Vanadium: Bushveld finalises the sale of Vanchem

News Analysis




Vanadium: Bushveld finalises the sale of Vanchem

Bushveld Minerals has announced the sale of the totality of its Vanchem assets for a total of up to US$40.8M to Southern Point Resources Fund (SPR), comprising an initial amount of US$20.6M and a deferred payment of between US$15M and US$20M. 

The deal replaced the November 2023 agreement to sell 50% of Vanchem to SPR for US$21.3M. Bushveld’s persistent liquidity issues made the full Vanchem sale necessary to avoid a provisional liquidation. Bushveld paid US$53.5m to acquire Vanchem in 2019.

Vanchem was part of Bushveld's two main operations, producing vanadium pentoxide, ferrovanadium and vanadium chemicals. Vanchem’s feedstock comes from Bushveld’s Vametco mine and third-party purchases. In 2023, Vanchem vanadium production was 1,408t V. The deal leaves Bushveld with the only Vametco mine and processing plant.  In 2023, Vametco’s production was 2,306t V, primarily VN.

Bushveld is also selling its 64% interest in the Mokopane vanadium mine project to SPR for US$3.7M, a sale authorised by the Competition Commission of South Africa (CCSA). The Mokopane mine was initially planned to have a production capacity of 5,300tpy V, to supply feedstock for the Vanchem processing plant.

Bushveld has also entered into a commercial agreement with SPR, in which SPR will carry out all marketing and sales of vanadium products, produced at both the Vametco and Vanchem plants on an exclusive basis. As part of the agreement, SPR will implement a 3.75% marketing fee of the total revenue.

Bushveld's tight liquidity situation was amplified by the drop in vanadium prices throughout 2023. Vanadium pentoxide prices dropped from US$9/lb in early 2023 to US$6/lb at the end of last year, impacted by weak demand in China, due to a poor construction sector, a depressed property market, and a weak macroeconomic environment in the rest of the world, primarily Europe. Another reason has been China’s increasing pentoxide imports from Russia, with China becoming a net pentoxide importer in 2023. The price decline continued in the first part of 2024, for the same reasons, and the vanadium pentoxide price reached a nadir of US$5/lb in April.

Project Blue expects a price stabilisation and a limited rebound in the second part of the year. However, overall, the recovery is likely to be limited in magnitude and depending on macro developments in China and the rest of the world. This subdued short-term outlook for vanadium will certainly make Bushveld’s restructuring process more difficult.