Vast opportunities for Vast Resources
“…But if Vast can sustain its momentum at Baita Plai, turning its concentrate production into steady sales, and its drilling programme into confirmation of an expanded resource, the share price might wake from its slumber later this year…”
Vast Resources (AIM:VAST), focused on establishing a portfolio of assets in Romania and Zimbabwe prospective for copper, gold, silver, zinc, lead and diamonds, has flown under the market’s radar over the past year, despite making solid progress at its flagship project.
Led by Chairman Brian Moritz, a former chairman at small cap miners Metal Bulletin, African Platinum, and Chromex Mining, and CEO Andrew Prelea, a veteran of the Romanian bulk iron ore and steel trade, Vast’s current focus is its 100pc interest in the Baita Plai Polymetallic Mine in the Apuseni Mountains, Transylvania, an area which hosts Romania’s largest polymetallic and uranium mines.
Baita Plai gets off the ground
Located some 50 kilometres from the country’s largest gold and copper mine, Rosia Montana, which has produced more than 10 million ounces (MoZ) of gold, and Roșia Poieni, which contains over one billion tonnes of porphyry copper ore, Baita Plai is a skarn deposit comprising several veins of calcareous sediments in eight distinct pipes. Vast published a new JORC estimate last October stating a Measured, Indicated and Inferred mineral resource of 608,000 tonnes of 2.58pc copper equivalent, with an initial mine production life of approximately three to four years. After upgrading the mine’s infrastructure the company commenced copper concentrate production last October, making its first commercial sale the following month.
Vast published a new ‘mechanised mine plan’ for Baita Plai this March, setting out how the modern infrastructure and technology the company continues to bring to the mine – including three load haul dump loaders, two Resemin Muki 22 long hole drilling rigs, and a Tomra XRT Ore processing and sorting machine, overseen by a expanded mine management team – would allow it to increase mining capacity by 65pc in contrast to a labour intensive programme.
The plan targets 124,500 tonnes of ore and 6,286 tonnes concentrate this year, and 237,300 tonnes of ore and 9,580 tonnes concentrate in 2022. Vast aims to ramp up net revenue from $17.2m in 2021-2022, to $34.7m in 2024-2025, and net operating cashflow from $4.9m in 2021-2022 to $21.9m in 2024-2025. The company expects the mine’s total valuation of more than $100m to underwrite future debt investment, but says the current plan will be funded from cashflow without recourse to fundraising. Vast is undertaking exploratory drilling to confirm an enlarged exploration target of up to 5.8 million tonnes (Mt) while continuing concentrate production.
According to the company’s most recent operations update, published earlier this week, Vast is ‘currently on schedule’ to meet operational cashflow projections to April 2022 in accordance with the revised mechanised mine plan. The mine’s infrastructure has undergone significant refurbishment – detailed in a separate RNS released on the same day – and the company continues to sell concentrate to its offtake partner. Amidst the positive news the announcement did however mention that the company has appointed another new General Manager at Baita Plai, the third person to hold the role in a matter of months, an ongoing development prospective investors might want to keep an eye on.
Alluvial diamond prospect in Zimbabwe
The company’s other primary interest is the Chiadzwa Community Concession in Marange, Zimbabwe, ‘widely regarded as the world’s richest alluvial diamond deposit.’ The project is at a much earlier stage than Baita Plai. Vast signed a Joint Venture Agreement in 2019 with Chiadzwa Mineral Resources Ltd, a company designated to represent the interests of the Chiadzwa community in the concession. The partners, constituted as Katanga Mining Ltd, are currently negotiating a further Joint Venture Agreement with Zimbabwe’s state owned diamond company. Little further information is available about the project so far, Vast simply stating that discussions with Zimbabwe regulators are ongoing.
Additional interests in Romania
The company has a cluster of additional interests in Romania beyond Baita Plai, the most significant being an exploration licence, secured last summer, for the Manaila-Carlibaba Project, comprising the Manaila Polymetallic Mine (currently on care and maintenance) and the Carlibaba extension project.
The 138.6 hectare Manaila-Carlibaba exploration licence contains a JORC 2012 compliant Measured and Indicated Mineral Resource of 3.6 Mt grading 0.93pc copper, 0.29pc lead, 0.63pc zinc, 0.23 g/t gold and 24.9 g/t silver with Inferred Mineral Resources of 1.0 Mt grading 1.10pc copper, 0.40pc lead, 0.84pc zinc, 0.24 g/r gold and 29.2 g/t silver. Vast’s preliminary studies indicate the potential for a new open pit mine to exploit mineral resources approximately 125 metres below surface, and a smaller higher-grade underground mine below the open pit mineral resources. The company plans to progress the mine ‘towards reopening following Baita Plai and the Chiadzwa Community Concession entering peak production.’
Vast has a 29.41pc interest in the Blueberry Gold Project, a 7.285 sq km brownfield area of prospectivity in Romania’s ‘Golden Quadrilateral’, a site with significant areas of polymetallic prospectivity (copper, zinc and lead coupled with particularly high gold and silver) that has produced approximately 55 MoZ of gold. Legacy data indicates prospectivity for gold and polymetallic mineralisation with sample values of up to 22.4 g/t of gold. A drilling programme and assaying is underway to deliver gather information to support an Inferred JORC Mineral Resource for gold and other polymetallic minerals including silver, copper, lead and zinc in one or more of several distinct breccia pipes.
Vast also has two licences in the Zagra-Telciu region, the 21 sq km Magura Neagra prospecting permit, which historic data indicates offers an exploration target of up to 3,000 Mt of ore, at grades ranging from 0.4 to 0.8pc copper and 0.3 to 0.5 g/t gold, and the adjacent 10 sq km Piciorul Zimbrului prospect, comprising six previously identified veins with associated copper and gold mineralisation.
Financing progress
Vast’s Baita Plai programme is backed by a £4.85m fundraise undertaken last December. The placing was designed to support an asset backed financing facility, but the deal with an ‘international banking institution’ fell through early this year when the prospective financier said it was ‘unable to proceed with the approval of transaction until the completion of certain corporate restructuring’ deemed necessary following the expansion of Vast’s portfolio and operations last year.
The company stated in its most recent interim results, for 1 May 2020 to 31 October 2020, that it ‘remains committed to seeking cheaper and strategic financing.’ The report, reflecting the company’s planning and expenditure prior to the commencement and sales of concentrate production in October, stated a cash balance at the end of the period of $239,000 (2019: $1.216m), and a retained deficit of $108,453 (2019: $103,948). The company achieved a 70pc decrease in losses after taxation from continuing operations, recording $1.040m (2019: $3.524m).
Following the breakdown the financial facility agreement Vast announced a significant capital restructuring in April, reducing the number of its existing ordinary shares by a factor of 100, converting 21,300,489,402 existing ordinary shares into 213,004,895 new ordinary shares and 2,343,053,845 new deferred shares. The number of ordinary shares the company previously had in issue was considerably higher than that of similarly sized AIM companies, and with its relatively low share price the company had ‘been advised that the share structure is inappropriate for an AIM company and needs to be rectified’. Vast expects the subdivision will improve the marketability of the company’s shares to institutional investors, and facilitate the possibility of future dividend payments.
Earlier this week the company announced another placing worth a gross £1,762,539.81, which will bridge mining and operational costs at Baita Plai to cover any short term revenue loss caused by disrupted shipping schedules forcing a combined shipment of concentrate produced across July and August 2021, and provide seed capital for the pipeline projects in Romania and Zimbabwe discussed above.
The new placing will also support the restructuring of a $6.5m convertible loan the company has with Atlas Special Opportunities LCC. The bond will be reconstituted as a longer-term straight debt facility. The raise will allow Vast to pay $1m now: the existing equity linked convertible bonds repayable on 29 January 2022 will become a traditional senior secured loan with a fixed price premium with repayment postponed to 30 June 2022. Vast says the restructuring eliminates the risk of bond conversion at the company’s current low share price.
The ongoing commodities boom
As CEO Andrew Prelea noted in the January interim report, Vast’s focus on copper puts the company in good position to contribute to the green energy revolution which TMS has discussed at length in our June and February features on the ongoing commodities boom, and in many of our company profiles. Though the shine has come off gold somewhat this year following last year’s exceptional performance, the price of the yellow metal has held up reasonably well – see our recent articles on Greatland Gold and Lexington Gold – and as ever stands in the sidelines as an go-to hedge against the possibility of higher inflation and continued Covid uncertainty.
As noted, Vast’s interest in the Chiadzwa diamond concession, is a longer term bet but the diamond market is also showing clear signals of picking up after a slump that predated the pandemic. Diamond jewellery sales in the US, the world’s largest market, were 30pc up through March to May as compared to the same period in 2019, and prices for rough diamonds rose 14.5pc through June, helped by the world’s largest diamond miners cutting supply by around a fifth to pre-Covid levels in order to support prices. Increased sales by luxury good companies such as LVMH and Watches of Switzerland indicate consumers are switching from ‘experiential luxury’ spending on intangibles like holidays to ‘material luxury’ spending.
If it is to realise Chiadzwa’s potential Vast will have to hope the project can establish itself amidst Zimbabwe’s chronic political and economic turmoil. Four years after President Emmerson Mnangagwa replaced long-time dictator Robert Mugabe brutal crackdowns on dissent against the ruling Zanu-PF party have continued, prompting even erstwhile ally South Africa to consider joining the US in imposing financial sanctions on the country’s elite.
And although Romania, keen to continue to develop its infrastructure, offers a much more stable environment, Vast was forced to assuage possible industrial unrest at Baita Plai earlier this summer when ‘a small group of underground miners’ opposed to the terms of a collective bargaining agreement negotiated between the company ‘presented themselves at the Baita Plai Administration Offices in opposition to the formal negotiation process’. The negotiations ‘were subsequently concluded without interruption to to either the due process or the Company’s mining operations.’ Vast says it pays 25pc more than the average for Romania’s mining sector and will increase benefits for the workforce, now nearly 300 strong, by a further 15pc over the next two years.
Looking ahead
Although material progress has been made at Baita Plai, Vast stocks have subsided over the past year or so, falling away from 22.5p last August to just over 7p at the time of writing. For all its seeming promise the Chiadzwa concession is at negotiation stage in a volatile jurisdiction. The new Manaila-Carlibaba Project is just a prospect for now. And the market will want to see Baita Plai’s mining plan turn into a run of solid results. And in the absence of a stable financing facility the company seems reliant on placings to support its debt obligations and fund future development beyond the current Baita Plai programme.
Right now Vast Resources is another mining small cap asking investors to take a leap of faith. But if it can sustain its momentum at Baita Plai, turning its concentrate production into steady sales, and its drilling programme into confirmation of an expanded resource, Vast’s share price might wake from its slumber later this year.
