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Perhaps Dr Teeling sums it up...
"DL: How do you communicate to investors the sense of hope that would transcend the risk?
JT: Greed. I wish I could put it more nicely. Though as I said before, I sell romance, not reality. Reality is the Kalahari Desert, which is not all that romantic. I don’t sell history, I sell mystery. But actually, I sell greed. Because if you had come with me on African Diamonds at the beginning, you would have made 90x your money. That is not bad. Even the average guy that got in when shares were 2p made 40x his investment. Botswana Diamonds is now 1.2p, so success will have a huge upside".
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Amazing we aren't higher tbh but I am sure the market will cotton on. If BOD gets the license for Thorny River and releases the Maibwe prospectus then we could be heading for quite a ride. I would also like to highlight that Eric Molale, Mineral Resources Minister of Botswana, said in an interview that another diamond discovery has been made which is as large as Jwaneng in Botswana.
https://twitter.com/paulzimnisky/status/1102924199927128066
"Is it true that there is a diamond deposit as big as Jwaneng that was discovered in Botswana?"
Yes, there is.
Where?
No! [All I can say] it’s in Botswana (laughs).
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Jwaneng is the richest diamond mine in the world. Given the comments from Dr Teeling and the fact that BCL was put into liquidation soon after the Maibwe find was reported to government it is conceivable that BOD might even have an effective 15% stake in the worlds largest or second largest diamond mine!
http://www.sundaystandard.info/khama%E2%80%99s-nephew-bcl-shady-diamond-deal
I guess it depends upon the value of the diamond mines.
1) Maibwe - I'll leave a quote from the CEO to explain this:
"The thing that makes our heart beat a bit faster would be something like Maibwe [the joint venture with BCL (51%), Future Minerals (20%) and Siseko (29%) in Botswana], in the Kalahari Desert, where they found kimberlites, and they were diamondiferous. The grades were exceedingly good … so good that you wouldn’t mention them. It still needs to be verified. There is no point in announcing stuff like that, ridiculous grades, and as I said, we have not been able to verify them. But we found the kimberlite and we found diamonds. So that has big potential. At this stage, that is probably the best one with large upside."
https://www.thediamondloupe.com/mining-and-exploration/2018-05-25/%E2%80%9Ci-want-be-producer%E2%80%9D-interview-john-teeling
2) Thorny River is detailed in the report:
http://www.botswanadiamonds.co.uk/res/vutomi-cpr_19022018-final-signed-website.pdf
"The Exploration Target volume thus identified at Thorny River (as at February 2018) is approximately
450,000 – 470,000m3 (Table 8.6). Using the estimated 2.6g/cm3 density calculated by Vutomi, this may
reflect target tonnages of over some 1.2MT to 100m depth".
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The report suggests an exploration target of around 450,000 cubic meters and depths ranging from 4-100m deep. Some of the recently drilled intersections were 18m thick in places and the sites also have the potential for eluvial deposits running at grades up to 1,433 cpht.
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"The economic kimberlite dykes in South Africa typically maintain their size and grade to depth, in contrast
to diatremes (Gurney & Kirkley, 1996). If the same holds true at Thorny River then an additional 260,000-
270,000m3 of kimberlite may be expected to exist to depths of 500m, the depth to which Indicated
Diamond Resources have been identified at the nearby Klipspringer."
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From the RNS, "Areas hosting possible blows have also been identified, and these will form part of the bulk sampling (mining) area, which is adjacent to that from which a bulk sample was taken in early 2018 (which indicated diamond values of US$120 - US$220 / carat and grades of 46 - 74 carats per hundred tonnes (or in-situ value of US$55 - US$160 / tonne))."
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The bulk sampling is intended to target 3.9km of linear Kimberlite fissure and is expected to commence before June :)
3) 14% of JV for Marange alluvial deposits
It seems likely, although funding could also potentially be via debt to avoid dilution. Dr Teeling is very wealthy and the company is also expecting revenue from Thorny River in H2, so short-term borrowing may be an option.
If we do see a placing then it will at least be a good sign that financing for the project has been secured. I suspect any finance deal will be done in phases and broken up into a drilling phase and a main project capex phase. It seems a bit risky for an investor to commit millions on the back of just a desktop and geological mapping study though, so I expect Vast will need to spend the $1m on geophysics and drilling first and the fund raising in BOD will be a while after the initial financing agreement is signed.
Ok, I think I have made my point about misrepresentation of asset values. It is not my intention to add to your misery so I will take up morris dancing until AP delivers something more concrete. If we start mining diamonds then this will hopefully all look very silly in a few months time.
For clarity I should probably correct the United Nations comment, since the “classifying Zimbabwe diamonds as conflict diamonds” appeared in several Zimbabwe newspaper headlines but upon further digging appears to be a bit of a stretch at this point in time. The Kimberley Process are in the final stages of reform and the UN resolution supported the call by the World Diamond Council for the definition of conflict diamonds to be extended to include government violence and the involvement of the army in mining activities or crackdowns like the incident back in January. So whilst there is a risk of Zimbabwe diamonds being classed as conflict diamonds if this reform happens in the future it is perhaps overstated.
The WDC and civil society have insisted requires the expansion of the definition of “conflict diamonds,” to include all forms of systemic violence in the diamond-mining areas. The UNGA resolution noted “initiatives put forward by participants, as well as joint initiatives by industry and by civil society as elements of a strengthened Kimberley Process...”
https://www.kimberleyprocess.com/en/system/files/documents/wdc_press_release_post-unga_session_4-3-2019.pdf
Background:
https://allafrica.com/stories/201903080274.html
Apologies if this comes off as one-sided but the case for getting involved in diamonds has been well made by others. My beef is with how the company management seemingly get away with anything and how they have conducted themselves. If the Zimbabwe assets weren’t going to generate any real value for shareholders within the next five years then I think it is fair to say they have been misrepresented to shareholders in the past few years, ditto Manaila. However despite how frustrated I am with the BOD it does appear that Marange is moving forwards and it seems reasonable to expect Vast to find a way of funding it when their survival is on the line. Hopefully AP can deliver news in the next few weeks and most of us will be happy to forgive him for all the screw ups and BS.
My armchair is very comfy thanks.
a) "once the loan was repaid and these assets were generating FCF Vast topco would have benefitted or could have used the excess FCF on developing other Zimbabwe assets such as diamonds."
I wasn't referring to funding Marange through PP profits and never said "walk on by". Many argue that these assets have no value to shareholders because we can't get the profit out of the country. However Vast has a 50/50 JV with BOD and a diamond database. The proceeds from Giant, Eureka and Pickstone could in the future be used other stuff like funding further kimberlite exploration if the profits couldn't be easily extracted to the UK..
The general point is that profits are only tied up for a few years and this could change by agreement with SSGI once Giant exploration is on it's way and Eureka was in production (which should have been this year). Besides, if the profits are truly tied up for 5+ years then is no-one bothered that AP has been presenting them as highly valuable assets to shareholders without mentioning this?
b) If Marange is as valuable as we all believe then I am sure a deal could have been worked out. Why put the company at such risk?
The general point again is that selling PP wasn't the only solution to the problem until the recent cash flow issues forced Vast into this position. It would have been wiser to be less greedy, take on less risk and get a slightly smaller slice of the pie if this could have avoided the sell-off.
Being hopelessly naive and detached from reality I am also factoring in that the UN is discussing classifying Zimbabwe diamonds as conflict diamonds in September. Lets not forget that Zimbabwe has a foreign currency shortage, rising inflation, a new fiat currency which has devalued 20%, a corrupt government and is also currently under US sanctions. In this context giving up a profitable and producing gold mine for diamonds before anything is signed is incredibly risky.
Is it worth it? Hopefully.
Here are some of the terms if anyone is interested:
http://www.lse.co.uk/share-regulatory-news.asp?shareprice=VAST&ArticleCode=txcqupi3&ArticleHeadline=NonConvertible_Debt_Facility__Disposal_of_nonControlling_Interest_in_PickstonePeerless_Gold_Mine_and_Giant_Gold_Mine_to_Raise_US8_million
A few highlights:
for Vast's existing projects, Vast shall not borrow further funds and shall not permit borrowing at the project level. Borrowings for this purpose do not include normal commercial offtake arrangements;Â
for the existing projects, Vast shall not raise equity except by giving SSA to the maximum extent permitted by law the right of first refusal on such equity raised;
for projects in Zimbabwe, Vast shall be permitted to raise funding through further equity or through debt or equity at project level provided SSA to the maximum extent permitted by law is given the right of first refusal;
for projects outside Zimbabwe and other than the Romanian Existing Projects, Vast must put SSA into a position to compete on equal terms with any third party for funding of any opportunity.
RATIONALE FOR THE SSA TRANSACTIONS
Whilst production at Pickstone has proved encouraging, the project is not projected to deliver cash to shareholders as free cash will be retained for expansion, namely:
Exploitation of the sulphide mineralisation - estimated to be ~US$8m to US$10m
Evaluation of Giant - expected to be ~US$5 million
The current economic and political uncertainties existing in Zimbabwe such as; exchange controls that could become restrictive; reintroduction of a quasi-Zimbabwe currency, Zimbabwe Reserve Bank "dollar bond notes" that may result in excessive inflation as happened to the former Zimbabwe dollar; proposed new mining taxation to increase the tax receipts by the state from the mining sector; and the required forfeiture of base metal and precious metal mining claims to the state, supports leveraging the Zimbabwe assets whilst retaining exposure to future upside potential when these challenges are resolved.
Pepco, which number is incorrect?
30m investment taken from AP in podcast at start of the year
https://m.youtube.com/watch?v=NGqwnPgJkz4
$8.4m operating profit taken from annual accounts
http://www.vastresourcesplc.com/wp-content/uploads/2018/09/Annual-Report-Account-28.09.18-.pdf
20 year mine life
http://www.vastresourcesplc.com/wp-content/uploads/2015/02/Zimbabwe-presentation-Pickstone-Peerless-05.05.15.pdf
I agree that the money was tied up with the outstanding SSGI loan until it was repaid and that the profits were tied up in developing Giant and Eureka (an asset added under AP’s watch using 6m debt from SSGI), but once the loan was repaid and these assets were generating FCF Vast topco would have benefitted or could have used the excess FCF on developing other Zimbabwe assets such as diamonds. There is a good argument to be made that diamonds will be worth the sacrifice IF Vast is successful in mining Marange, but it is an incredibly risky manoeuvre and not one being done in a planned fashion or by choice. My argument is that the management team screwed up majorly and should have been able to avoid selling PP. Even if you are prepared to argue that the SSGI loan or RP is the root cause of Vast’s problems, why did AP borrow a further $6m from SSGI to buy Eureka? Many here seem happy to blame Mercuria or RP for all of the problems but AP was the one in charge when the Mercuria deal was arranged. Roy Tucker signed off on the agreements and AP was also in charge when Manaila production dropped dismally (despite being fully aware of the issues) and failed to pay SSGI off $900k by December when it was a crucial part of his Mercuria deal. If AP is such a good deal maker, why not involve SSGI in Marange, pay off the loan and keep all assets?
I am not sure why everyone is surprised by this placing. The problem is that revenue generation is surely several months away. BP will take 4-6 months from financing to start generating cash according to the official plan. With the diamonds Vast will have to build the processing plant, fence the area, wait for the trucks, excavators etc to be delivered. Then they have to recover enough diamonds to be able to take to an auction. The diamonds etc will still have to be certified and I'm sure there are extra things like environmental impact assessments etc needed before mining can fully begin.
Also I find it hard to believe that more dilution isn't heading Vast's way. Vast PLC has a receivables mortgage with Mercuria which will make borrowing money from third parties more tricky.
https://beta.companieshouse.gov.uk/company/05414325/charges/n5K2WUC3aRvSuUGJl2nyIcof9Oc
Then there is the question of collateral. What exactly is Vast offering to lenders to secure millions of dollars worth of debt? The only option I can see is for Vast to take on debt in exchange for equity. This is going to be difficult in Zim as Vast doesn't hold the license or the land. It will also be tricky in Romania, as Mercuria has the receivables mortgage and part security over the assets. Perhaps this is why we no longer appear to be seeking off-take prepayment finance.
Taking a more glass half full view, the lack of signatures etc might just be down to the fact that whilst Vast is under the existing SSGI loan terms it cannot secure debt financing from other providers. Personally I don't think that they are likely to get a signature on the JV contract until they can first prove that financing is in place. So the sale of Zimbabwe assets likely needs to proceed first to unlock the rest.
I would be quite happy to see AP step down. Vast plowed $30m into an asset with a 20 year life and sold it for less than $3.5m, despite the asset generating $8m gross profit last year. Not to mention that the PP profits were was soon to increase due to the sulphides. Under AP's watch Vast has failed to manage cash flow and debt adequately. The end result is that Vast will soon have no assets in production. For that reason alone he should be given the boot IMO.
No JV contract signatures without startup financing secured in Zimbabwe. No financing agreements can be made until SSGI loan has new terms signed off. The national diamond policy still isn’t public. No heads of terms agreed with cornerstone investor yet. To me the RNS implied that financing Romanian operations via prepayment finance wasn’t a viable option. Vast now has no mines in production. BP will take 14 months of operation to repay the startup costs, let alone the 4 million owed to Mercuria. Financing via a loan is surely still tricky given that Mercuria has security over the mortgaged Sinarom revenues and 50% or perhaps 100% security over BP/Manaila once SSGI loan repaid. What exactly will the bank use for collateral? Zimbabwe has the same problem, no assets or land which can be used for collateral and an economy facing severe inflation, a new Zimbabwe dollar which lost 20% value within first two months with a dodgy oppressive government facing the prospect of food shortages after the biggest natural disaster for decades. Vast don’t even own the land or license. The government mining companies and minerals marketing corporation of Zimbabwe are all sanctioned by the USA and there is a big campaign to reclassify Zimbabwe diamonds as blood diamonds, which will be debated at the next UN meeting in September. So I expect more dilution will happen at some point.
So whilst it is tempting to have a punt there are a lot of things up in the air for Vast. If they are successful then BOD will get a nice slice of the pie, which along with the revenue from Thorny River should see a nicely profitable company. Historically BOD has risen on Marange news too so i’m happy to wait this one out.
Heritage Concession
The Company is pleased to announce that following the announcement of 14 February 2019 concerning the right to mine diamonds on the Heritage Concession the preparation of the joint venture agreement between the Company and the Chiadzwa Community Development Trust has now reached the form of an advanced draft. Following the signature of the joint venture agreement, operations at the Heritage Concession are able to commence on the ground immediately.
It is good that Vast now feels that it is in a position to ask for debt financing. However it also suggests that perhaps financing plans weren't as far advanced as made out previously. What happened to proceeding with the pre-payment finance agreement?
VM no one is disputing the handcuffs or difficulties placed on Vast by the deal. The issue is why did the company represent these assets as if they were going to be adding near-term value to shareholders? 25% of something that won’t generate FCF for five years should have been a footnote in the accounts, not the subject of podcasts, quarterlies and glossy presentations. Perhaps a better explanation is that the no real value for 5+ years claim is bullshit. The financing handcuffs were terms of the loan agreement which would have ended upon payback of the $3.4m and extracting money out of Zimbabwe could change with the whim of the government or be reinvested into diamond projects.
Sandy I can assure you that diamonds will help the healing process. The issue is as gkb47 states, if these assets aren’t going to be cashflow positive for five years or more then the company has grossly misrepresented their importance to shareholders. It implies that the only near-term producing asset held capable of FCF was manaila and despite this the company has never channeled significant capex to build a plant in the years of operation because they bet all of our investment on a license which might have never arrived and funding which to this day isn’t in place.
I admit that I am bitter sandcrab. However I am quite capable of being bitter whilst still appreciating the value that diamonds can offer. The two concepts are not mutually exclusive and my objection is more to the BS and spin...
I am bitter and annoyed because the company has changed the narrative several times and I personally feel have acted dishonestly. AP was quite happy to talk about how great the performance at Manaila and Pickstone was previously, or how Eureka is a "wonderful asset" for a great price of $6.4 million. Then Vast ends up selling Eureka and Pickstone for less than $3.5m and shuts down Manaila, despite previously claiming that Manaila was break-even most months and doing well. In short, the impression given to investors in 2017/2018 was that the company was expanding nicely and creating shareholder value.
Ask yourself how Mercuria must see Vast? They gave Vast $4m cash up front and then are told less than a year later that production will be reduced by a third, then finally they are told that they will be receiving no ore deliveries for months whilst Vast restructure. Not only that, but Vast also blames them for not lending them more money, despite not performing well on the off-take contract and investing only a tiny fraction of the $4m in capex knowing full well what remedial work needed to be done.
I have therefore made a point of calling the company out on this kind of stuff because most around here seem quite happy to either take the company excuses completely at face value or forgive pretty much anything they do because Vast will be worth millions in the future and AP seems like a nice guy. I find it ironic that I am accused of misleading investors when I have the audacity to point out how the company itself has been misleading investors, both historically and presently.
I am sure Lee will post his usual coherent investment case for the diamonds soon and explain why the end result will justify the means, and he may well be right. I actually think that the company is making progress.. Despite my grumbles it is probably correct for Vast to cut their losses and sell PP / Eureka given the extreme circumstances that they find themselves in.
I just get annoyed when people pretend that PP / Giant / Eureka had little value to offer Vast shareholders. If this was really the case then one has to logically conclude that AP has been overselling the value of these assets for the past 1-2 years and misleading investors. If it is not the case then AP is again misleading investors about the true value being destroyed over a $3.4m loan. Regardless of how much revenue the company ends up generating next year, in both scenarios one has to conclude that AP has to some extent misled investors.
You should use a PE of 17 or more FN, you will get a higher figure.
I have thought that for the last few months Vast is somewhat of a Phoenix. It needs to burn to the ground in order to rise again. This is their burning to the ground moment. I actually think it is probable that they will secure finance for Eureka and BP. However, what annoys me is the bullshit and distortions the company has frequently pedaled about the value of PP and Manaila and the fact that so many swallow it whole. Regardless of how much money the company may make in the future, the conduct of the company management has been poor and I think a reasonable case can be made that the company has misled shareholders. Luckily for Vast and BOD, it does look like the Diamonds in Zimbabwe are progressing and they should make a fortune if they ever start mining them.
Lee it’s called an argument and I assume that most can distinguish facts from opinion. I am not perfect and would welcome any corrections as I am happy to admit if anything I have stated is wrong (as I have done previously).
Perhaps you would care to rectify statements from the company directors whilst you are at it?
I agree we probably need to do this to survive and perhaps diamonds will make everything better, but what I can’t understand is why more people aren’t annoyed by the lies. If BP and Marange were the only assets with any real practical value to shareholders then why has so much emphasis been placed on other assets/opportunities to date? The BOD has never been held to account and never admits mistakes, even Mercuria are still being blamed for their mismanagement of cash flow!