TIDMBMN
RNS Number : 9925L
Bushveld Minerals Limited
11 September 2023
Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have
been deemed inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 until the release of this
announcement
11 September 2023
Bushveld Minerals Limited
("Bushveld Minerals" "Bushveld", the "Company" or the
"Group")
Investment by Southern Point Resources
Bushveld Minerals Limited (AIM: BMN), the integrated primary
vanadium producer and energy storage solutions provider, is pleased
to announce that it has entered into a binding term sheet with the
investment fund SPR GP1 (Pty) Limited ("Southern Point Resources"
or "SPR").
The binding term sheet describes the in-principle agreements
between SPR and the Group and the key provisions to be contained in
the comprehensive legal agreements to be entered into. The proposed
package of inter-conditional transactions, if concluded
successfully, would provide (i) immediate working capital, (ii) the
opportunity to retire (either entirely or partially) certain
existing financing instruments, (iii) an equity investment from SPR
into Bushveld Minerals, (iv) a marketing and working capital
solution to replace the Group's existing arrangements as and when
they expire over the coming 5-17 months and (vi) the opportunity to
recommission Vanchem's Kiln-1.
Highlights
The key terms of the cumulative proposed investment of
US$69.5-US$77.5 million are as follows:
-- An interim working capital facility secured against
production at the Vanchem plant designed to provide Bushveld with
additional working capital to fund the ongoing expansion of
production at Vanchem whilst the transactions contemplated below
are underway, totalling ZAR150 million (US$8.1 million).
-- The proposed purchase by SPR of 50% of the shares in
Bushveld's subsidiary that owns its Vanchem vanadium plant, and its
64% equity interest in its subsidiary that owns its Mokopane
project, for a total of US$25 million.
-- An equity investment by Southern Point Resources of US$12.5
million into the Company, at the same equity price as Orion Mine
Finance ("Orion").
-- A new marketing and sales arrangement under which SPR will be
appointed to carry out all marketing and sales of product for
Bushveld. In line with this arrangement, SPR will provide a
medium-term trade finance working capital facility to the Company,
totalling US$25-30 million.
o Some existing marketing arrangements expire at the end of
December 2023. To accommodate frame agreements now being entered
into for 2024, the parties have agreed that the existing marketing
arrangements will be extended to the end of December 2024.
-- A potential future commitment by SPR of an investment of
US$7-10 million in Vanchem for the recommissioning of Kiln -1.
Rationale
-- Providing near term additional working capital for the
Company at a time when production inputs have risen significantly
in light of the increased production at Vanchem which will take
time to translate into increased cash flows.
-- Sufficient overall funding to enable Bushveld to strengthen
its balance sheet by reducing gearing and generating free cashflow
to fund its operations on a sustainable basis.
-- Vanchem will be managed by Bushveld Minerals with the support
of SPR.
-- SPR has committed to invest between US$7-10 million in
Vanchem for the recommissioning of Kiln-1 to increase output and
reduce overall unit costs, providing a pathway for the Group to
further increase production beyond the base case and would
therefore be value accretive.
-- SPR also holds an interest in Highveld Robust Steel, a
company that is in the final stages of acquiring and planning the
resuscitation of the Highveld Steel complex, which would provide
significant synergistic benefits for both SPR and Vanchem. SPR
envisages supplying vanadium-rich slag to Vanchem for processing at
much lower and more efficient costs and higher outputs compared to
run of the mine ore. Bushveld would share in the benefit of such
optimisation.
-- SPR is also undertaking to develop Mokopane in the near term,
reducing the Company's feedstock risk and input costs via an
irrevocable life of mine supply agreement.
Key terms of the proposed transactions
1) Interim working capital facility of ZAR150 million ( US$8.1 million).
o Available immediately once the following funding conditions
have been met - (1) primarily consent from existing Bushveld
funders, and (2) consent from existing offtakers.
o The interim working capital facility is scheduled to mature on
implementation of the other transactions referred to in paragraphs
2, 3 and 4 below, or the first anniversary of financial close.
o On maturity, the facility will be offset against the amounts
payable by SPR in respect of the transactions referred to in
paragraphs 2, 3 and 4 below.
2) Sale of 50% of Bushveld's stake in Vanchem and sale of
Bushveld's 64% stake in Mokopane to SPR for total of US$25 million,
payable as follows:
o US$12.5 million on closing of the 50% Vanchem sale.
o US$10 million on maturity of the ZAR150 million (US$8.1
million) interim working capital facility.
o US$2.5 million on a contingent basis if the Mokopane sale
closes within one year of the conditions precedent to completion
having been met.
o The proceeds from the sale of Vanchem and Mokopane will be
utilised to reduce existing debt and strengthen the Company's
balance sheet.
3) New equity investment by SPR in Bushveld Minerals Limited for
an amount up to US$12.5 million:
o The subscription price per share agreed with Orion in relation
to its conversion of the restructured convertible loan note (as
announced by Bushveld on 5 May 2023), or if lower, the price per
share agreed with Orion after the date of this term sheet in
relation to its future conversion of the restructured convertible
loan note.
o The number of shares to be subscribed for shall not be more
than 29.9% of Bushveld ordinary shares of 1 pence each in
issue.
o SPR will be entitled to nominate one non-executive director to
the Bushveld board.
4) Three-year Marketing and sales appointment of SPR (extendable
by a further three years at SPR's discretion) with provisional
working capital facility of US$25-30 million, to replace existing
marketing and sales arrangements as and when they expire over the
coming 5-17 months.
5) Potential future investment into Vanchem by SPR of US$7-10
million in the form of equity, debt or a quasi-debt instrument for
the recommissioning of Kiln-1 to increase output, subject to
feasibility studies.
Conference call
Bushveld Minerals Finance Director, Tanya Chikanza, will host a
conference call at 9:00 am UK time (10:00 am SAST) today to discuss
the announcement. Participants may join the call by dialling:
Tel: United Kingdom: +44 (0) 330 551 0200; South Africa: Toll
Free: 0 800 980 512, USA Local: +1 786 697 3501
Password: Quote Bushveld Minerals - Conference call when
prompted by the operator.
A replay of the conference call will be available on the
Company's website post the call.
Craig Coltman, Chief Executive Officer, commented: "I am pleased
to announce this comprehensive transaction which will place the
Company in a much stronger financial position once complete - by
providing necessary near term working capital, reducing overall
debt and assisting the business in meeting its short to longer term
capital expenditure and optimisation requirements.
Introducing a partner at Vanchem provides a pathway for the
Group to increase production beyond the base case and would be
value accretive, with synergies arising from Vanchem being able to
access a steady supply slag with high vanadium content from the
Highveld facility. Finally, going back to the Orion Convertible
Loan Note restructuring, we continue to work towards closing the
transaction before the November due date."
Southern Point Resources commented: "Southern Point is proud to
announce this series of collaborative transactions which will
enable Bushveld to restructure their current balance sheet and
allow all stakeholders to unlock significant benefit from a unique
set of underlying assets which have much potential. This is
especially interesting considering Vanadium's critical role in the
global drive toward carbon reduction and the energy transition. SPR
is looking forward to being a significant participant in Bushveld's
future success."
Conditions Precedent to completion
The transactions referred to in paragraphs 2, 3, 4 and 5 under
"Key terms of the proposed transaction" above are conditional upon,
inter alia:
-- The funding conditions referred to in paragraph 1 under "Key
terms of the proposed transaction" have been met.
-- The parties having concluded detailed legal agreements
documenting the various transactions set out in the term sheet.
-- To the extent applicable, obtaining shareholder approval for
the transactions.
-- All requisite regulatory and other third party approvals
having been obtained (including, but not limited to, South African
exchange control approval and any approvals required pursuant to
the Competition Act, 1998).
-- SPR having conducted a confirmatory legal due diligence
investigation.
Financial Information on Vanchem and Mokopane
Bushveld Vanchem Proprietary Limited, a company incorporated in
South Africa, being the entity that owns and operates the vanadium
processing facility in Emalahleni ("Vanchem") reported a loss
before tax of US$42.1 million and revenue of US$36.9 million in the
year ended 31 December 2022. The book value of Vanchem in the
Company's accounts was US$62.2 million as at 31 December 2022. The
proposed disposal of a 50% interest is estimated to result in a
book value loss of US$9.8 million.
Pamish Investments No 39 Proprietary Limited, a company
incorporated in South Africa, covering the Mokopane vanadium
exploration project reported a loss before tax of US$372 and nil
revenue in the year ended 31 December 2022. The book value of
Mokopane in the Company's accounts was US$53.5 million as at 31
December 2022. The proposed disposal of the Company's interest in
Mokopane is estimated to result in a book value loss of US$49.8
million.
ENDS
Enquiries: info@bushveldminerals.com
+27 (0) 11 268
Bushveld Minerals Limited 6555
Craig Coltman, Chief Executive
Officer
Tanya Chikanza, Finance Director
Chika Edeh, Head of Investor Relations
Nominated Adviser +44 (0) 20 3470
SP Angel Corporate Finance LLP & Broker 0470
Richard Morrison / Charlie Bouverat
Grant Baker / Richard Parlons
+44 (0) 20 7653
RBC Capital Markets Joint Broker 4000
Sahil Suleman / Jamil Miah
Tavistock Financial PR
Gareth Tredway / Tara Vivian-Neal/ +44 (0) 207 920
James Whitaker 3150
ABOUT BUSHVELD MINERALS LIMITED
Bushveld Minerals is a low-cost, vertically integrated primary
vanadium producer. It is one of only three operating primary
vanadium producers, owning 2 of the world's 4 operating primary
vanadium processing facilities. In 2022, the Company produced more
than 3,800 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.
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
Vanadium Redox Flow Batteries ("VRFBs").
Detailed information on the Company and progress to date can be
accessed on the website www.bushveldminerals.com
About Vanchem
Vanchem is a primary vanadium-processing facility. It produces
vanadium pentoxide, ferrovanadium and vanadium chemicals, and is
capable of producing vanadium trioxide.
About Mokopane
The Mokopane project is one of the world's largest primary
vanadium resources, with an average grade of 1.80 percent V(2) O(5)
in-magnetite.
ABOUT Southern Point Resources
Southern Point Resources is a South African born focussed
investment fund founded by South African mining entrepreneurs and
mining finance specialists with extensive sector credentials. SPR
leverages financial and operational synergies with associated group
companies which generate in excess of US$500 million of revenue and
US$175 million of EBITDA on a combined basis. Its principals
combine a strong technical and operational skills base with an
extensive deal-making and financing track record, operating a group
of companies across large scale mining, beneficiation, contract
mining, engineering and logistics. The most notable associated
asset is South Africa's 6(th) largest thermal coal mining and
trading company which owns and operates seven coal mines producing,
trading, and selling over 10 million tons of coal per annum.
Additionally, SPR has executed in excess of US$600 million of
mining and mining finance transactions between our principals. This
associated asset and skills base combined with extensive financial
and execution capacity makes SPR well placed to execute selected
transactions in the Sub-Saharan Africa resources sector.
Given South Africa's strategic endowment of steelmaking inputs
and alloying materials reserves, SPR's principals' drive to
diversify from carbon materials into green metals, and the
groundswell transition in energy value chains and technologies, SPR
is focussed on highly value accretive equity and financing
transactions in the steelmaking inputs and future, and transition
metals sub-sectors.
More than 70% of the world's known Vanadium resources are
located in South Africa, vanadium is a critical steelmaking input
and also a very promising emergent battery metal. Bushveld owns two
of the world's four operating primary vanadium assets, a globally
significant resource base, making the transaction highly strategic
for SPR and very much in line with our fund's investment
approach.
SPR represents a well-capitalised Sub-Saharan Africa centric
mining investment fund with in-depth local mining expertise,
experience, and capability. SPR adds value beyond pure financial
investment by actively managing its underlying investments.
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END
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