Vast Resources (LSE: VAST) has announced today that the company has conducted the first blasting at its 1.8Mt Manaila polymetallic mine located in northern Romania. What’s more, the company has commenced its first production run of polymetallic concentrate at the firm’s processing facility in Iacobeni.
This initial production run follows Vast’s acquisition of a 50.1% interest in Sinarom Mining Group, the owner of the 1.8Mt polymetallic Manaila Mine at the end of July. Two weeks before investing in Sinarom, Vast took over management of Sinarom under a power of attorney.
Vast’s management is now looking to increase mine ore production to approximately 10,000 tonnes per month.
Investment payoff
Vast has invested in excess of $1m cleaning up the Manaila polymetallic mine and returning it to a usable condition. Acquired through Sinarom Mining Group’s bankruptcy proceedings, the Manaila mine has plenty of potential. Indeed, the mine has established infrastructure in place, which allowed Vast to begun production almost straight away, and there’s scope to drastically improve the mine’s output.
Vast intends to undertake optimisation work to improve the efficiency of the existing mining operations by cutting costs and enhance the quality of the resource recovered. Historically, Manaila produced a 13% copper concentrate and 3g/t gold concentrate. Copper concentrate has already been increased to 19%, and Vast has plans in place to improve the recovery of by-product credits, gold, silver and zinc.
Funding growth
With Manaila up and running, Vast now has a valuable income stream that will help the company develop its other interests.
And Vast isn’t struggling to find new, lucrative projects. For example, alongside the group’s other mining projects in Romania, Zimbabwe and Zambia, Vast has the opportunity to acquire 55 precious metal and polymetallic mines from Romania’s state mining company.
Vast really is an up-and-coming company. Alongside its Manaila polymetallic mine, the group is currently in the process of re-opening another shuttered Romania polymetallic mine named Baita Bihor.
Baita Bihor was closed during 2013 due to a lack of capital investment and poor management. However, Vast’s management believes that the projected post-tax cash flow on the existing mine, after clean-up costs, could exceed $200m.
The total cost to clean up and re-commission Baita Bihor is estimated at $4m. After this initial spend, there’s scope to increase mine production to 120,000 tpa by January 2016. Further development costs for the mine, Vast’s other projects, will be funded with Baita Bihor’s cash flow.
Still, as with all early-stage mining companies, Vast’s biggest problem at present is cash, or in Vast’s case, a lack of cash.
While the start-up of production at Manaila up and running, cash should start to flow into Vast’s accounts over the next few months but the company doesn’t have much room for error.
At the end of November last year, Vast’s cash balance stood at around $1m, and since the company has been forced to undertake several placings to raise additional cash. The most recent placing and subscription of 105,416,662 ordinary shares raised £1.26m.