29th Sep 2015 10:47
LONDON (Alliance News) - Xtract Resources PLC Tuesday said it is progressing all of its projects with the aim of increasing production by eight-fold through its recently acquired Manica project, as the company reported a slightly narrower pretax loss in the first half of 2015.
However, its producing Chepica mine in Chile was hit by an earthquake in the first half, forcing the company to develop a new entrance to the mine, which will result in the mine making much less profit in the second half of 2015 than previously anticipated.
Xtract shares were down 17.7% to 0.247 pence per share on Tuesday.
The miner operating in South Africa and South America reported a GBP810,000 pretax loss in the first six months of 2015, narrowing from the GBP1.0 million loss made a year earlier, despite revenue, derived from concentrate sales, dropping to GBP118,000 from GBP636,000.
Xtract added a new project to its books in the half after it signed an agreement to conditionally acquire the Manica gold project in Mozambique, which is expected to deliver 50,000 ounces of gold production from January 2017.
That project will sit alongside the Chepica mine in Chile and the O?Kiep and Carolusberg tailings project in South Africa in the company's portfolio.
"Manica, when in full production, will increase the company's current gold production profile eight-fold, from 8,000 ounces per annum to 65,000 ounces per annum, and has the potential to be a major revenue contributor and transform the company to an emerging mid-tier gold producer within 18 months," said Xtract.
At Chepica, Xtract is currently undertaking a drilling programme focused on extending the life of mine and increasing its resource whilst it is waiting for the results from drilling on the Carolusberg and O'Kiep copper tailings project which was recently completed.
Since the end of the first half, Xtract said a "major earthquake" around 250 kilometres away from Chepica damaged the main access haulage. As a result, Xtract plans to re-develop a new haulage to access the ore-body from a different position.
Although that will hit its operations, the mine will remain cashflow positive. Xtract said Chepica will generate a net profit of around USD150,000 in the third quarter of 2015, down from the previous USD1.2 million forecast, and is anticipated to make a USD650,000 profit in the fourth quarter, down from the original estimate of USD1.2 million.
"The impact of the earthquake is of course extremely disappointing. However safety is a major priority and we will not produce if we can not do so safely. We have an exemplary safety record at the mine, we have had no accidents or fatalities since we took operational control. Despite the impact the mine is still expected to make a net profit of USD650,000 in the fourth quarter and the new access haulage will ensure we can continue to produce safely and therefore sustainably," said Chief Executive Jan Nelson.
"We have reduced the net loss to the company by keeping operating expenses flat in spite of significant capital deployed at our Chepica Mine to increase off reef development and milling capacity in preparation of major stoping operations," he added.
Going forward, Xtract is focused on completing a bankable feasibility study for Manica to achieve commercial production within the next six months, subject to securing financing, whilst contiunuing to optimise and increase production from the Chepica mine. It will also continue to evaluate the tailings projects in South Africa.
By Joshua Warner; [email protected]; @JoshAlliance
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