Diversified mineral development company Bushveld Minerals Limited (LON:BMN) is set to move into vanadium production in South Africa through a reverse takeover.
The Aim-listed company has been granted exclusive rights for a six-week period to negotiate the acquisition of Evraz Group's 78.8% economic interest in Strategic Minerals Corporation (SMC), a holding company that owns the producing Vametco vanadium mine and plant in South Africa.
As this acquisition would count as a reverse takeover under Aim's rules, Bushveld's shares will remain suspended until either an admission document is published or the proposed acquisition is called off.
Vametco, which has assets on the western limb of the Bushveld complex, is one of only two vanadium producing operations in South Africa. It is free of debt and cash generative, Bushveld Minerals said. Bushveld intends to pay for the acquisition in cash.
In return for being granted an exclusivity period, Bushveld has placed US$500,000 on deposit that will become payable to Evraz if, at the end of the exclusivity period, Bushveld has not executed a sale and purchase agreement but Evraz has.
The exclusivity agreement also grants Bushveld a right of first refusal with regard to any competing offers received by Evraz during the exclusivity period and a for further period of three months. Furthermore, if, during the exclusivity period, Evraz gives effect to an equity investment in SMC, the disposal of its interests in SMC or the disposal of any of the group's assets, Evraz will pay to Bushveld a break fee of US$500,000.
“The proposed acquisition is transformational for the company and is exactly in line with our strategy of building our vanadium platform. Vametco is a low-cost producing asset with an established management team who have collectively worked across all the vanadium processing plants in South Africa. The asset, located adjacent to our recently acquired Brits vanadium project, offers a unique opportunity to acquire a producing asset at a small fraction of the cost of a similar greenfield asset,” said Fortune Mojapelo, chief executive officer of Bushveld Minerals.
"We have undertaken significant due diligence on this asset for over the past 15 months and will now advance funding opportunities to meet the initial payment on 12 May 2016. We look forward to updating shareholders on the proposed acquisition in due course," he added.