24 May 2024

Bushveld Minerals Limited

("Bushveld Minerals", "Bushveld" or the "Company")

Shareholder Correspondence and Questions & Answers

Summary:

The purpose of this announcement is to:

·     Provide an update on the proposed disposal of Vanchem and to respond to the published Open Letter from BVI;

·     Confirm that the Board has explored multiple alternative funding options;

·     Provide the rationale as to why any alternative proposal is not possible; and

·     Re-emphasise the probable consequences of the Vanchem Disposal (as defined below) not being accepted by Shareholders.

Bushveld Minerals Limited (AIM:BMN), the primary vanadium producer, notes the recent open letter ("Letter") by Business Venture Investments No 1833 (Proprietary) Limited ("BVI") dated 18 May 2024 regarding the recently announced agreement to dispose of 100% of Vanchem ("Vanchem Disposal" or the "Transaction") to Southern Point Resources Fund I S.A. LP ("SPR").

The Letter raised certain matters which the Company believes to be factually incorrect or potentially misleading and the Board of Bushveld (the "Board") wishes to provide further context and correct them to ensure the shareholders are fully informed of the background to the Vanchem Disposal and the financial position of the Company.

Less than 8 weeks ago, the Company sought to engage BVI along with other major shareholders on such matters and made it clear that further near-term funding would be required. At that time, BVI declined to sign a Non-Disclosure Agreement and this prevented the Company from sharing more detailed information with BVI. After the meeting, BVI also indicated that the BVI shareholders were not prepared to invest further equity into the Company, nor did they want to suffer dilution through an equity raise at Bushveld's currently low share price. Subsequently, and having heard the response from BVI, SPR and Orion put forward proposals to the Board; these were then negotiated to the point where a binding term sheet was signed with SPR, which was the subject of the Circular sent to shareholders on 13 May 2024 ("Circular").

In the alternative proposal that BVI outlined in the Letter and to which we respond in further detail below, we note that BVI has indicated the basis upon which Acacia has offered to settle its equity subscription where they remain in default, which default is the subject of pre-action legal correspondence. It is not clear to the Company in what capacity BVI and Mr Chipane are acting on Acacia's behalf and have the authority to be able to make such an offer.

The Board further notes BVI's stated intention to vote against the Vanchem Disposal, which could result in immediate business rescue or insolvency. Through both processes, shareholders are unlikely, in the context of the Company's debt position, to achieve any value.

The Company has prepared the following answers to the points raised in the Letter in order to assist BVI to reconsider their voting intentions.

1.   Why can SPR vote their shares at the upcoming general meeting given that they remain in default of their subscription agreement?

The Company has taken appropriate local legal advice and is acting in accordance with it. SPR's right to vote is not tied to receipt of the subscription funds, but rather to the issue of shares, which were issued as fully paid. The subscription monies owed, as first announced on 03 January 2024, are classified as a short-term receivable on Bushveld's balance sheet until they are received. In specific reference to clause 78 of the Company's Articles, the amount owing under the subscription agreement is not owing "in respect of these shares" but is a separate standalone debt.

The US$12.5 million loan which has been provided on an interest free, non-refundable and unsecured basis (to be repaid once SPR provides Bushveld with the entire US$12.5 million pursuant to the SPR subscription agreement) is a debt. SPR is treated as an equity holder in relation to their equity and a debt holder in relation to their debt.

There is nothing contravening South African foreign exchange regulations, the Company articles or the AIM Rules for Companies which prevents SPR from voting.

2.   The proposed Vanchem disposal does not give Bushveld any additional cash in the near future than the original 50% Vanchem sale.

The proposed sale of Vanchem will enable the Group to move forward in a more agile and lean manner without incurring the additional Vanchem near term losses, capital expenditure requirements or consequential Vanchem working capital demands. From July 2024 until the Closing Date, SPR has committed to advance a loan to Vanchem of up to US$8 million for working capital purposes and for critical capital expenditure, where such requirements were previously incurred by the Group on behalf of Vanchem. SPR's deferred consideration constitutes a minimum of US$15 million (12 quarters of US$1.25 million) but could be up to US$20 million. It will be payable quarterly in arrears commencing on the Closing Date. This means that part of the deferred consideration will be unlocked as early as Q4 2024, with potential for further upside exposure to Bushveld and its shareholders over the 3-year deferred consideration term, if in aggregate the distributable free cashflow is positive and exceeds the minimum quarterly payments of US$1.25 million.

In Summary, the structure of the Vanchem Disposal preserves Bushveld's underlying going concern asset value, significantly reducing the ongoing financial burden of a loss-making enterprise at the prevailing vanadium prices which are down US$10/kgV since June 2023, and allows the Company's balance sheet resources focus to be on the Vametco turnaround, unlike the original 50% Vanchem sale.

3.   The proposed Vanchem disposal is irrational and unreasonable in the context of a pending completion of the sale of 50%, whose only remaining condition precedent for completion is approval of the transaction by competition authorities.

Under the original proposal to sell 50% of Vanchem, Bushveld would likely, given the current cash position, need to suspend all operations for an indefinite period of time, given that the vanadium market has shifted dramatically against the Company compared to the time when the original agreement with SPR was entered into. With the Vanchem Disposal, SPR is going to advance Vanchem a loan for the ongoing costs of Vanchem in the interim period, including creditors and working capital, while concluding Competition Commission approval, which will reduce Bushveld's financial burden associated with running Vanchem and only be repayable in the unlikely event that the Transaction doesn't close.

The Company originally expected the proceeds from the Vanchem 50% sale to have been received by February / March 2024. The approval by the Competition Authorities ("CA") was significantly deferred when SPR's lawyers were informed by the CA that the threshold for the transaction constituting a large merger was breached when they considered the financial information of SPR's shareholders in combination with the financial information of the Bushveld Group. This was not foreseeable by the Company in advance of the submission and added additional complexity and hence delay. In addition, the Company was informed that the Minister of Trade, Industry, and Competition would participate in the transaction review, which has again extended the timeframe. These events were beyond the control of Bushveld and have delayed vital funds that would have allowed the business to normalise creditors and significantly improve its working capital position. Under South African law, the transaction cannot complete without the CA approval, meaning the Company has had to rely on loan advances from SPR. The Company has been advised by the authorities that it will not be possible to accelerate this process and a decision is expected in July/August 2024.

4.   The proposed Vanchem disposal removes from Bushveld a key growth asset. which is key to lowering the Company's unit costs while leaving Vametco and therefore Bushveld shareholders saddled with the debt.

Under the Vanchem Disposal, the current Vametco / Vanchem subordinated inter-company loan shall be equitized ahead of drawing down any advance from SPR. Given that this is an inter-company balance which is consolidated into the accounts of the Company without impacting upon the cash flow or balance sheet of the Company, this loan has no relevance to the financial standing or liquidity of the Company. Further, the primary reason for the inter-company balance has been the continued loss-making and urgent capital needs of Vanchem. This was known to BVI and was done in order to prevent Vanchem entering into insolvency proceedings or care and maintenance.

Without further funding, Vanchem may be required to consider filing for business rescue or liquidation. In the face of these challenges, full recovery of the Vanchem loan is therefore not a likely outcome. However, the proceeds of the Vanchem disposal will be applied to paying down the inter-company loan balance to Vametco.

5.   The financial consequences of the Vanchem disposal outlined in the Circular are selective and do not present a complete picture for shareholders to vote with.

The Board disagrees with the statement and has included relevant financial information in respect of the asset for sale as well as post transaction balance sheet information on Bushveld Minerals. In particular, the Circular clearly states that "Without further funding, Vanchem and/or Vametco may 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."

6.   There are better alternatives that could have been pursued and were likely not.

As part of the initial SPR investment process, the Company undertook an extensive outreach programme to interested parties. The Company has explored all viable funding options, including the sale of the energy and coal assets. The Company has also considered the issuance of further equity; however, as a result of the Company's share price trading below par value and limited shareholder support, this was not a viable option, given the immediate need for funding and the absence of any investors willing to advance funds other than Orion an SPR.

Once the original SPR investment (50% Vanchem disposal) was agreed and the Orion restructuring was implemented, all security of the Company, as well as the off-take of the Company had been pledged to secure these transactions. As such, in the very limited time available and given the entrenched nature of the incumbent investors in SPR and Orion, it was not possible to secure viable alternatives, and the amount required to secure the future of the Company was beyond what existing shareholders would be willing to provide, given the appetite and participation in the last round of funding.

Alternative Proposal

BVI has no authority to speak on behalf of Orion and SPR (and the Board questions BVI's authority to do so for Acacia) in respect of its alternative proposal and the material additional risk that Orion and SPR would need to assume through such a proposal.

Furthermore, as part of BVI's alternative proposal, there is no suggestion of a proposal that does not include substantial funding from SPR and Orion and which includes any contribution of risk capital by BVI.

Therefore, the only solution for shareholders remains the Vanchem Disposal which would provide Bushveld with sufficient capital to:

·     Meet the short-term funding requirements of Group to continue as a going concern;

·     Focus the financial resources on the Company's most valuable asset, Vametco, enabling the turnaround plan to be executed;

·     Eliminate the burden of Vanchem's working capital requirement; and

·     Allow Bushveld to have some residual exposure to value upside in Vanchem.

The Company has been completely transparent about the distressed state of the business and the immediate need for funding without delay as well as advising that the timing of the original SPR- Vanchem transaction being contingent upon matters that are outside of its control. The Alternative Proposal does not achieve any solution to this, nor does it provide an additional source of capital.

When the Company announced its 2022 financial results in June 2023, it was already clear that the Company could not continue as a going concern unless further funding was brought into the business, and until the existing complex business model was simplified to enable a reduction in the Company cost base.

Since that time, a number of significant actions have been implemented, including:

·     A change in executive leadership within the business;

·     The cessation of ongoing expenditure on non-core operations which were not likely to be income-generating in the short-term;

·      A reduction of 40% of the head office cost base;

·      A turnaround plan executed at Vanchem which has enabled an improvement in production volumes and reduced the monthly operating losses;

·      A plan to exit the non-core business units including Energy and Coal assets;

·      More than US$25m of new capital being introduced into the business, including an amount of US$8.1m in September 2023 and then an amount of US$3m on 1 May 2024, both amounts being funded at short notice by SPR based upon a signed term sheet when no other capital was available from other parties and where such capital was critical for the Company to remain operational and a going concern.

Despite all of the above actions, the Company has had to endure a collapse of US$10/kgV in the Vanadium price since June 2023 and this has resulted in ongoing operational losses due to production challenges and cashflow constraints.

Furthermore, the Board recognises that these difficult decisions required compromises in the strategy of the Company; however, they were taken in the best interests of the Shareholders and Group as a whole, taking into account the difficult circumstances the Company was faced with at each point in time.

The Board will continue to meet its fiduciary responsibilities to the Company and once the proposed Vanchem Disposal is completed, that will inevitably lead to a different construct of the Board and any changes that occur will be done in an orderly and AIM-compliant manner to ensure the stability of the Company.

Conclusion

The Vanchem Disposal would further allow Bushveld to focus its management and financial capacity on a single asset, Vametco. In Summary, the structure of the Vanchem Disposal preserves Bushveld's underlying going concern asset value, significantly reducing the ongoing financial burden of a loss-making enterprise at the prevailing vanadium prices which are down $10/kg since June 2023, and allows the Company's balance sheet resources focus to be on the Vametco turnaround.

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 will likely to lose a substantial part or all of their investment. The Company therefore again urges all shareholders to support the disposal transaction at the forthcoming General Meeting.

The Company has prepared a Q&A document dealing with further questions regarding the Proposed disposal of Vanchem that the Shareholders may have for the Company, which will be available on the Company website at: www.bushveldminerals.com

Craig Coltman, CEO of Bushveld Minerals Limited:

 "I'd recommend all shareholders to vote in favour of the Vanchem Disposal on the basis of the information laid out in the Company's circular dated 13 May 2024 as I and other members of the Board intend to do in respect of our own shares."

ENDS

Enquiries: info@bushveldminerals.com

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