Major South African mining company enters business rescue

Bushveld Minerals and its related companies have entered business rescue, unable to pay debts when they become due.
The company is a major primary, upstream vanadium producer that owns mines and processing plants. Its clientele includes steel and chemical producers.
However, on 15 November 2024, Bushveld Minerals SA (BMSA), Bushveld Vametco Holdings Limited (BVH) and Bushveld Vametco Alloys Limited (BVA) entered business rescue.
The directors of the company conducted investigations into the financial affairs of the group, finding operations to be in financial distress.
The group was unable to pay its debts when they became due within the following six months.
BMSA is indirectly 100% owned by Bushveld Minerals. It generates no income and is entirely reliant on management fees charged to BVA and/or BVH to fund its operating costs.
BVA is a wholly-owned subsidiary of BVH, and the issued shared capital of BVH is as follows:
- 74% by Bushveld Vanadium 1 Proprietary Limited, which is indirectly 100% owned by Bushveld Minerals;
- 26% by Bushveld Minerals.
The group said that BVA’s financial distress follows historically high creditor balances, which required a surplus of cash over and above that generated by operations to reduce long outstanding amounts.
Due to the creditor challenges, procurement of goods and services has been from non-preferred suppliers, impacting both price and quality.
Moreover, sustained depressed global vanadium markets reduced the revenue to an amount below the cost of production.
This generated losses every month for the year leading up to the business rescue application.
An ageing plant with machinery that has not been appropriately maintained at the required level due to a shortage of funds has also led to breakdowns and loss of production, creating additional costs and lost revenue.
The resultant future cash flows of BVA remain challenging and the going concern is uncertain.
BMSA and BVH’s financial distress comes amidst challenges in receiving management fees and other inflows from BVA that allow them to sustain their operations.
The resultant future cash flows of both BMSA and BVH also remain challenging and the going concern is uncertain.
Chances of recovery
Despite the company’s problems, capital inflows of at least US$15 million (R290 million) are due to BVA in the next three years from the sale of assets by the Bushveld Minerals group.
There are also trade debtor balances over US$7 million (R13 million) that will become due and payable to BVA.
The business rescue application also notes that BVH and BVA’s asset value and deposits are valued way below the replacement costs making the business potentially very attractive to buyers.
The vanadium price also showed encouraging increases from the start of October.
Various global trade and geo-political factors indicate that this increase would continue until the vanadium price rose to $40, which would turn the companies profitable.
At least two interested third parties have also expressed interest in investing in BVA’s business.
That said, no binding offer had been received by the business rescue commencement.
The business rescue proceedings are expected to afford the companies time to allow their business rescue practitioner, Matuson Associates, to meet with potential investors/purchasers.
This would result in a better return for creditors and shareholders than the immediate liquidation of the companies, the practitioners said.