Vast has a Eureka moment
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.
Vast Resources is a mining company with open pit polymetallic operations and a planned underground polymetallic mine in Romania, and an open pit gold mine in Zimbabwe. Co. holds gold and diamond related mining claims in Zimbabwe and has a presence in Zambia with interests in an earth and phosphate project. Co. mines and produces copper and zinc concentrate and gold bullion.
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