29th Jun 2015 06:52
LONDON (Alliance News) - Xtract Resources PLC Monday said it has raised GBP4.4 million after conducting a share placing to part-fund the acquisition of the Manica gold mining license, which houses the Fair Bride project in Mozambique.
The miner said it raised the funds after placing 1.46 billion shares at 0.30 pence per share. The shares closed Friday at 0.333p.
The funds will be used as part-consideration for a deal it has signed with Auroch Minerals NL to fully acquire the Manica gold license, which includes a number of gold prospects including the Fair Bride open-pit gold deposit, it said.
The total consideration for the deal is USD12.5 million, to be settled by a USD4.5 million cash payment and the issue of new shares to Auroch worth USD6.5 million. Xtract also will pay up to an additional USD1.5 million to settle project related creditors.
The Fair Bride project is six months from completion of a bankable feasibility study. A preliminary economic assessment has already been completed by Auroch, which showed that the Fair Bride deposit is capable of generating revenues of USD55 million per year at steady-state production with the payback on the project being less than three years, the company said.
At a USD1,250 per ounce gold price, the project can generate annual earnings of USD15 million pretax profit. On Monday, gold was trading at around USD1,183 per ounce.
The project will target production within 18 months, producing 50,000 ounces of gold a year at a targeted cash cost of USD650 per ounce from the project's 900,000 ounce JORC resource. The ore-body will be mined from surface as an open pit for five years and then from underground for a further three years.
Start-up capital costs are estimated to be USD28.4 million and underground development costs are estimated to be USD14.8 million. The underground capital development does not commence until the fourth year of the operation, after the initial project capital has been repaid and will be funded from cash flows.
"The project has been granted a mining license and will be Mozambique's first commercial gold operation generating first mover advantage in a highly prospective under explored but well documented artisanal mining camp," said Xtract.
By Joshua Warner; [email protected]; @JoshAlliance
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