Earlier this year, Bushveld Minerals (BMN) chief executive Fortune Mojapelo suggested to us that “cash elephant” might be a more accurate description of his company’s Vametco mine in South Africa. With vanadium prices soaring, “cash cow” simply didn’t cut it.
Now, in a further stretch of the mammalian analogy, Bushveld has an elephant in the room. Specifically, industrial action at Vametco, which began on 5 September and has resulted in a walkout of workers and a halt to production. The action surrounds a union demand for cash in lieu of an employee share options scheme, a dispute that Bushveld claims was settled in May, when bargaining workers were paid ZAR20,000 (£2,000) as compensation for “historical payments that could have been paid” had a share scheme been in place.
Bushveld has sought to emphasise the unprotected and apparently illegal nature of the strikes, although it remains in dialogue with the union and has committed to a new employee share scheme.
On Wednesday, at the recommendation of its Nomad, and following a court order for all striking employees to return to work, the miner provided an update on the strikes 15 minutes before the market closed. Predictably, the shares sold-off.
The next morning, investors awoke to news that Bushveld had acquired the 21 per cent it did not own in SMC, which in turn owns three-quarters of Vametco. In exchange for the stake, which lifts Bushveld’s holding in the mine from 59.1 to 75 per cent, seller Sojitz agreed to be paid $20m (£15.3m).
Shares in the miner leapt almost a fifth on the morning to 23p, and it’s not hard to see why. Vametco made ZAR521m in cash profits in the first half of 2018, which suggests that Sojitz has sold out for around two times annualised (and uninterrupted) earnings before interest, tax, depreciation and amortisation. At the time of writing, Sojitz had not responded to a request for comment on the apparent fire-sale price.
By Alex Newman
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