Xtract Resources PLC (LON:XTR) has appointed a new mining contractor for the alluvial gold deposits at its Manica mine in Mozambique.
AIM-quoted Xtract – along with its partner, Nexus – owns the mining rights to the concession but it doesn’t do any of the mining, instead, it contracts that out to other companies.
READ: Xtract reaches ‘equitable agreement’ with Nexus over Manica
Huafei Gold, formerly known as Sino Minerals, already held the exclusive right to mine the eastern half of the Manica concession and it has now also been awarded the contract to exploit the alluvial deposits.
Huafei is paying an upfront fee of US$150,000, while Xtract and Nexus, through their Explorator joint venture, will collect another US$200,000 by taking a cut of future alluvial gold production.
Explorator’s cut will start out at 22%, before falling to 20% once the US$200,000 fee has been settled.
Huafei will have 10 years to mine as much as it can, with an option to extend for another five years, assuming there is still some gold left.
“A number of contractors have expressed interest in mining the other areas of the alluvials in the Manica concession,” said Xtract executive chairman Colin Bird.
“Huafei Gold Resources was chosen because of their willingness to pay an upfront payment and demonstrated consistency of operation with their existing contract.”
He added: “They provided extra equipment into the concession and we look forward to increased production over the coming months and on completion of the rainy season.”
Xtract shares rose 7.2% to 0.78p in late-afternoon trading on Wednesday.