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Mizman: on the other hand, paying debt shows that the company is more creditworthy, and therefore makes it likelier that future funding needs can be met via debt rather than equity. Perhaps an optimistic thought when it comes to the near term but very relevant, IMO, when it comes to financing Manaila/Carlibaba in 2024/25.
Oofy: yes, indeed. The words "funding" and "finance" are frequently used synonymously. In my own experience of raising cash for a business, third parties with whom I dealt routinely used the expressions "debt funding", "debt finance", "equity funding" and "equity finance", where "funding" and "finance" were understood to be interchangeable.
Be that as it may, Vast has itself been absolutely explicit in the Final Report that it means both debt and equity as possible routes. For the avoidance of doubt, the Final Report phrasing is as follows:
"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."
Note: "investors and debt providers".
***
Companies raise liquidity for projects all the time. The idea that there's a Holy Grail where this will never happen again is unrealistic, IMO. A securely solvent company with 10 good projects might well decide to fund/finance (as you please) project 11 by turning to outside sources on commercial terms, rather than cross-financing from project surpluses or capital reserves. That's purely a business decision. What then typically matters for shareholders is whether the funding is dilutive or not. Hopefully not. And if yes, then whether it's a long-term II or the here-today-gone-tomorrow brigade.
In Vast's case, for example, getting Manaila off care and maintenance, and into profitable operations, is expected to involve a major infrastructural investment. That would almost certainly involve outside liquidity being furnished or else it could be years of waiting. But if Vast can make a good case about BPPM, its Tajik royalties and its handling of current creditors, then it might well secure a lender for the Manaila project rather than diluting equity holders, or attract a stable II on an equity basis.
More short-term, as in Q1, I think it's more up in the air which way liquidity will be sourced. But on a rising SP with a robust Q4 BPPM report, it might not matter too much anyway.
We'll see. Interesting times but much better than it was this January, IMO.
This is a good step forward, IMO. I posted on 26 October (20:08) that "I think the creditors are being revealed as not actually being an existential threat. ... 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."
We now have the first payment plan. A one-off sum to both creditors from the placing and a rolling arrangement for Mercuria from concentrate sales.
This confirms my discussion with nevergonnaretire and one or two others in recent days that the BPPM inventory + recent production figures indicate that Q4 is expected to see an operating surplus at the mine. We now know that there is a carve-out to service the Mercuria debt from that surplus, which was in fact the original idea for how to service the debt years ago when it was first taken out as an offtake finance.
Still outstanding is any ongoing payment plan for Alpha beyond the lump sum (Alpha's share not specified) from the placing. So I expect some evolution in the payment plan if diamonds are further delayed. Conversely, the prioritization of Mercuria for repayment from concentrate (per the original offtake terms) very likely means that Alpha will be prioritized from the 'historic parcel' if/when it is released and sold.
It remains the case that the company's Final Report has expressly stated that finance will be needed for "general working capital", and only the silliest punter would fail to see that because there's a lot else to pay for than just running BPPM and servicing debt. There's corporate overhead, Manaila on care and maintenance, and a bunch of other long-term projects on back burners. They are looking at both debt and equity options, and have said so.
All in all though, the year is ending in a much better place than it started - with or without 'historic parcel' - because of BPPM finally starting to pay its way.
IMO.
As always, some posters forget that Vast is choosing to be valued as a producer, not an explorer. So the market has made clear for a *very long long time* that it has no interest in valuing Vast on the basis of a rag-bag of assets. Their "intrinsic value" is of zero interest. What is counting here is the company's ability to MONETIZE those assets. Hence the current m/cap + SP.
Some want to see Vast become a real business, with profitable mining. Some want to punt on a potential diamond parcel spike. Different values. Different mind sets. So the world turns.
Nevergonnaretire: agreed. Diamond parcel is about having a punt on a one-off windfall. Good if it happens but that's not an ongoing business model. Mining is. So, for many, it is about revenue and reaching operating profit. Vast has one directly operated mine: BPPM. That's why it matters.
Corporate overhead at the Plc level runs somewhere in the ballpark of $300k per month if I'm not mistaken + there are other operating costs besides BPPM's day-to-day mining. So for the group as a whole to wash its face on the basis of BPPM, they'd probably need around twice the production level they currently have. Hence, I think, the Final Report reference to "general working capital".
The direction of travel has been broadly positive but there's a way to go yet. Having said that, both debt funders and the market might take notice along the way as the numbers grind upwards.
To be clear, although I am optimistic about BPPM potentially achieving operating surplus soon, this doesn't mean that it will yet be able to pay the whole Vast group's way.
The Final Report section on 'Risk - Going Concern' is the most recent statement and is very clear:
"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."
We'll see whether debt or equity transpires, or whether a mixture.
Supplementary thought: looking at the sustainability of BPPM going forward, beyond the current 598 DMT inventory...
Conc. *production* volumes (DMT) were:
June: 255
July: 209
August: 230
September: 120
The July-September (Q3) *production* total was 559 DMT, despite accident and strike interruptions. That's more than 3 times the June *sales* volume (167 x 3 = 501). So it looks like Q3 production was enough to match or pass a quarterly breakeven sales volume.
The June-August numbers suggest that - if we put aside September's strike interruptions - over 200 DMT per month should now be normal production, so over 600 DMT per quarter (maybe 700 DMT) without interruptions. That *potentially* begins to open up a modest operating surplus at the mine: i.e. 600-700 DMT production vs sales target of ~501 DMT.
This means that Q4 2023 to Q1 2024 might, potentially, see BPPM contributing a bit to costs beyond its own normal operations. That could include helping to support the updated BPPM JORC and licence costs, in the first instance. Further on, it could start to support other costs in the Romanian operations (e.g. Manaila on care & maintenance). Timing of any surplus partly depends what happens with the operating costs at BPPM as new concentrates and ramp-up unfold.
I wonder, also, when we will see first commercial sales of BPPM lead/zinc concentrates. They say they've started commercial production of these, so a first sale being reported either in Q4 or Q1 seems very possible.
At any rate, BPPM transitioning into operating surplus over the course of Q4 2023 and (more cautiously) H1 2024 seems entirely plausible to me.
IMO.
Nevergonnaretire: seems that our views align closely. I'm very interested to see how it pans out.
Fantasy: yes, your 11:58 is fair enough IMO. Some diversification of business models from fireside yarns and equity raises to revenue centres that generate actual commercial profit would be very welcome. A radical idea, I know.
Fantasy: PS. That is basically what the auditors have said.
Fantasy: the trouble with expecting Vast to go bust is that it's taking just as long as for Vast to turn that corner. Neither ever happens. But if BPPM can establish a full quarter at breakeven in Q4, possibly with the help of its fairly hefty stockpile, then the Plc's potential to raise more finance in Q1 is not about to evaporate. IMO.
RDeacs: not everyone posts in order to influence the SP. The BB doesn't influence the SP. The SP influences the BB. Only a very naive majority persistently fail to get that.
ASI: yes, indeed. It's a discussion board. Discussing the company's own reports to the market, and the upside and downside from the figures we have, is an example of what it should be for. Unfortunately some people just can't stomach facts.
Watching2: AIM action has almost nothing to do with BB posting. Do you have anything to say about the data provided by the company?
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.