22nd Sep 2016 07:17
LONDON (Alliance News) - Xtract Resources PLC saw its shares plummet on Thursday morning after the miner revealed it will stop investing in the Chepica gold and copper mine in Chile and look to sell its interest because the "fundamentals and the risk" have become unattractive.
Xtract shares were down 28% to 0.0290 pence per share and the company now has a market capitalisation of only GBP3.3 million. Shares are down 87% from the start of the year.
The miner previously launched a review of the Chepica mine and said it has now determined that the "underlying fundamentals and the risk associated with the project are no longer supportive of continuing investment by the company."
"On this basis, the company has advised the option holder that it will not make future option payments. The next option payment is due on 15 October 2016 following which the company will relinquish its option and mining rights at Chepica," Xtract added.
Xtract does not think the mine can produce at its desired rates and deliver the desired gold rates.
The miner also said that previous studies considered all the problems with the operation lied within the processing plant but said, following more studies, it would have to improve the plant and deliver new transport and mining equipment for the mine itself, pushing up costs.
That, in turn, means it would take longer for Chepica to begin generating more revenue than costs, delaying the turn to profitability.
The Chepica mine was also significantly impacted in late 2015 by a major earthquake and, separately, a "tragic dual fatality at the surface plant."
Xtract said it will look to dispose of its investment in the mine "in due course" and in the interim will do "all things necessary" to introduce new interested parties that are seeking a small scale underground mining in Latin America.
"Our internal review concludes that a new operator, with a separate input capital structure and operating experience in Latin America, may be able to achieve the operating returns required for new investment," said the miner.
As it looks to turn attention away from Chepica, it said on Thursday that it will release an update for its other mine, Manica, in the "early part of next week".
By Joshua Warner; [email protected]; @JoshAlliance
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