05 Jun Final Results
RNS Number : 3356P
Xtract Resources plc
05 June 2015
Xtract Resources Plc
(“Xtract” or the “Company”)
Final Results for the year ended 31 December 2014
Xtract Resources Plc (AIM:XTR) announces its final results for the year ended 31 December 2014, a year in which the Company achieved significant milestones in order to deliver on its growth objectives and shareholder value.
· First revenue received from concentrate £1.14m (2013: nil)
· Net loss of £2.95m (2013: £0.13m loss)
· Administrative and operating expenses of £2.34m (2013: £0.80m)
· Project costs of £0.21m (2013: £0.35m)
· Cash of £0.16m (2013: £0.16m)
· Net assets of £1.60m (2013: £2.27m)
· Concluded acquisition of Chepica Gold and Copper Mine and the Mejillones Phosphate Project in Chile for £1.25m in Xtract shares
· Accelerated development of four new levels at Chepica in order to add significant mining flexibility
· Streamlined operations through implementation of a new Mineral Resource System that has improved mining grade by over 1g/t gold in addition to moving to a mechanized mining operation which has reduced labour costs
· Installed new ball mill to increase mill capacity to 9,500 t/month from 5,500 t/ month
· Disposed of non-core Mejillones Phosphate Project in February 2015 for £0.4m
· Further strengthened management team with appointment of Eduard Victor as COO and Albert Pretorius as Mining Executive
· Raised £1.2m in July through the disposal of 5 million Global Oil Shale Group shares
· Raised US$1.3m in November from YA Global Masters facility (consisting of debt of US$0.75m and equity of US$0.55m). This facility has subsequently been paid down to zero
Jan Nelson, CEO of Xtract Resources commented: “Significant progress has been made to take the Chepica mine from a start-up operation to a mine that is now producing at steady state and generating profit. The loss sustained during the period under review was as a direct result of the cost involved in starting up a new mining operation. We have turned this corner and look forward to reporting a profit for the Group in the future. The team worked extremely hard and this perseverance paid off as not only was the mine turned around but significant funding was also raised post year end. This will now enable us to: grow the mining operations at Chepica; explore the remaining 70% of the exploration tenement around the mine; create mining flexibility and as a result consistent production delivery; and acquire additional projects to mitigate single asset risk to the Company and to grow our revenue base.
“We signed two option agreements post year end on the O’Kiep copper sulphide and Concordia copper oxide surface copper tailings projects in South Africa, which we believe have the potential to transform Xtract from small scale miner to a significant mid-tier producer.”
The Annual Report for the year ended 31 December 2014 is available on the Company’s website: www.xtractresources.com.
The year under review was most challenging in a financial environment not supportive of acquisition or development capital. Despite this the Company progressed with its acquisition strategy and disposed of assets no longer in line with the revitalised strategic plan. Whilst much was achieved during the year under review, post balance sheet events were material and company transforming.
On 24 February 2014 shareholders agreed to the acquisition of the Chepica gold and copper mine which resulted in the issuance of 500 million shares to Polar Mining Barbados. The consideration amounted to some £1.81 million, comprising of £1.25 million in shares and £0.56 million in cash. The acquisition also resulted in the Company holding a 100% interest in the Mejillones phosphate project.
The Chepica mine acquisition utilised all of the Company’s resources and as such we sought an extension on our due diligence period for the Namakwa Uranium deposit in South Africa. The extension was granted until 10 April 2014 during which time we carried out extensive due diligence on all aspects of a proposed Uranium mine development. On completion of this due diligence programme the board took the decision not to advance with the acquisition since our overall investment criteria demands were not met.
With such a challenging financing climate in 2014, the board reviewed all possible ways of raising money to meet its ongoing requirements. On the basis that the Global Oil Shale Group Limited (GOS) holding was considered to be non-core the board elected to sell 5 million shares for £1.2 million. The sale of the GOS shares was at 23.77 p per share against a nominal book price of 12 p per share representing a considerable profit on our position. In addition the realisation of the cash from the GOS disposal did not result in any shareholder dilution. A significant portion of the cash was injected into the Chepica mine with the intent to boost production and improve processing plant efficiencies.
During early October 2014 we announced the sale of our Mejillones phosphate deposit to Mines Global (MG) for a total consideration of £ 0.4 million to be satisfied in two tranches. The first one being £0.25 million within 14 days of signature and the balance being satisfied once successful transfer of all licenses was effected to MG. The final payment was made on 5 February 2015.
We announced a fundraising of approximately £0.85 million via YA Global Master SPV Limited (YAGM) consisting of a draw dawn facility and equity subscription. The funds were again largely deployed into the Chepica mine since a number of operating challenges were being faced. The challenges were underground unstable rock conditions, minor faulting and a requirement to upgrade plant throughput from 3,500 tonnes per month to over 6,500 tonnes per month with a future target of some 8,500 tonnes per month.
Post the period under review Chepica suffered severe operational problems one of which necessitated the mining of a bypass loop during which time the Company operated on considerably reduced tonnages which prevented us from meeting our cash flow forecast. Towards the end of the mining of the remedial loop, the Chepica management elected to employ contractors in the difficult mining conditions. Again during this period the Company negotiated a deferment of the earn-in option agreement which eased immediate cash flow constraints. Apart from underground mining, geological efforts were directed towards identifying easy to access outcrops with the view to additional ore from the underground workings.
Whilst the first quarter was extremely difficult a number of key decisions were made which have resulted in a much improved mining operation. At the time of writing my report the Chepica mine is showing enormous potential for the mid-term production and we look forward to good financial results. During 2015 the Company has successfully completed two placings to raise a total of £4.75 million which has resulted in a company well financed to consolidate its current operations and seek out other opportunities consistent with the board’s policy and strategy.
We announced on 27 March 2015 that the Company had entered into an agreement with Mineral Technologies International (MTI) through which Xtract would evaluate the O’Kiep Project, which comprises certain sulphide copper tailings in the Northern Cape. The area under option consists of over 33 million tonnes of sulphide copper tailings and is spread over two dumps. We were granted a 7 month option to do all necessary work to evaluate the tailings with the view to establish a tailings retreatment operation. The agreement catered for the payment of US$5.7 million in stage payments over two years, should we elect to acquire 100% of the dumps.
On 20 May 2015 we announced renegotiations of the option arrangement pursuant to the O’Kiep Project which resulted in considerable reduction of the overall consideration.
On 23 April 2015 we signed an agreement with Shirley Hayes IPK (Pty Limited) (IPK) a local copper explorer in South Africa to evaluate the Concordia project copper dumps. The agreement with IPK grants Xtract an exclusive 6 months period to conduct due diligence on the oxide material. As part of the agreement Xtract has agreed to issue IPK 3 million ordinary shares in Xtract. Should the Company proceed with construction of the project then it will be entitled to 75% of the gross revenue generated from operations with IPK entitled to the remaining 25%.
The Company is currently assessing a number of other acquisitions which satisfy our investment criteria with much of the early evaluation risk removed by others. Xtract is quite prepared and able to meet operational challenges but remains reluctant to be involved in grass root projects with discovery risk and numerous other uncertainties.
We hope to report further progress with our acquisition strategy during the second half of 2015 to support our serious intent to progress from a junior mining company to a mid-cap producer.
It is normal to thank fellow directors, management and staff for their efforts during the period under review. Such a bland statement would not address the tireless and tenacious efforts of all our staff who have put Xtract in such a strong position relative to its peers. In particular I would like to thank the operational staff at Chepica for their sterling work in developing the Chepica mine and identifying short-term opportunities for significant cash flow.
Our team remains dedicated and committed to producing shareholder returns well above average for the company’s size and the sector it operates within.
Non- Executive Chairman
5 June 2015
The full financial results are available in our Financial Reports section.