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(Sharecast News) - Vanadium producer and energy storage developer Bushveld Minerals announced its intention to forge a substantial investment partnership with the SPR GP1 fund, also known as Southern Point Resources, on Monday.
The AIM-traded firm said the decision came on the back of a binding term sheet outlining the proposed collaborations between the two entities.
Bushveld said it would receive a substantial investment of between $69.5m and $77.5m from SPR, under certain conditions.
Immediate working capital would be provided to Bushveld through an interim facility totalling ZAR 150m ($8.1m), secured against production at the Vanchem plant.
SPR would purchase 50% of the shares in Bushveld's subsidiary that controls the Vanchem vanadium plant, and 64% equity in the subsidiary governing the Mokopane project, with a collective investment there of around $25m.
Bushveld would also receive an equity investment of roughly $12.5m from SPR, maintaining parity with the equity price as set by Orion Mine Finance.
SPR would take over the responsibility for marketing and sales of Bushveld's products, furnishing a working capital facility estimated at between $25m and $30m.
With a future investment of $7m to $10m, Bushveld said SPR was planning to reinstate Vanchem's Kiln-1, boosting production.
Looking at its rationale, Bushveld said the collaboration aimed to address the escalating production costs at the Vanchem facility, ensuring a steady cash flow.
The partnership promised ample funding that would aid Bushveld in bolstering its balance sheet, reducing debts, and consistently financing its operations.
Additionally, Vanchem's management would remain under Bushveld Minerals, but with the strategic backing of SPR.
One notable aspect of the partnership was SPR's investment in Highveld Robust Steel - a company nearing the acquisition of the Highveld Steel complex.
That tie-up, the board said, could significantly benefit both SPR and Vanchem, with potential cost-effective vanadium-rich slag processing at Vanchem in a move that would optimise output and cut costs.
Finally, SPR's commitment to Mokopane's development would help reduce the company's feedstock risk, ensuring a more stable supply agreement, which ultimately would mean reduced input costs for Bushveld.
"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," said Bushveld chief executive officer Craig Coltman.
"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."
At 1157 BST, shares in Bushveld Minerals were up 17.53% at 2.38p.
Reporting by Josh White for Sharecast.com.
