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(Alliance News) - Bushveld Minerals Ltd shares surged on Monday after it entered a binding term sheet with Southern Point Resources GP1 (Pty) Ltd, in large part to fund ongoing expansion at its Vanchem plant.
The stock was up 16% at 2.34 pence in London on Monday morning.
The South Africa-focused iron ore and tin explorer and developer, based in Johannesburg, said the cumulative proposed investment will reach between USD69.5 million and USD77.5 million.
Chief Executive Officer Craig Coltman said the "comprehensive" deal "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".
Bushveld said the key terms include an interim working capital facility, totalling approximately USD8.1 million or ZAR150 million, secured against production at the Vanchem vanadium plant in Mpumalanga Province. It said this will provide additional working capital to fund the ongoing expansion of production there.
The agreement also proposes that SPR purchases, for around USD25 million, a 50% stake in the Bushveld subsidiary that owns Vanchem, and Bushveld's 64% equity interest in the subsidiary that owns its Mokopane vanadium project west of Polokwane. SPR may later invest between USD7 million and USD10 million in Vanchem for the recommissioning of Kiln-1.
Southern Point will be appointed to carry out all marketing and sales on Bushveld's behalf over the next three years, and will provide an approximate USD25 to 30 million medium-term trade finance working capital facility.
Finally, Southern Point will subscribe for up to USD12.5 million in Bushveld shares, or up to 29.9% of the company's issued share capital.
Bushveld also noted SPR's interest in Highveld Robust Steel, which is in the final stages of acquiring the Highveld Steel complex. This could allow for slag to be supplied to Vanchem for processing at "much lower and more efficient costs".
"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 of slag with high vanadium content from the Highveld facility," Coltman explained.
By Emma Curzon, Alliance News reporter
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