TIDMXTR
RNS Number : 8689G
Xtract Resources plc
06 March 2018
For immediate release
6 March 2018
Xtract Resources Plc
("Xtract" or the "Company")
Alluvial Mining Contractor new agreement and update
The Board of Xtract Resources Plc ("Xtract" or the "Company")
announces that the Company's wholly-owned Mozambican subsidiary,
Explorator Limitada ("Explorator") has agreed new terms ("New
Mining Contractor Agreement" or "New Agreement") with Moz Gold
Group Limitada ("Contract Miner" or "Moz Gold") for the
exploitation of the M blocks of the alluvial gold deposits at
Manica on the Western Area at its Manica mining concession in
Mozambique.
Highlights
-- Moz Gold to continue to mine Block M of the western half of
the Company's alluvial interest in the Manica Concession
-- New Agreement replaces original payments provisions with a gold split
-- Processing plant capacity to increase from a total of 3 to 7 processing plants
-- New Agreement entitles Explorator to a percentage of the gold
mined, based on a sliding scale
-- Moz Gold will make a minimum kilogram gold payment of 2.25kg
of gold for March 2018, and 3kg of gold (after the provision for
mining production tax) each and every further calendar month of the
contract term after March 2018
-- Gold payments attributable 40% to Xtract and 60% to Nexus
Capital Limited under the terms of the alluvial collaboration
agreement
-- Initial contract period of 10 years or the depletion of alluvials whichever comes first
Colin Bird, Executive Chairman said: "The change in the New
Agreement to a gold split should enable easier and more efficient
monitoring of the operation, along with and bi-weekly payment
increasing cash flow. Moz Gold have stripped a considerable amount
of overburden and are expected now to increase their gold
production. The Manica alluvial operations are beginning to
stabilise after recent heavy rains falls. The availability of
processing plant and earth moving equipment should ensure
significant and further increased production levels. The decrease
in rain fall, together with plant build up should also facilitate
increased production levels".
Background
On 19 June 2017, Xtract announced that the Company's
wholly-owned Mozambican subsidiary, Explorator, had concluded a
mining contractor agreement ("June Agreement") with Omnia Mining
Ltd ("Omnia") and Moz Gold for the exploitation of alluvial gold
deposits at Explorator's Manica mining concession in Mozambique.
The June Agreement provided for monthly payments by Omnia and Moz
Gold based on the monthly run-of-mine performance whereby
Explorator would receive a base net price per tonne of ore
processed by Omnia and Moz Gold, and additional incremental
payments based on a proportion of any increase in the gold price
above a reference price of US$1,250 per ounce and / or any failure
by Omnia and Moz Gold to achieve the agreed production targets.
In December 2017, Xtract announced that the June Agreement had
been amended whereby the Western mining area was to be divided into
two blocks ("M" blocks and "O" blocks), with Moz Gold appointed on
an exclusive basis to conduct alluvial mining and process on the M
blocks and Omnia agreed to enter into a new agreement for the O
blocks ("Amended June Agreement").
To date Moz Gold has mined a total of 98,784 tonnes run-of-mine
and has not met the agreed production targets set out in the June
Agreement, and accordingly there are accrued penalties payable by
Moz Gold for non-performance. As at 1 March 2018, Moz Gold owes in
aggregate approximately US$1.5 million to Explorator, comprising
US$1.3 million in respect of performance penalties, and a further
US$0.2 million in respect of accrued but unpaid run-of-mine
payments under the June Agreement (the "Moz Gold Indebtedness").
Payments of the Moz Gold Indebtedness are attributable as to 40% to
Xtract and 60% to Nexus Capital Limited ("Nexus") under the
alluvial collaboration agreement between Nexus and Xtract.
Moz Gold has agreed to enter into the New Agreement which
replaces the Amended June Agreement. A summary of the principal
terms of the New Agreement is set out below.
New Agreement
The New Agreement entered into today by Company's wholly-owned
Mozambican subsidiary, Explorator, and Moz Gold, sets out the terms
for the exploitation of the M blocks of the alluvial deposits at
Manica on the Western Area of the Mining Concession area. The New
Agreement will endure for a period of 10 years or the depletion of
alluvials.
The Contractor shall, during and for the duration of the
contract term perform the continuous, optimal and efficient
alluvial mining of the permitted area, and the processing of the
mined material for the extraction of Gold. Moz Gold will only be
entitled to continue to access and undertake alluvial mining (or
any other mining activity) of the Permitted Hard Rock Area until 31
August 2018.
Explorator will be responsible for recording the gold
concentrate produced from the permitted area on a daily basis. Moz
Gold shall be responsible for the smelting of the gold concentrate
into doré bars, for delivery to Explorator on a weekly basis.
Explorator's net share of the gold produced is based on a sliding
scale of gold produced plus 6% of the recorded gold concentrate
produced as described further below.
Explorator will be responsible for all statutory and legal
requirements regarding the licenses.
Consideration and Payments
In consideration for the appointment of Moz Gold, Explorator
will pay Moz Gold a fee in gold equal to the following:
-- 85% of the first 20kg of gold produced in any calendar month.
Explorator will retain 15% of the first 20kg of gold produced in a
calendar month; and
-- 82.5% of the following 5kg of gold produced in any calendar
month. Explorator will retain 17.5% of the following 5kg of gold
produced in a calendar month; and
-- 80% of the following 5kg of gold produced in any calendar
month. Explorator will retain 20% of the following 5kg of gold
produced in a calendar month; and
-- 76.5% of all gold in excess of 30kg produced in any calendar
month. Explorator will retain 23.5% of all Gold over 30kg produced
in a calendar month.
The gold retained by Explorator is attributable as to 40% to
Xtract and 60% to Nexus under the alluvial collaboration agreement
between Nexus and Xtract.
Explorator shall be entitled to deduct and withhold from service
fees payable to the Moz Gold the applicable mining production
tax.
Minimum Monthly Delivery
Moz Gold has agreed to produce and deliver a minimum monthly
amount of gold to Explorator for Explorator's sole benefit and
account of not less than 2.25kg of gold (after the provision for
mining production tax) for March 2018, and 3kg of gold (after the
provision for mining production tax) each and every further
calendar month of the Contract Term after March 2018.
Moz Gold shall be liable to pay Explorator any shortfall in the
Minimum Monthly Delivery, which shall be paid to Explorator on
demand either in gold or cash.
Outstanding Moz Gold Indebtedness
As described above, Moz Gold owes approximately US$1.5 million
under the Amended June Agreement. Explorator has agreed to give Moz
Gold a discount of 25% on Moz Gold Indebtedness provided that Moz
Gold pays an initial amount of US$130,000 no later than 29 March
2018 and 12 monthly instalments of US$83,122 (together with any
accrued interest) to Explorator to repay the debt in full. The
outstanding balance of the discounted amount owed will incur
interest at the rate of 12% per annum compounded monthly in
arrears. The first instalment is payable no later than 31 May 2018.
If Moz Gold fails to make any payment of any Instalment amount by
the due date for payment then the Explorator is entitled to demand
immediate payment of the full outstanding undiscounted amount and
all accrued interest.
As described above, payments of the Moz Gold Indebtedness are
attributable as to 40% to Xtract and 60% to Nexus under the
alluvial collaboration agreement between Nexus and Xtract.
Other
Moz Gold will be responsible and liable for any rehabilitation
of the mining concession to the extent mined by Moz Gold as
required under the relevant mining laws.
The Agreement contains an indemnity from Moz Gold to Explorator
and further customary terms and conditions (including
termination).
Update on Moz Gold Loan
On 15 December 2017, Xtract announced that it had agreed to loan
a total of US$700,000 to Moz Gold to be drawn down in two separate
tranches of US$400,000 and US$300,000 respectively, with an
interest rate of 30% per annum ("Loan Agreement"). A total of
US$324,000 of the 1(st) tranche has been drawn down by Moz Gold and
is fully repayable by 22 May 2018. The second tranche of US$300,000
can only be drawn down at Xtract's discretion and only once the
first tranche has been fully repaid or converted into equity in Moz
Gold. As at 1 March 2018 the total amount owed by Moz Gold under
the Loan Agreement (including accrued interest) amounted to
US$338,000.
Further details about the company's project portfolio as well as
a copy of this announcement are available from the Company's
website: www.xtractresources.com
This announcement contains inside information for the purposes
of Article 7 of EU Regulation No. 596/2014 on market abuse.
Enquiries:
Xtract Resources Colin Bird, Executive +44 (0)20 3416
Plc Chairman 6471
Michael Cornish
Roland Cornish +44 (0)207628
Beaumont Cornish Felicity Geidt 3369
Email: corpfin@b-cornish.co.uk
ENDS
This information is provided by RNS
The company news service from the London Stock Exchange
END
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