Ann: Acquisition of Advanced African Gold Project-VEC.AX, page-9

Vector dumps tech foray, takes punt on African gold
ANGELA KEAN
Sep 18, 2016
http://www.spcapitaliq.com/our-thinking/news/vector-dumps-tech-foray-takes-punt-on-african-gold
Vector Resources Ltd.'s decision to abandon its plan to quit mining and shift into technology may leave shareholders a little wary about injecting further capital into the flailing Australian junior gold explorer.

The ASX-listed company, which has a market capitalization of about A$4 million, revealed last week that it has now decided to acquire a 70% stake in the Maniema gold project in the Democratic Republic of Congo.

In 2015, Vector struck deals to sell off its Australian mining assets and buy security technology firm M2M Global Technology Ltd.

Nonexecutive Chairman Gary Castledine told SNL Metals & Mining that Vector believes it can create value and growth more effectively by developing an advanced gold project in an established gold mining region such as the DRC than it could with the acquisition of M2M Global.

"Vector looked at a range of opportunities before deciding to proceed and acquire the Maniema gold project," he said. "We have a high level of confidence in the ability of this project and the people involved to generate a positive return for our investors."

Vector needs to raise about A$1.7 million to fund the acquisition, a sum Castledine is "very confident" the company can achieve.

"We will comfortably raise what we need to raise and have already received significant support and interest from our shareholders and from brokers that have strong credentials of raising capital for African-focused gold companies," he said.

"Investors are motivated by returns and our investors are happy to see us make a decisive move into the gold sector."

MineLife analyst Gavin Wendt said shareholders' reaction to the rights issue will be a good indication of the overall sentiment of the market as well as the shareholders' view on the quality of the project.

"They are probably fully prepared for a not-so-great shareholder reaction in terms of take-up of the rights issue, which is why if the project is any good I would imagine that they would have had discussions, even offers from stockbrokers to perhaps underwrite or support the rights issue," he told SNL.

The problem with Vector's capital raising is the quantity of shares that need to be issued to raise the cash. The company is issuing shares at 0.1 of an Australian cent, which means it will need to issue 1,650,000,000 shares, and it already has 1,350,000,000 shares on issue.

Wendt said having that much "paper" can detract from the overall appeal of a company. "It tends to reflect rather negatively on a company because the only way that they can raise the sort of money that they want is to issue lots of shares because their share price is so low," he said.

"It is hugely dilutionary for shareholders that don't take up the opportunity, and with a share price that low and so many shares on issue, it does sort of tend to suggest the company has been around awhile and they've tried a few things that haven't worked."

On Sept. 14, the day Vector announced the acquisition of Maniema, 13,636,687 shares changed hands and the share price rallied 25% to an intra-day high of 0.5 of an Australian cent, but by the end of trade that day, the shares had retraced its gains and a day later lost a further 25% to close at 0.3 of an Australian cent.

Since late September 2011, Vector's share price has fallen 97.1%.

The company hit a stumbling block in mid-2014 when a bulk sampling program at the Gwendolyn project in Western Australia produced gold at a grade much less than expected.

This led to a review of not just the Gwendolyn project but the entire portfolio.

"Vector is a good example of probably what literally hundreds of companies at the micro end of the resource sector have done," Wendt said. "A lot of companies were looking at IT and [Vector] probably abandoned that because the resource sector has gone for another run."

The hot favorites for many resource companies are lithium, graphite and Western Australian gold, but failing that, African gold is also back on the radar.

Castledine told SNL that the decision to acquire a gold project in the DRC was based on "fundamentals and economics."

"DRC is one of the global mining centers and a part of the world where projects of this quality and scale are available to a company such as us," he said. "A similar project based in Australia would be significantly more expensive to acquire and would take substantially longer to advance towards development."

Once Vector has completed due diligence and received shareholder approval, it plans to make further appointments to its management team.

- See more at: http://www.spcapitaliq.com/our-thin...kes-punt-on-african-gold#sthash.qYeN0jq9.dpuf