REG-Final Results <Origin Href="QuoteRef">VAST.L</Origin>
22/09/2017 08:06
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Vast Resources plc / Ticker: VAST / Index: AIM / Sector: Mining
22 September 2017
Vast Resources plc
("Vast" or "the Company")
Final Results
Vast Resources plc, the AIM-listed mining company with operations in Romania
and Zimbabwe, is pleased to announce its final results for the year ended 31
March 2017.
A copy of the annual report will be available shortly on the Company's website
at http://www.vastresourcesplc.com/.
OVERVIEW OF THE YEAR
Vast Resources plc ('Vast' or the 'Company') has focussed its portfolio of
mining assets towards a Romania centric polymetallic mining base with the
partial divestiture of its gold mining holding in Zimbabwe agreed during the
year under review, and completed post period end. Production at Vast's initial
two mines, the Manaila Polymetallic Mine in Romania ('MPM') and the
Pickstone-Peerless Gold Mine in Zimbabwe ('PPGM') increased considerably over
prior year levels. The Company's mineralised footprint in Romania was
materially expanded with the award of several exploration licences culminating
post period end in a landmark step towards achieving the Baita Plai
Polymetallic Mine ('BPPM') right to mine, following success in a formal
selection process.
Financial
* 230% increase in revenue to $23.8 million (2016: $7.2 million)
* 72% decrease in loss from continuing operations to $2.4 million (2016: $8.5
million) - mining and production operations in Zimbabwe performed strongly.
However delays in improvements to operational performance in Romania and the
corporate overhead continued to weigh heavily on profitability
* There were no discontinued operations in the year under review whereas a
loss of $8.7 million from discontinued operations was incurred in 2016
* Cash balance at period end of $1.326 million (2016: $0.831 million)
Post period end:
* Cash balance of $0.425 million in the Group, plus a further $128,700 held in
Breckridge Investments (Private) Limited ('Breckridge') in Zimbabwe as at 31
August 2017
Operational Development
* Prospecting licence granted over Faneata tailings dam adjacent to BPPM
* Maiden JORC Resource estimate published at MPM which increased the
previously estimated open-pit resources under the Russian classification by
approximately 8 times
* Zinc production commenced with the installation of a new flotation line in
MPM
* Construction of a sulphide processing plant at PPGM commenced in the first
quarter of calendar 2017 - construction was funded by an overdraft facility
with a local bank, supplemented by internally generated cash flows
* Agreement to dispose of an effective 25% interest in PPGM and Giant Gold
Mine for $4 million in conjunction with a loan of $4 million from Sub-Sahara
Goldia Investments (completed post period end)
* Agreement to acquire the remaining 49.9% interest in Sinarom Mining Group,
the operating company of MPM, providing the Company with a 100% interest in
MPM (completed post period end)
Post period end:
* Much delayed remedial capital expenditure undertaken to streamline mining
and processing operations at MPM
* 4,037 Troy Ounces of gold produced at PPGM in quarter ended June 2017
* 828 and 157 tonnes of copper and zinc concentrate respectively produced at
MPM in quarter ended June 2017
* Success in formal selection process concerning the award of an association
licence at BPPM
Funding
* Fundraising share issues during the year:
Issue proceeds
US$ Sterling Shares issued Issued to
476,314 324,425 324,424,770 Crede capital - conversion of warrants
497,829 500,000 140,211,632 Existing investor group
198,761 203,660 203,660,040 Exercise of warrants by existing investor group
2,054,720 1,663,579 583,711,881 Open offer and supplementary placing
4,354 3,922 784,409 Exercise of open offer warrants
144,294 117,000 42,469,635 To settle liabilities
2,251,256 1,809,561 999,032,113 Conversion of Bracknor Fund loan notes
368,009 300,000 75,000,000 Exercise of Bracknor fund warrants
328,124 263,158 52,631,578 Exercise of warrants by brokers
199,010 161,570 161,569,805 Exercise of warrants by Management
6,522,671 5,346,876 2,583,495,863
Management
* 3 October 2016 - resignation of Graham Briggs as Non-Executive Director and
appointment of Brian Moritz
* 16 November 2016 - at the Annual General Meeting of the Company William
Battershill retired as director by rotation and did not offer himself for
re-election. Brian Moritz was appointed Chairman of the Company in his
place.
* 13 March 2017 - appointment of Craig Harvey as Chief Operations Officer
Post period end:
* 30 June 2017 - appointment of Brian Basham as Non-Executive Director
CHAIRMAN'S REPORT
It gives me great pleasure to present this my first chairman's report since
taking up the role on the 3(rd) October 2016. I would like to thank William
Battershill for his service to the company as chairman and a director during
its transition from an exploration company to a mining company. His
enthusiasm, commitment and support played an important part in this transition
of the company's objectives.
Strategic Highlights
This financial year has seen a significant increase in turnover from US$7.2m
in 2016 to US$23.8m. The operating loss has reduced from US$8.0m in 2016 to
US$1.6m, and the comprehensive loss attributable to shareholders from US$16.2m
in 2016 to US$3.7m.
The retention of free cash flow in Zimbabwe to finance the development of the
phase two sulphide processing facilities at the Pickstone-Peerless Gold Mine;
the funding of the Romanian overhead costs; the funding of maintaining the
listing in the United Kingdom and the associated overheads; and the financial
support for operations at the Manaila Polymetallic Mine along with the care
and maintenance of the Baita Plai Polymetallic mine in Romania; have required
further injection of capital via equity raisings and additional borrowings.
During the year, there were also changes agreed in the ownership of certain
subsidiary companies. Following period end part of our interest in the
Pickstone-Peerless Gold Mine was sold, although we retain voting control over
Pickstone-Peerless. The cash generated from that sale was used, in part, to
purchase the minority interest in the Manaila Polymetallic Mine, where we now
own a 100% interest. While both of these transactions were negotiated during
the year, they only reached completion following the reporting date.
Zimbabwe
Higher than normal rainfall affected operations at Pickstone-Peerless Gold
Mine; nevertheless 239,199 tons of ore were milled compared to a target of
240,000 tons. Access to the higher-grade areas was restricted and low grade
areas and stockpiles had to be utilised resulting in the production of 16,500
ounces of gold compared to the target of 18,000 ounces.
Post year end, milling rates and gold production have reverted to expected
levels and work on the sulphide phase two expansion has commenced.
Romania
The improving trend experienced at Manaila Polymetallic Mine in the first
three quarters of the financial year was severely hampered by unexpected
extremely cold weather conditions experienced in the fourth quarter. The cold
weather stopped mining and processing operations and therefore the volume of
copper and zinc concentrate production. Post year end, the weather conditions
returned to normal and the improvement in production has resumed.
Significant achievements during the year included; the removal of the high
levels of zinc in the copper concentrate thereby eliminating the zinc penalty;
achieving the optimum copper concentrate grade; the production of a separate
zinc concentrate and a second income stream; increased copper and zinc
concentrate quantities; and commencement of the installation of a gravity gold
circuit to recover free gold that was not being recovered in the copper and
zinc concentrate production.
The Baita Plai Polymetallic Mine association exploitation licence has remained
a key focus of activity in Romania as the quality of the ore body and the
potential profit and cash generation of this mine has persuaded the board to
persevere with the licence application. It is very pleasing to note that
this effort has now been rewarded by the selection announced on 30 August 2017
of our subsidiary company for the award of the licence. We now anticipate
the grant of the right to mine very shortly.
Management
Craig Harvey has been appointed Chief Operating Officer. He is mainly focussed
on Romania and improving the mine planning and mining at Manaila Polymetallic
Mine along with the various processing improvements earmarked for the
metallurgical complex at Iacobeni. The granting of the Baita Plai licence will
require further involvement in Romania as this mine is brought back into
production.
Craig also continues to provide support for the mining operations at
Pickstone-Peerless, the evaluation of the Giant Gold Mine and other potential
gold opportunities in Zimbabwe.
Carl Kindinger has assumed the full functions of the CFO role and the
corporate secretarial role has been transferred to corporate secretaries
Shakespeare Martineau. As stated previously, Roy Tucker indicated his desire
to wind down his involvement in the company and these changes in the CFO role
and the transfer of the corporate secretarial role are designed to facilitate
this objective.
Funding
US$4.2m was secured during the year via share issues by way of the conversion
of warrants issued in association with capital raisings; an open offer to
shareholders; the settlement of liabilities; and the Bracknor equity facility
for US$5 million that was terminated after its initial tranche of US$2
million. In addition, an additional US$5.3m was secured during the year
through debt financing, with $3.4m of debt being repaid.
The ongoing funding of the U.K. and Romania overheads, and the further support
required to bring the Romanian operations to a cash generative position
requires additional capital. The company is in discussions with potential
strategic partners and expects finalisation of the strategic funding options
shortly.
Corporate structure and strategy
The geographical and cultural diversity between Romania and Zimbabwe involves
the board in reviewing on an ongoing basis the corporate structure and the
strategy going forward. In addition, within the shareholder base there are
differing perceptions and expectations with regards to the countries and
metals produced by the company.
In the event of a separation between the Romanian and Zimbabwe operations
there would be individual listed entities with shareholders initially equally
represented in both companies. This would enable shareholders to focus
investment in either, or both companies, as they wished.
The potential strategic investment referred to earlier could be the catalyst
to achieving the objective of establishing separate listed companies to focus
on Zimbabwe and Romania.
Appreciation
The continued support of shareholders is appreciated; it is planned that
during the current financial year operations in Romania will become cash
generative and that developments in Zimbabwe will enable access to cash,
because of the anticipated strategic investment in the group.
To fellow directors, past and present, thank you for your advice and support,
and to management and staff in both Romania and Zimbabwe for their continued
efforts on behalf of the company.
Brian Moritz
Chairman
STRATEGIC REPORT
Principal activities, review of business and future developments
Vision
The vision of the Company is to become one of the largest copper producers in
Eastern Europe whilst retaining a significant interest in the potential
increasing gold production in Zimbabwe.
Principal activities
Vast is a diversified mining company with open pit polymetallic operations and
a planned underground polymetallic mine in Romania, and an open pit gold mine
in Zimbabwe. We hold gold and diamond related mining claims in Zimbabwe and
have a presence in Zambia with interests in a rare earth and phosphate
project. We mine and produce copper and zinc concentrate and gold bullion. We
operate a regional model, with our registered office in London, United Kingdom
and offices in Bucharest, Romania and Harare, Zimbabwe.
Review of business
Zimbabwe
Pickstone-Peerless Gold Mine - PPGM
PPGM continued to generate free cash flow. This was occasioned by a
substantial increase, over prior year levels, in tonnage milled and gold
production despite some weather-related disruptions. Cash costs per ounce of
gold produced declined to $819 /oz on the higher volumes of production.
Profitability has exceeded expectations. Prior to the commencement of the
construction of the new sulphide plant cash levels reached $2.5mil. The
sulphide plant will expand milling capacity by 75% to 35,000 tonnes per month
and will come on stream in the third quarter of 2017. The plant is and will be
part funded by a bank loan which is expected to be repaid out of internally
generated cash flow within 12 to 18 months of the start of production.
In line with the company's policy of support for the local community and
strengthening relations with government a joint venture agreement for a toll
treatment plant to recover gold from nearby artisanal mining activities was
been concluded and construction was completed during early 2017.
Giant Gold Mine - GGM
Evaluation of GGM, located 28km from PPGM, which has a current JORC-compliant
inferred resource of 500,000oz of gold, commenced in the year under review.
Romania
Manaila Polymetallic Mine ("MPM") together with extensions and proximal
licences
Insufficient funding for both pre-stripping activity and remedial capital
expenditure, together with unusually adverse winter weather conditions, took a
heavy toll in reduced production levels, which fell well below the targeted
15,000 tons per month of mill feed. Plant overheads were not fully recovered
as a result. Cash costs of concentrate exceeded realisable sales values per
tonne by a wide margin. Nevertheless, noteworthy achievements during the
year include the reduction of zinc contained in copper concentrate to
commercially acceptable levels, a steady improvement in quantity and quality
of copper concentrate produced, and the introduction of a separate zinc
concentrate. As a result, a reduction in refining charges and penalties have
secured higher metal concentrate prices.
In March 2017, a gravity concentrator was commissioned in order to recover a
pyrite concentrate with gold and silver credits. Test throughput has proved
to be inconsistent in terms of quantity and quality of the concentrate.
Independent process consultants have been brought to site to assist in
resolving these issues. We are now focused on the development required to
increase quantity to a level commensurate with our mining rate.
Recent funding made available to the Company has enabled commencement of the
necessary remedial capital expenditure on the plant. Furthermore, a crusher
has been ordered which will allow for the crushing circuit to deliver smaller
sized feed in order to decrease milling time. Although the cost of
transporting ore 34Km from the open pit to the plant continues to erode
profitability, trucking capacity has been expanded after year end, thus
ensuring this is no longer a limiting factor in production. Together these
measures should enable the full production target of 15,000tpm to be achieved
in September 2017. A significant improvement in performance has already been
achieved since the reporting date.
We are undertaking a drilling programme that is nearing completion at the
Carlibaba extension to the current Manaila licence area. Initial drilling
results are promising. The objective is to prove the potential of a second
open pit mining operation at Manaila. Full results from the Carlibaba drill
programme are anticipated for release in September 2017 together with an
outline of Carlibaba's development path.
A new metallurgical processing facility is proposed which will deal with ore
from Manaila and Carlibaba. This is intended to reduce significantly the
cost of transportation and processing of ore thereby driving down the cash
cost per tonne milled. It will also enable the plant to be contained in a
controlled environment, thus materially reducing the adverse effect of severe
winter weather.
In December 2016, the Company expanded its potential resource base through the
granting of two prospecting licences proximal to MPM - Piciorul Zimbrului
and Magura Neagra - over which, from previous exploration, there are initial
estimates of substantial polymetallic resources. Exploration licences will
be applied for once prospecting work is complete.
Baita Plai Polymetallic Mine ("BPPM") and Faneata Tailings Dam
We are aware of shareholders' frustrations regarding the timescales for the
grant of the BPPM mining association licence (sub-licence), but following the
Company's success in a formal selection process, we are now very confident
that the right to mine will be granted shortly. It needs to be emphasized
that the past delays have arisen from the unusual legal background to the
situation for which there is no precedent in Romanian mining history. Since
2014, Vast, through its subsidiary companies, has been granted five licences
all promptly and without any difficulties.
Once the association licence is granted, the Company anticipates that
production could begin within six months and has forecast a start-up capital
expenditure budget of $1.2 million to make the mine operational.
Meanwhile expenditure at BPPM has been limited to the required care and
maintenance requirements and some capital expenditure to comply with health
and safety regulations that permit continued access to the important areas of
the mine such as the pumping stations.
A prospecting licence was granted in May 2016 over the Faneata tailings dam
located 7km from the BPPM. Subject to the outcome of the feasibility study
the intention is to use the BPPM processing facility.
An internally generated Maiden Faneata JORC Compliant Resource Estimate in
March 2017 defined a total Mineral Resource of 3.0Mt (Gross, 2.4Mt being net
to Vast). Metallurgical test work has commenced to determine an optimal
processing method. A feasibility study to recover the contained metals is
underway. An application has been made for an exploitation permit over the
tailings dam in anticipation of positive feasibility results. Preliminary
economic assessment indicated a break even total processing recovery of 25%.
Corporate
In January 2017 the Company contracted with Sub-Sahara Goldia Investments
("Sub-Sahara") firstly to raise US$4million through a divestment of an
effective 25% interest in PPGM and GGM, and secondly US$4million by way of a
loan, both subject to certain conditions precedent. Draw down of a
significant part of the monies was not completed until June 2017 due to delays
in complying with the conditions precedent, principally obtaining consent of
the Reserve Bank of Zimbabwe.
In March 2017 the Company announced the acquisition of the remaining 49.9%
equity stake in SC Sinarom Mining Group SRL ("Sinarom") (the operator of MPM)
and also announced that discussions were continuing concerning further
transactions in relation to Sinarom which could include the introduction of a
joint venture partner or securing debt at the subsidiary level in order to
increase production at both MPM and the newly acquired Piciorul Zimbrului and
Magura Neagra licences.
In July 2017, it was announced that conditional heads of terms had been signed
with a corporate finance and investment firm with significant experience in,
and investment in, Romania (the "Investor"). This provided for a two-stage
investment totalling US$10 million for the purpose of the Company's capital
expenditure and working capital requirement, mostly for the expansion of
Romanian operations. The investment was subject to the rights of Sub-Sahara
under the terms of its loan agreement, which gave Sub-Sahara a right to
provide equivalent finance if the terms and conditions were the same, which
right has been exercised by Sub-Sahara in August 2017. Sub-Sahara has
indicated it wishes to work with the Investor and the two parties are in
discussion with each other and with Vast to deliver a mutually acceptable
investment and corporate strategy. Meanwhile, in order to prevent any
further delay in the grant of the BPPM mining association licence, it was
announced on 13 September 2017 that Sub-Sahara had provided an additional loan
of $1.68 million for payments in connection with the BPPM association
licence.
Strategy and Key Performance Indicators
Our strategy is to:
* develop an appropriate geographic and product profile consistent with our
strengths, available opportunities and risks;
* focus on optimising our operations to produce positive cash flow;
* add value to operations by increasing our resources and reserves;
* attract appropriate joint venture partners and public institutions to
invest in the Company;
* maintain optionality on Zimbabwe gold production without significant
increase in investment risk in Zimbabwe.
A key issue for the Company has been a lack of, or delay in obtaining,
adequate funding for Romania. This has caused utilisation of plant in need
of refurbishment and without adequate back-up. As a result the necessary
production volume to yield the targeted cash flow has not been achieved.
This was partly remedied by the delayed finance obtained from the January 2017
Sub-Sahara transaction, but would be fully addressed by the consummation of
the funding represented by the heads of terms announced in July 2017 or
equivalent finance from Sub-Sahara or elsewhere.
PPGM in Zimbabwe, which was adequately capitalised for the first phase oxide
mining and processing and had the benefit of new plant, has produced cash flow
in excess of targets. The cash generated has been applied in funding the
second phase new sulphide plant at PPGM and subsequently is planned to finance
the development of GGM. The cash generated currently is therefore not
available to fund the Company's overheads or Romanian development.
Excluding Zimbabwe, the Company was a net cash absorber. Inter alia a
corporate overhead in excess of $2mil p.a., had to be funded by debt and
dilutive equity raises in the absence of a dividend flow from Zimbabwe.
Management believes that delivering in the next two years on a second open pit
at MPM and a new processing facility at MPM will increase production volumes
appreciably and favourably transform the financial metrics of the Company.
In the light of the explanation of the financial constraints affecting
Romania, we should also highlight the fact that it has been impossible to
raise funding for investment in Zimbabwe. This resulted in bringing in a 50%
investor to get the first phase at PPGM into production. Furthermore, cash
generated from the first phase is therefore needed for the second phase
development and the development of GGM. Consequently, funding for head office
and Romania was raised through the disposal of 25% of PPGM and a loan from
Sub-Sahara.
Key performance indicators
In executing its strategy, the Board considers the Company's key performance
indicators to be:
* Cash cost per tonne milled* Cash cost per tonne is derived from aggregate
cash costs divided by tonnes milled and measures productivity.
* For PPGM the cash cost for the year was $57/t, 10% higher than the 2016
result.
* For MPM the cash cost for the year was $47/t, 30% higher than the 2016
result.
* Cash costs or per ounce sold for gold and per tonne sold for copper
concentrate* Cash cost per ounce sold is calculated by dividing aggregate cash
cost by gold ounces produced or concentrate tonnes produced;
* For PPGM the cash cost was $819/t, 39% lower than the 2016 result;
* For MPM the cash cost was $1,653/t, 36% higher than the 2016 result.
* Plant utilisation as in targeted production volumes processed* PPGM
processed a mill feed of 239,608 tonnes for the year, 103% higher than the
2016 level. The targeted plant capacity in 2017 was 240,000 tonnes per annum;
* MPM processed a mill feed of 97,285 tonnes for the year, 66% higher than the
2016 level, but 46% below the target of 180,000 tonnes per annum.
Total resources and reserves
* These measure our ability to discover and develop new ore bodies and to
replace and extend the life of our operating mines.
In Zimbabwe, continual evaluation of dormant operations takes place with a
view to supplementing the mineral resource base in that country.
In Romania, the focus is on converting the significant inferred mineral
resources, defined exploration targets and prospecting licences into measured
and indicated mineral resources which would support a feasibility study.
At MPM, the current drilling programme is expected to outline a second open
pit by upgrading inferred mineral resources to a minimum of indicated mineral
resources.
· The rate of utilisation of the Group's cash
resources. This is discussed further below.
Cash resources
· As can be seen from the statement of
financial position, cash resources for the Group at 31 March 2017 were
approximately $1.3 million (2016: $0.8 million). During the year, the cash
inflows from operations were $2.9 million (2016: $1.7million outflow) and the
inflows from financing activities were a net $6.1 million (2016: $7.6
million), after the repayment of borrowings of $3.4 million (2016: $1.2
million). Against this, the outflows from investing activities were $8.5
million (2016: $8.1 million). The Directors monitor the cash position of the
Company closely and seek to ensure that there are sufficient funds within the
business to allow the Company to meet its commitments and continue the
development of the assets. During the year to 31 March 2017, of the $9.4
million of financing raised from share issues and loan drawdowns, $8.8
million, or 93%, was spent on directly developing the three mining properties
in Romania and Zimbabwe.
· The Directors closely monitor the
development of the Company's assets and focus on ensuring that the regulatory
requirements of the licences are in good standing always and that any capital
expenditure on the assets is closely controlled and monitored. Details of the
Company's spend on capital items in the year are set out in note 10 of the
financial statements.
· The loss after tax arising from continuing
operations during the year was $3.6 million (2016: $6.9 million) However, over
the year there was net cash generated by operations of $2.9 million as a
result of $6.5 million of non-cash items, principally, depreciation, share
option and other share based payment charges, together with movement of a
deferred tax credit. The Company raised fresh share capital of $4.2 million
(2016: $5.2 million), raised new loan finance of $5.3 million (2016: $3.6
million) and retired debt of $3.4 million (2016: $1.2 million). The net
Capital expenditure on the development on mine properties was $8.8 million
(2016: $8.7 million). The overall increase in cash available to the Group was
therefore $0.5 million (2016: $2.3 million reduction).
Principal risks and Uncertainties
The Board has identified the following as being the principal strategic and
operational risks (in no order of priority)
* Risk - Going concern
The Group will require more cash for its near term investment purposes -
particularly for the development of the BPPM association licence once it is
received and for the expansion of Manaila operations to achieve planned
increases in mining and production capacity - but is confident that it will be
able to raise $10million in cash from investors with whom the Board is
currently in negotiation, or otherwise.
However, this position could be undermined by a failure to secure the
$10million investment. Further lengthy delays or the failure to be awarded,
despite the Company's selection, the BPPM association licence could have a
material adverse impact on the Company's cash flow. The inability to have
funds externalised from Zimbabwe to the Company's treasury in the United
Kingdom exacerbates the Company's dependence on equity and debt raises to fund
corporate overheads. These factors together with unseasonal severe climatic
conditions, unforeseen delays in permitting for new mining or plant capacity,
cost overruns or adverse commodity price movements are indicative of the
material uncertainties which may cast significant doubt about the Company's
ability to continue as a going concern.
Mitigation/Comments
The Board will continue to engage potential investors to aid understanding of
the fundamental strength of the Company's business to be able to attract
additional funding when required. The Board will also whenever possible
retain sufficient cash margin to offset contingencies.
Risk - Mining
Mining of natural resources involves significant risk. Drilling and operating
risks include geological, geotechnical, seismic factors, industrial and
mechanical incidents, technical failures, labour disputes and environmental
hazards.
Mitigation/Comments
Use of strong technical management together with modern technology and
electronic tools assist in reducing risk in this area. Good employee relations
are also key in reducing the exposure to labour disputes. The Company is
committed to following sound environmental guidelines and is keenly aware of
the issues surrounding each individual project.
Risk - Commodity prices
Commodity prices are subject to fluctuation in world markets and are dependent
on such factors as mineral output and demand, global economic trends and
geo-political stability.
Mitigation/Comments
The Company's management constantly monitors mineral grades mined and cost of
production to ensure that mining output becomes or remains economic always.
Mining and production shortcomings mentioned above have been addressed in
Romania and once output has stabilised at satisfactory levels, it will be
possible to hedge future price fluctuations by entering forward selling
contracts. Beyond that, the Company aims to become a low-cost producer of
copper and zinc concentrate in Romania by adopting the expansion strategy for
Romania.
* Risk - Management and Retention of Key Personnel
The successful achievement of the Company's strategies, business plans and
objectives depends upon its ability to attract and retain certain key
personnel.
Mitigation/Comments
The Company's policy is to the foster a management culture where management is
empowered and where innovation and creativity in the workplace are encouraged.
To retain key personnel, the Company has introduced a "Share Appreciation
Right Scheme" for directors and senior executives which it will shortly be
reviewing to take account of all current circumstances.
* Risk - Country and Political
The Company's operations are based in Zimbabwe and Romania. Emerging market
economies could be subject to greater risks, including legal, regulatory,
economic and political risks, and are potentially subject to rapid change.
In Zimbabwe, the principal risks remain a scarcity of foreign exchange,
difficulty with externalisation of funds, and the risk of indigenisation. The
country's Indigenisation Regulations are subject to change and are of
uncertain effect. Further information on the Indigenisation Regulations is
given in Note 26. With respect to the Giant Gold Mine, where artisanal
miners are present, any delay in resolving this issue could impact development
of the mine.
Mitigation/Comments
The Company's management team is experienced in its areas of operation and
skilled at operating within the framework of the local culture in Romania and
Zimbabwe to progress its objectives. In addition, in Zimbabwe our
co-investors, Grayfox and Sub-Sahara are well established locally and also
experienced and skilled in dealing with the authorities and local communities.
The Company routinely monitors political and regulatory developments in each
of its countries of operation. In addition, the Company actively engages in
dialogue with relevant Government representatives to keep abreast of all key
legal and regulatory developments applicable to its operations. The Company
has several internal processes and checks in place to ensure that it is wholly
compliant with all relevant regulations to maintain its mining or exploration
licences within each country of operation. The Company's strategy as
announced in January 2017 was to reduce exposure to Zimbabwe and focus on
developing its interests in Romania.
* Risk - Social, Safety and Environmental
The Group's success may depend upon its social, safety and environmental
performance, as failures can lead to delays or suspension of its mining
activities.
Mitigation/Comments
The Group takes its responsibilities in these areas seriously and monitors its
performance across these areas on a regular basis.
Outlook
The current period under review, as with last year, has seen further progress
in the development of the Company's operational status post its exploration
focus which had continued until early 2014.
Once again there have been significant challenges that have been overcome by
management's dedication and hard work; unusually high rainfall levels in
Zimbabwe, and extreme cold coupled with lack of necessary capital through
funding delays in Romania.
Pickstone-Peerless Gold Mine has performed very well and the phase two
sulphide processing facility development is making good progress. The planned
increase in annual milling tonnage from circa twenty thousand tonnes per annum
to thirty-five thousand tonnes per annum with an expected grade increase to
3.5 grammes per tonne is expected shortly.
Work on the evaluation of Giant Gold Mine has commenced with a view to
increasing the defined resources and completion of a scoping study as preludes
to pre-feasibility and bankable feasibility studies. In addition, further gold
mining opportunities continue to be examined.
In Romania, several significant objectives have been achieved, the most
notable being the selection of African Consolidated Resources SRL as the
recipient of the Baita Plai association licence, the funding of the licence
requirements, and the commencement of the final procedures to issue the
licence. Additionally, two strategic investors have indicated interest in
funding the reopening and redevelopment of the two existing mining operations.
The expectation is that phase one of the reopening of the Baita Plai
Polymetallic Mine at ten thousand tonnes ore mined and processed will be
achieved in mid-2018.
The minority interest of 49.9% in Sinarom Mining Group SRL, the operating
company of the Manaila Polymetallic Mine, has been acquired giving the Vast
Group total ownership of the mine. Improvements to the open cut mining
operation at Manaila and to the metallurgical complex at Iacobeni have
resulted in high grade copper and zinc concentrate production and the
commencement of a gravity gold concentrate that will provide a third income
stream when optimised.
To complement the expected production from Baita Plai Polymetallic Mine and
the improved production at the Manaila Polymetallic Mine, Vast will, with the
benefit of the planned additional funding, be progressing the construction of
a new metallurgical complex adjacent to the Manaila open cut mine. In addition
to improved capacity and the benefit of modern technology in terms of lower
costs and improved recoveries, the new complex will save transport costs of
ore and tailings between the mine and the current complex. These transport
costs currently represent up to 33% of the total operating cost of the mine.
The short to medium term objective of Vast is to have two cash generating
mines in both Romania and Zimbabwe, whilst seeking additional and potentially
larger mining operations in both countries.
As always, my thanks to fellow board members and management for the commitment
and hard work that has been put into the company.
On behalf of the Board
Roy A. Pitchford
Group Chief Executive Officer
21 September 2017
For further information, visit www.vastresourcesplc.com or please contact:
Vast Resources plc Roy Pitchford (Chief Executive Officer) www.vastresourcesplc.com +44 (0) 20 7236 1177
Beaumont Cornish - Financial & Nominated Adviser Roland Cornish James Biddle www.beaumontcornish.com
+44 (0) 020 7628 3396
Brandon Hill Capital Ltd - Joint Broker Jonathan Evans www.brandonhillcapital.com +44 (0) 20 3463 5016
Peterhouse Corporate Finance Ltd - Joint Broker Martin Lampshire and Fungai Ndoro www.pcorpfin.com +44 (0) 20 7469 0930
St Brides Partners Ltd Susie Geliher Charlotte Page www.stbridespartners.co.uk
+44 (0) 20 7236 1177
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 ("MAR").
Group statement of comprehensive income
for the year ended 31 March 2017
31 Mar 2017 31 Mar 2016
Group Group
Note $'000 $'000
Revenue 23,767 7,200
Cost of sales (17,381) (5,608)
Gross profit 6,386 1,592
Overhead expenses (8,047) (9,615)
Depreciation and impairment of property, plant and equipment (2,593) (2,151)
Profit (loss) on sale of property, plant and equipment 81 (57)
Share option and warrant expense 22 (1,648) (3,368)
Other administrative and overhead expenses (3,887) (4,039)
Loss from operations (1,661) (8,023)
Finance income 4 105 1
Finance expense 4 (812) (509)
Loss before taxation from continuing operations (2,368) (8,531)
Taxation (charge) credit 5 (1,193) 1,658
Loss after taxation from continuing operations (3,561) (6,873)
Gain on business combination 13 - 41
Loss on discontinued operations, net of tax - (8,739)
Total profit (loss) for the year (3,561) (15,571)
Other comprehensive income
- items that may subsequently be reclassified to either profit or loss
Gain on available for sale financial assets 3 10
Exchange gain (loss) on translation of foreign operations 750 (135)
Total comprehensive profit (loss) for the year (2,808) (15,696)
Total profit (loss) attributable to:
- the equity holders of the parent company (4,437) (16,100)
- non-controlling interests 876 529
(3,561) (15,571)
Total comprehensive profit (loss) attributable to:
- the equity holders of the parent company (3,684) (16,225)
- non-controlling interests 876 529
(2,808) (15,696)
Loss per share - basic and diluted 8 (0.13) (1.02)
Profit (loss) per share from continuing operations- basic and diluted 8 (0.13) (0.44)
The accompanying accounting policies and notes form an integral part of these
financial statements.
Group statement of changes in equity
for the year ended 31 March 2017
Share capital Share premium Share option reserve Foreign currency translation reserve Available for sale reserve Employee Benefit Trust ("EBT") reserve Retained deficit Total Non-controlling interests Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
At 31 March 2015 15,035 66,105 479 (1,843) (13) (3,942) (53,099) 22,722 10,969 33,691
Total comprehensive loss for the year - - - (135) 10 - (16,100) (16,225) 529 (15,696)
Share option and warrant charges - - 3,368 - - - - 3,368 - 3,368
Share options and warrants lapsed - - (1,748) - - - 1,748 - - -
Acquired through business combination
- Sinarom Mining Group SA - - - - - - (20) (20) 20 -
Shares issued:
- for cash consideration 796 4,364 - - - - - 5,160 - 5,160
- to settle liabilities 274 1,183 - - - - - 1,457 - 1,457
(including Directors)
At 31 March 2016 16,105 71,652 2,099 (1,978) (3) (3,942) (67,471) 16,462 11,518 27,980
Total comprehensive loss for the period - - - 750 3 - (4,437) (3,684) 876 (2,808)
Share option and warrant charges - - 1,648 - - - - 1,648 - 1,648
Share options and warrants lapsed - - (1,857) - - - 1,857 - - -
Convertible loan fair value adjustment - - - - - - 223 223 - 223
Shares issued:
- for cash consideration 2,064 2,112 - - - - - 4,176 - 4,176
- to settle liabilities 1,251 1,038 - - - - - 2,289 - 2,289
At 31 March 2017 19,420 74,802 1,890 (1,228) - (3,942) (69,828) 21,114 12,394 33,508
The accompanying accounting policies and notes form an integral part of these
financial statements
Company statement of changes in equity
for the year ended 31 March 2017
Share capital Share premium Share option reserve Foreign currency translation reserve Available for sale reserve EBT reserve Retained deficit Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
At 31 March 2015 15,035 66,105 479 (4,954) 5 (3,942) (42,039) 30,689
Total comprehensive loss for the year - - - - (5) - (5,807) (5,812)
Share option and warrant charges - - 3,368 - - - - 3,368
Share options and warrants lapsed (1,748) 1,748 -
Shares issued:
- for cash consideration 796 4,364 - - - - - 5,160
- to settle liabilities 274 1,183 - - - - - 1,457
(including Directors)
At 31 March 2016 16,105 71,652 2,099 (4,954) - (3,942) (46,098) 34,862
Total comprehensive loss for the year - - - - - - (4,615) (4,615)
Share option and warrant charges - - 1,648 - - - 1,648
Share options and warrants lapsed - - (1,857) - - - 1,857 -
Convertible loan fair value adjustment - - - - - - 223 223
Shares issued:
- for cash consideration 2,064 2,112 - - - - - 4,176
- to settle liabilities 1,251 1,038 - - - - - 2,289
At 31 March 2017 19,420 74,802 1,890 (4,954) - (3,942) (48,633) 38,583
The accompanying accounting policies and notes form an integral part of these
financial statements.
Group and Company statements of financial position
As at 31 March 2017
31 Mar 2017 31 Mar 2016 31 Mar 2017 31 Mar 2016
Group Group Company Company
$'000 $'000 $'000 $'000
Assets Note
Non-current assets
Property, plant and equipment 10 38,563 32,539 - -
Investment in subsidiaries 11 - - 218 218
Loans to group companies 12 - - 35,962 33,963
Deferred tax asset 5 465 1,658 - -
39,028 34,197 36,180 34,181
Current assets
Inventory 14 2,811 1,912 - -
Receivables 15 5,960 3,896 1,606 412
Available for sale investments 16 10 8 5 5
Cash and cash equivalents 1,326 831 1,239 615
Total current assets 10,107 6,647 2,850 1,032
Total Assets 49,135 40,844 39,030 35,213
Equity and Liabilities
Capital and reserves attributable to equity holders of the Parent
Share capital 19,420 16,105 19,420 16,105
Share premium 74,802 71,652 74,802 71,652
Share option reserve 1,890 2,099 1,890 2,099
Foreign currency translation reserve (1,228) (1,978) (4,954) (4,954)
Available for sale reserve - (3) - -
EBT reserve (3,942) (3,942) (3,942) (3,942)
Retained deficit (69,828) (67,471) (48,633) (46,098)
21,114 16,462 38,583 34,862
Non-controlling interests 12,394 11,518 - -
Total equity 33,508 27,980 38,583 34,862
Non-current liabilities
Loans and borrowings 17 3,166 911 - -
Provisions 19 1,095 954 - -
4,261 1,865 - -
Current liabilities
Loans and borrowings 17 3,076 2,504 - -
Trade and other payables 18 7,431 6,729 447 351
Bank overdraft 17 859 1,766 - -
Total current liabilities 11,366 10,999 447 351
Total liabilities 15,627 12,864 447 351
Total Equity and Liabilities 49,135 40,844 39,030 35,213
The accompanying accounting policies and notesform an integral part of these
financial statements.
The parent Company reported a loss after taxation for the year of $4.615
million (2016: $5.807 million).
The financial statements were approved and authorised for issue by the Board
of Directors on 21 September 2017 and were signed on its behalf by:
Roy C.
Tucker
Director
21 September 2017
Group and Company statements of cash flow
for the year ended 31 March 2017
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