29 Sep Half-year Report
Xtract Resources Plc
(“Xtract” or “the Company”)
Unaudited Interim Results for the six months ended 30 June 2023
Xtract Resources Plc (AIM: XTR), the gold producer, exploration and development company with projects in Australia, Mozambique and Zambia, announces its unaudited interim results for the six months ended 30 June 2023 (“Period”).
· An updated mining study completed on the Bushranger project by Optimal Mining Solutions (Pty) Ltd reported that the project could potentially generate significant cash margins using the 20mtpa and 25Mtpa model on 16 economic pit shells modelled from an operating cost perspective only with capital cost requirements excluded
· A pre-concentration study using TOMRA advanced optical sorting technology achieved a grade uplift of 52%, and a mass rejection of 62% of unmineralised material, on composite mineralized drill samples from the Bushranger project excluding a higher-grade outlier, indicating the project is well suited to ore pre-concentration, with positive financial impacts on a future mining operation at the project
· Production continued at the Manica Fair Bride project with production results published for the first quarter ended 31 March 2023
· A total of 140kg of gold was produced from the Fair Bride operation during quarter ended 31 March 2023, of which Xtract has a claim to 23% of profits
· Following the prolonged rainy season in Mozambique, production gathered pace in the second quarter ended 30 June 2023 with projected figures for this second quarter on target
· Work is underway at Xtract’s newly acquired Kakuyu project in Zambia, including the delineation of two large surface anomalies adjacent to the historic Kakuyu pit, with a combined strike length of over 2km of prospective ground for immediate follow-up surface work
· Reconnaissance work is continuing at Kakuyu to determine potential resources within the old waste dumps and to reveal mineralisation at the base of the pit, while improving access to the old open pit via a ramp push back exercise
· Post period end, the Company entered into a Joint Venture agreement with Coopermelon Limited, to earn a 65% interest in two licences prospective for copper mineralisation in northwest Zambia. The licences are underexplored to date and an initial two-year period will see exploration expenditure of at least US$2 million on the property, starting in late 2023
· Revenue from gold sales of £0.39m (H1 2022: £0.97m)
· Other revenue of £1.67m (H1 2022: £11k)
· Net Profit /(loss) of £0.62m (H1 2022: loss of £0.03m)
· Administration & operating expenses £1.05m (H1 2022: £1.33m (including a share-based payment charge of £1.47m))
· Cash of £0.38m (FY 2022: £1.24m)
· Net assets of £21.73m (FY 2022: £21.15m)
At the Bushranger copper-gold project located in the Lachlan Fold Belt of New South Wales the previous reporting period saw the delineation of an upgraded mineral resource of 512Mt @ 0.22% CuEq, at a cut-off of 0.1% CuEq, at the Racecourse prospect, and a maiden mineral resource of 87Mt @ 0.22% CuEq, at a cut-off of 0.1% CuEq, at the Ascot prospect, for a combined total of 599Mt @ 0.22% Cu. Work on the Bushranger project has continued during the current reporting period, allowing for reflection of the Phase Two drilling programme, consolidation of results and ongoing assessment of the economics for a profitable mining operation.
An updated open-pit mining study was completed by Optimal Mining Solutions (Pty) Ltd (“Optimal Mining”) to update the previous mining study and examine the economics of 20Mpta and 25Mpta open pit mining operation. Sixteen economic pit shells were modelled from an operating cost perspective with capital cost requirements excluded and which highlighted that the 20Mtpa and 25Mtpa open pit options potentially generate significant operating cash margins dependent upon mining rate, copper price and cut-off grade.
It was highlighted that the project may benefit from optical mineral sorting enabling the economics of the processing operation to be heightened with a reduction in feedstock and increased grade. Xtract engaged TOMRA Sorting Solutions (“TOMRA”) of Sydney, Australia, to undertake the pre-concentration test work on five composite drill samples.
All five composite drill core samples included in the study achieved upgrades to the copper and gold content of the pre-concentrated ore, while rejecting significant volumes of waste material. The average original grade of the four samples of copper-gold mineralisation excluding one higher grade outlier was 0.23% Cu, while the average grade of the pre-concentrated mineralisation was 0.35% Cu, which shows a grade uplift of 52%. The average mass yield was 36%, meaning that 64% of the original mass of the sample was rejected into the waste product, suggesting that it will be possible to greatly reduce the volume of material needed to be processed through the milling and floatation circuits of a processing plant.
At Manica, total gold production for the three-month period ended 31 March 2023 (“Q1 2023”) was 140kg, an increase on the previous reporting period, and of which Xtract holds a 23% share. Month-on-month gold production has increased from 37.6Kg in January 2023 to 66.3Kg in May 2023. Fair Bride’s average gold sale price for Q1 2023 was US$1,859 per ounce.
Clear indications are that post the heavy rains, results are improving significantly and production for the three months ended 30 June 2023 (“Q2 2023”) are expected to show a marked improvement with plant throughput increasing from 30,000 tonnes per month in Q1 2023 to current nameplate capacity of more than 40,000 tonnes per month.
Application of a more robust grade control process has also resulted in a marked improvement in run of mine grade delivered to the plant and mill running time has increased from 67.3% availability in the current quarter (ending 30 September 2023) to a reported 82% availability in May 2023.
Work is underway at the company’s new Kakuyu project in Zambia, with initial ground exploration defining large areas of prospective ground adjacent to the historic Kakuyu Hill open pit mine. On the southern side of Kakuyu Hill an approximate combined 800m west and east striking extension of copper mineralisation has been postulated, and on the northern side, a substantial copper in soil anomaly extends over an east west strike length of approximately 1.4km which is coincident with a hydrothermal breccia. Both targets require further surface works and drilling.
Potential exists for a small resource of copper associated with historical waste dump material that would have historically been considered low-grade and an assessment is underway to assess their importance.
Further work at Kakuyu concerns access to the historic pit with a push back improving ramp access and exposure to ore at the base of the pit. Additionally, a 250t bulk sample has been sent for processing at the Kabwe Refinery for drying, crushing and sampling ahead of negotiations for the future processing of ore production, with further samples also sent to an external processing consultant for metallurgical test work.
Following the period end, the Company entered into a Joint Venture agreement with Coopermelon limited to earn an initial 65% interest in two licences in Northwestern Zambia prospective for potentially high-grade Kamoa style mineralisation at depth and lower grade bulk-tonnage mineralisation at surface. There has been little exploration to date and the Xtract intends to spend an initial US$2 million over a two-year “Phase-One” exploration period, starting with surface reconnaissance works in late 2023.
Summary of Company Projects
The Bushranger project rapidly advanced during the previous reporting period, seeing the completion of the Phase Two drilling programme and ending with the release of an upgraded mineral resource for the Racecourse prospect and a maiden mineral resource for the Ascot prospect. Following the rapid advancement of work on the project during the previous reporting period, 2023 saw a period of quieter reflection on results and advances towards determining a saleable mined product from the project.
Open-Pit Mining Study
In the first quarter Xtract contracted independent consultants Optimal Mining Solutions (Pty) Ltd (“Optimal Mining”) to update the previous mining study and examine the economics of 20Mpta and 25Mpta open pit mining operations on the Bushranger Copper-Gold Project.
Sixteen economic pit shells were modelled from an operating cost perspective only with capital cost requirements excluded and which highlighted that the 20Mtpa and 25Mtpa open pit options potentially generate significant operating cash margins dependent upon mining rate, copper price and cut-off grade.
As processing of the Racecourse prospect ore contributes between 49% and 61% of the total production costs across the 16 cases examined, it was identified that the Racecourse prospect copper mineralisation may be well suited to pre-concentration, providing opportunities to streamline mining and processing, with positive impacts on metal recoveries, capital and operating costs through the use of sorting technology.
Optimal Mining identified a project with similar grades to Racecourse where pre-concentration reduced the amount of material to be concentrated up to approximately 50%, significantly reducing pre-production capital and operating costs and the decision was made to continue with a pre-concentration study.
Post year end positive results of the pre-concentration study were received, which entailed the sorting of the ore using TOMRA technology which utilises X-Ray transmission and machine learning to sort mineralisation into a pre-concentrated ore product and waste.
Xtract engaged TOMRA Sorting Solutions (“TOMRA”) of Sydney, Australia, to undertake the pre-concentration test work on five composite drill samples. Data was collected using TOMRA’s COM X-Ray Transmission (“XRT”) system which detects mineralised particles and then sorts the material into a pre-concentrated product and waste using amplified mechanical, hydraulic or pneumatic processes. The sorter is set up / trained using images taken of the samples. The images are then analysed using proprietary TOMRA image processing software. Based upon the images, sorting task specific algorithms are then developed and applied to sorting the mineralised material.
All five composite drill core samples included in the study achieved upgrades to the copper and gold content of the pre-concentrated ore, while rejecting significant volumes of waste material. Excluding one of the higher-grade samples as an outlier, the average original grade of the four samples of copper-gold mineralisation was 0.23% Cu, while the average grade of the pre-concentrated mineralisation was 0.35% Cu, which shows a grade uplift of 52%. The average mass yield was 36%, meaning that 64% of the original mass of the sample was rejected into the waste product, suggesting that it will be possible to greatly reduce the volume of material needed to be processed through the milling and floatation circuits of a processing plant.
The outlying sample had the highest original feed grade of 0.51% Cu and upgraded well with TOMRA treatment, but achieved lower metal recoveries due to higher metals content in waste fractions, suggesting that pre-concentration may not be as effective for higher-grade ore. This suggests that higher-grade material may not benefit from ore sorting to the same extent as the more typical deposit grades and would be more suited to direct processing.
The results overall show the potential of the TOMRA system to significantly increase the copper grade into a pre-concentrated product while rejecting potentially over 50% of the original rock mass into waste. The variability of the results indicate that more samples would need to be tested in order to determine an accurate average overall effect for TOMRA pre-concentration.
The pre-concentration results are sufficiently positive for the effects of TOMRA pre-concentration to be incorporated into the overall financial model for the Bushranger Project. Consequently, Xtract has engaged Optimal Mining Solutions (Pty) Ltd of Australia (“Optimal Mining”) to incorporate the TOMRA results into an updated economic model for the overall Bushranger Project.
Table 1: Bushranger Prospect Drill Samples Submitted for TOMRA Analysis
|Run||Drill Hole||From (m)||To (m)||Interval (m)||Cu%|
Table 2: Bushranger Prospect Drill Samples Results of TOMRA Analysis
|Run Number||1||2||3||4||5||Avg.||Avg. (excl. high grade run 4)|
|Cu Grade of Original Sample (Cu%)||0.20||0.24||0.25||0.56||0.21||0.29||0.23|
|Back Calc. Original Grade (Cu%)*||0.15||0.26||0.32||0.52||0.20||0.29||0.23|
|Product Grade (Cu%) following Pre-Conc.||0.35||0.35||0.41||0.94||0.30||0.47||0.35|
|Waste Grade (Cu%)||0.067||0.20||0.23||0.50||0.16||0.23||0.16|
|Original Mass (Kg)||22.5||32.7||10.5||13.7||11.9||18.3||19.4|
|Pre-Conc. Product Mass (Kg)||7.1||12.2||5.1||0.7||3.3||5.68||6.9|
|Waste Mass (Kg)||15.4||20.5||5.4||13||8.6||12.6||12.5|
|Original Contained Cu (kg)||3.4||8.5||3.4||7.1||2.4||5.0||4.4|
|Pre-Conc. Product Contained Cu (kg)||2.4||4.2||2.1||0.66||1.0||2.1||2.4|
|Mass Yield (%)||31.6||37.3||48.6||5.1||27.7||30.0||36.3|
|Metal Recovery (%)||72.6||49.6||62.1||9.3||32||45.1||54|
*Back calculation of initial Cu grade from final product for mass balance purposes.
Gold production has continued on the Manica project, with Fair Bride now the leading project, in which Xtract has a 23% share of net profit. Fair Bride gross gold production continued to increase during Q1 2023 and was 140Kg (equivalent to 4,552 ounces). Month-on-month gold production has increased from 37.6Kg in January 2023 to 66.3Kg in May 2023. Fair Bride’s average gold sale price for Q1 2023 was US$1,859 per ounce.
Revenue and therefore Xtract’s share of net profit was impacted by two main factors during Q1 2023. Operation through the first rainy season in Manica resulted in a shortfall in plant throughput as wet clay-rich near-surface mined material affected the operating efficiencies of both screens and the mill. Measures have been put in place to alleviate the problem and the impact of improvements can already be seen with the month-on-month ore processing figure rising from 30,000 tonnes per month in February 2023 to a current reported estimate of approximately 43,000 tonnes per month in May 2023.
A significant amount of additional close-spaced drilling was completed during Q1 2023 specifically to improve grade control and the ability to better predict the run of mine grade that could be anticipated by the processing plant. This work had an almost immediate impact on improvement in the run of mine grade with the average rising from 1.2g/t Au in February 2023 to a current reported grade for May 2023 of approximately 1.8g/t Au. An increase in grade equivalent to an additional $36 per tonne of ore delivered to the plant at the current gold price could also have a significant positive impact on revenue and margin.
|Table 3: Gold Production and sales prices – Fair Bride (Xtract 23% share of net profit)|
|Tonnes Mined & Processed (tons)||107,023|
|Average grade (g/t)||1.51|
|Au Production (ounces)||4,522|
|Au recovery (%)||87.70|
|Average sales price per ounce in US$||1,859|
|Cost per oz of Au (US$)||1,185|
For the other projects at the Manica Concession, including the Alluvial and other hard rock production, Xtract is entitled to a percentage share of the gold produced. The total gold production for these the other Manica Projects in Q1 2023 was 36Kg (equivalent to approximately 1,156 ounces) of which the Xtract’s share was 183 ounces. The average gold sales price for the other projects in Q1 2023 was US$.1,812 per ounce.
Manica Project Background
Mozambique is recognised as a stable mining jurisdiction within a favourable political and legal regime. The Manica Gold Project is situated in the Odzi-Mutare-Manica Greenstone belt, with an estimated 2 million ounces of gold previously mined in the area.
The Fair Bride Project is an open pit and underground project with a combined SAMREC compliant resource of 1.262 million ounces (including 782k ounces Measured and Indicated). In 2019, the Company was given the opportunity to move the Fair Bride Project forward, from development stage to production through a collaboration agreement with Mutapa Mining and Processing LDA, thereby mitigating any execution risk to Xtract.
At the end of June 2022 production on the Fair Bride project commenced with the introduction of low-grade ore to commission all parts of the processing circuit.
Towards the close of the previous reporting year Xtract entered into a joint venture agreement with Oval Mining Limited relating to the exploitation of small-scale production licence 29805-HQ-SML. Under the terms of the Agreement, Xtract and Oval have agreed that the net profit of the Kakuyu Project will accrue as to 60% to Xtract and 10% to Oval, with the balance of 30% accruing to Kakuyu Mining Limited, the licence holder.
The Kakuyu Project is located approximately 53km north-west of the town of Mumbwa, Central Province of Zambia, in a region well-known for mining including the nearby mines and occurrences of Sable Antelope, True Blue, Crystal Jacket, Maurice F Gifford, Lou Lou, Silverking and Kamiyobo. The most recent discovery is the Iron Oxide Copper Gold (“IOCG”) Kitumba project (BHP/Blackthorn Resources).
The Kakuyu Project has been operated at various times in the past by both small-scale commercial and artisanal miners. There has been limited exploration to date of the Kakuyu Project which provides Xtract with an opportunity to make fresh discoveries in an under-explored but prospective region. The Kakuyu Project is centred around the Kakuyu Hill pit and a large hematitic lens (approximately 800 by 200 metres) found in a fault-controlled setting which is understood either to be a shear hosted Cu-Au deposit or an oxidised post orogenic IOCG deposit, or a combination thereof. The extension of the lens feature is not well understood at depth, and potential exists in the wider licence where field investigations showed similar features, structures and alteration adjacent to the pit.
Work Completed During Reporting period
Exploration undertaken in and around the Kakuyu open pit has defined several copper targets offering potential for extension of the existing in-pit mineralisation and a significant increase in the projected life of mine. On the southern side of Kakuyu Hill an approximate combined 800m west and east striking extension of copper mineralisation has been postulated that requires validation through sampling and drilling. On the northern side of Kakuyu Hill, a substantial copper in soil anomaly extending over a strike length east to west of approximately 1.4 kilometres has been defined which is coincident with a hydrothermal breccia of the same composition as that hosting mineralisation in the open pit.
An assessment of waste dumps by the grade control team is under way to identify potential additional mineral resources presumed by previous operators to be low-grade or waste material. A programme of sampling is in progress and additional feedstock may be generated.
A detailed assessment and inventory of ore currently stored on the ROM pad is in progress to develop a grade control and ore blending plan to ensure the delivery of consistent tonnage and grade output.
Advancements towards a future mining operation have progressed, with work under way to push back the existing ramp access to the pit to expose in-pit extensions of higher-grade (targeting >2.0% Cu) ore providing additional feedstock whilst simultaneously improving pit access. In addition, a 250t bulk sample has been delivered to the Kabwe Refinery for drying, crushing and sampling ahead of negotiations for the future processing of ore production, with samples also sent to an external processing consultant for metallurgical test work.
The Company is now sourcing a drill rig to test the potential extensions to mineralisation associated with the existing open pit together with the substantial soil anomaly delineated along the northern boundary of Kakuyu Hill.
Post period end, the Company announced that it had entered into a Joint Venture agreement with Cooperlemon consultancy Limited in relation to the exploration for copper at large scale exploration licenses 29123-HQ-LEL and 30459-HQ-LEL in Northwest Zambia.
Under the Joint Venture agreement Xtract has agreed the following key terms:
Earn-in and Phase 1 exploration budget: Xtract will earn a 65% interest in the joint venture by funding exploration expenditure over an initial two-year period (“Phase 1”) on the Licences of not less than US$2 million. Exploration is expected to commence in Q4 2023 and will comprise both physical activity within the Licence boundaries (including but not limited to mapping, soil geochemistry, geophysics and drilling), and desktop studies, laboratory analysis and interpretation of data and results. Xtract anticipates funding this exploration expenditure from existing resources and current ongoing operational activities.
If the Phase 1 exploration results are successful and prove the continuity of mineralisation at grades suggesting the potential for the future development of a Mineral Resource of not less than 500,000 tonnes of contained copper, consistent with economic recovery at the depth of discovery with a minimum internal rate of return of not less than 25% and a payback period not exceeding 42 months (including the recovery of capital expenditure), then there will be a second two year exploration period (“Phase 2”).
Phase 2 exploration budget: The Phase 2 exploration expenditure of US$3 million will also be funded by Xtract who will be the operator of the Licences for the duration of the Agreement.
Consequence of Trade Sale: If there is a trade or any other sale of the Licences and / or the Joint Venture during Phase 1 of the joint venture then Xtract will be deemed to have a 55% interest in the Joint Venture. A sale requires the agreement of both Xtract and Cooperlemon.
Mine Development: In the event that either or both of the licences advance to a point where they are commercially viable and suitable for development then the licences will be moved to a corporate entity to be owned 75% by Xtract and 25% by Cooperlemon, and it will be the responsibility of the newly formed corporate entity to raise all capital for mine development and future operations.
The two licences cover a combined 107,000 hectares area covering ground in a highly prospective part of Northwest Zambia where competition for exploration licences is acute. The Company believes there is scope for the discovery of potentially high-grade Kamoa-style mineralisation at depth and lower grade bulk tonnage at or near-surface. There has been limited exploration to date and initial fieldwork will commence in September on the two licences with a view to defining potential drill targets as soon as possible.
Licence No: 29123-HQ-LEL, which comprises 88,149 hectares and expires on 7 September 2025, is held by Oval Mining Limited (“Oval”). The application for Licence 30459-HQ-LEL, which comprises 19,600 hectares and which has been approved for issue by the Zambian Mining Cadastre, is held by Far North Enterprises Limited (“Far North”). Both licences are located in North-West Zambia adjacent to the Democratic Republic of Congo (DRC) border. Oval and Far North have each agreed with Xtract to be bound by the terms and the conditions of the JV Agreement with Cooperlemon (who is acting on their behalf) as though they were a party to the JV Agreement.
During the Period, other revenue which relates to Xtract’s profit from Fair Bride amounted to £1.67m. Administration expenses for the Group amounted to £1.05m (H1 2022 – £1.33m). Non-operating income for the period amounted to £nil (H1 2022- 0.49m) and comprised primarily of fees invoiced within the group to third parties.
|Xtract Resources Plc||Colin Bird, Executive Chairman
|+44 (0)20 3416 6471
(Nominated Adviser and
|+44 (0)20 7628 3369|
|Novum Securities Limited
|Colin Rowbury/Jon Belliss||+44 (0)207 399 9427|
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 as it forms part of UK Domestic Law by virtue of the European Union (Withdrawal) Act 2018 (“UK MAR”). The person who arranged for the release of this announcement on behalf of the Company was Joel Silberstein, Director.
Further details are available from the Company’s website which details the company’s project portfolio as well as a copy of this announcement: www.xtractresources.com
The full Xtract Resources PLC Unaudited Interim Results for the six months ended 30 June 2023 are available here.