Bushveld gets 21% discount on Vanchem deal amid price lag
Bushveld Minerals negotiated a 21% discount on its purchase of Vanchem in SA because of a sluggish vanadium price, and pushed out the completion of the deal by a week.
Bushveld, which is traded on London’s Alternative Investment Market and intends listing in Johannesburg after it has concluded the Vanchem transaction, lowered the price and payment terms for the assets because the price of ferro vanadium has stayed stubbornly below $40/kg since May 2019, when it announced the deal.
Bushveld and the sellers have agreed to lower the price to $53.5m from $68m, with Bushveld paying $30m cash and the balance in unsecured convertible loan notes.
“The renegotiation of the Vanchem acquisition is a masterstroke for Bushveld and is a textbook deal from a management perspective,” said John Meyer from SP Angel, which is the financial adviser and broker to Bushveld.
“The revised payment terms enable Bushveld to retain an additional $38m of cash, which would have been used for the acquisition within its balance sheet. This cash can be used as equity to support further debt funding to build the Mokopane vanadium mine [about $20m] and recondition parts of the Vanchem process plant,” he said.
Bushveld intends more than doubling its output of vanadium to 8,400 tons a year and the purchase of Vanchem allows it to cheaply and quickly develop its Makopane deposit.
Bushveld produced 2,560 tons of vanadium from its Vametco operation near Brits,
North West in 2018. The operation is planned to produce 4,200 tons, while Vanchem will produce a similar amount.
Ferrovanadium is used to harden steel, as well as make it strong and noncorrosive, while vanadium electrolytes are used in batteries that can be repeatedly discharged and recharged without losing performance.
Bushveld intends being active in both applications and is building a vanadium electrolyte plant in East London,
ENERGY STORAGE
During a speech to unveil the new Integrated Resources Plan 2019, SA’s energy road map, mineral resources and energy minister Gwede Mantashe spoke of vanadium as one of the minerals coming from SA that would “play a critical role in the global energy storage sector”.
State power utility Eskom has deployed a vanadium-based battery, provided by Bushveld, as part of a range of tests in its strategy to improve its electricity supply to the country.
“The revised terms ensure the transaction remains competitive and allows the group to continue executing on its growth plans even in a volatile price environment,” said Bushveld CEO Fortune Mojapelo.
“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,” he said.
Bushveld is buying the Vanchem assets from Vanchem Vanadium Products, a subsidiary of Duferco, as well as the South Africa Japan Vanadium business from a company called VVP.