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Xtract Resources drops sale price of Manica gold project
7:46 CAT | 21 Jul 2016
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The British-based mining company Xtract Resources announced on Wednesday that it has dropped the price for the sale of its Manica gold project by 2.5 million US dollars.
The Manica gold project is situated four kilometres north of the central Mozambican town of Vila Manica, near the border with Zimbabwe.
In May, Xtract entered into an agreement with Nexus Capital Limited and Mineral Technologies International (MTI) for the sale of the project for 17.5 million dollars. However, it has now been agreed that the sale will go ahead with a price of just 15 million dollars.
The price drop was in response to an agreement that the purchasers would make an initial payment of two million dollars by 12 August, which is earlier than agreed in the original deal. This will help with a cash flow problem that was caused by technical problems at Xtract’s Chepica mine in Chile.
Xtract Resources bought the Manica project from the Australian company Auroch Minerals in June 2015 for 12.5 million dollars. Wednesday’s announcement also revealed that Xtract has struck a deal with Auroch Minerals, under which on 20 July it will pay 750,000 dollars of the remaining 2.5 million dollars.
The Manica licence covers both hard rock and alluvial deposits. Xtract plans to begin gold production from the hard rock deposit in the last quarter of 2017.
The alluvial mining is expected to commence in August and all the gold produced will be split with 20 per cent going to Xtract and the remainder going to MTI. Both parties will bear the operating costs on a pro rata basis, and these costs will be taken out of gold sales.
Xtract estimates that in the period until 1 March 2017, around five thousand ounces of gold will be produced at Manica. With gold at around 1,300 dollars an ounce, this equates to approximately 6.5 million dollars.
The company has a target of eventually producing 32,000 ounces of alluvial gold per year at a cash cost of 120 dollars an ounce.
Most of the gold in the Manica licence is contained in the “Fair Bride” deposit. In May, the company revealed that an independent technical report found that it holds 1.257 million ounces of gold which can be extracted at one gram per tonne. The mine is expected to have a lifespan of over twelve years.
The share price of Xtract Resources fell by a third on the London Stock Exchange following the release of the statement.
Source: AIM
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