Diversified mining group Vast Resources Plc says the selling off of its stake in its linchpin Zimbabwean gold asset is part of a broader strategy to restructure.
An agreement has since been made with some shareholders to acquire the Chegutu-based Pickstone Peerless Gold Mine.
Although Pickstone was Vast’s only revenue generating business, CEO Andrea Prelea has said the move to sell it was based on the need by the group to raise funds for its other projects, namely a new diamond project in Zimbabwe and the Baita Plai Polymetallic Mine in Romania.
The sale of Vast’s 25 percent stake in the Pickstone Peerless Gold mine to “some associated shareholders with the existing shareholder base” is expected to reduce other loan and liabilities on the group’s balance sheet by nearly US$38 million to US$10,5 million from US$48,3 million.
“We look at it a wiping the slate clean. Because of the historical structure, it has been limiting our ability to raise finance for both the Baita Plai and the diamonds project, so this was a necessary change to be made. It’s an important opportunity for Vast to raise funding for our assets going forward,” said Prelea.
The CEO said although Pickstone was cash generating, all profits were being swallowed by development projects that are currently ongoing at the mine.
“It was our only source of income, but under the agreements that we signed we had never actually seen any money coming out of it and that was a two-fold reason.
“All the profits were being ploughed back into building the Sulphur plant . . . and we took a decision as a board that we would not see money from it for the next five plus years because of the re-investment,” said Prelea.
“Aside from that we were taking all the debt on our balance sheet as we consolidated our accounts so although it was an income producing asset that was performing quite well, the last few months haven’t been performing as well as they should.
“So the long term effect was that it had handcuffed our ability to borrow for projects that needed near-term cash, and able to generate near-term cash for the company as well. Post this restructuring the company’s probably in the best position it’s ever been.”
The AIM-listed company’s remaining assets and interests, include the Baita Plai Polymetallic Mine, the Blueberry Project and the Piciorul Zimbrului and Magura Neagra licences, all located in Romania, and the Heritage Concession of the Marange diamond fields in Zimbabwe.
Prelea has said new acquisitions are off the table for the foreseeable future.