Thanks for the question Shareme16.I think there are a few key...

Thanks for the question Shareme16.

I think there are a few key differences between the two companies, their assets, markets and jurisdictions.

The attraction for investors with VEC was no doubt the asset - the allure of a multi-million oz deposit with an exploration target of between 10-20Moz according to management and added to that partially developed by Anglogold Ashanti and with many millions of dollars of equipment sitting on site ready to go. Sounds like a marketable story and in the right hands and with the right deal structure, it could be.

This part of the DRC is very remote (like most parts outside the copper belt) and as a result, the project faces significant logistical challenges (everything to build and operate the mine will have to come in from the eastern coast of Africa by truck and the road network in the DRC is very challenged - think 30-day long, one-way trips, dirt roads in primary rainforests that are subject to severe washouts - I know of trucks that get stuck for months at a time in mud up to their trays), terrane and vegetation challenges (as above, but also relevant for surface exploration costs - much, much different to driving up to Kalgoorlie to poke a few holes into the ground), lack of local governance and security (this area is bad, bad - I know of people who have landed there amid gunfire between local militia groups and had to take shelter behind heavy earthmoving equipment), very powerful vested interests in artisanal gold mining on the site (artisanal gold flows out from this area into Uganda and Rwanda with people high up in the political architecture benefitting from this illegal flow and they in turn fund the local militia groups to keep the area unstable - it is a nasty place), and also the DRC in general (it has fabulous mineral wealth, but it is also fabulously corrupt and a severe lack of governance). This is pioneering stuff (no joke, but parts of the eastern DRC have tribes of cannibal pygmies that while they have had contact with outside humans, haven't had much and they are still pretty raw). I won't mention the skullduggery that happens in country when some players seek to use their competitive advantages. It takes a lot to overcome all these things - time, lots of money, the right connections and a skilled and experienced management team. I don't see VEC having all of these attributes.

I also don't like the deal that VEC did with the vendor - too expensive for the risk profile. The vendor got significant upfront cash, an undilutable project interest and an interest in the company. The non-vendor VEC shareholders end up with only 51% (=85% of 60%) of the asset - this in return for taking on all the above risk and funding it in a market where funding is so selective and tight. To follow this up, VEC then took out the con note (to pay the vendor ?) and now find themselves in the position of probably not being able to pay it back in time. So what options do they have? Ask for an extension (hmmm), raise equity to repay (how? given the situation and performance to date), give the asset to Riverfort (maybe), let Riverfort take a >30% interest in VEC (possibly, but if I was Riverfort, I wouldn't be too happy with VEC paper), take out a bridge or another con note (how?). Whichever way you slice it, VEC shareholders are in for a bad ride.

Again, in the right hands and with the right deal this asset would add value to shareholders.

So, that's VEC.

On BAT, it is in a much, much better part of Africa to operate - sure it has its challenges (some similar to above), but they pale into insignificance compared to VEC. Has access to a developed port at Pemba, a functioning road network, terrane is much better, no artisanal mining issues, has community support, is/will be a simple open pit operation (I forgot to mention VEC is OP+UG). The orebody at BAT is bordering on world class given the notional mine life of 30+ years and, in my opinion, the graphite market is in for some serious growth with the battery/EV revolution in the near-medium term. In terms of the commercial side of things, BAT own 100% (or close to) of the asset and they don't have any con notes or other financing instruments that threaten their existence. They are straight equity at present. Existing BAT shareholders are critical of lack of progress in development, project financing, dilution and salaries - and while there is probably some merit in their grievances, the company is still funded and afloat and not threatened with extinction. I only recently bought into BAT so don't have the same experiences as the existing shareholders, but I am very much interested in the funding package, CAPEX and project build that management comes up with. The new MD kept Atlas Iron producing cashflow during very challenging times in the iron ore market, so I think could have the right DNA to bring the project online for a low capital intensity.

Hope I have answered your question Shareme16. Maybe a bit wordy, but worth putting in some colour.