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Ocelot: an amusing post. So they’re borrowing £20mm. To pay off debts of £17mm. and make Angus debr-free.. that’s all right then
Angus got so lucky with gas prices, they should be debt free now and paying substantial dividends to their shareholders. Inexperienced management taking poor decisions and even more dilatory action has led them to their present perilous position.
Recurring revenues should have led them to pay their loyal shareholders, not to gear up.
Asimpleinvestor: under the Companies Act, no company is allowed to issue new shares at a discount to the nominal price of the shares. Unless there’s some special provision re this for AIM companies that I don’t know about, this will preclude further issues below 0.10p. In practical terms, it’s going to be very difficult for them to find people to support a new issue at 0.10p while the market price stands at close to a nil premium to 0.10p, isn’t it? Even a pump and dump in advance of a placing represents a risk to supporters of such an issue as it will seem pretty obvious even to the most naive small investor. Vast need the diamonds. Anyone got a phone no. for the Mugabe house in Dubai?
Bubblepoint: I don’t see it as a game changer either, just another issue that will have to be ironed out by the parties to the refinancing, at a cost that will be borne ultimately by Angus shareholders. To repeat, Shell buys all the refined gas from Angus, which is carried to its plant by NG, and mixed with gas from other sources and sold on to Shell’s customers. If the contract is for all the gas and suddenly Angus wants all the gas to be sold to Trafigura, a price will have to be paid. It’s just business.
Bubblepoint: the pipeline is the NG pipeline, which is paid for separately, as I understand it. The gas is delivered by this pipeline to Shell’s facilities. Shell has agreed to take all the Saltfleetby gas. They have a contract. I don’t know the terms of that contract but “all the gas” seems to me to suggest that the contract may have to be adjusted if Angus wants it all to be sold on to Trafigura.
The hedge contracts are with Mercuria and have nothing to do with the offtake agreement.
My point is that there may well be another cost in relation to this if the Trafigura deal is to go through. This potential cost has not been raised before on here. Unsurprisingly, there hasn’t been an investor question on it.,
..start, not stater.
Bubblepoint: what have the hedges got to do with it?
The Earl of Lucan’s statement was that all the gas was being sold to Shell. In the absence of anything to the contrary, I prefer to rely on this. Yes, if they drop Shell, there’s likely to be a quid pro quo. If you add this to the compensation that will be due to Mercuria for the premature settlement of their forward (hedge, swap) contracts, and the 8% of revenue royalty that will stater to be paid to Mercuria as soon as the proposed Trafigura deal goes through, the latter are going to be somewhat out of pocket. I should imagine these factors are featuring in the endless negotiations between all the parties to the proposed Global Re-financing.
Well Buublepoint, that’s not what the Investopedia and many other definitions of “offtake agreement” say. They all say it’s a commitment to sell a commodity, including oil or gas, to the party of the second part. In this case, ALL the gas. The agreement can be renegotiated/cancelled, but there is usually a fee paid to the party of the second part - in this case, Shell.
HITS: are you sure about the proposed fixed offtake agreement? This is from the announcement in August 2020:
“We are pleased to have signed this agreement with Shell Energy which will cover all of the gas produced from Saltfleetby,” said managing director George Lucan.”
“All of the gas” suggests all of the gas. In other words, Shell would have to be consulted, at least. Whether they will have to be compensated depends on the wording of the contract.
I agree that the quantity and price of the fixed price contract are going to be very important. Assuming the Global Re-financing takes place at all. It’s quite possible it will offer Angus shareholders an even worse deal than the existing forward (hedge) contracts. Mercuria will want generous compensation for giving up their lucrative existing contracts.
Sandy: you’re missing the point, but I’ll take the trouble to answer these remarks one more time:
What difference does it make whether the real estate asset was put up by a Vast shareholder?
As far as I’m aware, the offtake agreement with Mercuria ended in April 2022. These are two recent RNS’s that apply:
“US$3,546,600 (2022: US$4,975,129) secured offtake finance from Mercuria Energy Trading SA. The loan is secured by a charge on the assets held by Sinarom Mining Group SRL which is the holder of the rights to the Manaila Mine and by a pledge on the shares of Vast Resources PLC 100% holding. The loan bore floating rate interest during the period of 10.7%. The repayment of the loan is to be made from surplus cashflows generated from BPPM.”
“The group said the off-take agreement will be effective until April 2022.”
In one of the recent RNS releases outlining details of the loan extensions, $50,000 is to be paid thenceforth to Mercuria from concentrate sales. If that’s what you’re referring to, no, I have no idea whether Vast has met this requirement. I’ve no reason to believe they haven’t. It’s de minimis though in the context of Vast’s financial state.
The fact is, Mercuria has not received the cash it was owed in May 2022 and therefore is able to enforce its covenants. The parcel of diamonds has been expected to enable these payments to be made. There’s not much comment on that recently. Vast’s obligations to Mercuria have been fairly consistently missed for at least eight months.
It’s also worth remembering that the Alpha loan is a bullet loan - capital and interest payable after 12 months (from 15 May 2022). So that’s a further £1.4mm by 29 February, on top of the capital sum, isn’t it? And the shares are now priced very close to their nominal value. Further equity raises would be highly dilutive and raise insufficient cash to deal with the debt service and cash flow issues here.
I’ll leave you to it now and wait until the next debt update. I’ve no desire to see the company fail and wish you success with it. Thumbing one’s nose at people who’ve lost money on a thing like this is unpleasant. You may in any case take the view prevalent on these AIM chat boards that you haven’t got a loss until you sell your shares.
Sandy: you’re pretty rude, you need to read what I write.
I’ve just outlined the position of the loan guarantor. You’ve come back to say I’ve got it wrong and then repeated what I said. Mercuria's security is over a different mining property. Their lien on Baita Plai is a third lien, not second. And the “payment plan” appears to have been missed so far. They’re going to want another sweetener. I’m not going to keep answering these unpleasant posts of yours, just wait and see. You’ve only got just over five weeks to wait.
Sandy: thanks for this. I have actually seen this before. Someone has put up a valuable real estate asset as security for the 20% (interest) asset-backed facility that Vast secured in May 2022, for full (bullet) repayment in May 2023. This person has a first lien on Baita Plai as security for this real estate asset being used in this way. The deal was arranged in this way because Alpha is generally a real estate lender and understands that form of lending and security. I’m not sure that this structure would give me much more confidence than a more straightforward loan.
Re the procedures to be followed in an event of default, it’s all there in the charges on the Companies House site. Any value remaining after the senior creditors have been paid out goes to the other creditors whose claims will depend on the seniority of their loans/goods and services supplied, and to the staff etc. That will take ages, during which the shares would be suspended.
These people at Mercuria are very smart. It might be an idea to have a gander at Angus Energy next month, when the deadline arrives for their re-financing.
Sandy: it is perfectly possible that the lenders won’t want to take over Vast’s assets next month. More likely, perhaps, is something like the imposition of big royalties on Vast’s future turnover from its mines, such that existing shareholders will be looking a very long way into the future for a return on their investment. The lenders have got Vast over a barrel, it’s they who will make the decisions next month. As for the suggestion that Vast’s lenders will get such a bad reputation, if they exercise their rights under their loan covenants, that no one in future will want to borrow from them: well, it’s open to Vast to negotiate better or similar terms to their existing bank loans and repay their lenders from the proceeds. It doesn’t look as if alternative lenders are forming an orderly queue to accommodate them though, does it?
Well, they can’t have another placing while the share price is at this level. I suppose some may take comfort from that. I did say yesterday that Vast needed more equity capital, not debt, but they need a lot more than this and this appears to be the last arrow in their quiver as far as share issues are concerned.
Look at all the things this infusion of £1.25 gross is supposed to cover (no mention of the cost of the issue). It merely tides them over to the end of February. The comment on the diamonds offers no comfort on whether the latter are there in the RBZ or not, nor on whether Vast will ever get them.
It’s less than five and a half weeks until the debt deadline. Which as we all know, is not a deadline, it’s a moveable feast with not the slightest hint of late payment. Only this time looks as if it may be different.
I’m realistic about this, not negative. And as I’ve said, to argue about terminology over clearly overdue loans is merely to bandy words and I’m not going to indulge in it any more. Well have to agree to differ. The point is, they’ve probably got five and a half weeks before they’ve got a problem either with much tougher terms or with the loans being called in. That’s not negative nor inaccurate. It’s how it is.
I’m sorry, Sandy, you’re merely bandying words re the debt. It’s already 8 months overdue for repayment. The repayment agreement stipulated May 2023, there has been a series of extensions - grace periods really. It doesn’t matter how you describe it though, it appears that the lenders are getting impatient.
Who’s going to lend to this? All the money raised would be going to pay off earlier lenders, not to grow the business. The terms of any new loan would be eye-watering and unaffordable. Vast needs more equity capital, not bigger, more expensive loans.
If Vast management are pursuing alternative sources of finance, it would be helpful if they’d discuss them in more specific terms either in an RNS or a televised chat with one of their PR people. As for commercial confidentiality, you can’t rely on any announcement that hides behind that kind of smokescreen with a company at this point in its fortunes. And look at all the exclusion clauses at the bottom of the RNS’s in any case. You can’t rely on a single thing, other than what has already happened and been revealed p in detail.
Clearly, you’re prepared to believe whatever Mr. Prelea offers in RNS’s and televised chats. You may be proved right. I don’t believe any of it in the case of a company in the perilous position in which Vast finds itself. It seems you also believe there’s a parcel of diamonds on a shelf at the RBS just waiting for someone to say the word before its release to Vast. I don’t. I suspect that Mrs. Mugabe or some other ruthless, unprincipled, greedy type has had it away on her/his toes with them ages ago. And unlike you, I think that obtaining alternative finance with which to repay Vast’s creditors in the absence of the diamonds is a difficult job. In my view, any activity in which the Vast Board is currently engaged other than trying to get the diamonds out(!) or finding alternative financing is mere displacement activity. I include the recent RNS’s.
I do accept that I may be wrong, though. There’s a tiny chance...
Sandy: unless the share price takes a substantial upward leap, allowing another very big placing, it appears extremely unlikely that a source of finance sufficient to repay the loans according to the revised schedule will be found. I suppose one could argue that’s it’s no more unlikely than that the absent diamonds will suddenly be produced but there’s little comfort in that.
Re your point 2, In my view, the wording of the most recent RNS, which you quote, relating to the debt was couched in different language from earlier ones. I would be concerned, it I were a shareholder here. And in any case, the final phrase “finalise ongoing repayment initiatives” refers to the parcel of diamonds.
And you make my point for me: when a company is five and a half weeks from hitting the buffers, announcements which exclude the source of the commodity it claims it will be intermediating for a commission and the name of the Swiss investment company who has given them this contract don’t somehow carry much weight.
Re your point 1. the distinction is irrelevant, any discussion on this would be mere bandying of words.
No, Sandy, I’m more of the opinion that something is missing from the RNS that should explain the apparent anomaly. I don’t impute any particular motivation nor point the finger at any one party. But the anomaly remains unexplained. Any of your conclusions may be correct. If so, however, it merits clarification. My experience in AIM-listed companies generally is that if their announcements require a leap of faith on the part of small investors, those announcements are not always the good news that they at first appear. You’re a believer here, I’m not. I think investors here have five and a half weeks before they will get a nasty surprise. Vast have admitted on numerous occasions that their ability to meet the terms of their loans, which are way overdue, depends solely on the receipt and sale of their parcel of diamonds. Five and a half weeks.
It’s a matter of volumes, isn't it? 2 tonnes of concentrate per month =24 tonnes per year. Finland seems to produce less than 1.5 tonnes of refined platinum per year. Yes, the other PGMs within the concentrate are valuable, but the PGMs in the concentrate total 15% of the weight of concentrate. 15% of 2 tonnes per month is 300 kilos, or 3.6 tonnes per year. That, subtracting other PGMs, must be close to Finland’s total annual refined platinum production. I may have got this all wrong, in which case I’d like to be corrected - I don’t like misleading people. But I think the question was worth asking, which I why I asked it.
Well yes, Sandy, but the most recent platinum production data I’ve seen for Finland is 1.4 metric tons per year. I realise that the contract is for concentrate, and PGMs, not just platinum, but if the data I’ve seen is current, how are Vast going to find 2 tones per month? And why would anyone want to use Vast for such a purpose? Or is there, as Dorothy Parker is alleged to have observed, less to this than meets the eye? Maybe there’s some more platinum being produced somewhere else?
Where in the EU are PGMs produced?