Xtract Resources (LON:XTR) has agreed the acquisition of the Chepica gold and copper mine in Chile after completing almost two months of due diligence.
The agreement is for Xtract to purchase a 15% direct interest with an earn-in option over the remaining 85%. The deal includes 100% of the Mejillones phosphate project, also in Chile.
The consideration, payable to vendor Polar Star Mining, is £1.25mln and will be satisfied by an issue of new shares at 0.25p per share.
Polar Star and related parties will own 33.2% once the deal completes and the company is seeking a waiver to avoid a mandatory takeover offer.
A financing package has been agreed with financier Yorkville for debt and equity, which will make available $300,000 gross in cash immediately, approximately £1mln on the receipt of the takeover waiver and loan of up to US$4.7mln as required.
An advisory committee comprising Professor Jim Porter and Graeme Farr has been appointed to oversee the operations both at Chepica and elsewhere. They will report to Jan Nelson, Xtract’s chief executive.
Chepica is currently operating with mill capability of 10,500 oz gold equivalent per annum at a production cost of US$700/oz. It is currently breaking even with positive cash flow targeted from April 2014, Xtract said.
Nelson said the acquisiton was a significant step forward in its plan to acquire early cash flow.
"We have also agreed a financing package of equity and debt to fully capitalize the development of the mine and the group.
"The finance package will also enable us to fund any further acquisitions such as Namakwa Uranium, if the due diligence proves successful, as well as other mines in the vicinity of Chepica."