Vast Resources(LSE: VAST) hasannounced todaythat the company hasconducted the first blasting at its1.8MtManailapolymetallic mine located in northern Romania. Whats more, the company has commenced its first production run of polymetallic concentrate at the firmsprocessing facility in Iacobeni.
This initial production run follows Vasts acquisition of a 50.1% interest inSinarom Mining Group, the owner of the 1.8Mt polymetallicManailaMine at the end of July. Two weeks before investing in Sinarom, Vast took over management ofSinarom under a power of attorney.
Vasts 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 theManailapolymetallic mine and returning it to a usable condition. Acquired through Sinarom Mining Groups bankruptcy proceedings, theManailamine has plenty ofpotential. Indeed, the mine has established infrastructure in place, which allowed Vast to begun production almoststraight away, and theres scope todrastically improve the mines 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,Manailaproduced 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
WithManailaup and running, Vast now has a valuable income stream that will help the company develop its other interests.
And Vast isnt struggling to find new, lucrative projects. For example, alongside the groups other mining projects in Romania, Zimbabwe and Zambia, Vast has the opportunity to acquire 55 precious metal and polymetallic mines from Romanias state mining company.
Vast really is an up-and-coming company. Alongside itsManailapolymetallic 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, Vasts management believes that the projectedpost-taxcash 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, theres scope to increase mine production to 120,000tpaby January 2016. Further development costs for the mine, Vasts other projects,will be funded with Baita Bihors cash flow.
Still, as with all early-stage mining companies, Vasts biggest problem at present is cash, or in Vasts case, a lack of cash.
While the start-up of production atManailaup and running, cash should start to flow into Vasts accounts over the next few months but the company doesnt have much room for error.
At the end of November last year, Vasts cash balance stood at around $1m, and since the company has been forced to undertake several placings toraiseadditional cash. The mostrecent placing and subscriptionof 105,416,662 ordinary shares raised 1.26m.
High risk, high reward
All in all, Vast is a high-risk/high-reward play. If the company can get its Romanian assets up and running without a hitch, to produce cash to fund further growth, Vast could hit 2p per share within the year.
Nevertheless, if Vast continues to struggle, the company’s shares could slide back below 1p.
So, Vast’s certainlynot a company that’s suitable for widows and orphans. With that in mind, if you’re looking for a reduced risk opportunity, The Motley Fool’s top analysts have recently identified a company that they consider to be one of the market’s“top small caps”.
All is revealed inour new free reportentitled“Is This Stock Tomorrow’s Big Winner?”
Don’t delay, download thefree report today— but hurry, it’s only available for a limited time.
Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.