Xtract Resources (LON:XTR) has sold its Manica gold project in Mozambique less than a year after it acquired it.
The explorer only received government approval for its acquisition in March but said the likely dilution in raising US$35mln to build a mine had prompted it to accept the offer from Nexus Capital/MTI.
Xtract will receive US$17.5mln in cash, which will net down to US$12mln after paying off the final consideration to vendor Auroch.
Manica was acquired from Auroch last June for US$12.5mln through a combination of cash and shares.
A scoping study indicated revenues from a mine at the site 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).
Under the terms of the sale to MTI, Xtract has to complete a bankable feasibility study by the end of June or forfeit US$1mln.
Jan Nelson, Xtract’s chief executive, said it had carried out a detailed strategic review on receipt of the proposal from MTI and Nexus.
“The Board has recognised the substantial dilution which shareholders would have had to bear and has elected to sell Manica at this stage in order to strengthen the company's balance sheet and focus on higher return targets which may realise shareholder value over a much shorter period."