REG - Bushveld Minerals Ld - Investment by Southern Point Resources

Bushveld MineralsAnnouncement

11/09/2023 07:00

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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

 Bushveld Minerals Limited                                                          +27 (0) 11 268 6555
 Craig Coltman, Chief Executive Officer
 Tanya Chikanza, Finance Director
 Chika Edeh, Head of Investor Relations

 SP Angel Corporate Finance LLP                     Nominated Adviser & Broker      +44 (0) 20 3470 0470
 Richard Morrison / Charlie Bouverat
 Grant Baker / Richard Parlons

 RBC Capital Markets                                Joint Broker                    +44 (0) 20 7653 4000
 Sahil Suleman / Jamil Miah

 Tavistock                                          Financial PR
 Gareth Tredway / Tara Vivian-Neal/ James Whitaker                                  +44 (0) 207 920 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 (http://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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