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Has Vast Resources’ deal with Takob come at just the right time?

Has Vast Resources’ deal with Takob come at just the right time?

The latest update from mining company Vast Resources (LON:VAST) that group revenue has increased 236% in Q1 2022 compared to the previous quarter is a much needed boon for this struggling mining company. Shares jumped from 0.28p to around 2.50p but have since dropped back to 1.58p.

Overall gross revenues in Q1 2022 from its Transylvanian-based Baita Plai Polymetallic mine and its other projects increased to around $£2.2m, a jump of 135% from Q4 2021.

Vast Resources JV with Takob provides further revenue

This 236% increase in revenue also includes what the update calls a contribution from Tajikistan. The company announced its participation in a new joint venture project in Tajikistan with open joint stock company, Korkhonai Boygardonii Takob. Takob is the owner of the operating Takob fluoride and galena mine in Tajikistan where the strategic fluoride concentrate is sold to TALCO’s chemical division for the production of essential raw materials required for primary aluminium production.

With the President of the Republic of Tajikistan, Emomali Rahmon having recently declared the intensive industrialisation of Tajikistan as their fourth national goal, it could be a case of right place, right time for Vast Resources. The JV which is already 100% financed, is set to provide a further revenue stream for Vast Resources with Vast receiving a 12.25% royalty from all sales of non-ferrous concentrate and any other metals produced at the mine.

Under the Master Agreement the mine is to produce approximately 7,000 tonnes per month of ore containing no less than 1.5-2% lead, 1.2-1.4% zinc and 27% fluoride of which two months’ production has been stockpiled on site ready for processing, which, we believe should begin any day now. There have been reports too that the mine once contained 30g/t silver and 1-2g/t gold.


Significant improvements to operations

There have also been a number of other changes this year which could mean that Vast Resources might be heading towards a profit. Firstly, it has changed the way the underground Baita Plai mine operates – initial mining in the start-up phase of the mine was abandoned due to safety concerns for mining personnel from in stope pillar failures. As a result, Vast Resources has implemented two Mantis CMR4 Jumbo Drilling rigs and an Aramine miniLoader with remote capability.

Essentially this is a move towards more mechanised drilling and cleaning processes which apart from ensuring that operators can be sited in safe, stable ground, the company expects by June 2022 to substantially increase production of copper concentrate which will be reflected in the Q3 2022 results.

Will high costs hamper profitability?

If previous years are anything to go by, we should however, expect costs to remain high. Last year’s revenue of $896,000 resulted in a cost of sales of $2.6m while administration and overheads came in at a weighty $4.2m. All in all, the total loss for the year ended 30 April 2021 amounted to $7.7m. Costs were similarly high for FY2020 too.

Nevertheless, with all the basic infrastructure for the mine now in place and at the ready for the increase in production, the board at Vast believes that the mine will become a profitable asset. Whether that is in this year or beyond, Vast Resources still has some way to go before it reaches its 2018 highs of 62p per share.

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This article does not constitute investment advice.  Do your own research or consult a professional advisor.

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