Markets aren’t always easy to understand in these uncertain times, especially in the junior mining space.
Sentiment has been poor for some years now, volumes can dry up or flood in in biblical proportions, and share prices can stagnate for months on end or swing wildly at a moment’s notice.
How to navigate this strange environment?
Under the direction of chief executive Roy Pitchford, VAST Resources PLC (LON:VAST) is having a good go, but it isn’t always easy.
In recent days Vast shares have ticked up for the first time in a long time.
That follows six months when an amount of shares equivalent to more than twice the company’s free float has changed hands.
This is an unusual state of affairs in anyone’s book, notwithstanding the uncharted market waters all companies are now moving through.
And no-one’s quite sure why it’s happening.
After all, it’s not as if the company hasn’t been delivering good news.
Quite the contrary. Vast is one of the few mining companies around that can actually boast real progress.
In the past six months it’s brought not one but two mines into production, Pickstone-Peerless in Zimbabwe and Manaila in Romania.
Plans to get a second Romanian mine up and running haven’t gone as smoothly as hoped, but Pitchford is hopeful that a negotiation through the whys and wherefores of Romanian bankruptcy laws should soon be complete, and the third mine, at Baita Plai, will be away.
So that’s all to the good.
“But,” says Pitchford, “since October last year, notwithstanding news of first gold at Pickstone-Peerless and first concentrate from Manaila, the share price has gone inexplicably down.”
Some analysts, notably Yuen Low at Shore Capital, argued that the company’s financing arrangements with Crede Capital, a US family office, had created a huge overhang.
Pitchford says he is perplexed by the sheer volume of shares moving through the market.
“In the six months to March three billion shares traded,” he says. “Our free float is 1.5bn. So the free float has changed hands twice in six months.”
What Vast can do about that remains to be seen. One argument might be that if the company continues to deliver good news then eventually the shorts, if that’s what they are, will be squeezed out.
But Pitchford isn’t convinced.
“There are unprecedented volumes of shares coming onto the market and pushing the shares down,” he says.
“But disgruntled shareholders are long out of our stock. Whether it’s market forces or something else, somebody is trading unprecedented volumes and depressing the price.”
It’s got to the point where the second tranche would have taken Crede through the 25% level. This triggered a clause in the agreement that meant that Vast was able to refuse the second tranche of the four-tranche raise and to turn instead to alternative sources of funding.
This is obviously far from ideal, but because Vast is a producing company, the effects are not as severe as they might otherwise be. It’s more a question of slowing growth than of undermining the company altogether.
“I need capital to increase production at Manaila,” says Pitchford. “I need capital to increase the resource base. All that will happen now is that these developments will take longer.”
Be that as it may, the question of the high volumes and the unprecedented selling remains.
At the moment Vast doesn’t have a cornerstone investor of note, or indeed any real institutional presence on the register.
Efforts to change that may get underway in earnest in due course. Or, says Pitchford, the company may consider alternative forms of finance.
After all, although the share price has taken a beating, the combination of Pitchford and the Vast portfolio has proved able to bring money to the table in the recent past. What form it will take now though, remains to be seen.