Vast Resources: can the struggling miner really turn things around?
AIM-listed mining company Vast Resources (AIM: VAST) has been taking a beating in the markets, with its share price down 78% to date and rumours floating about its future prospects.
Due to labour constraints, supply chain issues, Covid-prevention measures and geotechnical challenges, the company said that its plans to ramp up production in its Baita Plai polymetallic mine in Romania have been delayed. However, the company said it expects the mine to become profitable by the end of the year, on a monthly basis, but it lowered its revenue forecast to $78m in three years.
In addition to its operations in Romania, the group is also pursuing a diamond mining opportunity in Zimbabwe, where discussions are still ongoing to finalise an agreement for the right to mine. Vast Resources signed a joint venture agreement with Chiadzwa Mineral Resources back in 2019, but a further agreement with the government-backed Consolidated Diamond Company has yet to be concluded as it has faced long delays.
What has Vast Resources been telling investors?
In both locations, Vast Resources has faced some difficulties from Covid-19 and supply issues to legal troubles and historical claims.
The management team, led by CEO Andrew Prelea, tried to appease investors recently, publishing a series of answers to questions it received from shareholders.
In the Q&A, the group said it intends to “demonstrate a continued consistent improvement in our production profile at Baita Plai and rationalise the financing structures in place to support long term share price performance”.
It added: “Baita Plai is an exceptional asset and whilst it has taken longer to move into profitability than originally conceived, the company has overcome challenges…and has translated limited capital expenditure (by usual mining industry standards), into enormous potential value. The fact that the value is not reflected in the share price today, does not take away the fundamental potential value of the asset which should become more evident to the market as the asset progresses towards production capacity.”
Vast Resources also confirmed the existence of some outstanding court cases in Romania but said that they do not pose a risk to the company’s operations.
With regards to the delay in Zimbabwe, Vast said that it cannot publicly comment on it due to various political and legal sensitivities. It added, however, that it remains hopeful of a positive outcome.
In Zimbabwe, the company reiterated the benefit of a settlement of historical claims.
Can Vast Resources really bounce back?
Despite the delays in production, in the year to 30 April 2021, Vast has been able to narrow losses to $7.7m, which is a 7.1% reduction since the previous year. However, it also recorded a 3.7% increase in administrative and overhead expenses to $4.2m.
Last month, the group said it raised £1.35 million through a placing to cover a shortfall in working capital and for contingencies. Vast Resources placed 54 million shares at a price of 2.5p each.
Vast has been the subject of further controversy recently, as a leaked email exchange with WH Ireland had investors questioning the viability of the business. WH Ireland was asked to become joint broker for Vast but refused, according to the exchange reported by ShareProphets, because of a number of red flags. WH Ireland declined to comment on the leaked email.
Despite the struggles of Vast Resources, Shore Capital, which is the company’s house broker, said Vast Resources is valued significantly less than its peers, with the market ‘misreading’ its medium-term prospects.
The Q&A published on 5 November seems to have helped the business a little pushing its share price up 3.77% in mid-morning trading today to 2.75p. However, this is still more than 72% lower than its 52-week high of 10p.
The Armchair trader