AIM-listed Xtract Resources reports it has entered into a conditional sale and purchase agreement to sell the Manica gold project in Mozambique to Nexus Capital Limited and Mineral Technologies International Limited (MTI) for a cash consideration of US$17,5 million.
Aerial view of the Manica project showing location of the process plant, offices and workshop of the proposed mine (photo: Xtract Resources).
The Manica licence holds gold deposits (both hard rock and alluvial) which Xtract has been progressing towards production since June 2015. It is expected that a Bankable Feasibility Study (BFS), assessing the viability of developing and mining a hard rock gold deposit identified within the Manica licence, will be completed in Q2 2016, with mine construction planned to commence in Q4 2016 and first production in Q4 2017. Mining of the alluvial gold deposit is planned for Q3 2016.
Xtract has been exploring project financing options for Manica and says it is clear from this process that the significant capital requirement, expected to be approximately US$35 million in start up costs, would be highly likely to result in material dilution for Xtract’s shareholders.
“The Board carried out a detailed strategic review on receipt of the proposal from MTI and Nexus and we believe that the value we have added to the projects at Manica has been recognised by the offer,” says Jan Nelson, CEO of Xtract. “An uplift in value of 40 % in such a short time is testament to the work of the team at Xtract. The Board has recognised the substantial dilution which shareholders would have had to bear and has elected to sell Manica at this stage in order to strengthen the company’s balance sheet and focus on higher return targets which may realise shareholder value over a much shorter period.”
The agreement requires Xtract to deliver a BFS to MTI before 30 June 2016. In the event that Xtract does not deliver the BFS by this date, the purchase consideration will be reduced by US$1 million.
The work carried out to date at the Manica licence has led to completion of an independent technical report which confirms that, during the company's ownership of the project, the resource at Fair Bride has increased by 36 % to 1,26 Moz at a cut-off of 1 g/t.
MTI is already involved at Manica. In October 2015 Xtract announced that it had entered into a joint venture (JV) agreement with MTI to mine the alluvial gold deposit at the Manica licence, as a project separate to the hard rock gold deposit on which a BFS is being completed.
