Bushveld Minerals Limited reduces total consideration payable for Vanchem Acquisition

Bushveld Minerals Limited

Bushveld Minerals Limited (LON: BMN), the AIM quoted, integrated primary vanadium producer, with ownership of high grade vanadium assets in South Africa, has announced an update to the acquisition, announced on 1st May 2019, of:

· the Vanchem Plant and 100% of the issued shares in Ivanti Resources Limited from Vanchem Vanadium Products Limited, a subsidiary of Duferco Vanadium Investment Holding S.A.;

· the SAJV Business from South African Japan Vanadium Proprietary Limited, a wholly owned subsidiary of VVP;

(collectively, the “Vanchem Business”).

The Company is pleased to announce that it has renegotiated the consideration payable for the acquisition with the sellers and that the initial conditions to closure of the transaction have been met.

The total consideration has been reduced from US$68 million to US$53.5 million, of which US$30 million will be payable in cash and the balance through the issue of Bushveld Minerals unsecured convertible loan notes (as detailed below).

The improved terms take into account current market conditions while affirming the medium to long term vanadium market outlook of the Company, which is the natural buyer of Vanchem.

This acquisition ensures that the Company is in a solid position to achieve its long-term production target of more than 8,400 mtVp.a. and to build a leading downstream vanadium-based energy storage platform. Due to the revised payment terms the transaction is now expected to be completed on 07 November 2019.

Transaction Conditions Met

All conditions for Transaction Closure have been met.

Renegotiated acquisition terms

Total consideration has been revised from US$68 million to US$53.5 million, payable as follows:

· US$30 million in cash (which includes the US$6.8 million deposit paid into an escrow account on 1 May 2019) payable on Transaction Closure.

· An additional payment of US$23.0 million to be satisfied through the issue on Transaction Closure of Bushveld Minerals unsecured convertible loan notes (“Loan Notes”) with the following repayment, redemption and conversion terms (in addition to customary covenants, warranties and acceleration provisions):

o Interest at a coupon of 5% per annum payable annually in arrears or on conversion or redemption;

o Repayable in cash after the second anniversary of Transaction Closure, plus any accrued interest;

o Convertible at the holder’s option in two tranches of up to US$11.5 million each, after the first and second anniversary of Transaction Closure respectively, at a 5% discount to the prevailing 10-day volume weighted average Bushveld Minerals share price leading up to conversion;

o Early redemption of the Loan Notes at the election of Bushveld Minerals, subject to the condition that the holder will have an option of converting up to 50% of the early redemption amounts into Bushveld Minerals shares on the same terms set out above;

o Scope for acceleration of redemption of up to US$5 million of the Loan Notes 12 months after Transaction Closure if an average ferrovanadium price of $40/kgV is realised during any nine-month period during the12 month period after Transaction Closure;

o Obligation to repay an amount equal to 40% of any cash received on a new share issue which raises more than US$30m, provided no more than 50% of the Loan Notes have already been paid, redeemed or converted;

o Obligation to repay an amount equal to 50% of any debt raised over US$15 million, provided no more than 50% of the Loan Notes have been repaid, redeemed or converted;

o Obligation to repay on a substantial sale of assets or change of control;

o The holder will not be able to divest any Bushveld Minerals shares received for six months following conversion and be subject to an orderly market arrangement for the following six months.

· A deferral of US$0.5 million plus an amount equal to the working capital adjustment payable in cash after two years.

· All other terms remain substantially the same as per the original agreement announced on 1 May 2019.

The aforementioned revised Transaction terms, and other consequential changes, have been captured in an addendum to the original agreement which was signed on 22 October 2019.

The revised terms ensure the transaction remains competitive under current market conditions and allows the Group to continue executing on its growth plans even in a volatile price environment.

Fortune Mojapelo, CEO of Bushveld Minerals Limited, commented:

“Bushveld’s ambition to become a leading low cost producer takes a big step forward with the acquisition of Vanchem. With this acquisition, the Company will have two quality primary processing assets producing a complementary suite of products, with a four kiln configuration, that gives it unmatched production flexibility. This is supported by the Company’s high grade resource base, that is well serviced by logistics infrastructure. 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.

“The Vanchem acquisition completes at a time when vanadium prices have seen a market-dip necessitating the revised transaction terms. The Company’s view on the vanadium outlook however remains positive and supportive of the Company’s production growth aspirations. We look forward to completing this Transaction and unlocking its value as Bushveld continues on its journey into a significant low cost, vertically integrated primary vanadium company.”

Transaction Rationale

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 is value accretive as the Transaction:

· Provides increased exposure to vanadium, a commodity with compelling fundamentals:

o Robust and growing demand from steel manufacturers and energy storage

o A 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 processing facility:

o Following the refurbishment and ramp-up programme, Vanchem is expected to support steady state production of 4,200 mtVp.a.

o Diversification of Bushveld Minerals’ mining and processing footprint within South Africa

· The Vanchem Plant has the potential to expedite 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

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