20th Jan 2015 11:17
LONDON (Alliance News) - Xtract Resources PLC said Tuesday it now expects its Chepica Gold and Copper mine in Chile to be cash flow positive in February, later than expected due to disruptions at the mine, and it is negotiating to defer some creditor payments until the end of March.
The company has put most of the USD1.3 million it raised last November into further drilling and development at the mine, targeting for it to be cash flow positive by the start of 2015. Production at the mine was forecast to ramp up to 8,500 tonnes per month by December 2014.
However, a gold bearing rock when accessed proved to be "discontinuous and unstable", so the company had to develop a bypass loop. This has "seriously disrupted" production, reducing plant production to 4,500 tonnes from 8,500 tonnes in December. Xtract is forecasting production of 4,5000 tonnes for January.
The company said that, should development be established on the reef horizon at the mine within the next week, it will be able to achieve its revised forecast production cash flow for January.
However, this disruption has hit the company's working capital, meaning it is having to negotiate the deferral of payments it owes under an earn-in option agreement. Xtract Resources is due to pay USD110,000 by the end of January, USD135,000 and USD175,000 by the end of February and March, and then payments totalling USD2.4 million due on a quarterly basis from December 2015 to December 2016.
The company said that, should the option agreement not be re-negotiated successfully, or option payments not be deferred until its working capital situation improves, it will consider suspending mining operations at Chepica.
"We are continuing with our efforts to combat adverse ground conditions and ore body discontinuity, which is requiring additional capital and preventing the company from meeting operational and financial forecasts. The board are monitoring the situation on a daily basis to ensure that all decisions taken are in the best interests of shareholders," said Chief Executive Officer Jan Nelson in a statement.
Shares in Xtract are trading down 33% at 0.101 pence Tuesday morning.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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