Vast Resources PLC (AIM:VAST) is valued significantly less than its peers and the market is missing the company’s robust growth proposition, Shore Capital said as it initiated coverage on the Romania-focused miner.

In a note entitled ‘ready for the next step’, the company’s house broker noted that Vast wholly owns the Baita Plai and Manaila polymetallic mines plus has an interest in two exploration projects, along with a joint venture agreement on the Chiadzwa Diamond fields in Zimbabwe and a conditional agreement for the acquisition of the past-producing Ghaghoo diamond mine in Botswana.

“At this stage, Baita Plai is the main driver for our valuation as it is currently being ramped up to 14kt per month,” said Shore Cap analyst Sheldon Modeland.

As such, he expects Baita Plai’s copper equivalent output to reach circa 2.4k tons per annum (ktpa) in the 2023 financial year, rising to 3.3ktpa in 2024.

“This, coupled with Manaila’s potential re-start of an additional 3ktpa of copper equivalent over the short-term, subject to financing and development of the adjacent Carlibaba project, underpins an attractive and compelling investment case, in our view.”

Shore Cap’s base-case post-tax 2022 valuation for VAST is GBP86.9mln or 36p per share on a fully diluted basis, assuming the company successfully achieves its Baita Plai mine plan of 14kt per month producing 8ktpa of copper concentrate.

This increases to GBP112mln or 46p per share, the analyst added, should the Manaila mine be re-started after being put on care and maintenance since December 2018.

Applying a 30% discount to account for financing and execution risks arrives at a risk-adjusted NPV of GBP78.4mln or 33p per share for both Baita Plai and Manaila production.

On a relative basis, VAST’s enterprise value is 2.2 times 2023 underlying earnings (EBITDA).

This, the analyst added, “appears undervalued” when compared with a selected peer group where the equivalent multiple is 4.7.

“As such, we believe that the market is misreading the company’s robust medium-term production and earnings prospects.”

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