Bushveld Minerals (BMN) share price: AIM’s best mining opportunity?
Vanadium miner, Bushveld Minerals (BMN), has seen a meteoric rise since 2016 but has struggled year to date. With five analyst buys and no sells, is it time to buy?
Bushveld Minerals (BMN) is a dedicated vanadium producer which trades on the FTSE Alternative Investment Market (AIM). Vanadium is a hard yet malleable transition metal which is used in gears, jet engines, axles and crankshafts. Vanadium pentoxide can also be used in ceramics, while vanadium-gallium tape is widely used in superconducting magnets.
It is so strong that by adding just two pounds of vanadium to one tonne of steel, it doubles its strength. As a result, the vast majority of the world’s vanadium is used to create toughened steel alloys.
Vanadium is one of the most-used metals on earth, but it also happens to be one of the toughest to mine. It always exists within other minerals, including vanadinite, carnotite and bauxite, although it can also be found inside crude oil, coal, and oil shale. Extracting vanadium usually involves a process of smelting, roasting or leaching, before being chemically treated and solidified.
There are only a few dedicated vanadium mines in the world, and the some of the most productive mines are located in the Bushveld, in South Africa. Unsurprisingly, Bushveld Minerals’ principal operating address is in Johannesburg, just an hour and a half’s drive from the Bushveld mines.
Source: Bushveld Minerals
Bushveld Minerals has a controlling interest in four mines in the Bushveld area: Vametco, Brits, Vanchem, and Mokopane.
Bushveld Minerals: operational diversification
In 2016 the company decided to diversify its vanadium business, and created its subsidiary company Bushveld Energy – an energy storage solutions provider, which focuses on downstream elements of vanadium production. This includes the manufacturing of vanadium electrolytes, which are used to create powerful batteries that are then sold or leased to other companies.
BMN also has some minor interests in the coal business, via its wholly-owned subsidiary Lemur Holdings, as well as a controlling share in two iron and titanium mines in the Bushveld area. The firm also maintains a 9.5 per cent stake in fellow AIM member AfriTin – a mining company with a portfolio of near-production tin assets in Namibia and South Africa.
Shareholders are a mix of retail and institutional investors, as seen in the table below. The vast majority of shareholders have used a broker or investment platform to access these stocks, although fellow mining firms Acacia Resources and Yellow Dragon Holdings own a combined 12 per cent of the company stock as well. In line with AIM regulations, BMN’s directors hold a maximum of 2.89 per cent of the company stock.
|Shareholder||Number of ordinary shares||% of issued capital|
Hargreaves Landsdown Asset Mgt
|Halifax Share Dealing||114,120,004||10.19|
|Yellow Dragon Holdings||67,832,778||6.06|
|Golden Summit International||65,000,000||5.80|
|A J Bell Securities||39,681,274||
|Equiniti Financial Services||33,889,574||3.03|
|Bushveld Minerals Ltd Director & Related Holding(s||31,731,667||2.83|
Source: Bushveld Minerals
BMN’s shareholders have formed an action group called the Bushveld Perspective,1 where investors can track company reports, share prices, and research into BMN and the vanadium market.
BMN share price: a roller coaster stock
BMN was once seen as a classic slow-burning stock story. It launched on the AIM in March 2012 with an initial share price of 22.50p, but its price quickly dropped and it was six years before Bushveld could claw its way back to double digits again. Between 2014 and 2017, the stock price peaked at just 5.75p, reaching an all-time low of 1.27p in September 2016. However, a carefully managed mining expansion and the rising price of vanadium saw the stock rise by a massive 250 per cent in 2017.
By moving into vanadium electrolyte battery production and streamlining its portfolio, BMN was able to maintain this momentum throughout 2018, hitting an all-time high of 48.50p in November 2018.
However, in the year to date, the stock price has been trending downwards again, dipping to 23p in May 2019. While this may seem like bad news for investors, BMN’s fundamentals tell a different story. The company finally became profitable in May 2019, and most analysts are bullish on the stock’s future, predicting a 78 per cent increase in earnings in 2020.2
What is the outlook for Bushveld Minerals?
BMN’s outlook is obviously very dependent on the price and availability of vanadium. Market analysis3 has suggested that raw vanadium prices should reach $45 per kgV by 2020, up from the current price of $36 per kgV. The global vanadium market is expected to see a compound annual growth rate of 3.2 per cent to 20274, and Bushveld Minerals is in a good position to capitalise on this rising demand, thanks to its strong portfolio of mines. The conditional acquisition of the Vanchem mine in May 2019 should effectively double its annual vanadium output, pending a full refurbishment of the plant.
At a glance, BMN may seem like a volatile stock which comes with no shortage of risk. But savvy investors will always look beyond past performance to build their own view of the stock’s potential. The stock is currently trading at a price close to initial public offering (IPO), meaning that new investors can get some exposure to the company without paying a premium.
The fundamentals of the company appear to be solid – just seven years after it was founded, BMN is in profit, and expanding into new areas such as vanadium electrolyte batteries, and tin mining. This diversification should help to smooth the company’s stock price over the long term, reducing the risk of sudden price drops.
However, the company has been marred by accusations of short-selling and market manipulation5 over the past year, so day traders should be careful to ensure that artificial price changes do not have an undue influence on their decision.
Potential investors should instead look at the underlying issues in the company, including any plans for diversification and expansion, and external risks such as geo-political conflict, regulatory changes and global demand for vanadium.
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