30 May Final Results
RNS Number : 7133P
Xtract Resources plc
30 May 2018
Xtract Resources Plc
(“Xtract” or the “Company”)
Audited results for the 12 months ended 31 December 2017
Notice of Annual General Meeting
The Board of Xtract Resources Plc (“Xtract” or the “Company”) announces its audited financial results for the 12 months ended 31 December 2017. The 2017 Audited Annual Report and Accounts, including the notice of Annual General Meeting, are being posted to shareholders today and are available from the Company’s websitewww.xtractresources.com
The Annual General Meeting of Xtract will be held at the offices of Fladgate LLP, 16 Great Queen Street, London WC2B 5DG on 22 June 2018 at 3:00 p.m.
This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014. The person who arranged the release of this announcement on behalf of the Company was Joel Silberstein, Director.
|Xtract Resources Plc||Colin Bird, Executive Chairman||+44 (0) 203 416 6471|
|Beaumont Cornish (Nominated Adviser & Joint Broker)||Michael Cornish / Felicity Geidt||+44 (0) 207 628 3369|
|Novum Securities (Joint Broker)||Colin Rowbury||+44 (0) 207 399 9427|
●Revenue from gold sales of £0.17m (2016: £Nil m)
●Administrative and operating expenses of £1.06m (2016: £1.65m)
●Cash of £1.66m (2016: £0.18m)
●Net loss of £1.26m (2016: £8.94m)
●Net assets of £11.48m (2016: £6.56m)
● Definitive Feasibility Study for the Fair Bride Project completed
●Two alluvial mining contractor agreements successfully concluded
●Recovery and smelting of first gold in October 2017
●Terms agreed for Manica Gold Alluvial Collaboration Agreement between the Company and Nexus Capital Limited
● Settlement reached with Auroch Exploration on outstanding amounts in relation to Manica acquisition
● Reorganisation of loan agreement with YA II EQ Ltd
● Reorganisation of the Company’s issued share capital
● Total of £4.88 million raised through equity placings
● Outstanding amounts due to Auroch Exploration and YA II EQ Ltd settled in full
During the year under review we have seen much progress at the Manica gold mining site. On 28 February 2017 we announced the Definitive Feasibility Study (“DFS”) for the Manica Fair Bride Project. The DFS was independently prepared by Minxcon (Pty) Ltd and produced a very favourable result. The initial project has a seven-year mine life and consists of a simple open pit operation with no consideration being taken of developing the underground resources, which amount to almost a further 1 million oz accessible from the Fair Bride open pit.
This approach has been taken to give shareholders confidence in the future of this operation after the imbalance between expectation and delivery during 2015 and 2016. The key numbers of the project are an IRR of 41% total capital expenditure of US$43.7 million with a NPV of US$42 million at a discount rate of 8.4%. Of particular note is the direct cash cost of US$556 per oz and all up cost to include royalties and capital of US$862 per oz. This makes the project particularly robust against the current gold price and the projections of future gold price.
The Company elected not to pursue own operation of the alluvials with Nexus and decided to appoint a number of contractors to operate various alluvial areas within the concession. The agreement, known as the “Collaboration Agreement” was signed with Nexus and announced on 20 June 2017.
The first contractor agreement was signed on 19 June 2017 with a partnership between Omnia Mining Limited (“Omnia”) and Moz Gold Limitada (“Moz Gold”). Omnia have had a presence in the Manica region and have operated as alluvial miners within their own concession. Moz Gold principals have a history of alluvial mining for diamonds in the region of Kimberley, South Africa.
The second alluvial mining contractor agreement was signed on 11 July 2017 with a company known as Sino Minerals Investment Company Ltd (“Sino Minerals”), again a company experienced in alluvial mining. Immediately on signing, the companies set about recruiting labour and getting their equipment on site and the recovery of the first gold was announced on 8 October 2017. The first gold recovery was from Sino Minerals and marked a milestone in the Company’s history. Since that date, and up to the period of writing this report, we have been hectically involved in increasing the daily production.
Since November 2017 Manica has been generating cash flows to cover the Manica overhead but has yet to fulfil the expectation of management and, of course, shareholders. The operations close to the river have been moderately successful on the east, whilst the operations on the west river bank have been less than successful. Alluvial gold mining in the upper terraces has produced some large nuggets although contractors, understandably, have been reluctant to remove large amounts of overburden necessary to access the alluvials. The rainy season this year was particularly aggressive and delayed operations on the west, whilst Sino Minerals on the east were able to continue working with some disturbance although not terminal. This is testament to their innovative approach to alluvial mining, which removes the need for trucking and transporting.
Our experience of alluvial mining at Manica over the last six months has confirmed what is generally accepted in the industry i.e. alluvial mining results are difficult to define and results can be erratic and random. I often use the phrase “feast and famine” which does describe the situation very well. On the west we are seeing very fine gold, which requires an additional process plant and equipment specifically designed to recover fine gold and we are currently carrying out testwork aimed at recovering fine gold.
Omnia advised us that they no longer wished to work on our alluvial concession and we are in discussion with Moz Gold regarding plant modification or exit. We have a loan facility of US$0.4 million with Moz Gold which gives us a 20% conversion right into their company as well as default ownership of their processing plant. Dependent on our test-work, we may elect to utilise the plant on our own account or, alternatively, make it available to new contractors with the responsibility for fine gold modification being theirs.
At the time of writing this report, we are reviewing a number of contractor proposals who wish to work the alluvials on our behalf. This bodes well for mid-2018 improving performance and I am convinced that results will remain cash positive during the change phase.
In terms of the hard rock mining, we are reviewing several proposals to either finance, work for royalty or equipment provision against interest for the Fair Bride hard rock open pit. We expect to conclude an arrangement during the second half of the year and thereafter move into project development.
We have entered into a hard rock joint venture agreement with Omnia which simplistically mean that both parties contribute their hard rock occurrences for treatment into a common plant owned by Omnia and within their license area. Initial outcrop exposure testwork is under way and a concession potential analysis has been carried out by consultant geologists.
During the year a number of placements were made, with the Company raising £4.88 million (before costs) and allowing for all debt and liabilities to be extinguished. The Company now is in cash flow and is self-financing in Manica, whilst not yet cash positive at group level.
The outlook for our sector is strong especially for those companies who have operations or are close to operation. We continue to look for opportunities which might further favourably position the Company within the market and give the potential for an increase in shareholder value.
I would like to thank my fellow Directors and colleagues for their supportive and tireless work during the period especially those engaged in settling down the alluvials at Manica.
The full final results are available in pdf file format here.