LONDON (Alliance News) - Bushveld Minerals Ltd has signed a deal with steel-maker Evraz PLC to purchase a significant stake in the the Vametco vanadium mine and plant in South Africa.
The confirmation that the pair have signed a share purchase agreement follows on from Bushveld signing an exclusivity deal to analyse the Evraz-owned project last month. Bushveld said the Vametco project has some of the highest grades and lowest costs in the world, but the project only managed to squeeze out a tiny profit last year.
The agreement, which has been signed with Evraz Group SA, will lead to Bushveld acquiring Evraz's 78.8% economic interest in Strategic Minerals Corp, the owner of the Vametco vanadium mine and plant in South Africa.
Bushveld will pay USD17.2 million in cash for the asset in two tranches, paying one tranche of USD4.7 million followed by a second tranche of USD12.5 million. The company said the consideration is "substantially less" than the cost of building a new operation and plant of the same size and quality.
"The acquisition price of USD17.2 million is, we believe, attractive for a robust operating asset and is less than 10% of the replacement value. The phased structure breaks this transaction into bite-sizes that are desirable for a company of our size, even more so in an environment of improving vanadium prices," said Chief Executive Fortune Mojapelo.
"The transformational acquisition achieves Bushveld's stated strategy to develop a significant, vertically integrated vanadium platform and accelerates Bushveld's path to production by several years," the company added.
The deal remains conditional on funding and approval from shareholders and authorities. The acquisition will be classed as a reverse takeover under stock exchange rules.
The acquisition will give Bushveld mining rights for vanadium and other minerals over an open pit mine which is currently supplying ore to a vanadium processing plant in South Africa. The project has ore reserves of 27.0 million tonnes graded at 2.55% vanadium pentoxide, which Bushveld said was "some of the highest in-magnetite" grades in the world.
The mineral resources are in excess of 135.0 million tonnes with an average grade of 2.10%.
The plant currently has the capacity to produce 2,750 metric tonnes of vanadium, with the operation producing 2,419 tonnes during 2015.
Bushveld added the project is "one of the cheapest primary producers" of vanadium in the world, with the project running profitably. Revenue in 2015 from the project amounted to ZAR629.0 million, around GBP29.5 million, whilst operating profits came in at ZAR26,724, around GBP1,255.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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Bushveld Minerals (BMN)
Evraz (EVR)