Vast Resources plc Non-Convertible Debt Facility & Disposal Of Non-Controlling Interest In Pickstone-Peerless Gold Mine And G...

 
TIDMVAST 
 
   Vast Resources plc / Ticker: VAST / Index: AIM / Sector: Mining 
 
   30 January 2017 
 
   Vast Resources plc 
 
   ("Vast" or the "Company") 
 
   Non-Convertible Debt Facility 
 
   & Disposal of non - Controlling Interest in Pickstone-Peerless Gold Mine 
and Giant Gold Mine to Raise US$8 million 
 
   Vast Resources plc, the AIM listed mining company with operations in 
Romania and Zimbabwe, is pleased to announce that it has secured a loan 
facility and signed a conditional agreement for the partial disposal of 
a non-controlling interest in its Pickstone-Peerless Gold Mine and Giant 
Gold Mine providing gross proceeds of US$8 million principally to 
advance the Company's core activities in Romania. 
 
   OVERVIEW 
 
 
   -- Strategic investment by SSCG Africa Holdings Ltd ("SSA") providing gross 
      proceeds of US$8 million to Vast, by way of: 
 
          -- US$4 million cash consideration for the sale of 49.99 per cent. of 
             the Company's 50 per cent. interest in the Pickstone-Peerless Gold 
             Mine ("Pickstone") and the Giant Gold Mine ("Giant") ("Disposal"). 
 
          -- US$4 million long term loan to Vast - repayable in four years with 
             interest charged at 12 per cent. per annum, secured on the Group's 
             mineral assets ("Loan") 
 
   -- Transaction provides a significant cash injection to the Company by 
      crystallising a portion of the value of Pickstone and Giant whilst 
      retaining a controlling interest in the operating asset and optionality 
      on future Zimbabwean gold properties 
 
   -- Proceeds of the transaction ensure Vast is fully funded to accelerate 
      development of the Company's core Romanian portfolio of polymetallic 
      mining interests into positive cash flow. 
 
   -- Funding achieved without the issue of additional equity or convertible 
      securities by the Company 
 
   -- The Disposal is subject to certain conditions precedent including due 
      diligence and regulatory approval as outlined below and the Loan is 
      subject to drawdown in two tranches of US$2 million also as set out below 
 
 
   Roy Pitchford, Chief Executive of Vast, commented: "This transaction 
provides Vast with the financial strength to redirect capital to the 
area of the business which we believe will yield the maximum long term 
value accretion for the Company.  By accelerating the development of our 
assets in Romania, enabling the Company to become cash flow positive 
without the need for additional dilutionary fundraisings, I believe this 
transaction heralds a new phase of growth for Vast where we have the 
ability to rebuild shareholder value. 
 
   "We have been presented with a uniquely exciting opportunity to 
re-commission numerous high value brownfield mining assets across 
Romania, and through the application of a fully funded and robust 
investment strategy, I am confident that Vast has the potential to be a 
significant copper and base metal producer in Europe.  Our immediate 
priority is to expand and develop our current resources in and around 
the Manaila Polymetallic Mine complex and establish one of Europe's 
largest copper mining projects. 
 
   "SSA has demonstrated itself to be an extremely knowledgeable and 
enthusiastic strategic investor.  With exceptional influence in Africa, 
particularly Zimbabwe, SSA's involvement in the development of other 
associated gold projects will, I believe, provide further ancillary 
benefits in the future.  SSA has also expressed its interest in Vast's 
wider portfolio, including our Romanian interests, and this may prove 
fruitful as Vast evaluates longer term expansion plans in Romania; a 
country which we maintain offers an enormous opportunity for the 
Company." 
 
   Brian Moritz, Chairman of Vast, commented: "This is a pivotal 
transaction for Vast which allows us to strategically focus our efforts 
in Romania and presents the Company with an outstanding opportunity to 
develop what could be one of the largest copper operations in Europe. 
 
   "Moreover, we are deleveraging our exposure to Zimbabwe - a decision I 
believe to be prudent given the prevailing political and economic 
uncertainties of that country.  I do believe however that retaining a 
foothold in Zimbabwe to ensure we are "on the ground" when conditions 
improve in the country is a sensible approach, particularly when there 
is little risk to do so, with limited obligations to provide further 
capital.  However, if all parties chose to invest in the expansion of 
these gold operations, SSA has expressed its willingness to support this 
through its offer to fund Vast's contribution by way of a loan should 
Vast elect not to participate with a cash injection from its own or 
shareholders' resources." 
 
   ANTICIPATED USE OF FUNDS: 
 
   The gross proceeds of the strategic investment, being US$8 million, will 
be deployed as follows: 
 
 
   -- General corporate operating cost 
 
   -- Completion of the upgrading of the Manaila Polymetallic Mine ("Manaila") 
 
   -- Development of the additional mining opportunities identified in Romania 
      details of which the Company plans to announce in the near future 
 
   -- Negotiate with Grayfox for the early repayment of its loan. 
 
 
   RATIONALE FOR THE SSA TRANSACTIONS 
 
 
   -- Whilst production at Pickstone has proved encouraging, the project is not 
      projected to deliver cash to shareholders as free cash will be retained 
      for expansion, namely: 
 
          -- Exploitation of the sulphide mineralisation - estimated to be 
             US$8m to US$10m 
 
          -- Evaluation of Giant - expected to be US$5 million 
 
   -- The current economic and political uncertainties existing in Zimbabwe 
      such as; exchange controls that could become restrictive; reintroduction 
      of a quasi-Zimbabwe currency, Zimbabwe Reserve Bank "dollar bond notes" 
      that may result in excessive inflation as happened to the former Zimbabwe 
      dollar; proposed new mining taxation to increase the tax receipts by the 
      state from the mining sector; and the required forfeiture of base metal 
      and precious metal mining claims to the state, supports leveraging the 
      Zimbabwe assets whilst retaining exposure to future upside potential when 
      these challenges are resolved. 
 
   -- Future optionality on balance sheet restructuring - SSA has indicated 
      that the successful development of Vast's Romanian mining assets may 
      facilitate the conversion of any outstanding balance on its loan and its 
      49.99 per cent. holding in Canape into Vast shares on terms acceptable to 
      both companies. 
 
 
   BACKGROUND ON SSA 
 
   SSA is a Mauritian based investment holding company that is solely 
focussed on investing in Africa. It holds and performs the private 
equity strategy of Sub-Sahara Capital Group LP, an investment management 
firm that has been managing African investments since 2009. Sub-Sahara 
Capital Group LP is based in Arizona, US and has investment 
professionals on the ground in Harare, Zimbabwe. 
 
   THE TRANSACTIONS 
 
   Vast has today entered into three principal transactions with the SSA 
group of companies (the "SSA Group"). 
 
 
   1. Loan Purchase and Assignment Agreement (the "LPA Agreement"); and 
 
   2. Shareholders' and Subscription Agreement on two alternate bases (the 
      "Ronquil SSA Agreement" and the "Canape SSA Agreement" and collectively 
      the "SSA Agreements"); 
 
   3. Loan and Guarantee Agreement (the "LG Agreement") 
 
 
   By means of the LPA Agreement and the SSA Agreements, Vast has made an 
effective disposal, subject to certain conditions precedent, of 49.99 
per cent. of its 50 per cent. interest in Pickstone and Giant in 
Zimbabwe, in consideration of US$4,000,000 ("Disposal"). 
 
   By means of the LG Agreement, SSA has agreed to provide Vast a 
US$4,000,000 loan (the "Loan") repayable in four years at an interest 
rate of one per cent. per month and available to fund the overheads of 
Vast and to fund capital expenditure on Vast's projects in Romania. 
 
   LPA Agreement 
 
   This provides for the assignment of 49.99 per cent.of Vast's loan 
account with Canape for US$2,300,000 subject to the conditions precedent 
(a) that the Reserve Bank of Zimbabwe will approve the assignment of the 
loan and (b) that one or other of the SSA Agreements becomes effective 
by 7 April 2017 or such other later date as may be agreed between the 
parties. 
 
   SSA Agreements 
 
   Terms specific to Ronquil SSA Agreement: 
 
   --                    This agreement is between SSA Group's Zimbabwe 
subsidiary, Myristica Investments (Private) Limited ("Myristica"), Vast, 
Canape, and Canape's subsidiary company Ronquil Enterprises (Private) 
Limited ("Ronquil). 
 
 
 
   --                    Canape will transfer its 50 per cent. shareholding 
in Dallaglio Investments (Private) Limited ("Dallaglio") which owns, via 
Breckridge Investments (Private) Limited ("Breckridge"), Pickstone and 
Giant to Ronquil on a share for share basis subject to approval by the 
Zimbabwe Revenue Authority of the transaction as being tax free. 
 
 
 
   --                    Ronquil will issue new shares to Myristica which 
will constitute 49.99 per cent. of the enlarged share capital of 
Myristica for a subscription of US$1.7 million cash. This together with 
the US$2,300,000 consideration mentioned in the LPA Agreement above 
provides the effective US$4 million consideration for the Disposal 
 
 
 
   --                    Through a supplementary agreement SSA Group has 
agreed that all distributions will be pro rata to shareholding. 
 
   --                    In the event that the Zimbabwe Revenue Authority 
does not give approval of the tax free transfer of the shares in 
Dallaglio to Ronquil by 31 March 2017 or such later date as the parties 
may agree, this agreement will lapse and be superseded by the Canape SSA 
Agreement. 
 
 
 
   Terms specific to Canape SSA Agreement 
 
 
 
 
   -- This agreement is between Myristica, Vast and Canape and will only have 

      effect if the Ronquil SSA Agreement does not take effect because of 
      failure to obtain approval of tax free transfer of shares by the Zimbabwe 
      Revenue Authority. 
 
   -- Myristica will subscribe US$545,316 as a share subscription to Canape, 
      which will entitle it to 4,999 shares in Canape out of a total of 10,000 
      shares. 
 
   -- Myristica will also subscribe a loan to Canape of US$1,154,684.  Thus 
      securing that Myristica and SSA together will have 49.99 per cent. of the 
      loan funding from shareholders to Canape.  This together with the share 
      subscription agreement of US$545,316 and the US$2,300,000 consideration 
      mentioned in the LPA Agreement above provides the effective US$4 million 
      consideration for the Disposal 
 
   -- Vast has indemnified Myristica against any pre-existing liabilities in 
      Canape. 
 
 
 
   Terms common to both SSA Agreements 
 
 
   -- The agreements are subject to conditions precedent to be fulfilled by 
      31 March 2017 in the case of the Ronquil SSA Agreement or by 7 April 2017 
      in the case of the Canape SSA Agreement or in both cases such later date 
      as may be agreed between the parties concerning successful completion of 
      financial and legal due diligence by Myristica and the granting of a 
      Zimbabwe Investment Authority and indigenisation compliance certificate 
      for Myristica by the respective regulatory bodies in Zimbabwe. 
 
   -- Vast and Myristica will each have the right to appoint two directors to 
      the Board of Ronquil or Canape as the case may be.  The Chairman of the 
      Board shall at all times be a nominee of Canape in the Ronquil SSA 
      Agreement or Vast in the Canape SSA Agreement and the Chairman shall have 
      a casting vote. 
 
   -- Matters such as are customary in an agreement of this nature are reserved 
      for unanimous decision of shareholders. 
 
   -- In the event that the Board has decided that Ronquil or Canape, as the 
      case may be, requires further funding, each shareholder will have a right 
      of pro rata contribution either to loans or equity. 
 
   -- In the event that one party is not able or not willing to make a further 
      loan to Ronquil or Canape as the case may be where the Board has decided 
      that new funding is required then any deficiency may be made up by a 
      further loan (a "Disproportionate Equity Loan") by the other party at an 
      interest rate at the moving commercial lending rate as quoted by Barclays 
      Bank of Zimbabwe Limited and shall be entitled to security over the 
      assets of Canape for any such Disproportionate Equity Loan. 
 
   -- There are normal provisions for pre-emption rights in the event that one 
      party wishes to sell its interests. 
 
 
   LG Agreement 
 
   SSA has agreed to provide a US$4 million loan (the "Loan") repayable in 
four years at an interest rate of 1 per cent. per month, payable 
quarterly in arrears and available to fund the overheads of Vast and to 
fund capital expenditure on Vast's projects in Romania. 
 
   Principal terms of the Loan: 
 
 
   -- The agreement is between SSA's subsidiary, Sub-Sahara Goldia Investments; 
      Vast; and Vast's wholly owned subsidiary, Millwall International 
      Investments Limited ("Millwall"). 
 
   -- The Loan is made to Millwall but repayment is guaranteed by Vast. 
 
   -- The proceeds of the Loan will be paid to Vast in part satisfaction of 
      Millwall's indebtedness to Vast. 
 
   -- The Loan is in two tranches of US$2,000,000 each.  The first tranche is 
      payable immediately on signature subject to the transfer of the 
      collateral.  The second tranche is payable as soon as one of the SSA 
      Agreements has become effective. 
 
   -- Early repayment may be made of the US$4,000,000 in whole but not, unless 
      otherwise agreed, in part at any time at 30 days' notice on payment of a 
      2 per cent. early redemption fee. 
 
   -- Loan arrangement fee of 2 per cent., which is added to the principal 
      amount of the Loan. 
 
   -- It is secured on the shares of the holding companies of the Group's 
      various assets in Zimbabwe and in Romania. 
 
   -- The Loan is repayable at 60 days' notice at the option of SSA if the 
      following occurs: 
 
          -- if there is a change of CEO of Vast where SSA is not satisfied 
             about the incoming CEO and/or the Board of Vast at that time; 
 
          -- where 25 per cent. or more of the shares of Vast are held by a 
             single person or persons acting in concert. 
 
   -- The Loan is repayable at 60 days' notice in the event that both the LPA 
      Agreement and one of the SSA Agreements do not have effect by 7 April 
      2017 or by such later date as the parties may agree.  The net effect of 
      this is that the Loan is repayable at 60 days' notice if the conditions 
      precedent both in the LPA Agreement and at least one of the SSA 
      Agreements have not been fulfilled by 7 April 2017 or such later date as 
      the parties may agree. 
 
 
 
   --                     While the Loan is outstanding: 
 
 
 
 
   -- for Vast's existing projects, Vast shall not borrow further funds and 
      shall not permit borrowing at the project level.  Borrowings for this 
      purpose do not include normal commercial offtake arrangements; 
 
   -- for the existing projects, Vast shall not raise equity except by giving 
      SSA to the maximum extent permitted by law the right of first refusal on 
      such equity raised; 
 
   -- for projects in Zimbabwe, Vast shall be permitted to raise funding 
      through further equity or through debt or equity at project level 
      provided SSA to the maximum extent permitted by law is given the right of 
      first refusal; 
 
   -- for projects outside Zimbabwe and other than the Romanian Existing 
      Projects, Vast must put SSA into a position to compete on equal terms 
      with any third party for funding of any opportunity. 
 
 
   EFFECT OF THE TRANSACTIONS 
 
 
   -- Vast will retain control of Pickstone and Giant through its 50.01 per 
      cent. interest in Ronquil or Canape and its casting vote in Breckridge. 
 
   -- It will provide the Company with US$8.0 million working capital, which is 
      essential for overheads and the capital required for Romania. 
 
   -- The transactions do not involve any dilution at the parent company 
      level. 
 
   -- It secures Vast with a partner which is willing and able to fund further 
      projects, particularly in Zimbabwe where funding is often difficult to 
      secure. 
 
   -- In the event that further funding is required for additional projects in 
      Zimbabwe, Vast will have the right to contribute pro rata, however, 
      should Vast not be able to contribute its pro rata share, SSA will fund 
      Vast's contribution by way of a loan. 
 
   -- It will reduce the Zimbabwe country risk whilst creating very significant 
      optionality on Zimbabwe's future due to SSA's funding ability. 
 
   -- The carrying value of the assets subject to the Disposal (being an 
      effective 25%% of the consolidated figure) in the latest unaudited 
      balance sheet of the Group as at 30 September 2016 was approximately $6.6 
      million 
 
   -- Based on the Group's audited consolidated accounts for the year ended 31 
      March 2016, the turnover and profits from continuing operations before 
      taxation attributable to the Disposal (being an effective 25% of the 
      consolidated figures) were US$ 1,347,000 and US$256,000 respectively. As 
      the Company will retain a controlling interest, it intends to continue to 
      consolidate the interest in the Pickstone-Peerless mine. 
 
 
   **S** 
 
   For further information, visit www.vastresourcesplc.com or please 
contact: 
 
 
 
 
Vast Resources plc 
 Roy Pitchford (Chief Executive Officer)            [phone] - Office Romania 
                                                    [phone] - Mobile Romania 
                                                    [phone] - Mobile UK 
Beaumont Cornish - Financial & Nominated Adviser  www.beaumontcornish.com 
 Roland Cornish                                    [phone] 
 James Biddle 
Brandon Hill Capital Ltd - Joint Broker           www.brandonhillcapital.com 
 Jonathan Evans                                    [phone] 
Peterhouse Corporate Finance Ltd - Joint Broker   www.pcorpfin.com 
 Duncan Vasey                                      [phone] 
St Brides Partners Ltd                            www.stbridespartners.co.uk 
 Susie Geliher                                     [phone] 
 Charlotte Page 
 
 
   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"). 
 
   **S** 
 
   Notes 
 
   Vast Resources plc is an AIM listed mining and resource development 
company focussed on the rapid advancement of high quality brownfield 
projects and recommencing production at previously producing mines in 
Romania. 
 
   Vast Resources currently operates the Manaila Polymetallic Mine in 
Romania, which was commissioned in 2015.  The Company's portfolio also 
includes the Baita Plai Polymetallic Mine in Romania, where work is 
currently underway towards obtaining the relevant permissions to start 
developing and ultimately commissioning the mine. 
 
   The Company also has interests in a number of projects in Southern 
Africa including a 25per cent. interest in the producing 
Pickstone-Peerless Gold Mine in Zimbabwe. 
 
   This announcement is distributed by Nasdaq Corporate Solutions on behalf 
of Nasdaq Corporate Solutions clients. 
 
   The issuer of this announcement warrants that they are solely 
responsible for the content, accuracy and originality of the information 
contained therein. 
 
   Source: Vast Resources plc via Globenewswire 
 
 
  http://www.acrplc.com/ 
 

(END) Dow Jones Newswires

January 30, 2017 03:00 ET (08:00 GMT)

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