Ryan Mee, CEO of Fulcrum Metals, reviews FY23 and progress on the Gold Tailings Hub in Canada. Watch the video here.
Watching2: no thanks. Been following Vast a long time. Certainly know a long more about it than you and always prefer to focus on facts. Go cry on mummy's shoulder if the facts don't suit you. Or stick to FTSE 100 and your savings account.
IQ157: yes, without accident and strike interruptions, a 20% bump next quarter instead of 10% (as it was from Q2 to Q3) strikes me as a realistic possibility.
That would take DMT production from 559 to 671, with potentially (say) two-thirds (447 DMT) in October and November, potentially ready for shipping in December.
With 598 stockpiled, they could potentially ship a ballpark of 598 + (say) 447 = 1,045 DMT in Q4, in which case they'd be fine for a while at BPPM - maybe long enough to make it sustainable in H1 2024.
That's as far as BPPM goes, if all goes swimmingly. They'll still need Q1 cash for other things IMO, and have said so in the Final Report. But possibly at a better SP if they raise off the back of a really positive Q4 report.
Watching2: yes, an agenda to look at the actual reality of the company's statements and figures. What's your agenda? Clowning around? The market is also looking at the reality. Hence the m/cap and SP. Feel free to grow up at some point.
Gemstar: as you can see in the thread, that is very much like my view to the upside.
Nevergonnaretire: I agree. It's not looking pretty at all.
One thought to the upside: they ended Q3 with 598 tons of dry concentrate inventory. They also had no shipment in July, as in April.
I'm wondering if there's a deliberate strategy to shift (for now at least) to fewer but larger shipments. This could be a way of cutting costs, i.e. on shipping fees.
Taking the trebled June figures (= hypothetical 765 DMT produced / 501 DMT sold), then the 598 DMT inventory is somewhere in the ballpark of a full quarter's breakeven, depending exactly how one is gauging that.
So it's already very possible that Q4 could be a breakeven quarter or generate surplus if the shipping volumes that take place actually measure up. The question would then be how sustainable that is into subsequent quarters.
This doesn't take away from the likely need of funds by January or so, as you say, but it does mean that BPPM might still stabilize by H1 2024. Just needs a better trajectory than Q3 showed.
Castlepaul: apparently you missed the RNS disclaimer on forward-looking statements when those raises were announced, and also missed the Final Report section on 'Risk - Going Concern'
"The Company will require funding in order to repay the Mercuria and Alpha debt facilities, and to provide general working capital. ... the Company continues to engage with investors and debt providers in order to provide liquidity to repay the Mercuria and Alpha debt and to articulate the fundamental strength of the Group’s business so as to attract additional funding when required."
Okeydoke. Overall quarterly ore processing has barely budged, from 23,327 tonnes milled in Q2 to 25,600 in Q3 (about 10% up). The much vaunted 'nameplate production' is 14,000 per month, so that would be 42,000 per quarter. At about a 10% rise per quarter, it'll take another 5 or 6 quarters. That's news in 2025. Whoop, whoop.
(Here, I'm discounting the fact that they actually went backwards, as June was the peak ore processing month at 10,200 tons milled, vs only 7,649 in September. Oops.)
But let's be clear, 'nameplate production' is economically meaningless. You sell concentrate, not ore.
So let's compare June's 'breakeven' figures to Q3.
June
255 dry metric tons concentrate produced
167 dry metric tons concentrate sold
22% purity
Trebling those figures at 22% purity, you'd have hoped to see Q3 at around:
765 dry metric tons concentrate produced
501 dry metric tons concentrate sold.
Instead the figures are 559 and 354 respectively. That means BPPM went back to being a loss-maker, with the concentrate production and sales volumes ar around 73% and 71% of the breakeven figures. Meanwhile, purity dropped from 22% to 21%.
The Q3 report didn't bother to make excuses. The Final Report couched the overall situation in the usual flannel about all the excellent preparation they've been doing to make Vast a great company. Plus the necessary caveats that they will need to raise cash.
This is a D- grade of performance. 'Could do better' doesn't begin to capture it. And 'Next year, Rodney' would be a statement of sheer optimism.
Roll on the Q4 report in January/February. Meanwhile, the company will be counting its pennies. Perhaps a relatively large inventory of concentrate by end September will help out if they can bump the Q4 sales. But the begging bowl is also never far away.
IMO.
Smokinjoe: you mean his 0.91% of Vast?
Why do you think the consultancy model in Tajikistan appeals to him? Sure, it's 12.25% to Vast. But it's a complex deal. Smell the coffee. Of course he wants Vast to succeed; but it's not his only avenue.
Due 31 October unless I'm much mistaken, for the period 1 May 2022 to 30 April 2023. It'll be interesting to see what mileage they make of the post-period-end information.
Probably the Q3 BPPM production report not long afterwards.
1nvest: I agree.
2nd of 2.
Finally, if BPPM actually moves to a position of being able to support not only itself but also the Romanian subsidiary and maybe even the group, then there should be a recalibration.
This is currently Vast's one directly operated and currently active mine. It's the test for Vast as a producer. It's the ground that Vast has chosen to stand on as a producer.
Back in 2016, Vast had one profitable mine - Pickstone Peerless. They typically traded at an m/cap of £20m-30m, and apparently did their best to hide the fact they were unable to repatriate cash from Zim for a mix of regulatory and contractual reasons.
BPPM is different. It's EU. Repatriation of proceeds, once they arise, is easy. If BPPM proves itself, which it might over the range of Q3 2023 to Q2 2024 reports, then, adding a new JORC and a renewed licence, especially, this could lift off.
That set of operational circumstances would unlock major finance potential to being Manaila off care and maintenance, and to follow up on other potential projects.
So you then start to look more towards the range of a £50m-£100m m/cap over the medium term.
IMO.
END
1st of 2, I think.
1nvest: thanks for the thoughtful piece.
Yes, it's absolutely true that statements about not needing to raise in the foreseeable future have been commonplace in the past and the RNS disclaimers on forward-looking statements mean that "foreseeable" has a fairly short lifespan. That's purely and simply*fact* whether people like it or not. At the last round of giant headroom, some people went to the trouble of re-posting the company's statement that it didn't expect to need the headroom and that it was only a precaution, and look where we are now. I guess it helps when you've looked the CEO in the eye a fair few times and watched the track record. (Actually, on this one, the track record is enough.) So to be clear, this is still, just about, Vast's ONE proven business model.
Okay that's the downside. Is there an upside?
In my view, yes. At any rate, at the current m/cap there is.
What is it?
Well, first, from my point of view, I think the creditors are being revealed as not actually being an existential threat. Although the piecemeal extensions do indicate a threat (IMO from Alpha, not Mercuria), I also think Alpha are a bit boxed in. If BPPM maintains breakeven, scales up from its minnow state towards its monster potential, and can possibly even free enough cash to support the Romanian subsidiary as a whole, then Alpha will be on a hiding to nothing trying to get their real estate collateral in the courts. Vast has generated enough commercial progress in 2023, IMO, that the company is approaching payment plan territory, even if the 'historic parcel' is further delayed.
In fact, it's possible that Mercuria are in a position to be helpful in Vast's negotiations with Alpha. A long time back, we were told there would be an update when a new "inter-creditor" agreement was concluded. I believe the update never came. So I've long suspected that Mercuria and Alpha don't really see eye to eye.
I think, then, that the existential threat - which was real in January - is probably more or less off the table.
Second thought, in that case. Is a ~£9m m/cap the right place for Vast? Hard-nosed as I rightly am about AP's Barnum-like tendencies, I admit that I am respectful of the cumulative evidence that they have presented themselves successfully in Tajikistan as qualified consultants. I was puzzled as to how. The only real thing of merit I got from the recent interview was that they did so on the back of the (now gone) Pickstone Peerless. To be fair, that's actually quite clever.
So, we are looking at the birth pangs of a SECOND viable business model, which is low (or no) overhead consultancy.
ASI: thanks, that's helpful.
Gizabigrise: agreed, we don't yet know what number of shipments they plan annually. The general pattern (give or take) has been sort-of monthly with BPPM, and as far as I know that's pretty commonplace with mining. But indeed, we don't actually know.
Pecten: the original RNS of 3 May 2022 said: "Processing of stockpiled ore on site will commence in Q2 2022". So apparently it's taken almost a year and a half. (Lol.) I can't honestly believe this: I assume they commenced in a token fashion and then decided that they had to do a lot of refitting work before properly getting going.
Another issue that I don't recall seeing any update about goes back to the follow-up RNS of 24 May 2022:
"... the Company has executed a Memorandum of Understanding (“MoU”) linked to processing the tailings produced at Takob. The MoU, agreed between the Company’s Tajikistan focused Joint Venture subsidiary, and Open Joint Stock Company “Talco” is a separate and additional project to the Takob Joint Venture Project announced on 3 May 2022.
"The Company can announce that as part of this project, its joint venture partner, Formin TJK (“Formin”), has commenced surveying, soil sampling and preliminary drilling on site at the tailings facility and the results will be announced upon receipt from ALS Romania. Formin reported visible signs of lead, zinc and precious metals, including gold, silver & platinum group metals, in the tailings facility. Initial surface survey results compiled by Formin show that there is a minimum of 1 million tonnes and up to 3.3 million tonnes of tailings."
Whatever happened to that?
RNS:
"Loading of the first shipment of 136 Dry Metric tonnes of lead and zinc concentrate has commenced for delivery to our off-taker Trafigura."
Something to work with, though not much.
We don't have the breakdown of lead volume vs zinc volume, and we don't have purities. We don't know the detail of the offtake terms with Trafigura.
That being so, a ballpark hypothesis.
My understanding is that concentrate purities are generally higher with lead (say 40-80%) and zinc (say 50% area) than with copper, though I'm happy to be corrected. For now I'm going with a hypothesis of 50% for both.
LME cash pricing per tonne is $2,131 for lead and $2,430 for zinc.
Assuming the 136 tonnes are equally split, for the sake of argument, guesstimating at 50% purity, and taking LME values as the indicator, then the value of the shipment can be guesstimated as:
$2,280.50 (average tonne price across products) x 136 tonnes x 0.5 (50% purity) = $155,074.
A 12.25% "participation" to Vast = $18,997. That's almost AP's salary for a month, whoop whoop.
Presumably these numbers will grow and become, hopefully, more detailed.
The company already said it would confirm physical receipt.
RNS 31 March:
"... the processes for the release of the diamonds are continuing with the assistance of the Government.
A further announcement concerning the physical receipt of the diamonds will be made on finalisation."
They won't be selling them without having told the market that they've been released. That would be bonkers.
Sharepoint: yes, I'd expect Q3 production to be up.
Sharepoint: IMO, that's unfortunately not a safe assumption at all.
The phrasing is: "Based on current strategy and updated expectations the Company does not believe it will need to raise further equity funding for the foreseeable future."
All that means is that the company's current cash projection ("expectations") suggests that, by the time the current equity finance is spent, they won't need another one.
It certainly doesn't mean profitability now. Vast has used such phrasing before but then the "expectations" change. Note of course the RNS disclaimers about forward-looking language.
Reg: thanks. Yes, in the immediate term, the Q3 BPPM production update - to be expected either this month or early November - will be a crucial indicator. But Takob numbers (which we might or might not get) will also matter a great deal, I suspect, in the discussions Vast is having with creditors.
BPPM Q3 last year went backwards, for various reasons. They cannot be doing that now. The ramp-up needs to continue. The June breakeven figures revealed that the mine was then operating on about one-third of the budget that was projected back in 2020, and therefore broke even in June on around one-third of the copper concentrate volume that had been projected as breakeven back at that time. There are ups and downs to that.
I expect both the costs and the revenues to rise as BPPM transitions from a minnow to a monster. It's not at all clear to me that that will mean any free cash at BPPM very near term. Bringing on the lead/zinc production will carry its own costs and the scale-up in working hours (number and scale of shifts) will do likewise. But having broken even on copper in June, they can hopefully finance BPPM's rising production costs internally via rising copper sales and starting to bring on the lead/zinc revenue. So my main hope at present is simply that BPPM continues to break even as it scales up the volume and range of production. In any case, any immediate free cash (if there is any) will be needed by the Romanian subsidiary, which has a range of other commitments, e.g. supporting Manaila on care and maintenance.
I personally see Takob as the first free cash avenue, but we haven't been told enough yet to know what those numbers would look like. The creditors will know a lot more, of course.
Further on, the JORC is key for regulatory reasons (licence renewal 2024) + potentially to support a finance package for other Romanian assets once BPPM is more clearly and firmly solvent.
JV: I agree AP would be "looking at" it. My reading of him is that he'd prefer to avoid it if he can and just push through to operating profit, keep the whole thing for Vast, and then go from there. But it's not entirely in his hands, necessarily.
4th of 4, it seems, as cut off:
*basis of a payment plan.
END.