TIDMVAST
RNS Number : 3915J
Vast Resources PLC
23 August 2021
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)
Diamond value (effective
Tonnes Recovered grade cpht* Carats date 01/01/14)
Indicated 79,390,000 19.51 15,492,200 $242/ct
Inferred 28,777,000 17.52 5,040,300 $239/ct
(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 80,000m(3) 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 80,000m(3) 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 GBP2.34 million).
There follows below a statement of financial position of GDB at
31 December 2020.
Audited 31 December
2020
BWP
ASSETS
Non current assets
Property, plant and equipment 15,811,426
--------------------
15,811,426
--------------------
Current assets
Receivables 1,698,562
Inventories 19,161,719
Cash and cash equivalents 684,172
--------------------
21,544,453
--------------------
TOTAL ASSETS 37,355,879
====================
EQUITY AND LIABILITIES
Equity
Stated capital 2,022,217,390
Non distributable reserves 2,543,708
Accumulated loss -2,033,263,279
--------------------
TOTAL EQUITY -8,502,181
--------------------
LIABILITIES
Non current liabilities
Intercompany loan
Operating lease liability 1,583,559
Provision for rehabilitation 40,529,260
--------------------
42,112,819
--------------------
Current liabilities
Trade and other payables 3,745,241
--------------------
3,745,241
--------------------
TOTAL LIABILITIES 45,858,060
--------------------
TOTAL EQUITY AND LIABILTIES 37,355,879
====================
Forward Looking Statements
Certain statements in this announcement, are, or may be deemed
to be, forward looking statements. Forward looking statements are
identi ed 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 re ect 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:
Vast Resources plc www.vastplc.com
Andrew Prelea (CEO) +44 (0) 20 7846 0974
Andrew Hall (CCO)
Beaumont Cornish - Financial www.beaumontcornish.com
& Nominated Advisor +44 (0) 20 7628 3396
Roland Cornish
James Biddle
Shore Capital Stockbrokers www.shorecapmarkets.co.uk
Limited - Joint Broker +44 (0) 20 7408 4050
Jerry Keen (Corporate Broking)
Toby Gibbs / James Thomas (Corporate
Advisory)
Axis Capital Markets Limited www.axcap247.com
- Joint Broker +44 (0) 20 3206 0320
Richard Hutchison
St Brides Partners Limited www.stbridespartners.co.uk
Susie Geliher +44 (0) 20 7236 1177
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.
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END
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