Profits jump at Bushveld's Vametco Alloy on rising vanadium prices
Bushveld Minerals saw profits at part-owned Vametco Alloys shoot higher thanks to improved prices for vanadium, predicting prices would continue rising thanks to supply shortages.
During the first half of 2017, the company's EBITDA grew to $6.5m, an 80% increase from $3.2m in the year before and a 203% rise from their level in 2015.
Vanadium prices had improved materially, rising from a low of US$14.41/kgV in January 2016 to US$23.23/kgV in December 2016, the company explained in a statement, and had continued rising over the latest six-month stretch.
To back up its case, Bushveld referenced end-July European price quotes from Metalbulletin of $45/kgV and in excess of $50/kgV in China.
That improvement followed a period of challenging market conditions amid sustained depressed vanadium prices during 2015-16, which adversely impacted financial performance across the industry, Bushveld said.
Hence, the recent decision to increase Vametco's annual capacity from 3,000 metric tonnes to 5,000 over the coming three years.
On the other hand, with output flattening out recently, cash production costs had increased by 7%.
Furthermore, the strengthening in the South African rand had proven a headwind.
Yet cash production costs of $14.50/kgV at year-end 2016 had put Vametco in the bottom quartile of the international vanadium production cost curve.
Bushveld held a 45% stake in Bushveld Vametco, which in turn had a 78.8% ownership of Strategic Minerals Corporation, the ultimate holding company of Vametco, giving it a roughly 35% share in the firm's financials.
Fortune Mojapelo, CEO of Bushveld Minerals, commented: "Vametco is a significant Vanadium producer, with extremely competitive production costs, that is now undergoing an expansion initiative to deliver increasing volumes into a structurally deficit supply market. We are extremely pleased to have concluded the Vametco joint-acquisition at the time we did.
"We look forward to continuing to work with management in further driving down operating costs, plus delivering on its expansion initiatives."