rns number : 0147o bushveld minerals limited 04 february 2016

2/4/2016 Bushveld Minerals Ld | Mokopane Vanadium Project Pre-Feasibility Study | FE InvestEgate

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Bushveld Minerals Ld

MOKOPANE VANADIUM PROJECT PREFEASIBILITY STUDY

RNS Number : 0147OBushveld Minerals Limited04 February 2016

4 February 2016

Bushveld Minerals Ltd

("Bushveld" or the "Company")

PreFeasibility Study confirms Mokopane Vanadium Project as oneof the lowest cost vanadium projects with strategic importance to

the future vanadium market

Bushveld Minerals Limited (AIM: BMN), a mineral development company with a portfolio ofvanadium and titaniumbearing iron ore, tin and coal assets in Southern Africa, is pleased topresent a summary of the PreFeasibility Study (PFS) at its 64 % owned Mokopane VanadiumProject ("Mokopane Vanadium" or the "Project") in South Africa. The results of the PFS confirmthe emergence of Mokopane Vanadium as a marketleading vanadium project that, on allobjective measures, compares favourably with other leading vanadium deposits.

Highlights· PFS confirms Mokopane Vanadium as a strategic asset of major significance to the

future global vanadium market based on:

- Longterm mine life: Ore Reserve of 28.56 million tonnes ("Mt") supporting aminimum 30 year life of mine ("LoM") from less than 10% of the total projectresource of 298 Mt, which represents significant exploration upside

- Established processing method lowers project risks: selected salt roastprocessing method proven on a commercial scale by existing facilities over manydecades of operation

- Highquality product: PFS contemplates a 1.0 Mtpa run of mine ("RoM")operation producing on average 9,525 tpa of vanadium pentoxide (V2O5) flakes at99.5 weighted percent (wt%) purity

- Robust project economics: Payback period of four years with a Pretax NPV ofUS$418.0 M (based on a 9% base case discount rate) and an IRR of 24.8% (pretax) using a conservative longterm US$:ZAR12.75 exchange rate and a realvanadium price of US$7.50/lb (US$16.53/kg) for V2O5 flakes at >98 % purity

- Significant market share: RoM production to contribute as much as 6 % of globalannualised vanadium output and ~50 % of South African output relative to actual2014 market supply figures

· Base case scenario involves an integrated miningconcentratorsalt roast process businesscase for a modest capital expenditure of US$ 298.1 M to produce the 9,525 tpa V2O5

· The mining right application for the Project was submitted in Q1 2015 and Bushveld awaitsapproval.

Bushveld Minerals CEO, Fortune Mojapelo, said:



Bushveld Minerals CEO, Fortune Mojapelo, said:

"We are pleased to present such a positive PFS for the Mokopane Vanadium Project. The resultssupport our longheld goal to develop this project into a highly profitable, significant contributor toSouth African and global vanadium market output.

With a first quartile cash cost proposition, the project provides precisely the sort of asset werequire to pursue our recently announced integrated vanadium development strategy. We havetaken a conservative approach in determinig the PFS parameters and, in my view, as the globaleconomic environment improves the economics of the project will only get better.

While we are mindful of the recent low commodity price environment including subUS$3.50/lbV2O5 prices, an analysis of the fundamentals of the market, backed by independent research,suggests that a significant proportion of the current global vanadium production is unsustainableat these levels. Significant reductions in vanadium supply during the past 612 months, coupledwith a robust demand outlook, present a compelling argument for sustainable vanadium pricerecovery in the medium to long term.

We continue to engage with potential partners on ways to take this project forward towards aDefinitive Feasibility Study. We also continue to explore, assisted by insights developed by thisPFS, potential brownfield opportunities that could serve to further reduce the capital expenditurerequirements from what are already very modest levels, thereby providing an option to bringforward the date of production commencement and cashflow generation."

EXECUTIVE SUMMARYThe Mokopane Vanadium Project PreFeasibility Study was completed by a group of internationallyrecognised and respected consulting firms and individuals, commissioned to prepare a TechnicalReport for the PFS on behalf of Bushveld Minerals Limited. These include The MSA Group (Pty) Ltd,who had overall responsibility for compiling the PFS Report, WorleyParsonsRSA, TrueGroundConsulting, Hatch Goba (Pty) Ltd, Epoch Resources (Pty) Ltd, Digby Wells Environmental, andHindsight Financial and Commercial Solutions (Pty) Ltd (collectively the "Consultants") Metallurgicalanalysis for the Project was undertaken at SGS Laboratories and assays for the geological work andMineral Resource Estimate were undertaken at Set Point Laboratories. The Study has been completedto a PFSlevel of accuracy and all costings, unless specified otherwise, have been undertaken at anaccuracy level within ± 25 %.

The Project is located on the central portion of the Northern Limb of the Bushveld Complex in theLimpopo Province of South Africa. It is located within the Prospecting Right LP95PR, issued inaccordance with the Mineral and Petroleum Resources Development Act of 2002 (MPRDA), in theMokopane District, approximately 65 km west of Polokwane and 45 km northwest of Mokopane in theMokopane District, Limpopo Province, Republic of South Africa.

The Company owns an effective 64 % of the Project through its wholly owned subsidiary BushveldResources Limited (or "BRL"), which in turn holds 64 % of Pamish Investments No 39 (Pty) Ltd (or"Pamish"). Pamish holds a Prospecting Right (LP95PR) for an area comprising six farms covering anarea of 10,073 hectares. The Prospecting Right allowed for the prospecting of iron ore, vanadium,titanium and other minerals. An application for a new order mining right ("NOMR") was submitted to theDepartment of Mineral Resources in March 2015 and at the time of this report was still beingprocessed.

While the Project Mineral Resource Estimate totals 297 Mt and comprises three distinct mineralisedzones, the PFS has been undertaken on only one of these the Main Magnetite Layer ("MML"), whichwas also used for the Scoping Study completed in 2014. Work undertaken during this PreFeasibilityStudy has allowed a 28 Mt Ore Reserve to be declared.

WorleyParsonsRSA undertook the mining studies and modelled the mining requirements to support thedetermined scope of the Project. RoM of 1.0 Mtpa is to be processed through magnetic separation to



make concentrate, which is further processed through a salt roast plant to produce 9,525 tpa of V2O5flake. WorleyParsonsRSA modelled a two pit mine configuration each using the same openpit miningmethod and mining equipment. The pits, which dip to the west at approximately 18°, will be mined to amaximum depth of 80 m below original ground level with an overall highwall slope angle of 55°. TheMML HangingWall ("MMLHW") zones of mineralisation will be stored separately on stock piles forpossible future treatment on account of their potentially economic mineralisation. An allowance wasmade for dilution of 5 % with low grade mineralisation and a 5 % loss of MML material to the stockpiles.The production rate required is readily achievable and should allow for an accurate separation of thetwo MML intervals from the low grade hanging wall mineralisation and the MML parting. A rampexcavated from the high wall will provide access to the working faces in the pits. Mining contractors willbe employed as the mining practitioners and mining operations will take place from Monday to Fridayon a 24 hour three shift per day cycle.

The processing plant comprises a concentrator plant and the salt roast plant. The RoM proceedsthrough three stages of crushing before being milled to the required particle size. A magneticseparation process is used to separate the vanadiumcontaining magnetic fraction from the nonmagnetic waste material to produce a more concentrated, higher metal value concentrate. The wastematerial slurry is pumped to a tailings facility while the concentrate is filtered, stockpiled and transferredto the salt roast plant for further processing.

The salt roast process is the vanadium industry standard for processing titanomagnetite ores from theBushveld Complex in South Africa, having been proven on a commercial scale by existing facilities overmany decades of operation. The salt roast plant receives concentrate from the concentrator circuit andproduces V2O5 flake (99.5 wt% purity) as the final product via the alkali salt roast process. The processinvolves roasting the concentrate with alkali (sodium) salt, leaching of the resultant material with water,desilication, ammonium metavanadate ("AMV") precipitation and deammoniation to produce the finalV2O5 product.

The market fundamentals for vanadium are attractive. Demand is anchored in the steel sector wherevanadium is used as an alloying element for strength, corrosion resistance, weldability and fabricability.The most common application of vanadium is in reinforced bar (rebar) for the construction industry. Ashift towards stronger steels in the construction sector has seen vanadium consumption grow at almosttwice the rate of growth of steel production. In China particularly, authorities have promulgatedregulations in favour of strong vanadium containing steels. Use of vanadium in energy storageapplications is also poised to drive demand of vanadium going forward.

Supply is concentrated. In terms of feedstock, 64 % of vanadium supply is derived from coproduct slagproduced by steel plants processing vanadiumbearing magnetites, mostly in China. However,constrained steel economics resulting from low steel prices, lower steel production growth and highcost for captive magnetite ores, pose a threat to coproduct supply. Opportunity for Chinese steel plantsto substitute high cost low iron ("Fe") grade vanadium bearing ores with cheaper higher Fegradeseaborne haematite ores has seen supply of vanadium slag feedstock decrease, particularly for steelplants located in close proximity to a coast. Where such substitution opportunities do not exist anoutright reduction in steel production is also driving supply down. Highveld Steel & Vanadium hasrecently (May 2015) ceased production, removing as much as 11 % of global vanadium feedstocksupply (slag and primary ore) from the market. Notwithstanding the low prices of subUS$3.50/lb V2O5seen during 2015, the vanadium market balance is thus trending towards deficit and is expected to seeprices recover.

Roskill estimates that a recovery in FeV prices to about US$ 21 to US$ 24/kgV is likely by 2017 (FeVprices quoted as US$ per kilogram of vanadium). Over the longer term, this price level is expected tooffer insufficient incentive to encourage new supply or increases in secondary output. Assumingongoing growth in vanadium demand, a further recovery (in real terms) to about US$ 24/kgV to US$27/kgV could be expected. In nominal terms, the effects of inflation and an eventual recovery in energyprices will likely lead to higher vanadium prices.

A price of US$ 7.50/lb (US$ 16.53/kg) for V2O5 flakes at >98 % purity is assumed for the Project, withan anticipated initial production in 2019. This approximates the 10 year historical average of US$7.63/lb (Jun 2005 May 2015), and is approximately 17 % higher than the 15 year historical average ofUS$ 6.39/lb (Jun 2000 May 2015).

The PFS delivers robust economics with upside potential. The base case scenario of 9,525 tpa V2O5production requires a capital expenditure of US$ 298.1 million and yields a pretax NPV using a real 9% discount rate of US$ 418.0 million and a real pretax IRR of 24.8 %. The financial model assumes along term ZAR/US$ exchange of 12.75. Posttax metrics were based on a simple application of a 28 %South African corporate tax rate and do not take into account several tax incentives that the Project canaccess, particularly given alignment of the Project with the South African Government's incountrybeneficiation objectives.

A Rand/US$ exchange rate of ZAR 14.03 (10% weaker than the assumed long term rate of ZAR12.75/US$ and approximately equal to the rate on the effective date (1st October 2015) of this report),increases the real NPV toUS$ 463.7 million and the real IRR to 27.1 % on a pretax basis and US$ 292.1 million and 22.2 % on aposttax basis, respectively.

The following table summarises the Project parameters:



Bushveld Vanadium Project Salt Roast 1 Mtpa RoM Scenario

Item Unit Value

Production

Mineral Resource Mt 300Ore Reserve Mt 28Life of Mine Years 30V2O5 Production tpa 9,525

Macroeconomics

V2O5 priceUS$ /kg V2O5 16.53US$ /lb V2O5 7.50

Long Term Exchange Rate ZAR/US$ 12.75

Project Economics

Capital Costs Initial capital US$ million real 298

Sustaining capitalLoM US$ real 121

% p.a. (of initial capitalexpenditure) 1.3

Operating CostsLOM US$ million real 2,133US$ /t V2O5 flakes 7,222US$ /lb V2O5 flakes 3.28

Gross Revenue LoM US$ million real 4,720Royalty LoM US$ million real 96.86Net Revenue LoM US$ million real 4,623Unleveraged Cash flow LoM US$ million real 1,476

EBITDA Margin (Avg p.a. steadystate after royalties)

% 52.59LoM US$ million real 86.2

Pre Tax PostTaxNPV @ 7% real US$ million 587.2 377.3NPV @ 9% real US$ million 418.0 259.3IRR real % 24.8 20.4Effective Equity return (assuming50% Debt : Equity ratio) % 45.60 36.70

Payback from commencement ofproduction ramp up Years 4

The PreFeasibility Study recommends that the Project advances to the next stage of developmentwhich would involve the execution of a Definitive Feasibility Study (DFS). The Company is of the viewthere is now a sound basis to progress discussions with potential partners to continue to advance thisexciting project.

The executive summary is available in full at www.bushveldminerals.com.

Bushveld Minerals

Fortune Mojapelo

+27 (0) 11 268 6555

Strand Hanson

Andrew Emmott

+44 (0) 20 7409 3494

Mirabaud Securities

Rory Scott

+44 (0) 20 7878 3360

Brandon Hill Capital

Jonathan Evans

+44 (0) 20 3463 5000

Tavistock +44 (0) 20 7920 3150

http://www.bushveldminerals.com/



Jos Simson/ Nuala Gallagher

Russell & Associates

Jane Kamau AppiahYeboah/ James Duncan

+27 (0) 11 880 3924

APPENDIX

GEOLOGY

The Project Area is situated within the Northern Limb of the Bushveld Complex ("BC") and covers theupper portion of the Main Zone ("MZ") and the entire Upper Zone ("UZ") of the Rustenburg LayeredSuite ("RLS"). The UZ is approximately 1,250 m thick and dips gently (15° to 25°) to the west. The UZis characterised by the presence of vanadiferous titanomagnetite ("VTM") layers, which includedisseminated, semimassive and massive VTM intervals of variable thicknesses and variableproportions of oxide (Timagnetite) and silicate minerals (feldspar, pyroxene and olivine).

The Project is based on the three mineralised layers associated with the MML, which is part of the UZ.These are the MML, the MML HW and the AB Zone located in the footwall of the MML.

The MML mineralised zone occurs near the base of the UZ and consists of an upper VTMrich interval("MAG3") which is separated from a lower VTMrich interval ("MAG4") by a VTMpoorerleucogabbronorite "parting". The MML has an average true thickness of 9.8 m, including the VTMpoorparting, and dips between 18° and 24° to the west. The MAG3 ranges between 2.59 m and 7.65 m andaverages 4.09 m in true thickness. The MAG4 ranges between 2.48 m and 6.30 m and averages 3.59m in true thickness. The parting ranges from 0.93 m to 4.06 m and averages 2.16 m in true thickness.

The MML HW comprises fourteen continuous layers defined by geological logging and VTM content,consisting of alternating layers of relatively highgrade semimassive to massive VTM, lowergradegabbronorite and barren anorthosite. These fourteen layers of the MML HW package are conformablewith the MML and have a combined average true thickness of approximately 72 m.

The AB Zone represents the stratigraphically lowest accumulation of abundant VTM and occursapproximately 100 m below the MML, near the base of the UZ. The AB Zone consists of a relativelyhighergrade upper and lower layer of strongly disseminated VTM, separated by a lower grade parting.The layers of the AB Zone have an average dip of 21o to the west with a combined average truethickness of approximately 9.3 m.

The Scoping Study and the PreFeasibility Study have been based on the MML only and anticipate thatthe lower grade MML HW layers in the immediate hanging wall of the MML which form part of thestripping during the mining of the MML will be stock piled for potential future processing.

MINERAL RESOURCE ESTIMATES

The Project's current Mineral Resource totals 298 Mt across three identified zones associated with theMML, and the MML HW. The Mineral Resources stated below have been determined in accordancewith the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves The JORC Code, 2012 Edition ("JORC"), and are reported at a cutoff grade of 0.30 % V2O5 and to avertical depth of 120 m below surface. The MML, comprising two intervals as described above, has aMineral Resource of 63 Mt with average in situ V2O5 and Fe grades of 1.32 % and 40 % respectively.This comprises the two intervals (MAG3 and MAG4) which have a total Mineral Resource of 52 Mt withaverage grades of 1.48 % V2O5 and 45 % Fe; in addition to the lower grade parting which has aMineral Resource of 11 Mt at an average grade of 0.58 % V2O5 and 21 % Fe. The Mineral Resource isclassified as an Indicated Mineral Resource and is summarized in Table 1 below.

Table 1: MML Mineral Resource Estimate

LayerName

MineralResourceCategory

Width(m)

Tonnes(Mt1)

Density(t/m3)

V2O5(%)

Fe (%) Fe2O3(%)

TiO2(%)

MAG3 Indicated 4.09 27.5 4.08 1.50 45.5 65.1 10.0

PART Indicated 2.16 11.4 3.16 0.58 20.9 29.9 3.5

MAG4 Indicated 3.59 24.3 4.00 1.46 43.9 62.7 9.3

Total Indicated 9.84 63.2 3.85 1.32 40.4 57.8 8.6

The MMLHW is subdivided into fourteen continuous layers defined by geological logging and VTMcontent, consisting of alternating layers of relatively highgrade semimassive to massive VTM, lower



grade gabbronorite and barren anorthosite. These fourteen layers of the MML HW package areconformable with the MML and have a combined average true thickness of approximately 72 m. TheMMLHW Mineral Resource is 222 Mt and has average in situ grades of 0.50 % V2O5 and 19.8 % Fe. Itis classified as an Inferred Mineral Resource and is summarized in Table 2 below.

Table 2: MML Hanging Wall Mineral Resource Estimate

MineralResourceCategory

Width(m)

Tonnes(Mt1)

Density(t/m3)

V2O5(%)

Fe (%) Fe2O3(%)

TiO2(%)

Total Inferred 36.77 221.5 3.21 0.50 19.8 28.3 4.4

The MMLHW Mineral Resource forms part of the Project and it is expected that the MMLHW will becoextracted with the MML. MMLHW material will be stripped and stockpiled for future processingbecause the grades are generally lower relative to the MML.

A Mineral Resource Estimate was undertaken on the AB Zone during 2015, which defined a 12.5 MtInferred Mineral Resource in accordance with JORC. Davis Tube Tests ("DTT") were undertaken onthe samples from this Mineral Resource and showed concentrate grades of between 2.01 % and 2.65

% V2O5 with limited variability, an average concentrate grade of 2.21 % V2O5 and vanadiumrecoveries of up 97.82 %. However, this Mineral Resource, shown in Table 3 below, does not form partof the scope of the Project PFS.

Table 3: AB Zone Mineral Resource Estimate

Mineral ResourceCategory

Width(m)

Tonnes(Mt)

Density(t/m3)

V2O5(%)

Fe2O3(%)

TiO2(%)

Total Inferred 9.30 12.5 3.18 0.70 27.9 4.2

ORE RESERVE ESTIMATE

The Ore Reserves stated below have been determined in accordance with the Australasian Code forReporting of Exploration Results, Mineral Resources and Ore Reserves The JORC Code, 2012Edition ("JORC").

A Probable Ore Reserve of 28.56 Mt was determined for the Project. The Ore Reserve will be depletedat a rate of 952,000 tpa over a period of 30 years. In determining the Ore Reserve, WorleyParsonsRSAmodelled a two pit mine configuration using the same openpit mining method and fleet of miningequipment. The pits will be mined to a maximum depth of 80 m below original ground level with anoverall highwall slope angle of 55°. Three zones of mineralisation, (Zone A, Zone B and Zone C), whichoccur in the hanging wall above the MML, have been identified as having potential economicmineralisation and will be stored separately on the Low Grade and Lower Grade Stockpile for possiblefuture treatment. An allowance was made for dilution of 5 % with low grade mineralisation and a 5 %loss of MML material to the stockpiles. The production rate required is readily achievable and shouldallow for an accurate separation of the two MML intervals from the low grade hanging wallmineralisation and the MML parting. A ramp excavated from the high wall will provide access to theworking faces in the pits. Mining contractors will be employed as the mining practitioners and miningoperations will take place from Monday to Friday on a 24 hour three shift per day cycle. The OreReserve is summarised in Table 4 below.

Table 4: Probable Ore Reserves

Orebody True Thickness(m) SG (t/m³) Tonnes (million) V₂O₅ (%)

MML Upper, MAG 3 4.09 4.08 15,342 1.425

MML Lower, MAG 4 3.59 4.00 13,154 1.387

*Total/Average 7.68 4.04 28,496 1.41

MINING

Prior to the commencement of mining of the MML, bush clearing, topsoil and/or black turf removal andstorage, and nonMML and waste removal and storage will be required.

The MML ore will be mined in two pits, each following the dip of the MML (i.e. approximately 18º), onelocated to the north of the provincial road and one to the south. Each pit will utilise an access rampexcavated from the high wall (on the west) mined down at an angle of 8º to intersect the upper contactof the MML. Once the MML is intersected, mining will follow it along strike on a level gradient to create



an open pit width of approximately 30 m. This open pit will then advance via working faces to the northand south utilising the central, common ramp.

It was assumed for the purposes of this PFS that a specialised mining contractor will be appointed toundertake the excavation of the pit and the mining and transportation of the ore. Budget prices for thismining were procured from contractors who have knowledge of the area and have experience in themining conditions expected. The proposed mining method is within acceptable practices in SouthAfrica.

The Ore Reserves will be depleted at a rate of 952,000 tpa with an allowance of an additional 5 % ofnonMML included in the material delivered to the plant. At this rate the LoM is expected to be justunder 30 years. The mining study was completed to an accuracy of ± 20 %.

MINERAL PROCESSING

Metallurgical test work activities were carried out prior to the commencement of the PFS. The results ofthese previous test work activities were used to determine various process parameters in the currentplant design and are summarised in the PFS Report for reference. No further metallurgical test workhas been carried out during the PFS.

The following processing method was adopted for the Project:

Vanadiumbearing RoM is received from mining operations in the concentrator circuit. The RoMproceeds through three stages of crushing before being milled to the required particle size. A magneticseparation process is used to separate the vanadiumcontaining magnetic fraction from the nonmagnetic waste material, thereby producing a more concentrated, higher metal value concentrate. Thewaste material slurry is pumped to a tailings facility while the concentrate is filtered, stockpiled and thentransferred to the salt roast plant for further processing for recovery of the final vanadium product.

The salt roast process is the vanadium industry standard for processing titanomagnetite ores from theBushveld Complex in South Africa, having been proven on a commercial scale by existing facilities overmany decades of operation. The salt roast plant receives concentrate from the concentrator circuit andproduces V2O5 flake (99.5 wt% purity) as the final product via the alkali salt roast process. The processinvolves roasting of the concentrate with alkali (sodium) salt, leaching of the resultant material withwater, desilication, ammonium metavanadate ("AMV") precipitation and deammoniation to produce thefinal V2O5 product.

A summary of the overall concentrator and salt roast plant design basis parameters is presented inTable 5 below.

Table 5: Recovery plant design basis summary

Parameter Unit Value

RoM to concentrator t/a 1,000,000

RoM grade wt% V2O5 1.41

Concentrator mass yield wt% 67.3

Concentrator recovery wt% V2O5 83.5

Concentrator operating hours (crushing) hours/annum 4,916

Concentrator operating hours (milling and magneticseparation) hours/annum 7,790

Concentrate production tpa 672,600

Concentrate grade wt% V2O5 1.75

Salt roast plant operating hours hours/annum 7,709

Salt roast plant recovery % 80.5

V2O5 final production tpa 9,525

V2O5 product purity wt% 99.5

The following is a summary of the testwork carried out in the previous phase of the Project, based onwhich the abovedescribed processing method was determined.

• Concentrator Negligible variability for the Mineral Resource feed grade and V2O5 recoverywas expected, based on the understanding of the Project geology. This was further confirmed bytesting of samples from various drill holes, both down dip and along strike.

Davis tube testing ("DTT") was conducted on composites of samples received from the variousdrill holes to investigate the optimum grind size for beneficiation based on vanadium grade andrecovery achieved.

With respect to product grades, results indicate that the feed material is fully liberated at the grind



of 80 % < 53 µm. Tests of specific samples showed that the product grade is not particularlysensitive to the fineness of grind between 38 µm and 212 µm. A grind size of 80 % < 75 µm wasultimately selected as a sensible lower limit for the target grind based on test results related to Feand V recovery.

The final product (concentrate) specification that was selected based on the test results is shownin Table 6 below.

Table 6: The recommended concentrate analysis

SiO2 Al2O3 CaO MgO FeT K2O MnO Na2O P2O5 TiO2 Cr2O3 V2O5

ProductSpecification 1.03 3.50 0.15 1.20 57.62 0.01 0.25 0.01 0.0023 11.91 0.39 1.75

In terms of recovery, the following equation was developed based on the test result data andused to calculate the expected product yield:

Yield = 1.8296 *FeFeed ‐ 9.0556

· Salt Roast A Timagnetite concentrate sample from the MML was provided to MINTEK (SouthAfrica) to investigate vanadium extraction characteristics based on the alkali (sodium) saltroastprocess. Roasting and leaching tests were conducted on the vanadiumbearing concentrate todetermine the extraction efficiencies based on the following varied temperature and roasting timeparameters.

Based on the test results, literature sources and industry standards the following parameters wereselected for this study:

- a hot zone roasting temperature of 1,150 °C which corresponds to industry benchmarks fora combination of sodium carbonate and sodium sulphate salt feed to the kiln;

- a hot zone roasting time of one hour which, corresponds to industry benchmark; and- a vanadium recovery of 83 % based on the sodium carbonate test results.

PROJECT INFRASTRUCTUREThe envisaged production of 9,525 tpa does not present infrastructure constraints. Moreover, theProject Area is well serviced with infrastructure, being located in a wellestablished mining district withexisting worldclass mining operations:

Service infrastructure

· Rail & Road: The envisaged V2O5 product volumes (9,525 tpa) can be transported to marketeasily either by road or rail. A wellserviced network of paved roads connects the Project Area tothe ports of Richard's Bay (South Africa) or Matola (Mozambique). A railway line with sufficientcapacity for the envisaged V2O5 production passes 45 km from the Project Area;

· Port: Options exist in the form of the Richard's Bay Terminal (KwaZulu Natal, South Africa) andthe Matola Terminal (Maputo, Mozambique), both of which are undergoing capacity expansions;

· Power: The power supply has been identified as a main Eskom line approximately 10 km from themine with the existing Eskom servitude on the public road being identified as the route for theincoming line. Back up from a minimum 5 MVA permanent on site diesel generator will be ensuredto reduce the risks associated with any potential load shedding. Moreover, power supply from thenational grid will be supplemented by 9,600 MW with the progressive commissioning of both theMedupi and Kusile power stations over the next 5 years. Power supply is therefore not considereda constraint;

· Water: It is anticipated that raw water will be provided to site via a new pipeline to be installedfrom the Flag Boshielo Dam (Olifants River). The Olifants River Water Resources DevelopmentProject plans to build a pipeline from the Flag Boshielo Dam to Mokopane to meet the domesticand industrial needs of the area. This pipeline is currently being constructed; however it isanticipated to be able to supply water by 2020. Pamish is liaising with the relevant authorities(TransCaledon Tunnel Authority ("TCTA")) to register its water requirements. Prior to 2020, duringthe Project development and commissioning it is anticipated that existing, identified ground watersources in the Project Area will provide the needed water; and

· Coal: The project is ideally located in close proximity of coalfields that produce suitable coal forfeed into the rotary kiln. It is envisaged that coal in the required volumes would be available fromnearby mines.

Mining infrastructure

In order to enable mining of Pit 1 and Pit 2, the following infrastructure will be provided:

· bulk water supply and electrical reticulation:



- bulk water is stored at the receiving area from the local bulk water suppliers; and- electricity from the Eskom Incomer yard to the concentrator, salt roast plant and bulk

material handling point of distribution;

· waste water treatment, carried out at a water treatment facility in the concentrator area;· clean and dirty water runoff channels located at strategic points in and around the mining areas at

points determined via interaction with environmental specialists;· mining contractor laydown area, including operational facilities;· requisite fencing of the mining and plant operations; and· pollution control dams including piping and pumping systems to treatment facility located within the

process plant.

Waste Infrastructure Residue Disposal Facility and Stockpiles

Residue disposal facility ("RDF") and Stockpile facilities have been allocated in line with existingenvironmental legislation for classified waste. The RDF comprises the tailings from the magneticseparation ("Magsep") process and includes:

· a Class C lined Tailings Storage Facility ("TSF").· a concrete Return Water Sump ("RWS"); and· a Class C lined Storm Water Dam ("SWD").

The waste assessment norms and standards are articulated in government regulations according toconcentration thresholds of particular elements or chemical substances found within the waste.

The calcine, lime cake and sodium sulphate RDF, known as the calcine RDF, comprises:

· a threephased Class A lined Dry Stack Facility. A Class A liner is a legal requirement for all Type1 Waste (i.e. the calcine and lime cake and sodium sulphate). It is a "double" liner systemcomprising of two layers of clay, and two HDPE geomembranes, all underlain by a leakagedetection system. Type 1 wastes are classified as products of chemical substance of above LCT2but below or equal to LCT3 limits; or above TCT 1 and below or equal to TCT2 levels;

· a concrete RWS; and· a Class A lined SWD.

The Environmental Impact Assessment ("EIA") for Pamish has been conducted and has presentedguidelines for all of the Pamish tailings and stockpile infrastructure. This includes both the Low andLower Grade stockpiles and the Magsep RDF.

The EIA for SaltCo has still to be conducted. This EIA will address all of the associated tailings forSaltCo, (i.e. the calcine, lime cake and sodium sulphate RDF).

ENVIRONMENTAL ASPECTS

The Project site is surrounded by several communities and farmers who could potentially be impactedthrough the development of the Project.

Pamish is in the process of obtaining the necessary environmental authorisations and aims to complywith all relevant legal requirements. In terms of the requirements of the Mineral and PetroleumResources Development Act, 2002 as amended (Act No. 28 of 2002) ("MPRDA"), an application for aMining Right ("MRA") was submitted in March 2015, to the DMR for the Project through the SouthAfrican Mineral Resource Administration System ("SAMRAD") online portal under Reference LP30/5/1/1/2/10102 MR; Key tasks that need to be completed to secure the Mining Right include thefollowing:

· EIA and Environmental Management Plan ("EMP") in accordance with the MPRDA in support ofthe MRA and environmental authorisation in accordance with the National EnvironmentalManagement Act, 1998 (Act No. 107 of 1998) ("NEMA");

· Public Participation Process in accordance with the EIA 2014 Regulations (GN R982 published inGovernment Gazette 38282 of 4 December 2014);

· Specialist investigations in support of the EIA Report and EMP;· Integrated Water Use Licence Application ("IWULA") in compliance with the National Water Act,

1998 (Act No. 36 of 1998) ("NWA");· Approval from the South African Heritage Resources Development Agency ("SAHRA") in terms of

the National Heritage Resource Act, 1999 (Act No. 25 of 1999) ("NHRA"); and· Waste Management Licence ("WML") in compliance with the National Environmental

Management: Waste Act, 2008 (Act No. 59 of 2008) ("NEM:WA").

The purpose of the EIA process is to ensure that potential environmental and social impacts associatedwith construction, operation and closure of a project are identified, assessed and appropriatelymanaged. There are two primary phases of an EIA process, namely the scoping phase and the impactassessment phase. Identification of potential impacts occurs during the scoping phase, whilst theassessment and mitigation of those impacts occurs during the impact assessment phase. Both phaseshave been completed and are awaiting approval by the regulatory authorities. These have includednumerous specialist studies that were undertaken as part of the EIA process.

A Public Participation Process was completed during which landowners, communities, traditionalstructures and other Interested and Affected Parties ("I&Aps") were consulted.



Key environmental authorisations to be completed for the proposed salt roast plant are not material tothe mining right application. They have been identified and include:

· environmental authorisation for Listed Activities as per NEMA EIA 2014 Regulations;· WML in compliance with the National Environmental Management Waste Act 1998 (Act No. 59 of

2008) ("NEM:WA");· an Atmospheric Emissions Licence ("AEL") application and authorisation from the Waterberg

District Municipality as per the requirements of the National Environmental Management: AirQuality Act, 2004 (Act No. 39 of 2004) ("NEM:AQA"); and

· Water Use Licence Application ("WULA") in compliance with the National Water Act, 1998 (Act No.36 of 1998) ("NWA").

VANADIUM MARKETProperties and uses of VanadiumVanadium is a grey, soft, ductile high value metal whose main application is in the steel industry whereit lends its high strengthtoweight characteristics, corrosion resistance, weldability and fabricability.Other uses include application in vanadiumcontaining titanium alloys, and various chemical uses, themost significant of which is its use in utility scale energy storage battery systems.

ConsumptionVanadium consumption is concentrated, with the steel sector accounting for about 90 % of globalvanadium consumption. Growing intensity of use of vanadium in steel has seen vanadium consumptiongrow at a compound annual growth rate ("CAGR") of 7.4 % compared to a 3.6 % CAGR growth in steelproduction, and is expected to continue being a significant driver of vanadium consumption growth intothe future, especially in China which at 46 % of global vanadium consumption, is the largest vanadiumconsumer in the World. Key to this growing intensity of use of vanadium is greater enforcement oflegislation seeking to phase out the use of lower strength steel and replace it with higher strength steel(i.e., Grade III rebar).

The growing energy storage market could also present a step change opportunity for vanadiumdemand outlook through vanadiumbased, utilityscale vanadium redox flow battery ("VRFB")technology. This could see vanadium consumption in the chemicals sector, as vanadium electrolyte,grow from the low levels of approximately 3.5 % (2014). The energy storage market is expected to topUS$ 300 billion by 2030, according to various market forecast reports, with vanadiumbased energystorage systems estimated to capture a significant share of this market. VRFB's possess scalability,quick recharge rate and nearly unlimited ability to recharge without performance degradation; aspectswhich are touted as making them attractive in utilityscale applications. The industry estimates that thesuccessful commercialisation of VRFBs could provide a market for up to 10,000 tpa of vanadiumpentoxide.

SupplyVanadium supply is also concentrated both geographically and in terms of type of production.Approximately 80 % to90 % of the global supply of vanadium is from three countries, namely China (53 %), South Africa (20%) and Russia(17 %). The majority of the vanadium produced (approximately 64 %) is from vanadium slag producedas a coproduct in smelting vanadiumbearing magnetite iron ores (coproducers) during the steelproduction process. The slag is further processed via a roastleach process in countries withferrovanadium conversion facilities (e.g. in Czech Republic, South Korea and Japan). A significantamount of vanadium (approximately 20 %) is produced directly from vanadiumbearing magnetite oreswith sufficiently high vanadium grades (primary producers), mostly located in South Africa, via a roastleach process. About 12 % of global vanadium supply is produced from secondary sources.

Vanadium supply from steel plant coproducers, however, is threatened by a combination of theconstrained economics of the Chinese coproducer steel mills, driven by high cost low grade iron orefeedstock and a low steel price environment. The availability of cheap higher quality seabornehaematite iron ore presents opportunities for steel plant coproducers, especially the coastal plants, toreplace high cost captive vanadiumbearing iron ore, thus reducing availability of vanadium slag.

Market balanceThe demand and supply of vanadium have largely been in balance in 2014/15. Lower vanadiumconsumption that could be expected from negative steel production growth in China, is offset by aproportionately larger decrease in vanadium slag feedstock supply from coproducer steel productionand a still growing intensity of use of vanadium in produced steel. This could have the effect of drivingthe market towards a vanadium supply deficit, reducing, or eliminating excess vanadium inventoriesand returning fundamentals to drive vanadium prices going forward, the most significant of which is thecash cost of production.

Cash costsRoskill estimates costs for V2O5 of US$ 3.50/lb, US$ 4.50/lb and US$ 6.00/lb for coproduct, primaryvanadium and secondary vanadium production respectively. Roskill further forecasts that, based oncurrent consumption level, the cash cost of the least economic units necessary to meet demand isroughly US$ 6.00/lb V2O5 (US$ 13/kg V2O5 or US$ 23/kgV).

PricesRoskill estimates that a recovery in FeV prices to about US$ 21 to US$ 24/kgV is likely by 2017 (FeV



prices quoted as US$ per kilogram of vanadium). Over the longer term, this price level is expected tooffer insufficient incentive to encourage the development of new supply or increases in secondaryoutput. Assuming ongoing growth in demand, a further recovery (in real terms) to about US$ 24/kgV toUS$ 27/kgV could be expected. In nominal terms, the effects of inflation and an eventual recovery inenergy prices will likely lead to higher vanadium prices.

A price of US$ 7.50/lb (US$ 16.53/kg) for V2O5 flakes at >98 % purity is assumed for the Project. Thisapproximates the 10 year historical average of US$ 7.63/lb (Jun 2005 May 2015), and isapproximately 17 % higher than the 15 year historical average of US$ 6.39/lb (Jun 2000 May 2015).

CAPITAL AND OPERATING COST ESTIMATES

The accuracy of the capital and operating expenditure ('capex' and 'opex', respectively) presented inthe PreFeasibility Study are considered to be within a PFSlevel of accuracy of ±25% unless otherwisestated.

The economic analysis for the Project was completed for a 1,000 ktpa RoM and concentrator plantcapacity which is equivalent to a production of 673 ktpa of vanadiumcontaining magnetite concentrate,which in turn is fed into a salt roast plant to produce 9,525 tpa of vanadium pentoxide (V2O5) flakes(99.5 % contained V2O5). The business case metrics are set out in Table 7 below.

Table 7: Business case metrics

RoM Beneficiation Concentrate Plant

Beneficiated Product Concentrate Salt Roast Plant

RoM Ore(ktpa)

Fe(%)

V2O5(%)

MassYield(%)

V2O5Recovery

(%)

TreatmentPlant Feed

(kt)

ConcGrade

V2O5 (%)

V2O5Recovery

(%)

V2O5Produced(ktpa)

1,000 42 1.41 67.26 83.50 672.33 1.75 80.52 9.53

The Project will be developed under a "two operating company model". The Mine/Concentrator will beowned by Pamish, the company which is the current holder of the Prospecting Rights for the Projectand which has submitted the Mining Right Application to the Department of Mineral Resources (DMR).The Salt Roast Plant will be owned by a company still to be formed (SaltCo), a subsidiary of BushveldMinerals. The results presented herein are on a consolidated basis for the two companies.

The summary of Project establishment capital expenditure is set out in Table 8 below.

Table 8: Capital expenditure schedule includes contingencies

Total (US$'M)

Studies 7.73

Mining 3.67

Beneficiation & Owners Cost 222.14

Onsite Infrastructure 27.61

Bulk Services 3.89

Corporate 0.66

Environmental 0.60

Waste & Rock Dumps 31.81

Total Establishment Capex 298.11

A summary of operating cost metrics is set out in the Table 9 below. The US$ cost per pound of V2O5compares favourably to the Project's industry peers.

Table 9: Salient cash operating metrics of the Project

Metric Total Working Cost Makeup for V2O5 for 2022

Makeup Costs per lb V2O5

Units Results Units ResultsMining Cash Cost (including Royalty) US$ million 13.31 US$/lb 0.63

Concentrate Cash Cost US$ million 9.54 US$/lb 0.45

SRP Cash Cost US$ million 33.69 US$/lb 1.60

Overheads & Logistics Cash Cost US$ million 12.29 US$/lb 0.58

Total US$/lb 3.28Note: SRP Salt Roast Plant

A long term Rand/US$ exchange rate has been set at ZAR 12.75.



FINANCIAL ANALYSIS

The results of the financial evaluation of the Project show attractive economics for the base case of 1.0Mtpa RoM, producing a 672,000 tpa of V2O5 concentrate which is in turn processed in a salt roast plantto produce 9,525 tpa V2O5. The base case produces a pretax NPV9.0 and IRR of US$ 418.0 millionand 24.8 % respectively. The posttax NPV9.0 and IRR, based on a simple application of a corporatetax rate (28 %) are US$ 295.3 million and 20.36 % respectively. These results are summarised in Table10 below.

Table 10: Base Case Financial Evaluation Results Summary

Bushveld Vanadium Project Salt Roast 1 Mtpa RoM Scenario

Item Unit Value

Production

Mineral Resource Mt 300Ore Reserve Mt 28Life of Mine Years 30V2O5 Production tpa 9,525

Macroeconomics

V2O5 priceUS$/kg V2O5 16.53US$/lb V2O5 7.50

Long Term Exchange Rate ZAR/US$ 12.75

Project Economics

Capital CostsInitial capital US$ million real 298

Sustaining capitalLoM US$ real 121

% p.a. (of initial capitalexpenditure) 1.3

Operating CostsUS$ million LoM real 1,369US$ /t V2O5 flakes 7,223US$ /lb V2O5 flakes 3.28

Gross Revenue LoM US$ million real 4,720Royalty LoM US$ million real 96.86Net Revenue LoM US$ million real 4,623Unleveraged Cash flow LoM US$ million real 1,476

EBITDA Margin (Avg p.a. steadystate after royalties)

% 52.59LoM US$ million real 86.2

PreTax PostTaxNPV @ 7 % real US$ million 587.2 377.3NPV @ 9 % real US$ million 418.0 259.3IRR real % 24.8 20.4Effective Equity return (assuming50 % Debt : Equity ratio) % 45.60 36.70

Payback from commencement ofproduction ramp up Years 4

A long term term Rand/US$ exchange rate of ZAR 12.75 was used. A Rand/US$ exchange rate of ZAR14.03 to the US$ (10 % weaker than the assumed long term rate of ZAR 12.75/US$ and approximatelyequal to the rate on the effective date of this report), increases the real NPV to US$ 463.7 million andthe real IRR to 27.1 % on a pretax basis and US$ 292.1 million and 22.2 % on a posttax basis.

Once the Project is fully operational and a discount rate more commensurate with an operationalweighted average cost of capital ("WACC") is applied, significant NPV will be added to theshareholders of the Project (at a real discount rate of 6% the NPV of the Project is US$ 698.4 million ona pretax basis and US$ 454.8 million on a posttax basis.

A sensitivity analysis was undertaken to test the robustness of the project and the results thereof areshown in Table 11 below for the parameters with the most impact.

Table 11: Sensitivities of the Consolidated Project Pretax NPV (Real US$ million) to changes inkey metrics

Total Capex Working Costs ZAR/US$ Discount Rate V2O5 Flake Price



Exchange Rate

%NPVUS$

million%

NPVUS$

million%

NPVUS$

million%

NPVUS$

million%

NPVUS$

million

10 393.8 10 315.7 10 362.3 12 252.4 10 298.75 405.9 5 366.8 5 391.6 10 353.4 5 358.4

Base (US$298 million) 418.0

Base (US$3.28/lbV2O5)

418.0 Base (ZAR12.75) 418.0 Base

(9 %) 418.0

Base(US$7.50/lbV2O5)

418.0

5 430.2 5 469.2 5 441.9 8 495.0 5 477.7

10 442.3 10 520.4 10 463.7 7 587.2 10 537.4

15 454.4 15 571.6 15 483.5 6 698.4 15 597.1

This information is provided by RNSThe company news service from the London Stock Exchange

END MSCFMGGZRFRGVZM

rns number : 0147o bushveld minerals limited 04 february 2016

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