Xtract Resources PLC (LON:XTR) is to make a US$700,000 strategic investment in Moz Gold Limitada, the firm which currently operates the M Block in the Western mining area of its Manica mining concession in Mozambique.
The AIM listed firm said it is to make an initial convertible loan of US$400,000 to Moz Gold, with the loan and interest at 30% per annum to be repaid over 5 months. Xtract added that it has the right to convert the loan at any time into a 25% equity interest in Moz Gold.
READ: Xtract Resources expects “significant increase” in production at Manica after agreeing improved deal with contract miners
The firm said it has also agreed to provide a further US$300,000 convertible loan to Moz with the right to convert that for a further 10% interest in Moz Gold
The company noted that Moz Gold is now in commercial production on the Manica M Blocks, which are wholly-owned by Xtract’s Mozambican subsidiary, Explorator Limitada.
Colin Bird, Xtract’s executive chairman commented: "As owners of the Manica concession, Xtract consider it of shareholder benefit to take a bigger stake in gold production from the concession, since we consider the revenues will be long life and sustainable.”
He added: “This agreement should significantly enhance Xtract's earnings from alluvial activities well beyond initial expectations. All other components of area consolidation are proceeding satisfactorily, and I look forward to updating before year end or certainly early in the new year".
Xtract, which said it is funding the loan from its existing cash resources, saw its shares take on 2.7%, or 0.08p in late morning trading at 2.82p.
Moz is a private company newly incorporated in Mozambique, and owned by private individuals, which was formed to mine the alluvial gold deposits in the Western area of the Manica concession under contract from Xtract, and it has no other operations.