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The Manica gold licence will cost Xtract US$12.5mln and includes the Fair Bride open pit project, where a bankable feasible study (BFS) is due in six months and production a year later.
A scoping study carried out earlier indicated revenues from the mine of US$55mln annually based on 50,000 ounces per year of gold production, cash costs of US$650 per ounce and an open pit operation for five years and three years underground.
Resources are estimated at 900,000 ounces from 3.5Mt at a grade of 3.01 grams per tonne (g/t) with start-up costs of US$28.4mln. A further US$14.8mln will be needed for the underground development.
Fair Bride represents approximately 10% of the total licence at Manica and there are significant opportunities to increase the gold resource through exploration, said Xtract.
A placing, at 0.3p, will raise £4.4mln for Xtract to help pay £2.8mln (US$4.5mln) cash and £954,000 (US$1.5mln) of liabilities. The remaining £4.1mln (US$6.5mln) will be paid in shares.
Jan Nelson, Xtract’s chief executive said: "The Fair Bride project will allow the company to generate significant revenues.
“With payback on the project of less than three years, the fundamentals are attractive for various forms of project financing.
“The project is less than a year from a completed BFS and we firmly believe that there are significant areas for further optimisation which will lead to improved project economics."
Colin Bird, Xtract’s chairman, added: “This is one of the few high-grade, low-cost, low-risk, open-pitable gold opportunities in Africa. Infrastructure around the project is excellent and the project is 18 months from production.”
The shares, up 39% in the last three months, fell 12% to 0.299p in afternoon trade, anticipating the issue of new shares and reflecting the wider market malaise.
Nelson and Bird have more than a normal working knowledge of Manica, having been responsible for discovering its potential while working for Pan African Resources, and it’s a project that Nelson has been keeping close tabs on.
Auroch, the vendors, are explorers not mine managers, he told Proactive, adding that talks over a deal had been ongoing for some time. “A year ago we were not in a position to do a deal,” he said.
In the past few months, though, the share price has soared on the back of the discovery of high grade gold at its Chepica mine in Chile.
Interest has been such that today’s funding is the third call on shareholders in as many months.
In total, Xtract has now raised £9.125mln for Manica, Chepica and an option over the O’Kiep copper dumps in South Africa where drilling is set to start shortly.