South Africa-focused miner Bushveld Minerals Limited (LON:BMN) has agreed a deal with Wogen Resources Limited that will provide the funds needed to buy Strategic Minerals Corporation.
Bushveld, which has vanadium, titanium, iron ore, tin and coal assets, said Wogen will provide US$9.0mln in financing to its subsidiary Bushveld Vametco Group, which will be partly used to fund the acquisition of its 78.8% interest in Strategic Minerals from Evraz Group.
The financing includes a US$3.0mln product prepayment as part of a debt package for the acquisition and inventory and receivable funds of US$6.0 million to support the operations of newly acquired Vametco Alloys Limited.
Bushveld Vametco agreed to buy Strategic Minerals from Evraz last year for US$17.2mln, saying it expects the deal to be complete at the end of March 2017. The deal has secured unconditional approval from the Competition Commission.
Wogen will also become a marketer and distributor of newly acquired Vametco Alloys Limited’s production of Nitrovan, a vanadium-nitrogen product used to lower the strengthening costs of alloy steels.
The five-year agreement is conditional on the successful completion of the acquisition and provides for the full repayment of the prepayment facility by the end of 2018.
“The Wogen Agreement not only takes us a step closer to completing the transformational acquisition of Strategic Minerals but also provides important working capital finance for Vametco Alloys,” said Fortune Mojapelo, chief executive of Bushveld Minerals.
SP Angel said in a note to investors its a "major transaction" for Bushveld, which highlights the "robust nature" of the business at current vanadium prices.
The broker added: "Wogen’s support for Bushveld is significant for it provides finance and sales support for vanadium product from the Vametco Alloys plant. It looks like a good opportunity for Wogen and Wogen’s financial backing is good for Bushveld as it finalises the debt package to complete the acquisition. Our recent site visit and discussion on costs and sales support our view that the project offers significant upside based on current vanadium prices."
Last week Strategic Minerals and Sojitz Noble Alloy's agreed to waive their respective pre-emptive rights over shares Bushveld will purchase through the deal. The waivers were part of the conditions that had to be fulfilled for completion of the transaction.
Fortune Mojapelo, Bushveld’s chief executive, said confirmation of the waivers of pre-emptive rights by SMC and Sojitz was one of the most important hurdles to cross.
"We look forward to securing the Department of Mineral Resources' Ministerial consent to the Transaction in terms of section 11 of the Mineral and Petroleum Resources Development Act, of 2002."
Shares jumped 16.92% to 5.20p in early trading.
-- Adds details of acquisition, broker comment share price reaction --