Bushveld Minerals Regulatory News (BMN)

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

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

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 V2O5 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 6th 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.