Joel’s Resource Report (18 Oct 2019) – a #VAST opportunity!

Joel’s Resource Report (18 Oct 2019) – a #VAST opportunity!

The last week’s news flow in resources has been about as exceptional as my portfolio’s performance – uninspiring. But one company whose shares have experienced vertical lift-off is Vast Resources (VAST).

My plan with this article is to look at what investors get for VAST’s £53 million market cap.

Overview

VAST Resources is an AIM listed mining company with projects in Romania and Zimbabwe. I used to own VAST shares but ended up selling at a loss at 0.57p in 2018. I viewed the company’s prospects as substantially diminished due to cash flow issues and an unhelpful Romanian government.

(source: Google)

More recently, I thought that VAST’s market cap already priced in a lot of the good news – especially given warrants that are hundreds of percent in the money. But let’s explore it in more detail.

Financing

VAST has had funding issues since the previous loan provider opted not release tranche 2 of VAST’s facility in January. VAST should shortly be announcing a $13.5 million facility, enabling it to replace the previous lender.

Andrew Prelea, CEO, discusses the financing here:

Baita Plai Polymetallic Mine

Baita Plai is an 80% owned polymetallic mine in Romania and is the original reason I invested in VAST. Baita Plai has a “1,800,000 tonne copper-silver-zinc-lead- gold-tungsten-molybdenum ore body at 6% copper equivalent (Russian Reserves and Resources Reporting System) within the mining licence area”.

Bearing in mind that a copper grade of only 2% is considered high – this is an incredible resource. The NPV of VAST’s stake in this mine has previously been calculated at US$49.7 million. The Baita Plai mine benefits from:

(Source: VAST)

VAST has had to continue to raise funds for de-watering costs over the past year or two but with financing closed, VAST expect to be in production by Christmas.

Chiadzwa Community Diamond Project

VAST has been in Zimbabwe for many years and used to hold a claim over a diamond mine which was effectively stripped from the company years ago. Zimbabwe has a new, somewhat business-friendly government and VAST has signed a JV agreement with Chiadzwa Mineral Resources, a company designated to represent the Chiadzwa Community interests in the concession. The exact nature of the concession, its size and the agreement have not been announced to the market yet but news could be out by the time this article is released.

Andrew Prelea recently discussed the announcement:

Whilst it’s too early to work out profitability, VAST is estimating revenues of over $53 million per annum:

(Source: VAST)

Other projects

VAST also has a number of different projects in Romania that can be viewed on the company’s website. As they’re not the focus of funds, I view those projects as upside that may be of value in the future.

The fact that VAST have been able to attract financing is a testament to the quality of the projects and management. I started writing this article thinking that VAST shares were completely overvalued, but I do believe that market excitement around the Chiadzwa Community Diamond Project and Baita Plai is warranted

At this valuation, I’d want to have a better understanding of the expected profitability from both operations. What VAST is really worth is a difficult question, at this stage.

A potential issue I see for the company at the PLC level is that SVS securities were the company’s broker and therefore many shares and warrants may be stuck in the administration process. I’ll be keeping an eye on the company’s announcements to try to get an understanding of the future value and wish investors luck!

Till next week!

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