Vast Resources PLC

http://www.vastresourcesplc.com/ TICKER: VAST     EXCHANGE: AIM

Vast Resources has transitioned from an exploration company to a mining company, with a portfolio of high quality assets. In the short-term, the Company is focused on optimising mining operations at the Manaila Polymetallic Mine in Romania and exploring and developing the proximal area with the objective of establishing a multi-pit mining operation and new metallurgical processing complex.

LATEST REPORTS

 
Q1 2018. Stripped back, ready to rock
Published: May 09 2018

A mixed bag for Vast this quarter. Production at Manaila was impacted severely by the planned winter plant shut-down, with mining and processing throughput well down. However, the green shoots of recovery were evident post-period end, with an increase in copper ore and concentrate grades, and concentrate production already running close to the target quarterly run-rate.  Pickstone hit a record gold production quarter despite very high pre-stripping and heavy rainfall. With considerable remedial work undertaken at both operations, the outlook for future quarters finally looks to be on an upwards trajectory.
The planned plant shut-down at Manaila materially affected Q1 2018 production figures. A typical practise in Romania during the severe winter months, but nevertheless frustrating for Vast, with the shut-down masking some of the positive impact of remedial work. The substantial decrease in ore mined and milled resulted in copper concentrate production of 386t, a decrease of 31% from Q4.
Vast did provide a glimpse of post-period performance from mid-March to mid-April, and the impact of remedial work has already made a significant impact. Vast reports that the last 15 days in March the copper grade increased to 0.84% Cu, and for the first 15 days in April, to 0.79% Cu. This was achieved with concomitant increase in copper concentrate grade. For the first 15 days of April, the copper con grade increased to 19.4% - the highest level since the December 2016 quarter.
Record gold production at Pickstone. Despite a reduction in ore mined due to unseasonal heavy rainfall and an exceptionally high level of pre-stripping, total gold production for Q1 was 6,326oz, an increase of 4% over the 6,057oz in Q4. Lower tonnes were offset by higher milled gold grades which increased to 2.78g/t Au, from 2.46g/t Au, the highest milled grade achieved so far, impressive given that mined ore was supplemented with stockpile material.
We have updated our model for the quarterlies and recent events. We have pushed back modelled production at Baita by 6-months to early 2019 pending the licence award. This and the poor quarter at Manaila is off-set by rolling forward our NPVs for Manaila and Pickstone at year end and a better outlook at Pickstone. We incorporate a nominal value ($8.1m) for Vast’s 23.75% economic interest in Eureka, based on our typical $25 EV/oz resource value benchmark for African developers. 
The net result is that our current valuation of Vast increases to 1.19p / share, from 1.03p.
 
Vast has a Eureka moment
Published: Apr 25 2018

Vast Resources plc is an AIM-quoted resource development company that converted from an exploration company to a mining company in 2015, with two operating mines; the Manaila polymetallic mine in Romania (100%), and the Pickstone-Peerless gold mine (25%) in Zimbabwe.

 Vast’s Zimbabwean group company, Dallaglio Investments has acquired a 95% interest in the Eureka Gold mine in Zimbabwe, providing Vast with a 23.75% economic interest in the mine. The acquisition was undertaken at an inexpensive acquisition price of $4.5m and provides a low-cost addition to the company’s portfolio in Zimbabwe. Eureka has a 1.8Mtpa processing plant on care and maintenance offering potential for a low-cost re-start of mining operations.

 Dallaglio, in which Vast as a 25.01% interest, has acquired a 95% interest in Delta Gold Zimbabwe. The purchase price is US$4.485m, plus historical creditors of Delta Gold of $1.8m are to be paid off by a loan to Delta Gold from Dallaglio. This gives Vast a 23.75% economic interest in the Eureka gold mine.

 The US$4.485m purchase price is to be financed by a loan from Sub-Sahara Goldia Investments ('SSGI') to Dallaglio. SSGI has an effective 24.99% interest in Dallaglio and therefore funding for the acquisition has been sourced by Vast's associated entities in Zimbabwe without recourse to Vast. Vast expects that loan repayments to SSGI and finance of Delta Gold creditors can be met by cash flow distributions from the Pickstone Peerless mine.

 This represents the first new acquisition with Vast’s strategic partners in Zimbabwe for several years, fulfilling one of its priorities to pursue new opportunities in both Romania and Zimbabwe using external funding. The acquisition widens Vast’s portfolio in Zimbabwe, through a non-dilutive financing mechanism, and provides a neat use of cash flow from Pickstone, which at present is best used domestically in Zimbabwe. Vast is ahead of the curve there, and with its partners, is well placed to seek out and secure further opportunities. The winds of change are already being felt under the new Mnangagwa regime, and early investor-friendly policy changes have already started to bear fruit.

 Based on the low deal cost and 95% of the 1.37Moz acquired, this equates to a very low acquisition cost of $3.45/oz, or $4.8/oz if you include the $1.8m creditors payment. On any basis we view this as an exceptionally cheap acquisition, coming in well below typical gold space M&A deals ($50-$200/oz) and even below typical African gold discovery costs ($10-$25/oz). Our valuation remains at 1.03p / share, pending quarterly production news.

 
Less to fear now we have seen the nadir
Published: Mar 28 2018

Vast Resources plc is an AIM-quoted resource development company that converted from an exploration company to a mining company in 2015, with two operating mines; the Manaila polymetallic mine in Romania (100%), and the Pickstone-Peerless gold mine (25%) in Zimbabwe. 
It has now executed the financing and off-take deal with Mercuria Energy. The four-year off-take for Manaila and Baita is coupled with a $9.5m finance term sheet. The first $4m tranche has been drawn down allowing Vast to finally crack on with its expansion strategy in Romania.
Vast also released a significant upgrade to the Manaila resource, underpinning a long mine life and justifying the construction of a new metallurgical complex. The financing and off-take is a major achievement and the company’s focus on operations will now intensify.
Both management and shareholders can take a collective sigh of relief as the previously announced $9.5m pre-payment off-take deal with Mercuria was executed on 21st March. Tranche A ($4m) has been drawdown, of which $1.68m has been directed to repay the bridging loan from Sub-Sahara Goldia Investments, which will result in considerable cost savings. Drawdown of Tranche B ($5.5m) remains as per the Term Sheet.
The execution of the term-sheet means that the concomitant off-take agreement with Mercuria is now live, covering up to 100% of the copper and zinc concentrate produced at Manaila and Baita Plai in Romania until April 2022, a 4-month extension from Dec 2021. The off-take will provide a more stable backdrop to support the company’s development, with more beneficial pricing terms than the previous off-take contract, allowing Vast to retain a higher proportion of the value of the concentrate, particularly important at the higher-grade Baita deposit.
On the back of 19 DD holes Vast has also upgraded the Manaila JORC resource, resulting in a 78% increase in open pit tonnes (2.6Mt to 4.6Mt) and a 249% increase in underground tonnes (0.31Mt to 1.1Mt). This implies a LOM in excess of 11-years at 360kpta throughput. Importantly open pit Indicated tonnes have increased threefold, increasing the confidence in the resource. At 0.98% Cu (OP) and 1.58% Cu (UG), the resource grade remains well above the current production grade. 
We retain our current 1.03p valuation for Vast’s shares pending the imminent release of Jan-Mar production results, more clarity on the rejuvenated expansion plan in Romania (now that funds have been secured), and ensuing updates to our model.
 
Gearing up for launch
Published: Jan 26 2018

Vast Resources plc is an AIM-quoted resource development company that converted from an exploration company to a mining company in 2015, with two operating mines; the Manaila polymetallic mine in Romania (100%), and the Pickstone-Peerless gold mine (25%) in Zimbabwe. 
It has announced an off-take offer from Mercuria Energy Trading, one of the largest independent commodities groups globally. The four-year offtake for Manaila and Baita is coupled with a $9.5m pre-payment finance term sheet which should allow Vast to fully repay the Sub-Sahara bridging loan, accelerate debt repayments to Sub-Sahara, and crucially, allow Vast to execute and de-risk its expansion strategy in Romania.  
Mercuria operates in over 50 countries and is a world leader in the trading of physical energy products and bulk commodities. We view the off-take as a strong endorsement of the potential of Vast’s Romanian assets.
Vast has negotiated a four-year off-take deal covering 100% of copper and zinc production from Manaila and Baita, up until December 2021. Positively, Vast indicates that the pricing terms are significantly more attractive than the company’s previous off-take contract. This is particularly good news considering that the off-take covers Baita Plai, where Vast anticipates producing a higher grade, higher quality concentrate than presently produced at Manaila. This means that Vast will retain a higher proportion of the value of the concentrate and benefit accordingly.
It has also entered into an MOU with Sub-Sahara Goldia Investments to repay the company’s existing $1.68m bridging loan, and accelerate repayment of the outstanding $4m loan to be repaid by the end of 2019, 13 months ahead of schedule. This will result in considerable cost savings.
The funding injection would represent an important milestone for Vast, allowing the company to go full-steam ahead on its Romanian expansion plan without creating further dilution for shareholders. The financing will allow Vast to fully fund the two critical strands of this strategy.
As such, we view the off-take and financing package as a considerable achievement for Vast, meeting all the company’s short-term financing requirements in a non-dilutionary way, introducing better off-take terms and reducing future debt-servicing costs. Pending closure, we retain a 1.03p valuation for Vast’s shares.
 
2018 - Year of the litmus test
Published: Jan 22 2018

Vast Resources plc is an AIM-quoted resource development company that converted from an exploration company to a mining company in 2015, with two operating mines; the Manaila polymetallic mine in Romania (100%), and the Pickstone-Peerless gold mine (25%) in Zimbabwe. 
2018 looks to be a pivotal year for Vast as the company seeks to turn Manaila to account, and flip the needle towards being a cash flow positive operation, and re-open Baita Plai. In addition to ironing out operational inefficiencies and ramping up the quantity and quality of concentrate production at Manaila, Vast is chomping at the bit to push the button on a major expansion to unlock the value of its Romanian assets. Financing remains the key to unlocking this plan.
The new CEO Andrew Prelea has plans to cut-costs at the corporate level, always a welcome move in the eyes of shareholders. However, more important in our view, is the raft of planned work underway at all operations to increase production and cut costs. A portion of Manaila’s woes are related to issues we typically see when commissioning new capacity, e.g. inefficiencies in the new zinc flotation circuit.
Talking the talk, is likely to become walking the walk and 2018 should be the year of delivery. In Romania, the focus on cost control and ramping up operations, should provide the backbone to springboard into Manaila’s new metallurgical facility which Vast anticipates will slash operating costs. The final grant of the Baita licence would allow the button to be pushed on mine development. In Zimbabwe, the continually improving political situation, may result in a more favourable outlook for the Group’s assets in the country. 
Our valuation on Vast shares remains at 1.03p, and we see upcoming news-flow that might act as a catalyst to revaluation: December quarter production (late Jan), Carlibaba JORC-resource (Q1), financing and off-take update, grant of Baita Plai Association Licence.
 
Storm in a tea 'coup' ?
Published: Nov 28 2017

Vast Resources is an AIM-quoted resource development company that converted from an exploration company to a mining company in 2015, with two operating mines; the Manaila polymetallic mine in Romania (100%), and the Pickstone-Peerless gold mine (25%) in Zimbabwe.
The military taking control of Zimbabwe last week provided the momentum for a change of leadership, in what some commentators called a coup. Events were not accompanied by violence, and we believe that the seeds of regime change could ultimately be positive for the investment climate and mining sector.
After demonstrations on the streets and the threat of impeachment proceedings initiated by Zanu-PF, the ruling party, Mugabe resigned on November 21st. Mnangagwa subsequently emerged from hiding and was sworn into power on November 24th. Quite how all this plays out for Zimbabwe is hard to quantify, but we view any regime change or power shift undertaken within the framework of the constitution as positive for Zimbabwe.
Vast has also raised £1m at 0.525p/sh via a placing and proposes to raise a further £1.23m at the same price in an Open Offer to shareholders. The funds provide a stop-gap while the company finalises debt finance and other non-dilutionary mechanisms to satisfy its $10m strategic financing requirement. Vast reports that it has started an off-take contract bidding process with metal traders.
We view the end of the Mugabe regime as positive for the mining sector, as it will help to shrug off the heavy risk discount attached to Zimbabwe assets. We value Vast’s Pickstone mine using an onerous 12% discount rate. If we see a tangible decrease in political risk, we would look to reduce our discount rate. Using 8%, our Pickstone NPV increases by 33% to $32m from $24m, based on Vast’s 25% interest.
 
Vast can see clearly now, the rain has gone
Published: Oct 19 2017

Vast Resources plc is an AIM-quoted resource development company that converted from an exploration company to a mining company in 2015, with two operating mines; the Manaila polymetallic mine in Romania (100%), and the Pickstone-Peerless gold mine (25%) in Zimbabwe. 
Vast is on the cusp of emerging from a transitional period. The company is close to securing funds to execute its expansion plans in Romania, which should result in significantly higher production and lower operating costs. The key to this strategy is building a new processing facility for the company’s Manaila mine and developing a second open pit at the Carlibaba prospect.  In Zimbabwe, the construction of the sulphide plant is almost complete, which will also boost gold production and allow higher-grade sulphide ore to be processed.
If Vast successfully ramps up production at Manaila, it will be well-positioned to benefit from the forecast up-tick in copper demand, driven by the global build-out of the electric vehicle industry. It is also raring to press ahead with recommissioning the high-grade Baita Plai polymetallic mine in Romania. With considerable mine infrastructure in place, Vast is targeting a low-capital intensity re-start. The execution of the final association licence now seems to be moving closer, according to Vast’s update released yesterday.
Vast needs up to $10m in further funding to fully execute its growth strategy in Romania. The funds, provided by debt, will be directed towards the construction of a new metallurgical processing facility at Manaila, as well as providing the re-start capex for the Baita Plai mine. A number of funding options are on the table, and the company is evaluating several proposals with the aim of minimising dilution and retaining a greater proportion of the group’s assets in Romania.  Watch this space!!!
We currently value Vast shares at 1p/sh using a sum-of-the-parts valuation method based on our DCF models of Vast’s three main assets. Despite a leap in the shares on the Baita news, this indicative valuation suggests that Vast is still trading at only half our NAV estimate. There should be potential for further value accretion if Vast delivers on its expansion plans, and on the back of higher metal prices.

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