Bushveld Minerals Ltd (LON:BMN) is to take control of the Vametco vanadium project in South Africa through the buy-out of partner Yellow Dragon.
Shareholders will need to approve a reverse takeover that will see Bushveld pay US$11.1mln in cash and shares for Yellow Dragon’s 55% of their BVL joint venture.
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This will give it an indirect interest in the Vametco vanadium mine of 59.1%, compared to 26.6% currently, and enable it to consolidate the results into its financial numbers.
Fortune Mojapelo, Bushveld’s chief executive, said the acquisition completed the miner’s transition into a vanadium producer.
The price of vanadium has soared on predictions that in the future the metal will be an electrolyte in batteries used for electricity storage at power stations.
Mojapelo added: "Vametco has to date illustrated its strong cash generation capacity and, with the expansion initiatives underway, the drive toward a lower cost base which, in a rising vanadium price environment, ensures the transaction is accretive to our shareholders.”
Bushveld acquired its initial stake in April and even then said it had bought the asset at well below replacement cost.
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Vametco has 3.5% share of the global vanadium market currently but there is potential to expand production to more than 5,000 mtV per annum over the next three years.
In the three months to September, production at Vametco was running at an annual rate of about 3,000mtV per year.
Broker SP Angel raised its price target to 14p, adding the ongoing rise in vanadium prices should have a substantial impact on Vametco’s profit through the fourth quarter.
Shares rose 21% to 9.25p.
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