TIDMXTR
RNS Number : 4822A
Xtract Resources plc
29 May 2019
For immediate release
29 May 2019
Xtract Resources Plc
("Xtract" or the "Company")
Manica licence 3990C Hard Rock Collaboration Agreement
The Board of Xtract Resources Plc ("Xtract" or the "Company") is
pleased to announce that the Company has today concluded a
collaboration agreement ("Collaboration Agreement" or "Agreement")
with Mutapa Mining and Processing LDA ("MMP") for the mining and
mineral processing of the Company's Manica hard rock gold deposits
("Manica Project") at Xtract's Manica mining concession licence
3990C in Mozambique.
Highlights of the Agreement
-- Funding and operational agreement for Manica hard rock gold deposits signed on 29 May 2019
-- MMP, in partnership with Omnia, appointed as independent
mineral processing contractor on the various gold bearing mineral
deposits on the concession
-- Agreement provides for MMP to build and operate a carbon-in-leach (CIL) plant
-- MMP to finance and conduct the mining operations to include all capital and operating costs
-- Xtract will receive between 20% and 23% (dependent on
prevailing gold price) of the hard rock after tax operating cash
flow
-- Concession exploration programme to be initiated with an
objective to enlarge the gold resource within current known areas
not yet tested
-- Gravity recoverable gold to be exploited during the CIL
plant-build phase, assuming suitable material is available
Colin Bird, Executive Chairman said: "This agreement allows for
the extraction of CIL amenable resources to be commenced in the
mid-term whilst alluvial operations continue. The income to Xtract
once commercial levels of production are achieved, is expected to
be significant and continuing for in excess of 6 years. During the
construction period, we plan to process, those mineral resources
which are amenable to gravity processing and continue with the
alluvial operations. A concession exploration programme will be
initiated with a view to enlarging the currently known resource by
drilling at depth and testing areas not yet investigated. The CIL
plant will undoubtedly open up new feed material sources outside
the concession and where appropriate we will strike deals with the
concession owners to treat their ore on a commercial basis."
Fairbride Hard Rock Mining and Collaboration Agreement
Background
The Collaboration Agreement has been entered into on 29 May 2019
inter alia by the Company, the Company's wholly owned subsidiary,
Explorator Limitada ("Explorator"), and Mutapa Mining and
Processing LDA ("MMP") (the "Mining Contractor").
MMP is currently the owner of a 42,000 tonne per month hard rock
processing plant, that includes crushing, milling and gravity
recovery circuits and a furnace, for mining and mineral processing,
located in the Manica region of Mozambique.
The MMP plant has already had over US$11 million invested to
date and, so far as the Company is aware, represents the only
sophisticated hard rock processing capacity in the Manica region.
The MMP plant is the key reason supporting the rationale of
agreeing the Collaboration Agreement, as it reduces both capital
expenditure requirement and the time to production of the Manica
Project. Xtract are satisfied that MMP has the necessary technical
and operational capability to execute the proposed development plan
at Manica, including the installation, commissioning and operation
of the proposed CIL.
Key terms of the Collaboration Agreement
The terms of the Collaboration Agreement are as follows:
Appointment
The Company has appointed MMP an independent mineral processing
contractor, to provide a technical solution for processing the
Explorator's material, to conduct hard rock mining on the Manica
Project permitted area and to process the mined ore for the
recovery of Gold for a period of 10 years with an option to
extend.
MMP will provide all personnel and goods as may be necessary for
the performance of the services in accordance with the prescripts
and requirements of Mining Rights, the Mining Laws and the
requirements of all Regulatory Authorities. MMP will be responsible
for the construction of a suitable sized tailings dam in accordance
with international standards at a site to be pre-agreed with
Explorator.
Conditions Precedent
MMP have agreed to contribute their hard rock processing plant
to be utilised to process all oxide materials and, if appropriate,
transition and sulphide material, together with all infrastructure
and services contained within the fenced area of their mining
concession that relate to the processing plant and the services as
well as commit to the purchase and commission of suitable CIL plant
to carry out the services.
Conditions Subsequent
MMP has undertaken to commence construction of the CIL plant and
to provide Xtract with a schedule of purchases and an activity
chart indicating initial production and a target date for
commercial production of no later than 1 July 2020. MMP will also
be responsible for obtaining all rights, permits and licenses
required to carry out the services in accordance with the Mining
Laws.
Targets and Performance
MMP has agreed to commence construction (as demonstrated by the
placement of an order for the CIL), as soon as possible but in any
event no later than 1 November 2019 (with a long stop date of 1
February 2020). Construction installation work on the CIL is
planned to be completed with commercial production being achieved
by 1 July 2020 (with a long stop date of 1 October 2020).
Commercial production is defined in the Collaboration Agreement as
a being installation of a processing plant with a throughput
capacity of not less than 29,000 tonnes per month (being 70% of the
planned 42,000 tonnes per month throughput).
Mining Rights
Explorator will maintain the Concession and the Mining Rights in
good standing and will grant MMP exclusive rights to the hard rock
mining aspects of the Concession and the Mining Rights for the
duration of the Term.
Consideration & Payments
In consideration for the granting of exclusive rights to act as
the appointed hard rock mineral processing contractor at Manica,
MMP will pay Explorator an arrangement fee of US$20,000 for every
month of commercial production achieved.
MMP will receive 77% of all the operating profit produced from
the permitted area through the performance of the contract by MMP
when the prevailing price of Gold is greater than US$1,250 per
ounce. MMP's entitlement shall be increased to 78.5% at a
prevailing Gold price greater than US$1,175, and to 80% when the
prevailing price of Gold is less than US$1,100per ounce. For the
purposes of the Collaboration Agreement,
"profit" is defined as: Revenue on Sale less deductible costs
(excluding non-cash items) and corporation tax.
Exploration
The Company and MMP have agreed to incorporate a gold mining
exploration special purpose vehicle, on a 50:50 owned basis, and
with a monthly budget to be agreed by the parties from time to
time. Participation in exploration projects will be decided on a
case by case basis. The costs of exploration shall be divided on a
case by case basis. Each party may submit a project exploration
plan to the other party for review. The reviewing party may elect
to contribute up to 50 per cent. of the costs of exploration on
that project and will be awarded participation in the project on a
pro rata basis with its share of the costs.
MMP and Xtract have further agreed that, if with increased
knowledge of the Manica Concession it is deemed appropriate to
undertake a major drilling campaign to identify and delineate a
larger mineral resource then currently known in the Permitted Area,
the parties will agree to invest on a 50:50 basis to identify a
larger potential gold mining resource. The parties will form a new
SPV for this activity and it will be separately managed with both
parties having an equal interest. A larger mineral resource is
defined as all resources in the Permitted Area in excess of those
currently known, with a minimum threshold being 2,500,000
ounces.
In the event of a significant new discovery, each party will
have first right of refusal, should they wish to sell their share
in the SPV. If during the exploration phase either partner dilutes
to less than 25 per cent. of the SPV by not participating in the
exploration expenses, it will enter into a drag/tag along agreement
with the other party should they wish to dispose of the overall
enlarged asset.
Option to purchase the concession
The Company has granted MMP an option to purchase the Fairbride
concession, subject to all parties receiving necessary regulatory
approvals including, but not limited to, the Company obtaining
shareholder approval, for an amount equal to the greater of:
-- An amount equal to 80% of the net present value using a discount rate of 15%; or
-- US$20 million
This option to purchase has a term of 2 years and is only in
respect of the known resources in the Permitted Area. In the event
that the parties agree that the operation has extended life
potential (beyond 8 years) or alternatively discovers a larger
deposit then the parties may agree a buyout by mutual consent on
the basis of an amount equal to 80% of the net present value of the
larger resource, again using a discount rate of 15%.
This agreement replaces the Joint Venture and Collaboration
Agreement entered into with Omnia Mining Ltd on 19 February
2018.
Shareholders should note that there is no certainty that the
outcome of production and operating results at Manica pursuant to
the Collaboration Agreement will be as currently expected and a
number of factors could cause actual results to differ materially
from those expected and set out in the forward-looking statements
contained in this announcement.
Further details are available from the Company's website which
details the company's project portfolio as well as a copy of this
announcement: www.xtractresources.com
This announcement contains inside information for the purposes
of Article 7 of EU Regulation No. 596/2014 on market abuse. The
person who arranged for the release of this announcement on behalf
of the Company was Colin Bird, Director.
Enquiries:
Xtract Resources Plc Colin Bird, +44 (0)20 3416 6471
Executive Chairman www.xtractresources.com
Beaumont Cornish Limited Roland Cornish +44 (0)207628 3369
Nominated Adviser and Michael Cornish www.beaumontcornish.co.uk
Joint Broker Felicity Geidt
Novum Securities Limited Colin Rowbury +44 (0)207 399 9427
Joint Broker www.novumsecurities.com
Forward Looking Statements:
Certain statements in this announcement are, or may be, deemed
to be forward looking statements. Forward looking statements are
identi ed by their use of terms and phrases such as "believe"
"could" "should" "envisage" "estimate" "intend" "may" "plan" "will"
or the negative of those variations or comparable expressions
including references to assumptions. These forward-looking
statements are not based on historical facts but rather on the
Directors' current expectations and assumptions regarding the
Company's future growth results of operations performance future
capital and other expenditures (including the amount. nature and
sources of funding thereof) competitive advantages business
prospects and opportunities. Such forward looking statements re ect
the Directors' current beliefs and assumptions and are based on
information currently available to the Directors. A number of
factors could cause actual results to differ materially from the
results discussed in the forward-looking statements including risks
associated with vulnerability to general economic and business
conditions competition environmental and other regulatory changes
actions by governmental authorities the availability of capital
markets reliance on key personnel uninsured and underinsured losses
and other factors many of which are beyond the control of the
Company. Although any forward-looking statements contained in this
announcement are based upon what the Directors believe to be
reasonable assumptions. The Company cannot assure investors that
actual results will be consistent with such forward looking
statements.
ENDS
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END
AGRUKARRKWAVUAR
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