Bushveld Minerals: Robust Resource With Exploration Upside

AIM-listed Bushveld Minerals (BMN.L) is focused on developing its Mokopane iron-titanium-vanadium project in the northern limb of the Bushveld Complex in South Africa. BMN is in good company, as EVRAZ’s Highveld Steel and Vanadium is mining the same vanadiferous titano-magnetite horizon (the Main Magnetite Layer, or MML) at its Mapochs mine in the eastern limb of the Bushveld Complex. BMN has a JORC-compliant resource of 782Mt comprising 716Mt in the P-Q Zone (average grade of 32.6% Fe, 10.1% TiO2, and 0.18% V2O5 and 66Mt in the MML (average grade of 37.1% Fe, 9.2% TiO2 and 1.2% V2O5). The company’s focus is on completing a scoping study by Q213. Given that the Bushveld iron-titanium-vanadium project is at early stage of development, we have chosen a peer group EV/resource valuation methodology based on a number of Fe-Ti-V explorers and developers. BMN has a low EV/t at US$0.27/t compared with US$0.54/t for other Fe-Ti-V explorers and producers. We expect a PFS to be completed during Q114, at which time we will use the key project parameters to construct an NPV of the project.

Well-established mining district
The Bushveld Complex is a well-established mining district with infrastructure in place. BMN’s project is 45km from an existing rail line with immediate access of 1-2Mt pa, upgradable to c 5Mt pa. The project is also close to existing coal fields, which could be utilised for power and/or coking coal. Amplats operates its Mogalakwena PGM mine about 10km from BMN’s project. More importantly, the Mapochs mine, operated by Highveld Steel and Vanadium (a subsidiary of £3.7bn EVRAZ) currently processes the same vanadium-rich MML on the eastern limb of the Bushveld Complex.

Robust resource with exploration upside
Drill hole data from 5.5km of a traceable strike length of c 18km was used to define resources of 716Mt (containing 32.6% Fe) within the P-Q Zone and 66Mt (37.1% Fe) within the MML. Bushveld has an exploration target of 1Bt based on the correlation between soil samples and aeromagnetic survey results. With its defined resource already at 716mt based on c 30% of the traceable strike length, we believe BMN will be able to meet its target exploration of 1Bt.

Scoping study underway and PFS to follow
BMN’s focus is on completing a scoping study on the iron project in Q213. This will incorporate results from detailed studies on infrastructure, hydrological, mining and market analysis. Management expects a completed PFS during Q114.

Valuation: Discount to peers considering iron ore
Taking BMN’s attributable contained Fe resource of 166Mt (assuming 64% ownership) and multiplying by the peer group average of US$0.54/t gives an implied EV of US$89m, or £59m (20p per share). At a current share price of £0.12, BMN trades at a 40% discount to a valuation based on its Fe resource (20p). We will reconsider our valuation once key parameters have been defined.

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