Market Abuse Regulation ("MAR") Disclosure

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR. 

13 May 2024

Bushveld Minerals Limited

("Bushveld" or the "Company")

Posting of Circular and Notice of General Meeting

Bushveld Minerals Limited (AIM: BMN), the primary vanadium producer, announces that the Company has published a Circular (the "Circular") in connection with the Proposed disposal of Vanchem and notice of general meeting is being post to Shareholders today. The General Meeting will be held at at 10.00 a.m. (UK time) on 31 May 2024 at Oak House, Hirzel Street, St Peter Port, Guernsey, GY1 3RH.

The Circular and Form of Proxy can be accessed on the Company website:  www.bushveldminerals.com/investors/meetings/

A comprehensive Q&A document, answering questions posed to the Company since the release of the announcement has been drafted and will be available in the coming days on the Company's website: www.bushveldminerals.com 

For those shareholders that hold their Bushveld shares through a broker or other intermediary (non-registered/ beneficial shareholders), a completed voting instruction form should be deposited in accordance with the instructions printed on the form by no later than 10am (UK time) on 29 May 2024. Please contact your broker or intermediary for further instructions on how to vote, including through electronic means where available.

The Company and the Board of Directors consider that the Resolution is in the best interests of Shareholders as a whole and unanimously recommend that Shareholders vote in favour of the resolution, as they intend to do so in respect of their own beneficial holdings of 6,094,142 Ordinary Shares, representing 0.26 per cent. of the existing issued ordinary share capital of the Company at the upcoming General Meeting.

In addition to Southern Point Resources' (SPR) 330,687,830 Ordinary Shares (representing 14.31% of the Existing Ordinary Shares), the Company has received irrevocable undertakings from certain shareholders holding in aggregate 262,649,673 Ordinary Shares (representing approximately 11.37% of the existing Ordinary Shares) to vote in favour of the Resolution.

Enquiries: info@Bushveldminerals.com

LETTER FROM THE CHAIRMAN

Dear Shareholder

Proposed disposal of Vanchem and Notice of General Meeting

1. INTRODUCTION

On 7 May 2024, the Company announced that it had entered into the SPR Term Sheet to secure additional funding to provide immediate working capital relief to the Group, and ensure continuity of the Group's operations. The Company and relevant members of the Group have now entered into the Definitive Documents which implement the terms of the SPR Term Sheet.

Pursuant to the Vanchem SPA, the Group has conditionally agreed to sell the entire issued share capital of Vanchem for a total consideration of up to US$40.6 million, comprising an initial consideration of US$20.6 million and a deferred consideration of between US$15 million and US$20 million. The proposed terms of the Vanchem Disposal replace those announced by the Company on 20 November 2023 for the sale by the Company to SPR of a 50 per cent interest in Vanchem. Due to the relative size of the transaction, pursuant to AIM Rule 15, the Vanchem Disposal is conditional, amongst other things, upon Shareholder approval.

The Company requires additional funding to pay creditors and ensure that it has sufficient working capital to fund ongoing operations. SPR also agreed to increase the existing funding available from it through the interim working capital facility secured against production at the Vanchem plant (previously announced on 11 September 2023) from c.US$8.1 million by a further US$9 million, each of which amounts will be set off against the price payable by SPR for the Vanchem Disposal. The Company drew down and has already received an initial advance of US$3 million of this additional amount on 3 May 2024. SPR has agreed to advance a further US$5 million on 31 May 2024 and a further US$1 million on 30 June 2024, subject to certain conditions.

Additionally, the Company is in discussions with Orion pursuant to which Orion has indicated, on a non-binding basis, that it will, subject to certain conditions (including completion of the Vanchem Disposal), provide further funding to the Group by matching the additional funds paid by SPR on a $ for $ basis up to a maximum of US$10 million. Further details are set out on paragraph 5 of this letter.

The Company has sought South African legal advice from business rescue and insolvency law legal practitioners (the Insolvency Practitioners) on the question of the solvency of Vanchem and Vametco, in light of the Proposals, the details of which were shared with the Insolvency Practitioners. It was noted by the Insolvency Practitioners that, in the view of the Company's management team, if the Proposals were implemented the funds expected to be received would be sufficient to (i) cover outstanding debt obligations (including overdue creditors); and (ii) meet working capital requirements to continue operating. The advice received from the Insolvency Practitioners, based on this information was that (assuming the Proposals were implemented as expected) the Directors were not, at this time, obliged to take steps to put Vanchem and/or Vametco into business rescue, but that this would not be the case in the event that circumstances changed. Accordingly, the advice of the Insolvency Practitioners was that if the Proposals were not implemented then further advice would be required and that putting Vanchem and/or Vametco in to business rescue would be highly likely. As Vanchem and Vametco are the income generating operations of the Group, if they were to go into business rescue it would be likely that the Company would be forced to consider administration. The Proposals can only be implemented in the event that the Resolution is passed at the General Meeting.

In the event that the Resolution is not passed the Proposals will not proceed, and the Company will be forced to consider administration as, if no alternative funding becomes available immediately, Vanchem and/or Vametco would be required, pursuant to the South African Companies Act, 2008, to consider filing for business rescue or liquidation which may, depending on the circumstances, result in a total loss of income for the Group, and Shareholders are therefore likely to lose a substantial part or all of their investment.

The purpose of this Circular is to provide you with the details of, background to and reasons for the Proposals and to explain why the Directors believe that they are in the best interests of the Company and its Shareholders as a whole.

The action that you should take to vote on the Resolution, and the recommendation of the Board, are set out in paragraphs 10 (Action to be Taken) and 14 (Recommendation), respectively, of this letter.

2.      INFORMATION ON THE GROUP

The Group is a primary vanadium producer. It is one of only three operating primary vanadium producers in the world. In 2023, the Group produced more than 3,700 mtV.

The Group's principal vanadium operations are the Vametco vanadium mine and processing plant which it first acquired an interest in during April 2017, and the Vanchem production facility, a primary vanadium producing facility with a beneficiation plant capable of producing various vanadium oxides, ferro-vanadium and vanadium chemicals, acquired in November 2019.

The Company is in the process of divesting its interest in CellCube, a vanadium redox flow battery manufacturer and has started the process of looking for additional investors for Bushveld Electrolyte Company (Pty) Ltd.

3.      CURRENT TRADING AND PROSPECTS, AND RATIONALE FOR THE PROPOSALS

As announced by the Company on 23 April 2024, in the Q1 2024 Operational and Corporate Update, the Company's working capital was extremely tight for a number of reasons including:

(i) the continued delay in receiving funds from the equity fundraising undertaken in December 2023;

(ii)    delay in the completion of the Vanchem 2023 Disposal and the Pamish Disposal (Disposals) due to delays in obtaining the approval from the South African Competition Tribunal, initially anticipated for February 2024, but which is now expected in July/August 2024 as the Vanchem 2023 Disposal is treated as a "large" application in respect of which the Minister of Trade, Industry and Competition (South Africa) has exercised his discretion to participate;

(iii)   vanadium production levels being materially affected; and

(iv)   notably weaker vanadium prices (declining between 10% to 17% year to date across different markets).

Accordingly, as previously disclosed to Shareholders, the Company is dependent on the receipt of further funding to continue the Group's operations.

The Company has explored various available funding options, including the issue of further equity. However, as a result of the Company's share price trading below par value this was not a viable option within the required timeframe. Accordingly, the Board has determined that in order for the Company to continue as a going concern, having consulted with certain key stakeholders, the only viable option to bring in immediate funds is through an increased working capital facility with SPR and to sell its remaining interest in Vanchem on the proposed terms with SPR set out below.

4.      DETAILS OF THE SPR ARRANGEMENTS

Pursuant to the SPR Term Sheet and the Definitive Documents the Company has conditionally agreed on (inter alia) the following:

(i) the sale to SPR of the entire issued share capital of Vanchem for a total consideration of up to US$40.6 million pursuant to the Vanchem SPA; and

(ii)    SPR to advance, as a loan to Vanchem, between US$5 million and US$8 million for working capital and essential capital expenditure, which will be repayable, with interest at 15% per annum either (a) by Vanchem 3 months after the closing date of the Vanchem SPA or such later date as SPR and Vanchem may agree to in writing; or (b) in the event that the conditions (as set out below) to the Vanchem Disposal are not satisfied and the Vanchem Disposal does not complete, the date falling 3 calendar months after it becomes clear that the conditions will not be met, being in the event (inter alia) that (i) the Resolution is not passed at the General Meeting or (ii) the Competition Tribunal Consent is refused, or such later date as may be agreed between the Company and SPR.

Vanchem Disposal

The proposed terms of the Vanchem Disposal replace those announced on 20 November 2023 for the sale by the Company to SPR of a 50 per cent interest in Vanchem.

The total consideration for the Vanchem Disposal will be up to US$40.6 million, comprising:

(i)   an initial consideration of US$20.6 million consisting of:

·      the US$8.1 million working capital facility received in September 2023;

·      an additional US$9 million working capital facility of which:

o   US$3 million was received on 3 May 2024;

o   US$5 million can be drawn down on 31 May 2024;

o   US$1 million can be drawn down on 30 June 2024;

·        a US$3.5 million payment on the date of the closing of the Vanchem Disposal (Closing Date);

(ii)    a deferred consideration of between US$15 million and US$20 million payable quarterly in arrears over a term of three years commencing on the Closing Date (the Term) equivalent to 25% of the distributable free cash flow of Vanchem during the Term subject to:

·      a minimum payment of US$5 million per annum paid in quarterly cash payments of US$1.25 million each, amounting to a total cash value of US$15 million over the Term; and

·      a maximum payment of US$20 million over the Term.

The Vanchem Disposal is conditional on (inter alia):

(i)    such conditions as are customary in a transaction of a nature similar to the Vanchem Disposal;

(ii)    the passing of the Resolution at the General Meeting;

(iii)   Orion consent to the SPR Arrangements; and

(iv)   Competition Tribunal Approval, which is expected at the end July 2024/beginning of August 2024.

If the conditions are not met and the Vanchem Disposal does not complete, then the US$3 million advanced on 3 May 2024, together with any other payments received by the Group from SPR will be repayable on the same basis as the US$$8.1 million advanced in September 2023 under the working capital facility described in RNS No 9925 published by the Company on 11 September 2023.

The Vanchem Disposal will constitute a related party transaction pursuant to AIM Rule 13 and a fundamental change of business pursuant to AIM Rule 15.

In the event that the Resolution is not passed the Proposals will not proceed, and the Company would be forced to consider administration as, if no alternatively funding becomes available, Vanchem and/or Vametco would be required, pursuant to the South African Companies Act, 2008, to consider filing for business rescue or liquidation and Shareholders are therefore likely to lose a substantial part or all of their investment.

5.      DETAILS OF THE ORION 2024 FINANCING PACKAGE

In 2020, the Company agreed the Orion 2020 Financing Package, which was restructured on the terms of the Orion 2023 Financing Package as announced in November 2023.

The Company is currently in discussions with Orion with a view to:

(i) agreeing a further funding package, on an indicative and non-binding basis as at the date of this Circular, which would result in Orion providing further finding of up to US$10 million in cash on the basis that Orion's investment would match $ for $ the additional monies from SPR (up to an aggregate of US$10 million); and

(ii)   to explore all possible solutions regarding the repayment of the first tranche of the US$28.3 million term of US$7.1 million due by 30 June 2024. The Company is confident that it will reach a favorable solution for its shareholders and both parties.

The Orion 2024 Financing Package remains subject to the execution of definitive documents, which will be conditional on (inter alia) SARB approval and the passing of the Resolution.

A further announcement will be made in connection with the Orion 2024 Financing Package in due course.

6.      FINANCIAL EFFECTS OF THE PROPOSALS AND USE OF PROCEEDS

Based on unaudited management accounts for the year ended 31 December 2023, Vanchem reported sales of ZAR843.0 million (approx. US$45.7 million) (31 December 2022: ZAR 603.6 million (approx. US$ 36.9 million)), loss before tax of ZAR595.0 million (approx. US$32.2 million) (31 December 2022: ZAR688.7 million (approx. US$42.1 million)) and net assets of ZAR578.7 million (approx. US$31.1 million) (31 December 2022: ZAR1,054.8 million (approx. US$62.1 million)). The net assets decreased in 2023 primarily due to an increase in borrowings and trade and other payables and decrease in property, plant, and equipment.

Following completion of the Proposals, the Company will no longer consolidate Vanchem into its consolidated accounts. The profit on the Vanchem Disposal is estimated to be approximately US$5.2 million. On Completion, the Board intends to use the cash proceeds from the Vanchem Disposal to pay certain outstanding liabilities including, but not limited to, trade creditors, and to incur necessary capital expenditure on the Vametco assets.

Following Completion, assuming the Orion 2024 Financing Package is agreed, the Company will have available facilities and cash resources of US$8 million and net debt of US$90 million (total debt US$105 million less SPR owing for Vanchem US$15 million). According to the Company's internal working capital forecast, assuming unconstrained production and an average selling price of US$30/kgV at an exchange rate of R19:US$1 for the period May to December 2024, the Company will have sufficient working capital to sustain operations.

7.       STRATEGY FOLLOWING COMPLETION

The Company's strategy for Vametco will be focused on optimising operations by right-sizing the organisation to ensure that Vametco is a cash generating asset, by maximising value through operational efficiency and strategic cost management, organic growth and exploring growth opportunities in the vanadium market. The Company will streamline operations and enhance productivity through a focused capital expenditure and planned maintenance programme, while maintaining a strong focus on safety, environmental stewardship and social responsibility.

8.      RISKS

One of the Company's principal risks is working capital, which includes going concern and insolvency risks, all rated as high risks. This resulted from the financial challenges that the Company has been facing over time, due to low vanadium prices and the low share price, affecting the Company's ability to generate cash and to raise capital, respectively. It is critical that Shareholders approve the proposed disposal of Vanchem to ensure the continuity of the business and operations, as failure to obtain the required approval on time will significantly increase the risk of insolvency materialising, meaning that all operations may have to be suspended.

The future profitability, cashflow generation and viability of the Group will be dependent upon the market price of Vanadium. The volatility of the vanadium price is a risk that the Company monitors constantly.

Like all commodities, the vanadium price is affected by global market volatility and demand and supply fundamentals. A significant decrease in the vanadium price would have a material adverse effect on the Company's business, financial condition and results of operations.

The Company's assets, earnings and cashflows are affected by a variety of currencies. Most of the Company's revenue is in USD, and majority of the Company's costs are in Rand; hence, a significant strengthening of the Rand could impact the Company's earnings and cash flow generation. The Group does not enter into hedging arrangements with respect to foreign currency.

The Group's profitability and cashflow will depend on Vametco's operations. Planned production may not be achieved, or may be achieved at lower levels than envisaged, as a result of unforeseen operational problems and other disruptions resulting in reduced, or in extremis, no production at site. There is no assurance Vametco will be able to continue to operate profitability which would matierally adversely affect the Company's financial condition and prospects.

A description of other principal risks and uncertainties associated with the Group's business and how they are being managed is included in the Group's Annual Report and Financial Statements for the year ended 31 December 2022.

9.    GENERAL MEETING

In order for the Proposals to be put into effect the Resolution needs to be passed by the Shareholders at a general meeting and accordingly the Company is now convening a General Meeting for 10.00 a.m. on 31 May 2024 to consider and, if thought fit, pass the Resolution.

The Resolution must be passed either (i) on a show of hands by a simple majority of those Shareholders present in person or by proxy and voting or (ii) on a poll by those Shareholders (present in person or by proxy and voting) holding a simple majority of the Ordinary Shares voted, in each case, at the General Meeting.

It is intended that the votes on the Resolution will be taken as a poll in order that those Shareholders voting by proxy are properly accounted for.

Resolution

The Resolution, if passed, will approve the Vanchem Disposal for the purposes of Rule 15 of the AIM Rules, which in turn will allow the SPR Arrangements and the Orion 2024 Financing Package to be implemented.

Record Date

Pursuant to Regulation 41 of the CREST Regulations, the Company specifies that only those members registered on the Company's register of members at the Record Date (or, if the General Meeting is adjourned, at 6:00 p.m. on the day two days prior to the adjourned meeting) shall be entitled to attend and vote at the General Meeting.

10.  ACTION TO BE TAKEN

Shareholders will find enclosed with this Circular a Form of Proxy for use at the General Meeting. Whether or not Shareholders intend to be present at the meeting, Shareholders are requested to complete and return the Form of Proxy in accordance with the instructions printed thereon in the envelope provided so that it arrives at Link Group, PXS 1, Central Square, 29 Wellington Street, Leeds, LS1 4DL as soon as possible and in any event so as to be received by post or by hand (during normal business hours only) not later than 10,00 a.m. on 29 May 2024. Completion and return of the Form of Proxy will not prevent Shareholders from attending and voting at the meeting should they so wish.

Alternatively, you can submit a proxy vote online via the Link Investor Centre app or by accessing the web browser at https://investorcentre.linkgroup.co.uk/Login/Login. To be effective, the proxy vote must be submitted so as to have been received by the Company's registrars no later than 10.00 a.m. on 29 May 2024.

CREST members who wish to appoint a proxy or proxies through the CREST electronic appointment service may do so for the General Meeting by using the procedures described in the CREST Manual. CREST personal members or other CREST sponsored members, and those CREST members who have appointed (a) voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. In order to be valid the appropriate CREST message (a CREST Proxy Instruction) must be transmitted so as to be received by the Company's agent by no later than 10.00 a.m. on 29 May 2024.

Proxymity Voting - if you are an institutional investor you may also be able to appoint a proxy electronically via the Proxymity platform, a process which has been agreed by the Company and approved by the Registrar. For further information regarding Proxymity, please go to www.proxymity.io. Your proxy must be lodged by 10.00 a.m. on 29 May 2024 in order to be considered valid or, if the meeting is adjourned, by the time which is 48 hours before the time of the adjourned meeting. Before you can appoint a proxy via this process you will need to have agreed to Proxymity's associated terms and conditions. It is important that you read these carefully as you will be bound by them and they will govern the electronic appointment of your proxy. An electronic proxy appointment via the Proxymity platform may be revoked completely by sending an authenticated message via the platform instructing the removal of your proxy vote.

11.  IRREVOCABLE UNDERTAKINGS

In addition to SPR's 330,687,830 Ordinary Shares (representing 14.31% of the Existing Ordinary Shares), the Company has received irrevocable undertakings from certain shareholders holding in aggregate 262,649,673 Ordinary Shares (representing approximately 11.37% of the existing Ordinary Shares) to vote in favour of the Resolution.

12.  RELATED PARTY TRANSACTION

SPR, as a substantial shareholder in the Company (as defined by the AIM Rules), is a related party of the Company. Accordingly, the Vanchem Disposal to SPR constitutes a related party transaction pursuant to AIM Rule 13. The independent directors for the purposes of the transaction, being the whole board, having consulted with the Company's nominated adviser, consider that the terms of the transaction are fair and reasonable in so far as the Company's shareholders are concerned.

13.  Q&A

In order to assist Shareholders, the Company has prepared a "Frequently Asked Questions" document, dealing with questions regarding the Proposals that Shareholders may have for the Company. An announcement as to where this can be located will be announced separately.

14.  RECOMMENDATION

The Directors consider that the Resolution is in the best interests of Shareholders as a whole and unanimously recommend that Shareholders vote in favour of the Resolution as they intend to do in respect of their own beneficial holdings of 6,094,142 Ordinary Shares, representing 0.26 per cent. of the existing issued ordinary share capital of the Company.

If you are in any doubt as to any aspect of the proposals referred to in this Circular or as to the action you should take in respect of them, you should seek your own advice from your stockbroker, bank manager, solicitor, accountant or other professional adviser duly authorised under the FSMA if you are in the United Kingdom, or another appropriately authorised independent adviser if you are in a territory outside the United Kingdom.

Yours sincerely

Michael Kirkwood

Independent Non-Executive Chairman

ENDS

ABOUT BUSHVELD MINERALS LIMITED

Bushveld Minerals is a primary vanadium producer, it is one of only three operating primary vanadium producers, with a diversified vanadium product portfolio serving the needs of the steel, energy and chemical sectors.

Detailed information on the Company and progress to date can be accessed on the website www.bushveldminerals.com