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Bushveld Minerals Limited

Bushveld Minerals Limited acquisition of the Vanchem Plant, SAJV Business and Ivanti Shares

Bushveld Minerals Limited (LON: 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 with Vanchem Vanadium Products (Pty) Limited, a subsidiary of Duferco Vanadium Investment Holding S.A., South African Japan Vanadium Proprietary Limited, a wholly owned subsidiary of VVP and Duferco Participations Holding S.A. to conditionally acquire the following vanadium production assets in South Africa:

(i) the vanadium production business of VVP as a going concern;

(ii) the ferrovanadium production business of SAJV as a going concern; and

(iii) 100 per cent of the outstanding shares of Ivanti Resources (Pty) Limited, 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, which is to be settled in two stages. The Vanchem Plant and SAJV Business are hereinafter jointly referred to as the 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.

· 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 NitrovanTM 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 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) Limited1.

· 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 V2O5 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 (V2O5) 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 NitrovanTM 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.