BUSHVELD Minerals, a vanadium mining and processing firm, has outlined plans to refinance its balance sheet in which it will replace a term loan and a revolving credit facility with funding from private equity firm, Orion Mine Finance.
“We are excited to announce the innovative funding agreement with Orion which puts us on track with our expansion plans at Vametco,” said Fortune Mojapelo, CEO of Bushveld Minerals in a statement.
Orion Mine Finance, a subset of Orion Resource Partners, has some $6.2bn under management.
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.
The deal with Orion Mine Finance is for provision of a production financing agreement totalling $30m which is linked to production and revenue performance and 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.
In a separate agreement, Orion Mine Finance has agree to buy up to $20m in convertible loan notes under a $35m instrument which will be pumped into its Vanchem expansion plans as well as debt repayment. Bushveld said it would seek additional lenders to fulfil the balance of the instrument.
The debt repayment is to Nedbank, one of South Africa’s four largest banks. Bushveld said there was an outstanding balance of R375m (about $21.9m) plus accrued interest of $0.3m owed to Nedbank.
It is believed Bushveld has been working on this facility with Orion Mine Finance before the outbreak of the Covid-19 pandemic. However, Covid-19 has been a particular hinderance to the mid-cap and developing mine sector where capital demands are high and cash flow long-dated.
Bushveld Minerals reported an operating loss for the six months ended June of $9.9m, largely informed by stoppages and a depressed vanadium price, down 65% to an average of $24.20/kg. Revenue was subsequently 45% lower year-on-year. The company has cash on hand of $24.6m down from $34m on December 31.
The company downgraded full year production to between 2,700 to 2,850 mtV from a previous guidance of 3,000 to 3,200 mtV.
Mojapelo said that the previous owner of Vanchem, Duferco Participations Holding, had agreed to an early repayment of $11.5m of its $23m convertible loan notes. Of this outstanding amount, $6.5m will be repaid through the issue of new Bushveld shares whilst $5m of the loan notes and interest of $1.15m will be settled in cash.
“This puts us in an even stronger financial position with a solid balance sheet,” said Mojapelo. Shares in Bushveld Minerals have halved in value on the London Stock Exchange since mid-February, prior to the outbreak of Covid-19. The company is capitalised at £126.8m.
