Vast Res Regulatory News (VAST)

Vast Resources plc / Ticker: VAST / Index: AIM / Sector: Mining

23 August 2021

Vast Resources plc

("Vast" or the "Company")

Conditional Agreement for Acquisition of 90% interest in the

Ghaghoo Diamond Mine in Botswana

Vast Resources plc, the AIM-listed mining company, is pleased to announce the conditional agreement for the acquisition of Gem Diamonds Botswana (pty) Ltd ('GDB'), a wholly owned subsidiary of Gem Diamonds Ltd ('Gem Diamonds') which owns the Ghaghoo Diamond Mine in Botswana ("Ghaghoo"). The acquisition of Ghaghoo, which will be conducted through a joint venture between the Company and Botswana Diamonds plc ('BOD'), will provide Vast with a 90% interest in a high quality and previously producing diamond asset benefiting from world-class infrastructure and capable of generating material revenues in the near term.

The acquisition of GDB is conditional, inter alia, on the procurement by Vast of a bank guarantee in favour of Gem Diamonds and on relevant regulatory and competition authority approvals in Botswana and is expected to complete during the latter part of 2021.

It is not the intention of Vast to provide funding that may be required for the acquisition of the Ghaghoo Mine from new equity raisings and the Company is currently engaged with third party financiers to support the development of Ghaghoo into production.

Highlights

· Ghaghoo is a 10.8ha kimberlite pipe in central Botswana 300km north west of Gaborone which is currently on care and maintenance

· Fully permitted with mining licence to 31 December 2036

· Full spectrum of stones recovered including consistent recovery of high value fancy-coloured diamonds

· World class on-site treatment facility for 60,000t per month and full mining infrastructure

· US$250 million estimated historical exploration and underground mine development spend by previous developers

· SAMREC Resource (prepared by Venmyn for Gem Diamonds effective date 1 January 2014 and not subject to verification or updating by Vast)

(average grade recorded from past production 23.16 cpht)

*carats per hundred tonnes

· Average achieved prices from the last sale of production in March 2017 was US$175 per carat

· Circa 80,000m3 tailings dump suitable for reprocessing - comprehensive bulk sample tests to be conducted to assess the diamond potential of the tailings and establish a 'Total Content Curve' for the kimberlite which will be used to formulate the mining plan

· Application of TOMRA advanced sensor-based sorting technologies as part of bulk sampling tests which may allow higher recoveries both in the processing of the dump and in the future mining of the kimberlites than those indicated by historical records

Contracts summary

· Completion conditional on fulfilment of conditions precedent. These include procurement by Vast of a bank guarantee for 80% of the purchase price and regulatory and competition authority approvals in Botswana.

· US$4 million payable 50% five days after fulfilment of conditions precedent and 50% on 23 December 2021 or five days after fulfilment of conditions precedent if later. Completion ten days after fulfilment of conditions precedent.

· Okwa, a joint venture company between Vast (90%) and BOD (10%), is purchaser of 100% interest in GDB, the owner of the Ghaghoo Mine.

· Vast to provide the full finance for the acquisition and to bring the mine into steady state production up to a maximum of US$15 million without any reduction in BOD's share. BOD to have the right to contribute to earn up to a further 20%.

· BOD to provide technical advice and leadership until steady state production and to be appointed operator of the mine until such time as an agreed management team is implemented.

· Replacement rehabilitation guarantee for approximately US$3 million to be given by Okwa and guaranteed severally by Vast and BOD.

Andrew Prelea, Chief Executive Officer of the Vast Resources plc, commented:

"The proposed acquisition of the Ghaghoo Mine in Botswana is a highly compelling opportunity for Vast to deliver diamond production in a relatively short period, benefitting from a fully equipped mine that has $250 million of investment, infrastructure and a significant Resource of quality gems that include large stones and fancy colours. Importantly Ghaghoo is substantially de-risked both from an exploration and development perspective, and also from the funding structure that we are advancing with third party financiers.

"Furthermore, this transaction also aligns with our longer-term strategy to maximise and crystallise the value of our interests in Zimbabwe and the Southern African region."

An investor presentation focussing on the Ghaghoo Mine has been uploaded to the Vast website and can be found by using the following link: https://www.vastplc.com/investor-information/document-downloads/ under the Investor Presentations tab.

The Company also plan to share images and videos, including drone footage showing the substantial mining infrastructure on site at Ghaghoo, over the coming days on its social media.

Further details

Details of the Conditional Agreement to acquire Ghaghoo

· The Share Sale Agreement is between Gem Diamonds, Okwa, BOD and Vast.

· Okwa has conditionally agreed to acquire GDB, a wholly owned subsidiary of Gem Diamonds, for a cash consideration of US$4 million (the 'Purchase Price'). The Purchase Price will be adjusted upwards or downwards by the amount by which net current assets as per the final balance sheet of GDB to be prepared on completion are more or less than net current assets as at 30 June 2021. The adjustment is expected to be minimal. Completion will take place ten days after all suspensive conditions have been fulfilled.

· The Purchase Price is payable in two instalments. The first payment is US$2 million and is due five days after all suspensive conditions have been fulfilled. The second payment is due by 23 December 2021, or five days after all suspensive conditions have been fulfilled if later.

· Vast and BOD as shareholders of Okwa have severally guaranteed the obligations and performance of Okwa under the Share Sale Agreement in proportion to their respective shareholdings in Okwa from time to time.

· Completion is subject to a number of suspensive conditions being fulfilled by 31 January 2022 unless otherwise agreed between the parties including:

o Written confirmation from a bank acceptable to Gem Diamonds guaranteeing payment of 80% of the Purchase Price;

o Okwa providing a replacement guarantee in terms of section 38 of the Mines and Minerals Act with accompanying evidence of acknowledgement and consent by the Government of Botswana of the cancellation of the Gem Diamond's Guarantee;

o Written approval from:

(a) the Government of Botswana approving the transaction in accordance with section 50 of the Mines and Minerals Act; and

(b) the Competition Authority of Botswana approving the transaction in accordance with the provisions contained in Part X of the Botswana Competition Act (CAP 46:09).

The replacement guarantee under the Mines and Minerals Act is a guarantee for the rehabilitation obligation on closure of the mine which has been independently assessed at BWP34,332,195 (approximately US$3 million) on a sudden closure.

· It is the intention of all parties that the suspensive conditions are fulfilled and the transaction completed during Q4 2021 and the agreement provides for a longstop date of 31 January 2022.

Joint Venture with BOD

· Vast, BOD and Okwa have entered a shareholders agreement under which Vast and BOD are the shareholders in Okwa (initially Vast 90% BOD 10%), which company was established as a special purpose vehicle to carry out due diligence and acquire GDB.

· Vast is responsible for funding Okwa up to US$15 million for the purposes of carrying out due diligence, acquiring GDB and placing the Ghaghoo Mine into steady state production.

· BOD has a 10% free carry in consideration of the services it has provided to Okwa. This interest is not subject to any dilution unless Vast provides funding for Okwa in excess of US$15 million and may not be diluted below 2.5% thereafter. BOD also has the option of earning up to a further 20% interest in Okwa (thereby increasing its total interest to 30%) through funding US$20 for each US$80 funded by Vast .

· Vast has the right to appoint two directors and BOD the right to appoint one director to Okwa. The board will constitute a technical subcommittee for oversight of the operation of the mine and to determine funding requirements which will consist of two Vast nominees and one BOD nominee.

· BOD is responsible for leadership and technical advice until the mine reaches steady state production. BOD will be appointed operator of the mine until such time as an agreed management team is implemented.

· There are standard rights of pre-emption in the event of the sale of Okwa to a third party.

Background on Ghaghoo

Ghaghoo is a 10.8 hectare kimberlite pipe located in the Central Kalahari of Botswana and was discovered in 1982 by Falconbridge Mining (later Xstrata) and evaluated in joint venture with De Beers up to 2007. Gem Diamonds acquired Ghaghoo from De Beers and Xstrata in May 2007. Gem Diamonds continued to evaluate the project and a study was undertaken in 2010 to determine the most viable way in which to exploit the deposit. A Mining License was awarded to GDB in 2010. Further work on the kimberlite was deemed appropriate, and Gem Diamonds embarked on underground development to bulk sample the pipe in 2011/2012 through a decline shaft, and this developed into commercial production in 2015.

GDB is the holder of mining licence 2010/97L issued in terms of Section 41 of the Botswana Mines and Minerals act which grants GDB a mining licence for 25 years until 21 December 2036. The Government of Botswana does not have any equity in GDB but a royalty of 10% is payable to the Government of Botswana on all diamonds produced and sold.

Operations were based on a small underground mine that was ultimately not profitable due to operational issues arising through a focus on activities in another jurisdiction at a time of poor diamond market conditions. Accordingly, in February 2017, Gem Diamonds placed the mine on care and maintenance after recovery of just under 150,000 carats of diamonds.

There is extensive infrastructure on-site including a diamond processing plant comprising an autogenous mill, dense media separation plant ("DMS"), x-ray recovery and sort house. The due diligence has identified that there is a small low-grade kimberlite stockpile and DMS tailings of circa 80,000m³ and which contain up to 60% kimberlite.

A resource estimate for Ghaghoo, which uses a bottom cut-off of +1.5mm was prepared by Venmyn with an effective date of 1 January 2014. This estimate had a reported SAMREC compliant Indicated Resource of 79,390,000 tons with an average grade of 19.51 cpht and diamond value of $242/ct and an Inferred Resource of 28,777,000 tons with an average grade of 17.52 cpht and an average diamond value of $239/ct.

Due Diligence

BOD and Vast have jointly undertaken extensive internal and third-party due diligence work on Ghaghoo Mine including technical (Paradigm Project Management), financial, legal (Khan corporate law), diamonds (QTS Kristal Dinamika) and mine potential (Interlaced) which indicates that there is significant potential upside in both the potential diamond grade and value as well as various operational efficiencies. A detailed risk assessment was also carried out which included the resource, mining method (in particular with respect to the ingress of sand into the first underground mining level) and infrastructure.

A sinkhole, caused by the partial collapse of a portion of the crown pillar possibly due to over mining, covers an area on the first level of eight in the kimberlite pipe and limits the access to this particular zone of higher-grade kimberlite. Upper production levels will need to have reduced stope extraction so as to better manage the crown pillar and thereby reduce any potential further sand ingress into the underground workings. The changes to the mine plan are not expected to delay access to first ore as there are existing pre-developed crosscuts in place.

The Ghaghoo mine will also need to be de-watered. A rare large earthquake with an epicentre approximately 40km east of Ghaghoo in 2017 resulted in the rupture of the underground water seal leading to a large influx of water into the underground workings. A Botswana Diamonds PLC technical team site visit indicated that the water seal has been repaired and that this has significantly reduced the water ingress into the underground workings and which should result in a mine dewatering time to about 4 months.

Preliminary work has also included investigating alternative technologies in the diamond sorting area to improve diamond recovery. The re-commissioning programme for the plant will need to include an audit of the DMS operating parameters and optimisation of the autogenous mill to ensure that poor operations and management do not exacerbate the loss of diamonds to the DMS tailings.

Sampling is planned on the DMS tailings to assess the diamond potential of the tailings and to establish a Total Content Curve ("TCC") for the kimberlite. The results of this exercise will be used as an input to a feasibility study and could possibly provide the potential for an upgrade in the resource estimate.

The economic performance (and long term viability) of the mine will also depend on significantly lower unit power costs such as conversion of the existing diesel generators to solar power or feed from the national grid together with potential fiscal concessions.

Further information required by Schedule 4 AIM Rules for Companies

The latest audited accounts for GDB for the year to 31 December 2020 show a net loss for the year before tax of BWP35,818,697 (approximately £2.34 million).

There follows below a statement of financial position of GDB at 31 December 2020.

Forward Looking Statements

Certain statements in this announcement, are, or may be deemed to be, forward looking statements. Forward looking statements are identified by their use of terms and phrases such as ''believe'', ''could'', "should" ''envisage'', ''estimate'', ''intend'', ''may'', ''plan'', ''will'' or the negative of those, variations or comparable expressions, including references to assumptions. These forward-looking statements are not based on historical facts but rather on the Directors' current expectations and assumptions regarding the Company's future growth, results of operations, performance, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, business prospects and opportunities. Such forward looking statements reflect the Directors' current beliefs and assumptions and are based on information currently available to the Directors. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements including risks associated with vulnerability to general economic and business conditions, competition, environmental and other regulatory changes, actions by governmental authorities, the availability of capital markets, reliance on key personnel, uninsured and underinsured losses and other factors, many of which are beyond the control of the Company. Although any forward-looking statements contained in this announcement are based upon what the Directors believe to be reasonable assumptions, the Company cannot assure investors that actual results will be consistent with such forward looking statements.

This release, from a technical perspective, has been approved by James Campbell, Managing Director of Botswana Diamonds plc, in his capacity as per the joint venture and as a qualified geologist (Pr.Sci.Nat), a Member of the Geological Society of South Africa, a Fellow of the Southern African Institute of Mining and Metallurgy, a Fellow of the Institute of Materials, Metals and Mining (UK) and with over 35-years' experience in the diamond sector.

Beaumont Cornish Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting as nominated adviser to the Company in relation to the matters referred herein. Beaumont Cornish Limited is acting exclusively for the Company and for no one else in relation to the matters described in this announcement and is not advising any other person and accordingly will not be responsible to anyone other than the Company for providing the protections afforded to clients of Beaumont Cornish Limited, or for providing advice in relation to the contents of this announcement or any matter referred to in it.

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 as it forms part of UK Domestic Law by virtue of the European Union (Withdrawal) Act 2018.

Glossary

Crown Pillar: A crown pillar, defined as a rock mass situated above an uppermost stope of the mine, can be one of two types: a "surface crown pillar" and "crown pillar between open pit and underground".

Dense Media Separation plant: Dense medium separation (DMS) is a process whereby particles are sorted primarily on the basis of their densities. Particles with a wide range of densities are introduced into a medium suspension of a given density. Particles that are lighter than the medium density rise. These are commonly referred to as floats.

Indicated Resource: An 'Indicated Diamond Resource' is that part of a Diamond Resource for which quantity, grade, value, densities, shape and physical characteristics of the deposit are estimated with sufficient confidence to allow the application of Modifying Factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit. Geological evidence is derived from adequately detailed and reliable exploration, sampling and testing and is sufficient to assume geological and grade continuity between points of observation. An Indicated Mineral Resource has a lower level of confidence than that applying to a Measured Mineral Resource and may only be converted to a Probable Mineral Reserve (SAMREC).

Inferred Resource: An 'Inferred Diamond Resource' is that part of a Diamond Resource for which quantity, grade and average diamond value are estimated on the basis of limited geological evidence and sampling. Geological evidence is sufficient to imply, but not verify, geological and grade continuity. An Inferred Diamond Resource has a lower level of confidence than that applying to an Indicated Diamond Resource and must not be converted to a Diamond Reserve. It is reasonably expected that the majority of Inferred Diamond Resources could be upgraded to Indicated Diamond Resources with continued exploration (SAMREC).

Carat (ct): a unit of weight for precious stones and pearls, equivalent to 200 milligrams.

**ENDS**

For further information, visit www.vastplc.com or please contact:

ABOUT VAST RESOURCES PLC

Vast Resources plc is a United Kingdom AIM listed mining company with mines and projects in Romania and Zimbabwe.

In Romania, the Company is focused on the rapid advancement of high-quality projects by recommencing production at previously producing mines.

The Company's Romanian portfolio includes 100% interest in the producing Baita Plai Polymetallic Mine, located in the Apuseni Mountains, Transylvania, an area which hosts Romania's largest polymetallic mines. The mine has a JORC compliant Reserve & Resource Report which underpins the initial mine production life of approximately 3-4 years with an in-situ total mineral resource of 15,695 tonnes copper equivalent with a further 1.8M-3M tonnes exploration target. The Company is now working on confirming an enlarged exploration target of up to 5.8M tonnes.

The Company also owns the Manaila Polymetallic Mine in Romania, which was commissioned in 2015, currently on care and maintenance. The Company has been granted the Manaila Carlibaba Extended Exploitation Licence that will allow the Company to re-examine the exploitation of the mineral resources within the larger Manaila Carlibaba licence area.

In Zimbabwe, the Company is focused on the commencement of the joint venture mining agreement on the Community Diamond Concession, Chiadzwa, in the Marange Diamond Fields.

In Botswana, the Company is focused on finalising the acquisition of the Ghaghoo Diamond Mine, which will be conducted through a joint venture between the Company and Botswana Diamonds plc and will provide the Company with a 90% interest in a high quality and previously producing diamond asset benefiting from world-class infrastructure and capable of generating material revenues in the near term.