Bushveld Minerals is a vanadium producer in South Africa. Credit: LuYago via Shutterstock.com.

South African vanadium producer Bushveld Minerals has announced a binding term sheet with Southern Point Resources Fund I (SPR) to divest its Vanchem processing plant for a maximum consideration of $40.6m (R755.05m).

The deal consideration includes an initial $20.6m and a deferred amount ranging from $15m to $20m.

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Proceeds from the sale will address Bushveld Minerals’ immediate working capital requirements and ensure the ongoing operations of the company.

The company said it has weighed all financing options including additional equity issuance.

However, due to its stock trading below par value, the option was not considered feasible.

It has been seeking additional funding to pay creditors and maintain sufficient working capital for its operations.

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In line with this, SPR has consented to increase the interim working capital facility secured against production at the Vanchem plant by an additional $9m, from the initial $8.1m.

Bushveld received an initial advance of $3m on 3 May 2024. SPR is set to provide further advances of $5m and $1m on 31 May and 30 June 2024, respectively, subject to certain conditions.

Additionally, a $3.5m payment will be made upon the closing of the disposal.

The deferred payment will be made quarterly but is subject to a minimum annual payment of $5m.

The completion of the transaction is dependent on finalising the documentation, obtaining Bushveld shareholder approval and receiving competition Tribunal approval, anticipated by the end of July or early August 2024.

This deal replaces previous terms for a 50% stake sale in Vanchem.

Bushveld CEO Craig Coltman said: “The extension of the working capital facility provides vital funds to continue as a going concern.

“The proposed sale of Vanchem will enable the group to move forward in a more agile and lean manner and help pay down our creditors.

“Further details will be provided in due course but absent this funding the company would have had no option but to apply for business rescue.”