26th May 2016 09:18
LONDON (Alliance News) - AIM-listed Xtract Resources PLC on Thursday said it entered into a conditional sale and purchase agreement to sell the Manica Gold project in Mozambique to Nexus Capital and Mineral Technologies International Ltd for USD17.5 million in cash.
On completion, Xtract said it will receive the USD17.5 million, from which it will settle some outstanding payments owed to Auroch in for the acquisition of the Manica licence and the tax liability for the agreed sale to Nexus Capital and Mineral Technologies.
Following those payments, Xtract said it expects to have remaining cash proceeds of approximately USD12 million, which it intends to use for "operational activities, where appropriate, and to generate attractive returns for its shareholders". Having cash will enable the company to consider "new opportunities" when the board "believes that the mining sector is set for a recovery in the medium term", Xtract said.
Under the agreement, Xtract said it will sell its 100% interest in Explorator Limitada, the entity which holds title to the Manica mining licence 3990C on completion of the deal.
The Manica licence holds gold deposits which Xtract been looking to move to production since June 2015.
Xtract said it is expected that a bankable feasibility study, to assess the viability of developing and mining a hard rock gold deposit identified within the Manica licence, will be completed in the second quarter of 2016, Mine construction is planned to begin in the fourth quarter, with first production to follow in the final quarter of 2017. Mining of the alluvial gold deposit is planned for the third quarter of 2016.
Xtract, which had been looking at project financing options for Manica, said it's clear that the capital required, expected to come in at about USD35 million in start-up costs, would be "highly likely" to result in "material dilution" for Xtract's shareholders.
The company then decided that the offer from Nexus Capital and Mineral Technologies would be in the best interests of shareholders.
"The board carried out a detailed strategic review on receipt of the proposal from MTI and Nexus and we believe that the value we have added to the projects at Manica has been recognised by the offer. An uplift in value of 40% in such a short time is testament to the work of the team at Xtract," Jan Nelson, Xtract's chief executive officer, said in a statement.
"The board has recognised the substantial dilution which shareholders would have had to bear and has elected to sell Manica at this stage in order to strengthen the Company's balance sheet and focus on higher return targets which may realise shareholder value over a much shorter period," said Nelson.
Shares in Xtract were down 4.9% at 0.176 pence Thursday morning.
By Samuel Agini; [email protected]; @samuelagini
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