TIDMBMN
RNS Number : 6994X
Bushveld Minerals Limited
01 May 2019
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.
1 May 2019
Bushveld Minerals Limited
("Bushveld Minerals" or the "Company")
Conditional Business Purchase Agreement signed with Duferco for
the acquisition of the Vanchem Plant, SAJV Business and Ivanti
Shares
Bushveld Minerals Limited (AIM: BMN), the AIM quoted, integrated
primary vanadium producer, with ownership of high-grade vanadium
assets in South Africa, is pleased to announce that it has entered
into a Business and Share Purchase Agreement (the "Agreement") with
Vanchem Vanadium Products (Pty) Limited ("VVP"), a subsidiary of
Duferco Vanadium Investment Holding S.A. ("Duferco"), South African
Japan Vanadium Proprietary Limited ("SAJV"), a wholly owned
subsidiary of VVP and Duferco Participations Holding S.A. to
conditionally acquire the following vanadium production assets in
South Africa (the "Transaction"):
(i) the vanadium production business of VVP as a going concern ("Vanchem Plant");
(ii) the ferrovanadium production business of SAJV as a going
concern ("SAJV Business"); and
(iii) 100 per cent of the outstanding shares of Ivanti Resources
(Pty) Limited ("Ivanti"), a subsidiary of Duferco Participations
Holding S.A, which has economic rights to certain secondary
vanadium units treated within the Vanchem Plant,
as one indivisible transaction, for an aggregate cash
consideration of US$68 million (the "Consideration"), which is to
be settled in two stages. The Vanchem Plant and SAJV Business are
hereinafter jointly referred to as the Vanchem Business ("Vanchem
Business").
Bushveld Minerals CEO, Fortune Mojapelo will host a webcast for
analysts and investors to present the transaction today at 09H30
BST.
Link to the webcast:
https://webcasting.brrmedia.co.uk/broadcast/5cc315de3c8e41495e2420cb
Link to the presentation:
http://www.bushveldminerals.com/presentations/
Transaction Highlights
-- The Company is acquiring the Vanchem Business and 100 per
cent of the outstanding shares of Ivanti for an aggregate
Consideration of US$68 million.
-- Consideration is payable in stages, with US$6.8 million paid
on 30 April 2019 following the execution of the Agreement into an
escrow account pending completion of the Transaction, and US$61.2
million to be settled in full no sooner than 31 July 2019 and no
later than 31 October 2019.
-- For a 12 month period after completion of the Transaction,
VVP will be entitled to 50 per cent of the profits made by
Ivanti.
-- The Vanchem Plant is a primary vanadium producing facility
with a beneficiation plant capable of producing various vanadium
oxides, ferro-vanadium and vanadium chemicals.
-- The Vanchem Plant is located approximately 200 km by road
from the Company's Mokopane Vanadium Project ("Mokopane").
-- The Vanchem Business provides immediate production growth,
adding an estimated 960 mtV on an annualised basis using one of the
three kilns on site and is expected to achieve a steady state
production of 4,200 mtV per annum following refurbishment.
-- Refurbishment costs are expected to be approximately US$45
million and will be incurred over a five year period from the
completion of the Transaction.
-- Mokopane is intended to become a primary source of feedstock
for the Vanchem Business and its development will be accelerated as
a result of the Transaction.
-- Capital expenditure requirements associated with developing
Mokopane are estimated to be US$20 million.
-- The Company plans to finance the entire Consideration and
associated capital expenditure from the Company's existing cash
resources, future cash flows as well as, to the extent necessary,
debt facilities which are currently being negotiated.
Fortune Mojapelo, CEO of Bushveld Minerals Limited,
commented:
"It is with great pleasure that we announce another
transformative acquisition for Bushveld Minerals and its
shareholders. True to our previously stated goals, we are pleased
to conditionally acquire another brownfield operating asset on
South Africa's Bushveld Complex, to cement our position as one of
the leading vanadium producers globally and setting us on the path
to achieving our 10,000 mtV per annum production capacity
target.
This highly strategic transaction combines our existing
portfolio of high-grade low-cost primary vanadium resources,
including the Mokopane greenfield deposit, with an established
production facility. This substantially reduces the capital
required to bring the Mokopane Project into production, while also
bringing it online in a much shorter timeframe than if we were to
construct a new plant. We consider ourselves the ideal buyer for
these businesses and given our sound portfolio of high quality
deposits and a strong operating base established with Vametco, now
is the perfect time to take advantage of this opportunity.
Apart from the benefits generated by adding further brownfield
processing capacity to complement the Company's high-grade
deposits, there are several features of Vanchem that make it
particularly attractive to the Company's journey going forward.
Vanchem not only brings immediate scalable processing capacity,
it also has a three-kiln configuration which provides important
flexibility in terms of the Company's production throughputs
without compromising its cost efficiencies. Furthermore, Vanchem's
attractive suite of vanadium products complements the Nitrovan(TM)
produced at Vametco. These include ferrovanadium, vanadium
pentoxide vanadium trioxide and vanadium chemicals. The vanadium
chemicals capability will be particularly key as the Company grows
its exposure to the emerging stationary energy storage industry
through vanadium redox flow batteries.
This acquisition is core to our growth strategy of becoming a
leading, low-cost, vertically integrated producer and our ability
to adequately supply the burgeoning energy storage sector."
Key Terms
-- The Company is acquiring the Vanchem Business and 100 per
cent of the outstanding shares of Ivanti for an aggregate
Consideration of US$68 million.
-- The Vanchem Business consists of integrated vanadium
extraction and production facilities which can produce a range of
vanadium products. The plant comprises:
a) A core salt-roast processing plant, including 3 roasting
kilns, that produces vanadium trioxide and, vanadium pentoxide;
b) An electric smelting ferrovanadium converter, located at the
Highveld Steel & Vanadium ("Highveld") site, situated
approximately 10 km from the Vanchem Plant, which converts vanadium
trioxide into ferrovanadium;
c) An alumino-thermic smelting facility, also located at
Highveld which converts vanadium pentoxide into ferrovanadium;
and
d) A vanadium chemical plant producing various vanadium chemical products.
-- In addition, the Company will acquire 100 per cent of the
outstanding shares of Ivanti which has economic rights to certain
secondary vanadium units treated within the Vanchem Plant and
generates profits from the sale of these secondary units to the
Vanchem Plant.
-- For a 12 month period after completion of the Transaction,
VVP will be entitled to 50 per cent of the profits made by
Ivanti.
-- The Consideration is payable in two stages, with:
o US$6.8 million paid on 30 April 2019, following the execution
of the Agreement into an escrow account, pending completion of the
Transaction ("Escrow Amount"); and
o US$61.2 million to be settled in full no sooner than 31 July
2019 and no later than 31 October 2019.
-- Following completion of the Transaction, the Consideration
shall be adjusted for any working capital movements of the Vanchem
Business and Ivanti.
Key Information on the Vanchem Business and Ivanti
-- The Vanchem Plant is a primary vanadium producing facility
with a beneficiation plant capable of producing various vanadium
oxides, ferrovanadium and vanadium chemicals.
-- The Vanchem Plant is located at Ferrobank Industrial Park in Emalahleni Local Municipality, approximately 200 km by road from the Company's Mokopane on the Northern Limb of the Bushveld Complex.
-- The Vanchem Business provides immediate production growth,
adding an estimated 80 mtV per month (approx. 960 mtV on an
annualised basis) using one of the three kilns on site (20-25% of
available kiln capacity).
-- Following detailed due diligence on the Vanchem Business and
Ivanti, it is estimated the refurbishment costs to bring the entire
operation back into production will be approximately US$45 million.
The capital expenditure is planned to be spent over a five year
period, from the completion of the Transaction, to allow the
Vanchem Plant to achieve a steady state production of 4,200 mtV per
annum.
-- Ivanti has the rights to all historic and future calcine
arisings, together with all secondary vanadium leachate
therefrom.
-- Mokopane is intended to become a primary source of feedstock
for the Vanchem Business and its development will be accelerated as
a result of the Transaction. By transporting a crushed, screened
and dry magnetic separated ore from the Mokopane deposit to the
Vanchem Business for further beneficiation, the capital expenditure
requirements associated with developing Mokopane are significantly
reduced to US$20 million (based on current estimates). The
Mokopane-Vanchem model will create a fully integrated business in a
shorter time and at a lower cost than developing Mokopane as a
standalone operation. The expedited Mokopane development as a
primary feedstock supply to the Vanchem Business does not remove
the optionality of constructing a primary vanadium beneficiation
plant at Mokopane as set out in the 2016 pre-feasibility study on
Mokopane by MSA Group (Pty) Limited(1) .
-- The Transaction is consistent with Bushveld Minerals' stated
strategy of acquiring existing, low-cost, scalable brownfield
operating assets in South Africa to expedite development of the
Company's significant and high-grade resource base. Furthermore,
the Transaction sets the Company on the path to achieve a
production capacity of 10,000 mtV per annum while being one of the
lowest cost producers.
-- The Transaction fuels Bushveld's strategy of being a leading
integrated, diversified vanadium producer and major player in the
downstream energy storage sector for the metal, set to become a
significant source of vanadium demand in coming years.
-- The Company plans to finance the entire Consideration, the
associated capital expenditure and Mokopane development from the
Company's existing cash resources, future cash flows as well as, to
the extent necessary, debt facilities which are currently being
negotiated.
-- Bushveld will take operational control of Vanchem following
fulfilment of conditions precedent and transaction close.
1. The 2016 pre-feasibility study on the Mokopane Vanadium
Project by MSA Group (Pty) Limited estimated total capital
expenditure of US$298 million for a greenfield integrated mine
& processing plant producing 5,300 mtVp.a. of a >99% purity
V(2) O(5) product).
Vanchem Business Overview
The Vanchem Business is a primary vanadium producing facility
with a beneficiation plant capable of producing various vanadium
oxides, ferrovanadium and vanadium chemicals. The Vanchem Business
uses the salt roast beneficiation process, similar to the one used
at Vametco and is currently producing circa 80 mtV per month using
a single kiln. Following a refurbishment and ramp-up schedule,
which is estimated to require approximately US$45 million of
capital expenditure, which will be incurred over a five year
period, it is expected to reach steady state production of 4,200
mtV per annum utilising all three kilns. The plant consists of the
following components:
-- Milling and concentrator (magnetic separation) facility for
the treatment of magnetite;
-- A roast / leach configuration with three kilns;
-- An ammonium poly-vanadate precipitation plant;
-- A de-ammoniation / vanadium trioxide plant;
-- Vanadium pentoxide flake (V(2) O(5) ) production facilities;
-- Two conversion facilities (an electric smelting facility and
an aluminothermic smelting facility) for the production of
ferrovanadium; and
-- A vanadium chemical plant producing various vanadium chemical products.
The Vanchem Plant is situated at Ferrobank Industrial Park in
Emalahleni Local Municipality, Mpumalanga Province in the Republic
of South Africa and has been operating since the late 1970s,
processing a combination of ore feed from the Mapochs vanadium mine
("Mapochs") and slag from Highveld. Highveld continued to supply
ore to VVP from its Mapochs mine in Limpopo until it closed in
2015. The closure of the mine meant that VVP no longer had a supply
of ore and as a consequence, VVP went into Business Rescue in
November 2015. The Vanchem Plant was put into care and maintenance
later that year. The Vanchem Plant was partially re-started in the
third quarter of 2018, after VVP was able to procure magnetite ore
from third parties.
SAJV is located at the Highveld site and is situated
approximately 10 km from the Vanchem Plant. SAJV comprises of an
alumino-thermic smelting facility which is adjacent to the Vanchem
Plant electric smelting facility.
The Vanchem Business has secured sufficient ore supply from
third parties to support current levels of production, until
Mokopane's development has been completed. The Company retains the
optionality to supply magnetite concentrates from Vametco to the
Vanchem Business. Upon receipt of the mining right, Mokopane will
be a primary source of feedstock to the Vanchem Business as a
result of its large mineral reserve, therefore the Transaction
facilitates the expedited development of Mokopane. The
Mokopane-Vanchem model will represent a fully integrated business,
in line with the Company's strategy for Vametco.
Ivanti Overview
Calcine is a significant waste product from the salt roast
beneficiation process at the Vanchem Business and is deposited on a
calcine dump in close proximity to the Vanchem Plant.
Due to the water content in the calcine, rainfall and dust
suppression requirements, additional leaching of the vanadium units
takes place on the calcine dump. This leachate is pumped and
processed at the Vanchem Plant, contributing significantly to the
overall vanadium recovery in the plant. Ivanti owns the economic
benefits of the calcine dump and generates profits from the sale of
leachate to the Vanchem Plant for treatment. Ivanti's position was
secured due to their provision of funding to VVP during the
Business Rescue process. For a 12 month period after completion of
the Transaction, VVP will be entitled to 50 per cent of the profits
made by Ivanti.
Rationale for the Transaction
The acquisition is consistent with the Company's long term
strategy of acquiring existing, low-cost scalable brownfield
operating assets in South Africa to expedite the development of the
Company's significant and high-grade resource base. The Directors
believe that the acquisition will benefit the Company and its
shareholders for the following reasons:
-- Provides increased exposure to vanadium, a commodity with compelling fundamentals
o Robust and growing demand from steel manufacturers and energy
storage.
o A significant structural supply deficit due to concentrated
and constrained primary production.
o Limited new global vanadium production on the horizon.
o By sustainably reducing costs Vanchem will generate healthy
margins throughout the commodity cycle.
-- Provides diversification to Bushveld Minerals through the
addition of another cash generating processing facility
o Vametco is currently the Group's only cash generating
asset.
o The Vanchem Business is currently producing 80 mtV per month
(approximately 960 mtV per annum) and following the refurbishment
and ramp-up programme, it is expected to support steady state
production of 4,200 mtV per annum.
o Diversification of Bushveld Minerals' mining and processing
footprint within South Africa.
-- The Vanchem Plant expedites the development of Mokopane
o The two assets will together create a fully integrated
business in a shorter timeline, with reduced costs and risks than
developing Mokopane on a standalone basis.
o Three kilns provide optionality and increased availability
during planned and unplanned kiln maintenance programme.
-- Provides optimal product diversification
o The Vanchem Business is capable of producing various vanadium
oxides, ferrovanadium and vanadium chemicals, complementing
Vametco's existing Nitrovan(TM) offering.
-- Enhances Bushveld Minerals' ambitions in the global energy
storage and vanadium redox flow battery space
o Provides further capacity for electrolyte manufacturing
through the existing chemical plant and vanadium oxide
production.
Principal Terms of the Transaction
On 30 April 2019, the Company entered into the Agreement,
pursuant to which, through a South African subsidiary, it
conditionally agreed to acquire the Vanchem Plant from VVP, SAJV
Business from SAJV and Ivanti from Duferco, as going concerns and
as one indivisible transaction, for a total cash consideration of
US$68 million, as shall be adjusted by taking into account the
working capital of the respective businesses being acquired as at
30 September 2018 and as at 31 July 2019 (or 31 October 2019 as
applicable) and the profit shares in respect of Ivanti. The Company
and Duferco are each parties to the Agreement as guarantors of
their respective buyer and sellers.
The consideration payable comprises the following cash
payments:
US$6.8 million paid on 30 April 2019, following execution of the
Agreement into an escrow account, pending completion of the
Transaction ("Escrow Amount"); and
-- US$61.2 million, being the balance of the Consideration to be
settled in full no sooner than 31 July 2019 and no later than 31
October 2019.
In the event that the Company fails to comply with the
conditions to completion for which it is responsible, or after all
such conditions are fulfilled or waived it chooses not to complete,
the Escrow Amount will be released to the Sellers.
In the event that the Sellers fail to comply with the conditions
to completion for which they are responsible, or after all such
conditions are fulfilled or waived they choose not to complete, the
Escrow Amount will be released to the Company and a break fee
equivalent to the Escrow Amount will be payable to the Company.
For a 12 month period after completion of the Transaction VVP
will be entitled to 50 per cent of the profits made by Ivanti.
Vanchem Plant Refurbishment Programme and Mokopane
Development
The capital expenditure required to refurbish the entire
facility is estimated to be approximately US$45 million (R620
million), and will be incurred over a five year period, from the
completion of the Transaction. The refurbishment programme
comprises three phases that are designed to progressively bring the
other two kilns and all associated production units into full
production while investing in appropriate environmental management
infrastructure.
The Vanchem Business has secured sufficient ore supply from
third parties to support current levels of production, until
Mokopane's development has been completed. The Company retains the
optionality to supply magnetite concentrates from Vametco to the
Vanchem Business. The Transaction will facilitate the expedited
development of Mokopane, which will become a primary feedstock
supplier to the Vanchem Business, for an estimated capital
expenditure of US$20 million. This is subject to securing the
Mining Right for Mokopane.
Financing
The initial US$6.8 million has been paid out of the Company's
existing cash resources. The remaining US$61.2 million cash
consideration is expected to be settled via the Company's existing
cash resources, future cash flows and, to the extent necessary,
debt facilities. The Company is currently in negotiations with
local banks to provide these facilities.
The estimated refurbishment capital expenditures of
approximately US$45 million, which will be incurred over a five
year period from the completion of the Transaction, and the US$20
million capital spend for Mokopane will also be funded using a
combination of internal cash flows and debt facilities.
Conditions to Completion (inter alia)
-- South African Competition Commission approval, if required.
-- South African Reserve Bank approval.
-- The cession of specific commercial agreements.
-- No material adverse changes to the Vanchem Business or Ivanti
during the interim period between signature and completion of the
agreements.
Next Steps
Further updates and progress on the Transaction will be provided
as appropriate.
Enquiries: info@bushveldminerals.com
+27 (0) 11 268
Bushveld Minerals 6555
Fortune Mojapelo, Chief Executive
Officer
Chika Edeh, Head of Investor
Relations
SP Angel Corporate Finance Nominated Adviser +44 (0) 20 3470
LLP & Broker 0470
Ewan Leggat / Richard Morrison
Jonathan Williams / Richard
Parlons
Alternative Resource Capital Joint Broker
+44 (0) 20 7186
Rob Collins 9001
+44 (0) 20 7186
Alex Wood 9004
+44 (0) 20 7236
BMO Capital Markets Limited Joint Broker 1010
Jeffrey Couch / Tom Rider
Michael Rechsteiner / Neil
Elliot
+44 (0) 20 7920
Tavistock Financial PR 3150
Charles Vivian / Gareth Tredway
Financial PR (South +27 (0) 11 502
Brunswick Africa) 7300
Miyelani Shikwambana
ABOUT BUSHVELD MINERALS LIMITED
Bushveld Minerals is a low-cost, integrated, primary vanadium
producer, with ownership of high-grade vanadium assets.
The Company's flagship vanadium platform includes a 74 per cent
controlling interest in Bushveld Vametco Alloys (Pty) Ltd, a
primary vanadium mining and processing company; the Mokopane
Vanadium Project and the Brits Vanadium Project.
Bushveld's vision is to become a significant, low-cost,
integrated primary vanadium producer through owning high-grade
assets. This incorporates development and promotion of the role of
vanadium in the growing global energy storage market through
Bushveld Energy, the Company's energy storage project developer and
component manufacturer. Whilst the demand for vanadium remains
largely anchored in the steel industry, Bushveld Minerals believes
there is strong potential for an imminent and significant global
vanadium demand surge from the fast-growing energy storage market,
particularly through the use and adoption of Vanadium Redox Flow
Batteries.
While the Company's focus is on vanadium operations and the
development and promotion of VRFBs, it has additional investments
in coal, power and tin.
The Company's approach to project development recognises that,
whilst attractive project economics are imperative, they are
insufficient to secure capital to bring them to account. A clear
path to production within a visible timeframe, low capital
expenditure requirements and scalability are important factors in
ensuring a positive return on investment. This philosophy is core
to the Company's strategy in developing projects.
Detailed information on the Company and progress to date can be
accessed on the website www.bushveldminerals.com.
About Vametco
Vametco is located near Brits on the Western Limb of the
Bushveld Complex. The integrated operation comprises a vanadium ore
mine and a processing plant that produces Nitrovan(TM) , a
trademark product sold in major steel markets across the world. The
mine lies adjacent to the Brits Vanadium Project, which will in
future serve as an alternative source of near surface run of mine
(ROM) ore feed to the Vametco plant.
The Vametco mining operation uses open pit bench mining methods
to mine a well-defined orebody. The deposit is continuous with
limited faulting and dips in a northerly direction at approximately
20 degrees.
ROM ore is fed into a primary, secondary and tertiary crushing
circuit, followed by milling and magnetic separation to produce
magnetite concentrates. The magnetite concentrates are fed into the
extraction process which includes the kiln for roasting followed by
leaching and precipitation. Thereafter the precipitated vanadium as
ammonium metavanadate is converted to modified vanadium oxide (MVO)
in rotary calciners. MVO is fed into the mixplant and finally into
the shaft furnaces to produce Nitrovan(TM) .
About VVP, Ivanti and the SAJV Business
VVP reported, on an unaudited basis, for the year ended 30
September 2018, profits before tax of R141,877,347 and had gross
assets of R1,174,141,003.
SAJV reported, on an unaudited basis, for the year ended 30
September 2018, profits before tax of R7,402,329 and had gross
assets of R28,380,402.
Ivanti reported on a company basis (which captures the
performance of the Calcine benefits following from the limited
recommissioning of the Vanchem Plant from the third quarter of
calendar 2018), on an audited basis for the year ended 30 September
2018, profits before tax of R9,834,885 and had gross assets of
R55,241,199.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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