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UPDATE - Bushveld eyes early production on tin tailings deal; secures £2.85mln funding package

Bushveld Minerals agreed to acquire the majority of a tin tailings dump that could be the catalyst for early production from its Mokopane project in South Africa.

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--ADDS CEO COMMENTS FROM PROACTIVE INTERVIEW, BROKER REACTION--

Bushveld Minerals (LON:BMN) agreed to acquire the majority of a tin tailings dump that could be the catalyst for early production from its Mokopane project in South Africa.

It made the announcement as it revealed the details of flexible, equity-funded facility that will give it access to up to £2.85mln.

Bushveld will pay £559,470 for 87% of the Zaaiplaats tailings, estimated to contain between 2,600 and 4,500 tonnes of tin.

Chief executive Fortune Mojapelo said: "Having commenced a technical work programme on the Zaaiplaats Dump, including a review of historical data and additional mineralogical and metallurgical test work, we have begun to understand the potential of, and to de-risk the asset.

A technical due diligence and evaluation of the old tailings dumps, set to take two months, started on March 20.

“The optionality to secure the asset looks sensible, but this will delay the tin scoping study for at least two months during the due diligence period,” said Craig Foggo, an analyst at RFC Ambrian. “Should Bushveld exercise its option to acquire the tailings, the tin scoping study would be delayed beyond 3Q14,” he added. 

The Zaaiplaats tin tailings dump is located close to, and between the Groenfontein and the Zaaiplaats hard rock deposits, on which Bushveld already has a combined 18,477 tonne contained tin resource. Mojapelo said that the location “gives Bushveld scope to add an early tailings-first production scenario to our Mokopane tin project, with the potential of materially enhancing the economics of the Mokopane Tin Scoping Study.

“This is in line with our stated strategy for Bushveld's tin platform to consolidate a critical mass of contained tin inventory while pursuing opportunities for early production."

Separately, the group said agreed a funding package with Darwin Strategic, which has subscribed for 50mln shares at 5.7p each.

Darwin will sell the shares when told by Bushveld and buy back tranches of redeemable subscription notes held by the AIM-listed mine developer.

Mojapelo said the notes provide Bushveld “ultimate control and flexibility” of its financial needs.

“The discretion belongs to Bushveld in terms of the number of shares and in terms of the timing of those shares being sold,” he told Proactive Investors. “By doing that we are not at risk of another party shorting our stock,” he said, adding that he was also confident that the structure entails no stock overhang.

“All redemptions are done at Bushveld's discretion, at market prices without applying historical weighted averages and discounts, with Bushveld retaining 100% economic interest in the shares,” he explained.

“The terms enable the company to capitalise on high liquidity and share appreciation windows via an efficient capital raising platform."

Ambrian has a 5.5p price target and a “speculative buy” recommendation. Bushveld was trading at 5.47p on Tuesday.

Quick facts: Bushveld Minerals Ltd

Price: 20.35 GBX

LSE:BMN
Market: LSE
Market Cap: £234.63 m
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