Bushveld Minerals Regulatory News (BMN)

3 June 2016 

Bushveld Minerals Ltd

("Bushveld" or the "Company")

US$5.2 million financing to complete first tranche of Vametco acquisition

Restoration of trading in shares

Bushveld Minerals Limited (AIM: BMN), a diversified mineral development company with a portfolio of vanadium, titanium, iron ore, tin and coal assets in Africa, is pleased to announce that it has secured financing amounting to US$5.2 million, with strategic and financial partners, to complete the first phase of the acquisition of Strategic Minerals Corporation ("SMC") from Evraz Group SA ("Evraz") (the "Acquisition"), as announced on 9 May 2016.

Highlights

· Bushveld to partner with Yellow Dragon to acquire SMC through Bushveld Vametco Limited ("BVL"), a special purpose vehicle established for the purpose of the Acquisition. Yellow Dragon is a private, strategic investor in African resource projects;

· Bushveld to retain a 45 per cent equity interest in BVL and Yellow Dragon the other 55 per cent;

· Financing for the Acquisition to be arranged by way of loan finance to BVL in proportion to each party's shareholding, being US$2.33 million from Bushveld and US$2.86 million from Yellow Dragon ("BVL Loans") for the first US$4.7 million of consideration ("Tranche 1") due by 17 June 2016, plus associated transaction costs;

· Bushveld will fund its BVL Loans through a combined capital raise comprising:

o A placing of, and subscription for, a total of 98,333,334 new ordinary shares with institutional investors at 1.8p per share raising £1,770,000 (approximately US$2.6 million) (the "Placing"), led by a subscription for 50,000,000 new ordinary shares for the sum of £900,000 (approximately US$1.3 million) by Yellow Dragon ("Yellow Dragon Subscription"), together with the grant of one warrant for each two shares, exercisable at 2.4p for a period of 2 years;

· On completion of Tranche 1, BVL will have an effective interest in SMC of 23.0 per cent, which would increase to 78.8 per cent on completion of Tranche 2;

· The funding package agreed with Yellow Dragon reduces Bushveld's effective interest in SMC at both the Tranche 1 and Tranche 2 stages such that it is no longer classified as a reverse takeover under AIM rules. As a consequence, neither an Admission Document nor Bushveld shareholder approval are necessary to complete the Acquisition. Accordingly, trading in Bushveld's shares on AIM will recommence with effect from 7.30am on Friday, 3 June 2016;

· Bushveld has retired the £2.6 million senior unsecured convertible loan facility with Darwin Strategic Limited ("Darwin Strategic") in accordance with agreed terms of the facility and subsequently terminated the arrangement.

Fortune Mojapelo, CEO of Bushveld Minerals, said,

"I am pleased to announce the US$5.2 million funding package and welcome Yellow Dragon Holdings as a co-investor in Bushveld Vametco Limited.

In addition, Bushveld is pleased to announce the completion of an equity placement with a number of new and existing investors. These investors recognised the opportunity and growth that the acquisition of the Vametco mine and plant will bring to the Company and we thank them for their support.

"I look forward to updating shareholders in due course as we progress the transaction."

Enquiries: info@bushveldminerals.com 

US$5.2 million financing to complete first tranche of Vametco acquisition

Restoration of trading in shares

Bushveld Minerals Limited (AIM: BMN), a diversified mineral development company with a portfolio of vanadium, titanium, iron ore, tin and coal assets in Africa, is pleased to announce that it has secured financing amounting to US$5.2 million, including strategic partners, to complete the first phase of the acquisition of Strategic Minerals Corporation from Evraz Group SA, as announced on 9 May 2016.

The financing has been arranged by Bushveld and Bushveld Vametco Limited, a special purpose vehicle established for the purpose of the Acquisition, to raise a total of US$5.2 million, which BVL has secured through a funding arrangement agreed between Bushveld and Yellow Dragon Holdings Limited. Yellow Dragon is a private, strategic investor in African resource projects, representing a syndication of institutional and private investor groupings from Asia and Africa.

Bushveld and Yellow Dragon have agreed that they will hold 45 per cent and 55 per cent respectively in the ordinary share capital of BVL, and will provide loan finance to BVL in proportion to each party's shareholding, being US$2.33 million from Bushveld and US$2.86 million from Yellow Dragon. The agreement between Bushveld, BVL and Yellow Dragon is binding but remains subject to the entering in to of detailed final contracts. The arrangement will fund BVL to meet its obligations under the Share Purchase Agreement for the first US$4.7 million of consideration due by 17 June 2016, plus associated transaction costs, while minimising dilution for existing shareholders.

Bushveld will fund its BVL Loans through a combined capital raise comprising a placing of, and subscription for, a total of 98,333,334 new ordinary shares with institutional investors at 1.8p per share raising £1,770,000 (approximately US$2.6 million) (the "Placing"), led by a subscription for 50,000,000 new ordinary shares for the sum of £900,000 (approximately US$1.3 million) by Yellow Dragon ("Yellow Dragon Subscription"), together with the grant of one warrant for each two shares, exercisable at 2.4p for a period of 2 years.

As announced previously, Bushveld has already paid US$1.0 million towards Tranche 1 by way of an exclusivity fee and further fee, and will finance the remaining US$1.33 million of its share of the BVL Loans from existing resources together with the proceeds of the Yellow Dragon Subscription and the Placing. The balance of the capital raise will be used to further develop the group's tin and coal projects and for general working capital purposes.

Bushveld and Yellow Dragon have agreed to underwrite, in proportion to each party's shareholding in BVL, a further US$12.5 million of additional consideration payable by BVL under the SPA subject, inter alia, to completion of the Acquisition, which is conditional, inter alia, on receipt of certain regulatory approvals in South Africa. It is intended that Bushveld's share of Tranche 2 will be funded by a combination of debt and/ or equity as appropriate and subject, where necessary, to shareholder approval.

On completion of Tranche 1, BVL will have an effective interest in SMC of 23.0 per cent, which would increase to 78.8 per cent on completion of Tranche 2.

Further information regarding the acquisition and the terms of the financing provided by Yellow Dragon are set out below.

In addition, Bushveld announces the decision to retire the £2.6 million senior unsecured convertible loan facility with Darwin Strategic initially entered into on 28 May 2015 to fund the Lemur Resources takeover offer and extended in November 2015 to 29 February 2016. Accordingly, the Company has released the £2.6 million previously held in escrow to Darwin Strategic in accordance with the agreed terms of the facility and subsequently terminated the arrangement.

Restoration of trading

Trading in Bushveld's shares on AIM was suspended on 21 April 2016 pending publication of an Admission Document in connection with its then intended acquisition of a 78.8 per cent interest in SMC, which would have been a reverse takeover under the AIM Rules. The funding package agreed with Yellow Dragon reduces Bushveld's effective interest in SMC at both the Tranche 1 and Tranche 2 stages such that it is no longer classified as a reverse takeover. As a consequence, neither an Admission Document nor Bushveld shareholder approval are necessary to complete the acquisition. Accordingly, trading in Bushveld's shares on AIM will recommence with effect from 7.30am on Friday, 3 June 2016.

The Placing and Subscription

The completed Placing of, and Subscription for, new ordinary shares raised a total of £1,770,000. The Placing and Subscription comprises 98,333,334 new ordinary shares issued at 1.8p per new ordinary share together with the grant of one warrant for each two shares. The warrants are exercisable at 2.4p for a period of 2 years.

Yellow Dragon led the fundraise through a subscription for 50,000,000 new ordinary shares in Bushveld at a price of 1.8p per ordinary share together with 25,000,000 warrants with terms as above.

The Yellow Dragon Subscription is payable in two tranches:

· £350,000 has been paid on 12 May 2016; and

· the remaining £550,000 will be paid on 15 June 2016.

Conditional on Admission of the new ordinary shares, Bushveld has also agreed to grant warrants to Beaufort Securities Limited in connection with their role as placing agent as follows:

· 4,833,333 warrants, exercisable for five years from Admission at 1.8p per new ordinary share, and

· 1,086,000 warrants, exercisable for four years from Admission, comprising 434,000 at 6.9p and 652,000 at 4.6p per new ordinary share.

Bushveld's strategy, current trading and prospects

Bushveld is aiming to develop the most vertically integrated vanadium platform in the world, bringing together high quality mineral resources, processing capacity and downstream operations in vanadium chemicals, such as vanadium based flow batteries.

The group comprises three development platforms:

· Bushveld Resources:

o Developing an integrated mine-to-market vanadium business

o Owner of the Company's flagship asset, Mokopane Vanadium Project in Limpopo, South Africa

o Owns 84 per cent of Bushveld Energy, an energy storage solutions company focusing on vanadium redox flow battery technology in Africa

· Greenhills Resources: A portfolio of tin assets in Southern Africa

· Lemur Resources: Developing an integrated thermal coal and IPP project in Madagascar

The pre-feasibility study for the Mokopane project indicates a construction cost of US$298 million, including US$218 million for mineral processing (concentrator and salt roast plant). The acquisition of SMC gives Bushveld immediate access to a producing asset, providing greater scope to exploit Bushveld's wider vanadium strategy and to generate shareholder value for Bushveld's investors.

Vametco is a high quality, low cost producer with a global vanadium customer base. Its mine has vanadium ore grades which are among the highest in the world.

Bushveld believes that the outlook for demand globally for vanadium is strong and that Vametco is well placed to take advantage of an anticipated supply deficit, based on its analysis of the vanadium market.

The SMC acquisition should be viewed in the context of a broader Bushveld vanadium strategy to build a significant vertically integrated vanadium platform:

· The asset provides Bushveld an opportunity to accelerate the path to vanadium production and therefore operating cash flows at a strategically key point in the commodity cycle. The production base also allows Bushveld to leverage the cashflow base to advance its other vanadium projects without entirely depending on financial markets;

· It also accelerates the path to development of electrolyte manufacturing capacity in support of its energy business that is targeting the anticipated multi-billion dollar energy storage industry. By securing low cost production capacity, with a large resource base (one of the largest primary vanadium resources in the world), Bushveld is well positioned to address two key hurdles to vanadium redox flow batteries adoption:

o Security of supply (current production rate of Vametco uses, over a life of mine of 20 years, less than 10% of Bushveld's resource base;

o Security of cost input of vanadium in the VRFB (vanadium contributes over 30% of the costs of the VRFBs).

Consolidation of primary vanadium deposits on the Bushveld Complex, the second largest host of vanadium resources in the world, and the world's largest contributor to primary vanadium production. Given the significant constraints associated with steel-production co-product vanadium slag, and the high cost of secondary sources of vanadium, any primary vanadium producers with high grade deposits are well positioned to emerge as significant players in the vanadium market.

Use of proceeds

The total amount raised of £1.77 million (approximately US$2.6 million) will, together with Bushveld's existing resources, be used to fund Bushveld's share of the Tranche 1 Acquisition consideration (including, inter alia, due diligence, legal and financial advice, and broking commissions), to pay the Darwin interest, to further develop the group's other assets as described above and for general working capital purposes.

Issue of shares and admission to trading

Application will be made for the new ordinary shares issued pursuant to the Placing and Yellow Dragon Subscription to be admitted to trading on AIM and it is currently expected that trading will commence on 9 June 2016. Following their issue Bushveld will have 584,000,772 shares in issue. Yellow Dragon's interest will represent 8.6 per cent of the enlarged share capital following the issue of shares.

The Subscription Shares and the Placing Shares will be fully paid and will rank pari passu in all respects with the Company's existing ordinary shares.

The Company does not currently hold any ordinary shares in treasury. Accordingly, the above figure may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change in their interest in, the share capital of the Company under the Financial Conduct Authority's Disclosure and Transparency Rules.

Risk factors

Through the diligence work carried out over the past 15 months the Company had identified several standard risk factors associated with the Vametco operations, which it believes to have a detailed mitigating work-plan for. Risks identified include the following:

· A weaker commodity price than forecast

According to Bushveld's financial analysis the Transaction presents a positive NPV and IRR even at an assumed current spot vanadium price (US$19.50/kg contained V) throughout the LOM.

· A significantly stronger Rand/US$ exchange rate than forecast by Bushveld

The Transaction presents a positive NPV and IRR for long term ZAR/ US$ exchange rates as low as R10/US$. A sample of current forecasts taken across a range of leading financial institutions expects the South African currency to continue to weaken against major currencies, including the US$ (Source: Bloomberg).

· Regulatory approvals not being granted, thus Tranche 2 of the Transaction not being completed

Regulatory approval processes involved are prescriptive in their requirements. Based on concurrent discussions carried out to date Bushveld is satisfied the risk is low.

Additional information

About Bushveld Minerals Limited

Bushveld Minerals Limited is a diversified mineral development company with a portfolio of vanadium, iron ore, tin and coal assets in Southern Africa and Madagascar.

The Group owns the Bushveld Vanadium Project, Mokopane Vanadium Project, Bushveld Iron Ore Project and Mokopane Tin Project, located on the northern limb of the Bushveld Complex, South Africa. Bushveld also owns the Imaloto coal project in Madagascar, acquired in September, 2015, through its takeover of Lemur Resources.

Bushveld was admitted to the AIM of the London Stock Exchange in March 2012.

About Yellow Dragon Holdings Limited

Yellow Dragon is a private, strategic investor in African resource projects. The Group comprises a syndication of private investor groupings from Asia and Africa.

About SMC/ Vametco Alloys

Vametco Alloys is situated 8km to the northeast of Brits, in the North West Province of the Republic of South Africa, and is owned by SMC through its 75 per cent shareholding in the South African domiciled Vametco Holdings (Pty) Ltd ("Vametco Holdings"). Vametco Alloys is a 100 per cent subsidiary of Vametco Holdings. Key highlights of the Vametco operations include:

· Mining right for vanadium and other associated minerals over Portion 1 of the farm Uitvalgrond 431 JQ and Portion 1 of the farm Krokodilwaal 426 JQ in Brits, where it operates an open pit mine supplying ore to its vanadium processing plant located on the same properties.

· Ore Reserves of 27Mt (JORC) with some of the highest in-magnetite vanadium pentoxide (V2O5) grades in the world. The Ore Reserves are sufficient to support the operations for more than 20 years at current production levels.

· Mineral Resources in excess of 135Mt (JORC).

· Ore Reserves and Resources based on the April 2016 completed Competent Person's Report (VBKom), with scope to increase the reserve base by targeted exploration of the inferred resources.

· Current plant annual capacity of 2,750 metric tonnes vanadium in the form of Nitrovan and MVO.

· An established leadership team with extensive experience in vanadium processing, having collectively worked on all vanadium processing plants in South Africa. The management team will be retained in the business post the transaction.

· One of the cheapest primary producers of vanadium in the world.

· Adjacent to Bushveld's Brits Vanadium Project, which is the continuation of the strike of the Vametco mine deposit with similar vanadium grades to the mine. The deposit, which contains outcropping mineralisation, offers an extension of the life of operations and presents cheaper near-surface ore for the Vametco processing plant.

· Owned as to 25 per cent by Black Economic Empowerment ("BEE") shareholders, with provisions to increase this to 26 per cent.

The Vanadium Market

Bushveld has carried out research and analysis of the Vanadium market, the results of which are as follows:

· The Vanadium market is poised for significant upside on the back of a structural deficit that looks set to continue for the medium term;

· Demand continues to be robust driven by growing intensity of use of vanadium in steel, while applications in utility scale vanadium flow batteries presents significant potential demand upside;

· Supply, on the other hand, is constrained and has been declining;

· Thus, recently seen low prices of vanadium are not likely to continue:

o The cost curve suggests that the majority of production would be unprofitable at these levels;

o A current and forecast market deficit is expected to drive prices higher;

· Bushveld estimates Highveld liquidation to have taken out approximately 11 per cent of global vanadium feedstock supply;

· Substitutions at some of China's steel plants, of haematite (non-vanadium bearing) for high cost low grade magnetite deposits (e.g. Chengde);

· Reductions of production/capacity at other Chinese firms (e.g. Chinese government plans to cut 100-150Mt of loss making steel capacity - key culprits being high cost unprofitable magnetite processing steel plants)

o Indeed vanadium price has risen by over 40 per cent over the past 2 months, in response to global vanadium supply constraints;

o Roskill suggests that Vanadium prices higher than US$21/kgV are required to stimulate new vanadium supply (Roskill Premium Report 2015).

- ENDS -