Bushveld receives another tenuous lifelineHow does this sound? Your company is desperately short of cash. A white knight appears and offers you $21.3-million for a 50% stake in one of your assets. The white knight can’t come up with $12-million it has promised as part of a separate deal and after numerous delays cobbles together a loan, not cash. Meanwhile, the government is dragging its feet on approving the stock sale. You are down to almost your last million and now the white knight agrees to pay the $20.6-million it still owes you for the 50% stake plus a “deferred consideration’ of $15- to $20-million in return for 100% of your asset. The white knight has a lousy track record, but you say OK.This is the deal Bushveld Minerals has announced for the sale of Vanchem, one of its two vanadium operations in South Africa. Bushveld says it had no other choice. The sale is subject to shareholder approval, and shareholders are unlikely to be thrilled that Vanchem, not Vametco, is being put forward to attract cash. Bushveld overpaid for Vanchem in 2023, paying $53.5-million for a high-cost operation that was in receivership. Vametco had a horrendous first quarter, but it is a slightly lower-cost production facility that produces vanadium nitride, a value-added product.Bushveld announced that it had secured additional funding to provide immediate working capital relief and ensure continuity of operations at Vanchem and Vametco. Bushveld has agreed to sell 100% of Vanchem to Souhern Point Resources (SPR) for up to $40.6-million, with an initial consideration of $20.6-million and a deferred consideration of $15- to $20-million. This deal replaces the November 2023 agreement to sell 50% of Vanchem to SPR for $21.3-million.Because Bushveld is short of cash to pay creditors and continue operations, SPR has agreed to increase funding available through the interim working capital facility secured against Vanchem’s production. Bushveld received an initial advance of $3-million on May 3. SPR has agreed to advance a further $5-million on May 31 and a further $1-million on June 30, 2024.So, the initial payment for Vanchem of $20.6-million will consist of: $8.1-million working capital provided by SPR in September 2023, $9-million in additional working capital and $3.5-million on the closing of the Vanchem sale. Deferred consideration of between $15- to $20-million shall be paid by SPR to Bushveld using 25% of the distributable free cash flow of Vanchem for three years following the closing date of the Vanchem sale. The deferred consideration will be payable quarterly but subject of a minimum payment of $5-million per year paid as quarterly cash payments of $1.25-million amounting to a total nominal cash value of $15-million over the three years. The maximum payment will be $20-million. In additional to shareholder approval, Bushveld will need approval from the South African Competition Tribunal.BY ALICE AGOOS
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