Proposed conditional disposal of Vanchem

Bushveld Minerals Limited

07 May 2024

 

Market Abuse Regulation ("MAR") Disclosure

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR. 

7 May 2024

Bushveld Minerals Limited

("Bushveld Minerals", "Bushveld" or the "Company")

Corporate Update

Proposed conditional disposal of Vanchem

Increase in Working Capital Facilities

Bushveld Minerals Limited (AIM: BMN), the primary vanadium producer, announces that it has successfully secured additional funding to provide immediate working capital relief and ensure continuity of operations. The Company has entered into a binding term sheet with Southern Point Resources Fund I S.A. LP ("SPR") to conditionally sell  the entire Vanchem asset for a total consideration of up to US$40.6 million, comprising an initial consideration of US$20.6 million and a deferred consideration of between US$15 million and US$20 million (the "Disposal"). The proposed terms of the Disposal replace those announced on 20 November 2023 for the sale by Bushveld to SPR of a 50 per cent interest in Vanchem. The Disposal is conditional upon shareholder approval. 

As Bushveld Minerals requires additional funding to pay creditors and ensure that it has sufficient working capital to fund ongoing operations, SPR has also agreed to increase the funding available through the interim working capital facility secured against production at the Vanchem plant (previously announced on 11 September 2023) from c.US$8.1 million by a further US$9 million. The Company received an initial additional advance of US$3 million on 03 May 2024 (the "Initial Working Capital Facility Advance"). SPR has agreed to advance a further US$5 million on 31 May 2024 and a further US$1 million on 30 June 2024, subject to certain conditions.

Highlights

·      Bushveld Minerals has entered into a conditional binding term sheet to sell Vanchem for a total consideration of up to US$40.6 million.

·      SPR has conditionally agreed to increase the interim working capital facility secured against production at the Vanchem plant (previously announced on 11 September 2023) by c.US$9 million.

·      Bushveld Minerals received a US$3 million cash injection to pay creditors and ensure continuity of operations on 03 May 2024.  

·      In addition, SPR will advance, as a loan to Vanchem, between US$5 million and US$$8 million for working capital and essential capital expenditure.  

Background and transaction rationale

As announced in the Q1 2024 Operational and Corporate Update, the Company's working capital was extremely tight for a number of factors including (i) the continued delay in receiving funds from the equity fundraising (announced on 05 December 2023) (ii) delay in the Completion of the sale of a 50% interest in the Vanchem vanadium processing plant for US$21.3 million and the sale of a 64% interest in a subsidiary that owns the Mokopane Vanadium project for US$3.7 million, the Company announced that approval from the South African Competition Tribunal, initially anticipated for February 2024, is expected to be granted at the earliest in July 2024 (iii) production levels being materially affected (iv) notably weaker vanadium prices  (declining between 10 and 17% year to date across different markets). Accordingly, as previously disclosed to shareholders the Company was dependent on receipt of further funding to continue operations.

The Company has explored all available funding options including the further issue of equity, however as a result of the Company's share price trading below par value this was not a viable option, given the immediate need for funding.  Accordingly, the Board has determined that in order for the Company to continue as a going concern, having consulted with its key stakeholders, the only viable option to bring in immediate funds is through an increased working capital facility with SPR and to sell its remaining interest in Vanchem on the following proposed terms.

SPR debt funding

SPR has agreed to increase its interim working capital facility by a further US$9 million. The first advance of US$3 million was received on 03 May 2024. SPR has agreed to provide a further US$5 million on 31 May 2024 and a further US$1 million by 30 June 2024. The advance of the second and third payments is conditional upon certain consents (including the consent of Orion Mine Finance) and receipt of shareholder approval at a general meeting to be convened by the Company to effect the Disposal on or by 31 May 2024.

Vanchem Capital Expenditure and Creditor Funding

As at 03 May 2024, Vanchem has creditor balances of approximately US$13 million, with numerous balances being long overdue. Vanchem also requires ongoing funding for essential capital expenditure. Accordingly, SPR has agreed to advance a loan to Vanchem of between US$5 million and US$8 million for working capital and essential capital expenditure at an interest rate of 15% per annum (the "Vanchem Facility"). In the unlikely event that the Disposal does not close Bushveld will have to repay the loan plus the accrued interest.

Related Party Transactions

As a substantial shareholder in the Company as defined by the AIM Rules for Companies ("AIM Rules") the increase in the interim working capital facility with SPR and the provision of the Vanchem Facility constitute a related party transaction pursuant to AIM Rule 13 (the "Transaction"). The independent directors for the purposes of the Transaction, being the whole board, having consulted with the Company's nominated adviser, consider that the terms of the Transaction are fair and reasonable in so far as the Company's shareholders are concerned.

Proposed Terms of the Disposal

Under the terms of the conditional binding term sheet, Bushveld Minerals has agreed to sell its 100% interest in Vanchem for a total consideration of up to US$40.6 million, comprising a deferred consideration of up to US$20 million to be satisfied as follows:

Initial consideration of US$20.6 million

·      The initial consideration consists of:

o  US$8.1 million working capital facility received in September 2023;

o  An additional US$9 million working capital facility:

§ US$3m received on 03 May 2024;

§ US$5 million on 31 May 2024, subject to conditions set out below;

§ US$1 million on 30 June 2024, subject to conditions set out below;

o  A US$3.5 million payment on closing of the Disposal ("Closing Date").

Deferred consideration of between US$15 million and US$20 million

·      Following satisfaction of the conditions, and on the Closing Date, SPR shall pay Bushveld as consideration for the sale of its shares in Vanchem to SPR, 25% of the distributable free cash flow of Vanchem for the 3-years following the Closing Date ("Term" and "Deferred Consideration").

o  The Deferred Consideration shall be payable quarterly in arrears, but shall be subject to:

§ a minimum nominal payment of US$5 million per annum paid as quarterly cash payments of US$1.25 million, during the Term amounting to a total nominal cash value of US$15 million over the Term.

§  a maximum payment of US$20 million over the Term.

The transaction is conditional upon:

·      Entry into final documentation, which is progressing.

·      Bushveld shareholder approval.

·      Competition Tribunal Approval, expected at the end July 2024/ beginning of August 2024.

Disposal of the Company's remaining shares in Vanchem

The Disposal which remains subject to the completion and execution of binding documentation with SPR of the Company's remaining shares in Vanchem will constitute a related party transaction pursuant to AIM Rule 13. 

The Disposal will also constitute a fundamental change of business pursuant to AIM Rule 15 of the AIM Rules and as such will require the approval of shareholders at a general meeting to be convened by the Company. The Company has agreed to hold a shareholders meeting on or before 31 May 2024 at which a resolution for the approval of the Disposal will be proposed.  A further announcement will follow in connection with the publication of a circular containing the notice of the said general meeting. In the event that the Disposal is not approved by shareholders, the Company may need to start formal business rescue procedures.

Craig Coltman CEO of Bushveld Minerals commented:

"The extension of the working capital facility provides vital funds to continue as a going concern. The proposed sale of Vanchem will enable the Group to move forward in a more agile and lean manner and help pay down our creditors. Further details will be provided in due course but absent this funding the Company would have had no option but to apply for business rescue.

Fortunately, our turnaround at Vanchem has allowed us to achieve meaningful value for this asset which we are able to monetise over a very short space of time and focus on getting the Vametco plant and its long-life mine into an efficient, sustainable, cash-producing position."

ENDS

Enquiries: [e-mail]

Bushveld Minerals Limited		[phone]
Craig Coltman, Chief Executive Officer
Chika Edeh, Head of Investor Relations
SP Angel Corporate Finance LLP	Nominated Adviser & Joint Broker	[phone]
Richard Morrison / Charlie Bouverat
Grant Barker / Richard Parlons
Hannam & Partners	Joint Broker	[phone]
Andrew Chubb / Matt Hasson / Jay Ashfield
Tavistock	Financial PR	[phone]
Gareth Tredway / Tara Vivian-Neal / James Whitaker

ABOUT BUSHVELD MINERALS LIMITED

Bushveld Minerals is a primary vanadium producer, it is one of only three operating primary vanadium producers, with a diversified vanadium product portfolio serving the needs of the steel, energy and chemical sectors.

Detailed information on the Company and progress to date can be accessed on the website www.bushveldminerals.com

 

END