Bushveld Minerals Limited (LON:BMN) has completed its long-awaited acquisition of a 78.8% stake in Strategic Minerals Corporation, transforming it into a "significant player in the global vanadium market".
Strategic is the Evraz subsidiary that owns the Vametco open pit mine and processing plant , which is already next to to Bushveld's Brits Vanadium project in South Africa.
Bushveld has shelled out US$16.466mln, which it notes is "substantially" less than the cost of a greenfield mine and plant of the same capacity.
A delighted chief executive of Bushveld Fortune Mojapelo told investors: " Vametco is a high quality, low cost operation with a strong management team that combines extensive experience in primary vanadium production.
"We are particularly pleased to have acquired such a quality operation for what we believe is a very low price relative to its value in use to Bushveld."
Vametco already boasts reserves of JORC 27 million tonnes (Mt) with some of the highest in-magnetite vanadium pentoxide (V2O5) grades in the world, averaging of 2.55% vanadium pentoxide in magnetite.
These are sufficient to support operations for 24 years at current production levels.
There is scope to expand production capacity relatively quickly from 2,750 to 3,340 tonnes Vanadium per year, Bushveld said.
Bushveld has financed the deal via a fee cash payment to Evraz of US$1.646 million and a bridge loan of US$11mln from The Barak Fund SPC.
There is also a $3mln financing agreement with Wogen Resources Limited and a cash contribution of US$820,000 from Bushveld and Yellow Dragon Holdings Limited.
In addition to vanadium nitride for the steel industry, Vametco produces a vanadium oxide product more suited to batteries.
Broker Shore Capital said the deal was made the more pleasing due to dollar vanadium prices, which have returned to more reasonable levels than 2016’s lows, and continue to rise, and a significant weakening of the rand, thanks to the antics of President Zuma and the ANC.
"Bushveld appears to have timed its transaction well, initiating the Vametco acquisition at ‘bottom’ prices and completing it just as prices and the rand have turned in its favour. With luck, this trend will continue," said analyst Yuen Low.