Bushveld Minerals Limited (BMN) Earnings Call Transcript & Summary

Good day, everyone, and thank you for finding the time to join the call today at relatively short notice. I'm Tanya Chikanza, Finance Director of Bushveld Minerals, and I'll be presenting today's announcement. Following our news on the restructuring of the Orion convertible note a few months ago, I'm pleased that today, we are able to announce another important agreement with Southern Point Resources. This new transaction proposes the injection of fresh capital into the business, which will provide the necessary near-term working capital, assist in reducing overall debt and support the business in meeting its short- to longer-term capital expenditure and optimization requirements. While there are several components to the proposed investment, I'll briefly summarize the main ones. Firstly, our new partners, Southern Point Resources, will provide us with an interim working capital facility of ZAR 150 million. That's approximately $8.1 million. This will be directed towards the Vanchem plant to alleviate Bushveld's cash flow constraints whilst the other transactions are still underway. This facility will be offset against proceeds from the sale of Vanchem and Mokopane. Secondly, Southern Point Resources will purchase 50% of the subsidiary that owns Vanchem as well as our 64% controlling stake in the Mokopane greenfield project for a total of $25 million. Thirdly, Southern Point Resources have agreed to provide $12.5 million as an equity investment into the company at the same equity subscription price as Orion Mining Finance. Fourthly, a new marketing and sales agreement of $25 million to $30 million and that with Southern Point Resources will carry out all marketing and sales of product for Bushveld has been entered into. Some existing marketing arrangements expire at the end of December 2023 but accommodate the frame agreements we have with our important customers, we are making arrangements to extend this to the end of December 2024. And all parties are on board in this regard. Additionally, Southern Point Resources have agreed on a potential future investment of between $7 million and $10 million in Vanchem for the recommissioning of Kiln 1 to increase output and reduce overall unit costs, providing a pathway for the group to increase production beyond the base case and therefore, add further value. Upon completion of the transaction, Bushveld Minerals will continue to manage the Vanchem operation with the assistance of the technical team of Southern Point Resources. Bushveld and Southern Point Resources will endeavor to utilize their respective areas of expertise to ensure continued business improvement at Vanchem. Future synergies were also arise from Vanchem being able to access a steady supply of slag with high vanadium content as a feedstock mix from the Highveld Steel Industrial Park based on the resuscitation of the Highveld Steel plant [ waste ] new owners. Finally, going back to the Orion agreement that we announced, we continue to work towards closing this transaction before the November due date. Thank you for your time, and I'd like to pause now to take questions.

[Operator Instructions] And our first question comes from Marina Calero from RBC Capital Markets.

Can you please give us more details about the marketing and sales agreement you have signed? In particular, can you give us more color about what kind of commissions you will be paying to SPR?

Thanks, Marina. The marketing agreements are competitive to what we already have in place. So what will benefit from this arrangement, obviously, is coming as a package is that the facility is $25 million to $30 million. So that is an upscale and really takes into account the improvement we expect to see around production in the medium to longer term, which can accommodate those kind of levels. But in terms of commissions, they're competitive. They're on a pretty similar basis.

Okay. That's very helpful. And one more if I may, is there any lockup period for the equity investment of $12.5 million?

The equity, we're going to do documentation around that. And so in the process of all that, we will be looking at all those kinds of [ legwork ] -- really do you expect to use the same commercial basis that would ordinarily prevail for a company that's listed on the London Stock Exchange.

[Operator Instructions] We will now take our next question from Thomas Martin from BNP.

I had a few questions. I think, first of all, the working capital facility requires consent, I think, from the existing funders, presumably Orion is an important part of that. So I just wondered, have they already been presented with this plan? Or is today the first that they're hearing of it? I was trying to understand if you have any insight just to their views around it.

No, they're very much aware of it, so we are working through those consents. So I mean our stakeholders are very important to us, and we have endeavored to make sure that they are working with us in this process.

And in terms of the, yes, dilution impact for existing shareholders, obviously, the Orion debt conversion price is [indiscernible] and more so push the today's announcement perhaps? Is it -- will we get any more certainty around about that price before the November due date that you're working towards on the overall Orion refinancing? Or do we just need to wait until that's completely finished before we're certain on the price?

Yes, I think it's -- we are working all these transactions at the same time, and the fact that we've actually stated that this $12.5 million will come in at the same price is what Orion is coming in speaks to that. So I guess as we conclude the Orion and conclude this, it will be on a similar basis.

Perfect. And does that mean that the working capital facility is obviously up-front to the remainder of today's transaction? Is that anticipated to complete before year-end? Or do you think that, that part will actually be 2024?

No. We are working to complete that before year-end. And I think the market, therefore, is that fact that Orion is -- the Orion amount is due end of November. And so we're looking to conclude Orion around that time. So you certainly expect to see a lot of this process to be completed by then.

Okay, perfect. In today's announcement, I guess you're noting that you're selling, I think, half of Vanchem and Mokopane interest for $25 million. So I guess are you able to discuss the rationale and valuation around that? I guess do you think that the current market price for the remaining stake is effectively $25 million? Did you market or consider marketing Vanchem stake more broadly?