Aim-listed Bushveld Minerals has signed a long-term production financing agreement (PFA) of $30-million with mining-focused investment business Orion Mine Finance, primarily to finance its expansion plans at its Vametco operations, in South Africa, and to pay down some of its debt.
Under a separate investment agreement, Orion Mine Finance has also conditionally agreed to subscribe for between $10-million and $20-million of convertible loan notes under a $35-million convertible loan notes instrument.
Bushveld intends to seek other subscribers for the balance of the total. The instrument’s proceeds will go towards the first phase of Vanchem’s critical refurbishment programme and debt repayment.
Since both the PFA and the instrument require the prior written consent of financial services provider Nedbank, Bushveld and Bushveld Vametco Alloys are in discussions with the bank on the outstanding term loan and revolving credit facilities, including discussions on the potential prepayment of the outstanding debt facilities on completion of the PFA.
The outstanding balance of the Nedbank facilities is R375-million, plus accrued interest of $300 000.
“We are excited to announce the innovative funding agreement with Orion, which puts us on track with our expansion plans at Vametco and we look forward to further elaborating on these plans and the impact on our business in the coming months.
"Importantly, the long-term nature of the PFA and its early repayment options caters for the cyclical nature of the vanadium market and enables Bushveld to take advantage of the long-life, high-grade resources we are proud to own at Vametco, for the benefit of all our stakeholders.
"The instrument’s proceeds will go towards the first phase of Vanchem’s refurbishment programme and debt repayment,” says Bushveld CEO Fortune Mojapelo.
He adds that the previous owner of Vanchem, Duferco Participations, has agreed to accept an early repayment of $11.5-million of its $23-million convertible loan notes issued in accordance with the terms of acquisition announced on October 23, 2019.
Of the $11.5-million, $6.5-million will be repaid through the issue of new Bushveld shares and $5-million of the loan notes, while interest of $1.15-million will be settled as a cash payment.
Mojapelo says this puts Bushveld in an even stronger financial position with a solid balance sheet.
“While there are certain conditions and approvals outstanding, this total funding solution provides us with flexibility around our capital expenditure plans, which we were forced to review as a result of the Covid-19 pandemic.
"Once again, the relatively small amount of investment required for such a large uplift in production, vindicates our strategy of acquiring these brownfield processing facilities over the past several years, allowing us to ramp up production quicker and at a lower capital intensity than what would be required to build such capacity from greenfield investments,” he notes.
For the half-year ended June 30, Bushveld earned revenue of $43.1-million, impacted by the continuing lower pricing environment, as well as lost production owing to the Covid-19 pandemic.
Total lost revenue as a result of Covid-19 was $9.2-million, while the costs associated with hygiene, screening, protective and preventative measurements amounted to $400 000.
Net cash used in investing activities reduced to $5-million, to conserve cash during a period of supressed vanadium prices and uncertainty surrounding the impact of Covid-19.
Cash and cash equivalent was $24.6-million as at period-end, including a revolving credit facility of R125-million and term loan of R250-million.
The London Metal Bulletin ferrovanadium price averaged $25.70/kg in the period, 54% lower year-on-year.