BUSHVELD Minerals has raised $35m in convertible loan notes after private equity firm, Orion Mine Finance, subscribed for the entire amount.
The agreement represents a vote of confidence in Bushveld Minerals because Orion Mine Finance had previously agreed to buy $20m of the loan notes.
In return for the risk of placing the loan notes with a single holder, Bushveld has extracted a floor conversion price for the notes of 17 British pence per share.
Previously, Orion Mine was entitled to convert at 130% of the weighted average share price up to a maximum of 25p/share meaning, at today’s opening price of Bushveld Minerals, Orion Mine would have been able to convert at 12p + 30% equal to a total of 15.6p/share.
“That variable conversion does spook people a little bit, there are obviously ways to convert that favours the share price, but I think a fixed number does make things easier for Bushveld going forward,” said Oliver O’Donnell, head of research at broker, VSA Capital in London.
The impact is that at a 17p/share price, Bushveld Minerals’ downside is limited should its share price fall under pressure. At 17p/share, the subscription is a 39% premium to Bushveld’s closing share price as at November 6.
“While we did receive widespread interest from other investors in the Instrument, Orion’s willingness to upsize its investment in line with the terms of its existing commitment made them the natural investor for the entire $35m,” said Fortune Mojapelo, CEO of Bushveld.
Orion Mine Finance, a subset of Orion Resource Partners, has some $6.2bn under management.
The conversion agreement is part of a larger recapitalisation of Bushveld’s balance sheet in which Orion Mine provided a production financing agreement totalling $30m which is linked to production and revenue performance. The investment is guaranteed with the asset and company shares. It helps Bushveld Minerals pay down existing debt and secures production at its flagship Vametco facilities to an expanded level of about 4,200 mtV annually.
Bushveld Minerals plans to expand its South African vanadium production to 8,400 tons a year (mtV) from 2,931 mtV in its 2019 financial year.
All in all, its expansion ambitions carry a $100m price tag. It spent $53m last year buying the Vanchem facilities from a rival company. It also has the Mokopane vanadium resource that it wants to develop.