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.