Xtract Resources Plc (LON:XTR) made a positive announcement to the market on 4th August with the news that further high grade reefs systems have been discovered at their Chepica Mine. This is an exciting find and undoubtedly good news.
This has followed a busy period for the company where a number of announcements have prompted a variety of questions from investors. Shard has put a number of these to CEO Jan Nelson today to clarify the exciting recent developments.
Q: Good news yesterday at Chepica. Results from the imminent drilling will allow Shard to look at a re-rating of the mine life. How long before we can expect to hear results?
A: The drilling will commence within the next week and we expect the drilling program to be completed within 3 months. However, having said this we will release the results of each borehole as we drill them and receive the assay results so shareholders will have a clear picture of how the program unfolds and immediate visibility on the drilling results.
Q: How has the recent drop in the gold price impacted your predicted profit margins?
A: Our forecast for Q3 is for the mine to make US$1.2m - the gold price has dropped by over 20% and this will therefore directly impact on the bottom line. Therefore, without the gold price falling further we will see a 20% reduction in the forecasted figure of US$1.2m. We are however on schedule with the tonnage planned for the quarter and we are ahead by 25% on our planned development. Our costs are thus far 10% below budget.
Q: Please can you clarify the monthly profit statement that was made in the 25th June announcement.
A: The company was referring to gross profit - therefore profit before any capital expenditure. Miners commonly do this but we have realised this created confusion as shareholders do not have visibility on the capital expenditure. As a result we now refer to net profit - that is profit after capital expenditure. In the quarterly update due on 20 October I will give a very detailed account of all the production numbers and cost line items as well as the plan moving forward which will allow shareholders to have total insight at various levels to be able to make investment decisions and track our performance.
Q: Are you generating enough from Chepica to cover day to day running costs?
A: We are generating far more than our running costs including any capital expenditure on the Mine.
Q: Investors seemed a little underwhelmed by the quantum of your share purchase announced on 22nd July. Perhaps you could elaborate on this.
A: I can understand this. Perhaps some insight into my personal situation is needed. I am going through a divorce and from a personal financial situation most of my resources have been depleted due to the legal costs involved. I invested most of what I could spare to at least show my commitment. As soon as my situation changes I will invest more.
Q: Recent news flow from Fairbride has been encouraging. When can we expect to hear more?
A: Yes, absolutely - we are currently updating the financial model to take into consideration the recent improvement in recoveries. We are busy with work that will significantly impact on the total production costs. We also expect a significant increase in the resource. So shareholders can expect a lot of news flow.
Q: Have you enough cash to cover work programmes over the next six months for your existing projects.
A: We have enough cash to cover the work required on all of our projects for the next 12 months - and remember Chepica is generating positive cash flow
Q: Recent acquisitions have transformed Xtract. Are you still looking at further acquisitions?
A: No, we are focussing on making Chepica more profitable and growing production, completing the BFS on Manica and starting mine construction and drilling the Copper dumps.