear of reprisal. The policy aims to provide a secure platform for stakeholders and employees to raise concerns and prompt management to investigate each case reported. The policy commits the Company to treat all such disclosures made in good faith, 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. Annual Report and Financial Results 2021 77 Governance 2021 Remuneration Report PART 1: BACKGROUND STATEMENT FROM THE REMUNERATION COMMITTEE CHAIRMAN Dear Shareholders, On behalf of the Board, I am pleased to present the 2021 Remuneration report for Bushveld Minerals. This report describes our remuneration philosophy and how the policy was implemented. It also discloses payments made to Non-Executive and Executive Directors during the year. The aim in preparing this report is to ensure that shareholders and stakeholders fully understand the approach to remunerating executives and the wider employee base. This includes the key principles used to determine our reward frameworks to ensure that executives are focused on delivering long-term shareholder value consistent with the Company’s vision and strategy. In line with the practice adopted for several years, this report is again presented in the King IV™ recommended format, while taking cognisance of the requirements of an AIM-listed company during the review period. As Bushveld is not subject to Johannesburg Stock Exchange listing requirements, the policy and implementation reports are not put to non-binding shareholder votes. BUSINESS PERFORMANCE OVERVIEW AND IMPACT ON REMUNERATION OUTCOMES The table below outlines key performance indicators for the Bushveld Minerals Group over a two-year period. The Group reported improving underlying performance in its subsidiaries in the form of production volumes and operational metrics during the 2021 performance year. These improvements did not however translate into commensurate improvements in the ﬁnancial indicators partly owing to a slow recovery in vanadium prices. Further detail on the Group’s performance is detailed in the Finance Director’s Review. Indicator (US$) Underlying earnings before interest and tax (EBIT) Underlying earnings before interest,tax, depreciation and amortisation (EBITDA) Closing Cash & Cash equivalents Closing Share price 2021 2020 (46,784,667) (37,667,417) (9,886,934) (14,940,940) 15,432,852 50,540,672 10.10p 19.5p The remuneration outcomes for 2021 are as follows: No increases were awarded to the CEO and CFO for 2021. In line with the Company’s philosophy to address the wage gap and personal performance, some increases were awarded to lower levels of staff. The Non-Executive Directors volunteered to exercise pay leardership with a 10 per cent reduction in Non-Executive Director fees, being applied with effect from 1 January 2022.The reduction in fees in 2022 was to accommodate the transition and overlap of board members with four new directors joining the board and three directors including the Chairman retiring from the board. None of the short-term incentive (STI) performance measures attributable to ﬁnancial performance were achieved. The non-ﬁnancial measures relating to ESG and personal performance were largely achieved resulting in an overall STI performance outcome for the CEO and CFO of 33 per cent and 35 per cent of the on-target STI respectively. However, no STIs will be paid to the CEO and CFO for 2021 as a result of the ﬁnancial performance measures not having been achieved. After careful consideration, the Remuneration Committee, in their discretion, decided to proceed with paying bonuses to other employees despite the ﬁnancial performance conditions having not been met. These bonuses are based on performance against the non-ﬁnancial and personal performance measures, which have a weighting of between 30 to 50 per cent for managerial staff and 100 per cent for non-managerial staff. Full details of the STI measures used together with the outcomes are disclosed in the implementation report ( part 3 of the Renumeration report). Awards to certain Executive Committee (Exco) members have been deferred for up to 12 months and payment will be conditional on the achievement of speciﬁed outcomes. Bushveld’s Long-term Incentives (LTIs) comprise of deferred bonus awards (which are a function of the deferred element of STI) and performance awards (which are subject to three-year forward-looking targets). During 2021 deferred bonus awards were made based on the 2020 performance outcomes. The economic climate made it very difficult to set and calibrate appropriate three-year forward-looking performance measures. The lack of any performance awards in 2020 and 2021, may be addressed with a supplemental performance award during 2022, at the discretion of the Committee. In line with our policy the award will be subject to three-year forward looking performance measures aligned to long-term shareholder value creation. In considering the award, the Committee will also have due regard to the potential cost to shareholders and uncapped gains to Executives. 78 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information ROLE OF THE COMMITTEE AND KEY DECISIONS TAKEN The Committee was established by the Bushveld Minerals Board. 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 all compensation matters, the committee retains full discretion to amend pay outcomes in light of performance and reasonableness. In order to discharge its responsibility, 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. In the 2021 ﬁnancial period the Committee engaged in the following: Executive remuneration a. Reviewed total remuneration against external benchmarks. b. Recommended individual remuneration for executives. c. Reviewed and considered remuneration best practices to ensure that Bushveld’s current practices remain progressive and relevant. Non-Executive Director remuneration a. To demonstrate leadership in constraint and reﬂect Group performance the Non-Executive Directors fees were reduced by 10 per cent for 2022. Group-wide remuneration matters a. Reviewed the impact of COVID-19 on remuneration decisions. b. Reviewed the group’s pay scales. c. Approved the pay progression approach for annual increases for 2022. d. Considered fair and responsible pay (see details below). e. Reviewed retirement and risk beneﬁts across the Group. f. Approved STI targets for all Group companies. g. Approved increases and adjustments for executives, management and employees. h. Approved STIs for executives, management and employees. i. Approved the STI and LTI rule amendments relating to acceptance of awards. j. Performed progress testing pertaining to the 2019 performance share award. Performance – relating to the forthcoming performance cycle a. Set short-term performance targets; and b. Set performance targets for the 2022 LTI award. Compliance a. Reviewed and approved the Committee’s annual work plan. b. Reviewed and approved the Remuneration Report for publication. 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: Annual Report and Financial Results 2021 79 Governance 2021 Remuneration Report continued PART 1: BACKGROUND STATEMENT FROM THE REMUNERATION COMMITTEE CHAIRMAN ON FAIR AND RESPONSIBLE REMUNERATION CONTINUED Responsible pay a. All variable pay is subject to the achievement of performance metrics, carefully calibrated and approved by the Committee, ensuring a close alignment with shareholder value creation over the performance period. b. A portion of the STI is deferred and delivered in shares (bonus awards) which will be determined following the publication of the accounts. The LTI, taking the form of prospective Conditional Shares, may also be subject to a post vesting holding period which further enforces 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; and 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. 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 unfair or unjustiﬁed differentiation within its remuneration implementation. 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; and e. Pay is well administered, with employees paid accurately, on time and in a way that is convenient. 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 compared to both the South African mining speciﬁc and national Gini (based on a salary survey database). The outcome was considered by the Committee; and 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 targeted between the lower quartile and median of the market; and b. Executive pay is benchmarked against a comparator group with similar company features to the Group or subsidiary to ensure the reliability and validity of the benchmark data. SHAREHOLDER ENGAGEMENT When the shareholder register reﬂects more institutional shareholders, the Company will engage to obtain views and comments on 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 2022, the focus is to continue embedding and strengthening the Group’s remuneration and performance philosophy into the wider people management framework. – Align the annual performance increase and annual performance bonus payment dates with the release of ﬁnancial results; – Review Production bonus and Annual performance Bonus metrics for operations (Vametco and Vanchem). – Consider a retention scheme for key and at risk employees. – Furthermore, the Committee will prioritise the consolidation of the Provident Fund and Risk Beneﬁts in order to achieve economies of scale on cost incurred and standardise offerings across the Group. 80 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information REMUNERATION ADVISORS The Committee renewed 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. 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 30 June 2022 In all compensation matters, the committee retains full discretion to amend pay outcomes in light of performance and reasonableness. Total guaranteed remuneration is primarily set between the lower quartile and the median in the relevant market. Incentive-based rewards are earned by achieving stretch performance conditions consistent with shareholder interests over the short, medium and long term. Short-term incentives relate to ﬁnancial and ESG measures. Long-term incentives include measures of Free Cash Flow margin and Total Shareholder Return. ENCOURAGE A CULTURE THAT SUPPORTS SUSTAINABLE AND ENTREPRENEURIAL BUSINESS GROWTH. PROMOTE THE ACHIEVEMENT OF STRATEGIC OBJECTIVES WITHIN THE ORGANISATION’S RISK APPETITE. 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. Annual Report and Financial Results 2021 81 Governance 2021 Remuneration Report continued 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, Bushveld Vametco Alloys and Lemur Investments. The Committee aims for the policy to be rolled-out to all subsidiaries where it makes sense, taking into account existing contractual obligations and terms and conditions of employment. The Remuneration Policy conforms to the Quoted Companies Alliance governance code and is anchored on the following remuneration philosophy statements and principles: Bushveld’s remuneration and performance philosophy through the application of this policy, aims to: – Encourage a culture that supports sustainable and entrepreneurial business growth through the provision of appropriate individual and Group short-term and long-term performance-related rewards that are fair and responsible; – Promote the achievement of strategic objectives within the organisation’s risk appetite; – Promote positive outcomes across the economic, social and environmental context in which the Group operates; and – Promote a culture and responsible corporate citizenship. 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 STIs and LTIs. 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. OVERVIEW AND ELIGIBILITY: Fixed Pay Element Total Guaranteed Pay Base Salary Standard Benefits Definition It is the rate of remuneration an employee receives in exchange for services. An employee’s base salary can be expressed as an hourly rate or as a weekly, monthly, or annual salary. Benefits are over and above the base salary and include the Company contribution towards the retirement fund and any other employer-funded Group benefits. Applicable Grades All employees All employees Conditional Benefits or allowances Benefits received based on job specific requirements, and legislative requirements e.g. Shift allowance. According to job requirements Variable Pay Production Bonus Annual Bonus Long-Term Incentives (LTI) CSP 82 Cash bonus paid monthly, as per the scheme rules, aimed to achieve alignment between the Company and employees in the achievement of production, safety, and productivity targets at an operational level. Annual bonus is paid in cash and gives employees an incentive for the achievement of the Group’s short and medium-term goals, with payment levels based on both business unit and individual performance, depending on the level of the job. Certain job categories (D-F) STI is paid partly in cash (annual bonus) and partly as equity (deferred bonus). The deferred bonus is settled as bonus shares under the CSP (as described below) scheme. The vesting of conditional share awards is subject to forward looking Group performance conditions and continued employment. Employees represented in the bargaining counsel D, E and F Bands D, E and F Bands Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information Fixed Pay Element Definition Bonus Shares Bonus shares are based on the STI deferral and therefore not subject to forward looking performance vesting conditions, but continued employment is used as a vesting condition. Applicable Grades D, E and F Bands POLICY APPLICABLE TO THE VARIOUS ELEMENTS 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 target 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 the 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 for Corporate, Vanchem employees and 1 July for Vametco employees. Benefits Benefits include a Medical Aid, Retirement Fund, Group Life Cover, Disability Benefit and Death-in-Service- Benefit SHORT-TERM INCENTIVES Purpose Policy’s link to Company strategy and performance measures The purpose of the STI is to reward and incent employees for prior year performance. 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. 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 (Lost time injury frequency rate); and – 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. The targets for 2022 are disclosed below on page 87. Annual Report and Financial Results 2021 83 Governance 2021 Remuneration Report continued PART TWO: REMUNERATION POLICY CONTINUED Remuneration element Policy Bonus formula The STI operates as follows: – Qualifying Annual TGP x On-Target Incentive Percentage x {(Personal Score x Personal Weighting) + On-target incentive percentages (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); and – 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. Performance measure weightings 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 Subsidiary weightings for Vametco and Vanchem: Personal Weighting Business – Vametco Business – Group 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% 40% 40% 20% 84 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information Remuneration element Policy 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% As a result of the volatility in the market of the Vanadium price and exchange rate, the Committee implemented a collar and cap approach for the “consolidated economic profit” target. The intention of the collar and cap on the Vanadium price and foreign exchange rate is to ensure that management are partially insulated from factors that are beyond their control on both the upside and downside. For 2022, the collar and cap for the Vanadium price was set at US$35-US$45 while the exchange rate was set at R14.45 with a tolerance level of 10 per cent up and down. 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 1 2.5 3 4 5 Description Non performance Threshold On-Target Exceeds expectation Stretch performance Performance Score 0% 50% 100% 125% 150% 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 partly as a retention mechanism and to further align management’s short-term interests with those of the shareholders. The cash vs deferred on-target percentages are as follows: Level CEO and CFO Executives Senior management Middle management or Professional Specialists On-target bonus as a % of qualifying TGP Business weighting Personal weighting 45% 35% 30% 20% 28% 23% 18% 8% 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. STI opportunity Deferral operation LTIs Purpose Policy’s link to Company strategy 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. Annual Report and Financial Results 2021 85 Governance 2021 Remuneration Report continued PART TWO: REMUNERATION POLICY CONTINUED Remuneration element Policy 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; and – 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 Award levels Vesting levels 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 per cent – Absolute TSR | 60 per cent 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 an outperformance element in the case of superior performance as follows: – Threshold performance – 50 per cent linear vesting – Target performance – 100 per cent linear vesting – Stretch performance – up to 250 per cent linear vesting, at the Committee’s discretion. Vesting period Bonus awards vest in equal tranches after 12 and 18 months respectively after the end of the performance period in relation to which the deferral relates to. Bonus awards are not subject to a holding period. Dilution limit Performance awards are subject to a three-year vesting period, whereafter the shares will be settled. In addition, at the discretion of the Committee, 50 per cent of vested performance shares are subjected to additional holding periods of one year (25 per cent of the shares) and two years (the remaining 25 per cent) 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 five per cent 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. 2022 STI PERFORMANCE TARGETS The Committee has agreed the following ﬁnancial and non-ﬁnancial targets for the year: 86 Annual Report and Financial Results 2021 Company targets for 2022: Key performance area FINANCIAL MEASURES Consolidated economic profit NON-FINANCIAL MEASURES Comprehensive ESG Overall Weighting 70% 30% Occupational health + safety Environmental Social license To operate BUSINESS MEASURES: 80% weighted score Sub-weighting Key Performance Indicator Threshold (50% vesting) On target (100% vesting) Business Overview Governance Financial Statements Stretch (150% vesting) Supplementary Information 100% RONA vs WACC RONA = WACC RONA = WACC + 1.5% RONA = WACC + 3.0% 20% 10% Compliance to IFC Environmental and Social Performance Standards Total Recordable Injury Frequency Rate (TRIFR) N/A 100% N/A ≥2.5% performance improvement ≥5% performance improvement ≥10% performance improvement 10% Lost Time Injury N/A ≥50% performance improvement 100% performance improvement 5% 5% 5% 5% 5% 20% New Occupational disease cases Major Environmental Incidents Environmental non- compliance fines/ directives Environmental authorisations ISO 14001 certifications (Vametco)/ ISO 9001 accreditation (Vanchem) Acquire and maintain social license to operate N/A N/A N/A 0 0 0 N/A 100% retained N/A 100% N/A N/A N/A N/A N/A Compliance to applicable regulatory frameworks (MCII, B-BBEE & DTI Codes, etc) Additional: Adherence to MCIII plan milestones and improvement on previous year ratings on DTI Scorecards Additional: Effective cross- functional internal forums such as transformational forums inclusive of Business Unit Management, Finance, Procurement, HR and Stakeholder Engagement N/A Governance 15% N/A Full adherence to the QCA Code Adherence to the QCA Corporate Governance Code Annual Report and Financial Results 2021 87 Governance 2021 Remuneration Report continued PART TWO: REMUNERATION POLICY CONTINUED LTI (CSP performance awards) targets for 2022 Measure Weighting Threshold (50% vesting) Target (100% vesting) Stretch (up to 250% vesting) Free cash flow margin Absolute TSR 40% 60% US Based cost of equity (COE) US Based COE + 1.5% US Based COE + 3% US Based COE US Based COE + (3% to 5%) US Based COE + (10% to 15%) 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 (%) CFO (%) 450% 400% 350% 300% 250% 200% 150% 100% 50% 0% 450% 400% 350% 300% 250% 200% 150% 100% 50% 0% Threshold Target Stretch Threshold Target Stretch TPG STI Deferred STI LTI In line with Bushveld’s overall remuneration philosophy it can be observed that the largest portion of the CEO’s and CFO’s total reward, in the scenario of stretch performance, is weighted towards the stretch vesting of the performance LTI award. Consequently, in order to ensure that a strong pay for performance link is sustained a stretch LTI outcome is dependent on a signiﬁcant delivery of total shareholder return. However, to ensure that the principle of fair and responsible pay is maintained and to mitigate against a windfall gain outcome, the Committee retains full discretion to amend pay outcomes in the light of performance and reasonableness. 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 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% 88 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information 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 per cent of vested LTIs may be subject to claw-back as a post vesting recoupment of paid and vested incentives; and – LTIs that are subject to a holding period will be subject to claw-back as follows: 25 per cent can be clawed back for a one-year period post vesting and the ﬁnal 25 per cent for a two-year period post vesting. 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: STI & LTI Fault termination (resignation and dismissal) The incentive is forfeited. 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 appropriately to assist 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). Annual Report and Financial Results 2021 89 Governance 2021 Remuneration Report continued The current approved fee structure is as follows: Board Position Chairperson Non-executive director Senior non-executive director Board Committee Chairperson Remuneration committee Audit committee Nominations committee Disclosure committee Annual Fee – US$ 96,278 51,348 64,185 Annual Fee – US$ 6,419 6,419 3,209 3,209 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, some increases were awarded to lower levels of staff. The following TGP increases were awarded with effect from 1 January 2022: Occupational Level CEO and CFO Executives Middle management/professional specialists Non-management 2021 STI OUTCOMES Metrics and weightings The relative weighting and composition of Group and Individual objectives for 2021 were: Performance category Personal performance Business performance Business targets and outcomes % Increase 3% 4.6% 4.7% 5.1% CEO and CFO Other Executives 20% 80% 30% 70% Subsidiary Executives 40% 60% Measure Weighting Sub-weighting Threshold Target Stretch 2021 outcomes 2021 Target 2021 weighted outcome Consolidated Economic Profit (EVA = RONA vs WACC) ESG 70% 30% Occupational health and safety Environment Social license to operate Governance RONA = WACC 80% of target 5% 90% 2 RONA = WACC + 1.5% 100% of target 10% 95% 0 RONA = WACC + 3% 150% of target 15% 100% 0 full adherence to QCA code 0% 0% 81.5% 24% 80% 50% 100% 100% 24% 12.5% 25% 20% 30% 25% 25% 20% For the business performance measure in 2021, the collar was applied to the Vanadium price at US$35/kgV. The overall STI performance achievement for business targets is 24 per cent, resulting in the achievement of a “below threshold” business performance outcome. 90 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information Personal targets and outcomes Depending on the participant’s role, personal metrics and targets were set and evaluated with reference to the following performance categories: a. Strategy Implementation b. Production Volumes c. Production Costs d. Capital Projects e. Sustainability f. Organisational Health STI calculation and payments The STI is calculated based on the following formula, which incorporates six variables derived from the end of year performance evaluation scores: a. Qualifying Annual TGP x On-Target Incentive Percentage x ((Personal Score x Personal Weighting) + (Business Score x Business Weighting)). b. The STIs (cash and deferred shares) were as follows for the Company’s two executive directors, the CEO and CFO during 2021. Qualifying Annual TGP x On-Target Incentive Percentage x ((Personal Score x Personal Weighting) + (Business Score x Business Weighting)). Name TGP US$(A) On-target % (B) Personal Score (20%) C Business score (80%) (D) Non-financial weighted outcomes Financial weighted outcome STI = A X B X {C+D} Final STI F. Mojapelo T. Chikanza 424,328 318,050 45% 45% 14% 16% 0% 0% 19% 19% 63,013 50,093 Zero – No STI was paid as financial performance measures were not met. The remainder of the employees have received bonuses based on the outcome of the non-ﬁnancial and personal outcomes. 2021 CONDITIONAL SHARES AWARDED The CSP comprises two elements: performance shares and bonus shares. During 2021, no conditional performance shares were granted. Bonus shares were awarded based on the outcomes of the 2021 STI and are disclosed in the prior year’s report. No bonus awards will be awarded to the CEO and CFO in 2022 due to the non-payment of STI for 2021. 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: Executives F. Mojapelo T. Chikanza % of TGP held in shares (as at 31 Dec 2021) MSR target and target date 589% 200% (31 Dec 2021) 0% 150% (1 Oct 2022) Annual Report and Financial Results 2021 91 Governance 2021 Remuneration Report continued 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 Mojapelo 2,3 T Chikanza 3,4 Year 2021 2020 2021 2020 Guaranteed pay US$ Benefits US$ 424,067 381,107 318,050 285,760 – – – – LTI Reflected US$ Other Total single figure of Remuneration US$ STI 1 US$ – – 137,198 85,368 – – 103,388 64,330 – – – – 424,067 603,673 318,050 453,478 Footnotes: 1. The STI included in the 2021 and 2020 ﬁnancial years relates to the cash component accrued to incumbents relating to performance in the 2021 and 2020 ﬁnancial year respectively, however the STI is only paid after year end. For FY20, 1/3 of the STI will be settled in cash and 2/3 in shares which will vest in December 2021. 2. The LTI reﬂected in the 2020 ﬁnancial year includes the bonus share awards which relate to performance in the 2020 ﬁnancial year and will be awarded after year end. 3. No cash STI or Bonus shares were awarded for the FY2021 ﬁnancial year * All amounts for the 2021 single ﬁgure disclosure were converted to US$ using the average exchange rate of 14.7854 for the 2021 ﬁnancial year (2020: 16.4622). 92 Annual Report and Financial Results 2021 1 2 0 2 c e D 1 3 1 2 0 2 n o e u a v l d e t a m i t s E r i a f g n i s o c l i s t p e c e r l f o e u a v h s a C g n i s o C l n o e c n a a b l d e l t t e S g n i r u d , 3 2 ) $ S U ( 1 ) $ S U ( 1 2 0 2 c e D 1 3 1 2 0 2 1 2 0 2 g n i r u d 1 2 0 2 g n i r u d d e t i e f r o F d e t n a r G n o e u a v l d e t a m i t s E r i a f g n i s o c l l f o e u a v h s a C g n i s o C l 0 2 0 2 c e D 1 3 i s t p e c e r n o e c n a a b l d e l t t e S g n i r u d 2 ) $ S U ( 1 ) $ S U ( 0 2 0 2 0 2 0 2 c e D 1 3 0 2 0 2 0 2 0 2 g n i r u d 0 2 0 2 g n i r u d d e t i e f r o F d e t n a r G i g n n e p O n o e c n a a b l 0 2 0 2 n a J 1 g n i t s e V e t a d d r a w A e t a d s r o t c e r i d e v i t u c e x E s e m a N : t n e m e l t t e s n o w o ﬂ h s a c d n a s d r a w a d e t s e v n u f o e u d e h c S l l o e p a o M F j 2 4 3 9 9 , – 0 5 8 7 2 8 , – – – – 2 7 5 , 8 7 6 – 5 4 8 2 5 , – , 3 7 3 0 4 4 - – – – – – – – 2 7 5 , 8 7 6 – – 9 1 3 7 1 1 , 9 1 3 7 1 1 , , 3 7 3 0 4 4 ) 3 7 3 0 4 4 ( – 0 5 8 7 2 8 , – – – – – – – – 2 7 5 , 8 7 6 2 2 - t c O 9 1 - t c O d r a w a e r a h s e c n a m r o f r e P – – 5 4 7 0 8 8 % 0 5 d n a 0 2 0 2 1 2 0 2 e n u J n i c e D n i % 0 5 % 5 2 d n a 1 2 0 2 2 2 0 2 e n u J n i c e D n i % 5 7 0 2 - l u J d r a w a e r a h s s u n o B – 1 2 - l u J d r a w a e r a h s s u n o B – : s d r a w a P S C 1 6 8 4 7 , – 8 3 8 3 2 6 , – – 8 3 8 3 2 6 , – – – – – – – % 5 2 d n a 1 2 0 2 2 2 0 2 e n u J n i c e D n i % 5 7 1 2 - l u J d r a w a e r a h s s u n o B – : s e t o n t o o F a z n a k h C i . T : s d r a w a P S C e h t l f o g n i t s e v e h t d o i r e p d e s o c d e d n e t x e n a o t e u d , r e v e w o h , 1 2 0 2 r e b m e c e D 1 3 n o d e t s e v e v a h d u o w s u n o b h s a c l l a u n n a f o u e i l n i s e r a h s e h t f o t n e c r e p 0 0 1 d n a s e r a h s s u n o b e h t f o t n e c r e p 0 5 . d e d r a w e r e w s u n o b h s a c l a u n n a f o u e i l n i s e r a h s d n a s e r a h s s u n o b 1 2 0 2 g n i r u D . s e r a h s s u n o b e h t r o f ) t n e c r e p 0 0 1 0 2 0 2 ( : t n e c r e p 0 0 1 d n a ) t n e c r e p 0 : 0 2 0 2 ( t n e c r e p 0 f o e g a t n e c r e p g n i t s e v d e t a m i t s e n a h t i w . ) 7 2 0 $ S U : 0 2 0 2 ( 2 1 0 $ S U . f o e c i r p e r a h s d n e r a e y e h t t a d e d u c n l i e r a s d r a w a e r a h s s u n o b d n a s d r a w a e r a h s e c n a m r o f r e p e h T . e t a d g n i t s e v n o e u a v l t e k r a m e h t n o d e s a b r a e y e h t g n i r u d d e l t t e s s d r a w a e h t m o r f s d e e c o r p e h t s e d u c n I l . . 2 1 0 $ S U f o e c i r p e r a h s a d e t s e v 1 2 0 2 e n u J n i i d e t s e v h c h w d n a r a e y l . . 7 2 0 $ S U f o e c i r p e r a h s d n e r a e y e h t t a d e d u c n l i e r a r a e y l i a c n a n ﬁ 0 2 0 2 e h t n i i a c n a n ﬁ 0 2 0 2 e h t n i e d a m s d r a w a e r a h s s u n o b e h T e d a m s d r a w a e r a h s s u n o b e h T . 1 . 2 . 3 . 4 . 5 Business Overview Governance Financial Statements Supplementary Information 0 2 0 2 d e v i e c e r s e e f l a t o T , 5 1 1 9 0 1 7 5 1 2 8 , 7 6 7 7 5 , 9 9 1 5 5 , 1 2 0 2 d e v i e c e r s e e f l a t o T r i a h C e r u s o c s i D l e e t t i m m o C c o h - d a f o s g n i t e e m e c n a d n e t t A 9 9 2 2 9 , 4 3 0 6 6 , 4 3 0 6 6 , – – – 7 3 4 2 2 1 , 9 3 4 3 , 1 8 3 2 1 , 7 5 7 3 1 , 6 0 0 1 1 , 6 0 0 1 1 , – – – r i a h C 9 3 4 3 , e e t t i m m o C s n o i t a n m o N i – – – 9 7 8 6 , r i a h C t i d u A e e t t i m m o C – – – r i a h C 9 7 8 6 , e e t t i m m o C n o i t a r e n u m e R d r a o B , 8 7 1 3 0 1 5 8 7 8 6 , 8 2 0 5 5 , 8 2 0 5 5 , ) $ S U ( s r o t c e r i d e v i t u c e x e - n o n y b d e v i e c e r s e e F 1 2 0 2 . l l w o e b d e s o c s i d e r a 0 2 0 2 o t d e r a p m o c 1 2 0 2 g n i r u d d a p s e e f e h T . r a e y 1 2 0 2 e h t i r o f d e v o r p p a e r e w s r o t c e r i d e v i t u c e x e - n o n f o s e e f e h t o t s e s a e r c n i o N r a e y e h t g n i r u d d a p s e e f i r o t c e r i d e v i t u c e x e - n o N . 2 2 0 2 e n u J 0 3 o t d e r r e f e d n e e b e v a h s e r a h s s r o t c e r i d e v i t u c e x e - n o N n o s t a W n a I d o o w k r i K l e a h c M i l r e d n a d e i r F y m e r e J n e o j l i V y n o h t n A Annual Report and Financial Results 2021 93 Governance 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 2021. PRINCIPAL ACTIVITIES, BUSINESS REVIEW AND FUTURE DEVELOPMENTS Bushveld Minerals is a low-cost, vertically integrated primary vanadium producer. As the owner of two of the world’s four operating vanadium processing facilities, the Company is one of only three primary producers globally. In 2021, Bushveld Minerals produced approximately 3,600 mtV, representing approximately three per cent of the global vanadium market. With a diversiﬁed vanadium product portfolio serving the needs of the steel, energy and chemical sectors, the Company participates in the entire vanadium value chain through its two main pillars: Bushveld Vanadium, which mines and processes vanadium ore; and Bushveld Energy, an energy storage solutions provider. With Vanchem’s recently refurbished Kiln 3, Bushveld Vanadium expects to achieve a fully funded annualised steady state production run rate of between 5,000 mtVp.a. and 5,400 mtVp.a. by the end of 2022. With production at this rate, we have a business that is sustainable with an attractive cost proposition and good cash generation capacity. Beyond that, the full production potential of the Company’s assets is much greater and our investment proposition offers signiﬁcant further growth production to a level of 8,000 mtVp.a. over the medium to long term. This growth would be facilitated through the advancement of the feasibility and pre- feasibility studies at Vametco and Vanchem, respectively, which would require modest capital expenditure relative to a greenﬁeld operation. The potential growth to 8,000 mtVp.a. would provide an opportunity to reduce unit costs further and could be done in incremental, value accretive phases. Bushveld Energy is focused on developing and promoting the role of vanadium in the growing global energy storage market through the advancement of vanadium-based energy storage systems, speciﬁcally VRFBs. With respect to non-core interests, Bushveld Energy holds an indirect interest in Cellcube of 25.25 per cent. In addition, the Group also has interests in Lemur, an integrated thermal coal mining and independent power producer project in Madagascar. In September 2021, the Company disposed of its 4.76 per cent shareholding in AIM-listed AfriTin Mining Limited, the company demerged from Bushveld Minerals in November 2017, and realised a total of approximately US$3.5 million. 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. RESULTS AND DIVIDEND The Group’s results show a loss before tax for the year of US$37.7 million (2019: proﬁt of US$83.3 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 22. 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 2021 are as follows: Fortune Mojapelo Tanya Chikanza Ian Watson Michael J. Kirkwood Anthony Viljoen Jeremy Friedlander Kevin Alcock Mirco Bardella Jacqueline Musiitwa David Noko Chief Executive Officer Finance Director Chairman and Independent Non-Executive Director Senior Independent Non-Executive Director Non-Executive Director (retired 26 May 2022) Independent Non-Executive Director (retired 16 March 2022) Independent Non-Executive Director (appointed 16 March 2022) Independent Non-Executive Director (appointed 16 March 2022) Independent Non-Executive Director (appointed 16 March 2022) Independent Non-Executive Director (appointed 26 May 2022) DIRECTORS’ INTERESTS The Directors’ beneﬁcial interests in the shares of the Company at 31 December 2021 were: Ordinary shares of 1p each 31 December 2021 Ordinary shares of 1p each 31 December 2020 Fortune Mojapelo Tanya Chikanza Ian Watson Michael J. Kirkwood Anthony Viljoen Jeremy Friedlander 13,253,794 – 2,455,000 300,000 9,746,667 1,050,000 12,580,000 – 3,555,000 300,000 12,746,667 1,050,000 Fortune Mojapelo held 9,173,794 Ordinary Shares in Bushveld Minerals directly and has a beneﬁcial interest in a further 8,160,000 shares held through VM Investment Company (Pty) Ltd, a company in which he has a 50 per cent interest, resulting in a total of 13,253,794 shares. Anthony Viljoen held 5,666,667 Ordinary Shares in Bushveld Minerals directly and has a beneﬁcial interest in a further 8,160,000 Ordinary Shares held through VM Investment Company (Pty) Ltd, a company in which he has a 50 per cent interest, resulting in a total of 9,746,667 shares. 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. 94 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information 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 34 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 Review. 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 K Bredin Company Secretary 30 June 2022 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”) in conformity with the requirements of the Companies Act of 2006. 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, in conformity with the requirements of the Companies Act of 2006 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: select suitable accounting policies and apply them consistently; (i) (ii) make judgements and accounting estimates that are reasonable and prudent; (iii) state whether they have been prepared in accordance with IFRS in conformity with the requirements of the Companies Act of 2006; 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. Annual Report and Financial Results 2021 95 Financial Statements Financial Statements To fuel human freedom in advancing a better, safer, more durable existence for us all. 96 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information Annual Report and Financial Results 2021 97 Financial Statements Independent Auditor’s Report OPINION We have audited the ﬁnancial statements of Bushveld Minerals Limited and its subsidiaries (the ‘group’) for the year ended 31 December 2021 which comprise of the Consolidated Statement of Proﬁt or Loss, Consolidated Statement of Comprehensive Loss, 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 UK adopted International Accounting Standards. In our opinion, the ﬁnancial statements: – give a true and fair view of the state of the group’s affairs as at 31 December 2021 and of the group’s loss for the year then ended; – are in accordance with UK-adopted International Accounting Standards; 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 In auditing the ﬁnancial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the ﬁnancial statements is appropriate. Our evaluation of the directors’ assessment of the group’s ability to continue to adopt the going concern basis of accounting is described in the Key Audit Matters section, below. Based on the work we have performed, we have not identiﬁed any material uncertainties relating to events or conditions that, individually or collectively, may cast signiﬁcant doubt on the group’s ability to continue as a going concern for a period of at least twelve months from when the ﬁnancial statements are authorised for issue. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. Summary of our audit approach Key audit matters Group – Impairment of property, plant and equipment and intangible exploration and evaluation assets – Going concern Materiality Group – Overall materiality: $2,070,000 (2020: $3,000,000) – Performance materiality: $1,550,000 (2020: $2,250,000) Scope Our full-scope audit procedures covered 99% of revenue, 97% of total assets and 98% of proﬁt before tax. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most signiﬁcance in our audit of the group ﬁnancial statements of the current period and include the most signiﬁcant assessed risks of material misstatement (whether or not due to fraud) we identiﬁed, including 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. 98 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information Impairment of property, plant and equipment and intangible assets Key audit matter description The group has made of loss before tax of $47 million (2020: loss of US$38 million). As a result, there is a risk that the carrying value of the group’s property, plant and equipment and intangible exploration and evaluation may be impaired. The use of estimates and judgements in respect of impairment is disclosed in the “use of estimates and judgements” section of note 3 and details of intangible exploration and evaluation assets and property, plant and equipment are disclosed in notes 12 and 13 respectively. This is considered to be a Key Audit Matter due to the use of signiﬁcant management estimates and judgements in estimating the recoverable amount of the assets based on long-term forecasts which require the use of assumptions, including future vanadium price, production volumes, foreign exchange rates and costs. How the matter was addressed in the audit Our work included: – Review of the work of component auditors on component management’s impairment reviews; – Checking the integrity and arithmetic accuracy of the cash ﬂow forecasts 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 cash ﬂow forecasts to assess the impact of downside scenarios more severe 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 impairment and the application of a fair value less cost of disposal model. Key observations The model used by management in relation to the assessment of the Vanchem CGU is particularly sensitive to changes in the production volumes in the near term. Going concern Key audit matter description The group made a loss before tax for the year of $47 million (2020: loss of $38 million) and has signiﬁcant borrowings which are secured on the trade and assets of the group, some of which are subject to ﬁnancial covenants. The group has undertaken signiﬁcant capital expenditure in the year to increase the production capacity of its operations and the forecasts used in management’s assessment of going concern rely on the successful implementation and integration of these new facilities. The group is also directly impacted by changes in the market price of vanadium and the ZAR:USD exchange rate, both of which are outside the group’s control. Fluctuations in either of these assumptions can materially affect the results of the group. As an area that inherently contains a considerable degree of management estimation and judgement, going concern is an area that requires a signiﬁcant amount of audit effort and senior audit personnel time. Annual Report and Financial Results 2021 99 Financial Statements Independent Auditor’s Report continued Going concern How the matter was addressed in the audit Our work included: – Obtain and review management’s assessment of going concern and consider the reasonableness of assumptions used, corroborating them to external market information where possible. – Challenging management on the implications of disaffirming evidence and alternative viewpoints. – In relation to the forecasts and sensitivity analysis used in the going concern assessment we: – Checked the arithmetic accuracy of the forecasts; – Reviewed management’s sensitivity analysis to understand the impact of reasonably possible changes (deemed to be 10%) in the vanadium price, production volumes and exchange rate. – Challenged management on the key assumptions made, particularly with regards to the production volumes of Kiln 3 and requested management undertake additional sensitivity analysis beyond their original base-case; – Assessed the accuracy of the forecasts through comparison FY22 actual results to the date of approval. – Compared the forecasts produced as part of the 2020 audit, to the actual results for 2021 to assess the accuracy of management’s forecasts. – Reviewed management’s forward-looking covenant compliance assessment to assess consistency with the forecasts. – Considered the relevance, accuracy and balance of disclosures made in the ﬁnancial statements including the front end. Key observations Management’s going concern assessment is particularly sensitive to changes in the production volumes of the Vanchem business in the near term. 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. Based on our professional judgement, we determined materiality as follows: Overall materiality Group $2,070,000 (2020: $3,000,000) Basis for determining overall materiality Formula based on 5% of result before tax Rationale for benchmark applied As a listed entity, result before tax is considered to be the most appropriate benchmark for users of the ﬁnancial statements Performance materiality $1,550,000 (2020: $2,250,000) Basis for determining performance materiality 75% of overall materiality Reporting of misstatements to the Audit Committee Misstatements in excess of $103,000 and misstatements below that threshold that, in our view, warranted reporting on qualitative grounds. An overview of the scope of our audit The group consists of 30 components, located in the following countries; – Guernsey – South Africa – Mauritius – Madagascar – United States of America – United Kingdom 100 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information The coverage achieved by our audit procedures was: Full scope audit Speciﬁc audit procedures Total Number of components 5 3 8 Revenue Total assets Loss before tax 99% 0% 99% 95% 2% 97% 89% 9% 98% Analytical procedures at group level were performed for the remaining components. Of the above, full scope audits for 3 components and speciﬁc audit procedures for 2 components were undertaken by component auditors. OTHER INFORMATION The other information comprises the information included in the annual report, other than the ﬁnancial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the ﬁnancial statements does not cover the other information and we do not express any form of assurance conclusion thereon. 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 course of 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 this gives rise to a material misstatement in the ﬁnancial statements themselves. 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 95, 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. THE EXTENT TO WHICH THE AUDIT WAS CONSIDERED CAPABLE OF DETECTING IRREGULARITIES, INCLUDING FRAUD Irregularities are instances of non-compliance with laws and regulations. The objectives of our audit are to obtain sufficient appropriate audit evidence regarding compliance with laws and regulations that have a direct effect on the determination of material amounts and disclosures Annual Report and Financial Results 2021 101 Financial Statements Independent Auditor’s Report continued in the ﬁnancial statements, to perform audit procedures to help identify instances of non-compliance with other laws and regulations that may have a material effect on the ﬁnancial statements, and to respond appropriately to identiﬁed or suspected non-compliance with laws and regulations identiﬁed during the audit. In relation to fraud, the objectives of our audit are to identify and assess the risk of material misstatement of the ﬁnancial statements due to fraud, to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud through designing and implementing appropriate responses and to respond appropriately to fraud or suspected fraud identiﬁed during the audit. However, it is the primary responsibility of management, with the oversight of those charged with governance, to ensure that the entity’s operations are conducted in accordance with the provisions of laws and regulations and for the prevention and detection of fraud. In identifying and assessing risks of material misstatement in respect of irregularities, including fraud, the group audit engagement team and component auditors: – obtained an understanding of the nature of the industry and sector, including the legal and regulatory frameworks, that the group operate in and how the group is complying with the legal and regulatory frameworks; – inquired of management, and those charged with governance, about their own identiﬁcation and assessment of the risks of irregularities, including any known actual, suspected or alleged instances of fraud; – discussed matters about non-compliance with laws and regulations and how fraud might occur including assessment of how and where the ﬁnancial statements may be susceptible to fraud. All relevant laws and regulations identiﬁed at a Group level and areas susceptible to fraud that could have a material effect on the consolidated ﬁnancial statements were communicated to component auditors. Any instances of non-compliance with laws and regulations identiﬁed and communicated by a component auditor were considered in our group audit approach. The most signiﬁcant laws and regulations were determined as follows: Legislation/Regulation Additional audit procedures performed by the Group audit engagement team and component auditors included: IFRS and The Companies (Guernsey) Law 2008 – Review of the ﬁnancial statement disclosures and testing to supporting documentation; – Completion of disclosure checklists to identify areas of non-compliance. Tax compliance regulations in the jurisdictions in which the group operates – Inspection of advice received from internal/external tax advisors where relevant; – Consideration of whether any matter identiﬁed during the audit required reporting to an appropriate authority outside the entity. Mining Charter of South Africa and associated laws – Enquiry of management as to whether any breaches had been identiﬁed; – Review of supporting documentation where relevant. The areas that we identiﬁed as being susceptible to material misstatement due to fraud were: Risk Audit procedures performed by the Group audit engagement team and component auditors Revenue recognition – Tests of controls, tests of details, analytical procedures and cut-off testing. Management override of controls – Testing the appropriateness of journal entries and other adjustments; – Assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and – Evaluating the business rationale of any signiﬁcant transactions that are unusual or outside the normal course of business. A further description of our responsibilities for the audit of the ﬁnancial statements is included in appendix 1 of this auditor’s report. This description, which is located on page 103, forms part of our auditor’s report. 102 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information 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 Date: 30 June 2022 Appendix 1: Auditor’s responsibilities for the audit of the 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. – 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 safeguards. 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. Annual Report and Financial Results 2021 103 Financial Statements Consolidated Statement of Proﬁt or Loss For the year ended 31 December 2021 Continuing operations Revenue Cost of sales Gross profit/(loss) Other operating income Impairment losses Selling and distribution costs Other mine operating costs Idle plant costs Share-based payment Administration expenses Operating loss Finance income Finance costs Remeasurement of financial liabilities Loss from Joint venture Movement in earnout estimate Loss before taxation Taxation* Loss for the year Earnings per share Loss per ordinary share Basic (loss)/earnings per share (cents) Diluted (loss)/earnings per share (cents) Loss attributable to: Owners of the parent Non-controlling interest * Refer to note 35 for details of restatement. Note 2021 US$ 2020 Restated* US$ 5 106,857,285 (102,782,583) 89,988,078 (91,260,760) 12&13 23 7 8 9 28 17 26 10 11 11 4,074,702 2,618,971 (2,438,890) (6,406,621) (3,224,407) (3,386,899) 375,008 (20,894,292) (29,282,428) 935,347 (12,184,059) (1,902,172) (4,351,356) – (1,272,682) 2,304,528 – (4,828,710) (4,699,892) (4,152,153) (375,008) (19,783,176) (32,807,093) 1,077,991 (5,732,249) – – (206,066) (46,784,668) 4,671,255 (37,667,417) 6,570,026 (42,113,413) (31,097,391) (3.39) (3.39) – (2.63) (2.63) – (40,779,853) (1,333,560) (30,595,243) (502,148) (42,113,413) (31,097,391) The accounting policies on pages 110 to 121 and the notes on pages 109 to 147 form an integral part of the consolidated ﬁnancial statements. 104 Annual Report and Financial Results 2021 Consolidated Statement of Comprehensive Loss For the year ended 31 December 2021 Loss for the year Consolidated other comprehensive income: Items that will not be reclassified to profit or loss: (Losses)/gains on valuation of investments in equity instruments Other fair value movements Total items that will not be reclassified to profit or loss Items that may be reclassified to profit or loss: Currency translation differences Other comprehensive income for the year net of taxation Total comprehensive (loss) income Total comprehensive (loss) income attributable to: Owners of the parent Non-controlling interest * Refer to note 35 for details of restatement. All results relate to continuing activities. Business Overview Governance Financial Statements Supplementary Information Note 2021 US$ 2020 Restated* US$ (42,113,413) (31,097,391) (3,771,367) 13,830 13,483,194 103,448 (3,757,537) 13,586,642 (9,712,355) (9,660,609) (13,469,892) 3,926,033 (55,583,305) (27,171,358) (55,918,489) 335,184 (25,790,347) (1,381,011) (55,583,305) (27,171,358) The accounting policies on pages 110 to 121 and the notes on pages 109 to 147 form an integral part of the consolidated ﬁnancial statements. Annual Report and Financial Results 2021 105 Financial Statements Consolidated Statement of Financial Position For the year ended 31 December 2021 Assets Non-Current Assets Intangible assets Property, plant and equipment Investment property Financial assets at fair value Investment in joint venture 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* Share-based payment reserve Convertible loan note reserve Foreign currency translation reserve* Fair value reserve Equity attributable to owners of the parent Non-controlling interest Total Equity Liabilities Non-Current Liabilities Retirement benefit obligation Environmental rehabilitation liability Deferred consideration Loans Borrowings Lease liabilities Deferred tax Total Non-Current Liabilities Current Liabilities Trade and other payables Provisions Borrowings Lease liabilities Deferred consideration Total Current Liabilities Total Liabilities Total Equity and Liabilities * Refer to note 35 for details of restatement. Note 2021 US$ 2020 Restated* US$ 2019 Restated* US$ 12 13 14 16 17 18 19 20 16 21 22 22 22 23 22 22 24 25 26 27 28 29 15 30 31 28 29 26 59,254,372 153,110,702 2,595,359 – 7,855,237 59,003,825 167,579,993 2,811,017 – – 59,408,821 185,269,063 2,905,449 4,420,891 – 222,815,670 229,394,835 252,004,224 41,646,156 17,642,216 2,868,886 275,017 – 15,432,852 34,081,625 10,425,363 3,111,465 814,067 22,452,877 50,540,672 35,082,342 4,516,287 6,605,465 493,178 1,952,227 34,011,557 77,865,127 300,680,797 121,426,069 350,820,904 82,661,056 334,665,280 16,797,180 125,550,674 (1,265,040) – 54,814 (20,851,187) (1,938,397) 15,858,428 117,065,907 28,367,659 375,008 54,814 (9,470,088) 12,966,294 15,357,271 111,067,064 58,962,902 633,277 – (2,289,138) (620,349) 118,348,044 32,481,896 150,829,940 165,218,022 32,146,712 197,364,734 183,111,027 33,527,723 216,638,750 1,905,739 18,031,321 1,684,021 3,280,948 67,435,647 3,920,698 6,014,244 2,076,023 17,998,366 1,802,884 1,597,972 70,909,370 4,376,483 11,549,862 2,331,325 17,844,066 7,108,819 – 41,756,152 4,677,338 24,278,644 102,272,618 110,310,960 97,996,344 33,080,670 3,721,853 10,211,102 564,614 – 22,065,601 3,296,894 13,337,406 625,661 3,819,648 15,809,996 3,432,619 – 787,571 – 47,578,239 149,850,857 300,680,797 43,145,210 153,456,170 350,820,904 20,030,186 118,026,530 334,665,280 The consolidated ﬁnancial statements and the notes on pages 109 to 147, were approved by the board of directors on the 30 June 2022 and were signed on its behalf by: Tanya Chikanza Finance Director The accounting policies on pages 110 to 121 and the notes on pages 109 to 147 form an integral part of the consolidated ﬁnancial statements. 106 Annual Report and Financial Results 2021 Consolidated Statement of Changes in Equity Financial Statements For the year ended 31 December 2021 Supplementary Information Business Overview Governance r i a F e u a v l $ S U e v r e s e r – ) 9 4 3 0 2 6 ( , $ S U l a t o T y t i u q e $ S U t s e r e t n i - n o N g n i l l o r t n o c $ S U y n a p m o c / p u o r g e h t l a t o T l o t e b a t u b i r t t a l f o s r e d o h y t i u q e $ S U e m o c n i i d e n a t e R $ S U e v r e s e r e t o n n a o l l e b i t r e v n o C - e r a h S d e s a b $ S U e v r e s e r t n e m y a p $ S U e v r e s e r i n g e r o F e g n a h c x e n o i t a l s n a r t $ S U e r a h S i m u m e r p $ S U e r a h S l a t i p a c , 6 8 2 1 9 0 1 4 2 , , ) 6 3 5 2 5 4 4 2 ( , , ) 1 9 3 7 9 0 1 3 ( , , ) 0 9 0 3 9 6 8 ( , , 0 5 7 8 3 6 6 1 2 , , 4 9 1 3 8 4 3 1 , 9 4 4 3 0 1 , , 3 2 7 7 2 5 3 3 , , ) 8 4 1 2 0 5 ( – 3 2 7 7 2 5 , , 3 3 – – ) 3 6 8 , 8 7 8 ( , ) 6 3 5 2 5 4 4 2 ( , , 7 2 0 1 1 1 3 8 1 , , ) 3 4 2 5 9 5 0 3 ( , , ) 7 2 2 4 1 8 7 ( , , 4 9 1 3 8 4 3 1 , 9 4 4 3 0 1 , , ) 6 3 5 2 5 4 4 2 ( , ) 3 4 2 , 5 9 5 0 3 ( , – 2 0 9 , 2 6 9 , 8 5 ) 9 4 3 , 0 2 6 ( – – – – 9 4 4 3 0 1 , , 4 9 1 3 8 4 3 1 , 4 1 8 4 5 , 8 0 0 5 7 3 , , 0 0 0 0 0 5 6 , – – – 4 1 8 4 5 , 8 0 0 5 7 3 , , 0 0 0 0 0 5 6 , – – – – – – ) 8 3 8 , 3 0 2 , 6 2 ( ) 1 1 0 1 8 3 , , 1 ( ) 7 2 8 , 2 2 8 , 4 2 ( ) 3 4 2 , 5 9 5 0 3 ( , , 3 4 6 6 8 5 , 3 1 – – – – – – – – – – – – – – – – – – – 8 0 0 5 7 3 , 4 1 8 4 5 , – – – ) 1 6 8 , 5 5 6 1 ( , , ) 7 2 2 4 1 8 7 ( , – – ) 7 2 2 , 4 1 8 7 ( , – – – – – – – – – – – – – – – – – 3 4 8 , 8 9 9 5 , , 7 5 1 1 0 5 , 3 6 5 3 6 5 7 0 2 , , 8 3 4 5 1 4 3 8 , , ) 1 6 8 5 5 6 1 ( , , 4 6 0 7 6 0 1 1 1 , , 1 7 2 7 5 3 5 1 , d e t r o p e r y l s u o i v e r p s a e c n a a b g n n e p O l i – – j * t n e m t s u d a r a e y r o i r P , 4 6 0 7 6 0 1 1 1 , 1 7 2 7 5 3 , , 5 1 d e t a t s e r s a 0 2 0 2 y r a u n a J 1 0 t a e c n a a B l : x a t f o t e n , e m o c n i e v i s n e h e r p m o c r e h t O s e c n e r e f f i d n o i t a l s n a r t y c n e r r u C s t n e m t s e v n i n o t n e m e v o m e u a v r i a F l s t n e m e v o m e u a v r i a f l r e h t O r a e y e h t r o f s s o L r a e y e h t r o f s s o L e v i s n e h e r p m o c l a t o T e t o n n a o l l e b i t r e v n o c f o t n e n o p m o c y t i u q E : s r e n w o h t i w n o i t c a s n a r T t n e m y a p d e s a b - e r a h S s e r a h s f o e u s s I , 4 3 7 4 6 3 7 9 1 , , 2 1 7 6 4 1 2 3 , 2 2 0 8 1 2 , , 5 6 1 9 5 6 7 6 3 , , 8 2 4 9 2 , 6 6 9 , 2 1 4 1 8 , 4 5 8 0 0 5 7 3 , , ) 8 8 0 0 7 4 9 ( , , ) 5 5 3 2 1 7 9 ( , , ) 7 3 5 7 5 7 3 ( , – , ) 7 3 5 7 5 7 3 ( , , 4 4 7 8 6 6 1 , , ) 9 9 0 1 8 3 1 1 ( , – – , ) 3 1 4 3 1 1 2 4 ( , , ) 0 6 5 3 3 3 1 ( , , ) 3 5 8 9 7 7 0 4 ( , , ) 3 5 8 9 7 7 0 4 ( , – – , ) 7 3 5 7 5 7 3 ( , ) 5 0 3 , 3 8 5 , 5 5 ( , 4 8 1 5 3 3 ) 9 8 4 , 8 1 9 , 5 5 ( , ) 3 5 8 9 7 7 0 4 ( , , ) 7 3 5 7 5 7 3 ( , – ) 8 0 0 5 7 3 ( , , 9 1 5 3 2 4 9 , – – – – ) 8 0 0 5 7 3 ( , , 9 1 5 3 2 4 9 , – – – – , 4 5 1 7 4 1 1 1 , , ) 4 5 1 7 4 1 1 1 ( , – – – – – – – , 0 4 9 9 2 8 0 5 1 , 6 9 8 1 8 4 , , 2 3 , 4 4 0 8 4 3 , 8 1 1 ) 0 4 0 5 6 2 , , 1 ( ) 7 9 3 , 8 3 9 1 ( , 4 1 8 , 4 5 – – – – – – – ) 8 0 0 5 7 3 ( , – , ) 9 9 0 1 8 3 1 1 ( , – – – – ) 9 9 0 1 8 3 , , 1 1 ( , ) 7 8 1 1 5 8 0 2 ( , , 7 0 9 5 6 0 7 1 1 , 8 2 4 , 8 5 8 , 5 1 1 2 0 2 y r a u n a J 1 0 t a e c n a a B l – – – – , 7 6 7 4 8 4 8 , – – , 4 7 6 0 5 5 , 5 2 1 – – – – – – , 2 5 7 8 3 9 , 0 8 1 7 9 7 6 1 , : x a t f o t e n , e m o c n i e v i s n e h e r p m o c r e h t O s e c n e r e f f i d n o i t a l s n a r t y c n e r r u C s t n e m e v o m e u a v r i a f l r e h t O r a e y e h t r o f s s o L r a e y e h t r o f s s o L e v i s n e h e r p m o c l a t o T : s r e n w o h t i w n o i t c a s n a r T t n e m y a p d e s a b - e r a h S s e r a h s f o e u s s I s e v r e s e r n e e w t e b r e f s n a r T 1 2 0 2 r e b m e c e D 1 3 t a e c n a a B l . s t n e m e t a t s l i a c n a n ﬁ d e t a d i l o s n o c e h t f o t r a p l a r g e t n i n a m r o f 7 4 1 o t 9 0 1 s e g a p n o s e t o n e h t d n a 1 2 1 o t 0 1 1 s e g a p n o s e c i i l o p g n i t n u o c c a e h T 2 2 2 2 e t o N . t n e m e t a t s e r f o s l i a t e d r o f 5 3 e t o n o t r e f e R * Annual Report and Financial Results 2021 107 Financial Statements Consolidated Statement of Cash Flows For the year ended 31 December 2021 Cash flows from operating activities Loss before taxation Adjustments for: Depreciation property, plant and equipment (including right-of-use assets) Loss from joint venture Movement in earnout estimate Remeasurement of financial liabilities Interest income Finance costs Impairment losses Changes in working capital Income taxes received/(paid) Net cash outflow from operating activities Cash flows from investing activities Finance income Purchase of property, plant and equipment Payment of deferred consideration Purchase of investments Purchase of exploration and evaluation assets Disposal of financial assets held at fair value Net cash outflow from investing activities Cash flows from financing activities Proceeds from loans Finance costs Repayment of borrowings Proceeds from borrowings Lease payments Net cash (outflow)/inflow from financing activities Total cash movement for the year Cash and cash equivalents at the beginning of the year Effect of translation of foreign rate Total cash and cash equivalents at end of the year Reconciliation of net cash flow to movement in net debt Net debt at 1 January Decrease/(increase) in borrowings Increase in loans Net (decrease)/increase in cash and cash equivalents Decrease in lease liabilities Effects of exchange rate changes Net debt as at 31 December Net cash and bank debt Lease liabilities Net debt as at 31 December Note 2021 US$ 2020 US$ 13 26 28 8 9 12&13 8 13 26 16 12 27 28 28 (46,784,668) (37,667,417) 19,395,496 4,351,356 – 1,902,172 (935,347) 12,184,059 2,438,890 (5,022,120) 394,069 17,866,153 – 206,066 – (1,077,991) 5,732,249 – 1,253,029 (3,452,492) (12,076,093) (17,140,403) 935,347 (19,449,657) (3,874,449) (9,987,735) (928,960) 16,147,154 985,901 (9,269,924) (1,680,459) (1,883,208) (1,471,142) 286,643 (17,158,300) (13,032,189) 1,335,735 (2,947,577) (4,731,932) – (705,373) 1,597,972 (3,115,205) – 49,417,161 (753,302) (7,049,147) 47,146,626 (36,283,540) 50,540,672 1,175,720 16,974,034 34,011,557 (444,919) 21 15,432,852 50,540,672 (38,708,248) 4,731,932 (1,335,735) (36,283,540) 245,943 4,499,970 (7,744,604) (49,417,161) (1,597,972) 16,974,034 256,260 2,821,195 (66,849,678) (38,708,248) (62,213,897) (4,635,781) (33,706,104) (5,002,144) (66,849,678) (38,708,248) The accounting policies on pages 110 to 121 and the notes on pages 109 to 147 form an integral part of the consolidated ﬁnancial statements. 108 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information Notes to the Consolidated Financial Statements For the year ended 31 December 2021 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 Oak House, Hirzel Street, St Peter Port, Guernsey, GY1 3RH. The consolidated ﬁnancial statements of the Company as at and for the year ended 31 December 2021 comprise of the Company and its subsidiaries (The “Group”) and the Group’s interest in equity accounted investments. As at 31 December 2021, the Bushveld Group comprised of: Company Bushveld Minerals Limited Bushveld Resources Limited Ivanti Resources (Pty) Limited Pamish Investments No 39 (Pty) Limited Amaraka Investments No 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) Limited Bushveld Electrolyte Company (Pty) Ltd VRFB Holdings Limited Vanadium Electrolyte Rental Limited Enerox Holdings Limited 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 Lemur SA (Pty) Ltd Equity holding and voting rights Note N/A 1 100% 2 100% 2 64.00% 2 68.50% 2 100% 13 100% 2 62.5% 2 74% 2 51% 2 100% 1 84.00% 4 100% 12 100% 12 55% 4 50.5% 1&4 40% & 30% 14 50% 2 100% 7 100% 8 100% 11 74% 9 100% 10 100% 1 100% 5 99% 3 100% 6 99.00% 3 100% 3 100% 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 South Africa Guernsey UK Guernsey Guernsey United States South Africa South Africa South Africa South Africa Mauritius Madagascar Mauritius Madagascar Mauritius South Africa Nature of activities Ultimate holding company Holding company Mining and manufacturing company Mining right holder 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 Holding company Holding company Energy development Energy development Energy development Holding company Energy development Holding company Holding company Holding company Holding company Mining right holder Mining and manufacturing company Property owning company Holding company Coal exploration Holding company Power generation company Holding company Coal trading 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 14 Held by VRFB Holdings Limited Annual Report and Financial Results 2021 109 Financial Statements Notes to the Consolidated Financial Statements continued 2. ADOPTION OF NEW AND REVISED STANDARDS Accounting standards and interpretations applied In the current year, the Group has adopted the following standards and interpretations that are effective for the current ﬁnancial year and that are relevant to its operations: COVID-19-Related Rent Concessions (Amendments to IFRS 16) The new standard provides lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modiﬁcation. Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7) – Phase 2 The new standard is aimed at resolving the potential effects the IBOR reform could have on ﬁnancial reporting. The adoption of these Standards and Interpretations, which become effective for annual periods beginning on or after 1 January 2021, had no material impact on the ﬁnancial statements of the Group. 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: Reference to the Conceptual Framework (Amendments to IFRS 3) The amendments update an outdated reference in IFRS 3 without signiﬁcantly changing its requirements. Onerous Contracts — Cost of Fulﬁlling a Contract (Amendments to IAS 37) The amendments address costs a company should include as the cost of fulﬁlling a contract when assessing whether a contract is onerous. Property, Plant and Equipment — Proceeds before Intended Use (Amendments to IAS 16) The amendments prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Classiﬁcation of Liabilities as Current or Non-current (Amendments to IAS 1) The amendments provide a more general approach to the classiﬁcation of liabilities under IAS 1 based on the contractual arrangements in place at the reporting date. Subsidiary as a First-time Adopter (amendments to IFRS 1) The amendments simpliﬁed the application of IFRS 1 by a subsidiary that becomes a ﬁrst-time adopter after its parent. Subsidiary, associate or joint venture can elect to apply exemption in par D16(a) to the cumulative translation difference. Taxation in Fair Value Measurements (Amendments to IAS 41) The amendments removed the requirement to exclude cash ﬂows for taxation when measuring fair value. Fees in the ‘10 per cent’ Test for Derecognition of Financial Liabilities (Amendments to IFRS 9) The amendments clarify what is included in fees paid and fees received. The Directors anticipate that the adoption of these Standards and Interpretations, which become effective for annual periods beginning on or after 1 January 2022, in future periods will have no material impact on the ﬁnancial statements of the Group. 3. SIGNIFICANT ACCOUNTING POLICIES Basis of accounting These ﬁnancial statements have been prepared in accordance with International Financial Reporting Standards and UK adopted International Accounting Standards. The ﬁnancial year covers the 12 months to 31 December 2021. The comparative period covered the 12 month period to 31 December 2020. The notes to the ﬁnancial statements for the year ended 31 December 2019 have only been presented where impacted by the restatement (see note 35). 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. 110 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information Going concern The Group closely monitors and manages its liquidity risk and day to day working capital requirements. The Group has a R125 million (around $5.8million) Revolving Credit Facility with Nedbank at Vametco which is subject to ﬁnancial covenants. Cash forecasts are regularly produced, taking into account the global logistical challenges around sales to ensure sufficient cash within the Group to meet its obligations. The Group runs sensitivities for different scenarios, including but not limited to changes in commodity prices and exchange rates. The Group also routinely monitors the covenants associated with the RCF and proactively engages with Nedbank, the lender, where there is a risk of a breach. The accounting treatment of IFRS 9 on the Orion Product Finance Agreement led to an increase in accounting interest, over and above the actual interest paid and resulted in a breach of the net debt to EBITDA covenant as at 31 December 2021. The Group sought and was granted a waiver for the interest cover covenant by Nedbank and as part of that waiver, the deﬁnitions of the covenant have been clariﬁed and amended to exclude the impact of IFRS 9. There was no change to the presentation in the ﬁnancial statements due to breach, as the RCF facility is due for repayment in November 2022 (the cash outﬂows for which are included within the group forecasts) and was therefore already disclosed as a short term liability. Through our regular monitoring, based on Vametco’s actual performance to 30 May 2022 and forecast to 30 June 2022, we are conﬁdent of passing the 30 June 2022 covenant testing period. The main sensitivities considered as part of management’s going concern assessment are production, vanadium prices and exchange rates. In terms of production, the newly refurbished Kiln 3 at Vanchem has been commissioned and is ramping up. The Group’s ability to achieve its future production proﬁle is predicated on the Kiln’s successful increase in production during the ﬁrst three to four months following commissioning as this will result in the Group reaching its target of steady state production run rate of 5,000 to 5,400 mtV per annum by the end of the 2022 ﬁnancial year. This assumes forecast production volumes at Vanchem of 222 mtV by December 2022. The pace of ramp up of the kiln has been slower than planned, impacted by electricity loadshedding and technical issues that are consistent with a ramp up. The June 2022 production for Vanchem was 108 mtV. As part of our assessment of going concern, additional sensitivity analysis has been performed on the production proﬁle of Kiln 3, in particular over the next three to four months, where production is assumed to remain at 108 mtV, before ramping up to the year-end target of 222 mtV. We have not identiﬁed a cash ﬂow shortfall at group level as part of this sensitivity analysis. These forecasts assume that Vametco continues to perform in line with historic levels and planned maintenance shutdowns are undertaken annually, these shutdowns proceed in line with the planned timetable and no unplanned shutdowns are experienced during the going concern period. We have also stress tested the kiln’s long term production plan as well given its planned signiﬁcant future contribution to the Group’s production proﬁle and cash ﬂows. With regards to pricing, the short to medium term assumptions are that the average price achieved by the Group will be $40.99 through to 31 December 2022 and average at $35.04 throughout 2023. The year to date average price achieved by the group was $44.89. We have performed sensitivity analysis on the basis of the prices falling 10 per cent below those forecast and have not identiﬁed a cash shortfall at this level. The forecasts assume a ZAR/USD rate of 15. This compares to a current spot rate of 15.89 and a 1 year forward rate of 15.29. As noted above, the Nedbank RCF is due to be repaid in November 2022 and this is modelled in the cash ﬂow forecasts. In November 2023 the convertible loan note with Orion of $35million plus interest is due for repayment. Although this is beyond the 12 month going concern review period as considered by the board, repayment of the convertible loan note is included in the group’s long term forecasts through to December 2023. Where additional funding may be required, the Group believes it has several options available to it, including but not limited to, use of the overdraft facility, restructuring of the debt, cost reduction strategies as well as selling of non-core assets. Based on the current Group ﬁnances, having considered group budgets and cash ﬂow forecasts, possible downside scenarios around commodity pricing and exchange rate and in particular around Vanchem’s Kiln production proﬁle, the cash ﬂow forecasts demonstrate the Group will have sufficient headroom in its liquid resource 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 continue to adopt the going concern basis in preparing the consolidated ﬁnancial information. Basis of consolidation The consolidated ﬁnancial statements present the statement of ﬁnancial position and changes therein, statement of proﬁt or loss and cash ﬂow information of the Group. Where necessary, adjustments are made to the results of subsidiaries to ensure the consistency of their accounting policies with those used by the group. Intercompany transactions, balances and unrealised proﬁts and losses between group companies are eliminated on consolidation. Annual Report and Financial Results 2021 111 Financial Statements Notes to the Consolidated Financial Statements continued 3. SIGNIFICANT ACCOUNTING POLICIES CONTINUED 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. 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 in proﬁt or loss. Contingent consideration that is classiﬁed as equity is not re-measured, and its subsequent settlement is accounted for within equity. 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. Joint Ventures A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. Investments in joint ventures are accounted for using the equity method. Under the equity method, the share of the proﬁts or losses of the joint venture is recognised in proﬁt or loss and the share of the movements in equity is recognised in other comprehensive income. Investments in joint ventures are carried in the statement of ﬁnancial position at cost plus post-acquisition changes in the consolidated entity’s share of net assets of the joint venture. Goodwill relating to the joint venture is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment. Income earned from joint venture entities reduce the carrying amount of the investment. 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. 112 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information 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 and functional currency of the parent company. 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. 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 Group 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. Annual Report and Financial Results 2021 113 Financial Statements Notes to the Consolidated Financial Statements continued 3. SIGNIFICANT ACCOUNTING POLICIES CONTINUED Share based payments The fair value of bonus shares granted to employees for nil consideration under the short-term incentive scheme is recognised as an expense over the relevant service period, being the year to which the bonus relates and the vesting period of the shares. The fair value is measured at the grant date of the shares and is recognised in equity in the share-based payment reserve. The number of shares expected to vest is estimated based on the non-market vesting conditions. Where shares are forfeited due to a failure by the employee to satisfy the service conditions, any expenses previously recognised in relation to such shares are reversed effective from the date of the forfeiture. Finance income Interest income is recognised when it is probable that economic beneﬁts will ﬂow to the Group and the amount of income can be measured reliably. Interest income 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 or loss, 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. 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 impairment loss 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. 114 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information 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 (excluding right-of-use assets) Property, plant and equipment are stated at historical cost less accumulated depreciation, except for investment properties which are carried at fair value. Depreciation on assets commences when they are available for use by the group. Depreciation for property, plant and equipment is charged on a systematic basis over the estimated useful lives of the assets after deducting the estimated residual value of the assets, using the straight-line method. Depreciation for right-of-use assets is charged on the same basis except that the period is the shorter of the useful life of the asset (in line with the category of property, plant and equipment to which the asset is classiﬁed) and the lease term, unless the title to the asset transfers at the end of the lease term, in which case depreciation is over the useful life. The depreciation method applied is reviewed at least at each ﬁnancial year end, with any changes accounted for as a change in accounting estimate to be applied prospectively. The depreciation charge for each period is recognised in the statement of proﬁt or loss. The useful life of an asset is the period of time over which the asset is expected to be used. The estimated useful lives of assets and their residual values are reassessed annually at the end of each reporting period, with any changes in such accounting estimates being adjusted in the year of reassessment and applied prospectively. The estimated useful lives of items of property, plant and equipment are as follows: Buildings and other improvements Plant and machinery Motor vehicles, furniture and equipment Decommissioning asset Waste stripping asset 20-25 years 5-20 years 3-10 years Life of mine 21 months Assets under construction are not depreciated. 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. Impairment losses 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. In assessing whether an impairment is required, the carrying value of the asset or CGU is compared with its recoverable amount. The recoverable amount is the higher of the CGU’s fair value less costs of disposal (FVLCD) and value in use (VIU). Given the nature of the Group’s activities, information on the fair value of an asset is usually difficult to obtain unless negotiations with potential purchasers or similar transactions are taking place. Consequently, the FVLCD for each CGU is estimated based on discounted future estimated cash ﬂows (expressed in real terms) expected to be generated from the continued use of the CGUs using market-based commodity price and exchange assumptions, estimated quantities of recoverable minerals, production levels, operating costs and capital requirements, including any expansion projects, and its eventual disposal, based on the CGU 30 year plans and latest life of mine (LOM) plans. These cash ﬂows were discounted using a real post- tax discount rate that reﬂected current market assessments of the time value of money and the risks speciﬁc to the CGU. Estimates of quantities of recoverable minerals, production levels, operating costs and capital requirements and sourced from out planning process, including the LOM plans, twp-year budgets and CGU-speciﬁc studies. Annual Report and Financial Results 2021 115 Financial Statements Notes to the Consolidated Financial Statements continued 3. SIGNIFICANT ACCOUNTING POLICIES CONTINUED The determination of FVLCD for each CGU are considered to be Level 3 fair value measurements in both years, as they are derived from valuation techniques that include inputs that are not based on observable market data. The Group considers the inputs and the valuation approach to be consistent with the approach taken by market participants. Key assumptions The determination of FVLCD is most sensitive to the following key assumptions – Production volumes – Commodity prices – Discount rates – Exchange rates Production volumes: In calculating the FVLCD, the production volumes incorporated into the cash ﬂow models were 2,694 mtVpa for Vametco and 1,610 mtVpa for Vanchem in 2022 for a base case scenario. For a full growth case in a steady state, production volumes for Vametco is 3,400 mtVpa and for Vanchem is 4,600 mtVpa taking the total Group production to 8,000 mtVpa. Estimated production volumes are based on detailed life-of-mine plans and take into account development plans for the mines agreed by management as part of the long-term planning process. Production volumes are dependent on a number of variables, such as: the recoverable quantities; the production proﬁle; the cost of the development of the infrastructure necessary to extract the reserves; the production costs; the contractual duration of mining rights; and the selling price of the commodities extracted. As each producing mine has speciﬁc reserve characteristics and economic circumstances, the cash ﬂows of the mines are computed using appropriate individual economic models and key assumptions established by management. The production proﬁles used were consistent with the reserves and resource volumes approved as part of the Group’s process for the estimation of proved and probable reserves, resource estimates and in certain circumstances, include expansion projects. These are then assessed to ensure they are consistent with what a market participant would estimate. Commodity prices: Forecast commodity prices are based on management’s estimates and are derived from forward price curves and long-term views of global supply and demand, building on past experience of the industry and consistent with external sources. These prices were adjusted to arrive at appropriate consistent price assumptions for the different qualities and type of commodities, or, where appropriate, contracted prices were applied. These prices are reviewed at least annually. Estimated long–term FeV price for the current year and the comparative year that have been used to estimate future revenues, are as follows: Assumptions 2021 2020 2022 2023 Long term (2027+) 2021 2022 2023 Long term (2024+) FeV (US$ per KgV US$ 41.35 US$ 35.15 US$ 40.00 US$ 28.80 US$ 36.00 US$ 35.50 US$ 35.00 Discount rates: In calculating the FVLCD, a real post-tax discount rate of 7.70 per cent (2020: 7.09 per cent) was applied to the post-tax cash ﬂows expressed in real terms. This discount rate is derived from the Group’s post-tax weighted average cost of capital (WACC), with appropriate adjustments made to reﬂect the risks speciﬁc to the CGU and to determine the pre-tax rate. The WACC takes into account both debt and equity. The cost of equity is derived from the expected return on investment by the Group’s investors. The cost of debt is based on its interest- bearing borrowings the Group is obliged to service. Segment- speciﬁc risk is incorporated by applying individual beta factors. The beta factors are evaluated annually based on publicly available market data. Exchange rates: Foreign exchange rates are estimated with reference to external market forecasts and updated at least annually. The rates applied for the ﬁrst ﬁve years of the valuation are based on observable market data including spot and forward values, thereafter the estimate is interpolated to the long term assumption, which involves market analysis including equity analyst estimates. The assumed long-term US dollar/Rand is estimated to be 15.00 (2020:16.00). 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. 116 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information 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. Financial assets Measurement At initial recognition, the Group 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. Transaction costs of ﬁnancial assets carried at fair value through proﬁt or loss are expensed in proﬁt or loss. Financial assets are classiﬁed at initial recognition and subsequently measured at amortised cost, fair value though other comprehensive income (FVOCI) or fair value through proﬁt or loss (FVPL). 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. Debt instruments In order for a ﬁnancial asset to be classiﬁed and measured at amortised cost or FVOCI, 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 assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is subsequently measured at FVPL is recognised in proﬁt or loss and presented net within other gains/(losses) in the period in which it arises. Equity instruments The Group subsequently measures all equity investments at fair value. Where the Group’s management has elected to present fair value gains and losses on equity investments in OCI (however, the cumulative gain/loss on disposal is represented within equity), there is no subsequent reclassiﬁcation of fair value gains and losses to proﬁt or loss following the derecognition of the investment. Dividends from such investments continue to be recognised in proﬁt or loss as other income when the Group’s right to receive payments is established. Changes in the fair value of ﬁnancial assets at FVPL are recognised in other gains/(losses) in the statement of proﬁt or loss as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value. Derecognition Financial assets are derecognised when the rights to receive cash ﬂows from the ﬁnancial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership. Annual Report and Financial Results 2021 117 Financial Statements Notes to the Consolidated Financial Statements continued 3. SIGNIFICANT ACCOUNTING POLICIES CONTINUED Impairment The Group assesses on a forward-looking basis, the expected credit losses associated with its debt instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a signiﬁcant increase in credit risk. Trade and other receivables Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain signiﬁcant ﬁnancing components, when they are recognised at fair value. The Group holds the trade receivables with the objective to collect the contractual cash ﬂows and therefore measures them subsequently at amortised cost using the effective interest method, less any allowance for expected credit losses. To determine the expected credit loss allowance for trade and other receivables, the Group applies the simpliﬁed approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables, see note 32 for further details. Other receivables consist of prepayments and deposits, which are initially recognised as non-ﬁnancial assets and realised over time. 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 on hand, deposits held at call with ﬁnancial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insigniﬁcant risk of changes in value. Investments and other ﬁnancial assets Investments are equity instruments which the Group intends to hold for the foreseeable future and has irrevocably elected to classify them at FVOCI at inception. 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. Leases 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 118 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information 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 per cent-11 per cent 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 Group applies IAS 36 Impairment of Assets to determine whether a right-of- use asset is impaired and accounts for any identiﬁed impairment loss. Provisions 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. Annual Report and Financial Results 2021 119 Financial Statements Notes to the Consolidated Financial Statements continued 3. SIGNIFICANT ACCOUNTING POLICIES CONTINUED 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 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. 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. Sensitivities have been disclosed in note 24. iv. 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 2021 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. v. Impairment of ﬁnancial assets The loss allowances for ﬁnancial assets are based on assumptions about risk of default and expected loss rates. The Group uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Group’s past history, existing market conditions as well as forward looking estimates at the end of each reporting period. Details of the key assumptions and inputs used are disclosed in note 32. vi. Impairment of non-current 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. 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 restriction. 120 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information The Group also reviews and tests the carrying value of tangible assets when events or changes in circumstances indicate that the carrying amount may not be recoverable. Assets are grouped at the lowest level for which identiﬁable cash ﬂows are largely independent of cash ﬂows of other assets, which is generally at the individual operating asset level. If there are indications that impairment may have occurred, estimates are prepared of expected future cash ﬂows for each group of assets. Expected future cash ﬂows used to determine the recoverable amount of tangible assets are inherently uncertain and could materially change over time and impact the recoverable amounts. The cash ﬂows and recoverable amount are signiﬁcantly affected by a number of factors including published reserves, resources, exploration potential and production estimates, together with economic factors such as spot and future metal prices, discount rates, foreign currency exchange rates, estimates of costs to produce products and future capital expenditure. At the reporting date the Group assesses whether any of the indicators which gave rise to previously recognised impairments have changed such that the impairment loss no longer exists or may have decreased. The impairment loss is then assessed on the original factors for reversal and if indicated, such reversal is recognised. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. The recoverable amount is estimated based on the positive indicators. If an impairment loss has decreased, the carrying amount is recorded at the recoverable amount as limited in terms of IAS 36 Impairment of Assets. The directors performed an impairment review on tangible assets at 31 December 2021. No reasonable changes in the key assumptions or inputs would lead to an impairment charge over the next 12 month period. vii. Impairment of exploration and evaluation assets As disclosed in note 12, the Mokopane license held by the Group requires that mining operations commence prior to the end of January 2021. As at 31 December 2021 no mining has taken place at the site. An application for an extension to requirement to commence mining activities has been submitted to the Department of Mineral Resources and Energy (DMRE), however a response has not yet received. The directors are conﬁdent that the extension will be forthcoming and the license therefore remains valid. Consequently, the directors have made a judgment that no impairment of the related intangible asset is required. viii. Borrowing costs IAS 23 requires that borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset. It is the judgement of the directors that due to the insubstantial period of time over which assets have been constructed, that no assets meet the deﬁnition of a qualifying asset and therefore no borrowing costs have been capitalised. ix. Assessment of control The group’s investment in VRFB Holdings Limited has been accounted for as a joint venture on the basis that the directors have concluded that under IFRS 10 the group does not have the ability to use its power over the investee entity to inﬂuence its returns. This conclusion has been reached on the basis of speciﬁc terms of the joint venture agreement with the other investors to VRFB Holdings Limited and represents a signiﬁcant management judgement. x. Mustang Convertible Loan Note option As described in Note 36, as at 31 December 2021 Mustang Energy plc (Mustang) had an option to require that Bushveld Mineral Limited (the Company) issue to the Mustang Convertible Loan Note (CLN) holders such new number of Bushveld Mineral Limited shares as is equivalent to the par value of the noteholder’s CLN, together with accrued and unpaid interest in return for Mustang transferring to Bushveld Energy Limited Mustang’s shareholding in VRFB Holdings Limited. As at 31 December 2021 the Mustang CLNs had a nominal value of $8 million and a 10 per cent coupon. As at the year end this option had not been exercised by the Mustang CLN holders. Details of the exercise of certain options post year-end is described in Note 36. In the Director’s view, the fair value of this right is considered immaterial for recognition as at 31 December 2021. 4. SEGMENTAL REPORTING Bushveld Minerals Limited’s operating segments are identiﬁed by the Chief Executive Officer and the Executive Committee, collectively named as the Chief Operating Decision Makers (CODM). The operating segments are identiﬁed by the way the Group’s operations are organised. As at 31 December 2021 the Group operated within three operating segments, vanadium mining and production, energy and mineral exploration activities for vanadium and coal exploration. Activities take place in South Africa (iron ore, vanadium and energy), Madagascar (coal), other African countries (energy project development) and global (battery investment, vanadium sales). Segment revenue and results The following is an analysis of the Group’s revenue and results by reportable segment. Annual Report and Financial Results 2021 121 Financial Statements Notes to the Consolidated Financial Statements continued 4. SEGMENTAL REPORTING CONTINUED Year ended 31 December 2021 Results Segment revenue Segment costs Segmental loss Year ended 31 December 2020 Results Segment revenue Segment costs Segmental loss Vanadium mining and production US$ Energy US$ Total US$ 106,857,285 (123,442,467) – (882,453) 106,857,285 (124,324,920) (16,585,182) (882,453) (17,467,635) Vanadium mining and production US$ Energy US$ Total US$ 89,920,958 (110,750,141) 67,120 (1,050,735) 89,988,078 (111,800,876) (20,829,183) (983,615) (21,812,798) During the year there were no costs incurred for the exploration of vanadium and coal exploration. Costs attributable to both segments were of a capital nature. The reconciliation of segmental loss to the Group’s loss before tax is as follows: Segmental loss Unallocated costs Remeasurement of financial liabilities Share of loss in joint venture Movement in earnout estimate Finance income Finance costs 2021 2020 (17,467,635) (11,814,793) (1,902,172) (4,351,356) – 935,347 (12,184,059) (21,812,798) (10,994,295) – – (206,066) 1,077,991 (5,732,249) (46,784,668) (37,667,417) Unallocated costs relate primarily to corporate costs and parent company overheads not attributable to a speciﬁc segment. Other segmental information 31 December 2021 Intangible assets – exploration and evaluation Total reportable segmental net assets Unallocated net assets Vanadium and iron ore exploration US$ 47,374,076 47,374,076 – Vanadium mining and production US$ 6,481,542 94,923,233 – Coal exploration US$ 5,398,754 5,398,754 – Bushveld Energy US$ Total US$ – 17,034,295 – 59,254,372 164,730,358 (13,900,418) Total consolidated net assets – – – – 150,829,940 31 December 2020 Intangible assets – exploration and evaluation Total reportable segmental net assets Unallocated net liabilities Vanadium and iron ore exploration US$ Vanadium mining and production US$ 54,950,331 54,950,331 – – 168,285,858 – Coal exploration US$ 4,053,494 4,053,494 – Bushveld Energy US$ Total US$ – 21,388,618 – 59,003,825 248,678,301 (34,678,551) Total consolidated net assets – – – – 213,999,750 Unallocated assets and liabilities relate to corporate and parent company assets and liabilities not attributable to a speciﬁc segment. 122 Annual Report and Financial Results 2021 5. REVENUE Revenue from contracts with customers Sale of goods Bushveld Energy services rendered Disaggregation of revenue from contracts with customers The Group 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 – VCM Export sales of vanadium – AMV Rendering of services Bushveld Energy services rendered Total revenue from contracts with customers Business Overview Governance Financial Statements Supplementary Information 2021 US$ 2020 US$ 106,857,285 – 89,920,958 67,120 106,857,285 89,988,078 5,089,815 1,606,027 *(140,385) 21,720,633 71,713,328 – 6,867,867 2,161,420 1,055,785 370,686 16,452,321 61,537,773 230,248 8,112,725 106,857,285 89,920,958 – 67,120 106,857,285 89,988,078 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. * The negative sales amount is due to the return of MVO sold during the 2020 ﬁnancial year. 6. STAFF COSTS Details of directors’ remuneration are included in note 34 (related party transactions) and the Remuneration Report. 7. ADMINISTRATIVE EXPENSES BY NATURE Staff costs Depreciation of property, plant and equipment Professional fees Other Total administrative expenses 8. FINANCE INCOME Bank interest 2021 US$ 2020 US$ 10,746,322 392,669 5,860,976 3,894,325 8,146,473 256,929 6,017,782 5,361,992 20,894,292 19,783,176 2021 US$ 2020 US$ 935,347 1,077,991 Annual Report and Financial Results 2021 123 Financial Statements Notes to the Consolidated Financial Statements continued 9. FINANCE COSTS Interest on unsecured convertible loan notes Interest on rehabilitation liability Interest on borrowings Interest on lease liabilities Other finance costs 10. TAXATION Current Current income tax charge Local income tax – recognised in current tax for prior periods Deferred Prior year adjustment Deferred tax movement The tax expense represents the sum of the tax currently payable and the deferred tax adjustment for the year. Loss before tax Tax at the effective tax rate of 11.6% (2020: 18.6%) Tax effect on non-deductible items Origination and reversal of temporary differences Deferred tax asset not recognised Recognised deferred tax assets – initial recognition Taxation expense for the year 2021 US$ 4,706,184 1,781,584 4,984,532 459,430 252,329 2020 US$ 1,614,577 1,663,602 1,749,386 466,032 238,652 12,184,059 5,732,249 2021 US$ 2020 Restated US$ 370,437 (13,246) 3,265,229 – 357,191 3,265,229 82,573 (5,111,019) – (9,835,255) (5,028,446) (9,835,255) (4,671,255) (6,570,026) 2021 US$ (46,784,668) (5,422,632) 602,895 1,400,229 3,704,257 (4,956,004) 2020 Restated US$ (37,667,417) (7,023,575) 353,652 737,127 9,270,466 (9,907,696) (4,671,255) (6,570,026) 11. LOSS PER SHARE FROM CONTINUING OPERATIONS Basic loss per share The calculation of a basic loss per share of 3.39 cents (December 2020: 2.63 cents restated), is calculated using the total loss for the year attributable to the owners of the company of US$40,779,853 (December 2020: Restated loss of US$30,595,243) and 1,201,683,206 shares (2020: 1,164,710,352) being the weighted average number of share in issue during the year. Diluted loss per share Due to the Group being loss making for the year, instruments are not considered dilutive and therefore the diluted loss per share is the same as basic loss per share for both ﬁnancial years. 12. INTANGIBLE ASSETS Vanadium and Iron ore Coal Total 124 2021 2020 Cost/Valuation US$ Carrying value US$ Cost/Valuation US$ Carrying value US$ 53,855,618 5,398,754 53,855,618 5,398,754 54,950,331 4,053,494 54,950,331 4,053,494 59,254,372 59,254,372 59,003,825 59,003,825 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information Reconciliation of intangible assets – 2021 Vanadium and Iron ore Coal Opening balance US$ 54,950,331 4,053,494 59,003,825 Additions US$ 162,621 766,339 928,960 Foreign exchange movements US$ Impairment loss* US$ Total US$ (715,974) 578,921 (541,360) – 53,855,618 5,398,754 (137,053) (541,360) 59,254,372 * The directors performed an impairment review on intangible assets at 31 December 2021, and impaired assets that will not produce economically recoverable deposits based on planned future development of the projects, current and forecast commodity prices. Reconciliation of intangible assets – 2020 Vanadium and Iron ore Coal Opening balance US$ 56,827,085 2,581,736 Additions US$ 89,764 1,381,378 Foreign exchange movements US$ Impairment loss US$ Total US$ (1,966,518) 90,380 – – – 54,950,331 4,053,494 59,003,825 59,408,821 1,471,142 (1,876,138) Vanadium and Iron Ore The Company’s subsidiary, Bushveld Resources Limited has a 64 per cent interest in Pamish Investment No 39 (Proprietary) Limited (Pamish) which holds an interest in Prospecting right 95 (Pamish 39). The Department of Mineral Resources and Energy (DMRE) granted a mining right to Pamish Investments No. 39 (Pty) Ltd (Pamish) on the 28th of August 2019, 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 a vanadium resource. On 29 January 2020, the DMRE executed a 30-year mining right in favour of the Company, over ﬁve farms: Vogelstruisfontein 765 LR; Vriesland 781 LR; Vliegekraal 783 LR; Schoonoord 786 LR; and Bellevue 808 LR. The Mining Right required Pamish to commence mining activities, including in-situ activities associated with the Deﬁnitive Feasibility Study (DFS) by end of January 2021. The COVID-19 pandemic resulted in a signiﬁcant delay in the commencement of the DFS and the necessary engagement with local communities required to ﬁnalise Land Use arrangements and, consequently, this deadline was not met. Application to the DMRE for an extension of 18 months to commence mining activities has been submitted. Engagement has begun with communities to reach agreement for access to the project areas and secure a Land Use Arrangement. 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 and was executed in May 2021. 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 a prospecting right 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. A renewal application for Prospecting Right NW 30/5/1/1/2/11124 PR was granted for Great 1 Line on Farm Uitvalgrond 431 JQ Portion 3. Coal Coal Exploration licences have been issued to Coal Mining Madagascar SARL a 99 per cent 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. Annual Report and Financial Results 2021 125 Financial Statements Notes to the Consolidated Financial Statements continued 13. PROPERTY, PLANT AND EQUIPMENT Buildings and other improvements US$ Motor vehicles furniture and equipment US$ Plant and machinery US$ Decommissining assets US$ Right of use asset US$ Waste stripping asset US$ Assets under construction US$ Total US$ Cost At 1 January 2020 Additions Disposals Transfers Revaluations Foreign exchange differences 8,196,521 166,369,583 1,474,110 62,665 2,256,794 (192,023) (2,490,766) 121,070 11,645,072 – – (559,874) (6,179,154) – (336,491) 190,930 – (344,926) 2,597,288 – – – (695,244) 33,180 5,735,890 3,920,684 10,668,778 198,962,854 9,269,924 (3,019,280) – (695,244) (8,156,956) – 6,950,465 – – – (11,957,072) – – (718,321) (156,242) – – – – (231,619) At 31 December 2020 7,706,034 171,601,529 905,948 1,935,224 5,504,271 3,764,442 4,943,850 196,361,298 Additions Disposals Impairments of obsolete assets Assets under construction – – – 5,156,605 (1,916,158) (2,263,063) 24,024 (78,119) – (207,189) – – 396,239 – (3,723,494) – – – 14,079,978 – – 19,449,657 (5,717,771) (2,263,063) capitalised Foreign exchange differences – (426,162) 5,373,628 (3,323,601) 57,148 (108,315) – (73,658) – (834,539) – (5,430,776) (996,705) (40,948) – (5,803,928) At 31 December 2021 7,279,872 174,628,940 800,686 1,654,377 5,065,971 – 12,596,347 202,026,193 Depreciation At 1 January 2020 Disposals Depreciation charge for the year Foreign exchange differences (1,022,284) 336,491 (385,785) 3,367 (9,384,009) 2,407,463 (14,468,628) 301,705 (535,710) 248,586 (175,976) (151,754) (954,588) – (53,233) 31,352 (628,963) (1,168,237) – (2,347,763) (248,442) – (434,768) (150,129) – (13,693,791) – 2,992,540 – (17,866,153) (213,901) – At 31 December 2020 (1,068,211) (21,143,469) (614,854) (976,469) (1,213,860) (3,764,442) – (28,781,305) Depreciation charge for the year Disposals Impairment of obsolete assets Foreign exchange differences (354,785) – – 79,596 (18,087,039) 1,777,899 365,533 (7,221,073) (266,419) 89,424 – 34,257 (46,321) – – 76,847 (640,932) – – 3,723,494 – – 40,948 294,385 – (19,395,496) 5,590,817 – 365,533 – (6,695,040) – At 31 December 2021 (1,343,400) (44,308,149) (757,592) (945,943) (1,560,407) – – (48,915,491) Net Book Value At 31 December 2020 6,637,823 150,458,060 291,094 958,755 4,290,411 – 4,943,850 167,579,993 At 31 December 2021 5,936,472 130,320,791 43,094 708,434 3,505,564 – 12,596,347 153,110,702 The right of use asset of $3.5million relates to land and buildings of $3.4million and plant and machinery of $0.09million. Refer to note 3(vi) on management’s assumptions for the impairment of non-current assets. The net impairment charge of $1.8million recognised during the year relates to items of property, plant and equipment that were identiﬁed as being either obsolete, or no longer in use. 126 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information 14. INVESTMENT PROPERTY Investment properties 2,811,017 (215,658) 2,595,359 2,905,449 (94,432) 2,811,017 Opening balance US$ 2021 Fair value movements US$ Closing balance US$ Opening balance US$ 2020 Fair value movements US$ Closing balance US$ Investment properties 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 Domus Estate Management, an accredited independent valuer, as at 31 December 2021. 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. 15. DEFERRED TAX Deferred tax liability Residential properties Property plant and equipment Prepayments Doubtful debt allowance Total deferred tax liability Deferred tax asset Provisions Inventory Environmental rehabilitation liability Leases – Lease liability Assessed loss Post-retirement medical liability 2021 US$ 2020 Restated* US$ 2019 Restated* US$ (577,502) (25,721,549) (24,092) (11) (624,978) (29,267,614) (144,472) (332) (644,691) (32,182,666) (187,898) – (26,323,154) (30,037,396) (33,015,255) 3,813,396 – 1,976,545 165,925 13,819,438 533,607 3,926,545 356,194 2,009,660 178,783 11,435,066 581,286 3,674,640 1,082,620 2,004,422 86,793 1,235,365 652,771 Deferred tax balance from temporary differences other than unused tax losses 20,308,911 18,487,534 8,736,611 Total deferred tax asset Deferred tax liability Deferred tax assets Total net deferred tax liability 20,308,911 18,487,534 8,736,611 (26,323,154) 20,308,911 (30,037,396) 18,487,534 (33,015,255) 8,736,611 (6,014,243) (11,549,862) (24,278,644) The evidence supporting recognition of a deferred tax liability is forecasts for the component to which the losses relate which indicate with reasonable certainty the availability of sufficient future taxable proﬁts in the next 3 years against which the losses can be utilised. Refer to note 35 on a detailed explanation on the restatement. Annual Report and Financial Results 2021 127 Financial Statements Notes to the Consolidated Financial Statements continued 15. DEFERRED TAX CONTINUED Reconciliation of deferred tax asset/(liability) At beginning of year Transfer from statement of proﬁt or loss Revaluation through other comprehensive income Other movements Foreign exchange difference 16. FINANCIAL ASSETS AT FAIR VALUE At 1 January Additions Disposals Fair value movement Transfer to interest in joint venture Foreign exchange As at 31 December 2021 US$ 2020 US$ 2019 US$ (11,549,862) 5,028,446 (2,916) (72,442) 582,530 (24,278,644) 9,835,255 (34,919) 72,442 2,856,004 265,025 (23,077,361) (35,941) – (1,430,367) (6,014,244) (11,549,862) (24,278,644) 2021 US$ 2020 US$ 22,452,877 9,987,735 (16,147,154) (3,771,367) (12,291,834) (230,257) 1,952,227 7,304,099 (286,643) 13,483,194 – – – 22,452,877 During the year the Group made further investment in VRFB Holdings Limited and in April 2021 the investment became a joint venture. Further details are included in note 17. AfriTin Mining Limited 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. The investment in AfriTin was disposed in 2021. Invinity Energy Systems The investment in Invinity was realised, resulting in capital appreciation. The proceeds of the sale were used towards Bushveld Energy’s 2021 projects. 17. INTERESTS IN JOINT VENTURES Transfer from financial assets held at fair value Loss on joint venture undertaking Foreign exchange 2021 US$ 12,291,834 (4,351,356) (85,241) 7,855,237 2020 US$ – – – – VRFB Holdings Limited The investment in VRFB Holding Limited is in line with Bushveld Minerals’ strategy of partnering with Vanadium Redox Flow Battery (VRFB) companies. VRFB is a company incorporated as a special purpose vehicle consisting of various shareholders including Bushveld Energy Limited (BE), a majority owned subsidiary of Bushveld Minerals. In 2021, Bushveld acquired a 50.5 per cent interest in VRFB Holdings Limited (VRFB). VRFB is the holding company for the Group’s investment in CellCube (Enerox). Bushveld accounts for its 50.5 per cent shareholding in VRFB as an investment in joint venture as it does not meet the requirements of control under IFRS10. 128 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information The VRFB investment is part of Bushveld Minerals’ strategy of partnering with VRFB Original Equipment Manufacturers (OEMs) that includes supply of vanadium and electrolyte, deployments and investment into the rapidly growing energy storage market. The amount of write-down of inventories due to net realisable value provision requirement is nil (2020: nil). 18. INVENTORIES Finished goods Work in progress Raw materials Consumable stores Total inventories 19. TRADE AND OTHER RECEIVABLES Trade receivables Other receivables Loss allowance Non-financial instruments: VAT Total trade and other receivables Categorisation of trade and other receivables Trade and other receivables are categorised as follows in accordance with IFRS 9: Financial Instruments: At amortised cost Non-financial instruments 2021 US$ 2020 US$ 18,058,022 9,323,360 3,159,418 11,105,356 12,070,061 7,454,987 1,761,551 12,795,026 41,646,156 34,081,625 2021 US$ 2020 US$ 6,129,311 5,861,661 (76,704) 3,854,461 1,610,261 (32,826) 5,727,948 4,993,467 17,642,216 10,425,363 2021 US$ 2020 US$ 11,914,268 5,727,948 5,431,896 4,993,467 17,642,216 10,425,363 Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due for settlement within 15-90 days and therefore are all classiﬁed as current. Other receivables consist of prepayments and deposits, which are realised overtime. Due to the short-term nature of the current receivables, their carrying amount is considered to be the same as their fair value. Impairment and risk exposure Information about the impairment of trade receivables and the Group’s exposure to credit risk, foreign currency risk and interest rate risk can be found in note 32. 20. RESTRICTED INVESTMENT Rehabilitation trust fund and insurance fund 2021 US$ 2020 US$ 2,868,886 3,111,465 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 (refer to note 25 and 33 for further details). Annual Report and Financial Results 2021 129 Financial Statements Notes to the Consolidated Financial Statements continued 21. CASH AND CASH EQUIVALENTS Cash at hand and in bank 2021 US$ 2020 US$ 15,432,852 50,540,672 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. Short-term deposits include funds received from Orion Mine Finance (Orion) under the Production Financing Agreement (PFA) and Convertible Loan Notes Instrument (CLN). The total cash and cash equivalents denominated in South African Rand amount to US$14,883,820 (2020: US$34,165,671). The directors consider that the carrying amount of cash and cash equivalents approximates to their fair value. Refer to Note 28 for further information in relation to the Production Financing Agreement and Convertible Loan Notes Instrument. 22. SHARE CAPITAL AND SHARE PREMIUM At 1 January 2020 Shares issued – Duferco At 1 January 2021 Shares issued – PMDR Shares issued – PMDR Shares issued – Duferco At 31 December 2021 Shares Number Share capital US$ Share premium US$ Total share capital and premium US$ 1,153,642,682 37,115,210 15,357,271 501,157 111,067,064 5,998,843 126,424,335 6,500,000 1,190,757,892 1,473,651 1,335,277 66,892,037 15,858,428 18,910 17,134 902,708 117,065,907 203,281 184,194 8,097,292 132,924,335 222,191 201,328 9,000,000 1,260,458,857 16,797,180 125,550,674 142,347,854 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 2021 the Company owns 670,000 (2020: 670,000) treasury shares with a nominal value of 1 pence. Shares issued Duferco Participations Holding S.A. (Duferco) In settlement of US$6.5million of the convertible loan notes issued to Duferco on the acquisition of Vanchem, Bushveld Minerals Limited issued 37,115,210 new shares on 18 December 2020. The shares issued had a conversion price of 12.97p, which was a 5 per cent discount to the prevailing 10-day volume weighted average Bushveld Minerals share price leading up to conversion. Refer to note 28 for details on the Convertible Loan Note details. Persons Discharging Managerial Responsibilities (PMDRs) The Company issued 1,473,651 and 1,335,277 new ordinary shares of 1 pence each in the Company (Ordinary Shares) in respect of the Bonus Awards announced on 21 July 2020. Nature and purpose of other reserves Share premium The share premium reserve represents the amount subscribed for share capital in excess of nominal value. Share-based payment reserve The share-based payment reserve represents the cumulative fair value of share options granted to employees. 130 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information Convertible loan note reserve This reserve represents the equity portion of a convertible loan. 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. Retained income reserve The retained income reserve represents other net gains and losses and transactions with owners (e.g. dividends) not recognised elsewhere. 23. SHARE BASED PAYMENTS Short Term Incentive (STI) Bushveld Minerals Limited issued bonus shares to the employees under the STI scheme. The shares had a grant date of 5 August 2021 and vesting dates aligned to the STI scheme rules being, 12 months and 18 months from the ﬁnancial year end to which they relate, for the ﬁrst and second half of the settlement, respectively. The vesting of shares is dependent on the employees still be employed on the respective vesting dates. All bonus shares are settled directly by Bushveld Mineral Limited, in its own shares. The fair value of the rights at grant date US$955 451 was estimated by taking the market price of the company’s shares and the reporting exchange rate on that date. The following table shows the bonus shares granted and outstanding at the beginning and end of the reporting period: As at 1 January Granted during the year Vested during the year Forfeited during the year As at 31 December 2021 Number of shares – 5,204,396 – – 5,204,396 2020 Number of shares – – – – – Long Term Incentive (LTI) On 31 December 2021, 4,002,812 shares vested. These shares remained part of Bushveld’s equity as at 31 December 2021 because they where issued under the STI scheme rules in February 2022. Bushveld Minerals awarded a number of performance shares to employees on 28 November 2019 under its Long Term Incentive Plan. The grant vests over a period of three years. The vesting of the awards is subject to both employment and performance conditions. The performance condition is measured over a period of three years i.e. 1 January 2019 to 31 December 2021. The market condition states that 60 per cent of the number of shares awarded would vest based on the performance of Bushveld Ltd’s Total Shareholder Return (TSR), per annum, over the performance period. The non-market condition states that 40 per cent of the number of shares awarded will vest based on the performance of Bushveld Ltd’s Free Cash Flow Margin (FCF), per annum, over the performance period. As at 31 December 2021, it is assumed that 0 per cent of the conditional share awards made to participants during 2019 will vest. This is based on Bushveld’s performance on both TSR and FCF being below the threshold. Annual Report and Financial Results 2021 131 Financial Statements Notes to the Consolidated Financial Statements continued 23. SHARE BASED PAYMENTS CONTINUED As at 1 January Granted during the year Vested during the year As at 31 December 24. POST-RETIREMENT MEDICAL LIABILITY Beneﬁt liability Present value of the defined benefit obligation-wholly unfunded Present value of the defined benefit obligation-partially or wholly funded Balance at 31 December 2021 Number of shares 2,458,443 – – 2020 Number of shares 2,458,443 – – 2,458,443 2,458,443 2021 US$ 2020 US$ 2,076,023 (170,284) 2,331,325 (255,302) 1,905,739 2,076,023 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 2021. Key assumptions used Actual age Discount rates Health care cost inflation Duration of liability 2021 US$ 77.3 years 10.90% 7.90% 9.3 years 2020 US$ 77.3 years 10.60% 7.30% 9.1 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 per cent – US$2.07 million; Less 1 per cent – US$1.76 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 per cent – US$0.21 million; Less 1 per cent – US$0.18 million. 25. ENVIRONMENTAL REHABILITATION LIABILITY Opening balance Unwinding of discount rate Fair value adjustment Foreign exchange At 31 December 2021 2021 US$ 2020 US$ 17,998,366 1,781,584 (315,434) (1,433,195) 17,844,066 1,872,634 (1,007,237) (711,097) 18,031,321 17,998,366 The Group makes full provision for the future cost of rehabilitating mine sites and related production facilities on a discounted basis at the time of developing the mine and installing and using those facilities. The rehabilitation provision represents the present value of rehabilitation costs relating to mine sites, which are expected to be incurred up to 2037, which is when the producing mine properties are expected to cease operations. These provisions have been created based on the Group’s internal estimates. Assumptions based on the current economic environment have been made, which management believes are a reasonable basis upon changes to the assumptions. However, actual rehabilitation costs will ultimately depend upon future market prices for the necessary rehabilitation works required that will reﬂect market conditions at the relevant time. 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 2021 was 10.76 per cent (2020: 10.93 per cent). 132 Annual Report and Financial Results 2021 26. DEFERRED CONSIDERATION Opening balance Cash payment Interest Movement in earnout estimate Foreign exchange Split between non-current and current portions Non-current Current Business Overview Governance Financial Statements Supplementary Information 2021 US$ 2020 US$ 5,622,532 (3,723,980) 90,617 – (305,148) 7,108,819 (1,680,459) – 206,066 (11,894) 1,684,021 5,622,532 2021 US$ 2020 US$ 1,684,021 – 1,802,884 3,819,648 1,684,021 5,622,532 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 2021, to a maximum of US$1.68 million. The consideration attributable to the acquisition of Vanchem was settled in November 2021. 27. LOANS Industrial Development Corporation 2021 US$ 2020 US$ 3,280,948 1,597,972 The loan represents The Industrial Development Corporation’s contribution and is governed by the tripartite agreement between Bushveld Energy Company (Pty) Ltd, Bushveld Electrolyte Company (Pty) Ltd and The Industrial Development Corporation of South Africa Limited. The loan represents the initial capitalised costs of US$260,366 plus the subscription amount of US$3,020,582 of the total US$3,821,028 to be advanced to Bushveld Electrolyte Company Pty Ltd. Bushveld Electrolyte Company is a South African producer of vanadium electrolyte. The company is jointly owned by Bushveld Energy and the IDC, with shareholding of 55 per cent and 45 per cent respectively. Its ﬁrst manufacturing facility is under construction and located in East London, South Africa. The loan is interest free, unsecured, subordinated in favour of Bushveld Electrolyte Company’s creditors and has no ﬁxed term of repayment in the next 12 months. Split between non-current and current portions Non-current liabilities 2021 US$ 2020 US$ 3,280,948 1,597,972 Annual Report and Financial Results 2021 133 Financial Statements Notes to the Consolidated Financial Statements continued 28. BORROWINGS Development Bank of Southern Africa Nedbank Term Loan and Revolving Credit Facility Convertible Loan Notes – Duferco Production Financing Agreement – Orion Mine Finance Convertible Loan Notes Instrument – Orion Mine Finance Split between non-current and current portions Non-current Current 2021 US$ 2020 US$ 999,950 5,821,082 – 33,511,742 37,313,976 845,588 8,636,535 11,585,068 30,105,886 33,073,699 77,646,750 84,246,776 67,435,647 10,211,102 70,909,370 13,337,406 77,646,749 84,246,776 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 per cent capped at 2.5 times which ever is lower. As at 31 December 2021, US$999,950 (2020: US$845,588) was drawn down. Nedbank Term Loan and Revolving Credit Facility In November 2019, Bushveld Minerals Limited secured R375 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 R250 million loan and a R125 million revolving credit facility. The Nedbank term loan was repaid in December 2020. Key highlights of the R125 million revolving credit facility, which was drawn in March 2020: – Three-year term – Repayment due in November 2022; – Interest rate calculated using the three year or six months JIBAR1 as selected by the Company plus a 3.85% 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 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 Net Interest Cover Ratio; and – the Net Debt to EBITDA Ratio at a Borrower level shall not exceed 4.0 times. As reported in the going concern policy, the net debt to EBITDA ratio was breached at 31 December 2021 following the remeasurement of the Orion Mine Finance PFA liability. This covenant has been retrospectively waived by Nedbank. Convertible Loan Note – Duferco On 27 October 2021, Bushveld met the ﬁnal repayment terms of the remaining US$11.5 million unsecured convertible notes held by Duferco the previous owner of Vanchem, effective on 8 November 2021. US$2.5 million of the amount due, as well as the accrued interest of US$0.512 million, was satisﬁed in cash and the balance of US$9 million with the issue of 66,892,037 new ordinary shares of Bushveld, using a conversion price of 9.97p, which was a 5 per cent discount to the prevailing 10-day volume weighted average Bushveld Minerals share price leading up to conversion. There is no lock in or orderly marketing period for the shares issued. 134 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information Production Financing Agreement – Orion Mine Finance In December 2020, Bushveld Minerals Limited signed a long-term Production Financing Agreement of US$30 million (or the “PFA”) with mining-focused investment business Orion Mine Finance (Orion), primarily to ﬁnance its expansion plans at Bushveld Vametco Alloys (Pty) Ltd and debt repayment. Exchange control authorization from the South Africa Reserve Bank Financial Surveillance Department was granted in October 2020. A ﬁrst amendment was issued to the agreement on 6 August 2021. PFA Transaction Details The Company will repay the principal amount and pay interest via quarterly payments determined initially as the sum of: – a gross revenue rate (set at 1.175 per cent for 2020 and 2021 and 1.45 per cent from 2022 onwards, subject to adjustment based on applicable quarterly vanadium prices) multiplied by the gross revenue for the quarter; and – a unit rate of US$0.443/kgV multiplied by the aggregate amount of vanadium sold for the quarter. Once the Company reaches vanadium sales of approximately 132,020 mtV during the term of the facility, the gross revenue rate and unit rate will reduce by 75 per cent (i.e. to 25 per cent of the applicable rates). On each of the ﬁrst three loan anniversaries, the Company has the option to repay up to 50 per cent of both constituent loan parts (each may only be repaid once). If the Company utilises the loan repayment option, the gross revenue rate and/or the unit rate will reduce accordingly. The PFA capital will provide funding to continue to grow production at Vametco to more than 4,200 mtV per annual production level and debt repayment. Part of the proceeds of the Instrument were used by the Company to prepay in full the Nedbank ZAR250 million term loan. In addition, the following amendments will be applied to the ﬁnancial covenants: – Removing the cumulative DSCR covenant; – Increasing the default level on the group net debt to Group EBITDA ratio to 4.0 times – Changing the gross interest cover ratio to net interest cover ratio First Amendment Agreement dated 6 August 2021 In terms of the Amended Agreement with Orion, $17.8million of the funds ringfenced for the Vametco Phase 3 Expansion was re-allocated to Vanchem mainly for capital expenditure on kiln 3. Kiln 3 is expected to achieve a steady state production run rate of 2,600 mtVp.a by the end of 2022. Impact of Amended Agreement on future cash ﬂows of the debt instrument The original PFA had a cap of 1,075mtV per quarter. This amounted to 4,300mtV per annum expected from 2024 onwards following the completion of the Vametco Phase 3 expansion project The amended agreement, with the addition of the Vanchem production volumes from 1 July 2021 resulted in the initial cap of 4,300mtV being reached earlier, from 1 July 2022 instead of from 2024. Accounting for non-substantial modiﬁcations IFRS 9 requires the amortised cost of the liability to be recalculated by discounting the modiﬁed contractual cash ﬂows (excluding costs and fees) using the original effective interest rate. Any change to the amortised cost of the ﬁnancial liability is required to be recognised within proﬁt or loss at the date of the modiﬁcation. The carrying amount of the liability is then further revised for any costs or fees incurred. The effective interest rate is also revised accordingly, so the costs are amortised over the remaining term of the modiﬁed liability. As a result of the increased production volumes from Vanchem and the cap of 4,300mtV being reached earlier, this resulted in a non- substantial modiﬁcation to the contractual terms. The amortised cost was recalculated and the adjustment was recognised within proﬁt or loss: IFRS 9 fair value adjustment US$ 1,902,172 Annual Report and Financial Results 2021 135 Financial Statements Notes to the Consolidated Financial Statements continued 28. BORROWINGS CONTINUED Contractual and legal balances vs IFRS 9 accounting balances The contractual and legal accounting differ from IFRS 9 accounting. Below table illustrates the differences in the carrying values, interest and capital of the contractual PFA and IFRS 9 accounting for the 2021 ﬁnancial year. Reconciliation of Production Finance Agreement – Orion Mine Finance Opening balance Loan received Interest accrued – Contractual interest – Notional interest (IFRS 9) Repayments made Remeasurement (IFRS 9) Closing balance 2021 US$ 2020 US$ 30,105,886 – 4,058,488 1,198,919 2,859,569 (2,554,804) 1,902,172 – 30,000,000 105,886 105,886 – – – 33,511,742 30,105,886 Convertible Loan Notes Instrument – Orion Mine Finance Bushveld Minerals Limited, through an affiliate of Orion Mine Finance, agreed to subscribe for US$35 million convertible loan notes instrument (the “Instrument”). The conversion price of the convertible loan notes was set at 17 pence. The Instrument’s proceeds will go towards the ﬁrst phase of Vanchem’s critical refurbishment programme and debt repayment. Financing terms of the Instrument and convertible loan notes – A ﬁxed 10 per cent per annum coupon with a three year maturity date from the drawdown date. – All interest will accrue and be capitalised on a quarterly basis in arrears but compounded annually. – Accumulated capitalised and accrued interest is convertible into Bushveld ordinary shares. All interest and principal, to the extent not converted into ordinary shares, is due and payable at maturity date. – Funds raised are to be used for capital investment purposes for the ﬁrst phase of Vanchem’s critical refurbishment programme, and the balance for debt repayment purposes. Conversion feature Between drawdown and the Instrument’s maturity date Orion may, at their option, convert an amount of the outstanding debt, including capitalised and accrued interest, into Bushveld’s ordinary shares as follows: – First six months: Up to one third of the outstanding amount; – Second six months: Up to two thirds of the outstanding amount (less any amount previously converted); – From the anniversary of drawdown until the maturity date: the outstanding amount under the Instrument may be converted; – Bushveld also has the option to convert all, but not some, of the amount outstanding under the Instrument, if its volume weighted average share price is more than 200 per cent of the conversion price over a continuous 15 trading day period, a trading day being a day on which the AIM market is open for the trading of securities. At any time until the convertible maturity date, Orion may convert the debt as above mentioned into an amount of ordinary shares equal to the total amount available for conversion under the Instrument divided by the conversion price of 17 pence. The Orion and Nedbank borrowings are secured against certain group companies and associated assets. 136 Annual Report and Financial Results 2021 29. LEASE LIABILITIES A reconciliation of total operating lease commitments to the IFRS 16 lease liability at 31 December 2021 is as follows: Business Overview Governance Financial Statements Supplementary Information As at 1 January Additions Accretion of interest Payments Foreign exchange Non-current lease liabilities Current lease liabilities 30. TRADE AND OTHER PAYABLES Financial instruments: Trade payables Trade payables – related parties Accruals and other payables 2021 US$ 5,002,144 127,964 459,430 (705,373) (398,853) 2020 US$ 5,464,909 – 497,042 (753,302) (206,505) 4,485,312 5,002,144 3,920,698 564,614 4,376,483 625,661 4,485,312 5,002,144 2021 US$ 2020 US$ 28,329,519 107,026 4,644,125 17,074,422 – 4,991,179 33,080,670 22,065,601 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$20,622,241 (2020: US$15,895,209). 31. PROVISIONS Reconciliation of provisions – 2021 Leave pay Performance bonus Other Reconciliation of provisions – 2020 Leave pay Performance bonus Other Opening balance US$ 1,655,457 1,375,147 266,290 3,296,894 Opening balance US$ 1,193,630 2,098,565 140,424 Additions US$ 50,519 – 157,152 207,671 Additions US$ 504,394 881,920 221,983 Utilised during the year US$ – (333,724) (253,656) Foreign exchange US$ (77,252) – – Total US$ 1,628,724 1,923,343 169,786 (587,380) (77,252) 3,721,853 Utilised during the year US$ – (2,290,117) (92,680) Foreign exchange US$ (42,567) (36,292) (3,437) Total US$ 1,655,457 881,920 266,290 3,432,619 1,089,591 (2,382,797) (82,296) 2,680,430 Annual Report and Financial Results 2021 137 Financial Statements Notes to the Consolidated Financial Statements continued 31. PROVISIONS CONTINUED 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. Other The other provisions represents estimates for Group tax, legal and consulting fees to be charged. 32. 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$77,646,750 (2020: US$84,246,776). The capital structure of the Group consists of cash and cash equivalents, equity and borrowings. Equity comprises of issued capital and retained proﬁts. The Group is not subject to any externally imposed capital requirements. Principal ﬁnancial instruments The principal ﬁnancial instruments used by the Group, from which ﬁnancial instrument risk arises, are as follows: – Trade and other receivables – Cash at bank – Trade and other payables – Borrowings – Investments – Lease liabilities Categories of ﬁnancial instruments The Group holds the following financial assets: Financial assets at amortised cost Trade and other receivables Restricted investment Cash and cash equivalents Financial assets – Investment Total financial assets at amortised cost Financial assets at fair value Total financial assets 2021 US$ 2020 US$ 11,914,268 2,868,886 15,432,852 – 30,216,006 – 10,451,736 3,111,465 50,540,672 2,785,507 66,889,380 20,439,565 30,216,006 87,328,945 138 Annual Report and Financial Results 2021 The Group holds the following financial liabilities: Financial liabilities at amortised cost Trade and other payables Lease liabilities Deferred consideration Loans Borrowings Total financial liabilities Business Overview Governance Financial Statements Supplementary Information 2021 US$ 2020 US$ 33,080,670 4,485,312 1,684,021 3,280,948 77,646,750 23,853,676 5,002,144 5,416,466 1,597,972 84,246,776 120,177,701 120,117,034 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 policies 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: Vametco NV MVO AMV FEV Vanchem Vanadium Pentoxide Flake (FVP) Vanadium Pentoxide Chemical (VCM) Sodium Ammonium Vanadate (SAV) Ammonium Metavanadate (AMV) Ferro Vanadium (FEV) Vanadyl Oxalate Solution (VOX) Potassium Metavanadate Nitrovan 2021 US$/kgV 34.10 17.18 – – 2021 US$/kgV 25.04 32.73 51.22 35.19 31.53 195.41 35.31 30.60 2020 US$/kgV 23.56 17.18 17.53 22.33 2020 US$/kgV 19.86 22.79 32.97 26.79 22.56 – – – Annual Report and Financial Results 2021 139 Financial Statements Notes to the Consolidated Financial Statements continued 32. FINANCIAL INSTRUMENTS CONTINUED If the average price of each of these commodities increased/decreased by 10 per cent the total sales related to each of these commodities would have increased/decreased as follows: Vametco NV AMV Vametco NV MVO AMV FEV Vanchem Vanadium Pentoxide Flake (FVP) Vanadium Pentoxide Chemical (VCM) Sodium Ammonium Vanadate (SAV) Ammonium Metavanadate (AMV) Ferro Vanadium (FEV) Vanadyl Oxalate Solution (VOX) Potassium Metavanadate Nitrovan Vanchem Vanadium Pentoxide Flake (FVP) Vanadium Pentoxide Chemical (VCM) Sodium Ammonium Vanadate (SAV) Ammonium Metavanadate (AMV) Ferro Vanadium (FEV) Effect on 2021 revenue US$ Effect on 2021 net income US$ 8,431,404 (14,352) 6,069,757 (10,334) 8,417,052 6,059,423 Effect on 2020 revenue US$ 7,733,450 25,272 14,352 32,194 Effect on 2020 net income US$ 5,568,084 18,196 10,334 23,180 7,805,268 5,619,794 Effect on 2021 revenue US$ 610,815 298,089 71,954 27,320 1,637,211 137,723 46,810 483,666 Effect on 2021 net income US$ 439,787 214,624 51,807 19,670 1,178,792 99,160 33,703 348,239 3,313,588 2,385,782 Effect on 2020 revenue US$ 831,607 114,420 5,246 12,704 994,299 Effect on 2020 net income US$ 598,757 82,382 3,777 9,147 715,896 1,958,276 1,409,959 Credit risk Credit risk is the risk that the counterparty fails to repay its obligation to the Group in respect of the amounts owed. Credit risk arises from cash and cash equivalents, contractual cash ﬂows of debt investments carried at amortised cost, at fair value through other comprehensive income (FVOCI) and at fair value through proﬁt or loss (FVPL), as well as credit exposures to customers, including outstanding receivables. 140 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information Risk management Credit risk is managed on a Group basis. Credit veriﬁcation procedures are undertaken for all customers with whom we trade on credit. Otherwise, if there is no independent rating, risk control assesses the credit quality of the customer, taking into account its ﬁnancial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board. The compliance with credit limits by customers is regularly monitored by line management. 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 investments in debt instruments are considered to be low risk investments. The credit ratings of the investments are monitored for credit deterioration. Security At 31 December 2021, the company 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 company’s maximum exposure to credit risk without taking account of the value of any collateral obtained. At 31 December 2021 and at 31 December 2020, no ﬁnancial assets were past their due date. 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. Impairment of ﬁnancial assets The Group’s only ﬁnancial assets that are subject to the expected credit loss model are third party trade receivables. Trade receivables The Group applies the IFRS 9 simpliﬁed approach to measure expected credit losses which uses a lifetime expected loss allowance for all trade receivables and contract assets. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The expected loss rates are based on the payment proﬁles of sales over a period of 36 month before 31 December 2021 and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reﬂect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. The Group has identiﬁed the GDP and the unemployment rate of the countries in which it sells its goods and services to be the most relevant factors, and accordingly adjusts the historical loss rates based on expected changes in these factors. On that basis, the loss allowance as at 31 December 2021 and 31 December 2020 was determined as follows for trade receivables: 2021 Subsidiary Bushveld Vametco Alloys (Pty) Ltd Bushveld Vametco Limited Bushveld Vanchem (Pty) Ltd Ivanti Resources (Pty) Ltd Bushveld Minerals SA (Pty) Ltd Bushveld Energy Company (Pty) Ltd Expected credit loss rate Gross carrying amount US$ 0.11% 0.13% 0.13% 0.43% 0.19% 100.00% 87,076 4,197,730 1,274,756 609,197 7,743 66,866 6,243,368 Loss allowance US$ 96 5,457 1,657 2,620 15 66,866 76,711 Annual Report and Financial Results 2021 141 Financial Statements Notes to the Consolidated Financial Statements continued 32. FINANCIAL INSTRUMENTS CONTINUED 2020 Subsidiary Bushveld Vametco Alloys (Pty) Ltd Bushveld Vanchem (Pty) Ltd Bushveld Minerals SA (Pty) Ltd Bushveld Energy Company (Pty) Ltd Bushveld Vametco Limited Expected credit loss rate 0.95% 1.94% 1.94% 1.94% 0.93% Gross carrying amount US$ 312,230 38,169 69,189 72,651 2,835,340 3,327,579 Loss allowance US$ 2,966 740 1,342 1,409 26,369 32,826 Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Group, and a failure to make contractual payments for a period of greater than 120 days past due. Impairment losses on trade receivables are presented as net impairment losses within operating proﬁt. Subsequent recoveries of amounts previously written off are credited against the same line item. There were no impairment losses on trade receivables for the 2021 and 2020 ﬁnancial year. It is the Group’s policy that all customers 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. 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 Pound Sterling Euro South African Rand United States Dollar 2021 US$ 2020 US$ 10,272 47 14,942,559 479,974 663,914 – 34,165,671 15,711,087 15,432,852 50,540,672 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 2021, the Group had US$15,432,852 (2020: US$50,540,672) of cash reserves and borrowings of US$77,646,750 (2020: US$84,246,776). The Group will maintain its ability to service its borrowings over the next 12 months. Market risk The Group’s activities expose it primarily to the ﬁnancial risk of changes in foreign currency exchange rates and interest rates. 142 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information Interest rate risk The Group has interest bearing assets and liabilities, the Group’s income and operating cash ﬂows are dependent of changes in market interest rates. As part of the process of managing the Group’s interest rate risk, interest rate characteristics of new borrowings and the reﬁnancing of existing borrowings are positioned according to expected movements in interest rates. 2021 Interest bearing instruments Borrowings Cash and cash equivalents 2020 Interest bearing instruments Borrowings Cash and cash equivalents Value of loan (77,646,750) 852,547 Interest increase by 100 basis points 1% 1% Value of loan (84,246,776) 40,260,188 Interest increase by 100 basis points 1% 1% Effect (776,468) 8,525 (767,943) Effect (842,468) 402,602 (439,866) Foreign exchange risk As highlighted earlier in these ﬁnancial statements, the functional currency of the Group is US Dollars. The Group also has foreign currency denominated assets and liabilities. Exposure to exchange rate ﬂuctuations therefore arise. The carrying amount of the Group’s foreign currency denominated monetary assets and liabilities, all in US Dollars, are shown below: Cash and cash equivalents Other receivables Trade and other payables 2021 US$ 2020 US$ 15,134,842 12,696,364 (20,752,795) 34,829,585 4,818,931 (17,715,850) 7,078,411 21,932,666 The Group has transactional foreign exchange exposures, which arise from sales or purchases by an operating unit in currencies other than the unit’s functional currency. The Vanadium market is predominately priced in US dollars which exposes the Group to the risk of ﬂuctuations in the SA rand/US dollar. The Group monitors and manages risk via the newly established internal audit function. The Group does not enter into any derivative ﬁnancial instruments to manage its exposure to foreign currency risk. Fair value The directors are of the opinion that the book value of those ﬁnancial instruments carried at amortised cost approximates fair value. The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values. The Group used the following hierarchy for determining and disclosing the fair value of ﬁnancial instruments which are measured at fair value by valuation technique: – Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities. – Level 2: Other techniques for which all inputs which have a signiﬁcant effect on the recorded fair value are observable, either directly or indirectly. – Level 3: Techniques which use inputs that have a signiﬁcant effect on the recorded fair value that are not based on observable market data. Annual Report and Financial Results 2021 143 Financial Statements Notes to the Consolidated Financial Statements continued 32. FINANCIAL INSTRUMENTS CONTINUED Of the Group’s ﬁnancial assets at fair value as described in note 16, US$Nil (2020: US$20,148,778) is measured using level 1 techniques and US$Nil (2020: US$2,304,099) is measured using level 3 valuation techniques. There have been no transfers between level 2 and level 3 of the fair value hierarchy during the year ended 31 December 2021 and 31 December 2020. Financial assets Trade and other receivables Restricted investments Financial assets – investments Financial assets at fair value Cash and cash equivalents Financial liabilities Trade and other payables Borrowings Deferred consideration Loans Lease liabilities 2021 2020 Book value Fair value Book value Fair value 11,914,268 2,868,886 – – 15,432,852 11,914,268 2,868,886 – – 15,432,852 6,692,165 3,111,465 2,785,507 20,439,565 50,540,672 6,692,165 3,111,465 2,785,507 20,439,565 50,540,672 2021 2020 Book value Fair value Book value Fair value 33,080,670 77,646,749 1,684,021 3,280,948 4,485,312 33,080,670 77,646,749 1,684,021 3,280,948 4,485,312 22,065,601 84,246,776 5,416,466 1,597,972 – 22,065,601 84,246,776 5,416,466 1,597,972 – * Management assessed that the fair values of cash and cash equivalents, restricted investment, trade and other receivables and trade and other payables, borrowings, loans and lease liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments. 33. CONTINGENT LIABILITIES Bank guarantee As required by the Minerals and Petroleum Resources Act (South Africa), a guarantee amounting to US$12,762,752 (2020: US$6,204,018) before tax and US$11,098,045 (2020: US$4,446,893) 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. 34. 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 Investment Company (Pty) Ltd is a related party due to the Directors Fortune Mojapelo and Anthony Viljoen being majority shareholders of VM Investments. VM Investments owns the offices rented by Bushveld Minerals Limited. The rent paid in 2021 ﬁnancial period is US$162,897 (2020: US$159,651). Services rendered by Ondra LLP for the amount of US$200,000 (2020: US$566,056) is classiﬁed as a related party transaction due to a non executive director (Michael Kirkwood) being a partner at the ﬁrm. The company paid on behalf of Mr Fortune Mojapelo, tax on historic shares to the value of $439 094. The tax arises from historic shares issued to Mr Mojapelo. The company had an obligation to settle the tax on behalf of Mr Fortune Mojapelo. The amount is reﬂected as a debtor. The remuneration of key management personnel, being the directors and other executive committee members, is set out below. Further information about the remuneration of individual directors is provided in the Directors’ remuneration report. Salaries and fees Short-term incentives Long-term incentives 2021 US$ 2,181,500 166,190 – 2020 US$ 2,181,022 144,055 564,420 2,145,438 2,889,497 144 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information 35. RESTATEMENTS Bushveld Vanchem acquired the business of Vanchem Vanadium Products (Pty) Ltd and South African Japan Vanadium (Pty) Ltd on 7 November 2019. The transaction was accounted for as a business combination as prescribed by IFRS 3. In the preparation of the 2019 annual ﬁnancial statements, the gain on bargain purchase of R1.2billion (c.$60 million) that arose from the business combination was treated as a permanent tax difference and no deferred tax was provided in relation to the uplift in the fair value of the property, plant and equipment acquired. It was subsequently identiﬁed that the accounting treatment in the 2019 annual ﬁnancial audited statements was incorrect and a deferred tax liability should have been recognised as part of the net assets acquired. The adjustment impacts on the deferred tax balances at 31 December 2019 and 31 December 2020 and the income tax charge in those periods. The information in the following tables show the effect of the restatement on each affected ﬁnancial statement line item: Consolidated Statement of Financial Position Deferred tax asset/(liability) Retained earnings Foreign exchange translation reserve No impact on cash ﬂows as reported for the year ended 31 December 2020 were noted. Consolidated Statement of Financial Position Deferred tax asset/(liability) Retained earnings Foreign exchange translation reserve Consolidated Statement of Profit or Loss Taxation Basic loss per share Previously reported at 31 December 2020 Adjustment Restated at 31 December 2020 5,085,154 (46,734,823) (16,635,016) 18,367,164 (11,549,862) (28,367,659) 11,202,236 (1,732,148) 9,470,088 Previously reported at 31 December 2019 Adjustment Restated at 31 December 2019 173,892 (24,452,536) (24,278,644) (83,415,438) 24,452,536 (58,962,902) 1,655,861 633,277 2,289,138 Previously reported at 31 December 2020 Adjustment Restated at 31 December 2020 484,654 6,085,372 6,570,026 (3.00) 0.37 (2.63) 36. EVENTS AFTER THE REPORTING PERIOD Mustang Convertible Loan Note option On 27 April 2021, Bushveld Minerals Limited (the Company) announced an investment by Mustang Energy Plc (Mustang) into VRFB Holdings Limited (VRFB-H) to acquire an indirect interest of 11.05 per cent in Enerox GmbH (Enerox). Mustang invested approximately US$7.5 million to subscribe for a 22.10 per cent interest in VRFB-H (Mustang Subscription Shares) which was deployed into Enerox through its holding company, Enerox Holdings Limited (EHL). Mustang funded its investment by way of an issue of US$8 million unsecured convertible loan notes (CLNs) bearing a 10 per cent coupon to certain investors (Mustang Capital Raise). This was captured in an investment agreement (the Investment Agreement). A condition of the Investment Agreement was that Mustang’s shares be readmitted to trading on the Standard List of the Main Market of the London Stock Exchange (Readmission) by 31 December 2021 (the Maturity Date), failing which Mustang would have had the right, by serving written notice on Bushveld within 5 Business Days following the Maturity Date (the Notice Date), to require that Bushveld, in return for Mustang transferring to Bushveld Energy Limited all of the Mustang Subscription Shares and payment of a backstop fee (Backstop Fee), must: – issue to each CLN holder by 28 January 2022 such number of new Bushveld Minerals shares (at a price equal to the 20-day volume weighted average prior to the date of issue, and rounded down to the nearest share) as is equivalent to the par value of the noteholders’ CLNs together with accrued and unpaid interest; and – procure that such Bushveld shares are admitted to trading on the AIM market of the London Stock Exchange plc within ﬁve Business Days thereafter (Backstop). Annual Report and Financial Results 2021 145 Financial Statements Notes to the Consolidated Financial Statements continued 36. EVENTS AFTER THE REPORTING PERIOD CONTINUED As at 31 December 2021, the directors have concluded that the fair value of the option right is immaterial for recognition. Post completion of the investment, on 14 July 2021, the Company announced that Garnet Commerce Limited (Garnet), a shareholder in Enerox through its holding in EHL, issued a claim form in the High Court of Justice: Business and Property Courts of England and Wales (Chancery Division) against VRFB-H and EHL (the Litigation). Garnet’s claim form sought declarations against VRFB-H concerning alleged breaches of the joint venture agreement in relation to EHL, in respect of the indirect investment into EHL through VRFB-H by Mustang Energy Plc. The Mustang Capital Raise and the concurrent acquisition by Mustang of shares in the capital of VRFB-H constitutes a reverse takeover under the Financial Conduct Authority’s Listing Rules and requires the publication of a prospectus. Due to the uncertainty of the Litigation at the time it precluded Mustang from issuing a prospectus which is a precursor for Readmission. On 19 January 2022: – One of the CLN holders, Primorus Investment Plc (Primorus) elected to sell US$1.0 million of its CLNs to other CLN noteholders. In addition, the Company granted an option to Primorus to sell its residual CLNs (nominal value of US$1.5 million plus accrued interest thereon) to the Company. The Company could elect, at its discretion, as consideration for the exercise of the option, to pay cash or to issue new Bushveld Minerals convertible loan notes (BMN CLNs); – The parties to the Investment Agreement updated the terms of that agreement as follows (Updated Terms): – The requirement for the publication of a prospectus by Mustang and Readmission was to occur by no later than 28 February 2022; – In circumstances where Readmission did not take place by 28 February 2022, assuming Mustang cannot redeem the CLNs: – Mustang will give notice to Bushveld to exercise the Backstop and to the CLNs holders that it has done so, with a request that the CLN holders advise of their election to convert their CLNs into Bushveld or VRFB-H shares by the end of March 2022; – Bushveld will issue the new Bushveld shares under the Backstop in return for the transfer of the Mustang Subscription Shares; and – Mustang will transfer the Mustang Subscription Shares to Bushveld. In terms of the Investment Agreement, certain of the CLNs holders, on exercise of the Backstop, have the discretion to elect not to receive new Bushveld Minerals shares and instead receive shares directly in the capital of VRFB-H. – The Backstop Fee payable by Mustang to Bushveld will be reduced from 5.0% to 2.0% of the amount of any – CLNs converted to Bushveld shares, to be satisﬁed by the issue of Mustang shares at a price of 20 pence each. – In the event that the Litigation is resolved such that Mustang can continue to hold the VRFB-H shares and the – Backstop has been exercised, then Mustang has the option to buy back the Mustang Subscription Shares that would have been transferred to Bushveld in terms of the Backstop and Bushveld would have the option to put the Mustang Subscription Shares to Mustang at the original subscription price. – Bushveld provided Mustang with a working capital loan of US$220 000 at no interest (Loan), repayable in the event the Litigation is settled or determined such that Mustang can hold shares directly or indirectly in VRFB- – H. Mustang repay the Loan in cash, or in shares (together with a warrant for every two shares), in full on the earlier of 31 December 2023 or Mustang completing a capital raise. The Loan shall be waived in full in the event that the Litigation is settled or determined such that Bushveld Energy cannot hold shares directly or indirectly in VRFB-H and the Backstop arrangements have been implemented. – Sixty per cent of the Backstop Fee has been waived in the event the Litigation does not result in Mustang being able to hold shares in VRFB-H. Primorus elected to exercise the option and on 28 March 2022: – The Company issued the BMN CLNs to Primorus; – Mustang cancelled the Mustang CLNs issued to Primorus on 26 April 2021 and issued US$1,500,000 10 per cent convertible loan notes to Bushveld, subject to and with the beneﬁt of the provisions contained in the Loan Note Instrument entered into by Mustang on 26 April 2021 as amended and restated on 18 January 2022 and as further amended and restated between Mustang and the CLNs noteholders on 28 March 2022. The conversion price of the Mustang CLNs is £0.18; – Mustang paid Bushveld a Backstop Fee of US$32,737; and – The Updated Terms were further updated and supplemented as follows: – The nominal amount of the BMN CLNs is £1,208,988, being the nominal value of the Mustang CLNs issued to Primorus of US$1.5 million plus interest accrued thereon as at 28 March 2022 of US$136,849.32 (being an aggregate amount of US$1,636.849.32), converted at an exchange rate of US$1.3539/GBP; – Unless previously redeemed by the Company, and subject to a conversion notice being received by the Company at least three business days prior to the relevant conversion date, a tranche consisting of one sixth of the aggregate amount of the BMN CLNs may be converted by Primorus into Bushveld Minerals shares at any time within a conversion period (the six conversion periods being: 28 February 2022 to 14 April 2022; 15 April 2022 to 14 July 2022; 15 July 2022 to 14 October 2022; 15 October 2022 to 16 January 2023; 17 January 2023 to 14 April 2023;15 April 2023 to 14 July 2023) at a conversion price of £0.098987, being the volume weighted average price of a share as shown on Bloomberg over the 20 trading days prior to (and excluding) 28 February 2022. Primorus issued conversion notices in the ﬁrst two conversion periods and has accordingly converted one third of the BMN CLNs. 146 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information Enerox Legal Matter Garnet Commerce Limited (Garnet) issued a claim form in the English High court against VRFB Holdings Limited (VRFB-H) and Enerox Holdings Limited (EHL). EHL owns a 100 per cent interest in Enerox GmbH (Enerox), a Vanadium Redox Flow Battery manufacturer, providing grid scale and micro-grid energy storage solutions. Garnet’s claim form sought declarations against VRFB-H concerning an alleged breach of the joint venture agreement in relation to EHL. The alleged breach was in respect of the indirect investment, announced on 27 April 2021, into EHL by Mustang Energy Plc through VRFB-H, in terms of which Mustang acquired a 22.1 percent shareholding in VRFB-H in return for an investment of US$7,5 million. The judgement was made on 7 March 20222 in the High Court of Justice: Business and Property Courts of England and Wales (Chancery Division) in the matter between Garnet Commerce Limited (Claimant), VRFB Holdings Limited and Enerox Holdings Limited (Defendants) and 2289609 Alberta Limited (Third Party) (Claim No. BL-2021-001153). The judgement outcome vindicated the position that the investment by VRFB Holdings Limited (VRFB-H) into Enerox Holdings Limited (EHL), funded as it were partly from an investment by Mustang plc (Mustang), was entirely appropriate and not in violation of any agreements. Accordingly, the investment by Mustang into VRFB-H, and the investment by VRFB- H into EHL, continue to be in place. As previously announced, Mustang’s investment into VRFB-H constitutes a reverse takeover according to the AIM Rules. As such, Mustang shares remained suspended while it prepares a prospectus on its investment into VRFB-H. Kiln 3 In June 2022 the refurbishment of Kiln 3 was successfully commissioned at Vanchem. The commissioning was completed on time and within budget, with focus now on plant optimization and ramp-up. The kiln is currently ramping up. Refer to note Going concern note 3. Bushveld Minigrid In June 2022 Bushveld Minerals Limited secured funding for the engineering, procurement and construction (EPC) of the Vametco hybrid mini-grid, which is owned by its 84 per cent-owned energy subsidiary, Bushveld Energy Limited (Bushveld Energy). Bushveld Energy has completed the development and achieved ﬁnancial closing for a 3.5 MW solar PV plus a 1 MW/4 MWh Vanadium Redox Flow Battery (VRFB) hybrid mini-grid project for Vametco, which will operate as a funded independent power producer (IPP). Bushveld Energy and NESA Investment Holdings, a South African investment ﬁrm, have signed a shareholders agreement as strategic equity partners in the project’s development and ﬁnancing, with the project being housed in a separate special purpose vehicle (SPV). NESA has provided 60 per cent of the equity, while Bushveld Energy has provided 40 per cent. Bushveld Energy will recognise a development fee of ZAR5.6 million as revenue from the project upon ﬁnancial close. ABSA Relationship Banking has approved a ZAR64 million (approximately US$4.1 million) loan to part fund the construction of the mini-grid project. The project’s total cost is estimated to be ZAR113 million (approximately US$7.1 million).It will be built on a turnkey basis by NESA Power, who have already executed an Engineering, Procurement and Supply (EPC) Agreement alongside the SPV., The project’s 1 MW/4 MWh VRFB will be supplied by CellCube, a VRFB original equipment manufacturer in which Bushveld owns an indirect 25.25 per cent interest. Site preparation for construction began in Q1 2022. The project is now fully funded and is expected to be completed in H1 2023. Annual Report and Financial Results 2021 147 Supplementary Information Supplementary Information 148 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information Annual Report and Financial Results 2021 149 Supplementary Information Mineral Resources and Reserves DEFINITION 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. Measured/Indicated Mineral Resource is that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of conﬁdence sufficient to allow the appropriate application of technical and economic parameters to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing of information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed. Ore Reserves are declared for open pits inside the Life-of-Mine pit design (the optimised pit shell in this instance), which include the dilution of 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, and 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 VAMETCO MINE The Vametco Mine is situated about 6.5 km northeast of the town of Madibeng (formerly known as Brits). It is an operational opencast vanadium mine, located in the Bojanala Platinum District within the North-West Province of the Republic of South Africa. The operation comprises an open pit mine which supplies ore directly to the vanadium processing plant located on the same property. The open pit is approximately 3.5 km long, in an east-west direction. The vanadium is extracted from magnetite occurring near the basal contact of the Upper Zone of the Bushveld Igneous Complex. The mine has been in operation since 1967. Mineral Resources & Reserves The Mineral Resources and Reserves estimates for Vametco Mine reported herein are based on the Competent Person’s depletion statement prepared by an independent consultancy company, MSA Group, as at 31 December 2021. Key highlights – Ore Reserves have been depleted after 12 months of mining by approximately two per cent from previous Ore Reserve estimate as at 31 December 2020. As at 31 December 2021, Ore Reserves are reported at 262,000 tonnes V2O5 in magnetite at a grade of 2.02 per cent V2O5 in magnetite (previously 267,200 tonnes V2O5 in magnetite); – The combined Inferred and Indicated Mineral Resource across three seams (The Lower, Intermediate and Upper Seams), as reported at 31 December 2021, is 182.7 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 703.9 thousand tonnes of contained vanadium (previously 184.2 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 709.8 thousand tonnes of contained vanadium); – Within this, the Ore Reserve in the Probable Category comprise three seams (The Lower, Intermediate and Upper Seams) and is reported as 45.3 Mt at an average grade of 2.02 per cent V2O5 in magnetite, with an average magnetite content of 28.6 per cent in whole rock for 146,900 tonnes of vanadium (previously 46.4 Mt V2O5 in magnetite across the same three seams at an average grade of 2.02 per cent V2O5 in magnetite, with an average magnetite content of 28.6 per cent in whole rock for 146,900 tonnes of vanadium); – The Lower Seam is the main ore seam and the thickest, ranging from 13.8 to 52.0 metres in thickness, comprising a Probable Reserve of 38.4 Mt at an average grade of 2.05 per cent V2O5 in magnetite, with an average magnetite content of 29.2 per cent in whole rock for 128,900 tonnes of vanadium; – The decrease in the 2021 Mineral Resource, by 0.81 per cent less tonnes than the 31 December 2020 estimate, is attributed to mining of the seams over the last twelve months; – The decrease in the Ore Reserve tonnages from 46.4 Mt to 45.3 Mt as at 31 December 2021 is due to the depletion of all of the seams over the twelve month period based on the pit to plant reconciled production data from Vametco. An adjustment was made to the modifying factors to reﬂect more accurate Ore Reserve grades for the individual seams. The Ore Reserve modifying factors (mining loss and dilution) were adjusted based on pit to plant reconciliation production data supplied by Bushveld Vametco Alloys (Pty). Ltd. This resulted in a signiﬁcant increase in the Upper Seam magnetite grade in line with actual performance from 26.8 per cent in 2020 to 49.4 per cent in 2021; and – No Mineral Resource Exploration was carried out over this period. 150 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information Table 1: Vametco Mineral Resource at a cut-off grade of 20% magnetite, as at 31 December 2021 – 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) 5.6 27.6 106.8 140.1 10.2 7.0 25.3 42.6 15.8 34.7 132.2 182.7 1.44 0.67 0.72 0.74 1.46 0.67 0.74 0.90 1.45 0.67 0.72 0.78 65.8 32.9 32.3 33.8 63.6 32.1 31.3 39.1 64.4 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 65.9 173.3 702.3 941.5 113.7 43.4 158.4 315.6 179.6 216.7 860.6 1,257.0 36.9 97.1 393.3 527.2 63.7 24.3 88.7 176.7 100.6 121.4 482.0 703.9 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. Depleted using 31 December 2021 pit survey. 7. Reported on a Gross Basis. Bushveld Minerals shareholding in Bushveld Vametco Alloys is 74 per cent. Table 2: Vametco Mineral Resource at a cut-off grade of 20% magnetite, as at 31 December 2021 – 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 20.5 79.0 103.7 7.6 5.2 18.8 31.5 11.7 25.7 97.8 135.2 1.44 0.67 0.72 0.74 1.46 0.67 0.74 0.90 1.45 0.67 0.72 0.78 65.8 32.9 32.3 33.8 63.6 32.1 31.3 39.2 64.4 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 48.8 128.3 519.7 696.7 84.2 32.1 117.2 233.5 132.9 160.4 636.9 930.2 27.3 71.8 291.0 390.2 47.1 18.0 65.7 130.8 74.4 89.8 356.6 520.9 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. Depleted using 31 December 2021 pit survey. 7. Reported on an Attributable Basis. Bushveld Minerals shareholding in Bushveld Vametco Alloys is 74 per cent. Annual Report and Financial Results 2021 151 Supplementary Information Mineral Resources and Reserves continued Table 3: Vametco Ore Reserves, 31 December 2021 – 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) 0.5 6.3 38.4 45.3 1.05 0.51 0.63 0.62 49.4 23.4 29.2 28.6 1.77 1.88 2.05 2.02 4.7 27.5 230.1 262.4 2.7 15.4 128.9 146.9 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 run of mine (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 Reserves depleted as at 31 December 2021 using 31 December 2021 pit survey. 5. The Ore Reserve estimate was based on the original pit design completed in March 2019. 6. Modifying factors adjusted by seam from previous 31 December 2020 Ore Reserve estimate based on analysis of pit to plant production information. 7. Ore Reserve estimate depleted using Datamine Studio 5DP Open Pit software and latest topography supplied by Vametco as of 31 December 2021. 8. Reported on a Gross Basis. Bushveld Minerals shareholding in Bushveld Vametco Alloys is 74 per cent. Table 4: Vametco Ore Reserves, 31 December 2021 – 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) 0.4 4.6 28.5 33.5 1.05 0.51 0.63 0.62 49.4 23.4 29.2 28.6 1.8 1.9 2.1 2.02 3.5 20.4 170.3 194.2 2.0 11.4 95.4 108.7 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 Reserves depleted as at 31 December 2021 using 31 December 2021 pit survey. 5. The Ore Reserve estimate was based on the original pit design completed in March 2019. 6. Modifying factors adjusted by seam from previous 31 December 2020 Ore Reserve estimate based on analysis of pit to plant production information. 7. Ore Reserve estimate depleted using Datamine Studio 5DP Open Pit software and latest topography supplied by Vametco as of 31 December 2021. 8. Reported on a Gross Basis. Bushveld Minerals shareholding in Bushveld Vametco Alloys is 74 per cent. BRITS This project is located directly east of Bushveld’s Vametco Mine in the Bojanala Platinum District within the North-West Province and hosts high-grade vanadium mineralisation in several magnetite layers. The mineralisation, which is outcropping in places, 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. A Drilling programme completed in 2018 and a subsequent maiden Mineral Resource statement and Competent Person’s Report published in January 2020 has shown a lower seam weighted average grade of 0.6 per cent V2O5 in-whole rock and 1.6 per cent V2O5 in-magnetite, which are among the highest grades in the world. Brits has the potential to provide additional feed tonnage for Vametco and, if required, concentrate feed for the Vanchem plant. Brits Vanadium Project comprises of three different companies in which Bushveld Resources Ltd holds interest in their assets ranging between 51 per cent and 74 per cent, and the three companies are Caber Trade and Invest 1 (Pty) Ltd, Great 1 Line Invest (Pty) Ltd and Gemsbok Platinum (Pty) Ltd. Caber Trade and Invest 1 (Pty) Ltd (Caber Trade), in which the Company holds an interest of 51 per cent, which, as previously reported, had a mining right application refused by the Department of Mineral Resources and Energy (DMRE) in 2020. Caber Trade lodged an appeal against the decision and has recently been advised that the process has been concluded with the DMRE refusing the appeal. The Company is considering its options. The Caber Trade properties were not included in the CPR, and the refusal of the mining right has no impact on the mineral resource statement. 152 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information Great 1 Line Invest (Pty) Ltd (Great 1 Line), is the prospecting right holder of Portion 3 of farm Uitvalgrond 431 JQ, and an interest of 62.5 per cent is held through Bushveld Resources Ltd. This is the property on which the Mineral Resource estimate contained in the 2019 CPR is based on. The prospecting right renewal application for this asset was granted for a one-year extension, however an appeal procedure is in process with the DMRE to request for a three-year extension that was initially applied for. Gemsbok Magnetite (Pty) Ltd (Gemsbok), is the prospecting right holder of the Remainder of farm Doornpoort 295 JR. Bushveld Resources Ltd holds 74 per cent interest in this company. Environmental Authorisation for Gemsbok was granted and currently waiting for the granting of the prospecting right renewal submitted to the DMRE. Minerals Resource A JORC compliant maiden Mineral Resource was declared in June 2019 on Portion 3 of the farm Uitvalgrond 431 JQ on which the project is situated, and no further exploration work has been conducted on the project after this mineral resource estimate. This resource was classiﬁed into the Indicated and Inferred categories. 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 Mineral Resource is reported up to a depth of 150 m below the surface and 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 km to the most eastern fault where the last line of drilling was completed. As such there is potential to increase the resource on the remaining eastern unexplored portion of the farm on a strike length of 1 km. 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; and – The Mineral Resource is reported up to a depth of 150 m 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 km 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 km. Annual Report and Financial Results 2021 153 Supplementary Information Mineral Resources and Reserves continued Table 5: Brits Mineral Resource (Uitvalgrond 431 JQ Portion 3) at a cut-off grade of 20 % magnetite, 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 concentrate (%) Tonnes V2O5 in magnetite concentrate (thousands) Tonnes V in magnetite concentrate (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 Mineral Reserves, have no demonstrated economic viability. 3. Magnetite content (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 per cent of the Mineral Resource for the property (Bushveld has a 62.5 per cent ownership of the property (Uitvalgrond 431 JQ Portion 3). 6. Bushveld Minerals, through its subsidiary Bushveld is the operator of Brits Vanadium Project. Table 6: Brits Mineral Resource (Uitvalgrond 431 JQ Portion 3) at a cut-off grade of 20 % magnetite, 18 June 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 of magnetite concentrate (%) Tonnes V2O5 in magnetite concentrate (thousands) Tonnes V in magnetite concentrate (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 Mineral Reserves have no demonstrated economic viability. 3. Magnetite content (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 on a net attributable basis (Bushveld has a 62.5 per cent ownership of the property (Uitvalgrond 431 JQ Portion 3). 6. Bushveld Minerals, through its subsidiary Bushveld is the operator of Brits Vanadium Project. 154 Annual Report and Financial Results 2021 Table 7: MML and MML HW Mineral Resources at a 0.30% V2O5 cut-off, ≤120 m depth, as at 15 October 2017 Business Overview Governance Financial Statements Supplementary Information Width (m) Tonnes (Mt1) Density (t/m3) V2O5 (%) Fe (%) Fe2O3 (%) TiO2 (%) SiO2* (%) Al2O3* (%) P2O5* (%) S* (%) V2O5 (Kt2) Fe (Mt1) Layer Name UG-C UG-A UMG1 UMG2 MAG1 HW GAB** MAG1 MAG2 MML HW Total MAG3 PART MAG4 Total Mineral resource category Inferred Inferred Inferred Inferred Inferred Inferred Inferred Inferred 4.04 1.64 3.24 2.03 17.53 1.31 1.10 5.89 31.8 12.7 25.5 15.7 72.3 12.0 9.2 42.3 Inferred 36.77 221.5 Indicated Indicated Indicated 4.09 2.16 3.59 27.5 11.4 24.3 Indicated 9.84 63.2 3.85 3.48 3.31 3.30 3.40 3.02 3.96 3.57 3.01 3.21 4.08 3.16 4.00 0.64 0.59 0.59 0.69 0.31 1.07 0.83 0.32 0.50 1.50 0.58 1.46 1.32 25.7 23.2 22.9 25.9 13.1 40.0 30.2 13.4 36.7 33.1 32.7 37.0 18.8 57.1 43.1 19.2 19.8 28.3 45.5 20.9 43.9 40.4 65.1 29.9 62.7 57.8 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 0.12 0.01 0.01 0.01 0.12 0.06 0.06 0.11 202.8 75.6 150.4 107.7 223.3 128.7 76.3 136.0 8.2 3.0 5.8 4.1 9.5 4.8 2.8 5.7 0.08 1,100.8 43.8 0.12 0.17 0.24 0.18 412.5 66.3 354.9 833.7 12.5 2.4 10.7 25.6 0.01 0.10 1,934.5 69.4 Total Mineral Resources3 46.61 284.8 3.33 0.68 24.4 34.8 Notes: 1. Mt = million tonnes. 2. Kt = thousand tonnes. 3. Rounding may cause computational errors; No geological losses applied. * ** 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. Included for information purposes only, no value will be derived from these materials. Table 8: Probable Ore Reserves for Mokopane Project Orebody MML Upper (MAG3) MML Lower (MAG4) Total/Average* Notes: Mineral Resource is reported at a 40% Fe2O3 cut-off; No geological losses applied. * Included for informative purposes only, no value will be derived from these materials. True Thickness (m) 4.09 3.59 7.68 SG (t/m³) 4.08 4.00 4.04* Tonnes (million) 15,342 13,154 28,496 V2O5 (%) 1.43 1.39 1.41* Table 9: AB Zone Mineral Resource at 0.3% V2O5 cut-off, ≤120 m vertical depth, as at 15 October 2017 Layer Name AB Upper AB Parting AB Lower Total3 Mineral Resource Category Inferred Inferred Inferred Tonnes (Mt1) Thickness (m) Density t/m3 2.7 3.7 6.0 1.93 2.86 4.51 9.30 3.29 3.07 3.21 3.18 V2O5 % 0.89 0.48 0.75 0.70 Fe2O3 % 34.7 20.9 29.1 27.9 TiO2 % 5.4 3.0 4.3 4.2 P2O5* % 0.01 0.01 0.01 0.01 SiO2* % 30.3 40.0 34.6 35.3 Al2O3* % 17.1 19.7 18.6 18.6 S* % 0.06 0.01 0.01 0.02 V2O5 % 24.3 17.9 45.1 87.3 Inferred 12.5 Notes: 1. Mt = million tonnes. 2. Kt = thousand tonnes. 3. Total: Rounding may cause computational errors; No geological losses applied. * Included for informative purposes only, no value will be derived from these materials. The Mineral Resources and Reserves estimates are based on the Competent Person’s Report prepared by MSA Group as at 15 October 2017. Annual Report and Financial Results 2021 155 Supplementary Information Mineral Resources and Reserves continued Table 10: N-Q zone (weathered + unweathered) indicated mineral resource less than 200 m depth, as at 8 March 2013 Layer Name Q3 Q2 Q1 PMAG PFWDISS* OMAG* NMAG TOTAL Tonnes million 138.63 81.17 26.36 34.44 67.28 2.63 4.58 355.09 SG g/cm3 3.61 4.01 3.59 3.62 3.38 4.00 4.41 3.67 Fe % 31.7 41.9 32.5 32.4 26.9 37.2 48.7 Fe2O3 % 45.4 59.9 46.6 46.3 38.5 53.2 69.6 Fe Metal Tonnes million 43.99 34.00 8.58 11.15 18.13 0.98 2.23 TiO2 % 10.2 15.2 10.5 10.1 7.1 11.1 16.0 33.51 47.65 119.06 10.85 V2O5 % 0.13 0.28 0.28 0.29 0.22 0.49 0.56 0.22 SiO2 % 25.2 12.6 22.3 21.3 30.1 18.5 6.9 22.37 Al2O3 % 9.9 6.5 9.9 10.5 12.8 7.9 5.3 9.66 P2O5 % 0.06 0.02 0.02 0.03 0.03 0.01 0.03 0.05 * Layer reported at a 35 per cent Fe2O3 cut-off; no geological losses applied. Table 11: N-Q Zone (Unweathered) Inferred Mineral Resource, 200 m to 400 m depth, as at 8 Mar 2013 Layer Name Q3 Q2 Q1 PMAG PFWDISS* OMAG* NMAG TOTAL Tonnes million Density t/m3 139.03 92.64 23.42 38.28 76.51 1.87 7.22 378.97 3.59 3.99 3.64 3.58 3.37 3.77 4.32 3.66 Fe % 30.2 40.2 32.7 30.6 26.8 32.4 46.3 Fe2O3 % 43.3 57.5 46.8 43.7 38.3 46.3 66.2 Fe Metal Tonnes million 42.05 37.27 7.66 11.70 20.49 0.61 3.34 TiO2 % 8.8 14.1 10.8 9.8 6.9 9.5 15.6 32.47 46.47 123.12 10.07 V2O5 % 0.09 0.23 0.27 0.26 0.21 0.40 0.49 0.19 SiO2 % 28.3 15.3 22.2 23.5 30.2 23.1 8.3 Al2O3 % 10.3 7.6 10.6 11.5 12.8 10.4 5.8 24.24 10.20 P2O5 % 0.13 0.02 0.02 0.04 0.03 0.02 0.02 0.06 S % 0.40 0.27 0.27 0.80 0.33 0.12 0.11 0.38 S % 0.61 0.55 0.36 0.74 0.43 0.10 0.14 0.55 * Layer reported at a 35 per cent Fe2O3 cut-off; no geological losses applied. Table 12: P-Q Zone Inferred Mineral Resource, surface to 300 m vertical depth at a 35% Fe2O3 cut-off for the farms Schoonoord 786LR and Bellevue 808LR, as at 15 October 2017 Layer Name Q3 Q2 Q1 PMAG PFWDISS* TOTAL1 Quantity million tonnes 75.3 85.5 13.1 19.7 27.3 220.8 Density t/m3 3.77 4.14 3.82 3.52 3.45 3.85 Fe % 34.3 42.6 36.4 27.6 27.8 36.2 Fe2O3 % 49.1 60.9 52.1 39.5 39.8 51.9 Fe Metal million tonnes 25.82 36.40 4.76 5.45 7.60 80.03 TiO2 % 10.5 14.9 12.2 8.3 8.0 11.8 V2O5 % 0.10 0.26 0.30 0.23 0.22 0.20 SiO2 % 23.0 13.1 19.1 29.1 28.3 20.1 Al2O3 % 9.4 6.9 9.8 12.4 12.9 9.2 P2O5 % 0.28 0.03 0.03 0.06 0.06 0.12 S % 0.55 0.50 0.46 1.00 0.55 0.57 * Layer reported at a 35 per cent Fe2O3 cut-off; no geological losses applied. 156 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information The PQ Phosphate Project Mineral Resources 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 as shown in Table 13. 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. Figures are based on the Competent Person’s report prepared by MSA Group as at 15 October 2017. Table 13: Inferred Mineral Resource of Phosphate Zone at a 3% P2O5 cut-off, as at 15 October 2017 Farm Vliegekraal Malokong Schoonoord Bellevue TOTAL1 Tonnes millions 330.0 1.8 104.9 5.0 441.6 P2O5 % 3.6 3.2 3.6 3.6 3.6 Fe2O3 % 32.1 35.5 34.1 34.4 32.6 S* % 0.39 0.37 0.40 0.41 0.39 SiO2* % 34.0 35.4 33.0 33.3 33.7 *CaO* % 9.1 8.6 8.8 8.9 9.0 Density t/m3 3.30 3.27 3.37 3.36 3.32 1. Total = All tabulated data has been rounded and as a result minor computational errors may occur. Lemur Holdings Limited The Mineral Resource estimates are based on the competent person’s report prepared by Sumsare Consulting Group CC at 29 April 2019. Table 14: Resource for the Imaloto coal project Category Coal Resource per asset Measured Indicated Inferred Sub total Total Tonnes (Millions) 91.613 31.497 12.627 135.737 135.737 Gross Net attributable (99%) Operator Raw Coal Quality (ADB) Raw Coal quality (ADB) Ash (%) CV (MJ/Kg) 32.5 35.7 34.4 33.4 33.4 19.62 18.14 18.80 19.20 19.20 Tonnes (Millions) 90.697 31.182 12.501 134.380 134.380 Ash (%) CV (MJ/Kg) 32.5 35.7 34.4 33.4 33.4 19.62 18.14 18.80 19.20 19.20 Lemur Holdings Limited Annual Report and Financial Results 2021 157 Titanium Dioxide Total Injury Frequency Rate Total guaranteed pay Total Shareholder Return TiO2 TIFR TGP TSR Vametco Vametco mine & processing plant Vanadium Carbon Nitride VCN Vanadium Pentoxide V2O5 Vanadium Trioxide V2O3 Vanadium Redox Flow Battery VRFB VIP VRFB Investment Platform Vanchem Vanchem Vanadium Plant WACC WML WUL Weighted Average Cost of Capital Waste Management License Water Use License Supplementary Information Acronyms Air Emission License Adult Education and Training Ammonium Meta Vanadate Annual General Meeting Bushveld Electrolyte Company Brits Vanadium Project Bureau Veritas Compound Annual Growth Rate Conditional Share Plan Deﬁnitive feasibility study Department of Forestry, Fisheries and the Environment Department of Water and Sanitation Enerox GmbH Environmental Impact Assessment Environmental Management System Engineering, Procurement and Construction Environment, Social and Governance Ferrovanadium Geological Society of South Africa Gigawatt Gigawatt hour Human Resources Development Industrial Development Corporation Integrated Resource Plan Integrated Water Use Licence International Finance Corporation Invinity Energy Systems plc Johannesburg Stock Exchange Joint Ore Reserves Committee Thousands of tonnes Long-term incentive Lost time injury frequency rate Main Magnetite Layer AEL AET AMV AGM BELCO Brits BV CAGR CSP DFS DFFE DWS Enerox EIA EMS EPC ESG FeV GSSA GW GWh HRD IDC IRP IWUL IFC Invinity JSE JORC kt LTI LTIFR MML MML-HW Main Magnetite Layer Hanging Wall mtV Metric ton of Vanadium MtVp.a. Metric ton of Vanadium per annum MW MWh Mt MVO NDC NEMA NEMWA National Environmental Management Waste Act OEM PCC PFA P2O5 QMS QCA Code Quoted Companies Alliance Corporate Governance Code redT RCF RONA STI SMMEs Megawatt Megawatt hour Millions of tonnes Modiﬁed vanadium oxide Nationally Determined Contribution National Environmental Management Act redT energy plc Revolving Credit Facility Return on Net Assets Short-term incentive Small, Medium and Micro Enterprises Original Equipment Manufacturer Presidential Climate Commission Production Finance Agreement Phosphate Quality Management System 158 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information Glossary Mining terms Beneﬁciation Any process that improves (beneﬁts) the economic value of the ore by removing the gangue minerals prior to further metallurgical treatment. Brownﬁeld The development or exploration of assets located inside the area of inﬂuence of existing mine operations which can share infrastructure/ management. Competent Person’s Report A report on the technical aspects of a project or mine prepared by a Competent Person (CP). The contents are determined by the nature/status of the project/mine being reported and may include a techno-economic model as appropriate for the level of study. A Competent Person must have a minimum of ﬁve years’ relevant experience in the style of mineralisation or type of deposit under consideration and in the activity that the person is undertaking (JORC Code, 2012). Crushing First stage of mineral processing which involves reducing large rocks or boulders into smaller sizes using equipment such as gyratory crushers, jaw crushers and cone crushers. Greenﬁeld The development or exploration of assets located outside the area of inﬂuence of existing mine operations/infrastructure. Hanging Wall The strata situated above the targeted mineralised ore zone. Indicated Mineral Resource An ‘Indicated Mineral Resource’ is that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of conﬁdence sufficient to allow the appropriate application of technical and economic parameters to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing of information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed. Inferred Mineral Resource An ‘Inferred Mineral Resource’ is that part of a Mineral Resource for which quantity and grade (or quality) are estimated on the basis of limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify geological and grade (or quality) continuity. It is based on exploration, sampling and testing of information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. Leaching The process by which a soluble metal can be economically recovered from minerals in ore by dissolution. Life of Mine Life of Mine (LoM) is the time in which the ore reserves (or such reasonable extension of the reserves as conservative geological analysis may justify) will be mined economically to completion. Magnetic Separation The process of concentrating magnetic ore where the magnetic rock particles are separated from non-magnetic rock particles by using a magnet. Magnetite A naturally occurring mineral form of iron ore with the chemical formula Fe3O4. Main Magnetite Layer The vanadium-bearing magnetite layer in the lower portion of the upper zone of the Bushveld Complex, consisting of heavy to disseminated magnetite. It varies in thickness from 1 to 10 metres. Measured Mineral Resource A Measured Mineral Resource’ is that part of a mineral resource for which quantity, grade (or quality), densities, shape and physical characteristics are so well established that they can be estimated with sufficient conﬁdence to allow the appropriate application of technical and economic parameters to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing of information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to conﬁrm both geological and grade continuity. Milling The process of breaking down aggregate rock material into even smaller sizes (usually into powder-like form) using equipment such as a ball mill. Mineralisation A concentration (or occurrence) of material of possible economic interest, in or on the Earth’s crust, for which quantity and quality cannot be estimated with sufficient conﬁdence to be deﬁned as a Mineral Resource. Mineralisation is not classiﬁed as a Mineral Resource or Mineral Reserve and can only be reported under Exploration Results. The data and information relating to it must be sufficient to allow a considered and balanced judgement of its signiﬁcance. Mineral Deposits A mass of naturally occurring mineral material, usually of economic interest, without regard to mode of origin. Annual Report and Financial Results 2021 159 Supplementary Information Glossary continued Mining terms Mineral Reserves Mineral Reserves are sub-divided into two categories. The proven category is the highest level of reserves or the level with the most conﬁdence. The probable category is the lower level of conﬁdence of the reserves. Reserves are distinguished from Resources as all the technical and economic parameters have been applied and the estimated grade and tonnage of the resources should closely approximate the actual results of mining. The guidelines state: “Mineral Reserves are inclusive of the diluting material that will be mined in conjunction with the Mineral Reserve and delivered to the treatment plant or equivalent facility.” The guidelines also state that, “The term ‘Mineral Reserve’ need not necessarily signify that extraction facilities are in place or operative or that all government approvals have been received. It does signify that there are reasonable expectations of such approvals.” Mineral Resource A Mineral Resource is a concentration or occurrence of solid material of economic interest in or on the earth’s crust in such form, grade or quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade, continuity and other geological characteristics of a Mineral Resource are known, estimated or interpreted from speciﬁc geological evidence and knowledge, including sampling. Mineral Resource/Reserve Depletion Reconciling the metal quantity within the latest resource/reserve estimate that has been mined from a previous resource/reserve estimate. Modiﬁed Vanadium Oxide (MVO) An oxide form of vanadium (a mixture of V2O5, V2O4 and V2O3) that is chemically produced by reducing Ammonium Metavanadate (NH4VO3) and is used as feedstock for ﬁnal vanadium products such as Nitrovan (NV) and Ferrovanadium (FeV). Open Pit Mining A method of mining rock or minerals by removing them from an open pit commencing from the earth’s surface. Ore Reserves 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. Qualiﬁed Person A professionally qualiﬁed member in good standing of an appropriate recognised professional association who has at least ﬁve years’ relevant experience within the sector. A professional association is a Recognised Professional Organisation (RPO) of engineers and/or geoscientists. Reserve Life Current stated Ore Reserves estimate divided by the current approved nominated production rate at the end of the ﬁnancial year. Run of Mine Ore mined in the course of regular mining activities and extracted from the mining operation. Tonnes include allowances for diluting materials and for losses that occur when the material is mined. Salt Roasting Process where a magnetite concentrate is roasted with salts (sodium carbonate and sodium sulphate) in an extremely high temperature rotary kiln with temperatures of up to 1,150˚C to form water soluble solids containing vanadium. Strike Horizontal direction or trend of a geological structure, perpendicular to its down dip direction. Other terms Bankable Feasibility Study A feasibility study is bankable if it has been prepared in detail and with objectivity so that the company could submit it to investors or lenders when seeking ﬁnancing for the project. Deﬁnitive Feasibility Study A feasibility study based on the best alternative identiﬁed in the preliminary feasibility study, and suitable as a basis for detailed design and construction. The deﬁnitive feasibility study is based on indicated and measured mineral resources. Pre-feasibility Study A pre-feasibility study is an early stage analysis of a potential mining project. It is conducted and designed to give company stakeholders the basic information required to choose between potential investments. EBITDA Earnings before interest, tax, depreciation and amortization is a measure of a company’s operating performance. Free Cash Flow Free cash ﬂow represents the net cash generated from operating activities, after taking into consideration capital expenditure. 160 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION If you are in any doubt as to what action you should take, you are recommended to seek your own ﬁnancial advice immediately from your stockbroker, bank manager, solicitor, accountant or other independent ﬁnancial advisor who specialises in advising on shares or other securities and who is, in the case of UK shareholders, authorised under the Financial Services and Market Act 2000. If you have sold or transferred your shares in Bushveld Minerals Limited, please forward this document at once to the purchaser or transferee or to the stockbroker, bank or other agent through whom the sale or transfer was effected, for delivery to the purchaser or transferee. If you have sold or transferred part of your registered holding of shares, please consult the stockbroker, bank or other agent through whom the sale or transfer was effected. Notice of Annual General Meeting BUSHVELD MINERALS LIMITED (Incorporated in Guernsey under registered number 54506) REGISTERED OFFICE: Oak House, Hirzel Street, St Peter Port Guernsey, GY1 3RH. 30 June 2022 Notice is hereby given of an Annual General Meeting of Bushveld Minerals Limited to be held at 11:00 am on 8 August 2022 at Oak House, Hirzel Street, St Peter Port, Guernsey, GY1 3RH. PLEASE READ CAREFULLY – ARRANGEMENTS FOR THE ANNUAL GENERAL MEETING IN LIGHT OF COVID-19 At the date of this Notice, there are no COVID-19 related restrictions on travel to and from Guernsey, nor movement within Guernsey. Accordingly, it is expected that shareholders in Guernsey, or those who wish to travel to Guernsey for the Meeting, will be able to attend the Meeting as normal. However, this situation may change prior to the date of the Meeting and it may be necessary for the Company to impose restrictions on entry to the Meeting in order to limit or restrict the number of attendees if this is necessary to maintain any required level of social distancing between attendees at the Meeting or any restriction on the maximum number of attendees. In addition, the Board recognises that travel to Guernsey may not be feasible for the majority of shareholders and has put in place the following measures (the “COVID-19 Precautions”): 1. The Company urges shareholders to vote by proxy and to appoint the chairman of the Meeting as their proxy for that purpose. If a shareholder appoints someone other than the chairman of the Meeting as their proxy, that proxy, if not present in Guernsey, may not be able physically to attend the Meeting or cast the shareholder’s vote. All votes on the resolutions contained in this Notice will be held by poll, so that all voting rights exercised by shareholders who are entitled to do so at the Meeting will be counted. 2. The Board encourages all shareholders to exercise their votes by proxy, and to submit any questions in respect of the Meeting in advance. This should ensure that your votes are registered in the event that attendance at the Meeting is not possible. Shareholders are encouraged to use the online voting facilities detailed below where possible rather than submitting a paper proxy card. 3. Shareholders who do choose to attend the Meeting in person are asked to comply with any applicable guidance issued by States of Guernsey on respecting personal space and practising good hand hygiene, and with any distancing requirements requested by the Chairman. 4. The arrangements for the Meeting proposed by the Board are subject to constant review, and should they be subject to change in line with any new guidance from the States of Guernsey, or in the event that the situation surrounding COVID-19 should affect the plans to hold the Meeting at the proposed date and time or at the proposed address, the Company will update shareholders through a market announcement and will provide further details on the Company’s website. The Board reserves the right, should it become necessary, to restrict attendance at the Meeting as part of security arrangements pursuant to Article 73.2 of the Articles of Incorporation of the Company (the “Articles”). Annual Report and Financial Results 2021 161 Supplementary Information Notice of Annual General Meeting continued ORDINARY RESOLUTIONS 1. To receive and adopt the Annual Financial Statements of the Company and the Directors report and the report of the Auditors for the ﬁnancial year ended 31 December 2021. 2. To approve the Directors Fees as reﬂected in Remuneration Report and in Note 34 of the Annual Financial Statements. 3. That Messrs RSM UK Audit LLP be reappointed as Auditors to the Company. 4. That the Directors be authorised to approve the remuneration of the Company’s Auditors to the Company. 5. That Fortune Mojapelo shall be re-elected as a Director, having retired by rotation and offered himself for re-election. 6. That Tanya Chikanza shall be re-elected as a Director, having retired by rotation and offered herself for re-election. 7. That Kevin Alcock shall be re-elected as a Director in accordance with Article 140 of the Articles, having been appointed by the Directors in March 2022. 8. That Mirco Bardella shall be re-elected as a Director in accordance with Article 140 of the Articles, having been appointed by the Directors in March 2022. 9. That Jacqueline Musiitwa shall be re-elected as a Director in accordance with Article 140 of the Articles, having been appointed by the Directors in March 2022. 10. That David Noko shall be re-elected as a Director in accordance with Article 140 of the Articles, having been appointed by the Directors in May 2022. 11. The Company be generally and unconditionally authorised for the purposes of Articles 50.3 of the Articles to make on market acquisitions (as deﬁned in Article 50.5 of the Articles) of Ordinary Shares on such terms and in such manner as the Directors determine provided that: (i) the maximum aggregate number of Ordinary shares which may be purchased is 126,545,682 Ordinary Shares; (ii) the minimum price (excluding expenses) which may be paid for each Ordinary share is £0.01; (iii) the maximum price (excluding expenses) which may be paid for any Ordinary Share does not exceed 105 per cent of the average closing price of such shares for the 5 business days of AIM prior to the date of purchase; and this authority shall expire at the conclusion of the next Annual General Meeting of the Company unless such authority is renewed prior to that time (except in relation the purchase of Ordinary Shares the contract for which was concluded before the expiry of such authority, in which case such purchase may be concluded wholly or partly after such expiry). (iv) 12. The Directors of the Company be and are hereby authorised to exercise all powers of the Company to issue, grant rights to subscribe for, or to convert any securities into, up to 421,818,941 shares (together “Equity Securities”) in the capital of the Company being approximately one third of the issued share capital of the Company (excluding treasury shares) in accordance with Article 8.3 of the Articles of Incorporation of the Company such authority to expire, unless previously renewed, revoked or varied by the Company by ordinary resolution, at the end of the next Annual General Meeting of the Company or, if earlier, at the close of business on the date falling 15 months from the date of the passing of this Resolution, but in each case, during this period the Company may make offers, and enter into agreements, which would, or might, require Equity Securities to be issued or granted after the authority given to the Directors of the Company pursuant to this Resolution ends and the Directors of the Company may issue or grant Equity Securities under any such offer or agreement as if the authority given to the Directors of the Company pursuant to this Resolution had not ended. This Resolution is in substitution for all unexercised authorities previously granted to the Directors of the Company to issue or grant Equity Securities; and SPECIAL RESOLUTIONS 13. If Resolution 12 is passed, the Directors of the Company be and they are hereby authorised to exercise all powers of the Company to issue or grant Equity Securities in the capital of the Company pursuant to the issue or grant referred to in Resolution 12 as if the pre-emption rights contained in Article 9.9 of the Articles of Incorporation of the Company did not apply to such issue or grant provided that: (A) the maximum aggregate number of Equity Securities that may be issued or granted under this authority is 126,545,682 shares, being approximately 10.0 per cent of the issued share capital of the Company (excluding treasury shares); and (B) the authority hereby conferred, unless previously renewed, revoked or varied by the Company by special resolution, shall expire at the end of the next Annual General Meeting of the Company or, if earlier, at the close of business on the date falling 15 months from the date of the passing of this Resolution, save that the Company may before such expiry make an offer or agreement which would or might require Equity Securities to be issued or granted after such expiry and the Directors may issue or grant Equity Securities in pursuance of such an offer or agreement as if the authority conferred by the above resolution had not expired. This Resolution is in substitution for all unexercised authorities previously granted to the Directors of the Company to issue or grant Equity Securities in the capital of the Company as if the pre-emption rights contained in Article 9.9 of the Articles of Incorporation of the Company did not apply to such issue or grant. 14. That the Articles of Incorporation of the Company be and are hereby amended as follows: (i) Article 105 be amended by the deletion of the words “At no time after Admission shall a majority of Directors be resident in the United Kingdom.” (ii) Article 112.7 be deleted (iii) Article 130 be amended by the deletion of the words “(other than, at any time after Admission, a Director resident in the United Kingdom)” 162 Annual Report and Financial Results 2021 Business Overview Governance Financial Statements Supplementary Information (iv) Article 142 be amended by the deletion of the words “All meetings of the Directors shall take place outside the United Kingdom and principally, in Guernsey. Any decision reached or resolution passed by the Directors at any meeting held in the United Kingdom shall be invalid and of no effect.” (v) Article 147 be amended by the deletion of the words “either in the United Kingdom or elsewhere” (vi) Article 151 be amended by the deletion of the words “provided that no Directors physically present in the United Kingdom at the time of any such meeting may participate in the meeting by means of a conference telephone or any communication equipment unless 50 per cent or more of the Directors participating are physically present outside the United Kingdom.” (vii) Article 152 be amended by the deletion of the words “No such resolution shall be valid if a majority of the Directors sign the resolution in the United Kingdom.” (viii) Article 169 be deleted ORDINARY RESOLUTION 15. That, for the purposes of section 160 of the Companies (Guernsey) Law, 2008 (as amended), the appointment of Tanya Chikanza as a director of the Company (in contravention of Article 130 as it applied at that time, as a result of her being resident in the United Kingdom) be and is hereby ratiﬁed. By order of the Board K BREDIN Company Secretary 30 June 2022 EXPLANATORY NOTES TO CERTAIN OF THE RESOLUTIONS Resolution 14: As evidenced by the board changes that were announced to the market in March and May of this year, the Board, through the Nomination Committee, has been kept busy with the implementing of its succession planning endeavours. Through that process, it has become evident that certain of the articles within the Company’s Articles of Incorporation (Articles), which have not been amended since listing in 2012, and which relate to the residency of directors, are unnecessarily restrictive. Consequently, to allow for more ﬂexibility when identifying and appointing suitable candidates to the Board in the future, it is being requested that shareholders approve the amending of the Articles as detailed in resolution 14. Similarly, it is requested that the restrictions in respect of where meetings are held and decisions made be removed, which is also included within resolution 14. Resolution 15: This resolution relates to the appointment of Tanya Chikanza in her capacity as an executive director of the Company. It has come to light that by appointing Tanya Chikanza as an executive, the Company inadvertently breached its Articles, which state that “The Directors may appoint one or more of their number (other than, at any time after Admission, a director resident in the United Kingdom) to an executive office on such terms as they think ﬁt…”. Although Tanya’s appointment was contrary to Article 130, her appointment as a director is not invalidated. The breach relates only to the appointment of executive office, and not to her appointment as a director, and accordingly, the breach does not mean that any actions taken by Tanya would have been beyond her powers as a director, void or voidable, or not binding on Bushveld as intended. While resolution 14 amends Article 130, resolution 15 ratiﬁes Tanya’s earlier appointment and the consequent breach of Article 130, so as to remedy the position. Notice of Meeting Notes: The following notes explain your general rights as a shareholder and your right to attend and vote at this Meeting or to appoint someone else to vote on your behalf. 1. To be entitled to attend and vote at the Meeting (and for the purpose of the determination by the Company of the number of votes they may cast), shareholders must be registered in the Register of Members of the Company at close of trading on 6 August 2022. Changes to the Register of Members after the relevant deadline shall be disregarded in determining the rights of any person to attend and vote at the Meeting. 2. Shareholders are entitled to appoint another person as a proxy as set out below to exercise all or part of their rights to attend and to speak and vote on their behalf at the Meeting. A shareholder may appoint more than one proxy in relation to the Meeting provided that each proxy is appointed to exercise the rights attached to a different ordinary share or ordinary shares held by that shareholder. A proxy need not be a shareholder of the Company, but please note that in accordance with the measures set out above, shareholders are encouraged to appoint the Chairman of the Meeting as their proxy for the purposes of ensuring that their proxy will be able to attend the Meeting. Annual Report and Financial Results 2021 163 Supplementary Information Notice of Annual General Meeting continued 3. In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the Company’s Register of Members in respect of the joint holding (the ﬁrst named being the most senior). 4. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the resolution. If no voting indication is given, your proxy will vote or abstain from voting at his or her discretion. In the absence of any speciﬁc instructions from you, your proxy will vote (or abstain from voting) as he or she thinks ﬁt in relation to any other matter which is put before the Meeting. 5. You can vote either: – by logging on to www.signalshares.com and following the instructions. This system allows you to appoint a proxy and to instruct your proxy how to vote. If you have note used the service before you will need to register online, for which you will need your investor code (IVC). In order for a proxy appointment to be made in this way, you will need to submit your instructions via www.signalshares.com by 11:00 am on 6 August 2022; – by requesting a hard copy form of proxy directly from the Registrars, Link Group by phone – UK – 0371 664 0300. (Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. Lines are open between 09:00-17:30, Monday to Friday excluding public holidays in England and Wales). In order for a proxy appointment by way of a hard copy form of proxy to be valid, the form of proxy must be received by Link Group at 10th Floor, Central Square, 29 Wellington Street, Leeds, LS1 4DL by 11:00 am on 6 August 2022. – in the case of shareholders holding their shares through CREST, by submitting a CREST Proxy Instruction utilising the CREST electronic proxy appointment service in accordance with the procedures set out below. 6. If you return more than one proxy appointment, either by paper or electronic communication (including via www.signalshares.com), the appointment received last by the Registrar before the latest time for the receipt of proxies will take precedence. You are advised to read the terms and conditions of use carefully. Electronic communication facilities are open to all shareholders and those who use them will not be disadvantaged. 7. The return of a completed form of proxy or any CREST Proxy Instruction (as described in note 10 below), or the submission of instructions via www.signalshares.com, will not prevent a shareholder from attending the Meeting and voting in person if he/she wishes to do so. 8. Shareholders holding their shares through CREST who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for the Meeting (and any adjournment of the Meeting) by using the procedures described in the CREST Manual (available from www.euroclear.com/site/public/EUI). Shareholders holding their shares through a CREST sponsor or service provider(s) should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. 9. In order for a proxy appointment or instruction made by means of CREST to be valid, the appropriate CREST message (a ‘CREST Proxy Instruction’) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s speciﬁcations and must contain the information required for such instructions, as described in the CREST Manual. The message must be transmitted so as to be received by the issuer’s agent (ID RA10) by 11:00 am on 6 August 2022. For this purpose, the time of receipt will be taken to mean the time (as determined by the timestamp applied to the message by the CREST application host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time, any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means. 10. Shareholders holding their shares through CREST and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK & Ireland Limited does not make available special procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the shareholder concerned to take (or, if the shareholder is a CREST personal member, or sponsored member, or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, shareholders holding their shares through CREST and, where applicable, their CREST sponsors or voting system providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 34(1) of the Uncertiﬁcated Securities (Guernsey) Regulations, 2009. 11. Any corporation which is a shareholder can appoint one or more corporate representatives who may exercise on its behalf all of its powers as a shareholder provided that no more than one corporate representative exercises powers in relation to the same shares. 12. As at 29 June 2022 (being the latest practicable business day prior to the publication of this Notice), the Company’s ordinary issued share capital (excluding treasury shares) consists of 1,265,456,822 ordinary shares, carrying one vote each. Therefore, the total voting rights in the Company as at 30 June 2022 are 1,265,456,822. 13. You may not use any electronic address (within the meaning of Section 523(2) of the Companies (Guernsey) Law, 2008) provided in either this Notice or any related documents (including the form of proxy) to communicate with the Company for any purposes other than those expressly stated. 14. A copy of this Notice can be found on the Company’s website at www.bushveldminerals.com/investors 164 Annual Report and Financial Results 2021 Company Information BUSHVELD MINERALS Registered Office Oak House, Hirzel Street St Peter Port GY1 3RH Principal Operating Address 2nd Floor, Building 3 Illovo Edge Office Park 9 Harries Road, Illovo Johannesburg, 2116 South Africa Tel: +27 11 268 6555 SP ANGEL Nominated Adviser & Broker Prince Frederick House 35-39 Maddox Street London W1S 2PP RBC EUROPE LIMITED Joint Broker 100 Bishopsgate London EC2N 4AA GOWLING WLG Legal Counsel – UK 4 More London Riverside London SE1 2AU RSM Independent Auditor RSM UK Audit LLP 25 Farringdon Street London EC4A 4AB LINK GROUP Company Registrar 10th Floor Central Square 29 Wellington Street Leeds LS1 4DL MS. KATE BREDIN Company Secretariat Email: kate.bredin@bushveldminerals.com Tel: +27 (0) 11 268 6555 Fax: +27 (0) 11 268 5170 MS. CHIKA EDEH Head of Investor Relations Email: Chika.edeh@bushveldminerals.com Tel: +27 (0) 11 268 6555 Fax: +27 (0) 11 268 5170 BUSHVELD MINERALS Registered Office Oak House, Hirzel Street St Peter Port Guernsey, GY1 3RH www.bushveldminerals.com

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